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Uttarakhand High Court · body

2018 DIGILAW 307 (UTT)

Namrata Sen v. Captain Saurabh Chauhan (Retd. )

2018-06-11

SUDHANSHU DHULIA

body2018
JUDGMENT : Sudhanshu Dhulia, J. This arbitration application has been filed by the applicant under Section 11(6) of the Arbitration and Conciliation Act, 1996 for appointment of an Arbitrator. 2. The case of the applicant in brief is that there was an original partnership agreement between the maternal grand-mother of the applicant, namely, Smt. Reva Rautela, and her brother i.e. the respondent on 18.12.2006. The partnership was for running a hotel in the name and style of “Reva Retreat” at “Bhowali”, district Nainital. Admittedly, this partnership deed is a document which is duly registered. During the course of hearing this document was also produced before this Court by the respondent, and was perused by this Court. On 06.06.2008, the present applicant was inducted as one of the partners in the firm and since then she claims to be a partner of the firm. It is again an admitted fact that the supplementary partnership deed dated 06.06.2008 was never registered. Smt. Reva Rautela, the maternal grandmother of the applicant and the respondent, passed away on 16.10.2014. Thereafter certain dispute arose between the applicant and the respondent, who are sister and brother, respectively. The applicant moved an application before the respondent for appointment of an arbitrator, on which no action was taken and consequently the applicant became constrained to file the present arbitration application under Section 11 (6) of the Arbitration and Conciliation Act, 1996 for appointment of an arbitrator. 3. Counter affidavit and rejoinder affidavit have been filed. Parties have been heard at length at various points of time. 4. The principal contention of the counsel for the respondent Sri Naresh Pant is that the applicant is not a partner. In fact respondent denies the supplementary partnership deed and claims it to be a forged and fabricated document. Therefore the clear stand of the respondent is that since the applicant is not a partner of the firm, and the supplementary partnership deed on which she has placed reliance is a forged and fabricated, there is no question of appointment of arbitrator. 5. The fact of the matter is that though the supplementary partnership deed is not registered, the respondent had admitted the applicant to be a partner of the firm in the year 2010-11, 2011-12 and 2012-13 before the Income Tax authorities, a fact to which the respondent admits. 6. 5. The fact of the matter is that though the supplementary partnership deed is not registered, the respondent had admitted the applicant to be a partner of the firm in the year 2010-11, 2011-12 and 2012-13 before the Income Tax authorities, a fact to which the respondent admits. 6. Be that as it may, the veracity and the bona fide of the claim of the applicant of a partner is that the respondent had admitted that applicant was one of the partners of the firm, and he now cannot retract. 7. There are other important facts, which must be settled before any order is passed in this matter. The first and foremost point raised by the respondent is that in any case the supplementary deed on which reliance is being placed by the applicant is an unregistered document. The respondent has relied upon Section 49 of Registration Act, 1908 as well as Section 69 of the Indian Partnership Act, 1932. 8. Section 49 of the Registration Act, 1908 reads as under: “49. Effect of non-registration of documents required to be registered.- No document required by section 17 [or by any provision of the Transfer of Property Act, 1882 (4 of 1882)], to be registered shall- (a) affect any immovable property comprised therein, or (b) confer any power to adopt, or (c) be received as evidence of any transaction affecting such property or conferring such power, unless it has been registered: [Provided that an unregistered document affecting immovable property and required by this Act or the Transfer of Property Act, 1882 (4 of 1882), to be registered may be received as evidence of a contract in a suit for specific performance under Chapter II of the Specific Relief Act, 1877 (3 of 1877) or as evidence of any collateral transaction not required to be effected by registered instrument.]” 9. Section 69 of the Indian Partnership Act, 1932 reads as under: 69. Section 69 of the Indian Partnership Act, 1932 reads as under: 69. Effect of non-registration.- (1) No suit to enforce a right arising from a contract or conferred by this Act shall be instituted in any court by or on behalf of any person suing as a partner in a firm against the firm or any person alleged to be or to have been a partner in the firm unless the firm is registered and the person suing is or has been shown in the Register of Firms as a partner in the firm. (2) No suit to enforce a right arising from a contract shall be instituted in any Court by or on behalf of a firm against any third party unless the firm is registered and the persons suing are or have been shown in the Register of Firms as partners in the firm. (3) The provisions of sub-sections (1) and (2) shall apply also to a claim of set-off or other proceeding to enforce a right arising from a contract, but shall not affect,- (a) the enforcement of any right to sue for the dissolution of a firm or for accounts of a dissolved firm, or any right or power to realise the property of a dissolved firm; or (b) the powers of an official assignee, receiver or Court under the Presidency-towns Insolvency Act, 1909 (3 of 1909) or the Provincial Insolvency Act, 1920 (5 of 1920) to realise the property of an insolvent partner. (4) This section shall not apply,- (a) to firms or to partners in firms which have no place of business in [the territories to which this Act extends], or whose places of business in [the said territories], are situated in areas to which, by notification under [section 56], the Chapter does not apply, or (b) to any suit or claim or set-off not exceeding one hundred rupees in value which, in the Presidency-towns, is not of a kind specified in section 19 of the Presidency Small Cause Courts Act, 1882 (5 of 1882), or, outside the Presidency-towns, is not of a kind specified in the Second Schedule to the Provincial Small Cause Courts Act, 1887 (9 of 1887), or to any proceeding in execution or other proceeding incidental to or arising from any such suit or claim.” 10. The learned counsel for the applicant, on the other hand, would argue that as far as Section 49 of the Registration Act, 1908 is concerned, an unregistered document for a collateral purposes can still be a valid document and reliance can be placed upon such a document. To strengthen his argument, the learned counsel Sri B.D. Pandey has relied upon a decision of Hon’ble Apex Court in the case of SMS Tea Estates Private Limited v. Chandmari Tea Company Private Limited, reported in (2011) 14 SCC 66 . 11. Section 69 of the Indian Partnership Act, 1932 deals with effect of non-registration of a firm. Sub-Section (3) of Section 69 of the Indian Partnership Act, 1932 which says that effect of non-registration of a firm shall also apply to “other proceedings”, which are there to enforce a right arising from a contract, but leave certain proceedings aside. In the case of Umesh Goel v. Himachal Pradesh Cooperative Group Housing Society Limited, reported in (2016) 11 SCC 313 , the Hon’ble Apex Court has held that appointment of arbitrator is not covered under the “other proceedings” and therefore even if the firm is not registered and if there is an arbitration clause, then the parties are not barred to invoke arbitration clause even though the document is not registered. 12. In original partnership deed dated 18.12.2006, the arbitration clause reads as under: “18. ARBITRATION: Any difference which may arise between the partners or their representatives regarding the interpretation of these presents or regarding the rights and liabilities of either partner arising hereunder or any other matter or thing concerning the firm or the affairs thereof shall be referred arbitration. Where the partners fail to agree to a sole arbitrator, each partner shall nominate an equal number of arbitrators. The decision of the arbitrator or arbitrators as the case may be, or of the umpire, in the case of difference of opinion between them, selected by them at the commencement of the reference, shall be biding upon all the partners.” 13. Admittedly in the supplementary partnership deed dated 6.6.2008, there is no provision for arbitration clause. But the supplementary partnership deed states as under: “11. Admittedly in the supplementary partnership deed dated 6.6.2008, there is no provision for arbitration clause. But the supplementary partnership deed states as under: “11. That subject to what is otherwise provided herein the term and conditions mentioned in the said deed of partnership dated 18.12.2006 will be binding on the parties as if the said NEW PARTNER was a party thereto and subject as aforesaid the said deed of partnership as amended by this agreement will be treated the deed of partnership between the parties hereto.” 14. The learned counsel for the applicant would then rely upon sub-section (5) of Section 7 of the Arbitration and Conciliation Act, 1996 and would argue that since reference is made to another document and its applicability, and admittedly the earlier partnership deed has an arbitration clause, the same would be applicable in the supplementary contract. 15. Sub-section (5) of Section 7 of the Arbitration and Conciliation Act, 1996 reads as under: “7. Arbitration agreement.– (1) In this Part, “arbitration agreement” means an agreement by the parties to submit to arbitration all or certain disputes which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not. 2……. 3……. 4……. (5) The reference in a contract to a document containing an arbitration clause constitutes an arbitration agreement if the contract is in writing and the reference is such as to make that arbitration clause part of the contract.” 16. A perusal of the aforesaid provision makes it clear that three things are necessary where a reference to an arbitration clause in another document is being resorted to. Firstly, there should be a reference in the contract to a document which contains an arbitration clause and secondly, it shall be only applicable if the contract is in writing and thirdly, the reference should be such as to make the arbitration clause a part of the contract. Meaning thereby, a mere reference to document would not be enough. The reference should categorically state that the arbitration clause is also now a part of the contract. 17. Meaning thereby, a mere reference to document would not be enough. The reference should categorically state that the arbitration clause is also now a part of the contract. 17. The supplementary contract dated 06.06.2008 not only includes the parties to the original contract, but it also categorically states that the deed of partnership dated 18.12.2006 is binding on the parties as if the new partner were a party thereto and that agreement will be treated as “the deed of partnership between the parties thereto”. There is no scope of any ambiguity here. It definitely makes the entire contract dated 18.12.2006 a part and parcel of the new deed. Therefore, there being a clear reference in the supplementary contract dated 06.06.2008 which states that terms and conditions mentioned in the partnership deed dated 18.12.2006 will be binding on the parties, the arbitration clause in the original deed shall be treated to be part of the supplementary contract as well. 18. Another plea of the respondent was that in any case the application under Section 11 (6) of the Arbitration and Conciliation Act, 1996 for appointment of arbitrator is time barred. 19. The first request of the applicant to appoint arbitrator is dated 20.05.2015. The application under Section 11 (6) of the Arbitration and Conciliation Act, 1996 was filed before this Court on 23.11.2015 i.e. well within time. Although no limitation is prescribed in the Act for moving an application under sub-section (6) of Section 11 of the Arbitration and Conciliation Act, 1996, but in view of Section 43 of the Act read with Article 137 of the Limitation Act, 1963 the period of limitation would be three years. This period of three years would be counted from the date the requisition was made by the applicant i.e. 20.05.2015. As no response was given by the respondent to the request of the applicant to appoint an arbitrator, the applicant was constrained to file the present arbitration application. 20. Moreover, in a recent judgment of the Hon’ble Apex Court in the case of Duro Felguera S.A. v. Gangavaram Port Ltd. reported in (2017) 9 SCC 729 , in para 59 has held as under: “59. The scope of the power under Section 11 (6) of the 1996 Act was considerably wide in view of the decisions in SBP and Co. v. Patel Engg. Ltd., (2005) 8 SCC 618 and National Insurance Co. The scope of the power under Section 11 (6) of the 1996 Act was considerably wide in view of the decisions in SBP and Co. v. Patel Engg. Ltd., (2005) 8 SCC 618 and National Insurance Co. Ltd. v. Boghara Polyfab (P) Ltd., (2009) 1 SCC 267 . This position continued till the amendment brought about in 2015. After the amendment, all the courts need to see is whether an arbitration agreement exists – nothing more, nothing less. The legislative policy and purpose is essentially to minimize the Court’s intervention at the stage of appointing the arbitrator and this intention as incorporated in Section 11(6-A) ought to be respected.” 21. Therefore, in view of the above, this Court is convinced that since there is a dispute and since there is an arbitration clause in the deed, the arbitrator must be appointed. This Court appoints Justice Irshad Hussain, former Judge of this High Court, as the sole arbitrator who shall constitute the arbitral tribunal. This shall, however, be subject the learned Arbitrator’s disclosure under Section 11(8) read with Section 12 of the Arbitration and conciliation Act. 22. Arbitration petition is allowed.