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TMI Blog2000 (4) TMI 758X X X X Extracts X X X X X X X X Extracts X X X X ..... Mulla quoted earlier, that passage is only confined to the inherent powers of the court as to whether dissolution of partnership is just and equitable, but we have demonstrated in the course of our order that it is permissible for the court to refer to arbitration a dispute in relation to dissolution as well on grounds such as destruction of mutual trust and confidence between the partners which is the foundation therefor. - SPECIAL LEAVE PETITIONS (CIVIL) NOS. 17010-17012 OF 1999 - - - Dated:- 18-4-2000 - S. RAJENDRA BABU AND S.N. PHUKAN, JJ. T.R. Andhyarujina, Vinod A. Bobde, R.F. Nariman. V.A. Mohta, S.M. Jadhav, B.T. Seth, N.D. Talele, W.S. Kane, D.M. Nargolkar and Shakil Ahamad Syed for the Appearing Parties . JUDGMENT Rajendra Babu, J. - A partnership firm, V.H. Patel Company, was constituted consisting of four brothers, namely, Jamnadas Himabhai Patel, Vallabhai Himabhai Patel, Gordhandas Himabhai Patel and Hirubhai Himabhai Patel, all sons of Dineshbhai Hirubhai Patel. On the death of Jamnadas Himabhai Patel the partnership was reconstituted with Gordhandas Himabhai Patel, Vallabhai Himabhai Patel, Hirubhai Himabhai Patel, Parmanand Jamnadas Pate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -2-1991 disposing of the matter in the following terms : "On 16-1-1991 when this petition came up for hearing before us, we had suggested to the parties that having regard to their close relationship and the nature of the dispute it would be desirable to explore the possibility of settlement or have the dispute resolved through arbitration. The parties have now arrived at a consent order which is signed and presented by the learned advocates for the Petitioner and the Respondents, which we take on record. According to the consent terms the parties have agreed to have their dispute resolved through sole arbitration of Mr. Justice D.M. Rege (Retd.) of Bombay High Court. We direct an order to be drawn up in terms of consent terms. The Special Leave Petition will stand disposed of in terms of the consent terms." 2. The crucial part of the Consent Terms is also extracted hereunder which is contained in para No. 2 thereof : "Both the parties agree that disputes relating to the rights and obligations of the parties arising out of the agreement dated 3-7-1987 and retirement deed dated 1-8-1987 and to the user of the trade marks in question and determination of the rights of the r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itration petition was filed by the respondent No. 1 for partial decree in terms of the accepted part of the award, namely, in terms of ( b ) and ( c ) of the operative part of the order and for status quo ante as on 25-1-1989 by setting aside the assignment deed dated 18-2-1999. The learned Single Judge of the High Court confirmed the award of the sole arbitrator so far as the declaration that the agreement dated 3-7-1987 and the retirement deed dated 8-1-1987 are ineffective, unenforceable, and not binding on the parties. The learned Single Judge set aside the finding on issue No. 17, that is, whether the arbitrator has jurisdiction to entertain the counter-claim by which counter-claim respondent No. 1 had sought for dissolution of the firm of V.H. Patel Company and remitted the issue back to the arbitrator for de novo consideration and decision in accordance with law. The learned Single Judge directed that till the arbitrator makes a fresh award, arrangement in relation to the business as was in existence while the proceedings were pending before the arbitrator should continue to operate for a period of four weeks after the award was made. It was also made clear that the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pable of being made is incorrect. It is pointed out that reliance placed on the decision in Indian Oil Corpn. Ltd. v. Amritsar Gas Service [1991] (1) SCC 533, is wrong. It is submitted that in that case there was scope for fresh pleadings as the reference to arbitrator was made by the court in an appeal arising out of refusal to stay the suit under section 34 of the Arbitration Act and the reference was made of all the disputes between the parties in the suit and, therefore, the occasion to make a counter-claim in the written statement could arise only after the order of reference. Another ground is raised in support of this contention that the terms of partnership do not contemplate dissolution of the firm at will but by mutual agreement . Therefore, it is pointed out that dissolution of the firm is based only on just and equitable ground and, therefore, partners claim for a decree for dissolution of the firm rests in its origin not on contract but on the inherent right to invoke the courts jurisdiction on equitable grounds in spite of the terms in which the right and obligation of the parties may have been regulated and defined by the partnership contract. Our attention ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the merits of the matter, it is unnecessary to go into the question whether an appeal could have been preferred to the Division Bench in the High Court or not, particularly when a notice had already been ordered by this Court and the matter has been finally heard. We leave open this question to be raised in an appropriate proceeding. So far as the present case is concerned, it is suffice to say that we examine the merits of the matter as put forth before us and decide the case. 8. The contention of the learned counsel for the petitioners in this case pertain to the scope of reference to arbitration which turns around the terms of the order made by this Court on 15-2-1991 in Special Leave No. 11533 of the 1990 and the Consent Terms on which the said order is based. It is no doubt true that in the two suits that had been filed there is no specific prayer for dissolution of the firm. The Consent Terms indicate that disputes relating to the rights and obligations of the parties arising out of the agreement dated 3-7-1987 and retirement deed dated 1-8-1987 and to the user of the trade marks in question were indeed referred to the arbitrator. The High Court is conscious of the que ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of the arbitrator to consider that question. It is further to be seen that the parties are from the same family, there were disputes between them, they tried to resolve the disputes by entering into an arrangement which ultimately failed. 9. We asked the parties to appreciate the matter in the proper perspective to produce the Partnership Deed and the Partnership Deed dated 21-4-1986 is produced before us. Clause 5 provides that the partnership is commenced on and from 2-4-1986 and shall continue for a term of period until the parties herein before mentioned mutually agree to dissolve. Clause 11 thereto provides that all disputes and questions in connection with the partnership or with this Deed existing between the parties shall be referred to Arbitration under the provisions of the Indian Arbitration Act, 1940, or any Statutory modification or re-enactment thereof for the time being in force . In the suit filed before the court it is no doubt true that one party, respondent No. 1, was seeking to establish that he had not retired from the partnership and, therefore, there is justification in the criticism levelled by the learned counsel for the petitioner that the prayer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relation to disputes and get them resolved in the very suits that were already pending by appropriate modification of the pleadings. If that was permissible, certainly the present course adopted by the High Court is also permissible. 11. A contention has been raised before us that the arbitrator has no power to dissolve a partnership firm, especially on a ground that such dissolution is based on a ground or any other ground which renders it just and equitable to dissolve and that is the power of the court. It was pointed out that mere strained relationship between the partners would not be enough to dissolve a partnership. It is not necessary for us to examine this contention in this case when the partners sought for dissolution of the partnership on various grounds enumerated in sections 44( c ) to ( f ) may also be sufficient and may not be necessary to invoke the inherent jurisdiction of a court such as dissolution is just and equitable. If there has been breach of agreement and conduct is destructive of mutual confidence certainly such conduct can give rise to a ground for dissolution of the partnership. While mere disagreement or quarrel arising from impropriety of partner ..... X X X X Extracts X X X X X X X X Extracts X X X X
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