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2017 DIGILAW 1863 (RAJ)

Sagar Choudhary v. Dilip Singh

2017-08-18

MOHAMMAD RAFIQ

body2017
JUDGMENT : Mohammad Rafiq, J. This application under section 11 of the Arbitration and Conciliation Act, 1996, has been filed by petitioner Sagar Choudhary, praying for appointment of an independent sole Arbitrator for resolution its disputes and differences with respondent Dilip Singh. 2. Petitioner and respondent were partners in M/s Alwar Indane, Shop No. 17, Shiv Complex, Near Jail Circle, Alwar (Raj.), which, according to the applicant, was carrying dealership of Indian Oil Corporation Limited in the area of Alwar (Rajasthan). A partnership deed was executed between the parties on 11.09.2014, wherein 49% share was agreed of the petitioner and remaining 51% share was agreed of the respondent. Earlier the dealership was allotted to a proprietorship firm of the respondent. While the said firm was reconstituted as a partnership firm because of financial crunches and the petitioner was admitted as one of the partner of the said firm to carry the said dealership business. The petitioner claims that he at that time invested a sum of Rs. 1,60,00,000/- into the said firm for carrying out day to day business activities. It was a clear understanding between the partners that in case the respondent failed to give the name of the petitioner endorsed in the said dealership of Indian Oil Corporation Limited, he shall refund the complete investment made by the petitioner. An application was sent by the respondent to the Indian Oil Corporation on 12.09.2014 for reconstitution of the firm and changing it from sole proprietorship to partnership firm by admitting the petitioner as one of the partners to the firm. After the aforesaid partnership deed was entered into between the parties, the petitioner started handling day to day affairs of the firm and he even signed the documents. The respondent on 22.01.2016 along-with 15-16 persons attacked the petitioner for which FIR No. 27/2016 was registered on the same day with Police Station Shivaji Park, Alwar, for offence under Sections 143, 341, 323 and 379 IPC. It was thereafter that the respondent filed a Civil Suit No. 34/04/16 along-with an application for Temporary Injunction No. 46/29/2016 before the court of Civil Judge & Judicial Magistrate No. 1, Alwar, against three persons, namely, the petitioner, Mr. Om Prakash Choudhary and Mr. Tara Chand. Their application for temporary injunction was rejected vide order dated 05.04.2016 on the premise that the respondent has not come with clean hands and suppressed the material facts. Om Prakash Choudhary and Mr. Tara Chand. Their application for temporary injunction was rejected vide order dated 05.04.2016 on the premise that the respondent has not come with clean hands and suppressed the material facts. In that suit, an application under Order 7, Rule 11 of the Code of Civil Procedure was preferred by the petitioner for rejection of the suit on the ground of arbitration clause available in the partnership deed. Application was rejected by the court vide order dated 08.02.2016. According to the petitioner, challenge to that order was made in a writ petition before this court. During pendency of the civil suit, the Indian Oil Corporation rejected the application for converting the proprietorship firm as partnership firm on the ground of pendency of various litigation and penalties pending against the respondent. The respondent by concealing the fact of rejection of the application, demanded more money from the petitioner in the garb of partnership deed with assurance that the application for reconstitution of partnership was in process. 3. Mr. Pankaj Gupta, learned counsel for petitioner, argued that in the light of clause 15 of the partnership deed executed between the parties, which contains the arbitration clause, the petitioner sent a notice dated 26.02.2016 to the respondent for his concurrence on the name of the arbitrator. The counsel for the respondent vide letter dated 23.03.2016 replied to the said notice and denied for appointment of arbitrator and disputed the arbitration clause. Thus the respondent failed to appoint the arbitrator. Learned counsel, in support of his arguments, has relied on a judgment of the Supreme Court in National Agricultural Co-op. Marketing Federation of India Ltd. v. Gains Trading Ltd., 2007 (2) Arb. LR 339 (SC). 4. Mr. Ashok Mehta, learned senior counsel for the respondent, opposed the application and raised preliminary objection that due to personal reasons and other factors, the respondent intended to convert the sole proprietorship firm into a partnership firm but there was a precondition to that effect which was required to be fulfilled in case the constitution of the business effectuates to be changed. The precondition i.e. clause 21 of the distributorship agreement envisages that in the event of distributor being a partnership firm, any change in the constitution of the firm, whether by retirement, introduction of new partners or otherwise howsoever will not be permitted without the previous written approval of the Corporation, namely, the Indian Oil Corporation. Learned counsel therefore argued that the very intention of the partnership deed provides that in case it was converted into a partnership deed, prior approval of the Corporation would be necessary. The application sent to the Corporation by the respondent in that behalf, was rejected by the Corporation vide order dated 25.09.2014. It was denied that the petitioner at the time of constitution the partnership firm had invested a sum of Rs. 1.60 crores in the business of the firm. Rest of the amount which the petitioner claims to have given to the respondent, if any, has been given after 25.09.2014 when the Indian Oil Corporation Limited had refused to reconstitute the business into the partnership firm. By virtue of that rejection, it is evident that the partnership deed was never acted upon. 5. Mr. Ashok Mehta, learned senior counsel, argued that after the Indian Oil Corporation Limited refused permission to convert the proprietorship firm into partnership firm vide order dated 25.09.2014, the firm stood declared null and void as it was one of the conditions of the partnership deed that if the Indian Oil Corporation Limited did not grant permission for such conversion, in that even the petitioner cannot claim refund of the amount given to the respondent by invoking arbitration clause, as the partnership firm never come into operation. 6. Learned senior counsel further argued that the if the petitioner wants to recover any sum of money, then the same can be done by filing money recovery suit and the present application cannot be decided by invoking the arbitration clause. Learned senior counsel argued that the arbitrator does not have any any competence to pass any decree. Learned counsel in support of his arguments, has relied on the judgment of the Bombay High Court in Dawoodbhai Abdulkader v. Abdulkader Ismailji, AIR 1931 Bom 164. 7. Learned senior counsel argued that the arbitrator does not have any any competence to pass any decree. Learned counsel in support of his arguments, has relied on the judgment of the Bombay High Court in Dawoodbhai Abdulkader v. Abdulkader Ismailji, AIR 1931 Bom 164. 7. Having heard learned counsel for the parties and perused the material on record, I find that even if the partnership deed was never acted upon between the parties, the fact that arbitration clause containing the provision for arbitration would still survive even after the partnership deed is cancelled or revoked. As regards the competence of the arbitrator to pass the order, it is not for this court to entertain the merits of the claim and counter claim. The respondent can always agitate any argument in support of his stand as to competence of the arbitrator to examine the provisions of section 16 of the Arbitration and Conciliation Act, 1996. Even if the partnership deed is taken to be dissolved for refusal of the Indian Oil Corporation to grant permission for constitution of proprietorship firm into partnership firm in the business of Section 11 of the Act of 1996, the arbitration clause contained in such partnership deed would still survive as such clause shall be taken as a standalone agreement. 8. The application succeeds and is allowed. Hon'ble Mr. Justice Anoop Chand Goyal (Retired), R/o D-19-B, "Seema Sadan", Meera Marg, Bani Park, Jaipur, (Cell No. 0141-2208310), is hereby appointed as an independent sole arbitrator to resolve the disputes between the parties. Payment of the costs of arbitration proceedings and the arbitration fees shall be made as per the Fourth Schedule of the Arbitration and Conciliation (Amendment) Act, 2015 read with Manual of Procedure for Alternative Dispute Resolution, 2009 of this Court, as amended from time to time. 9. A copy of this order be sent to Hon'ble Mr. Justice Anoop Chand Goyal (Retired), R/o D-19-B, "Seema Sadan", Meera Marg, Bani Park, Jaipur, for needful.