Research › Search › Judgment

Bombay High Court · body

2023 DIGILAW 1369 (BOM)

Parvez Khodayar Raisi v. Behram Rashid Zandbaf

2023-06-26

BHARATI DANGRE

body2023
JUDGMENT/ORDER 1. By the present application, the Applicant in the capacity as Partner of M/s.Parsi Bakery, seek reference of the disputes that have arisen with Respondent Nos.1 and 2 (erstwhile Partners of M/s.Parsi Bakery), since it is the claim of the Applicant that, he has dissolved the Partnership firm, to be referred to a Sole Arbitrator to be appointed by this Court, by invoking its power under Sub-Sec. (6) of Sec. 11 of the Arbitration and Conciliation Act, 1996. In the Application, Respondent No.3 is Executor, whereas, Respondent No.5 is beneficiary of the Will executed by one of the erstwhile Partner Mr. Merwan Boman Afsadizadeh, who is no more. His daughter is impleaded as Respondent No.4 to the Arbitration Application. 2. The request to refer the disputes to an Arbitrator is made in the wake of Clause 12, comprised in the Deed of Partnership entered between the four Partners on 1/12/2003. The Partnership Deed clearly set out the share of each of the Partner in the capital, assets, effects, goodwill and all tangible and intangible rights and benefits pertaining thereto including the benefits of tenancy rights of the said business premises as also the net profits and losses of the partnership business in the following proportions: (a) Merwan Boman Afsadizadeh 37.5% (b) Parvez Khodayar Raisi 37.5% (c) Rohinton Rashid Zandbaf 12.5% (d) Behram Rashid Zandbaf 12.5% 3. The Deed of Partnership specify that the duration of the Partnership shall be "At Will" of the Partners and in case if any partner desires to retire or separate from the Partnership at any time, he may do so on giving to the other/s not less than one calender month's previous notice in writing, of his intention to do so. The Deed of Partnership specify that the duration of the Partnership shall be "At Will" of the Partners and in case if any partner desires to retire or separate from the Partnership at any time, he may do so on giving to the other/s not less than one calender month's previous notice in writing, of his intention to do so. An important clause in the Partnership Deed stipulate a contingency in case of death of one of the Partner and the said clause read thus: "11 In case of death of any of the partners, the partnership shall not stand dissolved but shall continue to function with the admission of any one of the legal heirs of such deceased partner (as shall or may be mutually agreed and decided upon by all the legal heirs of such deceased partner) as partner in the said business in place of the deceased partner as far as possible on the same terms and conditions, in the event of such legal heirs of the deceased partner not desiring to continue as partner in the said business in place of the deceased partner, they shall be interested and concerned in the partnership both as to its profits and losses till the day of death of such deceased partner." The very said Deed, in Clause 12 carve out a mode for resolution of the dispute arising between the parties to the Partnership Deed, at any time, in respect of any matter whatsoever touching the Partnership Agreement or otherwise either during its tenure or thereafter, for being referred to Arbitration and to be dealt with the provisions of the Indian Arbitration Act, with final and binding effect being given to the Award on all the Parties to disputes. 4. In this background, on 14/5/2020, Mr.Merwan Boman expired and the Applicant addressed a communication to the other two Partners as well as the legal heirs of Mr.Merwan Boman asserting therein that the duration of the firm is 'At Will' and attempts were made to settle accounts, on the death of Merwan Boman as he is not desirous of continuing the relationship of a Partner with them. As a result, he is invoking option of dissolving the firm with immediate effect i.e. from the date of receipt of the notice and he invoked the arbitration vide its communication dtd. As a result, he is invoking option of dissolving the firm with immediate effect i.e. from the date of receipt of the notice and he invoked the arbitration vide its communication dtd. 15/12/2021, in the wake of Clause 12 and even the name of Advocate was suggested to act as Sole Arbitrator. Since there was no response from the other end, Arbitration Application is filed by invoking Sub Sec. (6) of Sec. 11, to appoint the Sole Arbitrator to resolve the disputes. 5. The learned counsel for Respondent Nos.1 and 2, have no objection for the disputes being referred to the Sole Arbitrator, as in terms of the Partnership Deed, the disputes are to be resolved through the Sole Arbitrator. The learned counsel representing Respondent Nos.3 and 5 would, however, submit that Respondent No.3 is Executor and Respondent No.5 is beneficiary of the Will executed by Merwan Boman and the Suit is filed by Respondent No.3 in the Bombay High Court seeking a direction to admit Respondent No.5 as beneficiary as well as partner in the Firm. I need not delve deep in the details of the said proceedings, since the only question that arise before me today is, whether Respondent Nos.3, 4 and 5 can also be referred to the Arbitrator and the answer to the said question, raised by the learned counsel is, in the positive, i.e. they can be. 6. When turn to Sec. 35 of the Arbitration and Conciliation Act, which provides finality for arbitral Awards, the provision clearly contemplate that, subject to it, the Arbitral Award shall be final and binding on the parties and persons under them respectively. Similarly Sec. 40 of Arbitration Act, a significant provision reads thus : "40. Arbitration agreement not to be discharged by death of party thereto- (1) 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. (2) The mandate of an arbitrator shall not be terminated by the death of any party by whom he was appointed. (3) Nothing in this Sec. shall affect the operation of any law by virtue of which any right of action is extinguished by the death of a person." 7. (2) The mandate of an arbitrator shall not be terminated by the death of any party by whom he was appointed. (3) Nothing in this Sec. shall affect the operation of any law by virtue of which any right of action is extinguished by the death of a person." 7. At this juncture, it is also necessary to reproduce definition of "Legal Representative" as defined under Sec. 2(g) which reads thus: (g) "Legal Representative" means a person who in law represents the estate of a deceased person, and includes any person who intermeddles with the estate of the deceased, and, where a party acts in a representative character, the person on whom the estate devolves on the death of the party so acting." The term 'Legal Representative' is given a wider commotation by including a person who in law represent estate of the deceased and also any person, who can intermeddle with the estate and where a party acts in a representative character, the person on whom estate devolves on the death of the party so acting. The term 'Legal Representative' would, therefore, necessarily cover the legal heir and undisputedly, Respondent Nos.3, 4 and 5 to the Application being the legal heirs, one being the executor, another being the beneficiary, under the Will of the deceased claim their interest against Respondent No.5, the daughter of Merwan Boman, one of the Partner. 8. The learned counsel, appearing for the Respondent Nos.3 and 5, by inviting my attention to Clause 11 of the Partnership Deed would also pose question as to who would represent deceased Merwan Boman before the arbitrator? In my considered opinion, Clause 11 itself provides the answer. Clause 11 provides for a contingency where one of the Partner expire and in such contingency the Partnership shall not be dissolved, but it shall continue to function. The contingency being provided, by way of an option, that either it shall continue with admission of any one of the legal heir of such deceased partner or as may be mutually agreed and decided upon by all the legal heirs of the deceased partner and upon such condition being satisfied, the Partnership shall continue. The intention being to have consent of the either one of the legal heir or all the legal heirs to substitute as Partner in place of deceased Partner. 9. The intention being to have consent of the either one of the legal heir or all the legal heirs to substitute as Partner in place of deceased Partner. 9. I do not see any difficulty in all the legal heirs of Merwan Boman being represented before the Arbitrator and since the Arbitration has been invoked to resolve the disputes arising between the Partners interse, who were the Partners in the Deed of Partnership dtd. 1/12/2003, the legal heirs of Merwan Boman can very well be parties to the Arbitration proceedings. In reaching the aforesaid conclusion, I am fortified by the observation of the Hon'ble Apex Court in the case of Ravi Prakash Goel vs. Chandra Prakash Goel & Another, (2008) 13 SCC 667 where the Supreme Court formulated the issue whether the right to sue for rendition of accounts, even on the representation of deceased, and whether the arbitration can be commenced by the heirs after the death of Partner, specifically when disputes have arisen during the life time of the partner. While giving a definite connotation to the term 'Legal Representative', their Lordships of the Hon'ble Apex Court have specifically observed as under: "20. The definition of "legal representative" became necessary because such representatives are bound by and also entitled to enforce an arbitration agreement. Sec. 40 clearly says 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. In our opinion, a person who has the right to represent the estate of the deceased person occupies the status of a legal person (sic representative). Sec. 35 of the 1996 Act which imparts the touch of finality to an arbitral award says that the award shall have binding effect on the "parties and persons claiming under them". 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. The 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. We have already extracted Secs. 46, 47 and 48 of the Partnership Act. The 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. We have already extracted Secs. 46, 47 and 48 of the Partnership Act. Sec. 46 provides two things, namely, first is to realise the assets of the business and then to apply the same for discharge of liabilities and finally to distribute the surplus, if any, among the partners. All that Sec. 46 empowers is that every partner shall claim that this is to be done for ultimate distribution of the surplus to the partners according to their shares. A suit to enforce the latter right relating to the distribution of surplus is generally called a suit for an account which means account taken up accoardingly. This right to a partner to file a suit for account is not affected by the fact that the retiring partner has already inspected the accounts of the firm. Sec. 46 is, however, merely declaratory of the rights of the partners or their legal representatives in the surplus and does not set out the mode of calculating the surplus. The share of a partner upon the winding up of a dissolved firm, is only in the residue which is left after the liabilities mentioned in the various clauses of Sec. 48 have been paid out. Payment of capital and advances to partners is not out of the residue. The amount paid as capital investment to a partner will have to be deducted in order to find the value of the residue, because the value of a partner's share is only his proportion of the residue. 22. "Right of representative of a partner-The right of a representative of a partner is really a claim against the surplus assets on realisation whether the surplus consists entirely of the proceeds of realisation or whether they include some specific items of property, which existed on the death of the partner. The proper remedy of a partner in the circumstances is to have accounts taken to ascertain his share and if the right to sue for accounts is barred by limitation, the partner cannot sue any partner in possession of the assets for a share therein, and the limitation will be governed by Article 5 of the Limitation Act." 23. The proper remedy of a partner in the circumstances is to have accounts taken to ascertain his share and if the right to sue for accounts is barred by limitation, the partner cannot sue any partner in possession of the assets for a share therein, and the limitation will be governed by Article 5 of the Limitation Act." 23. On the dissolution of the firm, the arbitration clause does not come to an end and so if a dispute had arisen during the lifetime of the deceased partner, his legal representatives would be entitled to take proceedings under Sec. 20 of the Arbitration Act, 1940. 24. When a partner dies and the partnership comes to an end it is not only right but also the duty of the surviving partner to realise the assets for the purpose of winding up of the partnership affairs including the payment of the partnership debts. However, it is true that in a general sense the executors or administrators of the deceased partner may be said to have a lien upon the partnership assets in respect of his interest in the partnership and taking the partnership account." In the wake of above observations which offer a clarity upon the term 'Legal Representative', as indicated in Sec. 40 of the Arbitration and Conciliation Act, I see no difficulty in Respondent Nos.3, 4 and 5 being sent for Arbitration, since arbitration has already been invoked by the other side and there is no response. The Arbitration Application, therefore, deserve to be allowed. 10. The Commercial Arbitration Petition filed under Sec. 9 by the Applicant is permitted to be converted as Application under Sec. 17 to be decided by the learned Arbitrator after affording opportunity of hearing to all the concerned. One thing I must clarify that Respondent Nos.3, 4 and 5, being the legal heirs of Merwan Boman, participating in the arbitration proceedings, shall be entitled to have their shares distributed, depending upon the outcome of the probate proceedings. 11. In the wake of above, I deem it appropriate to appoint Mr.Akash Rebello as Sole Arbitrator to resolve the disputes between the parties, on the following terms: TERMS OF APPOINTMENT (a) Appointment of Arbitrator : Advocate Mr.Akash Rebello, is hereby appointed as a Sole Arbitrator to decide the disputes and differences between the parties under the documents referred to above. In the wake of above, I deem it appropriate to appoint Mr.Akash Rebello as Sole Arbitrator to resolve the disputes between the parties, on the following terms: TERMS OF APPOINTMENT (a) Appointment of Arbitrator : Advocate Mr.Akash Rebello, is hereby appointed as a Sole Arbitrator to decide the disputes and differences between the parties under the documents referred to above. (b) Communication to Arbitrator of this order :- (i) A copy of this order will be communicated to the learned Sole Arbitrator by the Advocates for the applicant/petitioner within one week from the date this order is uploaded. (c) Disclosure : The learned Arbitrator, within a period of 15 days before entering the arbitration reference, shall forward a statement of disclosure as per the requirement of Sec. 11(8) read with Sec. 12(1) of the Arbitration and Conciliation Act, 1996, to the Prothonotary and Senior Master of this Court, to be placed on record of this application, with a copy to be forwarded to both the parties. (d) Appearance before the Arbitrator : The parties shall appear before the Sole Arbitrator within a period of two weeks from today and the learned Arbitrator shall fix up a first date of hearing in the week commencing from 19/12/2022. The Arbitral Tribunal shall give all further directions with reference to the arbitration and also as to how it is to proceed. (e) Contact and communication information of the parties : Contact and communication particulars are to be provided by both sides to the learned Sole Arbitrator. This information shall include a valid and functional E-mail address as well as mobile numbers of the parties, participating in the process as well as of the Advocates. (f) Sec. 16 application : The respondent is at liberty to raise all questions of jurisdiction within the meaning of Sec. 16 of the Arbitration Act. All contentions are left open. (g) Fees : The learned Arbitrator shall be entitled for the fees as per the Bombay High Court (Fee Payable to Arbitrators) Rules, 2018 and the arbitral costs and fees of the Arbitrator shall be borne by the parties in equal portion and shall be subject to the final Award that may be passed by the Tribunal. (h) Venue and seat of Arbitration : Parties agree that the venue and seat of the arbitration will be in Mumbai. (h) Venue and seat of Arbitration : Parties agree that the venue and seat of the arbitration will be in Mumbai. (i) Procedure : These directions are not in derogation of the powers of the learned Sole Arbitrator to decide and frame all matters of procedure in arbitration. (j) All contentions of both sides are left open to be raised by the respective parties before the Arbitral Tribunal, in accordance with law. Arbitration Application and Arbitration Petition stand disposed off in the aforesaid terms.