S.J. Kathawalla, J@mdashThe above application is filed by the applicants under section 11 of the Arbitration and Conciliation Act, 1996 ("the Act") for appointment of an Arbitrator to adjudicate upon the disputes which have arisen between the Parties under the Partnership Deeds dated 1st April, 1989 and 21st January, 1990, entered into between the applicants and the respondent Nos. 1, 2 and 3. By a Partnership Deed dated 1st April 1989 executed by and between the applicants and the respondents, the Applicants were admitted as Partners of the Partnership Firm M/s. Vimal Corporation (''the said Partnership Firm''). Since at the relevant time, applicant No. 2 was a minor, it was agreed that the profits and losses of the Partnership Firm shall be divided between the Partners in the following proportions:
2. After the applicant No. 2 attained majority, a fresh Deed of Partnership dated 21st January, 1990 was executed by and between the applicants and the respondents. It was provided in the said Partnership Deed that the profits and losses of the business of the Partnership shall be divided between the Parties in the following proportion.
3. The applicants have therefore claimed a 50% share in the said Partnership Firm.
4. The said Partnership Deeds dated 1st April, 1989 and 21st January, 1990 contain an identical arbitration clause viz. Clause 23 and the same is reproduced hereunder:
"23. If any disputes or differences arise between the parties hereto or their representatives with regard to the construction, meaning or effect of this Indenture of partnership or any part thereof or with respect to the rights and obligations of the parties hereto or with respect to any matter relating to or concerning or touching the partnership business shall be referred to the pint arbitration of Shri S.S. Pradhan and Miss. K.C. Nichani and this Agreement shall be deemed to be the submission within the meaning of the Indian Arbitration Act, 1940 or any statutory modification or enactment thereof for the time being in force and decision of the said Arbitrators shall be final and binding upon the parties hereto."
5. In Clause (d) of paragraph 17 of the affidavit-in-reply filed on behalf of respondents, it is admitted that along with the Partnership Deed dated 21st January, 1990, a Power of Attorney dated 22nd January, 1990 was also executed by the respondents in favor of the applicant No. 1 and one Mr. Balkrishna C. Mody.
6. Disputes arose between the Parties, and the applicants through their Advocates'' Notice dated 20th December 2010 addressed to the respondents invoked the arbitration clause/agreement. The respondents declined to consent to the appointment of the arbitrators on the ground that the applicants were not the Partners of the said Partnership Firm. After some correspondence was exchanged between the Parties, the applicants filed the above application under section 11 of the Act for appointment of an Arbitrator. The applicants have informed the Court that the Arbitrators named in the arbitration clause/agreement are unable to act as Arbitrators and therefore this Court may appoint an independent Arbitrator to decide the disputes between the Parties arising out of the Partnership Deeds dated 1st April, 1989 and 21st January, 1990.
7. The main contention raised on behalf of the respondents before this Court is that admittedly "the said partnership firm of M/s. Vimal Corporation is an unregistered firm.... that arbitral proceedings would not be maintainable at the instance of the partners of the unregistered firm having regard to the mandatory provisions as contained in section 69 of the Indian Partnership Act, 1932". In support of this contention, the Learned Advocate appearing for the respondents has relied on the judgment of the Hon''ble Supreme Court in
8. It is submitted on behalf of the respondents that upon appreciation of the legal position emerging from the above judgments, the present proceedings by the applicants under section 11 of the Act are not maintainable and consequently the present application is liable to be dismissed.
9. The applicants have inter alia relied upon the decision of the Hon''ble Supreme Court in the case of
10. Section 69 of the Partnership Act deals with the effect of non-registration and the same is reproduced hereunder:
69. Effect of non-registration.--(1) No suit to enforce a right arising from a contract or conferred by this Act shall be instituted in any Court by or on behalf of any person suing as a partner in a firm against the firm or any person alleged to be or to have been a partner in the firm unless the firm is registered and the person suing is or has been shown in the Register of Firms as a partner in the firm.
(2) No suit to enforce a right arising from a contract shall be instituted in any Court by or on behalf of a firm against any third party unless the firm is registered and the persons suing are or have been shown in the Register of Firms as partners in the firm.
(3) The provisions of sub-sections (1) and (2) shall apply also to a claim of set-off or other proceedings to enforce a right arising from a contract, but shall not affect,-
(a) the enforcement of any right to sue for the dissolution of a firm or for accounts of a dissolved firm, or any right or power to realize the property of a dissolved firm, or
(b) the powers of an official assignee, receiver or Court under the Presidency Towns Insolvency Act, 1909, or the Provincial Insolvency Act, 1920, to realize the property of an insolvent partner.
(4) This section shall not apply.-
(a) to firms or to partners in firms which have no place of business in the territories to which this Act extends, or whose places of business in the said territories, are situated in areas to which, by notification under section 56, this Chapter does not apply, or
(b) to any suit or claim of set-off not exceeding one hundred rupees in value which, in the Presidency towns, is not of a kind specified in section 19 of the Presidency Small Cause Courts Act, 1882, or outside the Presidency Towns is not of a kind specified in Second Schedule to the Provincial Small Cause Courts Act, 1887, or to any proceeding in execution or other proceeding incidental to or arising from any such suit or claim."
11. The bar under section 69(1) of the Partnership Act stipulates that no suit to enforce a right arising under a contract or conferred by the Partnership Act could be instituted in any Court by a partner against the firm or against other partners unless the firm is registered and the person suing is or has been shown in the Register of Firms as a partner in the firm. The bar under section 69(2) stipulates that no suit to enforce a right arising from a contract could be instituted in any Court by a firm against a third party unless the firm is registered, and the persons are shown as the partners in the firm. The bar under section 69(3) stipulates that the provisions of sub-sections (1) and (2) would also apply to a claim of set-off or other proceedings to enforce a right arising from a contract. It is therefore clear that the bar under sections 69(1) and 69(2) has been extended under section 69(3) to "other proceedings." However, since the bar under section 69(1) and (2) has been incorporated in section 69(3), the same shall be applicable to "other proceedings" only if such proceedings are instituted in "a Court". In other words, if the proceedings are not instituted in a Court, then the bar would not apply.
12. In the case of
"4. The short question which falls for determination is whether reference to all arbitration without recourse to Court is barred by section 69(3) of the Partnership Act...........In our view, the word proceeding in section 69(3) means something in the nature of a suit i.e. a proceeding which is instituted or initiated in a Court. This is clear from the language of sub-section (3) which extends the provision of sub-sections (1) and (2) to a claim of set-off or other proceedings to enforce a right arising from a contract. Sub-sections (1) and (2) merely bar the institution of certain suits in any Court. Therefore, applying the provisions of those sub-sections to a case covered by sub-section (3), the penalty or disqualification that the non registration of a Firm entails is that it is debarred from instituting proceedings in any Court. In our view, the word proceeding in section 69(3) does not cover a reference to arbitration aliunde the Court. This would be clear from the provisions of section 69 itself that proceedings contemplated by it are proceedings in Court. Proceedings covered by sub-sections (1) and (2) are proceedings in the Court. Sub-section (3) deals with reference to the provisions of sub-sections (1) and (2) and say that it shall apply also to a claim of set off or other proceedings to enforce a right arising from a contract. Therefore. it is implicit that proceedings contemplated by sub-section (3) are also proceedings filed in Court and the reference to arbitration without intervention of the Court is not prohibited by the section."
(emphasis supplied)
13. In the case of
"5........Learned Counsel for the petitioner has laid great emphasis on the observation of the Supreme Court in para 7 to the effect that "It is true that the arbitral proceedings would not be maintainable at the instance of an unregistered firm having regard to the mandatory permission contained in section 69 of the Indian Partnership At 1932". According to learned Counsel for the petition this observation covers proceedings before the Arbitrator also and therefore above observation of the Apex Court must be construed to lay down that section 69 of the Indian Partnership Act will be applicable to the proceeding before the Arbitrator also. In my view, such an inference cannot be drawn. Reading the judgment as a whole would indicate that while making those observations, the Supreme Court was conscious of the fact that respondent had filed an application under section 20 of the Arbitration Act 1940 on 1.5.91 and thus arbitral proceedings had been set in motion. There is clear observation to this effect in para 9. This means that while making the observations referred to in para 7 of the judgment, Supreme Court treated section 20 petition as setting in motion of arbitral proceedings and it is in this context that the observation made in para 7 must be read and understood. This judgment is not an authority for the proposition that section 69 of the Partnership Act will apply to the proceedings before the Arbitral Tribunal. Section 20 petition was a proceeding before the Court and therefore it was not maintainable at the instance of unregistered firm in view of law laid down by the Supreme Court in the case of Jagdish Chandra Gupta (supra). In the case of
15. In the case of
"9. The prohibition contained in section 69 is in respect of instituting a proceeding to enforce a right arising from a contract in any Court by an unregistered firm, and it had no application to the proceedings before an Arbitrator and that too when the reference to the Arbitrator was at the instance of the appellant itself. If the said bar engrafted in section 69 is absolute in its terms and is destructive of any and every right arising under the contract itself and not confined merely to enforcement of a right arising from a contract by an unregistered firm by instituting a suit or other proceedings in Court only, it would become a jurisdictional issue in respect of the Arbitrator''s power, authority and competency itself, undermining thereby the legal efficacy of the very award, and consequently furnish a ground by itself to challenge the award when it is sought to be made a rule of Court. The case before us cannot be said to be one such and the learned Counsel for the appellant though was fully conscious of this fact, yet tried to assert that it is open to the appellant to take up the objection based upon section 69 of the Partnership Act, at any stage - even during the post-award proceedings to enforce the award passed. The Award in this case cannot either rightly or legitimately said to be vitiated on account of the prohibition contained in section 69 of the Partnership At, 1932 since the same has no application to proceedings before an Arbitrator."
16. Thus the legal position which emerges from the above judgments is that the bar under section 69 of the Partnership Act would extend to any proceeding before a Court and if the proceeding is not before a Court, the bar would have no applicability.
17. The next question therefore which falls for consideration is whether the Learned Chief Justice or his designate hearing an application under section 11 of the Arbitration and Conciliation Act is "a Court" or not. In this respect, the Constitution Bench of the Hon''ble Supreme Court in the case of
"13........ The framers of the statute must certainly be taken to have been conscious of the definition of "Court" in the Act. It is easily possible to contemplate that they did not want the power under section 11 to be conferred on the District Court or the High Court exercising original jurisdiction. The intention apparently was to confer the power on the highest judicial authority in the State and in the country, on the Chief Justices of the High Courts and on the Chief Justice of India. Such a provision is necessarily intended to add the greatest credibility to the arbitral process. The arguments that the power thus conferred on the Chief Justice could not even be delegated to any other Judge of the High Court or of the Supreme Court, stands negative only because of the power given to designate another. The intention of the legislature appears to be clear that it wanted to ensure that the power under section 11(6) of the Act was exercised by the highest judicial authority in the concerned State or in the country. This is to ensure the utmost authority to the process of constituting the Arbitral Tribunal"
"15. ...... Replacing of the word "Court" in the Model Law with the expression "Chief Justice" in the Act, appears to be more for excluding the exercise of power by the District Court and by the Court as an entity leading to obvious consequences in the matter of the procedure to be followed and the rights of appeal governing the matter. The departure from Article 11 of the Model law and the use of the expression "Chief Justice" cannot be taken to exclude the theory of its being an adjudication under section 11 of the Act by a judicial authority."
"18. It is true that the power under section 11(6) of the Act is not conferred on the Supreme Court or on the High Court, but it is conferred on the Chief Justice of India or the Chief Justice of the High Court. One possible reason for specifying the authority as the Chief Justice, could be that if it were merely the conferment of the power on the high Court, or the Supreme Court, the matter would be governed by the normal procedure of that Court, including the right of appeal and Parliament obviously wanted to avoid that situation, since one of the objects was to restrict the interference by courts in the arbitral process. Therefore, the power was conferred on the highest judicial authority in the country and in the State in their capacities as Chief Justices. They have been conferred the power or the right to pass an order contemplated by section 11 of the Act. We have already seen that it is not possible to envisage that the power is conferred on the Chief Justice as persona designata. Therefore, the fact that the power is conferred on the Chief Justice, and not on the Court presided over by him is not sufficient to hold that the power thus conferred is merely an administrative power and is not a judicial power."
18. The Hon''ble Supreme Court has in the decision of
"6....... He contends that under Article 145 of the Constitution, the Supreme Court is empowered to frame "rules for regulating generally the practice and procedure of the Court", and under Clause (2), the minimum number of Judges, who were to sit for any purpose, is also to be fixed by the rules. The Supreme Court has framed rules known as the Supreme Court Rules, 1966 (hereinafter referred to as "the Rules"). Under Order 7, Rule 1 of the Rules, "every cause, appeal or matter shall be heard by a Bench consisting of not less than two Judges nominated by the Chief Justice". Exception is made for those matters specifically provided there under, which could be heard by a Judge sitting singly nominated by the Chief Justice. The contention is that since a petition under section 11(6) of the Act is not specifically enumerated under the proviso to Order 7, Rule 1 of the Rules, such a petition would have to be heard by a Bench consisting of not less than two Judges."
"7. In my view, this contention is entirely misconceived for two reasons. In the first place, Article 145 of the Constitution itself proceeds by declaring that the provisions of the article were "subject to the provisions of any law made by Parliament". The Act is definitely a "law made by Parliament" and it does not prescribe that a petition under section 11(6) has to be heard by a Bench consisting of at least two Judges. Second, the power under Article 145 of the Constitution and the rules framed there under, are intended to govern the practice and procedure of the Supreme Court. I am unable to persuade myself to believe that, the power exercisable by the Chief Justice under section 11(6) of the Act is the power of the Supreme Court under the Constitution. My first impression on this issue is also confirmed by the judgment of this Court in Patel Engg. where it was observed that:
"13. It is common ground that the Act has adopted the UNCITRAL Model Law on International Commercial Arbitration, but at the same time it has made some departures from the Model Law. Section 11 is in the place of Article 11 of the Model Law. The Model Law provides for the making of a request under Article 11 to ''the Court or other authority specified in Article 6 to take the necessary measure''. The words in section 11 of the Act are ''the Chief Justice or the person or institution designated by him''. The fact that instead of the Court, the powers are conferred on the Chief Justice, has to be appreciated in the context of the statute. ''Court'' is defined in the Act to be the Principal Civil Court of original jurisdiction of the district and includes the High Court in exercise of its ordinary original civil jurisdiction. The Principal Civil Court of original jurisdiction is normally the District Court. The High Courts in India exercising ordinary original civil jurisdiction are not too many. So in most of the States the Court concerned would be the District Court. Obviously, Parliament did not want to confer the power on the District Court, to entertain a request for appointing an Arbitrator or for constituting an Arbitral Tribunal under section 11 of the Act. It has to be noted that under section 9 of the Act, the District Court or the High Court exercising original jurisdiction, has the power to make interim orders prior to, during or even post-arbitration. It has also the power to entertain a challenge to the award that may ultimately be made. The framers of the statute must certainly be taken to have been conscious of the definition of ''Court'' in the Act. It is easily possible to contemplate that they did not want the power under section 11 to be conferred on the District Court or the High Court exercising original jurisdiction. The intention apparently was to confer the power on the highest judicial authority in the State and in the country, on the Chief Justices of the High Courts and on the Chief justice of India."
8. In short, the power under section 11(6) is the power of a designate referred to under the section and not that of the Supreme Court, albeit that it has now been held to have judicial characteristics by reason of the judgment in Patel Eng. Since this is the power of the Chief Justice and not the power of the Supreme Court, the specification in Order 7, Rule 1 of the Rules as to the minimum number of judges, would have no application thereto. If the argument of the learned Counsel is right, then even the Chief Justice cannot pass such an order unless he is sitting in a Bench with One or more companion Judges. No such intention is evidenced by Parliament in enacting section 11(6) of the Act. Since Parliament has enacted a law under which the power is exercisable by the Chief Justice or his designate, who could be "any person or institution", I do not think that the requirement of Order 7, Rule 1 of the Rules would apply to such a situation at all. The contention is, therefore, rejected."
19. In the case of State of West Bengal and others Vs. Associated Contractors (supra), the issue that arose before the two Judge Bench of the Hon''ble Supreme Court was as to which Court will have the jurisdiction to entertain and decide an application under section 34 of the Act read with section 2(1)(e) of the Act and other provisions including section 42 of the Act. The matter was referred to a larger Bench by the two Judge Bench to decide this question of law. A three Judge Bench of the Hon''ble Supreme Court after considering all the relevant decisions on the subject including the decision of the seven Judge Bench in SBP & Co. Vs. Patel Engg. Ltd. (supra) held as follows:
"It is obvious that section 11 applications are not to be moved before the "Court" as defined but before the Chief Justice either of the High Court or of the Supreme Court as the case may be, or their delegates. This is despite the fact that the Chief Justice or his delegate have now to decide judicially and not administratively. Again, section 42 of the Act would not apply to applications made before the Chief Justice or his delegate for the simple reason that the Chief Justice or his delegate is not "Court" as defined by section 2(1)(e) of the Act."
20. From the aforesaid judgments, it is clear that the Chief Justice or his designate, who hears an application under section 11, is not a Court. That being so, an application under section 11 not being made to a Court, the bar under section 69 of the Partnership Act would not be attracted.
21. This Court has in the case of
"9. Shri Patni, learned Advocate has placed reliance on the decisions in the cases of
22. The Hon''ble Supreme Court has held in the case of Firm Ashok Traders & Anr. Vs. Gurumukh Das Saluja & Ors. (supra) that an application under section 9 of the Act is maintainable in the case of unregistered partnership firm. In this regard, paragraphs 12, 13, 17 and 18 of the said decision are reproduced hereunder:
"12. In our opinion, which we would term as prima facie, the bar enacted by section 69 of the Partnership Act does not affect the maintainability of an application under section 9 of the A & C Act."
"13. The A & C Act, 1996 is a long leap in the direction of alternate dispute resolution systems. It is based on UNCITRIAL Model. The decided cases under the preceding Act of 1940 have to be applied with caution for determining the issues arising for decision under the new Act. An application under section 9 under the scheme of the A & C Act is not a suit. Undoubtedly, such application results in initiation of civil proceedings but can it be said that a party filing an application under section 9 of the Act is enforcing a right arising from a contract? "Party" is defined in Clause (h) of sub-section (1) of section 2 of the A & C Act to mean "a party to an arbitration agreement". So, the right conferred by section 9 is on a party to an arbitration agreement. The time or the stage for invoking the jurisdiction of Court under section 9 can be: (i) before, or (ii) during arbitral proceedings, or (iii) at any time after the making of the arbitral award but before it is enforced in accordance with section 36. With the pronouncement of this Court in
"17.......Section 9 permits application being filed in the Court before the commencement of the arbitral proceedings but the provision does not give any indication of how much before. The word "before" means, inter alia, "ahead of; in presence or sight of; under the consideration or cognizance of". The two events sought to be interconnected by use of the term "before" must have proximity of relationship by reference to occurrence; the later event proximately following the preceding event as a foreseeable or "with insight" certainty. The party invoking section 9 may not have actually commenced the arbitral proceedings but must be able to satisfy the Court that the arbitral proceedings are actually contemplated or manifestly intended (as Sundaram Finance Ltd. puts its) and are positively going to commence within a reasonable time."
"18....... The party having succeeded in securing an interim measure of protection before arbitral proceedings cannot afford to sit and sleep over the relief, conveniently forgetting the "proximately contemplated" or "manifestly intended" arbitral proceedings itself. If arbitral proceedings are not commenced within a reasonable time of an order under section 9, the relationship between the order under section 9 and the arbitral proceedings would stand snapped and the relief allowed to the party shall cease to be an order made "before" i.e. in contemplation of arbitral proceedings. The Court, approached by a party with an application under section 9, is justified in asking the party and being told how and when the party approaching the Court proposes to commence the arbitral proceedings. Rather, the scheme in which section 9 is placed obligates the court to do so. The Court may also while passing an order under section 9 put the party on terms and may recall the order if the party commits breach of the terms."
Before a Court grants relief under section 9 of the Act, it is imperative that the Court is satisfied that the petitioner had manifestly intended and was positively going to commence arbitration proceedings. If it was impossible to initiate arbitration proceedings before the Tribunal by making an application under section 11, the Court would not grant relief under section 9 of the Act. It will therefore be correct to say that the Hon''ble Supreme Court whilst holding that an application under section 9 is maintainable in the case of an unregistered partnership firm also was of the view that the bar under section 69 of the Partnership Act would not apply to an application under section 11 of the Act, otherwise the said judgment would be meaningless and unworkable.
23. The judgments sought to be relied on by the respondents in support of their contention that the bar under section 69 applies to an application under section 11 of the Act, are all judgments which lay down that applications made to the Court under section 8 or section 20 of the Arbitration Act, 1940 are barred in view of the provisions of section 69. The said judgments are not under the provisions of the 1996 Act and the said judgments do not consider the case of an application under section 11. Under sections 8 and 20 of the Arbitration Act, 1940, the application for making a reference to arbitration had to be by way of suits filed in the High Court and therefore were held to be barred. The same have no application whatsoever in the context of the 1996 Act where the application is being made not to the Court but to the Chief Justice or his designate. Even the Supreme Court judgment in U.P. State Sugar Corporation Ltd. Vs. Jain Construction Co. and another (supra) was under section 20 of the Arbitration Act, 1940 and the observations made therein about arbitral proceedings not being maintainable at the instance of an unregistered firm are in the context of a section 20 application. As noted above, the position is explained by the Delhi High Court in the case of Noida Toll Bridge Company Ltd. (supra) particularly with reference to the observations of the Supreme Court in U.P. State Sugar Corporation Ltd. (supra). Even the case of Jagdish Chandra (supra) was of an application to a Court under section 8 by an unregistered firm seeking to enforce a right under an arbitration agreement in Court.
24. Again, in any event, none of the judgments relied on by the respondents have considered that under section 11, the application is not to a Court but to the learned Chief Justice or his designate which is admittedly not a Court. The said judgments are therefore sub-silentio. Being sub-silentio, they do not constitute precedent and are not binding ratios, as held by the Hon''ble Supreme Court in the case of
"41. Does this principle extend and apply to a conclusion of law, which was neither raised nor preceded by any consideration. In other words can such conclusions be considered as declaration of law? Here again the English courts and jurists have carved out an exception to the rule of precedents. It has been explained as rule of sub-silentio. "A decision passes sub-silentio, in the technical sense that has come to be attached to that phrase, when the particular point of law involved in the decision is not perceived by the Court or present to its mind." (Salmond on Jurisprudence 12th Edn., p. 153). In Lancaster Motor Company (London) Ltd. Vs. Bremith Ltd. the Court did not feel bound by earlier decision as it was rendered ''without any argument, without reference to the crucial words of the rule and without any citation of the authority''. It was approved by this Court in
25. In the circumstances it is clear that the bar under section 69 of the Partnership Act does not apply to an application filed under section 11 of the Act or to the arbitration proceedings itself. Since the application is not being made to a Court, the bar under section 69 would have no applicability and the objection raised by the respondents in this regard is totally misconceived and rejected.
26. The next contention raised by the respondents is that the said application is not maintainable since the arbitration agreement relates to the period prior to 1996, and the reference provided is to two Arbitrators. It is submitted that in view of the provisions of Schedule 1 of para 2 of the said Arbitration Act, 1940, the Arbitrators were under a statutory obligation to appoint an umpire not later than one month from the latest date of their respective appointments and in the absence of appointment of the Umpire the arbitration agreement was unenforceable and became non est and the Award made was invalid. In support of this contention, the respondents have relied on the decisions in the case of
Paragraph 2 of the first Schedule reads as under:
"2. If the reference is to an even number of Arbitrators, the Arbitrators shall appoint an umpire not later than one month from the latest date of their respective appointments."
In the instant case, it is not the case of the respondents that the Arbitrators named in Clause 23 of the Partnership Agreements have been informed about their appointment or that the disputes have been referred to them after having arisen. In view thereof, the question of the Arbitrators appointing an Umpire within one month from the date of their respective appointments did not arise. The submission therefore that the Arbitration Agreement has become non est and the Award made will be invalid, is rejected.
27. It is also submitted on behalf of the respondents that, "after 1998, the said partnership between applicants and respondents ceased to have any effect and the contract stood discharged and the said agreement including the arbitration agreement ceased to operate". In paragraph 10 of the written submissions it is alleged that, "the partnership ceased to exist in 1998." It is submitted that therefore there is no valid and enforceable arbitration agreement between the Parties, which is a requirement of section 2(1)(b) read with section 7 of the Act. There is nothing on record to show that the Parties have agreed that the Partnership Firm would stand dissolved or has ceased to exist from the year 1998. In fact in Clause (d) of para 17 of the affidavit-in-reply filed on behalf of the respondents, it is admitted that along with the Partnership Deed dated 21st January, 1990, a Power of Attorney dated 22nd January 1990 was also executed by the respondents in favor of applicant No. 1 and one Mr. Balkrishna C. Mody. The said Power of Attorney was revoked by the respondents only after the applicants invoked arbitration through their Advocates letter dated 20th December 2010 as per Clause 23 of the Partnership Deeds dated 1st April 1989 and 21st January 1990. In fact, even if the Partnership stood dissolved as alleged, it cannot be held that the arbitration clause cannot operate and that the same has perished along with the original contract which has no legal existence. In view thereof the submission advanced on behalf of the respondents that there does not exist any valid and legally enforceable arbitration agreement, and therefore the above application is misconceived cannot be accepted and is rejected.
28. The respondents have further contended that the averments made in the application shows that the Partnership is nonfunctional and treated as dissolved since 1998. The cause of action therefore occurred much prior to the expiry of three years. The application is therefore barred by the law of limitation. As set out in the earlier paragraph, it is admitted by the respondents that along with the Partnership Deed dated 21st January, 1990, a Power of Attorney dated 22nd January 1990 was also executed by the respondents in favor of Applicant No. 1 and one Mr. Balkrishna C. Mody, which Power of Attorney was revoked by the respondents only after the applicants invoked arbitration as per Clause 23 of the Partnership Deeds dated 1st April 1989 and 21st January 1990. The issue of limitation can therefore always be decided by the Arbitrator.
29. The respondents have also alleged that the applicants have acted against the objects and purpose of the Partnership and have done certain acts behind the backs of the respondents which would prejudice the land belonging to the Partnership Firm and the respondents. It is alleged that these facts clearly demonstrate that there is no relationship existing between the Parties as Partners, and in view of the fraud and criminal offences being involved, the matter cannot be referred to arbitration. Just because the respondents have made allegations of fraud etc. against the applicants, it cannot be held that the matter cannot be referred to Arbitration. It is pertinent to mention in this context that in a recent decision of the Hon''ble Supreme Court in
30. The respondents have further submitted that a suit was filed by the Partnership Firm of M/s. Vimal Corporation against M/s. Shri Shanti Textile Mills Pvt. Ltd. and others, in the Bombay City Civil Court, being Suit No. 1596 of 2000. The applicants had applied for being impleaded as party defendants to the said suit by contending that they were the Partners of the said Partnership Firm of M/s. Vimal Corporation. It is submitted that the City Civil Court by its Order dated 16th October 2012 rejected the Chamber Summons of the applicants on the ground that the Deed of Partnership dated 21st January 1990 was never acted upon, and the said Order has remained unchallenged by the applicants. I have perused the Order dated 16th October 2012 passed by the Bombay City Civil Court in Chamber Summons No. 785 of 2012. The said Chamber Summons is dismissed by the City Civil Court on the ground that without there being any registration of the Firm, the applicants cannot be treated as Partners of the plaintiff''s Firm and that the applicants have to establish their right, title and interest in the assets of the Partnership Firm by bringing an appropriate suit. By the said Order the City Civil Court has also recorded that the decree if any passed in favor of the plaintiffs Firm will not affect the alleged rights of the applicants, and the applicants will also not be prejudiced in any manner. The Chamber Summons taken out by the applicants was therefore dismissed by the City Civil Court on the ground that the applicants cannot be said to be a necessary or proper party to the litigation. However, in the said Order passed by the City Civil Court, I have not come across any finding as alleged by the respondents that the Deed of Partnership dated 21st January, 1990 was never acted upon. The submission made by the respondents that since redevelopment of the property belonging to the Partnership is within the jurisdiction of the Slum Rehabilitation Authority under the Maharashtra Slum Areas (Improvement, Clearance and Redevelopment) Act, 1971, the above application should not be entertained, also cannot be accepted and is rejected. In the circumstances I pass the following Order:
(i) Mr. Shailesh Shah, Senior Advocate, is appointed as a sole Arbitrator to decide the disputes arising between the Parties under the Deeds of Partnership dated 1st April 1989 and 21st January 1990.
(ii) All contentions of the parties are kept open. The application is accordingly disposed of.
