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Case Reviews, The Law

Mrs. Madhu Devi Fatehpuria V. M/S Jugal Kishore Shyam Prakash & Co.

The instant case deals with the issue that whether the petitioner can seek the appointment of an Arbitrator to adjudicate the disputes between the parties under Section 11(6) of the Arbitration and Conciliation Act, 1996. To resolve the issue, the court held that the place of registration of a partnership firm would confer territorial jurisdiction on the Court to adjudicate a petition under Section 11 of the Arbitration Act in cases where jurisdiction or seat is not mentioned in the contract.              

By: Shivani Kharai, 4th year BBA LL.B (Hons), CMR University, School of Legal Studies, Bangalore.

Bench: Honourable Ms. Justice Jyoti Singh

Court: High Court of Delhi

Petitioner: Mrs. Madhu Devi Fatehpuria

Respondents: M/S Jugal Kishore Shyam Prakash

Date of Judgment: 13 March 2020

“In Absence of any specification as to jurisdiction or seat/venue in the contract, the place of registration of a partnership firm would confer territorial jurisdiction on the Court to adjudicate a petition under Section 11 of the Arbitration Act seeking appointment of an arbitrator to adjudicate upon the disputes which had arisen between two partners in the said firm.”1

Facts of the case

  • Respondent is the Partnership Firm registered under the Partnership Act, 1932 with the Registrar of Firms, Delhi. Commencement of business of trading of textile products, amongst other things. 
  • As per the agreement, the profit-sharing ratio in the partnership firm of the petitioner is 40% share and the other three respondents have a combined share of 60%.
  • Petitioner entered into the partnership deed on 18 May 1992. The deed contained an Arbitration Clause which reads as:

“12. ARBITRATION: In case of any dispute or disputes among the partners regarding the interpretation of this deed or with regard to other affairs pertaining to this partnership business, the same shall be referred and settled with an arbitrator mutually agreed upon by the partners.”

  • The petitioner had invested huge sums of money in the Firm. Since the year 2009, respondents have not shared copies of the account of the Firm, despite several requests. Copies of the audited balance sheets, ITR, Sales Tax, and GST Returns as well as other documents have also not been shared with the petitioner. 
  • The respondents unilaterally stopped paying interest at the agreed rates as well as his share in the profits in the manner provided in the Deed to the petitioner.
  • Apart from that, the three respondents together have been carrying out parallel businesses and diverted the business activities of the respondent (Jugal Kishore), exploiting the Goodwill for personal gains.
  • The petitioner served a notice dated 10 December 2018 invoking Arbitration when all other remedies for peaceful and amicable Dissolution of the Partnership failed.
  • The petitioner many times proposed the name of an Advocate be appointed as the Arbitrator so that the disputes could be adjudicated. However, two respondents sent a reply dated 17 January 2019 and did not accept the appointment of the proposed Arbitrator. And the respondent failed to appoint the arbitrator.

Issues

  • Whether the petitioner can seek the appointment of an Arbitrator to adjudicate the disputes between the parties under Section 11(6) of the Arbitration and Conciliation Act, 1996?

Rules

Section 11(6), Arbitration and Conciliation Act, 1996

Where, under an appointment procedure agreed upon by the parties,

(a) A party fails to act as required under that procedure; or

(b) The parties, or the two appointed arbitrators, fail to reach an agreement expected of them under that procedure; or

(c) A person, including an institution, fails to perform any function entrusted to him or it under that procedure, a party may request the Chief Justice or any person or institution designated by him to take the necessary measure unless the agreement on the appointment procedure provides other means for securing the appointment.2

Contentions

Respondent:

  • It is argued that the petitioner has concealed that the Partnership Deed dated 18 May 1992 was replaced with a new contract and superseded by a Partnership Deed dated 01 April 2006, which does not contain any Arbitration Clause.

The Deed of 18 May 1992 does not exist anymore and the present petition is thus not maintainable.

  • It is vehemently contended that the petitioner has intentionally concealed the said Partnership Deed from this Court.
  • It is next contended that the 2006 Partnership Deed is not a mere amendment but a new partnership deed on a Stamp Paper of value of Rs.300. The Deed nowhere contains any covenant which indicates that earlier terms of the Partnership Deed of 1992 shall remain intact.
  • The Territorial Jurisdiction to entertain the petition for the reason that even assuming that the partnership deed dated 18.05.1992 is valid and subsists, Clause 12 nowhere mentions that the seat or the venue of Arbitration would be New Delhi. The Deed was itself executed and signed at Coimbatore, Tamil Nadu. Clause 2 of the Deed specifies that the principal place of business would be Coimbatore while only the Branch Office is in Delhi.

Petitioner:

  • The petitioner proposed the name of an Advocate be appointed as the Arbitrator so that the disputes could be adjudicated. However, two respondents sent a reply dated 17 January 2019 and did not accept the appointment of the proposed Arbitrator. Having exhausted all other means to redress her grievances, the petitioner has filed the present petition.
  • The petitioner has not suppressed the partnership dated 01 April 2006. The stand was that the petitioner does not even recall having signed any such Partnership Deed and the only Deed executed and signed by her was the Deed dated 18 May 1992.
  • If the Deed dated 01 April 2006 existed, the same would have been mentioned in the Registration Certificate.

Judgment:

This Court does not find merit in the contention of the respondents that the disputes sought to be referred by the petitioner relate to the Dissolution of the Firm and are beyond the ambit of the Arbitration Agreement. In any case, the issue of arbitrability of Claims would be in the domain of the Arbitral Tribunal.

The Court held that in the absence of any specification as to jurisdiction or seat or venue in the contract, the place of registration of a partnership firm would grant territorial jurisdiction on the Court to adjudicate a petition under Section 11 of the Arbitration Act seeking appointment of an arbitrator to adjudicate upon the disputes which had arisen between two partners in the said firm.

Cases referred:

  • Uttarakhand Purv Sainik Kalyan Nigam Ltd. v. Northern Coal Field Ltd, (2020) 2 SCC 455.
  • National Insurance Co. Ltd. v. Boghara Polyfab (P) Ltd., (2009) 1 SCC 267: (2009) 1 SCC (Civ) 117.
  • SBP & Co. v. Patel Engg. Ltd, (2005) 8 SCC 618.

EndNotes:

1.Amit George, The Delhi High Court in Review: March 2020 [Part I], Bar And Bench, (April 27, 2020, 4:10 PM), https://www.barandbench.com/columns/the-delhi-high-court-in-review-march-2020-part-i.

2.The Arbitration and Conciliation Act, 1996.

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