Madras High Court
S.Sudhakar vs S.Giridharan on 10 November, 2022
Author: Senthilkumar Ramamoorthy
Bench: Senthilkumar Ramamoorthy
Arb.O.P. No.583 of 2022 IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 10.11.2022 CORAM THE HONOURABLE MR.JUSTICE SENTHILKUMAR RAMAMOORTHY Arb.O.P.(Comm.Div.) No.583 of 2022 & O.A.Nos.657 to 659 of 2022
1. S.Sudhakar
2. S.Dhinakar
3. Shri Lakshmi Agro Foods No.9, N.N.Garden, 10th Street, Chennai-600 021 Rep.by its Partner S.Sudhakar ... Petitioners/Applicants vs. S.Giridharan ... Respondent/Respondent PRAYER: Arbitration Original Petition filed under Section 11(5) read with Sections 10(2) and 12(1)(b) of the Arbitration and Conciliation Act, 1996 pleased to appoint a Sole Arbitrator for the purposes of adjudication upon all differences and disputes that have arisen between the parties under the Re-constitution of Partnership dated 04.01.2001, and pass such further or other others as this Hon'ble Court may deem fit and proper in the facts and circumstances of the case and render justice.
https://www.mhc.tn.gov.in/judis 1 / 12 Arb.O.P. No.583 of 2022 For Petitioners : Mr.Madhan Babu for M/s.R.Parthasarathy For Respondent : Mr.K.P.Sathish Kumar for M/s.P.Raja **********
Two partners and a partnership firm have jointly filed this petition under Section 11 of the Arbitration and Conciliation Act 1996 (the Arbitration Act) and three applications under Section 9 thereof. For ease of reference, the parties are referred to in this order as per their status in the Section 11 petition.
2. The petitioners state that a partnership firm under the name and style of “Shri Laxmi Agro Foods” was constituted. The said firm is engaged in the business of trading in food products such as pulses. The petitioners assert that the partnership firm was re-constituted upon the retirement of Mr.L.Senthivelan and Mr.L.Arun Kumar and that a Deed of Re-constitution of Partnership (the Deed) was executed on 04.06.2001. According to the petitioners, the Deed was executed by the two petitioners, Mr.K.Selvaraj, who is their late father, and the respondent herein. In terms thereof, it is stated that the respondent herein acknowledged the receipt of a sum of Rs.25,00,000/- in full https://www.mhc.tn.gov.in/judis 2 / 12 Arb.O.P. No.583 of 2022 and final settlement of all claims in relation to the partnership firm. The petitioners rely upon clause 19 of the said deed, which provides for dispute resolution by arbitration.
3. Learned counsel for the petitioners points out that clause 19 names an arbitrator. However, by referring to a communication dated 14.09.2022 from the named arbitrator, it is stated that the named arbitrator would be ineligible in terms of Section 12(5) read with Schedule 7 of the Arbitration Act.
4. Learned counsel also points out that the respondent herein instituted a civil suit before the commercial court at Chennai seeking relief in relation to a specific trade mark. The said suit was rejected for want of jurisdiction.
5. Learned counsel further submits that the petition is filed under Section 11(6) of the Arbitration Act and that, therefore, the 30 day period prescribed under Section 11(4) thereof does not apply. https://www.mhc.tn.gov.in/judis 3 / 12 Arb.O.P. No.583 of 2022
6. As regards the applications under Section 9, by drawing reference to a message sent by the respondent and a letter addressed to a prospective business partner of the petitioners, it is stated that the respondent is communicating with such persons to cause prejudice to the business of the partnership firm, in spite of exiting from the firm. Therefore, he submits that interim orders be granted to restrain such interference pending arbitral proceedings.
7. The petition and applications are strongly opposed by the respondent. The first ground on which the petition is opposed is the non-production of the original Deed. By drawing reference to Rule 3.1 of the Madras High Court (Arbitration) Rules 2020, it is stated that the production of the original or a duly certified copy is mandatory. The next ground on which the petition is opposed is that the Deed, which is the document containing the arbitration clause, is not valid. Learned counsel points out that the said document does not bear the signature of the party of the second part, the late Mr.Selvaraj. Learned counsel also asserts that the signature of the respondent on the said document is denied. The third objection is on the ground that https://www.mhc.tn.gov.in/judis 4 / 12 Arb.O.P. No.583 of 2022 the arbitration clause names an arbitrator. Therefore, it is stated that the dispute should be referred to the named arbitrator and not to any other person. This submission is made without prejudice to the contention that the agreement is not valid. The fourth objection is on the ground that the petitioners approached this Court prior to the expiry of the 30 day notice period under Section 11 of the Arbitration Act.
8. As regards the Section 9 applications, it is stated that the petitioners have not produced a valid partnership deed. They have also not produced records relating to the GST registration of the partnership firm. In the absence of such documents, it is stated that the applications for interim relief should be rejected.
9. A photocopy of the Deed is on record. While learned counsel for the petitioners asserts that the petitioners are in possession of the original, the original is not before this Court. The production of the original is not mandatory for a petition under Section 11 of the Arbitration Act as per Rule 3 of the Madras High Court (Arbitration) https://www.mhc.tn.gov.in/judis 5 / 12 Arb.O.P. No.583 of 2022 Rules, 2020. Even as regards a Section 9 application, a copy certified by the party or his representative is sufficient. The photocopy produced before this Court appears to bear a blurred signature, as regards the party of the second part on a few pages, but the signature of the party of the second part is clearly not visible on the last page of the document. Although the respondent denies his signature, the Deed bears a signature which appears prima facie to be that of the respondent on all pages thereof.
10. Clause 19 of this Deed provides for resolution of disputes by arbitration. The said clause is set out below:
“19. In the event of disputes or differences amongst any of the Parties hereto in relation to the terms and conditions stipulated under this agreement, the same shall be resolved by reference of the dispute to Mr.V.Mahesh, Chartered Accountant who shall act as the Sole Arbitrator. The Parties hereto shall be governed by the law relating to Arbitration in force on that date.”
11. The question that arises for consideration is whether the petitioners have made out a case for reference of the dispute for https://www.mhc.tn.gov.in/judis 6 / 12 Arb.O.P. No.583 of 2022 arbitration notwithstanding the objections raised in relation to the validity of the agreement containing the arbitration clause. By a legal fiction, the Arbitration Act provides, in Section 16(1) thereof, that the arbitration clause constitutes a distinct agreement which survives notwithstanding conclusions that the contract containing such clause is invalid. The request for constitution of the arbitral tribunal should be viewed in that statutory context.
12. As noticed earlier, the Deed prima facie appears to bear the signature of the respondent herein, who is described therein as a confirming party. The respondent, however, disputes the signature on the document. Learned counsel for the petitioners relied on an order dated 11.12.2015 in V.S.Ravichandran and another v. G.Ramesh and others in O.P.No.793 of 2015. In the said order, notwithstanding objections with regard to the validity of the partnership deed containing the arbitration clause, the dispute was referred for arbitration subject to the examination of the validity of the partnership deed by the arbitral tribunal, including by subjecting the same to forensic examination. Learned counsel also placed for consideration https://www.mhc.tn.gov.in/judis 7 / 12 Arb.O.P. No.583 of 2022 the recent judgment of the Hon'ble Supreme Court in Emaar India Ltd. v. Tarun Aggarwal Projects LLP and another, 2022 SCC Online SC 1328, particularly paragraph 23 thereof, with regard to the limited scope of Section 11 and the circumstances under which a petition under Section 11 may be rejected. He also placed for consideration Bharat Rasiklal Ashra v. Gautam Rasiklal Ashra and another, (2012) 2 SCC 144, particularly paragraphs 16 and 17 thereof, with regard to the need to be wary of attempts to derail such proceedings by raising objections with regard to the validity of the agreement.
13. As regards the objection on the ground that there is a named arbitrator, the named arbitrator has stated as under in the communication dated 14.09.2022:
“Hence it is proved beyond doubt that Mr.S.Giridharan has no affairs in the aforesaid partnership firm directly / indirectly as per partnership Reconstitution Deed dated 04.06.2001. Furthermore, he and his wife/son/his assignor/friends etc have no rights over the fixed assets/movable assets/tangible assets/intangible assets (Trademark https://www.mhc.tn.gov.in/judis 8 / 12 Arb.O.P. No.583 of 2022 “Udhayam”), loans secured /unsecured/etc. As a result the outgoing partner Shri S.Giridharan and others who had retired from the aforesaid partnership firm had assigned the rights of the intangible assets (UDHAYAM) to the remaining partners. This is treated as an Assignment Deed. There are various judgments given by Honorable Apex Court of India in favour of remaining partners.”
14. In light of the above categorical opinion expressed by the named arbitrator in favour of the petitioners, the named arbitrator is clearly ineligible to act as arbitrator as per Section 12(5) read with Schedule 7 of the Arbitration Act. Therefore, the dispute cannot be referred to the named arbitrator.
15. The last objection relating to the 30 day notice period remains to be considered. In this case, the arbitration clause provides for the reference of disputes to the named arbitrator. The named arbitrator has not failed to act but is de jure unable to act. In the circumstances, it would be a meaningless ritual to call upon him to act as per clause 19 of the Deed. The situation does not fit neatly into sub-sections 4, 5 and 6 of the Arbitration Act. Significantly, the https://www.mhc.tn.gov.in/judis 9 / 12 Arb.O.P. No.583 of 2022 respondent denies the validity of the Deed and, consequently, the arbitration clause. In these circumstances, the objection regarding the failure to wait until expiry of the 30 day period is liable to be overruled.
16. When the law on Section 11 is considered in the factual context, the petitioners have made out a case for reference of the dispute for arbitration subject to the consideration of the objections of the respondent with regard to the validity of the Deed, including by reference thereof for forensic examination if considered appropriate by the arbitral tribunal.
17. In these circumstances, this petition is allowed by appointing Mr.Justice K.N.Basha, a retired Judge of this Court, residing at Flat No.F-1, ''STAR'', No.25/1, Dr.Ambedkar Road, Old ICF Link road, North Thirumalai Nagar, Villivakkam, Chennai-600 049, Mobile No.:9444454545, as the sole arbitrator. The sole arbitrator is requested to enter upon reference and adjudicate the dispute, including all objections raised by either party. The fees and expenses in relation to the arbitral proceedings shall be fixed by the arbitrator in consultation with the parties. https://www.mhc.tn.gov.in/judis 10 / 12 Arb.O.P. No.583 of 2022
18. As regards the applications for interim relief, such relief is prayed for primarily on the ground that the respondent is interfering with the conduct of the business of the partnership firm. Without doubt, the respondent has a right to initiate appropriate legal proceedings to redress any grievances. Without prejudice to such right, the respondent is restrained from interfering with the business by communicating with business partners, competitors or the like in relation to the business of the partnership firm for a period of three weeks after the arbitral tribunal enters upon reference. Meanwhile, it is open to the applicants to file petitions under Section 17 of the Arbitration Act seeking similar relief from the arbitral tribunal. All the applications are disposed of on these terms.
10.11.2022 Index : Yes/No Internet : Yes/No kal/rrg https://www.mhc.tn.gov.in/judis 11 / 12 Arb.O.P. No.583 of 2022 SENTHILKUMAR RAMAMOORTHY J.
kal/rrg Arb.O.P.(Comm.Div.) No.583 of 2022 & O.A.Nos.657 to 659 of 2022 10.11.2022 https://www.mhc.tn.gov.in/judis 12 / 12