Gauhati High Court
Rampat Lal Verma vs Rahul Verma And 7 Ors on 22 October, 2024
Page No.# 1/19
GAHC010187132024
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THE GAUHATI HIGH COURT
(HIGH COURT OF ASSAM, NAGALAND, MIZORAM AND ARUNACHAL PRADESH)
Case No. : Arb.A./6/2024
RAMPAT LAL VERMA
S/O LATE SAHINDAR PRASAD VERMA,
RESIDENT OF MEGHALAYA ROAD, DIBRUGARH TOWN, PO, PS AND DIST
DIBRUGARH, ASSAM 786001
VERSUS
RAHUL VERMA AND 7 ORS
S/O LATE SAMPAT LAL VERMA,
RESIDENT OF MEGHALAYA ROAD, DIBRUGARH TOWN, PO, PS AND DIST
DIBRUGARH, ASSAM 786001
2:SMTI MRIDULATA VERMA
S/O LATE SAMPAT LAL VERMA
RESIDENT OF MEGHALAYA ROAD
DIBRUGARH TOWN
PO
PS AND DIST DIBRUGARH
ASSAM 786001
3:SMTI PRIYANKA VERMA
D/O LATE SAMPAT LAL VERMA
RESIDENT OF MEGHALAYA ROAD
DIBRUGARH TOWN
PO
PS AND DIST DIBRUGARH
ASSAM 786001
4:SMTI PREETY VERMA
D/O LATE SAMPAT LAL VERMA
Page No.# 2/19
RESIDENT OF MEGHALAYA ROAD
DIBRUGARH TOWN
PO
PS AND DIST DIBRUGARH
ASSAM 786001
5:SMTI. MEENA DEVI
D/O LATE SAHINDAR PRASAD VERMA
W/O LATE NAGENDER PRASAD
VILLAGE PHULTAKIA
PO KESARIYA
DIST EAST CHAMPARAN BIHAR
845424
6:SMTI LAXMI DEVI
D/O LATE SAHINDAR PRASAD VERMA
W/O SRI MOHAN PRASAD SAHU
VASTU VIHAR
PO MUZAFFARPUR DIST MUZAFFARPUR
BIHAR
843113
7:SMTI SANTOSHI DEVI
D/O LATE SAHINDAR PRASAD VERMA
W/O SRI VIJAY KUMAR SIMRA
MANSOORPUR
PO MANSOORPUR
DIST VAISHALI
BIHAR
843101
8:SMTI MAYA DEVI
D/O LATE SAHINDAR PRASAD VERMA
W/O SRI MOHAN LAL PRASAD
NAKCHHED TOLA
HENRI BAZAR
PO MOTIHARI
DIST MOTIHARI
BIHAR
84540
Page No.# 3/19
Advocate for the appellant : Mr. P.J. Saikia, Senior Advocate;
Mr. A.K. Gupta.
Advocate for the respondents : Mr. S. Dutta, Senior Advocate;
Ms. S. Mochahari.
Date of hearing : 23.09.2024
Date of judgment : 22.10 2024
BEFORE
HONOURABLE MR. JUSTICE ROBIN PHUKAN
JUDGMENT & ORDER (CAV)
Heard Mr. P.J. Saikia, learned Senior Counsel, assisted by Mr. A.K. Gupta,
learned counsel for the appellant and Mr. S. Dutta, learned Senior counsel,
assisted by Ms. S. Mochahari, learned counsel for the respondents.
2. This appeal, under Section 37(1)(a) of the Arbitration and Conciliation Act,
1996, is directed against the order dated 09.08.2024, passed by the learned
Civil Judge (Senior Division), Dibrugarh, in Misc. (J) Case No. 206/2024, arising
out of Commercial Suit No. 02/2024.
3. It is to be noted here that vide impugned order dated 09.08.2024, the
learned Civil Judge (Senior Division), Dibrugarh ('trial Court', for short) had
dismissed the Petition No. 3608/2024, filed by the appellant/defendant No. 1,
under Section 8 of the Arbitration and Conciliation Act, 1996 ('Act of 1996', for
short), praying for dismissal of the analogous Commercial Suit by referring the
parties to go for arbitration, under Section 8 of the Act of 1996.
4. The background facts, leading to filing of the present appeal, are briefly
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stated as under:
"The respondents Nos. 1 to 4 herein as plaintiffs have instituted a
Commercial Suit No. 02/2024, against the present appellant and proforma
respondents. The claim of the respondents of the aforesaid Commercial
Suit is that they are legal heirs and representatives of Late Sampat Lal
Verma and that there was a partnership firm in the name and style of M/s
Verma Market, which came into existence on 01.04.1984 and thereafter,
continued vide deed of partnership, dated 01.04.1992, as per terms and
conditions incorporated in the said partnership deed, and that the
appellant, along with Lalmati Devi Verma and Sampat Lal Verma, were the
partners of the said partnership firm having 1/3 rd share each in the said
partnership firm and the said firm constructed multi storey RCC buildings
on different plots and also own different businesses including Hotel
Maurya, and that one of the partners, namely, Lalmati Devi Verma expired
on 24.12.2022, and after the death of Lalmati Devi Verma, the partnership
firm continued with two partners viz. the appellant and Sampat Lal Verma
and since the legal heirs of Lalmati Devi Verma were not interested to take
any share in the partnership firm, they relinquished their share in favour
of the two continuing partners. Thereafter, Sampat Lal Verma expired on
21.11.2023 and on the demise of Sampat Lal Verma, the partnership firm
stands dissolved automatically on 21.11.2023, as one of the two
remaining partners expired and that the plaintiffs being the legal heirs of
deceased partner, namely, Sampat Lal Verma, were not interested in
continuing the firm or constitute a fresh partnership firm and as such, on
26.01.2024, the plaintiff No. 1 requested the appellant to render the
accounts of the firm and disburse half share of the surplus and property of
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the partnership firm, but the appellant refused to do the same. It is also
stated that even after dissolution of the firm, the appellant willfully and
persistently committed breach relating to the affairs of the dissolved
partnership firm and also utilized the money of the partnership firm for his
personal use and that the appellant is also planning to grab the entire
share and property of the partnership firm by manipulating the accounts
of the firm and that the aforesaid illegal acts of the appellant casted a
cloud of doubt in the mind of the plaintiffs about their half share in the
property/surplus of the dissolved partnership firm and therefore, prayed
for a decree of declaration that the partnership firm, namely, M/s Verma
Market had already been dissolved on the death of Sampat Lal Verma or
alternatively a decree for dissolution of the partnership firm and for
declaration that the plaintiffs are entitled to half share of the surplus and
proceed of the assets and properties of the firm after meeting the
liabilities of the firm and for disbursal of the half share of partnership firm
and for appointment of receiver, mandatory injunction etc.
On receipt of the summon, the appellant entered appearance before
the learned trial Court and since there is a clause for arbitration in the
partnership deed i.e. Clause No. 15, the appellant filed one petition, being
Petition No. 3608/2024, to refer the matter for arbitration and to dismiss
the Commercial Suit.
Upon the said petition, the learned trial Court registered a
miscellaneous case, being Misc. (J) Case No. 206/2024, and thereafter,
hearing the learned Advocates of both the parties, passed the impugned
order dated 09.08.2024."
5. Being aggrieved, the appellant has approached this Court by filing the
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present appeal, and contended to set aside the impugned order on the following
grounds:
(i) That, the learned trial Court committed gross error of law and facts
in passing the impugned order dated 09.08.2024, in Misc. (J) Case
No. 206/2024, arising out of Commercial Suit No. 02/2024, and
therefore, the impugned order is liable to be set aside.
(ii) That, the learned trial Court passed the impugned order dated
09.08.2024, in Misc. (J) Case No. 206/2024, arising out of
Commercial Suit No. 02/2024, without application of mind and
without considering the record as well as provisions of law in its true
perspective and therefore, the impugned order dated 09.08.2024, is
liable to be set aside.
(iii) That, Clause No. 15 of the deed of partnership dated 01.04.1992,
provided that "in case of any dispute or difference of opinion
regarding the partnership affairs or regarding dissolution or
discontinue of the business or at any time the matter shall be
referred to arbitration........." In view of the aforesaid clause, the
instant Commercial Suit is not maintainable and liable to be
dismissed. But, without considering this aspect of the matter, the
learned trial Court passed the impugned order dated 09.08.2024 and
therefore, the same is liable to be set aside.
(iv) That, the plaintiffs are the legal heirs of Sampat Lal Verma and the
deed of partnership also includes the legal heirs of the deceased
partner, namely, Sampat Lal Verma and in view of section 40(1) of
the Arbitration and Conciliation Act, 1996, the legal representatives
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are also bound by the terms and conditions of the partnership deed.
But, without considering this aspect of the matter, the learned trial
Court passed the impugned order dated 09.08.2024 and therefore,
same is liable to be set aside.
(v) That, it is settled position of law that once existence of arbitration
clause is proved, the judicial authority has no authority to go into the
question of applicability of the arbitration clause to the facts of the
case and it is for arbitral tribunal to decide whether arbitration
agreement is applicable to the dispute raised by the parties. In the
instant case, the plaintiffs themselves admit the deed of partnership
and thereby the clause of arbitration is also admitted. But, without
considering this aspect of the matter, the learned trial Court passed
the impugned order dated 09.08.2024 and therefore, the same is
liable to be set aside.
(vi) That, although the partnership firm loses its character after the
death of Sampat Lal Verma, but for the purpose of distribution of
surplus etc. the said partnership deed is enforceable even by or
against the legal heirs of the deceased, who are not the partners in
the said firm and therefore legal heirs are also bound by the terms
and conditions of the said partnership deed. But without considering
this aspect of the matter, the learned trial Court passed the
impugned order dated 09.08.2024 and therefore, the same is liable
to be set aside.
(vii) That, the death of a partner does not bring into an end of the
partnership for all purposes, the provision pertaining to arbitration
can be invoked against the legal heirs of the deceased partner, once
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there is an arbitral clause even though the legal heirs of the
deceased partner may not be entitled to be inducted as partner,
nonetheless the right to pursue the remedy by invoking the arbitral
clause does not ceases and therefore, the arbitration clause can be
invoked against the plaintiffs, but without considering this aspect of
the matter, the learned trial Court passed the impugned order dated
09.08.2024 and therefore, the same is liable to be set aside.
(viii) That, in any view of matter the impugned order dated 09.08.2024,
passed by the learned Civil Judge (Senior Division) Dibrugarh, in
Misc. (J) Case No. 206/2024, arising out of Commercial Suit No.
02/2024, is liable to be set aside and quashed.
6. Mr. P.J. Saikia, learned Senior counsel for the appellant submits that there
is an arbitration clause in the partnership deed itself i.e. Clause No. 15 and in
view of existence of the arbitration clause, the matter ought to have been
referred to the arbitrator, but, the learned trial Court had ignored the same and
relied upon a decision of Hon'ble Supreme Court in the case of S.P. Misra
and Ors. vs. Mohd. Laiquddin Khan and Anr., reported in (2019) 10
SCC 329, wherein it has been held that a partnership firm stands itself dissolved
statutorily by operation of law owing to the death of a partner in a partnership
firm having two partners. Mr. Saikia, referring to Section 7 and Section 7(2) of
the Act of 1996, submits that the learned trial Court has no jurisdiction to enter
in the Commercial Suit and that the legal heirs of the deceased partner i.e. Late
Sampat Lal Verma, are also bound by the said agreement on account of death
of Sampat Lal Verma, and the learned trial Court had committed illegality by
holding that on account of death of one of the partners, the firm automatically
stands dissolved. Referring to a decision of Hon'ble Supreme Court in Ravi
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Prakash Goel vs. Chandra Prakash Goel and Anr., reported in AIR
2007 SC 1517, Mr. Saikia submits that in view of the provision of Section 46
read with Section 48 of the Indian Partnership Act as well as Section 40 of the
Arbitration and Conciliation Act, 1996 the application for appointment of
arbitrator under arbitration clause of the partnership deed was liable to be
allowed. Referring to another decision of Hon'ble Supreme Court, in Sushma
Shivkumar Daga and Anr. vs. Madhurkumar Ramkrishnaji Bajaj and
Ors, reported in AIR 2024 SC 197, Mr. Saikia submits that reference of case
to arbitral tribunal can be declined by the court only if the dispute is non-
arbitrable. Mr. Saikia has also referred to the following case laws to support his
submission:
(i) Greaves Cotton Limited vs. United Machinery and
appliances, reported in AIR 2017 SC 120.
(ii) Limras Lottery Trading and Co. vs. State of Mizoram,
reported in AIR 2017 GAUHATI 190.
(iii) Weatherford Oil Tool Middle East Limited vs. Baker
Hughes Singapore Pte, reported in AIR 2022 SC 5229.
(iv) Philip Vanlalmawia John vs. State of Mizoram and Ors.,
reported in 2012 (5) GLT 757.
7. Per contra, Mr. Dutta, learned Senior counsel for the respondents has
supported the finding so recorded by the learned trial Court. He submits that in
view of the decision of Hon'ble Supreme Court in the case of S.P. Misra
(supra), the firm M/s Verma Market automatically came to an end and the
partnership firm is not binding upon the legal heirs of the present respondents
and as such, the appellant by filing petition seeking time to submit written
statement has submitted to the jurisdiction of the learned Civil Judge (Senior
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Division), Dibrugarh, and besides, there is non-compliance of section 8(2) of the
Act of 1996. Further, Mr. Dutta submits that in the plaint, the respondents herein
have alleged commission of fraud by the appellant and the arbitrator has no
jurisdiction to decide such an issue. Referring to another decision of Hon'ble
Supreme Court, in Atul Singh and Ors. vs. Sunil Kumar Singh and
Ors., reported in (2008) 2 SCC 602, Mr. Dutta submits that the
respondents, being not parties to the arbitration agreement and also being not
parties to the partnership deed, not bound by the arbitration clause of the
partnership deed and as such, the learned trial court has rightly rejected the
petition and that the appeal is devoid of merit and therefore, Mr. Dutta has
contended to dismiss the same. Mr. Dutta has also referred to the following case
laws to support his submission:
(i) Booz Allen and Hamilton Inc. vs. SBI Home Finance
Limited and Ors., reported in (2011) 5 SCC 532.
(ii) M/s Deorah & Co. Diburgarh vs. Commissioner of
Income-Tax, N.E. Region, Shillong, reported in (1993) 1
Gau LR 155.
8. In view of the contentions as well as submissions of learned Advocates of
both sides, the issue before this court is:-
Whether, in view of existence of an arbitration clause
in the partnership deed, the learned trial court is
justified in dismissing the petition filed by the
appellant under Section 8 of the Arbitration and
Conciliation Act?
09. I have carefully gone through the petition and the documents placed on
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record and also gone through the impugned order dated 09.08.2024 passed by
the learned trial court. Also I have gone through the decisions referred by the
learned Advocates of both sides.
10. It appears that the entire controversy revolves around section 42 of the
Partnership Act, and while passing the impugned order the learned trial court
also considered Sections 42(c) of the said Act. Therefore, it is necessary to
discuss the said provision. The section read as under:-
42. Dissolution on the happening of certain contingencies.--
Subject to contract between the partners a firm is dissolved,
(a) if constituted for a fixed term, by the expiry of
that term;
(b) if constituted to carry out one or more
adventures or undertakings, by the completion
thereof;
(c) by the death of a partner; and
(d) by the adjudication of a partner as an insolvent.
11. A cursory perusal of the Section 42 indicates that by virtue of Clause (c) to
said section, a firm would not get automatically dissolved by the death of a
partner. It is subject to the contract between the parties. Section 42(c) can
appropriately be applied to a partnership where there are more than two
partners. If one of them dies, the firm is dissolved; but if there is a contract to
the contrary, the surviving partners will continue the firm. This is well settled in
a decision of Hon'ble Supreme Court in C.I.T.M.P. vs. Seth Govindram
Sugar Mills reported in (1956) 57 ITR 510.
12. In the case in hand, it appears from the Annexure- 'B', the partnership
deed, that the same is binding upon the present respondents in view of Clause
No. 2 of the said deed, wherein it is stated that the death or retirement of any
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partner shall not have the effect of dissolving the partnership, which will
continue between the other partners and one of the heirs or one of the
representatives of the deceased partner if so agreed. It also appears that the
partnership can be dissolved by any party giving two months' notice in writing
to the other of his/her intention to do so, by common consent the partnership
can be dissolved at any time.
13. It is not in dispute that the deed of partnership-Annexure-'B', which being
enclosed at page No. 29 to 37, of the memo of Appeal that there is an
arbitration clause which is read as under:-
"15. In case of any dispute or difference of opinion regarding
the partnership affairs or regarding dissolution or
discontinuance of the partnership business or at any time the
matter shall be referred to arbitration. The award of the
arbitrator or the Board of arbitrators so given shall be final
and binding on the parties."
14. Further, from the cause title of the plaint of the Commercial Suit, which is
enclosed with the Memo of Appeal as Annexure-'A', at page No. 13, that it was
filed for declaration/dissolution, appointment of receiver, injunction etc. and a
prayer had been made for declaration that the partnership firm of M/s Verma
Market had already been dissolved on the death of Sampat Lal Verma or
alternatively, a decree for dissolution of the partnership firm M/s Verma Market
and for declaration of ½ share of the respondents herein and appointment of
receiver, perpetual and mandatory and prohibitory injunction, cost etc.
15. The deed of partnership, dated 01.04.1992 (Annexure-B), specially clause
No. 15, indicates that in case of dispute or difference of opinion regarding the
partnership affairs or regarding dissolution or discontinuance of the partnership
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business or at any time, the matter shall be referred to arbitration and since the
dispute regarding partnership affairs of the firm or regarding dissolution or
discontinuation of the partnership business, all have to be governed by the
terms and conditions mentioned in the deed of partnership.
16. On the other hand Clause No. 12, of the said deed indicates that the
partner may alter, amend the terms of the partnership and add and other terms
if mutually agreed upon, whatever not mentioned herein, specifically, shall
governed by the terms of the Indian Partnership Act and Rules thereunder as in
force. Thus, this clause indicates that the Indian Partnership Act and Rules shall
cover only those aspects not specifically mentioned in the deed.
17. It also appears that the dispute relates to the affairs of the partnership
firm and regarding its dissolution or discontinuation of the partnership business
has been specifically dealt with in clause 15 of the deed, which indicates that
the dispute regarding affairs of the firm its dissolution or discontinuation of the
business has to be referred to arbitration. And since this aspect has been
specifically provided in the partnership deed itself, this Court is of the view that
section 42(c) of the Indian Partnership Act would not stand in the way of
referring the matter to arbitration in as much as it has been expressly provided
in the partnership deed, dated 01.04.1992.
18. It is to be noted here that Section 40(1) of the Arbitration and Conciliation
Act, 1996, provides that the legal representatives are also bound by the terms
and conditions of the partnership deed. But, inspite of this the learned trial
court has held that the partnership firm stands itself dissolved statutorily by
operation of law owing to the death of a partner in a partnership firm having
two partners and as such, on the death of one of the partners statutorily
dissolve the partnership firm by operation of law. In arriving at such a finding
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the learned trial court had placed reliance upon the decision of Hon'ble Supreme
Court in the case of S.P. Misra (supra).
19. In the case of S.P. Misra (supra), the issue before the Hon'ble Supreme
Court was executability of a decree obtained by one of the partners of a
partnership deed, and on account of his death the decree was sought to be
executed by his legal heirs against the legal heirs of the judgment debtor, who
was the other partner of the partnership deed, and who had already suffered
demise. In this context Hon'ble Supreme Court has held that since the legal
heirs of the judgment debtor were not parties to the partnership deed and that
the partnership stands dissolved statutorily, by operation of law, in view of
provision of Section 42(c) of the Indian Partnership Act, 1932, in view of death
of one of the partners, the legal heirs are not parties to the partnership firm and
also have not derived the benefit of the assets of the partnership firm, the
decree, so obtained is not executable against the legal heirs of the deceased
partner.
20. But, the issue here in this case relates to referring of the dispute relating to
the partnership affairs and regarding dissolution and discontinuance of the
partnership business between one of the partner to the partnership deed and
legal heirs of the deceased partner, to arbitration, in view of clause 15 of the
said partnership deed. The issue here in this case is different from the issue in
the case of S.P. Misra (supra). In view of different factual backdrop and
different issues involved in the both the cases this court afraid the ratio laid
down in the case of S.P. Misra (supra) would not advance the case of the
respondent.
21. In view of clause 2 of the deed of partnership, which has already been
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discussed herein above, and in view of existence of express provision to deal
with the affairs of the firm, its dissolution or discontinuation that has been
specifically provided in clause 15 of the deed of partnership, this Court of the
view that the ground so assigned for dismissal of the petition under Section 8 of
the Arbitration and Conciliation Act, 1996, is bereft of any logic.
22. It is to be noted here that Hon'ble Supreme Court in the case of Ravi
Prakash Goel (supra), at paragraph No. 27, has held that if the right to sue for
rendition of accounts of partnership firm survives on the legal representative of
a deceased partner, he is also entitled to invoke the arbitration clause contained
in the partnership deed. In the case in hand, the right to sue for the rendition of
accounts of the partnership firm i.e. M/s Verma Market survives on the legal
representatives of the deceased partner, namely, Sampat Lal Verma and they
are also entitled to invoke the arbitration clause contained in the partnership
deed and on the same logic, the appellant herein also being the sole surviving
partner can invoke the arbitration clause contained in the partnership firm deed
against the legal heirs of the deceased partner of the partnership firm.
23. It is also to be noted here that Hon'ble Supreme Court in the case of P.
Anand Gajapathi Raju & Ors vs P.V.G. Raju (Died) & Ors., reported
in AIR 2000 SC 1886, while examining the scope of Section 5 of the Act of
1996, held that Section 5 of the Act clearly brings out the object of the new Act,
namely, that of encouraging resolution of disputes expeditiously and less
expensively and when there is an arbitration agreement, the Courts intervention
should be minimal. Then, referring to Section 8 of the Act of 1996, Hon'ble
Supreme Court has held that the language of Section 8 is peremptory. It is,
therefore, obligatory for the Court to refer the parties to arbitration in terms of
their arbitration agreement and nothing remains to be decided in the original
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action.
24. Same principle is reiterated in the case of Hindustan Petroleum Corpn.
Ltd vs. M/S. Pinkcity Midway Petroleums reported in (2003) 6 SCC
503, wherein it has been held that if the existence of an arbitral clause in the
agreement is accepted by both the parties as also by the courts below but the
applicability thereof is disputed by the respondent and the said dispute is
accepted by the courts below. Be that as it may, at the cost of repetition, we
may again state that the existence of the arbitration clause is admitted. If that
be so, in view of the mandatory language of Section 8 of the Act, the courts
below ought to have referred the dispute to arbitration.
25. Indisputably, the dispute between the parties is arbitrable. Indisputably
also there is arbitration clause in the deed of partnership. It is also well settled
in the case of Sushma Shivkumar Daga and Anr.(supra) that reference of
case to arbitral tribunal can be declined by the court only if the dispute is non-
arbitrable. This being the position, I find sufficient force in the submission of Mr.
Saikia, learned Senior counsel for the appellant and the decisions, so referred by
him, also strengthened his submission, that once there is an arbitration clause,
the Court has to refer the matter to the arbitrator.
26. Though, Mr. Dutta, learned Senior Counsel for the respondents submits
that by not raising the issue at the very first instance, the appellant herein has
waived his right and that he has submitted to the jurisdiction of the Court, and
that he has not complied with the provision of section 8(2) of the Arbitration
and Conciliation Act, 1996, yet, said submission left this Court unimpressed in as
much as, along with the petition, the appellant had enclosed the original
partnership deed for referring the dispute to arbitration. This is apparent from
the written objection filed by the respondent herein. And as such it cannot be
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said that he had not complied with the Section 8(2) of the said Act. The suit
was instituted on 12.02.2024 and the appellant had received the summon on
23.02.2024, and on 26.04.2024 he had filed a petition for providing a legible
copy of the deed of partnership and for granting him time to file written
statement and thereafter, on 30.05.2024, he had filed the petition under section
8 of the said Act. Mere filing a petition seeking time to file written statement,
and thereby submitting to the jurisdiction of the learned trial court, to the
considered opinion of this court is an argument too tenuous to accept.
26.1. Also I have carefully gone through the decision in Atul Singh
(supra), referred by Mr. Dutta and I find the factual background of the said
case is clearly distinguishable from the facts herein this case, inasmuch as in the
said case the arbitration agreement itself was claimed to be illegal and void by
the other parties and such a question regarding validity of agreement can be
decided by civil court only. This is not the fact situation here in this case. It is
however a fact that the respondents are not parties to the partnership deed.
But, by virtue of Clause-2 the said deed, being legal representative of the
deemed partner they are bound by the Clause.
26.2. Similarly, mere averment here and there in the plaint regarding fraud,
without there being any supporting material would not justify rejection of the
petition under section 8 of the Act. While dealing with this aspect, in the case of
Rashid Raza vs. Sadaf Akhtar, reported in (2019) 8 SCC 710 , Hon'ble
Supreme Court has explained its earlier decision in A. Ayyasamy v. A.
Paramasivam, reported in (2016) 10 SCC 386, has held as under:-
"4. The principles of law laid down in this appeal make a
distinction between serious allegations of
forgery/fabrication in support of the plea of fraud as
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opposed to "simple allegations". Two working tests laid
down in para 25 are: (1) does this plea permeate the entire
contract and above all, the agreement of arbitration,
rendering it void, or (2) whether the allegations of fraud
touch upon the internal affairs of the parties inter se
having no implication in the public domain."
26.3. Here in this case no material has been brought to the notice of this court
by Mr. Dutta, the learned counsel for the respondent, in support of the
allegation of fraud. Besides, the same failed to withstand the two tests laid
down in the case discussed herein above. The allegation seems to have touched
upon the internal affairs of the parties, inter-se having no implication in the
public domain. I have also gone through the other decisions referred by Mr.
Dutta. There is no quarrel at the bar about the proposition of law laid down in
the said cases. But, in the given fact situation, the ratio laid down in the said
cases, to the considered opinion of this Court, would not advance the case of
the respondents and therefore, reference and detail discussion of all those
decision is found to be not required to decide the instant appeal.
27. Under the aforesaid discussion and finding, this court is of the view that
the impugned order of rejection of the petition Section 8 of the Arbitration and
Conciliation Act, for referring the matter for arbitration, so passed by the
learned trial court has failed to withstand the legal scrutiny. In view of existence
of an arbitration clause in the partnership deed, the learned trial court is not
justified in dismissing the petition.
28. In the result, I find sufficient merit in this appeal and accordingly, the same
stands allowed. The impugned order, dated 09.08.2024, stands set aside and
quashed. Consequent upon, the learned trial Court shall, forthwith, refer the
matter for arbitration.
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29. In terms of above, this arbitration appeal stands disposed of. The parties
have to bear their own cost.
.
JUDGE Comparing Assistant