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2025 DIGILAW 351 (MP)

Sapna Sangeeta Ventures LLP v. Shri Chandra Kumar

2025-06-17

BINOD KUMAR DWIVEDI, VIVEK RUSIA

body2025
ORDER Rusia -- 1. Petitioners have filed this petition being aggrieved by the order dated 23.1.2024 passed by the Commercial Court in Commercial Case No. 13/2021 whereby the application filed under section 8 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the ‘Act of 1996’) has been dismissed. 2. Facts of the case in short are as under : 2.1 On 15.7.1976, first partnership deed was executed in the name ‘’Suresh Chandra Khandelwal & Company’’ between five partners namely Sureshchandra Khandelwal, Dineshchandra Khandelwal, Smt. Indramani Khandelwal, Giriraj Prasad Khandelwal and Vinod Kumar. Thereafter, the second partnership deed was executed on 16.10.1980 between the aforesaid five partners and two new partners namely Gopaldas Tolani and Arjundas Tolani for the purpose of carrying on business of development and construction of cinema complex. The partnership firm was registered with the Registrar of Firms and Society on 15.12.1980. The firm acquired land admeasuring 3750.33 sq.mtr. in Scheme No. 47 of City Improvement Trust, Indore for construction of cinema complex. On 22.12.1980, the third partnership deed was executed between five partners and the existing initial five partners were retired from the partnership firm. Thereafter, fourth, fifth and sixth partnership deeds were executed on 1.4.1989, 1.4.1989 and 1.4.2009, respectively. After 11 years, the respondents No. 1 and 2 demanded record of the partnership firm. Subsequently a legal notice was served on 23.1.2021 and a suit was filed on 23.2.2021 before the Commercial Court, Indore seeking relief that the partnership firm between the plaintiff and defendants No. 2, 3 and 4 under the deed of partnership be wound up and the partnership fraudulently created by defendants No. 2, 3 and 5 be declared as illegal, null and void & other similar reliefs. 2.2 After notice, the present petitioners appeared in the suit and filed an application under Order VII rule 11(d) of the Code of Civil Procedure read with section 8 of the Act of 1996 on 28.11.2022 seeking dismissal of the suit as time barred and liable to be referred to the Arbitrator. The plaintiffs filed reply on 5.7.2023. Vide impugned order dated 23.1.2024, the learned Commercial Court has rejected the application under Order VII rule 11(d) of the CPC and declined to reject the plaint. However, the petitioners are not challenging the aforesaid part of order. The plaintiffs filed reply on 5.7.2023. Vide impugned order dated 23.1.2024, the learned Commercial Court has rejected the application under Order VII rule 11(d) of the CPC and declined to reject the plaint. However, the petitioners are not challenging the aforesaid part of order. 2.3 Vide impugned order, the application filed under section 8 of the Act of 1996 has also been rejected solely on the ground that the relief claimed is not arbitrable therefore, there is no benefit of sending the matter to the arbitration. However, the Commercial Court has held that there is an arbitration clause in the agreement as the defendants have filed the original copy of the partnership deed and the retirement deed and further held that the judgment passed by the High Court of Delhi in case of SPML Infra Ltd. v. Trisquare Switchgears Pvt. Ltd. reported in 2022 SCC OnLine Del 1914 is not applicable to the facts of the present case. Hence, the defendants have filed this present petition under Article 227 of the Constitution of India challenging the rejection of application under section 8 of the Act of 1996. 3. Shri Manoj Munshi, learned Senior Counsel appearing on behalf of the petitioners submits that the learned Commercial Court has wrongly rejected the application solely on the ground that there is an allegation of fraud against the defendants in the plaint and the said issue of fraud cannot be decided by the Arbitrator. Shri Munshi, learned Sr. Counsel submits that the allegation of fraud is between the parties to an agreement which has no implication in the public domain to oust the jurisdiction of the Arbitrator. He has placed reliance on the judgment passed in case of Sushma Shivkumar Daga & Anr. v. Madhurkumar Ramkrishnaji Bajaj & Ors., reported in 2023 INSC 1081 wherein the apex Court has held that, ‘if an allegation of fraud exists strictly between the parties concerned, the same will not be termed to be as a serious nature of fraud and hence would not be barred for arbitration’ (para 20). 4. v. Madhurkumar Ramkrishnaji Bajaj & Ors., reported in 2023 INSC 1081 wherein the apex Court has held that, ‘if an allegation of fraud exists strictly between the parties concerned, the same will not be termed to be as a serious nature of fraud and hence would not be barred for arbitration’ (para 20). 4. Per contra, Shri Pankaj Jain, learned counsel appearing for the respondents/plaintiffs submits that the learned Commercial Court has wrongly discarded the judgment passed by the High Court of Delhi in case of SPML Infra (supra), on the ground that the defendants, in the present case, did not file their objection under section 8 of the Act of 1996 immediately after their appearance and only when their right to file written statement was going to be closed after expiry of 120 days, they filed an application under section 8 of the Act of 1996. Shri Jain, learned counsel has placed reliance on the judgment passed by the apex Court in case of Booz Allen and Hamilton Inc. v. SBI Home Finance Limited & Ors., reported in (2011) 5 SCC 532 in which the application filed under section 8 of the Act of 1996 has been dismissed on the ground that the suit being one for enforcement of a mortgaged by sale, should be tried by the civil Court. Shri Jain, learned counsel submits that in the present case, the respondent is challenging the partnership and retirement deeds on the ground of fraud, therefore, this issue is liable to be decided by the Court and not by the Arbitral Tribunal. Hence, no interference is called for. Heard learned counsel for the parties. 5. It is not in dispute that in the partnership deed dated 22.1.1980 between the plaintiffs and the defendants, their is an arbitration clause which is reproduced below : ‘’(13) All disputes and questions whatsoever with respect to this partnership which may during the existence of the partnership or afterwards, arise between the partners or between their respective heirs, shall be referred to the arbitration. The decision of the arbitrator/s shall be final and binding upon all the partners.’’ 6. According to this arbitration clause, all the disputes and questions whatsoever with respect to the partnership deed or afterwards arising between the parties shall be referred to the arbitration. The decision of the arbitrator/s shall be final and binding upon all the partners.’’ 6. According to this arbitration clause, all the disputes and questions whatsoever with respect to the partnership deed or afterwards arising between the parties shall be referred to the arbitration. The respondents/plaintiffs raised objection that the petitioners/defendants did not raise this issue at the first instance, therefore, they lost the right to seek reference to the arbitration. In support of their contention, they placed reliance on the judgment passed by the High Court of Delhi in case of SPML Infra (supra). 7. In the case of SPML Infra (supra) , the application was filed under section 8 of the Act of 1996 after expiry of the statutory period to file written statement and the defendant’s right was closed. But in the present case, the application under section 8 was filed before closing of the right as observed by the Commercial Court itself and rightly rejected the applicability of the judgment in case of SPML Infra (supra). 8. The second objection was raised that the Arbitrator has no power to declare the document null and void. It is settled law that the Arbitrator has all powers to pass a decree which can be passed by the civil Court between the parties. As per the language of section 8(1) of the Act of 1996, the Court is only required to examine whether, prima facie, no valid arbitration agreement exists. Otherwise, it is mandatory for the judicial authority to refer the dispute as per arbitration agreement. Admittedly, the Commercial Court has found that there is an arbitration agreement between the parties and the original agreement has been filed. In such circumstances, the Court cannot reject the application by observing that the dispute is not arbitrable. 9. In case of A.Ayyasamy v. Paramasivam reported in AIR 2016 SCC 4675 , the apex Court has held that where there are allegations of fraud simplicitor and such allegations are merely alleged, it would not nullify the effect of the arbitration agreement between the parties as such issues can be determined by the Arbitral Tribunal. In case of P. Anand Gajapathi Raju & Ors v. P.V.G. Raju (Died ) & Ors., reported in 2000 (4) SCC 539 , the apex Court has held that the language of section 8 is peremptory in nature. In case of P. Anand Gajapathi Raju & Ors v. P.V.G. Raju (Died ) & Ors., reported in 2000 (4) SCC 539 , the apex Court has held that the language of section 8 is peremptory in nature. Therefore, in case where there is an arbitration clause in agreement, it is obligatory for the Court to refer the parties to arbitration in terms of their arbitration agreement and nothing remains to be decided in the original action after such an application is made except to refer the dispute to an Arbitrator. 10. Therefore, in view of the foregoing discussions and in the light of the law laid down by the apex Court, the impugned order dated 23.1.2024 is liable to be and is hereby set aside. The application filed by the petitioners/defendants under section 8 of the Act of 1996 is allowed. Parties are referred to the Arbitration. Petition stands allowed and disposed of accordingly.