Purkharam Choudhary vs Kishan Jangu

This application under Section 11(6) of the Arbitration and Conciliation Act, 1996 ('the Act, 1996') has been filed by the applicant seeking appointment of sole arbitrator to resolve the dispute between the parties.

It is inter alia indicated in the application that the applicant and the respondent entered into an agreement and constituted a partnership firm, terms whereof were indicated in the deed dated 29/6/2015 (Annex.1), which inter alia provided for settlement of disputes through arbitration.

It is claimed that the applicant found discrepancies in the accounts maintained by the respondent, raised objections qua several transactions and valued disputed transactions at Rs. 50,62,059/-, however, the dispute raised by the applicant was not settled by the respondent, therefore, a notice dated 11/4/2018 seeking appointment of arbitrator by suggesting name was issued. The notice was responded denying the averments contained therein.

Based on the above averments, it is claimed in the application that a sole arbitrator be appointed for resolution of dispute between the parties.

Notice of the application was issued to which a response has been filed raising preliminary objections.

It is inter alia submitted by learned counsel for the respondent that as on the deed of partnership requisite stamp duty has not been paid, the arbitration clause contained therein cannot be relied on in view of inadmissibility of said document under Section 39 of the Rajasthan Stamp Act, 1998 ('the Act, 1988')

Further submissions have been made that as the partnership firm is not registered with the Registrar of Firms, in view of provisions of Section 69(3) of the Partnership Act, 1932 ('the Act, 1932'), the application is not maintainable and on that count also the same deserves to be dismissed.

On the merits of the application, it is submitted that the respondent is always ready and willing to resolve the dispute by mutual consent and the applicant lacks willingness to settle the dispute amicably.

Reliance has been placed on Jagdish Chander Gupta vs. Kajaria Traders (India) Ltd. : AIR 1964 SC 1882, Dilip Singhavi vs. Shekhaddin Mohemmad : 2018 (2) RLW 1362 (Raj.), Nakoda Granite & Marmo Pvt. Ltd. vs. Yogendra Singhvi : 2015(1) RLW 862 (Raj.) and Naina Thakkar vs. Annapuran Builders : (2013) 14 SCC 354.

I have considered the submissions made by learned counsel for the parties and have perused the material available on record.

A perusal of the partnership deed (Annex.1) indicates that stamp duty worth Rs.500/- has been paid. Learned counsel for the respondent made submissions that as the applicant has raised issues in the application which are worth over Rs. 50 lakh, the stamp duty required to be paid on the partnership deed would be governed by Article 43 (1) (b) of the Schedule attached to the Act, 1998, which requires payment of minimum stamp duty of Rs.2000/- subject to maximum of Rs.10,000/-.

A perusal of the entry relevant for the purpose reads as under:

Partnership -

(1) Instrument of Partnership.-

(a) where there is no share contribution in partnership or where such contribution brought in by way of cash does not exceed Rs.50,000/-

(b) where such share contribution brought in by way of cash is in excess of Rs.50,000/-, for every Rs.50,000/- or part thereof.

Two thousand rupees.

Two Thousand rupees, subject to maximum duty of rupees ten thousand.

It may be noticed that the rate of stamp duty of Rs.2,000/- under Article 43(1)(a) was amended w.e.f. 8.3.2016 prior to which it was Rs.500/-.

A perusal of entry 43(1)(b) indicates that where the share contribution brought in by way of cash is in excess of Rs.50,000/-, for every Rs.50,000/- or part thereof the duty payable is Rs.2,000/- subject to maximum duty of Rs.10,000/-.

A bare perusal of the partnership deed reveals that the deed no where indicates any amount whatsoever as contribution in partnership having brought in cash and, therefore, the provisions of Article 43(1)(b) would have no application.

The submission made by learned counsel for the respondent that as the claim pertaining to dispute raised in the application is above Rs.50 lakh, the same would determine the duty payable has been noticed for rejection purpose only as it is well settled that the duty is payable on the document and it is only the contents of the document which are required to be seen for the purpose and not the subsequent events/transactions. The entry under Article 43(1)(a), quoted hereinbefore, is the entry which is attracted in the present case where there is no share contribution in partnership and as noticed the duty at the relevant time was Rs.500/- only and, therefore, the submission regarding insufficiency of the stamp duty paid on the deed of partnership has no basis and as such the same is rejected.

Coming to the objection relating to the lack of registration of partnership firm and, therefore, the application being barred under Section 69(3) of the Act, 1932, suffice it to notice that Hon'ble Supreme Court in Umesh Goel vs. Himachal Pradesh Cooperative Group Housing Society Limited : (2016) 11 SCC 313 after dealing with the judgment in the case of Jagdish Chander Gupta (supra), relied on by learned counsel for the respondent, and relying on the judgment in the case of Kamal Pushp Enterprises vs. D.R. Construction : (2000) 6 SCC 659 came to the following conclusion:

"37. Though the learned Senior Counsel for the appellant and the respondent referred to certain other decisions in support of their respective submissions, as we are fortified by our conclusion, based on the interpretation of Section 69 of the Partnership Act vis-à-vis the 1996 Act and the 1940 Act as well as supported by the decision in Jagdish Chander and Kamal Pushp Enterprises, we do not find any necessity to refer to those decisions in detail. Having regard to our conclusion that arbitral proceedings will not come under the expression "other proceedings" of Section 69(3) of the Partnership Act, the ban imposed under the said Section 69 can have no application to arbitral proceedings as well as the arbitration award. Therefore, the appeal stands allowed, the impugned judgment of the Division Bench is set aside and the judgment of the learned Single Judge stands restored. No costs."

In view of the above, the objection raised by learned counsel for the respondent in this regard also cannot be sustained.

In view of the provisions of Section 11(6A) of the Act, 1996, as there is an arbitration agreement between the parties and the dispute having arisen between them, the same deserves to be resolved through arbitration in terms of the arbitration clause.

In view of the above discussion, the application is allowed. Mr. Mandal Prasad Bohra (Retd. District Judge), resident of C-22, Krishna Nagar, Pali Road, Jodhpur (Mobile No.94149-16625) is appointed as a sole arbitrator to adjudicate upon the dispute between the parties in terms of the arbitration agreement and as per the Manual of Procedure for Alternative Dispute Resolution, 2009, as amended upto date. The above appointment is subject to necessary disclosure being made under Section 12 of the Act.