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2023 DIGILAW 277 (UTT)

Jagdish Bhatia v. Parvati Devi

2023-04-27

VIPIN SANGHI

body2023
JUDGMENT : The applicant has preferred the present Application under Section 11(6) of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the ‘Act’) to seek appointment of an Arbitrator to adjudicate the disputes between the parties. 2. The case of the applicant is that the applicant entered into a partnership deed dated 01.10.1981 to carry on the business under the name and style of “M/s Bhatia Enterprises”, along with several other partners. He further states that the said Firm was reconstituted on 01.11.1999 upon retirement of one of the partners, namely Sri Suraj Prakash Bhatia. The applicant states that upon reconstitution, there were several partners in the partnership firm, wherein the applicant has 4% share. The applicant narrates that the records of the Firm were being maintained by Sri Kishan Lal Bhatia. Upon his demise, the records were taken into custody by respondent No. 5-Sri Chander Prakash Bhatia. He further states that upon demise of the existing partners, their legal representatives became partners of the Firm. The applicant narrates that several proceedings under Section 9 of the Act were initiated by one or the other parties. He further states that in the year 2019, it was decided between the partners of the Firm and their heirs that the construction standing over the property of the Firm be demolished and the property be divided as per the percentage of the shares. The applicant has placed on record the Agreement executed between the parties in that regard. 3. In Paragraph-12 of the Application, it is stated that dissolution of the Firm has not taken place. He further states that Sri Jitendra Bhatia has not made available the Books of Account for inspection, despite the applicant’s demands. He further states that the applicant’s demand for partition of the property in respective shares was not agreed to by the respondents. It is further claimed that respondent No. 5 has sought to deal with the property of the partnership firm in September, 2021. Clause 27 of the Partnership Deed contains the Arbitration Agreement. The applicant states that disputes and differences have arisen between the parties under the Partnership Deed, which need to be resolved through arbitration. 4. Notices have been exchanged between the parties, which have been referred to in the Application. 5. Upon filing of this Application, notices were issued to the respondents. The applicant states that disputes and differences have arisen between the parties under the Partnership Deed, which need to be resolved through arbitration. 4. Notices have been exchanged between the parties, which have been referred to in the Application. 5. Upon filing of this Application, notices were issued to the respondents. A reply has been filed on behalf of respondent No. 4; a composite reply has been filed on behalf of respondent Nos. 5, 6, 7, 8, 9 & 15, and; another reply has been filed on behalf of respondent Nos. 3, 10, 11, 12, 13 & 14. 6. The stand taken by the respondents is that the aforesaid Partnership Firm stood dissolved in the year 2011 with the issuance of a notice for dissolution which was issued by Sri Jeet Ram Bhatia, one of the partners of the Firm, on 21.01.2011. In the said notice, which was addressed to the existing partners, including the applicant Sri Jagdish Chand Bhatia, Sri Jeet Ram Bhatia expressly conveyed his intention of dissolving the Firm w.e.f 21.01.2011. He also stated that “You are aware that the business of the firm stands closed w.e.f. 20.01.2011.” 7. The applicant responded to the said notice, through registered AD post, and the response of the applicant-Jagdish Chand Bhatia has also been placed on record, which reads as follows:- “To, Sir, Shri Jeet Ram Bhatia, S/o Late Shri Rikhi Ram Bhatia, R/o 124/5, Rajendra Nagar, Street No. 4, Kaulagarh Road, Dehradun. Kindly refer to your letter dated 21/01/2011. In context of the above notice we have to state the following facts: - 1. That your letter is without any basis and is an attempt on your part to avoid payment of legitimate dues to us. You are withholding the accounts and funds of the firm. 2. That the letter has been issued by you only to evade payment of the legitimate dues of the partners and to coerce us to forego our rights. 3. I have also learnt that you have filed an application under Section 9 of the Arbitration and Conciliation Act, 1996 before the court of learned District Judge, Dehradun. Since the matter is subjudice before the learned court we reserve our right to file a detailed reply in the learned court. 3. I have also learnt that you have filed an application under Section 9 of the Arbitration and Conciliation Act, 1996 before the court of learned District Judge, Dehradun. Since the matter is subjudice before the learned court we reserve our right to file a detailed reply in the learned court. However, in the meantime you are requested to pay the entire amount due to us and give us the complete accounts of the firm which have been withheld by you. Yours sincerely, (Shri Jagdish Chand,) S/o Late Shri Rikhi Ram Bhatia, 609, Rajendra Nagar, Street No. 4, Kaulagarh Road, Dehradun. 8. The case of the respondent is that the applicant, therefore, acknowledged the receipt of the dissolution notice, and therefore, cannot run away from the same. Since the partnership was “at Will”, the same could be dissolved by any of the partners at any time, and it stood dissolved with the issuance of the notice of dissolution dated 21.01.2011. 9. The submission of learned counsel for the respondents is that no returns of the Firm were filed after 2011, since no partnership business was carried on thereafter. In this regard, the Certificate issued by the Chartered Accountant of the firm “M/s A.K. Kashyap & Co. 37/1 Rajpur Road, Dehradun” has been tendered in Court, which states that “On the basis of verification done at Income Tax Website, we confirm that M/s Bhatia Enterprises, Chakrata Road, Dehradun, having its PAN: AAFFB6940F filed its last Income Tax Return for the F.Y. 2009-10 (AY 2010-11) on 15.03.2011. We have been explained that since there was no business conducted after that hence no return of income was filed after that period.” 10. Further submission of the learned counsel for the respondents is that in 2019, the parties decided that the property, which was earlier held by the Firm, and which was now owned by the erstwhile partners, and their heirs, in their respective shares, be demolished. Accordingly, the parties entered into an Agreement between themselves for demolition of the existing constructed property and distribution of the proceeds of the sale of the debris in accordance with their respective shares. This Agreement has been placed on record by the applicant himself. It is pointed out that in terms of the Agreement, the applicant accepted Rs. 32,000 + Rs. 24,000/-, total Rs. 56,000/- towards his 4% share in the debris of the constructed property. 11. This Agreement has been placed on record by the applicant himself. It is pointed out that in terms of the Agreement, the applicant accepted Rs. 32,000 + Rs. 24,000/-, total Rs. 56,000/- towards his 4% share in the debris of the constructed property. 11. It is argued that this Agreement, firstly, does not purport to be amongst the parties in their capacity as partners of the said firm, and, secondly, does not contain any arbitration clause, and the disputes arising under the said Agreement are not referable to arbitration. 12. Learned counsel for the respondents have argued that any claim arising in the partnership deed is clearly barred by limitation, inasmuch, as, dissolution of the firm took place on 21.01.2011, whereas the Arbitration Application has been filed in 2022. The period of limitation prescribed for claiming accounts and shares of the profits of a dissolved partnership is three years, and the time from which the period begins to run, is the date of dissolution of the firm, as is evident from Entry-5 of the Schedule to the Limitation Act, 1963. 13. Learned counsel for the respondents have also placed reliance on a recent judgment of the Supreme Court in NTPC Ltd. vs. M/s SPML Infra Ltd. (Civil Appeal No. 4778 of 2022, decided on 10th April, 2023) dealing with the scope of enquiry that the Court should undertake while dealing with an application under Section 11(6) of the Arbitration and Conciliation Act, 1996. Relevant paragraphs of the said judgment read as follows:- “28. The limited scrutiny, through the eye of the needle, is necessary and compelling. It is intertwined with the duty of the referral court to protect the parties from being forced to arbitrate when the matter is demonstrably non-arbitrable. It has been termed as a legitimate interference by courts to refuse reference in order to prevent wastage of public and private resources. Further, as noted in Vidya Drolia (supra), if this duty within the limited compass is not exercised, and the Court becomes too reluctant to intervene, it may undermine the effectiveness of both, arbitration and the Court. It has been termed as a legitimate interference by courts to refuse reference in order to prevent wastage of public and private resources. Further, as noted in Vidya Drolia (supra), if this duty within the limited compass is not exercised, and the Court becomes too reluctant to intervene, it may undermine the effectiveness of both, arbitration and the Court. Therefore, this Court or a High Court, as the case may be, while exercising jurisdiction under Section 11(6) of the Act, is not expected to act mechanically merely to deliver a purported dispute raised by an applicant at the doors of the chosen arbitrator, as explained in DLF Home Developers Limited v. Rajapura Homes Pvt. Ltd. 46. We will now examine whether the allegations of coercion and economic duress in the execution of the Settlement Agreement are bona fide or not. This inquiry has a direct bearing on the arbitrability of the dispute. It was during the subsistence of the Writ Petition and the High Court’s interim order, when SPML had complete protection of the Court, that the parties entered into the Settlement Agreement. This agreement was comprehensive. It inter alia provided for (i) the release of Bank Guarantees by NTPC, (ii) the withdrawal of SPML’s Writ Petition, (iii) restraining NTPC from filing contempt proceedings against SPML for letting the Bank Guarantees expire, and finally, (iv) restraining SPML from initiating any proceedings under the subject contract, including arbitration. The Settlement Agreement also recorded that there were no subsisting issues pending between the parties. 48. The foregoing clarifies beyond doubt that the claims sought to be submitted to arbitration were raised as an afterthought. Further, SPML’s allegations of coercion and economic duress in the execution of the Settlement Agreement lack bona fide. They are liable to be knocked down as ex facie frivolous and untenable. 49. In view of the above-referred facts, which speak for themselves, we are of the opinion that this is a case where the High Court should have exercised the prima facie test to screen and strike down the ex-facie meritless and dishonest litigation. These are the kinds of cases where the High Court should exercise the restricted and limited review to check and protect parties from being forced to arbitrate.” 14. I have considered the rival submissions of learned counsels and perused the records. These are the kinds of cases where the High Court should exercise the restricted and limited review to check and protect parties from being forced to arbitrate.” 14. I have considered the rival submissions of learned counsels and perused the records. It is evident that any claim arising out of the partnership deed is clearly barred by limitation, inasmuch as the partnership deed, which was “at will”, stood dissolved on 21.01.2011 on account of the issuance of the notice of dissolution of erstwhile partner Sri Jeet Ram Bhatia. The applicant himself acknowledged receipt of the said notice of dissolution by replying to it, and therefore, cannot be heard to say that the partnership firm has not been dissolved. The right of the applicant to claim accounts and shares in the profit of the Firm accrued on the date of dissolution, and should have been invoked within the period of limitation of three years, which expired on 20.01.2014. Admittedly, no notice invoking the arbitration was issued by the applicant before 20.01.2014. The notice invoking the arbitration has been issued by the applicant only on 18.07.2022, which is clearly beyond the period of limitation. 15. So far as the Agreement entered into between the parties on 10.01.2019 is concerned, the said Agreement is distinct from the partnership deed, which does not survive after 21.01.2011, and the said Agreement dated 10.01.2019 does not contain any Arbitration Agreement. It is an agreement between individuals in their individual capacity. A perusal of the Agreement entered into between the parties on 10.01.2019 shows that the parties have entered into the said Agreement in their own right, and as co-owner of the joint property. It is open to them to have their inter se disputes in relation to the joint property resolved in civil proceedings. Consequently, any dispute arising under the said Agreement cannot be referred to Arbitration. 16. In the light of the aforesaid, and while being conscious of the decision of the Supreme Court in NTPC Ltd. vs. M/s SPML Infra Ltd. (supra), I am not inclined to allow this Application. The same is, accordingly, dismissed.