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TMI Blog2013 (4) TMI 332X X X X Extracts X X X X X X X X Extracts X X X X ..... also applied for resolution of dispute between the parties on the basis of the arbitration agreement recorded between the parties in the said deed of partnership dated 24th April, 2000. It is not the case of the respondent that there existed any other arbitration agreement between the parties other than the arbitration agreement recorded in the said deed of partnership dated 24th April, 2000. These findings of fact recorded by the learned arbitrator in the said award dated 25th June, 2007 are final and binding. Thus the respondent himself having invoked arbitration clause under the same partnership deed dated 24th April, 2000 which culminated in the said award, which proceedings were filed after 2000, respondent cannot be permitted to raise a plea that the terms and conditions of the partnership deed including arbitration agreement ceased to exist in view of the parties not having executed a fresh partnership deed after 24th April, 2000. From the arbitration proceedings initiated by the respondent himself which culminated in award, it is clear that the rights and obligations of the parties under the said deed of partnership dated 24th April, 2000 including arbitration agree ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtnership deed dated 24th April, 2000 shall be read in isolation or that the said two documents signed by the parties were in substitution of the partnership deed. The applicants in the present application have prayed that the arbitrator be appointed on behalf of the respondent or in the alternative to appoint Mr.Justice S.K.Shah, former Judge as the sole arbitrator. In view of the fact that the respondent has not agreed to appoint any arbitrator and did not agree to the name of Mr.Justice S.K.Shah, former Judge of this Court as arbitrator, Mr.Justice J.P.Devadhar, former Judge of this Court is appointed as an arbitrator on behalf of the respondent. Both the learned arbitrators are requested to appoint the presiding arbitrator in accodance with the provisions of the Arbitration and Conciliation Act, 1996. - Arbitration Application No. 244 of 2012 - - - Dated:- 9-4-2013 - R. D. Dhanuka, J. For the Petitioners : Mr. Simil Purohit, i/b. M/s. Kanga Co. For the Respondent : Ms. Snehal Shah, a/w. Ms.Deepti Panda, Mr.Ayaz Bilawala, Ms. Neha Bhatt and Ms. Bhagyashree Warikar, i/b. M/s.Bilawala Co. JUDGMENT By this application under section 11(6) of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s as sole Arbitrator and in case he is not available or declines to act or resigns, then to a single Arbitrator if the Partners agree upon one otherwise to the Arbitrators to be appointed by each party to the difference in accordance with the provision of the Arbitration and Conciliation Act, 1996 or any statutory modification thereof. 4. During the period between April 2000 and 2007, four partners out of nine retired. According to the applicants, the respondent who was entitle to 5% share in the net profit of the firm under the said deed of partnership dated 24th April, 2000, his share was increased to 13.97% in the profit and losses of the said firm by reason of the retirement or cessation of the other five partners. 5. During the period 2001-02, dispute arose between the parties. The respondent had invoked arbitration clause in terms of the partnership deed. The applicant filed a petition under section 9 of the Arbitration and Conciliation Act, 1996 in this court (543 of 2004) against the respondents and other partners. This court by an order dated 16th December, 2004 passed an order and direction regarding operation of the bank account of the firm by joint signature o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reads as under :- OPERATIVE PART (a) I, therefore, conclude that I cannot order expulsion of the Respondent Nos. 1 to 4 from the partnership deed even though I have recorded my findings against them that they have committed breaches of the Partnership Deed on 2 counts as discussed hereinabove. i.e. (i) Not executing a fresh Partnership Deed and (ii) illegal suspension of Shri Y.N.Thakkar In view of my findings in negative on the issue of expulsion of the Respondent Nos. 1 to 4 as prayed in prayer (b), I answer in negative the issue of consequential reliefs as stated in prayer (c). (b) Since the Respondent Nos. 1 to 4 have failed to execute the fresh Deed of Partnership and since a number of other partners have retired, as a mandatory term of the Deed, a fresh Deed must be executed. This breach can be remedied or cured. The Respondent Nos. 1 to 4 and the Claimant shall execute a fresh Deed of Partnership on or before 31.7.2007. (c) The letter dated 1.10.2003 purporting to suspend Shri Y.N.Thakkar from the partnership firm and demanding a sum of Rs.7 Crores from him is hereby quashed and set aside being totally illegal, improper and contrary to the provisions of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5th June, 2007, which was accepted by the applicants, the deed of partnership dated 24th April, 2000 stood nullified and became infructous and consequently clause 18 referred by the applicants in their notice was non-existent. It is submitted that in view of the said award, a fresh deed has to be executed effective from 1st August, 2003 and pending such execution, the terms of the partnership is governed by order dated 8th September, 2005 passed by this Court. Paragraphs 6 and 7 of the said reply are extracted as under :- 6. P-10-As stated above, the Deed of Partnership dated 24.4.2000 does not survive in view of the Award. Consequently there is no Arbitration agreement. 7. P-11-As stated above, your reference is void abinitio, illegal, etc. Without prejudice, I do not concur and also do not agree with the appointment of Mr Justice V.P.Tipnis(Retd) as a Sole Arbitrator. I appoint Mr.F.S.Broacha, Advocate having his address at-Yeshwant Chambers, 2nd Floor, 18-B, Bharucha Marg, Kala Ghoda, Mumbai 400 023 as my Arbitrator. 11. The applicants thereafter filed a petition under section 9 of the Arbitration Act, 1996 in this court (543 of 2010) for seeking interim measures ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... letter dated 16th September, 2010 Mr.F.S.Broacha, the arbitrator nominated by the respondent resigned. 15. By his letter dated 14th May, 2012, the respondent addressed to Mr.Justice V.P.Tipnis, the Former Judge of this court, the then arbitrator appointed by this court, the respondent contended that by order dated 26th August, 2011, the learned sole arbitrator had to first decide whether arbitration agreement exist or not. It is submitted that the learned arbitrator did not have jurisdiction to decide that issue as the same could be decided only by the court in view of the Supreme Court decision in case of Bharat Ashra vs. Gautam Ashra Ors. and unless and until the Court including the Supreme Court decides about the existence of the arbitration agreement, the learned arbitrator could not proceed in the matter. It was also contended that as per award dated 25th June, 2007, the partnership deed dated 24th April, 2000 containing the arbitration clause was nullified in terms of clause 2 of the said deed and there did not exist any arbitration agreement. It was also contended that the partners had not agreed, how to share the profit of the firm from 1st April, 2000 onwards and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the applicants to the respondent by letter sent by e-mail on 6th July 2012, 27th July 2012, 29th July 2012, 2nd August 2012, 10th August 2012 and 13th August 2012 in response to the notice issued by the applicants for compliance of various obligations on the part of the respondent, the respondent replied that though months had passed, the applicants had not appointed their arbitrator in the arbitration initiated by them on 26th September, 2009. It was also stated that various issues raised by the applicants would be taken up in the arbitration. The respondents also forwarded a list of 19 issues which issues were before the arbitrator as on 27th July, 2012. The respondent also disputed the authority of the applicants to question his authority as the matter was in arbitration. The respondent also stated that the allegations regarding losses suffered by the applicants may be taken up in the ongoing arbitration. The respondent vide e-mail dated 2nd August, 2012 informed the applicants regarding servicing client that he would deal with the said issue in arbitration. The respondent stated that he would refer the matter to the ongoing arbitration. By e-mail dated 10th August, 2012, the r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... one or more adventures or undertakings carries out other adventures or undertakings, the mutual rights and duties of the partners in respect of the other adventures or undertakings are the same as those in respect of the original adventures or undertakings. 19. The learned counsel submits that the dispute which was referred to the earlier arbitration proceedings were then existing between the parties whereas the present disputes are for the period post declaration of the award made by the earlier arbitrator and such disputes were not subject matter of the previous arbitration. The learned counsel invited my attention to award and the notice invoking arbitration clause to demonstrate the difference in the nature of the dispute which were subject matter of the first arbitration and which would be the subject matter of the arbitration for which the applicants seek appointment of the learned arbitrator. The learned counsel submits that in the previous arbitration proceedings, the respondent invoked arbitration clause and prayed for expulsion of the applicants as partners of the suit firm whereas the disputes now arisen between the parties relates to the disbursement of profit, wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... follows : December, 1917. Each month's delivery to be treated as a distinct and separate contract. Any dispute whatsoever arising on or out of this contract shall be referred to arbitration under the rules of the Bengal Chamber of Commerce, applicable for the time being, for decision, and such decision shall be accepted as final and binding on both parties to this contract. The award may, at the instance of either party and without any notice to the other of them, be made a rule of the High Court of Judicature at Fort William. These three terms are all part of the printed form with the exception of the words "December, 1917," at the end of the first. Of the three lacs of yards contracted for, one-half lac was duly delivered and may now be ignored. No delivery was in fact made of any part of the remainder, which divides itself into three separate lots. Ah regards the first lot of 50,000 yards which was not delivered, on the 28th February 1918 the defendant demanded arbitration by the Bengal Chamber of Commerce and proceedings were confined to this particular claim. On the 25th July 1918 on this portion of the claim an award was made by the Board in favour of the plai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eed to such a reference and the mere fact that the property which is the subject matter of dispute was also the subject matter of an earlier litigation, cannot prevent the parties to refer the dispute about that property to arbitration. What is referred to arbitrators in such a case is the fresh dispute and although the finding of the Court in the previous litigation may have a bearing on the dispute referred to the arbitrators, it would not stand in the way of reference of the fresh dispute to the arbitratOrs. It is not the case of the appellant before us that the precise dispute which was the subject matter of the award dated 20th October, 1956 had been adjudicated upon earlier in a civil Court. 23. The learned counsel also placed reliance upon the judgment of this Court in case of International Airports Authority of India vs. M/s.Mohinder Singh Co. 1996(1) Bom C.R.666 and in particular paragraph 12 in support of the plea that successive reference is permissible. Paragraph 12 of the said judgment reads thus :- 12. As per the arbitration agreement between the petitioners and the respondents, the disputes were required to be referred to the sole arbitration of the per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to make further references of their claims against each other for arbitration got exhausted. There is equally no merit in the contention of the petitioners that all the claims and/or disputes which have been referred for arbitration of the arbitrator after the first reference were beyond the scope of the reference to arbitration already made and as such, could not be entertained by the arbitrator. It is correct that the first reference made for arbitration was confined to five items of claims of the respondents included in the letter dated 23rd February 1985 addressed by the Chief Engineer of the petitioners while appointing the arbitrator. However, the completion of the work under the contract by the respondents even after making the first reference to arbitration had continued and since the further claims of the respondents arose out of and/or in relating to the work subsequently carried out by the respondents under the contract, the respondents wanted the same to be referred to arbitration in the first reference itself. Since the petitioners objected to such reference being made and themselves agreed for separate references in respect of such subsequent claims of the respondents ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the respondent himself that the applicants were not taking steps to appoint arbitrator in accordance with the arbitration clause and that the respondent was not under any obligation to deal with any of the issues raised by the applicants as the same would be dealt with by him in the arbitration proceedings. It is thus submitted that even by correspondence, the parties have recorded arbitration agreement and thus it satisfies the definition of an arbitration agreement under clause 7(4) (b) of the Arbitration and Conciliation Act, 1996. 26. Mr.Shah, the learned counsel appearing for the respondent on the other hand submits that the arbitration clause recorded in the partnership deed dated 24th April, 2000 is exhausted on the declaration of the award by the erstwhile arbitrator. It is submitted that the learned arbitrator had rendered a finding that the parties continuing under the partnership deed dated 24th April, 2000 was in contravention of law and in violation of clause 2 of the partnership deed and had directed both the parties to enter into a fresh partnership deed, the applicants have not challenged the said award, the finding of the Arbitral Tribunal that the partnersh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted between the parties under Memorandum of Understanding dated 9th October, 2007. It is submitted that there are no averments in the arbitration application made by the applicants that the business continued under the partnership deed dated 24th April, 2000. The learned counsel invited my attention to paragraph 21 of the petition filed by the applicants herein under section 9 of the Arbitration Act, 1996 to demonstrate that it is not the claim of the applicants that the shares of the respondent at 13.97% in the profit and loss of the partnership firm was under partnership deed dated 24th April, 2000. 31. As far as correspondence addressed by the respondent regarding alleged existence of arbitration clause referred to and relied upon by the applicants is concerned, the learned counsel submits that by such correspondence respondent has not waived his rights to take a plea that such arbitration agreement does not survive. It is submitted that right since inception, it was the stand of the respondent that in view of the declaration of the award by the erstwhile Arbitral Tribunal the arbitration agreement ceased to have effect and is exhausted. It is submitted that the respondent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndent had challenged the said award dated 25th June, 2000 in this court which petition was dismissed and appeal and Special Leave Petition arising therefrom also came to be dismissed. It is not in dispute that neither of the parties have applied for execution of the said award dated 25th June, 2007. 35. On perusal of the award, it is clear that the respondent had prayed for a declaration that Mr. Mahendra Thakkar be declared as senior partner of the firm. The respondent had also prayed that the applicants herein be expelled from the suit firm and should be directed to repay to the firm salary and profit received by them from the period 22nd August, 2003 or 1st October, 2003. It is also clear that in the said award, the learned arbitrator rendered a finding that the partnership and its business continued on the date of award on the basis of the old partnership deed and was not permissible under clause 2 of the said deed. The learned arbitrator rendered a finding that the business of the firm was continuing in contravention of the mandatory condition stipulated in clause 2 of the existing partnership deed. On perusal of the prayers setout by the learned arbitrator in para (7) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pute that the respondent himself has applied for expulsion of the applicants of the said partnership by relying upon clause 9(a) and (b) of the said partnership deed dated 24th April, 2000 in the said arbitration proceedings. 37. On consideration of the findings rendered by the learned arbitrator in the said award dated 25th June, 2007 on which reliance is placed by the respondent in this proceedings, I am of the opinion that both parties have continued the business under the said partnership deed dated 24th April, 2000. In my view merely because the Memorandum of Understanding and the Consent Terms were entered into between parties subsequently, provisions of the partnership deed dated 24th April, 2000 did not stand superseded. The perusal of the Memorandum of Understanding and the Consent Terms relied upon by both parties would indicate that the Consent Terms dated 8th September, 2005 were arrived at between the parties in the proceedings filed under section 9 by the applicants. It also indicates that both parties had agreed that the Consent Terms dated 8th September, 1995 arrived at between the Arbitration Petition No. 543 of 2004 shall continued to be in force as modified ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appearing for the applicants is right in his submission that the dispute which would be subject matter of the arbitration in the present proceedings have arisen after declaration of the said award by the erstwhile Arbitral Tribunal and in view of the existence of the arbitration agreement and continuation of the business by the parties under the said partnership deed with modification thereof, the successive reference of the dispute to arbitration on the basis of the existing arbitration clause is permissible. It is not the case of the respondent that the dispute which have arisen for which the applicants have invoked arbitration clause ought to have been the subject matter of the earlier arbitration proceedings. In my view Mr.Purohit, the learned counsel appearing for the applicants is right in placing reliance upon the judgment of this court in case of International Airports Authority of India (supra) , the judgment of the Supreme Court inc case of Naraindas (supra) and the judgment of the Calcutta High Court in case of Balmukund Rina (supra) . In my view all the judgments referred to and relied upon by the applicants supports their plea that successive reference to arbitrati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re parties to the said deed dated 24th April, 2000 have retired and are not parties to the present arbitration proceedings, the matter cannot be referred to arbitration is concerned, in my view Mr.Purohit is right in his submission that the dispute sought to be raised by the applicants to arbitration for which the arbitration clause has been invoked is the dispute between the applicants and the respondent and not between the applicants and the partners who have already stood retired from the partnership business and thus arbitration application is not bad for non-joinder of retired partners. 43. On perusal of clause 18 of the partnership deed dated 24th April, 2000, it is clear that both the parties had agreed to appoint a single arbitrator and in the event of the disagreement, the arbitrator to be appointed by each party to the difference. It is not in dispute that the applicants by their letter dated 5th July, 2012 have nominated Mr.Justice S.K.Shah, former Judge of this Court. The respondent however by his letter dated 2nd August, 2012 has refused to appoint any arbitrator on his behalf. 44. The applicants in the present application have prayed that the arbitrator be a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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