Delhi High Court
Akshay Chaturvedi vs Ayush Chaturvedi & Anr. on 7 August, 2024
Author: Neena Bansal Krishna
Bench: Neena Bansal Krishna
* IN THE HIGH COURT OF DELHI AT NEW DELHI
Reserved on: 29th April, 2024
% Pronounced on: 07th August, 2024
+ ARB.P. 228/2024
AKSHAY CHATURVEDI
S/o Arvind Chaturvedi,
R/o A103, Plot 29, Sector 6,
Dwarka, New Delhi-110075
..... Petitioner
Through: Mr. Vishesh Kanodia & Mr. Pradeep
Kanodia, Advocates.
versus
1. AYUSH CHATURVEDI
S/o Ashwani Chaturvedi,
R/o C/o Sushanti Filling Station,
Indian Oil Petrol Pump 1,
LSC, Sector 6, Dwarka,
New Delhi-110075
..... Respondent No. 1
2. ARCHANA CHATURVEDI
W/o Ashwani Chaturvedi,
R/o C/o Sushanti Filling Station,
Indian Oil Petrol Pump 1,
LSC, Sector 6, Dwarka,
New Delhi-110075
..... Respondent No. 2
Through: Mr. Sanat Kumar, Sr. Advocate with
Mr. Vinayak Batta, Advocate.
CORAM:
HON'BLE MS. JUSTICE NEENA BANSAL KRISHNA
Signature Not Verified
Digitally Signed ARB.P. 228/2024 Page 1 of 22
By:VIKAS ARORA
Signing Date:09.08.2024
18:37:54
JUDGMENT
NEENA BANSAL KRISHNA, J.
I.A. 4103/2024 (u/S 5 of Limitation Act, 1963 r/w Section 151 of CPC, 1908)
1. By way of present Application, the applicant/petitioner seeks condonation of 257 days' delay in re-filing the present petition.
2. For the grounds and reasons stated in the present Application, the Application is allowed. The delay of 257 days in re-filing the present petition is hereby condoned.
3. The Application is disposed of.
ARB.P. 228/20244. The present Petition under Section 11(6) of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as "the Act, 1996") has been filed on behalf of the petitioner seeking appointment of a sole Arbitrator for adjudication of the disputes that have arisen between the parties in respect of Partnership Deeds dated 06.06.2021 and 01.01.2022.
5. Briefly stated, the original Proprietor, Shri Ashwini Chaturvedi, the paternal uncle (brother of petitioner's father) of the petitioner was assigned the Dealership of Indian Oil Corporation Limited (hereinafter referred to as "IOCL") Petrol Pump vide Letter of Intent dated 04.06.1991 issued by the Chief Divisional Manager, IOCL, allotting him a Petrol Pump in Kanpur. A fresh Letter of Intent substituting the earlier one, for a Petrol Pump in New Delhi was issued to the original Proprietor, Shri Ashwini Chaturvedi in the year 1995 which subsequently culminated into a Dealership.
6. It is asserted by the Petitioner that the said Dealership got originally Signature Not Verified Digitally Signed ARB.P. 228/2024 Page 2 of 22 By:VIKAS ARORA Signing Date:09.08.2024 18:37:54 assigned to Shri Ashwini Chaturvedi purely at the instance of petitioner's father, Shri Arvind Chaturvedi. Since the inception, the original Proprietor was always dependent upon the petitioner's father who not only received the Dealership of the Petrol Pump because of the efforts of the petitioner's father but was able to run the business solely because of the petitioner's father's money and investments. Moreover, the charge of running the Petrol Pump was often left to the petitioner's father who was instrumental in its success.
7. The petitioner has claimed that since the original Proprietor did not have the requisite finances, he constantly corresponded with IOCL requesting the reconstitution of the Dealership from sole Proprietorship to Partnership between himself and his brother, Shri Arvind Chaturvedi.
8. In September, 1999, the original Proprietor, Shri Ashwini Chaturvedi as well as the father, Shri Arvind Chaturvedi, of the petitioner wrote separate letters to the Chief Divisional Officer, IOCL requesting the permission for conversion of sole Proprietorship into the Partnership.
9. On 29.09.1999, the Petrol/HSD Pump Dealership Agreement (hereinafter referred to as the "Dealership Agreement") was executed between the original Proprietor and the IOCL, assigning the original Proprietor the Dealership of the Petrol Pump.
10. On 06.06.2021, a Partnership Deed was executed between the petitioner and the original Proprietor and the petitioner became the partner instead of his father. Thereafter, the petitioner and the original Proprietor submitted the Partnership Deed to IOCL along with the Letter dated 07.12.2021 to the Chief Divisional Manager, IOCL requesting him to reconstitute the Dealership in the name of Partnership Firm which was duly Signature Not Verified Digitally Signed ARB.P. 228/2024 Page 3 of 22 By:VIKAS ARORA Signing Date:09.08.2024 18:37:54 acknowledged by IOCL.
11. It is submitted that the physical meetings were held and before the Dealership could be transferred in the name of Partnership Firm, the family decided that the original Proprietor would retire from the business because of his health issues and his son, Sh. Ayush Chaturvedi/the respondent No. 1 herein, would take over the position of his father, the original Proprietor under the Partnership which had been constituted on 06.06.2021.
12. A fresh Partnership Deed dated 01.01.2022 was thus, executed between the petitioner and the respondent No. 1 and the share of original Proprietor was transferred to him, the respondent No. 1 herein.
13. Since the first Reconstitution Application, wherein the petitioner and the original Proprietor were the partners, was still under consideration, the IOCL rejected the reconstitution based on the first Partnership Deed dated 06.06.2021 because of change of partners via E-mail dated 21.01.2022. On 21.02.2022, a second reconstitution proposal was filed along with the Partnership Deed dated 01.01.2022 to reconstitute the Dealership in favour of the petitioner and the respondent No. 1.
14. Before in-principle approval for reconstitution of the Dealership could be obtained, the original Proprietor died on 01.02.2022. Since the original Proprietor had died in the middle of the reconstitution formalities, the Firm could not be reconstituted and the petitioner and the respondent No. 1 were left to operate the business and share profits without reconstitution from IOCL.
15. The petitioner has asserted that to his utter shock, the petitioner's aunt, wife of original Proprietor, the respondent No. 2 herein, in collusion and in connivance with the respondent No. 1 staked claim to the Dealership Signature Not Verified Digitally Signed ARB.P. 228/2024 Page 4 of 22 By:VIKAS ARORA Signing Date:09.08.2024 18:37:54 in place of original Proprietor which was accepted by IOCL and the temporary operational rights to the Petrol Pump were granted to the respondent No. 2, on 24.02.2022. The IOCL also granted time to the respondent No. 2 to submit the reconstitution proposal within three months.
16. Discovering the breaches committed by the respondent Nos. 1 and 2, the petitioner and his father addressed a joint Letter dated 26.04.2022 to the Chief Retail Sales Manager, IOCL presenting him the entire facts and circumstances concerning the Petrol Pump, M/s Sushanti Filling Station in order to bring to his attention to the disputes regarding the same so that the Dealership may not be reconstituted in favour of the respondent No. 2 and be kept in abeyance till the disputes are resolved.
17. The IOCL vide Reply dated 05.05.2022 rejected the objections of the petitioner and his father by stating that upon the death of original Proprietor, the respondent No. 2, his wife, has become entitled to reconstitution of the Dealership in her favour and the earlier reconstitution proposals that were submitted, have become invalid on the demise of original Proprietor.
18. The petitioner has claimed that the respondent No. 2, being bound by the Contract entered into between the original Proprietor, has no authority to request the reconstitution of Dealership in her sole name. The respondent No. 2 is bound by the Arbitration Clause in the two Partnership Deeds as they both were signed by the original Proprietor, who was her predecessor-in-interest. Reliance has been placed on the decision in Jyoti Gupta vs. Kewalsons and Ors, 2018 SCC OnLine Del 7942, wherein it has been observed that upon the death of a partner, the Arbitration Agreement between the partners shall survive and can be enforced by the legal heirs of the deceased partner.
Signature Not Verified Digitally Signed ARB.P. 228/2024 Page 5 of 22 By:VIKAS ARORA Signing Date:09.08.2024 18:37:5419. In order to secure the amounts and the dues of the petitioner, the petitioner had filed Petition bearing No. OMP(I)(COMM) 187/2022 under Section 9 of the Act, 1996 which is still pending.
20. It is submitted that as per the two Partnership Deeds, the petitioner is entitled to receive a salary of Rs. 1,00,000/- per month, 20% bonus of total salary, and 30% of firm income before charging salary and bonus in excess of Rs. 3,00,000/-. This amount roughly adds upto Rs. 45,00,000/- a year and approximately Rs. 2,70,00,000/- over an average estimate of six years.
21. It is further submitted that the Partnership Deeds can only be terminated by mutual consent of the parties, the respondents are in breach of their obligations under the said two Partnership Deeds to pay the said sum to the petitioner.
22. A Notice dated 03.04.2023 through the counsel for the petitioner was served by the petitioner on the respondents to invoke the Arbitration Clause in the two Partnership Deeds calling upon the respondents to appoint a sole Arbitrator.
23. The respondents in the Reply, through their counsel, disagreed to the appointment of the Arbitrator claiming that there was no enforceable contract between the parties.
24. The petitioner has submitted that the respondents have failed to fulfil their obligations under the Partnership Deeds to pay the lawful dues of the petitioner under the said two Partnership Deeds and are continuing to be in breach. Therefore, the present petition has been filed on behalf of the petitioner seeking appointment of a sole Arbitrator.
25. The respondents in their Reply have claimed that the present petition is not maintainable as it is based on two proposed Partnership Deeds Signature Not Verified Digitally Signed ARB.P. 228/2024 Page 6 of 22 By:VIKAS ARORA Signing Date:09.08.2024 18:37:54 which never came into force and do not have any legal effect.
26. The first proposed Partnership Deed was rejected by IOCL via E-mail dated 21.01.2022 and the same became non-est by virtue of novation.
27. The other proposed Partnership Deed dated 01.01.2022 was signed with different partners, namely, the petitioner and the respondent No. 1. Further, in regard to the second proposed Partnership Deed, before a decision could be taken upon on it, the sole Proprietor died. Accordingly, the second proposal also got rejected by IOCL as is evident from its Letter dated 05.05.2022.
28. The respondents have asserted that the documents relied upon by the petitioner were only proposals as is evident from the heading of both these documents which read as "Proposed Partnership Deed" and they never fructified into the Partnership Deeds.
29. Moreover, Clause 4 of both the proposals makes it even more clear that prior written approval of IOCL would be required in order to change the constitution of the Firm. Thus, the two documents were only a proposal which is contingent upon the receiving the approval of IOCL and these documents never got so approved. The partnership never got fructified and no rights flow from the same and there is no legally enforceable Agreement.
30. It is contended that the petitioner cannot claim any relief against the respondent No. 1 and he does not have any right, title or interest in the Retail Outlet/Dealership of the Petrol Pump.
31. It is further asserted that the respondent No. 2 has been wrongly made a party in the present petition as she was not a party to the two proposed Partnership Deeds dated 06.06.2021 and 01.01.2022 respectively. There is no Agreement between the petitioner and the respondent No. 2 having a Signature Not Verified Digitally Signed ARB.P. 228/2024 Page 7 of 22 By:VIKAS ARORA Signing Date:09.08.2024 18:37:54 valid Arbitration Clause.
32. It is further submitted that it was only the sole Proprietor who was the Dealer of the Retail Outlet and the ultimate owner is the IOCL. The Dealer cannot enter into the independent Agreement regarding its Retail Outlet of its own without the approval of IOCL. Therefore, even if it is assumed that the Dealer enters into an Agreement with the petitioner but it is still required the approval of IOCL, which in the present case has been rejected vide Letter dated 05.05.2022. The proposals never attained finality and no legally enforceable Agreement ever came into existence.
33. It is further asserted that the Proprietor of the Retail Outlet Petrol Pump never got reconstituted as the proposals got rejected by IOCL. The petitioner himself admits that he does not have any right in the Retail Outlet. Also, the claim of the petitioner is based on the said two proposed Partnership Deeds, is completely misconceived as there is no concluded Agreement.
34. Moreover, the submissions made by the petitioner are contrary to the Dealership Agreement which provides that the Dealership shall not enter into any Agreement, Contract or understanding whereby the operations of the Dealership are or may be controlled or carried out and or financed by any other person/Firm or Company whether directly or indirectly, whether in whole or in part.
35. The respondents have placed reliance on the decision in M.V. Shankar Bhat and Anr. vs. Claude Pinto, 2003 (4) SCC 86, wherein it has been observed that if an Agreement entered into is subject to ratification by another party, then the same is not a concluded Contract.
36. Reliance has also been placed on the decision in Magic Eye Signature Not Verified Digitally Signed ARB.P. 228/2024 Page 8 of 22 By:VIKAS ARORA Signing Date:09.08.2024 18:37:54 Developers Ltd. vs. M/s Green Edge Infrastructure Private Ltd & Ors., 2023 (8) SCC 50, wherein it has been held that it is the duty of the Referral Judge to first determine the validity of the Arbitration Agreement, if raised at a pre-referral stage and it should not be left to be determined by the Arbitral Tribunal.
37. It is claimed that before there could be any concluded Partnership Deeds and assignment of the Dealership, the original Proprietor, Shri Ashwini Chaturvedi died of a massive heart attack on 01.02.2022. Upon his demise, IOCL vide its Letter dated 24.02.2022 asked the legal heirs of Late Shri Ashwini Chaturvedi to submit the reconstitution proposal, since as per its Policy, only legal heirs were entitled to be inducted as the Dealers on the demise of sole Proprietor.
38. The petitioner along with his father, Shri Arvind Chaturvedi wrote a Letter dated 24.02.2022 to IOCL requesting that the reconstitution proposal may be kept in abeyance to which IOCL replied vide its Order dated 05.05.2022 that as per its Policy, upon the demise of sole Proprietor, the steps were to be undertaken as per the details therein. It was also explained that the proposed Partnership Deeds became invalid on the demise of sole Proprietor of the Petrol Pump. It was also explained why the proposal had been rejected.
39. As per the guidelines of IOCL, the respondent No. 2 submitted the proposal for reconstitution on 29.03.2022 that all the legal heirs of Late Shri Ashwani Chaturvedi, the original Proprietor, including the respondent No. 1 relinquished their rights in favour of their mother i.e., the respondent No. 2 herein for being appointed as the sole Proprietor of the Retail Outlet. This Proposal dated 29.03.2022 has been approved by the IOCL and the Signature Not Verified Digitally Signed ARB.P. 228/2024 Page 9 of 22 By:VIKAS ARORA Signing Date:09.08.2024 18:37:54 respondent No. 2 has been appointed as the sole Proprietor by virtue of the Dealership Agreement dated 28.07.2022.
40. On merits, all the averments made by the petitioner have been denied.
41. Learned counsel for the petitioner has submitted that there was a Partnership Agreement entered into between the parties which contained a valid Arbitration Clause and therefore, the present petition is maintainable.
42. The arbitral disputes have been raised by way of present petition, for which a Notice had also been given and therefore, the present Petition under Section 11 of the Act, 1996 is maintainable.
43. Learned counsel on behalf of the petitioner on the decision in In Re:
Interplay between Arbitration Agreements under the Arbitration and Conciliation Act, 1996 and the Indian Stamp Act, 1899, 2023 SCC OnLine SC 1666, wherein it has been observed that existence of valid Arbitration Agreement is a pre-requisite of invoking Section 11 of the Act, 1996. Learned counsel for the petitioner has also placed reliance on the decisions in Ashapura Mine-Chem Limited vs. Gujarat Mineral Development Corporation, 2015 SCC OnLine SC 356, Umesh Goel vs. Himachal Pradesh Cooperative Group Housing Society Limited, 2016 SCC OnLine SC 624, Jyoti Gupta vs. Kewalsons & Ors., 2018 SCC OnLine Del 7942 and Ved Gupta vs. Apsara Theatres, Jammu and Another, (1983) 4 SCC 323, wherein also similar propositions have been laid down.
44. Learned Senior Advocate on behalf of the respondent has, however, vehemently opposed the present petition and has asserted that there is no reconstitution Policy of IOCL. Clause 11 specifically provides that there cannot be any reconstitution of the Dealership without prior approval of Signature Not Verified Digitally Signed ARB.P. 228/2024 Page 10 of 22 By:VIKAS ARORA Signing Date:09.08.2024 18:37:54 Zonal Head/State Head. There is also reconstitution fee which is liable to be paid. The Application for reconstitution though filed in the name of the proposed Partnership with IOCL, but it was never approved. In fact, prior to the approval of this reconstitution Application, the original Proprietor, Shri Ashwani Chaturvedi expired on 01.02.2022 and consequently, in terms of the Policy, it is his wife to whom the Dealership has been transferred as a „No Objection‟ has been given by respondent No. 1 and other legal heir of deceased Shri Ashwani Chaturvedi, in favour of the respondent No. 2, their mother.
45. It is submitted that there being no Dealership transferred in the name of proposed Partnership, there is no question of the Partnership having been given effect to. Also, it is evident that no Partnership got constituted but only the proposed Partnership was there which was to be given effect to.
46. Learned Senior Advocate on behalf of the respondent further submits that there is no valid Arbitration Clause between the parties and therefore, the disputes if any, inter se the parties, cannot be referred to arbitration.
47. Learned Senior Advocate on behalf of the respondent has placed reliance on the decision in U.P. Rajkiya Nirman Nigam Ltd. vs. Indure Pvt. Ltd. and Others, (1996) 2 SCC 667 to assert that when there is only a draft Agreement between the parties, the same cannot be termed as a binding Agreement between the parties for referring their disputes to arbitration. Section 2(a) of the Act envisages a written agreement for arbitration and that written agreement to submit the existing or future differences to arbitration; when the original contract itself was not a concluded contract, then there is no Arbitration Agreement invoking the arbitration.
48. Reliance has also been placed on the decision in Magic Eye Signature Not Verified Digitally Signed ARB.P. 228/2024 Page 11 of 22 By:VIKAS ARORA Signing Date:09.08.2024 18:37:54 Developers Ltd. (supra), wherein a reference has been made to N.N. Global Mercantile Private Limited vs. Indo Unique Flame Ltd. and Ors., 2023 (7) SCC 1, wherein it has been observed that while considering the referral of the disputes to arbitration under Section 11(6) of the Act, 1996, the Court must examine and ascertain about the existence of the Arbitration Agreement.
49. Learned Senior Advocate on behalf of the respondent has also placed reliance on the decision in M.V. Shankar Bhat and Anr. (supra).
50. Submissions heard.
51. The Court while considering an Application under S.11 of the Act, has a limited scope of considering whether there exists a valid Arbitration Agreement between the parties.
52. t is a settled proposition of law which has been defined by the Constitution Bench of the Apex Court in N.N. Global Mercantile Private Limited, (supra) that the intention behind insertion of Section 11(6) of the Act, 1996 was to confine the Court acting under Section 11 of the Act, 1996 to examine and ascertain about the existence of an Arbitration Agreement.
53. The Apex Court in Duro Felguera, S A vs. Gangavaram Port Ltd.,, (2017) 9 SCC 729 had held that the referral Court only needs to consider one aspect to determine the existence of an Arbitration Agreement i.e., whether the underlying contract contains an Arbitration Agreement which provides for arbitration pertaining to the disputes which have arisen between the parties to the Agreement. The validity of an arbitration agreement should be restricted to the requirement of formal validity such as the requirement that the agreement must be in writing. This interpretation also gives true effect to the doctrine of kompetenz-kompetenz by leaving the issue of Signature Not Verified Digitally Signed ARB.P. 228/2024 Page 12 of 22 By:VIKAS ARORA Signing Date:09.08.2024 18:37:54 substantive existence and validity of an Arbitration Agreement to be decided by arbitral tribunal under Section 16 of the Act, 1996. It was further observed that the scope of the authority of an arbitral tribunal under Section 16 of the Act, 1996 is wide because it can deal with issues pertaining to the existence and validity of an Arbitration Agreement. Section 11 of the Act, 1996 only deals with existence, the former should be given more weight. Post the 2015 Amendment Act, the referral Courts are only required to prima facie determine the existence or validity of an Arbitration Agreement. The basis for such prima facie determination lies in the fact that the Arbitral Tribunal will later have the competence to rule on the issue of existence and validity of the Arbitration Agreement. Therefore, the separability principle applies at the referral stage.
54. In the case of Vidya Drolia and Ors. vs. Durga Trading Corporation, (2021) 2 SCC 1, it was observed that when an Application under Section 11(6) of the Act, 1996 is made, two facts which are essential to be considered by the referral Court are firstly, whether there is an Arbitration Clause and secondly, whether the disputes are arbitrable. Issue of limitation should be left for the Arbitrator, except when the claims are blatantly on the face barred by limitation.
55. The Supreme Court in its recent judgment in In Re: Interplay, (supra) held that in Section 11(6) of the Act, 1996, the use of the term "examination" in itself connotes that the scope of the power is limited to a prima facie determination. Since the Act, 1996 is a self-contained Code, the requirement of "existence" of an Arbitration Agreement draws effect from Section 7 of the Act, 1996.
56. The core question which thus arises before this Court is whether there Signature Not Verified Digitally Signed ARB.P. 228/2024 Page 13 of 22 By:VIKAS ARORA Signing Date:09.08.2024 18:37:54 existed any valid Arbitration Agreement inter se the parties. The first document relied upon by the petitioner is the "Proposed Partnership Deed"
dated 06.06.2021 between the original Proprietor, Shri Ashwini Chaturvedi, the paternal uncle of the petitioner, who was holding the Dealership of the Petrol Pump of IOCL, and the petitioner-Akshay Chaturvedi.
57. It is not in dispute that the original Proprietor, Shri Ashwini Chaturvedi who had the Dealership of a Petrol Pump from IOCL and was running it in the name of M/s Sushanti Filling Station, was the paternal uncle of the petitioner and the brother of the petitioner's father, Shri Arvind Chaturvedi.
58. Moreover, the petitioner has asserted that there was some substantial contribution of efforts by his father, Shri Arvind Chaturvedi who had supported the original Proprietor, Shri Ashwini Chaturvedi in setting up of this business which was always acknowledged by Late Shri Ashwini Chaturvedi. It is in recognition of this support extended to Late Shri Ashwini Chaturvedi, the original Proprietor, throughout by the father of the petitioner that Late Shri Ashwini Chaturvedi (who had the Dealership of the Petrol Pump of IOCL) entered into a Partnership Deed dated 06.06.2021 with the petitioner, Akshay Chaturvedi. Though the said Partnership Deed dated 06.06.2021 has a title of "Proposed Partnership Deed", but its terms need to considered in order to ascertain whether it was a proposed Partnership Deed or not. It was clearly stipulated "that both the parties have agreed to carry on the business of Petrol Pump in the name of M/s Sushanti Urjalaya at LSC Sector 6 Dwarka, New Delhi in Partnership w.e.f. 06.06.2021". Further, terms were specified in regard to the investments/profit sharing and the remuneration and maintenance of the Signature Not Verified Digitally Signed ARB.P. 228/2024 Page 14 of 22 By:VIKAS ARORA Signing Date:09.08.2024 18:37:54 books of account. It was also agreed in the Partnership Deed dated 06.06.2021 that the first account year of the Partnership shall close on 31 st day of March, 2022. Clause 25 of the Partnership Deed dated 06.06.2021 provided as under: -
"25. That if any time, any question of dispute arise among the partners relating to or meaning thereof effects of any clause of the agreement of the partnership deed in question it shall be referred to the arbitration under the Indian Arbitration Act then in force and decision arrived at by the Arbitrator as appointed shall be binding on all partners."
59. It is also pertinent to mention here that the business of Partnership may have been in the name of the original Proprietor, Shri Ashwini Chaturvedi, but it is nowhere the requirement of a Partnership Firm that the assets/business must be owned by the Partnership Firm. Here, it is quite evident that the propriety of Dealership was in the name of the original Proprietor, Shri Ashwini Chaturvedi who agreed to put his resources in the name of Partnership Firm to be run jointly by the partners of the Partnership Firm in accordance with the terms and conditions as agreed therein. The partnership came into existence w.e.f. 06.06.2021. The parties may have intended the transfer of the Dealership in the name of the constituted Partnership, but till such time there was nothing which prevented the original dealer to enter into the Partnership for the management of the business of the Petrol Pump by the partnership Firm and to share its profits in the manner agreed in the Partnership Deed.
60. From the various terms of this Partnership Deed dated 06.06.2021, it is absolutely clearly that it was a Partnership which got constituted which defined obligations, rights and liabilities of each partner. It gave the date of Signature Not Verified Digitally Signed ARB.P. 228/2024 Page 15 of 22 By:VIKAS ARORA Signing Date:09.08.2024 18:37:54 commencement and also the date of closure of the first accounting year. There is nothing in the Partnership Deed dated 06.06.2021 which suggests that it was to come into existence on a subsequent date or its existence or is dependent upon the happening of any event. The Partnership Deed dated 06.06.2021, though described as proposed, was, in fact, a Partnership duly entered into between the original Proprietor, Shri Ashwini Chaturvedi and the petitioner-Akshay Chaturvedi. The disputes are claimed to have arisen in respect of this partnership business and there being a valid Arbitration Clause, the disputes which have arisen therein are liable to be referred to arbitration for adjudication
61. Therefore, the claim of the respondents that it was only a proposed Partnership which never came into existence, is not tenable at this stage while holding an inquiry under Section 11 of the Act, 1996.
62. Learned counsel for the petitioner has further relied upon the second Partnership Deed dated 01.01.2022, which again was termed as "proposed Partnership Deed" between the petitioner-Akshay Chaturvedi and the respondent No. 1-Ayush Chaturvedi, son of the original Proprietor, Shri Ashwini Chaturvedi who was the partner in the first Partnership. Herein again, it was recited that Shri Ashwini Chaturvedi had been allotted a Petrol Pump of IOCL and was functioning it as a proprietorship business in the name and style of M/s Sushanti Filling Station at Sector 6 Dwarka, New Delhi. Shri Ashwini Chaturvedi had made a request for resignation from the Proprietorship Firm and the first and second party to the Partnership Deed have been invited to join as partners to carry on the business of running the said Petrol Pump in Partnership. This proposal had been accepted by both the parties who have agreed to carry on the business of running the said Signature Not Verified Digitally Signed ARB.P. 228/2024 Page 16 of 22 By:VIKAS ARORA Signing Date:09.08.2024 18:37:54 Petrol Pump in the name of M/s Sushanti Filling Station at Sector 6 Dwarka, New Delhi in Partnership w.e.f. 01.01.2022. The remaining terms and conditions are essentially the same as were in the first Partnership Deed dated 06.06.2021 and the closing date of the accounting year had been provided as 31st day of March of the next year. This Partnership has also been duly signed by both the partners.
63. What emerges from the recitals in the Partnership Deed is that after the first Partnership which was not dissolved, the petitioner constituted another Partnership Deed with the son Shri Ashwini Chaturvedi, respondent No. 1. From the recital of the Partnership Deed dated 01.01.2022, it also emerges that Shri Ashwini Chaturvedi, the sole Proprietor of the business of Petrol Pump, had already moved an application for transfer of the Dealership in the name of Partnership constituted between respondent No. 1- Ayush Chaturvedi and the petitioner-Akshay Chaturvedi.
64. Pertinent it is to note here that there are two different aspects for consideration. One is the existence of the Partnership Deeds and the other is the Petrol Pump business. The original Proprietor, Shri Ashwini Chaturvedi had separately applied to IOCL for transfer of Dealership in the name of Partnership, of which the petitioner and the respondent No. 1-Ayush Chaturvedi were the partners.
65. What business got transferred in the name of partnership and what was the earnings of the Partnership are questions independent of the Partnership which got duly constituted. Therefore, a valid Partnership Deed was duly constituted ; whether any business of Petrol Pump as indeed taken up by the Partnership and what was the business conducted by the Partnership is a moot point, which is a dispute to be decided by the Signature Not Verified Digitally Signed ARB.P. 228/2024 Page 17 of 22 By:VIKAS ARORA Signing Date:09.08.2024 18:37:54 Arbitrator.
66. Here at the stage of Section 11 of the Act, 1996, the only question to be considered whether there is a valid Arbitration Agreement. As discussed in detail, both the Partnership Deeds got validly executed and came into existence and each contained the Arbitration Clause, which is binding upon the parties.
67. It is therefore, held that there was a valid subsisting Partnership and Arbitration Agreement between the parties.
68. The second aspect which may be referred to is that though there is nothing to show that the first Partnership Deed between the petitioner- Akshay Chaturvedi and the original Proprietor, Shri Ashwini Chaturvedi ever got dissolved, but it cannot be overlooked that since it was a Partnership of two persons, it got dissolved on the demise of Shri Ashwini Chaturvedi 01.02.2022. However, even after the demise of Shri Ashwini Chaturvedi, it is his legal heirs who are liable to honour his obligations, responsibilities and liabilities under the Partnership Deed dated 06.06.2021. For this, reliance may be placed on the decision in Smt. Prem Lata & Anr. vs. M/s. Ishar Dass Chaman Lal & Ors., (1995) SCC (2) 145, the Supreme Court while considering the effect of death of a partner on an Arbitration Agreement, observed that though on the demise of the partner ipso facto the partnership stands dissolved, but the legal representatives of the deceased partner who was seeking to enforce for the accounts of the dissolved firm or any other right or power to realise the property of the dissolved Firm, cannot be prevented. The right to sue for the dissolution of the Firm must of necessity be interpreted to mean the right to enforce the Arbitration Clause for resolution of disputes relating to the dissolved firm, of rendition of Signature Not Verified Digitally Signed ARB.P. 228/2024 Page 18 of 22 By:VIKAS ARORA Signing Date:09.08.2024 18:37:54 accounts or any right or power to realise the property of the dissolved Firm. The Apex Court had also observed that where the Partnership Deed clearly recites that all the disputes touching the affairs of the Partnership Firm were referable to the Arbitrator. It cannot be challenged that the disputes regarding the accounts of the Partnership Firm, is the dispute touching the affairs of the Firm. A reference was made to Section 40 of Act, 1996 to observe that it is clear from Section 40 that an Arbitration Agreement is not discharged by the death of any party and on such death, it is enforceable by or against the legal representatives of the deceased. Furthermore, authority of the Arbitrator does not get revoked by the death of a party appointing it subject to the operation of any law by virtue of which the death of a person extinguishes the right of action of that person.
69. In Smt. Parwati Devi & Ors. vs. Kesarwani & Company, Sahson, (2011) SCC OnLine All 786, the Hon'ble Supreme Court observed that Section 40 of Act, 1996 and Sections 46, 47 and 48 of the Indian Partnership Act entitle the legal representative of a deceased partner to enforce the Arbitration Agreement which may be contained in a Partnership Deed even after the partnership stands dissolved.
70. In Jyoti Gupta vs. Kewalsons & Ors., ARB.P. 599/2017 decided on 19.03.2018, Coordinate of this Court considered the similar question and after making a reference to the above-mentioned judgments, concluded that the death of a partner does not bring to an end the provision pertaining to arbitration and the legal heirs would be entitled to invoke the Arbitration Clause.
71. In Ravi Prakash Goel vs. Chandra Prakash Goel & Anr., Appeal (Civil) bearing No. 1526/2007 decided on 21st March, 2007, the Hon'ble Signature Not Verified Digitally Signed ARB.P. 228/2024 Page 19 of 22 By:VIKAS ARORA Signing Date:09.08.2024 18:37:54 Supreme Court while addressing the question of referring the disputes to arbitration under the Partnership Deed by the legal heirs of any of the partners, held that the arbitration can be commenced by the legal heirs of any of the deceased partners, since Section 46 of the Partnership Act, 1932 provides for the right of the partners on dissolution of a Firm and states that each partner or his representative on the dissolution of the firm would be entitled to have surplus of the property of the Firm distributed, after payment of debts and liabilities, amongst the partners or their representatives according to their respective right.
72. Likewise, coordinate bench of this Court in Jyoti Gupta, (supra) while considering the Petition under Section 11 of the Act, 1996 observed that the third party as used in the Partnership Deed, does not exclude inclusion of legal heirs, legal representatives etc. The right to sue or be sued survives in favour of/against the legal heirs of the persons suing or being sued. So long as the disputes which have arisen during the lifetime of a deceased partner, they are referrable to Arbitration.
73. Therefore, it has to be held that the disputes under the first Partnership Deed dated 06.06.2021 are referable which have arisen during the life time of Late Shri Ashwini Chaturvedi. Insofar as the second Partnership Deed dated 01.01.2022 is concerned, it is still subsisting inter se the partners.
74. The next aspect for consideration is that whether the bar of Section 69 Partnership Act, is attracted because both the Partnership Deeds are not registered. This aspect has been considered in detail by the Apex Court in Umesh Goel, (supra), wherein it was observed that the prohibition contained in Section 69 is in respect of instituting a proceeding to enforce a right arising from a contract in any Court by an unregistered firm, and it had no Signature Not Verified Digitally Signed ARB.P. 228/2024 Page 20 of 22 By:VIKAS ARORA Signing Date:09.08.2024 18:37:54 application to the proceedings before an Arbitrator. If the bar engrafted in Section 69 is absolute in its terms and is destructive of any and every right arising under the contract itself and not confined merely to enforcement of a right arising from a contract by an unregistered firm by instituting a suit or other proceedings in Court only, it would become a jurisdictional issue in respect of the Arbitrator's power, authority and competency itself, undermining thereby the legal efficacy of the very Award, and consequently furnish a ground by itself to challenge the Award when it is sought to be made a rule of Court. The Award cannot either rightly or legitimately sought to be vitiated on account of the prohibition contained in Section 69 of the partnership Act, 1932 since the same has no application to proceedings before an Arbitrator.
75. Therefore, the bar of Partnership Deeds not being registered would not be an impediment to the referral of the present dispute to the arbitration.
76. It is, therefore, held that there is a valid Arbitration Clause inter se the parties and prima facie, it has been disclosed that there are arbitrable disputes. It is thus, concluded that there exists a valid written Arbitration Agreement between the parties and the arbitrable disputes have been raised by the petitioner.
77. Without prejudice to the rights and contentions of the parties to raises all their contentions and defences before the Ld. Arbitrator, the present petition is allowed. Ms. Ruchi Narula, Advocate, Mobile No. 9810084123, is hereby appointed as the Arbitrator to adjudicate the disputes between the parties.
78. The fees of the Arbitrator would be fixed in accordance with the Fourth Schedule of the Act, 1996 or as consented by the parties.
Signature Not Verified Digitally Signed ARB.P. 228/2024 Page 21 of 22 By:VIKAS ARORA Signing Date:09.08.2024 18:37:5479. This is subject to the Arbitrator making necessary disclosure as under
Section 12(1) of the Act, 1996 and not being ineligible under Section 12(5) of the Act, 1996.
80. The arbitration shall be conducted under the aegis of Delhi International Arbitration Centre, Delhi High Court.
81. The parties are directed to contact the Arbitrator within one week of being communicated a copy of this Order to them by the Registry of this Court. A copy of this Order be also communicated to the Ld. Arbitrator.
82. The discussion made hereinabove is for the purpose of appointment of the Arbitrator and is not a reflection on the merits of the case.
83. Accordingly, the present petition is disposed of in the above terms.
(NEENA BANSAL KRISHNA) JUDGE AUGUST 07, 2024 S.Sharma Signature Not Verified Digitally Signed ARB.P. 228/2024 Page 22 of 22 By:VIKAS ARORA Signing Date:09.08.2024 18:37:54