Kerala High Court
Sri.P.Radhakrishnan Nair vs M/S.Tulsi Vkl Developers on 4 March, 2025
AR NO.223/2024 1
2025:KER:33039
IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT
THE HONOURABLE MR. JUSTICE SYAM KUMAR V.M.
TUESDAY, THE 4TH DAY OF MARCH 2025 / 13TH PHALGUNA, 1946
AR NO.223 OF 2024
PETITIONER:
SRI.P.RADHAKRISHNAN NAIR,
AGED 74 YEARS
S/O.LATE N PARAMESWARAN NAIR, KEERTHI, KN-45,
3RD CROSS ROAD, KEERTHI NAGAR, KOCHI -,
PIN - 682026
BY ADVS.
P.MARTIN JOSE
P.PRIJITH
THOMAS P.KURUVILLA
R.GITHESH
AJAY BEN JOSE
MANJUNATH MENON
SACHIN JACOB AMBAT
HARIKRISHNAN S.
ANNA LINDA EDEN
RESPONDENTS:
1 M/S.TULSI VKL DEVELOPERS,
36/299, 139, MAVELIPURAM,
NEAR SUN RISE HOSPITAL, SEA-PORT AIRPORT ROAD,
KAKKANAD -, PIN - 682030
2 MR.TULASIDAS G.,
MANAGING PARTNER, M/S.TULSI VKL DEVELOPERS,
2.D., SHARON NEST, VAZHAKKALA,
KOCHI -, PIN - 682030
AR NO.223/2024 2
2025:KER:33039
3 SMT.TINTU THULASIDAS,
W/O.MR.TULASIDAS G, PARTNER, M/S.TULSI VKL
DEVELOPERS, 2.D., SHARON NEST,
VAZHAKKALA, KOCHI -, PIN - 682030
BY ADV PRAVEEN.K.JOY, R1 TO R3
THIS ARBITRATION REQUEST HAVING COME UP FOR ADMISSION
ON 04.03.2025, THE COURT ON THE SAME DAY DELIVERED THE
FOLLOWING:
AR NO.223/2024 3
2025:KER:33039
ORDER
Dated this the 04th day of March, 2025 This Arbitration Request is filed invoking Section 11 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as "the Act") seeking to appoint an Arbitrator with respect to disputes and differences that have arisen between the petitioner and respondents under Annexure I and Annexure III.
2. Petitioner and the 2nd respondent were partners of the 1 st respondent firm TULSI VKL Developers which was constituted vide Annexure I partnership deed dated 23.11.2015. The said partnership deed contained an arbitration clause at Clause 16. The business of the 1st respondent firm was that of property developers and builders. Annexure II understanding termed as 'partners of understanding' was entered into between the petitioner and the 2 nd respondent on 24.11.2015 with respect to the sale and development of 5 acres of land scheduled in the said document and situated in Puthencruz. Villas were proposed to be constructed on the said land after dividing the same into plots. Petitioner contends that as per the AR NO.223/2024 4 2025:KER:33039 Annexure II the entire responsibility of development of the said land was upon the 2nd respondent. Disputes arose between the petitioner and the 2nd respondent concerning the project envisaged under Annexure II. The petitioner contends that with respect to the sale of the plots developed pursuant to Annexure II, an amount of Rs.2,73,61,690/- is due to him from respondents 1 and 2. It is also contended that over and above such sale of land, the profit earned on account of the sale of villas constructed thereon at an average rate of Rs.12 lakh per villa, which is Rs.6,84,00,000/- and 50% of which works out to Rs.3,42,00,000/- is also his entitlement. According to the petitioner, the total amount due to be paid to each partner was Rs.6,15,61,690/- along with interest and the same had not paid. It is thus the contention of the petitioner that, despite the 1 st respondent firm having received such huge profit, the petitioner was not paid his legitimate share and this led him to issue a resignation letter dated 03.02.2022 inter alia seeking settlement of the amounts due to him. It is the case of the petitioner that the respondents 1 and 2 offered to pay the amount due to the petitioner on execution of a deed of retirement from the 1st respondent partnership firm and hence a deed of retirement dated 01.04.2022 produced as Annexure AR NO.223/2024 5 2025:KER:33039 III was entered into. By the said deed of retirement, the petitioner resigned from the 1st respondent and the wife of the 2 nd respondent (3rd respondent in this A.R.) was made a partner of the 1 st respondent firm. The said deed of retirement also contained an arbitration clause at Clause 16. In so far as the amounts due remained unpaid and since a dispute had thus arisen between the parties under the relevant arbitration clause, petitioner issued to the respondents a notice (Annexure A IV) invoking the arbitration clause on 28.08.2024, and nominating a retired Judge of this Court as the Arbitrator. The respondents, however, failed to act upon the invocation and hence the petitioner has filed this Arbitration Request invoking Section 11 of the Act.
3. A counter affidavit has been filed by the respondents inter alia contending that Annexure I partnership deed had been reconstituted based on Annexure III Deed of Reconstitution and as per which the petitioner has retired with effect from 01.04.2022. Since the petitioner has thus retired, it is contended by the respondents that no further claim would lie against the respondent firm or against the other continuing partners. After having retired unconditionally there cannot be any claim nor would an Arbitration AR NO.223/2024 6 2025:KER:33039 Request lie seeking appointment of Arbitrator. No Arbitration Request is maintainable under Annexure I partnership deed nor under Annexure III reconstitution deed. The wording used in Annexure III is "Dispute between the partners". Since the petitioner is not a partner under Annexure III, he cannot invoke the arbitration clause therein nor file the Arbitration Request seeking to appoint an Arbitrator. It is also contended that Annexure IV notice had been issued with respect to an agreement for sale dated 30.04.2015 and a joint venture agreement dated 23.11.2015 between the 2 nd respondent and a group of Companies represented by one Sri.Shaji K.Mathew. The said documents do not fall within the scope and ambit of Annexure III. On the said count too, the Arbitration Request is not maintainable. Thus the claims under Annexure IV notice does not come under the scope of the arbitration clause, they are not arbitrable. The claims seen raised in Annexure IV notice and the purported dispute mentioned therein are separate, independent and unconnected with Annexure I, partnership deed. Thus it is contended that the disputes raised by the petitioner are not capable of being arbitrated and the purported disputes raised based on the aforesaid agreements dated 30.04.2015 and 23.11.2015 are by itself time AR NO.223/2024 7 2025:KER:33039 barred claims and hence the arbitration request is also hit by the bar of limitation. The Arbitration Request thus according to respondents is only to be dismissed.
4. Heard Sri. Martin Jose P., Advocate, for the Petitioner and Sri. Praveen K. Joy, Advocate for the respondents.
5. The learned counsel for the petitioner reiterates the contentions made in the Arbitration Request and submits that all the essential mandates for invoking Section 11 of the Act have been duly satisfied. As regards the contentions put forth in the counter affidavit, it is submitted by the learned counsel for the petitioner that, the same are all questions that are beyond the purview of consideration of this court while exercising reference under Section 11 of the Act. It is submitted that the scope of inquiry at the stage of appointment of Arbitrator is limited to the scrutiny of the prima facie existence of the arbitration agreement and nothing else. If the referral court cannot decide the issue without going into disputed facts, it ought to leave the issue to be decided by the arbitral tribunal. The referral court should not unnecessarily interfere with the arbitration proceedings and must allow the arbitral tribunal to exercise its primary jurisdiction. It is also submitted that the question whether the non-signatory is AR NO.223/2024 8 2025:KER:33039 indeed a party to the arbitration agreement may have to be decided based on factual appreciation and hence ought to be left to the Arbitrator to decide. Thus, according to the learned counsel for the petitioner, the question whether the claims under Annexure IV invocation notice fall within the arbitration clauses under Annexure I or Annexure III is a matter for the Arbitrator to look into and decide and not for this court to consider in the reference stage. Reliance is placed in this respect on the dictum laid down by the Hon'ble Supreme Court in Cox and Kings Ltd. v. SAP India Pvt. Ltd. And another [(2025)1 SCC 611].
6. Per contra, the learned counsel appearing for the respondents reiterated the contentions made in the counter affidavit filed and submitted that the disputes now raised by the petitioner after his retirement from the partnership cannot be arbitrated and that the claims put forth in Annexure IV notices of invocation are totally beyond the scope of the arbitration clauses in Annexure I as well as Annexure III. He places reliance on the dictum laid down by the Hon'ble Supreme Court in Kerala State Electricity Board v. Kurien E Kalathil, [AIR 2018 SC 1351]. wherein it has been held that referring the parties to arbitration has serious consequences of AR NO.223/2024 9 2025:KER:33039 taking them away from the stream of civil courts and subjecting them to the rigor of arbitration proceedings. In the absence of an arbitration agreement, the court can refer the parties to arbitration only with the written consent of the parties, either by way of a joint memo or joint application. Insofar as the petitioner is no longer a partner, he is not entitled to invoke the arbitration clause in Annexure III. The Arbitration Request filed by the petitioner is hence not sustainable in law. Reliance is also placed by the learned counsel for the respondents on the dictum laid down by the Hon'ble Supreme Court in NBCC (India) Ltd. v. Zillion Infra Projects Pvt. Ltd. [(2024) 7 SCC 174] wherein it had been held that the arbitration clause from another contract can be incorporated into the contract only by specific reference to the arbitration clause. A reference to the document in the contract should be such that shows the intention to incorporate the arbitration clause from another document into the contract between the parties. The case at hand is a 'two contract case' and not a 'single contract case'. Therefore the arbitration clause as mentioned in Annexure I and Annexure III would not cover a dispute arising from the agreement for sale dated 30.04.2015 and the joint venture agreement dated 23.11.2015. Any dispute arising AR NO.223/2024 10 2025:KER:33039 from the latter cannot be arbitrated invoking the arbitration clause in the former. It is even more so since the petitioner is no longer a 'partner'. Reference is also made to the judgment of the High Court of Delhi in GTM Builders and Promoters Pvt. Ltd. v. Sneh Development Pvt. Ltd. [2023 SCC OnLine Del 1666] wherein it was held that while adjudicating a petition under Section 11(6) of the Act, a court has to endeavour to evaluate whether there exists a written agreement between the parties for resolution of disputes through arbitration and whether the aggrieved party has made out a prima facie arbitrable case. It is necessary to take note of the fact that the mere existence of an arbitration agreement or arbitration clause would not be sufficient to allow the prayer for reference to an Arbitrator. Even in the presence of an arbitration agreement, the court may decline the reference to appoint an Arbitrator when the dispute does not correlate to the agreement. Based on the said dictum it is contended that the petitioner has failed to show that the dispute which is sought to be referred to the Arbitrator is a dispute arising out of the or connected to Annexure I nor Annexure III and hence the dispute is not per se arbitrable in nature.
7. I have heard both sides in detail, pursued the annexures AR NO.223/2024 11 2025:KER:33039 produced and have considered the precedents relied on. The arbitration clause (Clause 16) of Annexure I, partnership deed reads as follows.
"Any dispute arising out of this partnership between the partners or their legal representative shall be referred for adjudication to arbitration of persons appointed by partners or their legal representatives."
A similar clause is seen incorporated in Clause 16 of Annexure III agreement also. Petitioner as well as the 2 nd respondent are signatories to both Annexure I and Annexure III. It is no longer res integra that an arbitration clause in a partnership deed typically survives the deed's termination or dissolution, meaning it remains valid and enforceable even after the partnership is dissolved. This is because the arbitration clause is often treated as an independent agreement, separate from the main partnership agreement, which continues to exist even after the underlying contract is terminated. This is clearly revealed by Section 16 (1) of the Act, which reads as follows:
"16. Competence of the arbitral tribunal to rule on its jurisdiction.-
1. The arbitral tribunal may rule on its own jurisdiction, including ruling on any objections with respect to the existence or validity of the arbitration agreement, and for that purpose,
(a) An arbitration clause which forms part of the contract shall be treated as an agreement independent of the other AR NO.223/2024 12 2025:KER:33039 terms of the contract:and
(b) a decision by the arbitral tribunal that the contract is null and void shall not entail ipso jure the invalidity of the arbitration clause."
It is thus trite that an arbitration clause being a collateral term need not in all situations perish with the coming to an end of the contract. It may survive and this concept of separability of the arbitration clause is widely accepted. [See Reva Electric Car Company Private Limited v. Green Mobil [(2012) 2 SCC 93; Branch Manager, Magma Leasing and Finance Ltd. and Anr. v. Potluri Madhavilala and Anr. (2009) 10 SCC 103]. Hence contentions to the contrary put forth by the learned counsel for the respondent cannot be countenanced.
8. It is clearly discernible that a dispute had arisen between the parties with respect to and arising out of their relationship under Annexure I partnership deed. It is also clearly discernible that the retirement of the petitioner from the partnership had been effected only on 01.04.2022 by the execution of the Annexure III reconstituted deed of partnership. Petitioner is a party to the said reconstituted deed of partnership as the retiring partner. It is the contention of the petitioner that he had while retiring from the partnership of the 1 st AR NO.223/2024 13 2025:KER:33039 respondent firm requested for settlement of the amounts due to him and that there had been no such settlement of accounts till date and there is not even a contention put forth by the 1 st and 2nd respondents that there had indeed been a settlement of accounts with the petitioner. I find merit in this contention. The petitioner has made out a prima facie cause of action and subsistence of disputes under the Annexure I, partnership deed. As regards the contention that the arbitration request and the cause of action are time barred and stale, in view of the fact that the Arbitration Request has been filed on 29.10.2024 ie., well within three years of the execution of Annexure III, the said contention cannot thus be sustained. The contention that Annexure IV notice of invocation had been issued with respect to disputes that do not fall within the scope and ambit of Annexure III, the same is essentially a question that concerns arbitrability and hence is to be left open to be decided by the Arbitrator. Nevertheless, nothing has been produced to even prima facie conclude that the partners of the 1 st respondent wanted to set apart the project referred to in Annexure II from the scope and ambit of the partnership.
9. The essential elements to constitute an arbitration AR NO.223/2024 14 2025:KER:33039 agreement viz., (1) The presence of a present or a future difference in connection with some contemplated affair. (2) Intention of the parties to settle such differences by a private Tribunal. (3) Agreement in writing to be bound by the decision of such Tribunal, and (4) the parties being in ad idem regarding the same, are found existing. [See Babanrao Rajaram Pund v. Samarth Builders & Developers and another (2022) 9 SCC 691]. The pleadings and annexures to the Arbitration Request reveal the existence of disputes between the parties under the arbitration clauses in Annexure I and Annexure III. There has been due invocation of the arbitration clauses by the petitioner and a refusal on the part of the 1 st and 2nd respondents to settle the dispute by reference to arbitration as agreed. The cause of action is not time-barred. It is trite that the Arbitrator can decide on questions regarding jurisdiction/arbitrability/ maintainability and limitation, if any, in the arbitration proceedings. Hence, I find it fit and appropriate to allow the Arbitration Request and to appoint a retired Judge of this Court from the panel of Arbitrators maintained by this Court, as the Arbitrator.
Accordingly, this Arbitration Request stands allowed and it is ordered as follows :
AR NO.223/2024 15
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(i) Justice A.M. Babu, former Judge of the High Court of Kerala, residing at Khans' Kanjirapally (House), Sunrise Residents' Association, Kumarapuram (P.O.), Kunnathunadu, Ernakulam, Pin 683 565, is nominated as the sole Arbitrator to resolve the disputes that have arisen between the petitioner and the respondents 1 and
(ii) The learned Arbitrator may entertain all disputes/issues between the parties in connection with the said agreement, including questions of jurisdiction/ arbitrability/maintainability and limitation, if any, raised by the parties.
(iii) The Registry shall communicate a copy of this order to the learned Arbitrator within ten days from today and obtain a Statement of Disclosure from the learned Arbitrator as stipulated under Section 11(8) read with Section 12(1) of the Act.
(iv) Upon receipt of the Disclosure Statement, the Registry shall issue to the learned Arbitrator a certified copy of this order with a copy of the Disclosure Statement appended. The original of the Disclosure AR NO.223/2024 16 2025:KER:33039 Statement shall be retained in Court.
(v) The fees of the learned Arbitrator shall be governed by the Fourth Schedule of the Act.
Sd/-
SYAM KUMAR V. M. JUDGE csl AR NO.223/2024 17 2025:KER:33039 APPENDIX OF AR 223/2024 PETITIONER'S ANNEXURES Annexure I ANNEXURE-I TRUE COPY OF PARTNERSHIP DEED DATED 23-11-2015 CONSTITUTED BY THE 1ST RESPONDENT IN THE NAME AND STYLE 'TULSI VKL DEVELOPERS' Annexure II TRUE COPY OF 'PARTNERS OF UNDERSTANDING' EXECUTED BETWEEN THE PETITIONER AND 2ND RESPONDENT ON BEHALF OF 1ST RESPONDENT FIRM ON 24-11-2015 Annexure III TRUE COPY OF DEED OF RETIREMENT AND RECONSTITUTION OF THE 1ST RESPONDENT PARTNERSHIP FIRM EXECUTED ON 01-04-2022 Annexure IV TRUE COPY OF NOTICE ISSUED BY THE PETITIONER TO THE 2ND RESPONDENT Annexure V TRUE COPY OF ACKNOWLEDGMENT CARDS EVIDENCING THE RECEIPT OF LAWYER NOTICE BY RESPONDENTS 1 AND 2 Annexure VI TRUE COPY OF UNCLAIMED NOTICE WITH POSTAL COVER RESPONDENT ANNEXURES Annexure R1(a) TRUE COPY OF THE REPLY LETTER DATED NIL