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2006 DIGILAW 630 (PNJ)

Laxmi Solvent Industries v. Madan Lal

2006-02-22

HEMANT GUPTA

body2006
Judgment 1. The present revision petition is directed against the order passed by the learned trial Court on 1.2.1994, whereby an application filed by the defendants for staying of the proceedings in terms of Section 34 of the Arbitration Act, 1940 , was dismissed on the ground that the dispute between the parties relates to repayment of the amount of the loan of the bank and thus, the matter cannot be referred to the Arbitrator. 2. The parties are partners in terms of Partnership Deed dated 21.8.1991. Clause 11 of the Partnership Deed contemplates applicability of the provisions of Indian Arbitration Act in case of any dispute. It was found that prior to the said Partnership Deed, there was a dissolution of partnership on 20.8.1990 and all the assets and rights and liabilities of the dissolved firm were taken over by the new firm. Since there is dispute between the partners, the same are required to be referred to an arbitrator in terms of Clause 11 of the Partnership Deed. 3. The learned trial Court declined the application by relying upon clause 4 of the Partnership Deed, which is to the following effect:- "the capital to be invested shall be at prorata and present liabilities including court case shall also be as prorata. Besides the guarantors, which are in a court case filed by the central Bank of India, Shahabad Markanda and whose property allegedly mortgaged with the Bank shall not be liable for payment of bank loan, if decreed by the court and all the present partners shall make the payment and in case the present partners make any default in making bank payment, then this partnership deed shall stand dissolved automatically and Sh. Madan Lal Party No.1 shall be entitled to dispose of the factory for payment of bank loan i. e. the present partners shall make payment of any decretal amount. " 4. The learned trial Court found that in terms of the said Clause, the dispute cannot be referred to an Arbitrator. I am of the opinion that the order passed by the learned trial court, holding that the dispute cannot be referred to an Arbitrator is clearly not sustainable in law. The dispute whether the provisions of Clause 4 have been complied with or not is also required to be decided by the arbitrator in terms of Clause 11 of the Partnership Deed. The dispute whether the provisions of Clause 4 have been complied with or not is also required to be decided by the arbitrator in terms of Clause 11 of the Partnership Deed. Therefore, the order dated 1/2/1994 is set aside. The proceedings in the suit are ordered to be stayed in terms of Sec.34 of the Arbitration Act. The revision petition stands allowed in the above terms.