Arbitration – Whether new partner of the firm is a necessary party

This petition is filed in rather piquant circumstances as observed by the High Court.

The disputes between the parties’ centre around exist of the petitioner from the partnership firm. 

The Arbitral Tribunal is seized of all the proceedings of two partnership deeds.  Respondent No.2 had filed an application under Section 16 of the AA that when the petitioner was a partner of the firm, he was not a partner.  Consequently, there cannot be forwarding of baton linking the petitioner to respondent no.2 under the arbitration agreement.

However, the Arbitrator resigned from the proceedings on 16.1.2025 after the respondent no.2 made allegations.

The petitioner, therefore, filed section 11 petition for substitute Arbitrator.

The Respondent no.2 objected to the same on the grounds that he was not a party to the arbitration agreement between the petitioner and the respondent no.2 and he cannot be linked with the parties to the said agreement.

HELD that the partnership firm was continued even after the respondent no.2 became partner.  The arbitration clause is contained in the arbitration agreement.   At one point of time, the petitioner and respondent no.1 were partners and at another point of time, the firm continued with respondent nos.1 and 2 as partners.   A partnership firm does not have an existence independent of its partners.  The implications of a partner at a subsequent period time may or may not make such subsequent partner, a necessary party.  However, what liabilities an incoming partner would have in respect of dues already incurred by the firm is a matter of evidence for the Arbitrator to consider and decide.

Judgment dated 24.2.2025 of the High Court of Bombay in Arbitration Petition No.53 of 2025 (AS) of Darshan Mahendra Nibjya   Vs.  Jayantilal Tarachand Oswal and others