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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 ..... that the partnership shall be a partnership at Will and may be dissolved with the unanimous consent of all the partners. It is agreed that no partners shall have a right to dissolve the partnership. Under clause 2 of the said partnership deed, it was agreed that any partner shall be at liberty to retire from the partnership on giving atleast six calender months' notice in writing to the other partners and on the expiration of such period, the partnership shall continue with the remaining partners on the terms decided mutually by the remaining partners. Under the said deed, each partner was entitled to receive a monthly salary mentioned in clause 5(a) of the said deed. The profit sharing ratio was agreed as per clause 5(b) of the said deed. According to the said clause, respondent was entitled to 5% share in the net profit after charging the salaries stated in the clause 5(a) as an expenses of the firm. The applicants were entitled to 17.50%, 9%, 4.25% respectively. Each of the partners were entitled to reimbursement of various expenditure incurred in carrying out their work and duties as partners. Clause 12(b) of the said Deed provided that every partner shall retire from the firm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... c. Clause 2(a), (b) and 12 of the said consent terms are extracted as under :- 2(a) The parties hereto agree and confirm that without prejudice to their respective rights and contentions which they will be entitled to raise in the arbitration proceedings initiated by Respondent No.1 challenging the Accounts of the said Firm for the year ended 31st March 2004 each of the parties hereto shall be entitled to withdraw the amount lying to his credit in the Current Account with the said Firm as on 31st March 2004/1st April 2004 provided, any amount already withdrawn by a partner subsequent to 1st April 2004 shall be deducted at the time of withdrawal of the amount by him as contemplated under this clause. (b) The parties hereto agree and confirm that each partner shall be entitled to withdraw 50% of his share of profits for the year ended 31st March, 2005, calculated on the basis of unaudited accounts of the said Firm which would be done latest by 31dt October, 2005. 12. The parties hereto agree and confirm that they have arrived at and agreed to the arrangement/agreement contained in these presents with a view to ensure smooth day to day working and operations of the said Firm and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... recording and thereby agreeing to various terms and conditions. Perusal of the terms and conditions of the Memorandum of the Understanding reveals that the same was entered into between the parties as partners of N.M.Raiji & Co., Chartered Accountants. Under the said Memorandum of Understanding, parties agreed to distribute the balance of the undistributed profit in the year ending 31st March, 2006 and 31st March, 2007 amongst all the partners including relevant ex-partners. Clause 12 of the said Memorandum of Understanding provided that the consent terms dated 8th September, 2005 arrived at between parties thereto in Arbitration Petition No. 543 of 2004 shall continue to be in force as modified by the said Memorandum of Understanding. The said Memorandum of Understanding was signed by the petitioners as well as respondent duly witnessed by a partner of M/s.Kanga & Co. 9. By letter dated 26th September, 2009, the applicants herein invoked arbitration clause i.e. clause 18 of the partnership deed dated 24th April, 2000 and appointed Mr.Justice V.P.Tipnis, Former Judge as an arbitrator and called upon the respondent to concur in his appointment as a sole arbitrator within 30 days f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the audit staff of the firm shall be paid revised/increased salary as was mutually agreed by and between the parties. It was agreed that the parties were at liberty to make applications for interim reliefs as they was deem fit including applications for withdrawal of any such application is made, the Arbitral Tribunal shall decide the issue without being influenced by the said consent order. 12. By letter dated 4th February, 2010, the applicants through their advocate requested the arbitrator nominated by the applicants and the arbitrator nominated by the respondent to appoint the presiding arbitrator and to fix the date and time for a meeting to give preliminary directions in the matter. 13. The applicants thereafter filed Arbitration Application (97/2011) seeking appointment of presiding arbitrator. By order dated 26th August, 2011, the said arbitration application was disposed of. By consent of parties, the designate Judge of the Hon'ble Chief Justice appointed Mr.Justice V.P.Tipnis, Former Judge as a sole arbitrator. It was directed that the dispute between the parties were referred to the learned arbitrator. It was clarified that the parties were at liberty to raise all th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssed by the applicants through their solicitor and letter dated 15th May, 2012 addressed by the respondent conveyed that he did not wish to continue as arbitrator and withdrew from the said office. By letter dated 5th July, 2012, the applicants through their solicitors appointed Mr.Justice S.K.Shah, former Judge of this court as an arbitrator and called upon the respondent to concur in his appointment as the sole arbitrator and in case of disagreement to nominate his nominee arbitrator within a period of 30 days. The respondent by letter dated 2nd August, 20112 once again reiterated his contention that there was no arbitration agreement between the parties and unless and until the said preliminary issue was decided by the High Court as held by the Supreme Court in the matter of Bharat Ashra vs. Gautam Ashra & Ors., the arbitration initiated by the applicants could not proceed any further. Without prejudice to the said contentions, it was stated that as per the arbitration award dated 25th June, 2007 which had attained finality by order of the Supreme Court dated 26th March 2010, the partnership deed dated 24th April, 2000 containing the arbitration clause was nullified in terms of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... counsel appearing for the applicants submits that it is not in dispute that the partnership firm is existing and is in operation till today. It is submitted that the last partnership deed executed by and between the parties was on 24th April, 2000. The learned counsel submits that though during the period between 24th April, 2000 and 2007, some of the partners retired and profit sharing ratio in respect of the other partners were revised, all other rights and obligations of the parties continued under the existing partnership deed dated 24th April, 2000. The learned counsel placed reliance upon section 17 of the Partnership Act in support of the plea that till a fresh deed of partnership is executed, the existing deed of partnership would continue. Section 17 of the Partnership Act is extracted as under :- Section 17 in The Indian Partnership Act, 1932 17. Rights and duties of partners-- Subject to contract between the partners,- (a) after a change in the firm - Where a change occurs in the constitution of a firm, the mutual rights and duties of the partners in the reconstituted firm remain the same as they were immediately before the change, as far as may be; (b) after the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he first round of arbitration and thus arbitration agreement is not exhausted by declaration of the award in the first arbitration. 20. Mr.Purohit, the learned counsel lastly submits that the arbitration clause is very wide and thus issues as to whether respondent would be entitled to share in the profit and loss at 13.97% or in any other ratio and issues relating to accounts and withdrawal of profit and other amounts are the disputes arising out of the partnership and thus considering the wider scope of arbitration clause, these issues can be referred to arbitration. It is submitted that the arbitrator would have wide power to decide all such issues which are arising out of the partnership and the claims proposed to be made by the applicants are the disputes arising out of partnership and thus falls within the ambit of the arbitration clause. 21. Mr.Purohit, the learned counsel appearing for the applicants placed reliance upon the judgment of the Calcutta High Court in case of Balmukund Rina vs. Gopiram Bhotica AIR 1920 Calcutta 676and in particular pages 676 and 677 which reads thus :- This is an appeal by the plaintiff in a suit to restrain two arbitration proceedings pend ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arate contract, the defendant properly obtained an award as regards the first portion of his claim; this clearly does not prevent him from proceeding with arbitration in respect of matters arising out of subsequent breaches of contract. We agree with Mr. Justice Rankin that as in the present case there were several and separate contracts, there is no foundation for the contention that the right conferred by the arbitration clause was fully exhausted as soon as a complete award was made upon the first reference. We may add that the decision of the House of Lords in the case of Chandanmull v. Donald Campbell and Co. 54 Ind. Cas. 289 : 23 C.W.N. 707 footnote shows that there may be successive awards even in the same matter. There, a dispute arose as to the effect of the award on the first arbitration; for the settlement of this dispute, a second reference to arbitration was made : it was ruled that such second arbitration was valid. 22. The learned counsel also placed reliance upon the judgment of the Supreme Court in case of Naraindas vs. Vallabhdas & Ors. AIR 1972 SC 1 and in particular paragraph 8 thereof in support of the plea that successive reference is permissible under the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appointment of the sole arbitrator on each occasion was in consonance with the said arbitration agreement and as such, valid and legal. It may also be mentioned here that the Chief Engineer of the petitioners in charge of the work, the appointing authority, at the time of arising of the disputes between the petitioners and the respondents and at the time, of appointment of the said K. D. Bali as sole arbitrator, was the Administrative Head of the Department of Engineering of the petitioners and the controversy raised by the petitioners in this regard is devoid of any merit. Moreover, the appointment of the arbitrator was made by the petitioners themselves and the petitioners by long participation of the arbitration proceedings before the arbitrator accepted such appointment and it is neither valid nor legal nor proper on the part of the petitioners now to allege that the appointment of the arbitrator by the Chief Engineer of the petitioners in charge of the work at the material time was not proper. The appointment of the arbitrator in each of the said references being in accordance with the arbitration between the petitioners and the respondents was valid and legal and all subseque ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e disputes to arbitration between the petitioners and the respondents was appointed, the disputes and/or claims and/or counterclaims arising out or in relation to the contract could be referred to the Arbitrator by or at the instance of either of the parties to the Contract and this exactly was done in the said references. Needless to state that in arbitration proceedings under same arbitration agreement, successive references of various disputes arising from time to time under the same contract between the parties thereto can be referred to arbitration and be made the subject matter of successive references. 24. The learned counsel submits that the respondent has taken advantage of the increase in the share of the profit and loss from 5% provided under the partnership deed dated 24th April, 2000 which is increased to 13.97% after execution of the said partnership deed. It is submitted that all other rights and obligations of the parties are being implemented by the parties under the provisions of the said deed and thus respondent cannot be permitted to plead that the said partnership deed has come to an end and the rights and obligations of the parties has ceased to operate unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d dated 24th April, 2000 which does not exist. It is submitted that the arbitration application is thus not maintainable. 28. The learned counsel submits that if the applicants seek enforcement of the rights and obligations under the said partnership deed dated 24th April, 2000, in view of the stand of the applicants themselves that profits and loss sharing ratio have been changed from time to time at different rate then what was recorded in the partnership deed, the stand of the applicants would be inconsistent with the rights and obligations recorded in the said partnership deed. It is submitted that in view of the retirement of some of the partners who were parties to the said partnership deed dated 24th April, 2000 are not parties to the present proceedings, dispute only inter se between the applicants and this respondent arising out of the same partners, deed as claimed by the applicants cannot be referred to arbitration. 29. The learned counsel submits that the applicants not having challenged the award delivered by the erstwhile Arbitral Tribunal, the findings rendered by the Arbitral Tribunal in the said award are final and binding also on the applicants. 30. The lear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ween the parties. 32. The learned counsel submits that though by the order passed by this court while appointing Mr.Justice V.P.Tipnis, former judge of this court as sole arbitrator in earlier application filed under section 11 all the contentions including existing of arbitration clause were kept open and the said order not having been challenged by the respondent, in view of the judgment of the Supreme Court that if any such issue regarding existence of arbitration agreement is raised, the same has to be decided by the Hon'ble Chief Justice or his designate Judge and thus the said issue shall be decided by me in this proceedings. 33. The question that arises for consideration in this proceeding is as to whether arbitration agreement recorded in partnership deed dated 24th April, 2000 entered into between the parties is exhausted and ceased to have effect on declaration of the award dated 25th June, 2007 made by the Arbitral Tribunal in the earlier proceedings and if the same is not exhausted whether dispute now having arisen between the parties can be referred to arbitration under the said arbitration agreement. 34. There is no dispute between the parties that arbitration a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 36. In my view, 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, in my view 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 agreement continued. The respondent has acted upon the said arbitration clause and had demanded various reliefs based on the provisions of the said partnership deed. It is not in dispute that the learned arbitrator has rendered a finding that the partnership business continued on the bas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is binding on parties herein. Even otherwise in view of section 7(4) (b), in view of both the parties having recorded arbitration agreement in the correspondence exchanged between them, it satisfies the condition of an arbitration agreement under section 7(4) (a) of the Arbitration and Conciliation Act, 1996. In my view the present application filed by the applicants for appointment of the arbitrator is maintainable. I am not inclined to accept the submission made by the learned counsel appearing for the respondent that though in such letters, the arbitration agreement is referred, respondent has not given up his plea that on declaration of the award by the erstwhile Arbitral Tribunal, the arbitration agreement is exhausted and ceased to have effect. I am also not inclined to accept the submission of the respondent that in view of the applicants not referring to section 7(4) (b) of the Arbitration and Conciliation Act, 1996 in their arbitration application, no reliance on the correspondence exchanged between the parties could be made to construe such correspondence as record of arbitration agreement in terms of clause 7(4) (b) of the Act. 39. On perusal of the dispute filed in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o arbitration in terms of the said clause. I am also not inclined to accept the submission made by the respondent that the Memorandum of Understanding and the Consent Terms entered into between the parties after execution of the partnership 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. 41. I am not inclined to accept the submission made by Mr. Shah, the learned counsel appearing for the respondent that the applicants not having challenged the award rendered by the erstwhile Arbitral Tribunal by which both parties were directed to execute fresh deed of partnership and thus the earlier partnership deed and partnership executed on 24th April, 2000 ceased to exist. On perusal of the award, it is clear that the learned arbitrator had rendered a finding that the partnership firm continued under the said partnership deed dated 24th April, 2000 till date. It is true that the respondent did not challenge the said award but at the same time it is not in dispute that the respondent also has not applied for execution of the said award so far. I am not inclined to accept the submission ..... X X X X Extracts X X X X X X X X Extracts X X X X
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