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2019 DIGILAW 34 (GAU)

Supratik Dey v. Nilotpal Dey

2019-01-11

UJJAL BHUYAN

body2019
JUDGMENT : 1. This order will dispose of both Arb. Pet. Nos. 15 and 16/2018. Heard Mr. J.I. Borbhuiya, learned counsel for the petitioners in both the petitions and Mr. D. Mazumdar, learned senior counsel for respondents in both the petitions. 2. Both the petitions have been filed under section 11 of the Arbitration and Conciliation Act, 1996 for appointment of Arbitrator for arbitrating the dispute between the petitioners and respondent Nos. 1, 2 and 3. 3. Both the petitions arise out of the same partnership deed. However, in Arb. Pet. No. 15/2018, cause of the dispute pertains to South Point English Medium Institute, Silchar whereas in Arb. Pet. No. 16/2018, the discord pertains to Hemangini Dey (Memorial) Junior Science College, also situated at Silchar. 4. Petitioner No. 1 is the husband and petitioner No. 2 is his wife whereas respondent No. 1 is the brother of petitioner No. 1 and respondent No. 2 is the wife of respondent No. 1. Respondent No. 3 is the mother of both petitioner No. 1 and respondent No. 1 and widow of late Indu Bhushan Dey. 5. It is stated that Indu Bhushan Dey was the owner and title holder of three plots of land at Silchar; the details of which are mentioned in paragraph No. 2 of the arbitration petition. On the land owned by late Indu Bhushan Dey, the two educational institutions, namely, South Point English Medium Institute, Silchar and Hemangini Dey (Memorial) Junior Science College were established in the years 1982 and 2002, respectively. 6. A partnership deed was executed between Indu Bhushan Dey, Smt. Bijoya Dey (respondent No. 3), Sri Nilotpal Dey (respondent No. 2), Sri Supratik Dey (petitioner No. 1), Smt. Krishna Dey (respondent No. 2) and Smt. Jayeeta Dey (petitioner No. 2) on 1.4.2002. The partnership was to manage the two educational institutions. The partnership deed also provided for sharing of profit and loss in the manner provided in the partnership deed, which has been extracted in paragraph 5 of the arbitration petition. Clause 17 of the partnership deed dated 1.4.2002 provided for settlement of dispute relatable to and arising out of the partnership by way of arbitration. 7. Indu Bhushan expired on 16.8.2016. Petitioners reside abroad. Therefore, they have constituted an attorney to represent them and to look after their interest. Allegation of the petitioners is that respondent Nos. Clause 17 of the partnership deed dated 1.4.2002 provided for settlement of dispute relatable to and arising out of the partnership by way of arbitration. 7. Indu Bhushan expired on 16.8.2016. Petitioners reside abroad. Therefore, they have constituted an attorney to represent them and to look after their interest. Allegation of the petitioners is that respondent Nos. 1 and 2 are not managing the affairs of the partnership in letter and spirit of the partnership deed and are using the two educational institutions purely for their personal gain. Their further grievance is that they have not been provided the profit of the partnership which has been entirely appropriated by respondent Nos. 1 and 2. Despite several communications made in this regard, respondent Nos. 1 and 2 have not replied to the petitioners. According to the petitioners, respondent Nos. 1 and 2 have diverted Rs. 1.27 crores and 29 lakhs from the two educational institutions to themselves as loans and advances during the period from 2011 to 2016, which would be evident from the balance sheets of the financial years comprising the said period. 8. Ultimately, petitioners invoked the arbitration clause of the partnership deed and issued legal notices dated 18.5.2018 through their engaged counsel which were duly served upon respondent Nos. 1, 2 and 3. Despite receipt of such notice, respondents failed to act as per the legal notices. It is in such circumstances that the present petitions have been filed. 9. Notice in the two cases were issued on 3.8.2018. 10. Respondents have filed a common affidavit in Arb. Pet. No. 15/2018. 11. Mr. Mazumdar, learned senior counsel for the respondents submitted at the time of hearing that this affidavit would cover both the arbitration petitions. 12. Stand taken in the affidavit is that the arbitration petitions are not maintainable. The partnership firm having not been registered, the present proceeding would be barred under the Indian Partnership Act, 1932. The educational institutions are being run by a company by the name and style of Neelikrishb Associates Private Ltd., of which respondent No. 1 is a Director. While denying the allegations made by the petitioners, it is stated that in the absence of registration of the partnership firm, prayer for referring the dispute to arbitration cannot be entertained. 13. Mr. J.I. Borbhuiya, learned counsel for the petitioners submits that the arbitration petitions are maintainable. While denying the allegations made by the petitioners, it is stated that in the absence of registration of the partnership firm, prayer for referring the dispute to arbitration cannot be entertained. 13. Mr. J.I. Borbhuiya, learned counsel for the petitioners submits that the arbitration petitions are maintainable. Section 69 of the Indian Partnership Act, 1932 (‘Partnership Act’) would not act as a bar for filing a petition seeking appointment of arbitrator to arbitrate the dispute raised by the petitioners as such a course of action is provided by the partnership deed itself to which respondents are parties. In support of his submission, Mr. Borbhuiya has placed reliance on two Supreme Court decisions and one decision of the Delhi High Court. 14. On the other hand, Mr. Mazumdar, learned senior counsel for the respondents submits that petitioners do not want dissolution of the partnership firm or rendition of accounts post-dissolution. All that the petitioners want is their share in the partnership. Referring to section 69 of the Partnership Act, he submits that the said provision is mandatory and unless the partnership deed is registered, no suit or other proceedings would be maintainable which would also include a petition under section 11 of the Arbitration and Conciliation Act, 1996. In support of his submissions, Mr. Mazumdar has placed reliance on the following decisions: (i) Jagdish Chandra Gupta v. Kajaria Traders (India) Ltd., AIR 1964 SC 1882 ; (ii) Seth Loon Karan Sethiya v. Ivan E. John, (1977) 1 SCC 379 : AIR 1977 SC 336 ; (iii) Krishna Motor Service v. HB Vittala Kamath, (1996) 10 SCC 88 ; (iv) Monirul Hasan (Md.) v. Iftikar Ahmed @ (Md.), 2000 (1) GLT 325; and (v) Ess Vee Traders v. Ambuja Cement Rajasthan Ltd., (2006) 8 AD (Del.) 164. 15. Submissions made by learned counsel for the parties have been duly considered. Also perused the materials on record. 16. Partnership deed has been placed on record by the petitioners as Annexure 2 to the arbitration petition. It was made on 1.4.2002. 15. Submissions made by learned counsel for the parties have been duly considered. Also perused the materials on record. 16. Partnership deed has been placed on record by the petitioners as Annexure 2 to the arbitration petition. It was made on 1.4.2002. While it may not be necessary or relevant to refer to the other provisions of the partnership deed, what is to be noted is that under clause 17 thereof, any dispute amongst the parties or their legal representatives about the interpretation of the partnership deed or the rights and liabilities thereunder or any matter touching upon the partnership affairs shall be settled by arbitration and the provisions of the Indian Arbitration Act shall apply. Clause 17 is as under: “That in the event of any dispute amongst the parties or their legal representatives about the interpretation of this deed or their rights and liabilities thereunder or any matter whatsoever touching upon the partnership affairs whether in course of or about termination of the partnership or thereafter shall be settled by arbitration and the provisions of the Indian Arbitration Act shall in that behalf apply.” 17. Petitioners have not disputed the contention of the respondents that the partnership deed or the partnership firm are not registered; therefore, court may proceed on the basis that the partnership is not registered. Section 11 of the Partnership Act provides that mutual rights and duties of the partners of a firm may be determined by contract between the partners which may be either in express form or may be by implication by a course of dealing. Section 12 deals with conduct of the business amongst the partners. Amongst others, it says that subject to contract between the partners, every partner has a right to take part in the conduct of the business besides having the right to access and inspect the books of the firm. Sections 39 to 44 forming part of Chapter VI deal with dissolution of a firm. 18. Section 57 deals with appointment of Registrar of Firms. Section 58 lays down the details relating to application for registration. Section 59 provides that when the Registrar is satisfied with the provisions of section 58 have been duly complied with, he shall record an entry of the statement in a register called the register of firms and shall file the statement. 19. Section 58 lays down the details relating to application for registration. Section 59 provides that when the Registrar is satisfied with the provisions of section 58 have been duly complied with, he shall record an entry of the statement in a register called the register of firms and shall file the statement. 19. Section 69 is relevant as it deals with effect of non-registration. While sub-section (1) thereof says that no suit to enforce a right arising from a contract or conferred by the Partnership 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 who 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. 20. Sub-section (2) thereof also does not permit filing of suit by an unregistered firm against any third party. As per sub-section (3), such provision shall also apply to a claim of set-off or other proceeding to enforce a right arising from a contract, however, such provision shall not affect the enforcement of any right to sue for dissolution of a firm or for accounts of a dissolved firm, or any right or power to realize the property of a dissolved firm. 21. In Kamal Pushp Enterprises v. DR Construction Co., (2000) 6 SCC 659 , Supreme Court was considering correctness of the decision of the Madhya Pradesh High Court holding that provisions of section 69 of the Partnership Act do not stand in the way of an unregistered firm defending proceedings against it and that it only precluded initiation of any proceeding by such a firm. Referring to the previous decision of the Supreme Court in the case of Jagdish Chandra Gupta (supra) and other cases, Supreme Court held that the prohibition contained in section 69 is in respect of instituting a proceeding to enforce a right arising from a contract in any court by an unregistered firm and it would have no application to a proceeding before an arbitrator and that too, when the reference to the arbitrator was at the instance of the other side. 22. 22. This point was elaborated by the Supreme Court in Umesh Goel v. Himachal Pradesh Cooperative Group Housing Society Ltd., (2016) 11 SCC 313 wherein it was held that arbitral proceedings will not come under the expression “other proceedings” as appearing in section 69(3) of the Partnership Act and that the bar imposed under section 69 can have no application to arbitral proceedings as well as to the arbitration award. 23. Following the above, Supreme Court in Ananthesh Bhakta v. Nayana S. Bhakta, (2017) 5 SCC 185 made it clear that when the partners and those who claim through partners agreed to get their dispute settled by arbitration, it is not open to any of the partners or anyone claiming through the partners to contend that partnership being unregistered, the dispute cannot be referred to arbitration. It was further held that neither in the Arbitration and Conciliation Act, 1996 nor in any other statute, there was any prohibition for referring any dispute concerning unregistered partnership deed to arbitration. 24. That being position, court is of the view that the dispute raised by the petitioners is an arbitrable one and is required to be arbitrated as per mandate of clause 17 of the partnership deed dated 1.4.2002. 25. Consequently, Sri Kamalendu Choudhury, former District and Sessions Judge, Cachar at Silchar is appointed as the Arbitrator to arbitrate the dispute between the parties subject to his consent and disclosure under sections 11(8) and 12(1) of the Arbitration and Conciliation Act, 1996. 26. Parties or their representative(s) to appear before the learned Arbitrator within 30 days. 27. Registry to inform Sri Kamalendu Choudhury, District and Sessions Judge (Retd.), Cachar at Silchar accordingly. Both the arbitration petitions are disposed of.