Kamla Devi Bhala and Others vs Puran Mal Somani and Others

Ajay Rastogi, J.—Instant arbitration application has been filed u/S. 10 & 11 of the Arbitration & Conciliation Act, 1996 for appointment of Arbitrator.

The salient facts, which are relevant for the present purpose, as referred in the arbitration application, are that M/s. Sualal Murlidhar, a partnership firm, entered into partnership on 13.05.1957 and the partnership was reduced into writing on 18.11.1990.

The partnership firm M/s. Sualal Murlidhar, as alleged, purchased a shop whose present number is 295 and municipal number is 9/999 and situated at Chandpole Bazaar on the southern line. The shop is situated at S. No. 5, which runs from staircase of the Tilak Mandir from Chhoti Chopar to Chandpole Bazaar, Jaipur.

Initially, the partnership firm was between the following six persons:--

"(1) Shri Gajanand Bhalla S/o. late Shri Murlidhar Bhalla.

(2) Shri Jagdish Narain Bhalla S/o. Shri Kaluram Bhalla.

(3) Shri Puran Mal Somani S/o. late Shri Hardev Somani.

(4) Shri Chandan Mal Somani S/o. Rameshwar Lal.

(5) Smt. Nirmala Devi Maroo W/o. Shri Madan Lal Maroo.

(6) Shri Murari Lal Maroo S/o. late Shri Hari Prasad Maroo."

The profit & loss of partnership firm was as under:--

"(1) Party of the first part : 15%

(2) Party of the second part : 15%

(3) Party of the third part : 15%

(4) Party of the fourth part 25%

(5) Party of the fifth part : 15%

(6) Party of the sixth part : 15%"

One of the partner Jagdish Narain Bhala S/o. Kaluram Bhala died on 28.08.1996 and as alleged in his place his wife Smt. Kamla Devi Bhala was substituted as partner and for executing a new partnership stamp papers were purchased on 18.09.1996 and executed on 29.09.1996 but, as alleged, by a typographical mistake, the date of execution of the partnership stood typed as 29.08.1996. There is no dispute as regards the first partnership which was reduced into writing, executed on 18.11.1990 containing the clause of arbitration to resolve if there is a dispute or difference at any time arises between the partners or their legal heirs and executors with respect to their partnership or any matter in connection with or incidental thereto. Clause 18 of the partnership deed, which was executed between the partners on 18.11.1990 is reproduced hereunder for ready reference:--

"18. That any dispute or difference that may at any time arise between the partners or their legal heirs and executors with respect to this partnership or any matter in connection with or incidental thereto shall be referred to Arbitration in accordance with the provisions of the arbitration Act, 1940 and the rules, if any, made thereunder and this agreement shall be deemed to be an agreement to submit to arbitration."

The deed of partnership was entered and executed in September, 1996 but, as alleged, due to typographical mistake, it stood typed as 29.08.1996 and the conditions of deed of partnership are almost as verbatim same to the deed of partnership Dt. 18.11.1990 except that it contain substitution of Smt. Kamla Devi Bhala on account of death of earlier partner namely Jagdish Narain Bhala, who died on 28.08.1996 and it too contain the same clause of arbitration, as verbatim, Clause-18 to resolve the dispute or difference, which may arise between the partners.

Clause-18 of the deed of partnership which was executed on 29.09.1996 and, as alleged, due to typographical mistake stood typed as 29.08.1996, is reproduced ad infra:--

"18. That any dispute or difference that may at any time arise between the partners or their legal heirs and executors with respect to this partnership or any matter in connection with or incidental thereto shall be referred to arbitration in accordance with the provisions of the Arbitration Act, 1940 and the rules, if any, made thereunder and this agreement shall be deemed to be an agreement to submit to arbitration."

The partnership executed on 29.09.1996, but as alleged due to typographical mistake, the date of execution of partnership deed stood typed as 29.08.1996, contains the following partners & profit and loss of the partnership firm was ad infra:--

"(1) Shri Gajanand Bhalla S/o. late Shri Murlidhar Bhalla. 15%

(2) Smt. Kamla Devi Bhalla W/o. late Shri Jagdish Narain Bhalla 15%

(3) Shri Puran Mal Somani S/o. late Shri Hardev Somani. 15%

(4) Shri Chandan Mal Somani S/o. Rameshwar Lal. 15%

(5) Smt. Nirmala Devi Maroo W/o. Shri Madan Lal Maroo. 15%

(6) Shri Murari Lal Maroo S/o. late Shri Hari Prasad Maroo. 15%"

The above partnership was on the same profit ratio sharing to the earlier partnership Dt. 18.11.1990 except the substitution of Smt. Kamla Devi Bhala replacing her husband late Sh. Jagdish Narain Bhala. It has also been alleged that partnership firm has following properties:--

"(1) Shop No. 295, the Municipal Number of which is 9/999 situated at Chandpole Bazaar, Vinit Tilak Mandir, Chandpole Bazaar, Jaipur.

(2) Shop No. K-11, Surajpole Mandi, which was allotted to partnership firm M/s. Sualal Murlidhar by KUMS, Jaipur.

(3) One shop No. D-97, Nai Anaj Mandi, Chandpole Anaj Mandi, which was purchased by the partnership firm."

It has also been alleged that Shop bearing No. A-11 situated at Surajpole Mandi was cancelled by Krishi Upaj Mandi Samiti on 08.08.2001 and the partners filed a revision petition bearing No. 53/2001-2002 on 01.09.2001 which bear the signatures of all the partners including Smt. Kamla Devi Bhala and the revision petition filed by the partners against cancellation was allowed by the Director, Agriculture Marketing Board.

It has further been stated that on 14.08.2003, the respondents No. 1 & 2 tried to remove the locks of the shop namely: Sualal Murlidhar situated in Chandpole Bazaar, Jaipur and that constrained the present applicant to file an application u/S. 9 of the Act before the ld. Trial Judge. In response to the application filed u/S. 9 of the Act, reply was filed by the respondent No. 1 and that point of time, it was alleged that on 22.11.1993, the partnership was dissolved and disputed the execution of the partnership deed Dt. 29.09.1996. However, the Additional District Judge (Fast Track) No. 3, Jaipur City, Jaipur, after hearing the parties and taking note of the objection raised regarding partnership firm being dissolved, as alleged on 22.11.1993, passed an order on 07.02.2009. The operative part of the order Dt. 07.02.2009 passed by the Additional District Judge (Fast Track) No. 3, Jaipur City, Jaipur on the application u/S. 9 of the Act is reproduced, ad infra:--

There being an arbitral dispute between the parties for settlement of properties, owned by the partnership firm M/s. Sualal Murlidhar, and that constrained the present applicant to file an application u/S. 10 & 11 of the Act, 1996 for appointment of Arbitrator.

After the notices of the present arbitration application came to be served, reply has been filed by the respondent No. 1, who appears to be the main contesting party and a separate reply has been filed by the respondent No. 3, which is almost on the same parallel lines, however, from the reply filed by the respondents, the initial establishment of partnership firm Dt. 03.05.1957 and execution of partnership deed Dt. 18.11.1990 is not disputed, however, it has been averred that the partnership firm was dissolved on 22.11.1993 and after the death of Sh. Jagdish Narain Bhala, who was one of the partner, on 28.08.1996, the forged partnership deed was prepared on 29.09.1996 and notarized on 16.04.1998.

It has also been averred that against the order of the Additional District Judge (Fast Track) No. 3, Jaipur City, Jaipur on an application u/S. 9 of the Act Dt. 07.02.2009, S.B. Civil Misc. Appeal No. 526/2011 has been filed which is pending consideration before this court, however, therein service upon all the respondents (alleged partners) has not been effected so far. It has also been alleged that it was the partnership deed Dt. 29.09.1996 which as per the deed, executed on 29.08.1996, being forged and fraudulently notarized, a criminal complaint was filed in the competent court of jurisdiction, which was sent for investigation u/S. 156 (3) of the Code and FIR No. 263 Dt. 24.07.2009 was registered at Police Station Galta Gate u/S. 420, 467, 468, 471 & 120B IPC against seven persons including the present applicant. However, the Investigating Officer has submitted Final Report therein but a protest petition has been filed by the respondent which is still pending consideration before the competent court of jurisdiction. It has also been averred that the Registrar of Firms, on the basis of deed of dissolution Dt. 22.11.1993, dissolved the firm on 26.07.2008, however, the Deputy Director, Registrar of Firms reviewed the order without any authority and restored the firm vide order Dt. 24.10.2008 and that has been challenged by the respondents by filing S.B. Civil Writ Petition No. 10889/2009 which is pending adjudication and that apart the respondents submit that a Civil Suit has been filed along with an application of Temporary Injunction for declaration of document - partnership deed, as alleged Dt. 29.08.1996, to be null and void in May, 2011 that is pending adjudication.

I have heard counsel for the parties and also perused the material on record.

Before examining the question which arises for consideration as to whether the arbitration agreement between the parties, as denied by the respondents, was at all executed on 29.09.1996 and what will be its effect and whether the Chief Justice or his Designate can appoint an Arbitrator without deciding the question whether there was an arbitration agreement between the parties or it may be left for the Arbitrator to decide after affording opportunity of hearing to the parties.

In S.B.P. and Co. Vs. Patel Engineering Ltd. and Another, and National Insurance Co. Ltd. Vs. Boghara Polyfab Pvt. Ltd., , the Constitutional Bench of the Apex Court held that when an application u/S. 11 of the Act is filed, it is for the Chief Justice or his Designate to decide whether there is an arbitration agreement, as defined in the Act and whether the party who has made a request before him, is a party to such an agreement and a distinction has been made as to which issues could be left for the Arbitrator to decide.

Following the decision in SBP & Co. (supra), the Apex Court in National Insurance Co. Ltd. (supra) held ad infra:--

"12. Following the decision in SBP & Co. this Court in National Insurance Co. Ltd. held as follows: (National Insurance Co. Ltd. case, SCC p. 283, paras 22.1 - 22.3)

Where the intervention of the court is sought for appointment of an Arbitral Tribunal under Section 11, the duty of the Chief Justice or his designate is defined in SBP & Co. This Court identified and segregated the preliminary issues that may arise for consideration in an application under Section 11 of the Act into three categories, that is, (i) issues which the Chief Justice or his designate is bound to decide; (ii) issues which he can also decide, that is, issues which he may choose to decide; and (iii) issues which should be left to the Arbitral Tribunal to decide.

22.1. The issues (first category) which the Chief Justice/his designate will have to decide are

(a) Whether the party making the application has approached the appropriate High Court.

(b) Whether there is an arbitration agreement and whether the party who has applied under Section 11 of the Act, is a party to such an agreement.

22.2. The issues (second category) which the Chief Justice/his designate may choose to decide (or leave them to the decision of the Arbitral Tribunal) are:

(a) Whether the claim is a deed (long-barred) claim or a live claim.

(b) Whether the parties have concluded the contract/transaction by recording satisfaction of their mutual rights and obligation or by receiving the final payment without objection.

22.3. The issues (third category) which the Chief Justice/his designate should leave exclusively to the Arbitral Tribunal are:

(i) Whether a claim made falls within the arbitration clause (as for example, a matter which is reserved for final decision of a departmental authority and excepted or excluded from arbitration).

(ii) Merits or any claim involved in the arbitration."

It is settled by judgment of the Apex Court that the question "whether there was an arbitration agreement executed between the parties" has to be decided only by the Chief Justice of his Designate and that cannot be left to the decision of the Arbitral Tribunal, as the question in regard to the execution of the arbitration agreement is a jurisdictional issue and unless there is a valid arbitration agreement, the application filed u/S. 11 of the Act will not be maintainable and if an objection has been raised with regard to the arbitration agreement, which is the basis for appointment of Arbitrator, regarding forgery or fabrication of document, it is for the Chief Justice or his designate to decide the issue. It is also well settled that an Arbitrator can be appointed only if there is an arbitration agreement in regard to the contract in question.

In the instant case, it is not disputed that M/s. Sualal Murlidhar, a partnership firm, was initially entered into the business on 03.05.1957 and partnership deed was reduced into writing on 18.11.1990 and initially there were six partners in the partnership firm including late Shri Jagdish Narain Bhala and the deed contained Clause-18 of the agreement for settlement of disputes or differences that may at any time arise between the partners or their legal heirs and executors with respect to the partnership or any matter in connection with or incidental thereto by reference being made to the Arbitrator under the provisions of the Arbitration Act.

However, the issue in question, as come up for consideration, is in respect of the objection raised by the respondent No. 1 to the partnership firm being dissolved on 22.11.1993 and later partnership deed which is said to have been executed on 29.09.1996, for which, as alleged by the applicant, stamp papers were purchased on 18.09.1996 and by a typographical mistake, the date of execution of the partnership deed stood typed as 29.08.1996, also contain Clause-18 for settlement of disputes or differences, if arise between the partners or their legal heirs and executors with respect to the partnership or any matter in connection with or incidental thereto by reference being made to the Arbitration under the provisions of the Arbitration Act. Both the partnership deeds Dt. 18.11.1990 and 29.09.1996 are virtually same except that in the later partnership deed, there is a reference regarding the death of one of the partner Shri Jagdish Narain Bhala who died on 28.08.1996 and that substituted Smt. Kamla Devi Bhala as a partner, as alleged in the partnership deed executed on 29.09.1996. The question before the court is not in respect of the partnership stands dissolved, as alleged by the respondents on 22.11.1993 for which an objection has been raised that it has not been signed by the working partners namely Chandan Mal Somani, Smt. Nirmala Devi Maroo and Murari Lal Maroo. Apart from it there is another objection of the applicant that the original dissolution deed, if any, has not been produced and no cognizance can be taken on the photostat copy of the deed of dissolution, which has been placed on record. Apart from it, this court finds substance in the submission made that in the year 2001 when there was an order passed in respect of cancellation of Shop No. A-11 of partnership firm situated at Surajpole Mandi by Krishi Upaj Mandi, a Revision Petition No. 53/2001-2002 was filed under the signatures of all the partners including Smt. Kamla Devi Bhala which creates serious doubt about the partnership being dissolved on 22.11.1993 because there appears no reasonable justification for a revision petition being filed under the signatures of all the partners including Smt. Kamla Devi Bhala in the year 2001 and it cannot be disputed from the material which has come on record that stamp papers were purchased on 18.09.1996 and as alleged Jagdish Narain Bhala died on 26.08.1996 and there could be a substitution of partnership on account of his death and was open for the partners to substitute Smt. Kamla Devi Bhala as a partner and execute the partnership deed on 29.09.1996, which ultimately is not going to make a material distinction for the reason that Shri Jagdish Narain Bhala died on 28.08.1996 and execution on 29.09.1996 or 29.08.1996, as referred to in the partnership deed, no material change could be said to be affected as the death of Jagdish Narain Bhala being prior to the date of execution, as per the objection of respondents, on 29.09.1996 or as alleged by the petitioner to be executed on 29.08.1996, ordinarily if the stamp papers were purchased on 18.09.1996 the execution could not be of any date anterior thereto but as already observed, if Jagdish Narain Bhala was substituted on account of his death on 28.08.1996 and deed has been signed by all the six partners including Smt. Kamla Devi Bhala, the apprehension which has been indicated by the respondents ordinarily cannot be doubted and apart from it when the application was filed by the applicant u/S. 9 of the Act before the ld. District Judge, the objection was raised by the respondent No. 1 in respect of dissolution of partnership firm on 22.11.1993 and a forged partnership deed being prepared on 29.09.1996 was considered by the ld. Additional District Judge on the basis of the material which came on record, objection was overruled and the application filed by the applicant u/S. 9 of the Act was accepted vide order Dt. 07.02.2009 and that certainly supports the submission made by the applicant that the partnership deed was executed between the parties which contains Clause-18 of the agreement to resolve the inter-se dispute of the parties under Arbitration Act and as regards objection raised by the respondents to support the submission that the later partnership deed substituting Smt. Kamla Devi Bhala by replacing her husband Jagdish Narain Bhala is forged and an FIR was registered in this regard, suffice it to say that the Investigating Officer has submitted Final Report in the same and merely because their protest petition is pending, that will not rule-out the existence of partnership deed being executed between the parties in the year 1996. In furtherance thereto, the partnership deed of the year 1996 apart from the fact that whether it was scribed in August, 1996 or September, 1996, it is signed by all the six partners including Smt. Kamla Devi Bhala who could be said to have been substituted after the death of her husband on 28.08.1996.

From the series of facts, which came on record, at least this court can record a finding that the partnership deed was executed between the parties in September, 1996 to which the present applicant and respondents are partners and that contains Clause-18 to resolve their disputes or differences, if any arise between the parties or their legal heirs and executors with respect to their partnership or any matter in connection with or incidental thereto by making a reference to the Arbitrator, in accordance with the Arbitration Act and the applicant has been able to satisfy that the twin conditions which are supposed to be complied with and considered by the Apex Court in Bharat Rasiklal Ashra Vs. Gautam Rasiklal Ashra and Another, have been complied with in the facts & circumstances of the instant case.

After taking note of the submissions made and the material which has come on record, details already noticed by this court, this court is of the view that the partnership deed was executed between the parties duly singed by all the six partners including Smt. Kamla Devi Bhala after the death of her husband on 28.08.1996, in the year 1996, and that contains Clause-18 of the arbitration agreement to resolve the dispute or difference, if arises between the partners, by the process of Arbitration and mere allegation of being forged or fabricated the deed, may not in itself be considered to be sufficient to create a doubt in reference to the partnership deed which was executed between the parties and this court can further record that there is no iota of doubt ever came for consideration regarding the partnership deed being executed in September, 1996 and as already observed that Jagdish Narain Bhala, who was one of the partners in the partnership firm, earlier executed a partnership deed on 18.11.1990 and who died on 28.08.1996, there could be substitution of partner only after his death and when the stamp papers were purchased on 18.09.1996, obviously the execution could have taken place only thereafter by substituting Smt. Kamla Devi Bhala W/o. Jagdish Narain Bhala in the new partnership firm.

No other question was raised for consideration of this court.

Consequently, this court is of the considered view that the present application filed by the applicant deserves acceptance and the Chief Justice or his Designate, in terms of the arbitration agreement, holds competence to appoint an Arbitrator u/S. 11 of the Arbitration & Conciliation Act, 1996.

Consequently, the instant application is allowed and this court considers it appropriate to appoint Mr. Ramavtar Sharma (Retd. District Judge), F-36, Rampath, Shyam Nagar, Sodala, Jaipur as sole Arbitrator to resolve the arbitral dispute. The cost of arbitration & fee of Arbitrator shall be determined in terms of the arbitration manual. The parties are at liberty to raise objections u/S. 16 of the Act, as permissible under the law.

A copy of this order be sent to Mr. Ramavtar Sharma (Retd. District Judge) and the parties are directed to appear before the Arbitrator on 19.04.2014 at 11:00 AM.