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2019 DIGILAW 352 (GAU)

Nirmal Chandra Paul v. Jyotsna Paul

2019-03-15

UJJAL BHUYAN

body2019
ORDER : UJJAL BHUYAN, J. 1. Heard Mr. S.K. Ghosh, learned counsel for the petitioners and Mr. AHMR Choudhury, learned counsel for the respondents. 2. This is an application under Section 11 of the Arbitration and Conciliation Act, 1996 (1996 Act) for appointment of arbitrator. 3. Petitioner Nos. 1 to 5 are the sons and daughter of Lt. Nehal Ch. Paul whereas petitioner Nos. 6 and 7 are the widow and son of late Nikhil Ch Paul. 4. Respondents are wife, daughters and sons of late Nishi Kanta Paul. 5. According to the petitioners, a partnership deed was executed on 29.03.1972 under the name and style of M/s. NCNK Paul dealing with grocery items such as sugar, atta, flour, petrol and its bio products. This was followed by another partnership deed dated 14.04.1976 and finally on 14.04.1980. 6. It is stated that predecessor of the respondents Nishi Kanta Paul had mortgaged the title deeds of the land over which residence and petrol pump were constructed with the Bank of Baroda, Silchar Branch for availing loan. For failure to repay the loan, proceedings were initiated by the Bank before the Debts Recovery Tribunal at Guwahati which decreed against the firm, namely, M/s. NCNK Paul, and it was only at the appellate stage that an amicable settlement would be arrived at but at a considerable cost. 7. There was also litigation with the Indian Oil Corporation Ltd. which led to institution of civil suit and thereafter money execution case by the said Corporation. It is in such circumstances that petitioners called upon the respondents to render cooperation to the extent of their shares in meeting the liabilities of the partnership firm. But that was not agreed upon by the respondents. 8. Petitioners invoked the arbitration clause in the partnership deed dated 14.4.1980 and sought reference to arbitration of the dispute that had arisen between petitioners and respondents. As there was no response and under wrong legal advice petitioners had moved the Court of learned District Judge, Hailakandi under Section 8 of the 1996 Act for appointment of arbitrator which was registered as Misc. Arbitration Case No. 1/2017. However, despite not having jurisdiction, learned District Judge proceeded on merit and rejected the petition of the petitioners vide order dated 22.03.2018 on the ground that respondents were not parties to the arbitration agreement. 9. Arbitration Case No. 1/2017. However, despite not having jurisdiction, learned District Judge proceeded on merit and rejected the petition of the petitioners vide order dated 22.03.2018 on the ground that respondents were not parties to the arbitration agreement. 9. It is in such circumstances, that the present petition has been filed. 9.1. Notice in this case was issued on 25.05.2018. 10. Respondents in their common affidavit have denied existence of the partnership deeds and also default by their predecessor in repayment of Bank dues. However, dues claimed by Indian Oil Corporation Ltd. has been admitted but it is stated that respondents have paid their share of the dues. Order passed by the learned District Judge rejecting the petition of the petitioners for appointment of arbitrator is supported by the respondents. Stand taken in the affidavit is that since respondents were not parties to the arbitration agreement, they cannot be compelled to face arbitration proceeding. Therefore, arbitration petition should be dismissed. 11. In the course of the hearing on 25.01.2019, this Court noted that the deed of partnership dated 14.04.1980 was between Nishi Kanta Paul, Nikhil Ch. Paul, Nirmal Ch. Paul and Niranjan Ch Paul. Petitioners are the legal heirs of Nehal Ch Paul and Nikhil Ch. Paul. On the other hand, it was submitted that respondents are legal heirs of Nishi Kanta Paul. In the proceedings held on 25.01.2019 this Court posed a question as to whether petitioners can invoke the arbitration clause i.e. Clause 21 of the deed of partnership dated 14.04.1980 as they have not been formally inducted as partners of the partnership firm. 11.1. Learned counsel for the parties made elaborate submission on this aspect of the matter in the hearing which took place on 15.02.2019. 12. Submissions made by learned counsel for the parties have been considered. 13. In this proceeding we are concerned with the deed of partnership dated 14.04.1980. The partners in the said deed of partnership were- 1. Nishi Kanta Paul, 2 Nikhil Ch. Paul, 3. Nirmal Ch. Paul, and 4. Naranjan Ch. Paul. 13.1. 12. Submissions made by learned counsel for the parties have been considered. 13. In this proceeding we are concerned with the deed of partnership dated 14.04.1980. The partners in the said deed of partnership were- 1. Nishi Kanta Paul, 2 Nikhil Ch. Paul, 3. Nirmal Ch. Paul, and 4. Naranjan Ch. Paul. 13.1. Clause 21 of the said deed of partnership provides that in case of any dispute in respect of the parties, the same would be settled by way of majority decision of the partners and in case majority decision could not be arrived at, then the dispute would be settled in accordance with the provisions of the Indian Arbitration Act, 1940. 14. From a perusal of the order dated 22.03.2018 passed by the learned District Judge, it is seen that in the proceedings before the District Judge, Hailakandi no objection was raised by the respondents that the deed of partnership dated 14.04.1980 was non-existent; infact contention was that this agreement was not binding on the respondents as they were not parties to the same which contention was upheld by the learned District Judge. Therefore, at this stage, it is not open to the respondents to contend that this deed of agreement is nonexistent. 15. It is also trite that reference to Indian Arbitration Act, 1940 may be construed to be a reference to the 1996 Act. This position has been clarified by the Supreme Court. 16. From a perusal of the deed of partnership dated 14.04.1980, it is seen that it was a partnership between four brothers, all sons of late Nehal Ch Paul, namely, Nishi Kanta Paul, Nikhil Ch. Paul, Nirmal Ch Paul and Naranjan Ch Paul. Nirmal Ch Paul and Naranjan Ch. Paul are petitioner Nos. 1 and 2. Petitioner Nos. 3, 4 and 5 are daughters of late Nehal Ch. Paul; whereas petitioner Nos. 6 and 7 are the widow and son respectively of Nikhil Ch. Paul, the second partner. 16.1. On the other hand, respondents are the legal heirs of partner No. 1. Nishi Kanta Paul. 16.2. It is true that barring petitioner Nos. 1 and 2 the others i.e., petitioner Nos. 3 to 7 are not formally inducted into the partnership. Likewise, respondents have also not been inducted as partners to the partnership. 16.3. Therefore, the question of law framed by this Court on 25.01.2019 may be reframed as to whether petitioner Nos. 16.2. It is true that barring petitioner Nos. 1 and 2 the others i.e., petitioner Nos. 3 to 7 are not formally inducted into the partnership. Likewise, respondents have also not been inducted as partners to the partnership. 16.3. Therefore, the question of law framed by this Court on 25.01.2019 may be reframed as to whether petitioner Nos. 3 to 7 can invoke the arbitration clause of the deed of partnership dated 14.04.1980 and whether respondents not been formally inducted into the partnership can be subjected to an arbitration proceeding? 17. To answer this question, it will be apposite to refer to the relevant provisions of the 1996 Act and the Partnership Act, 1932. 18. Before adverting to the provisions contained in the 1996 Act, relevant provisions of the Partnership Act, 1932 may be briefly examined. As per Section 4 of the Partnership Act, 1932 (Partnership Act), partnership has been defined as the relation between persons who have agreed to share the profits of a business carried on by all or any of them acting for all. While the persons entering into the partnership are individually called partners, the partnership collectively is called a firm. Of course, a firm or partnership is not a legal entity in the sense that it is not a juristic person; it can at best be said to be an association of persons. 19. As per Section 11, mutual rights and duties of the partners of a firm may be determined by contract between the partners. Section 12 deals with conduct of business between the partners of the partnership firm while Section 13 lays down mutual rights and liabilities of the partners. Section 46 deals with right of partners to have business wound up after dissolution. Section 46 says that on the dissolution of a firm every partner or his representative is entitled, as against all the other partners or their representatives, to have the property of the firm applied in payment of the debts and liabilities of the firm, and to have the surplus distributed among the partners or their representatives according to their rights. Section 46 says that on the dissolution of a firm every partner or his representative is entitled, as against all the other partners or their representatives, to have the property of the firm applied in payment of the debts and liabilities of the firm, and to have the surplus distributed among the partners or their representatives according to their rights. As per Section 47, after dissolution of a firm, the authority of each partner to bind the firm and the other mutual rights and obligations of the partners continue notwithstanding the dissolution so far as may be necessary to wind up the affairs of the firm and to complete the transactions remaining unfinished at the time of dissolution. Section 48 provides for the mode of settlement of accounts between partners after dissolution. 20. Coming to the 1996 Act, Section 2 (i)(h) thereof defines party to mean a party to an arbitration agreement. Arbitration agreement is defined in Section 2 (i)(b) read with Section 7. It means an agreement by the parties to submit to arbitration all or certain disputes which have arisen or which may arise between the parties in respect of a defined legal relationship, whether contractual or not. As per Sub-section (2) of Section 7, an arbitration agreement may be in the form of an arbitration clause in a contract or in the form of a separate agreement; either way it has to be in writing. Section 40 of the 1996 Act says that an arbitration agreement shall not be discharged by the death of any party thereto either as respects the deceased or as respects any other party, but shall in such event be enforceable by or against the legal representative of the deceased. As per Sub-section (2) of Section 40, mandate of an arbitrator shall not be terminated by the death of any party by whom he was appointed. 21. The aforesaid provisions of the Partnership Act as well as the 1996 Act were examined by the Supreme Court in Ravi Prakash Goel Vs Chandra Prakash Goel reported in (2008) 13 SCC 667 . Supreme Court held that it is clear from Section 40 of the 1996 Act that an arbitration agreement is not discharged by the death of any party thereto. In case of death, it is enforceable by or against the legal representatives of the deceased. Supreme Court held that it is clear from Section 40 of the 1996 Act that an arbitration agreement is not discharged by the death of any party thereto. In case of death, it is enforceable by or against the legal representatives of the deceased. Authority of the arbitrator is not revoked by the death of the party appointing him. Referring to the definition of "legal representative" under Section 2(1)(g) of the 1996 Act, Supreme Court observed that this definition is necessary because such representatives are bound by and also entitled to enforce an arbitration agreement. Supreme Court held that an arbitration agreement is not discharged by the death of a party. The agreement remains enforceable by or against the legal representatives of the deceased. Supreme Court opined that a person who has the right to represent the estate of the deceased person occupies the status of a legal representatives. Persons claiming under the rights of a deceased person are the personal representatives of the deceased party and they have the right to enforce the award and are also bound by it. Arbitration agreement is enforceable by or against the legal representative of a deceased party provided the right to sue in respect of the cause of action survives. 21.1. Referring to the provisions contained in Sections 46, 47 and 48 of the Partnership Act, Supreme Court held that on the dissolution of the firm, the arbitration clause does not come to an end. If a dispute had arisen during the lifetime of the deceased partner, his legal representatives would be entitled to take proceedings under Section 20 of the Indian Arbitration Act, 1940. When a partner dies and the partnership comes to an end, it is not only the right but also the duty of the surviving partner to realise the assets for the purpose of winding up the partnership affairs including payment of the partnership debts. Supreme Court held that Sections 46 and 48 of the Partnership Act have to be read and interpreted together. 22. If the two provisions are so interpreted in the context of Section 40 of the 1996 Act, application for appointment of arbitrator under the arbitration clause of the partnership deed is required to be allowed. Supreme Court held that Sections 46 and 48 of the Partnership Act have to be read and interpreted together. 22. If the two provisions are so interpreted in the context of Section 40 of the 1996 Act, application for appointment of arbitrator under the arbitration clause of the partnership deed is required to be allowed. While right to sue for rendition of accounts of the partnership survives on the legal representative of the deceased partner, he is also entitled to invoke the arbitration clause contained in the partnership deed. Therefore, from what can be culled out from the above, it is quite clear that legal representative of the deceased partner of a partnership would have the legal right to seek remedy under the 1996 Act provided the dispute is traceable to the period when the partnership deed was in force. 23. Before parting with the record, it may be mentioned that the application filed before the Court of District Judge, Hailakandi was legally untenable inasmuch as Section 8 of the 1996 Act deals with the power of a judicial authority to refer an action brought before it which is subject of an arbitration agreement to arbitration. This power is certainly not identical with the provisions contained in Section 11 more particularly Sub-section (6) thereof which deals with appointment of arbitrator by the Supreme Court or by the High Court or by any person or institution designated by such Court to appoint arbitrator. Therefore, Section 8 of the 1996 Act is not the provision for appointment of arbitrator. 24. Net result of the above discussion is that there is a dispute between the parties which can be traced to the partnership deed dated 14.04.1980. Since the partnership deed contains an arbitration clause, petitioners would be legally entitled to invoke the said clause. 25. Accordingly, the parties are referred to arbitration. Sri Kamalendu Choudhury, retired District and Sessions Judge, Cachar, Silchar is appointed as the arbitrator to arbitrate the dispute between the parties subject to his consent and disclosure. 26. Parties to appear before the learned arbitrator within 6 (six) weeks' from today whereafter learned arbitrator shall commence the arbitral proceedings. 27. Office to inform the learned arbitrator. 28. Arbitration petition is disposed of.