Shalu Jain vs Shivcharandas And Son

Rekha Borana, J

The present is an application filed under Section 11 (6) of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the ‘Act of 1996’) for appointment of a sole arbitrator.

The case of the applicant is that partnership deed dated 09.08.2020 (Annex.2) was executed between her father Rakesh Kumar Jain and his nephew Siddharth Jain. Her father Rakesh Kumar Jain expired on 08.04.2021 and she being the daughter of deceased Rakesh Kumar Jain, vide letter dated 19.05.2021 (Annex.3), called upon non applicant No.2 to induct her in the partnership firm in place of her father. The said request was not acceded to and hence, the applicant invoked clause No.14 of the deed/agreement, the same being an arbitration clause.

Notice dated 28.09.2022 (Annex. 4) was served upon non applicants calling upon to give consent on the name of the arbitrator as suggested by the applicant.

The above notice was not responded to and hence, the present application has been filed.

Learned counsel for the non applicants raised two preliminary objections:

(i) Clause 14 of partnership deed dated 09.08.2020 cannot be invoked by the present applicant, she not being a party to the said partnership deed.

(ii) The partnership deed in question already stood cancelled w.e.f. 30.06.2021 and when no partnership survives, no question of inducting the applicant as a partner would arise.

Responding to the above objections, counsel for the applicant submits that she being a legal heir/representative of the deceased partner, is not only entitled to pray for induction in the firm in terms of Clause 13 of the agreement but also to call for rendition of accounts of the firm.

Counsel submits that arbitration agreement survives even after the death of a partner and hence, the applicant is very well entitled to invoke the arbitration clause.

Heard the Counsels. Perused the record.

Before proceeding on to deal with the preliminary objections as raised by counsel for the respondents, Clause 13 and 14 of the partnership deed in question which provides for a provision on death of any of the partners and further, the provision for arbitration, would be apt:

“13. On the death of any partner or for any other reason the firm shall not be dissolved but shall be carried out by the remaining partners with or without the heirs or successors of the deceased partner/partners

THAT if during the continuance of the partnership or at any time thereafter any dispute or difference of opinion a rise among the parties or any of their representative touching the partnership or the account of transaction of meaning or effect of this deed or any thing herein above under this deed be referred to arbitration under the provision of Indian arbitration act, then enforce.”

Section 40 of the Act of 1996 reads as under:

“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 section shall affect the operation of any law by virtue of which any right of action is extinguished by the death of a person.”

A bare perusal of the above provision clarifies that an arbitration agreement does not stand discharged by death of any of the party to the agreement. Further, the above provision specifically envisage that in the event of death of any of the party to the arbitration agreement, the agreement shall be enforceable by or against the legal representative of the deceased.

In view of the above clear provision which entitles the legal representative of a deceased to enforce/invoke an arbitration agreement, this Court is of the considered opinion that the applicant is very well entitled to invoke Clause 14 of the agreement in question, she being the daughter of the deceased partner.

While dealing with an akin situation, the Hon’ble Apex Court in Ravi Prakash Goel Vs. Chandra Prakash Goel & Anr.; 2008 (13) SCC 667 while interpreting Section 46 and 48 of the Indian Partnership Act, 1932 and Section 40 of the Act of 1996 held that while right to sue for rendition of accounts of partnership firm survives on the legal representative of a deceased partner, he is also entitled to invoke the arbitration clause contained in the partnership deed.

On similar terms, Delhi High Court in the case of  Jyoti Gupta Vs. Kewalsons & Ors.; 2018 SCC OnLine Del 7942 held as under:

“12. A reading of the above judgments would clearly show that it is no longer res integra that upon death of a partner, the arbitration agreement between the partners shall survive and can be enforced by the legal heirs of the deceased partner. Whether upon the death of a partner, the surviving partners were under an obligation to induct one of the legal heirs of the deceased partner or not into the partnership as also whether such decision can be challenged by the legal heirs, and in case the legal heirs accept the decision of the surviving partners not to induct any legal heirs of the deceased partner into the partnership, what would be the effect, are all questions to be determined by the Arbitral Tribunal constituted in terms of the arbitration agreement between the parties. Further, merely because the arbitration agreement refers to the disputes between 'partners', the same cannot debar or take away the right of enforcement of such an arbitration agreement vested in the legal heirs of the deceased partner in view of Section 40 of the Act.”

In view of the above settled position of law, the objection raised by counsel for the respondents is clearly not tenable.

So far as the ground of the partnership firm itself not being in existence is concerned, firstly, the dispute raised is not only for induction in the partnership firm but also of the non applicant’s illegally devouring the capital and profits of the partnership firm. Secondly, on application under Section 9 of the Act of 1996 as filed by the applicant, the competent Court has vide order dated

02.05.2023 already passed an order of temporary injunction which would remain in effect till the date of constitution of Arbitral Tribunal.

In view of the above facts, this Court is of the clear opinion that a dispute has definitely arisen between the parties and the same needs to be resolved through arbitration in terms of Clause 14 of the deed/agreement in question. An independent and impartial arbitrator therefore deserves to be appointed by this Court to resolve the disputes that have arisen between the parties and as raised vide notice dated 28.09.2022 (Annx.4).

In view of the submissions made and the observations aforementioned, the present application under Section 11(6) of the Act of 1996 is allowed. Shri Mukesh Bhargava, Former Judge, Commercial Court No.2, Jodhpur, residing at 17-E 377, Chopasni Housing Board, Jodhpur is appointed as the sole arbitrator to adjudicate upon the disputes as raised vide notice dated 28.09.2022 (Annex.4).

The arbitration fee and the costs shall be in accordance with the Fourth Schedule to the Act of 1996. The above appointment shall be subject to the necessary disclosure being made by the arbitrator in terms of Section 12 of the Act of 1996.

The intimation of the appointment as aforesaid be given by the Registry to Shri Mukesh Bhargava, Former Judge, Commercial Court No.2, Jodhpur, residing at 17-E 377, Chopasni Housing Board, Jodhpur (Mobile No.9414016376). The parties would also be at liberty to intimate Shri Mukesh Bhargava and to call upon for appropriate date for necessary directions.

Pending applications, if any, stand disposed of.