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2016 DIGILAW 1196 (RAJ)

VIJAY KUMAR DATA(HUF) v. BABU LAL DATA

2016-08-19

MOHAMMAD RAFIQ

body2016
ORDER : 1. This application under Section 11 of the Arbitration and Conciliation Act, 1996 (for short 'the Act') has been filed by Vijay Kumar Data(HUF) through himself as its Karta and Daya Kishan Data S/o. Shri Niranjan Lal Data, inter alia with the prayer that either Shri P.K. Bhatia, retired District and Sessions Judge or any other person be appointed as Sole Arbitrator to resolve the dispute between the applicants and non-applicants in accordance with the provisions of law. 2. Brief facts as averred in the application are that a partnership was constituted in the name and style of M/s. Vijay Tin Industries amongst Daya Kishan Data, Mrs. Gayatri Devi and Mrs. Chemeli Devi. A partnership deed dated 16.04.1982 was executed amongst them having 30%, 45% and 25% share respectively in the net profits and losses of the partnership business. The firm was to carry business of manufacturing, fabricating, assembling, sale and supply of all kinds of classes of Tin Containers and its operations. The principal place of business was at Khairthal, District Alwar. Partnership was at will and all the partners had predetermined shares in profits and losses of the firm. Smt. Gayatri Devi Data retired from the partnership firm vide deed dated 03.04.2002 and in her place, Vijay Kumar Data (HUF) through himself as its karta, was inducted as a partner w.e.f. 03.04.2002 having share of 45% in the profits and losses of the said firm. Terms and conditions of new partnership deed was modified/altered from time to time. On retirement of Smt. Chameli Devi on 01.04.2007, fresh partnership deed dated 11.05.2007 was executed amongst Applicant no. 1 and applicant no. 2 each having equal share of 50% in profits and losses of the firm. Thereafter, yet another partnership deed dated 01.01.2008 was executed amongst Daya Kishan Data; Vijay Kumar Data (as karta of his HUF); Babu Lal Data and Ajay Kumar Data each having equal share of 25% in profits and losses of the firm. According to the applicants, they were made to sign partnership deed dated 01.04.2008 as witnesses with the understanding that all the assets of the firm, tangible and intangible, will be valued at market rates and their share so arrived at will be valued at market rates and the shares of the applicants so arrived at will be credited in their accounts. Non-applicants, however, utterly failed to determine and credit it to the account of the applicants. The applicants made several requests to the firm and continuing partners to value the assets both tangible and intangible and provide statement of the accounts. However, the non-applicants did not respond to the same. 3. Mr. Amol Vyas, learned counsel for the applicant submitted that as per estimate of the applicants, total tangible, intangible, movable and immovable assets of the firm stood at Rs. one crore and each of them is entitled to 50% share of it. When the non-applicants failed to settle the accounts of the applicants, a legal notice dated 04.12.2010 was served on the non-applicants, requiring them to repay the aforesaid amount of Rs. one crore along with interest @ 18% p.a. as damages for unnecessary withholding the amount due without any rhyme and reason. Aforesaid notice clearly stated that in case the non-applicants did not pay the aforesaid amount, the applicant will be constrained to invoke arbitration clause as envisaged in Clause 9 of partnership deed and seek reference of the dispute to the arbitrator. The non-applicants chose not to reply the repeated requests of the applicants. It is argued that a dispute amongst the partners of the firm has arisen and as per Clause 9 of the partnership deed dated 01.01.2008 and 01.04.2008, the same is required to be referred to the sole arbitrator in terms of provisions of the Act. The applicants, therefore, again served notice as per provisions of Section 11(5) of the Act through their counsel on 22.12.2010 upon the non-applicants suggesting name of Mr. P.K. Bhatia, retired District and Sessions Judge as sole arbitrator to resolve the dispute between the parties. Since non-applicants have failed to refer the dispute to sole arbitrator, therefore, present application has been filed by the applicants. 4. Learned counsel for the applicants argued that Clause 9 of the partnership deed dated 01.01.2008 and 01.04.2008 provides that in case of disputes or differences between the partners in respect of the terms and conditions referred to in the deed, the same shall be resolved through Arbitration Act of India. 5. Mr. Anuroop Singhi, learned counsel for the non- applicants opposed the application and argued that since the applicants have not placed on record copies of alleged partnership deeds dated 16.04.1982 and 03.04.2002, they should be eschewed from consideration while deciding present application. 5. Mr. Anuroop Singhi, learned counsel for the non- applicants opposed the application and argued that since the applicants have not placed on record copies of alleged partnership deeds dated 16.04.1982 and 03.04.2002, they should be eschewed from consideration while deciding present application. Learned counsel argued that larger issue of partition of family is pending before the Supreme Court in SLP(Civil) No. 11870/2015 and the amount to be paid to the applicants herein, if at all, would depend upon the order to be passed by the Supreme Court in the said matter. Therefore, there is no existing dispute in the present matter as on date, which can be resolved by appointment of sole arbitrator. Present applicants are not partners of the firm as per the partnership deed dated 01.04.2008, which has been executed between Babu Lal Data and Ajay Kumar Data as two partners. Present applicants are mere signatories to the aforesaid partnership deed. As mere witnesses, no right whatsoever accrue in favour of the applicants to approach this Court by filing present application under Section 11(6) of the Act to seek appointment of sole arbitrator. 6. Mr. Anuroop Singhi, learned counsel relying on the judgment of the Supreme Court in Major (Retd.) Inder Singh Rekhi Vs. Delhi Development Authority, AIR 1988 (SC) 1007 argued that mere failure or inaction to pay does not lead to the inference of the existence of the dispute. It is submitted that various matters with respect to the partition between the parties herein are pending before various judicial courts including the Supreme Court. In these circumstances, appointment of an arbitrator will only entail to multiplicity of the dispute and increase burden of the courts. It is only after adjudication of the matter by the Supreme Court that the amount, if at all any, becomes payable to the applicants. Any amount without any substance or justification can neither crate any right nor any dispute so as to invoke jurisdiction of this Court under Section 11(6) of the Act. Even as per the notices dated 04.12.2010 and 22.12.2010 served by the counsel of the applicants, amount claimed is merely an estimation and apportionment, which cannot justify filing of the present application. Even as per the notices dated 04.12.2010 and 22.12.2010 served by the counsel of the applicants, amount claimed is merely an estimation and apportionment, which cannot justify filing of the present application. Moreover, as per the clause of partnership deeds relied upon by the applicants, the retiring partners are only entitled to the amount lying in their capital account whereas as per the legal notices, the applicants have claimed share in the total tangible and intangible, movable and immovable assets of the firm. Thus, the claim itself does not give rise to any dispute. It is contended that in pursuance of order passed by this Court in Arbitration Application No. 60/2010 are put to rest by the Arbitrator in view of pendency of SLP before the Supreme Court and no fruitful purpose would be served by passing any order in the present proceedings. 7. Mr. Amol Vyas, learned counsel rejoined and submitted that argument of the non-applicants that a larger issue of partition of family is pending before the Supreme Court is completely baseless. In fact, non-applicant Babu Lal Data filed a suit for partition and the same is pending before Additional District and Sessions Judge, No. 3, Jiapur Metropolitan, Jaipur. Along with the suit, an application for temporary injunction was also filed by the plaintiff, which was partly allowed by the trial court. However, order of the trial court was set aside by this Court, against which, SLP has been filed by the non-applicants and the same is pending before the Supreme Court and as of now, there is no order of injunction/stay therein. Pendency of SLP before the Supreme Court will not come in the way of this Court for appointing sole arbitrator. It is further argued that argument that partnership deed dated 01.04.2008 has been executed between Babu Lal Data and Vijay Kumar Data and name of the applicants find place only as witnesses has already been dealt with by this Court in Arbitration Application No. 60/2010 wherein this Court has referred the dispute to sole arbitrator. It is argued that subsequent partnership deed executed between the remaining partners either with continuance or induction of new partners cannot take away the arrangement agreed in favour of those, who were parties to the earlier partnership deed more so when new partnership deed did not speak about it. It is argued that subsequent partnership deed executed between the remaining partners either with continuance or induction of new partners cannot take away the arrangement agreed in favour of those, who were parties to the earlier partnership deed more so when new partnership deed did not speak about it. As far as settlement of accounts is concerned, the same will be decided/done by the sole arbitrator as and when appointed by this Court. 8. I have given my thoughtful consideration to rival submissions and perused the material placed on record. 9. Let me begin with deciding objection raised by learned counsel for the non-applicants that since the applicants Vijay Kumar Data (HUF) and Daya Kishan Data are not partners in the last partnership deed dated 01.04.2008 and have signed the deed aforesaid as mere witnesses, therefore, no right accrues in their favour to approach this Court by filing present application under Section 11(6) of the Act. This argument is noted only to be rejected for the simple reason that partnership deed dated 01.04.2008 has substituted/replaced earlier partnership deed executed between the applicants and non-applicants on 01.01.2008. All the partnership deeds contained identical clause with regard to its duration that the partnership business shall be at will and any partner may ask his retirement from the firm by giving a one month's notice to the other partners of the firm. In the event of retirement of any partner, no amount in the goodwill of the firm shall be paid to the retiring partner and only the amount lying in their capital account shall be paid to the retiring partner. All the partnership deeds also contained identically worded Clause 9, which provides that the Arbitration Act of India shall govern the position and situation arising out of any dispute or differences between the partners in respect of the terms and conditions referred to in the deed. 10. That originally partnership firm constituted pursuant to partnership dated 16.04.1982 had Shri Daya Kishan Data, Smt. Gayatri Devi Data and Smt. Chameli Devi Data as three partners, each of them having 30%, 45% and 25% share respectively in the profits and losses of the firm. 10. That originally partnership firm constituted pursuant to partnership dated 16.04.1982 had Shri Daya Kishan Data, Smt. Gayatri Devi Data and Smt. Chameli Devi Data as three partners, each of them having 30%, 45% and 25% share respectively in the profits and losses of the firm. Since Smt. Gayatri Devi Data retired from partnership firm in pursuance to partnership deed dated 03.04.2002, Shri Vijay Kumar Data (HUF) was inducted in her place from that date with her share of 45% in the profits and losses of the firm. Upon retirement of Smt. Chameli Devi Data on 01.04.2007, a fresh partnership deed dated 11.05.2007 was executed in between Applicant No. 1 and 2 having equal share of 50% in profits and losses of the partnership business. But then, it was followed by another partnership deed dated 01.01.2008, which was executed amongst Shri Daya Kishan Data(applicant no. 2); Shri Vijay Data(karta of HUF as applicant no. 1); Shri Babu Lal Data(non-applicant no. 1) and Shri Ajay Kumar Data(non- applicant no. 2), each of them were having equal share of 25% in the profits and losses of the firm. Mere fact that Applicants Vijay Kumar Data and Daya Kishan Data ceased to be partners of the firm by virtue of partnership deed dated 01.04.2008 does not extinguish their right to claim reference of dispute to sole arbitrator. Notwithstanding the applicants not being partners in the newly constituted firm pursuant to partnership deed dated 01.04.2008, the arbitration clause with regard to settlement of dispute amongst these four partners contained in partnership deed dated 01.01.2008 would survive. Therefore, the applicants can very much seek reference of the dispute to arbitrator by invoking Section 11(6) of the Act. 11. Arbitration Act envisages that arbitration clause shall be treated as agreement independent on the other terms of the contract. The Supreme Court in Enercon (India) Limited & Others Vs. Enercon Gmbh & Another, (2014) 5 SCC 1 held that concept of separability of the arbitration clause/agreement from the underlying contract is a necessity to ensure the intention of the parties to resolve the disputes by arbitration does not evaporate into thin air with every challenge to the legality, validity, finality or breach of the underlying contract. Section 16 of the Act accepts the concept that the main contract and the arbitration agreement from two independent contracts. Section 16 of the Act accepts the concept that the main contract and the arbitration agreement from two independent contracts. Commercial rights and obligations are contained in the underlying, substantive, or the main contract. It is followed by a second contract, which expresses the agreement and the intention of the parties to resolve the disputes relating to the underlying contract through arbitration. 12. The Supreme Court in Ashapura Mine-chem Limited Vs. Gujarat Mineral Development Corporation, (2015) 8 SCC 193 was dealing with a case in which the appellant and the respondent entered into a memorandum of understanding(MOU) wherein the appellant proposed to constitute a joint venture along with another company for setting up an alumina plant. Under Clause 19, it was stipulated that the MOU was subject to approval of the Board of Directors of the appellant as well as the respondent. It was further specifically mentioned that after getting necessary approval by both sides, the MOU would be converted into an agreement between the appellant and the respondent. Clause 26 of the MOU provided for resolution of disputes/difference in the first instance, amicably by mutual consultation and Clause 27 provided that if amicable settlement is not reached between the parties, then such unresolved disputes or differences concerning or arising from the MOU and its implementation, breach or termination whatsoever shall be referred to the arbitration of a sole arbitrator appointed by the parties and the arbitration shall be governed by the Arbitration and Conciliation Act, 1996 (India) and conducted in the city of Ahmedabad. Subsequent to signing of the MOU, the respondent cancelled the MOU alleging failure on the part of the appellant in complying with various terms and conditions of the MOU. It was held by the Supreme Court that even if MOU did not fructify into full-fledged agreement, arbitration clause contained in MOU is an independent arbitration agreement and even if MOU is terminated, arbitration agreement continues to remain in force and parties are entitled to invoke said clause and exercise option for appointment of arbitrator. 13. In the present case also, even if the applicants ceased to be partners of the firm subsequent to partnership deed dated 01.04.2008, by reason of the fact that they had share in the earlier partnership deed dated 01.01.2008, which also contained arbitration clause. 13. In the present case also, even if the applicants ceased to be partners of the firm subsequent to partnership deed dated 01.04.2008, by reason of the fact that they had share in the earlier partnership deed dated 01.01.2008, which also contained arbitration clause. Such arbitration clause has to be taken as an independent arbitration agreement, therefore, doors of arbitration cannot be shut on the applicants. Mere fact that certain issues in some of the cognate matters between the same parties or some of the partners are pending before the different courts would not be a reason not to refer present dispute to the arbitrators. 14. In view of above discussion, the application deserves to succeed and the same is accordingly allowed. Hon'ble Mr. S.N. Jha, retired Chief Justice of this Court, MD-37, Eldeco Mansionz, Sector 48, Sohna Road, Gurgaon-122001; Phone-09431024997 is hereby appointed as an independent sole arbitrator to resolve the disputes between the parties. Payment of the cost of arbitration proceedings and the arbitration fees shall be made as per the Manual of Procedure for Alternative Dispute Resolution, 2009 of this Court. 15. A copy of this order be sent to Hon'ble Mr. S.N. Jha, retired Chief Justice of this Court, MD-37, Eldeco Mansionz, Sector 48, Sohna Road, Gurgaon-122001; Phone-09431024997.