Arbitrator – Appointment – Pendency of civil or criminal litigation between partners is not a bar
On 1.5.2019, the partnership deed was executed between the parties for Chartered Accountancy Firm. Clause 30 provides for the dispute resolution by arbitration.
However, the respondent committed various acts detriment to the interest of the said firm and also started proprietorship CA firm with a similar firm. Moreover, the respondent dissolved the firm without settling the accounts. The petitioner invoked arbitration clause. The respondent opposed arbitration on the ground that the firm was dissolved.
The Respondent filed the civil suit for rendition of accounts. The petitioner filed section 8 AA application to refer the dispute for arbitration.
The petitioners filed section 11 petition for appointment of arbitrator. The Respondent had opposed the same on the grounds – (i) that the partnership was dissolved and therefore, the partnership deed including arbitration clause cannot be given an effect to and (ii) the notice invoking arbitration was given only by the petitioner no.2.
HELD that the clause does not require all the parties to serve arbitration notice to the respondent. Notice by one of the parties to the agreement would be sufficient compliance of statutory provisions.
Giving arbitration is purely procedural and decisive step. Its form and terms do not call for a strict scrutiny. Technicality cannot be attached with section 21 AA notice as that would defeat the objective of the statute which provides for speedy resolution of disputes.
The arbitration clause of the partnership deed does not come to an end with the dissolution of the partnership. The dispute of accounts of partnership firm is a dispute which the touches the affairs of the firm is clearly referable to an Arbitrator and the parties cannot be compelled to take recourse to the civil courts. (Ravi Prakash Goel Vs. Chandra Prakash Goel and another – 2008 (13) SCC 667).
Pendency of a civil and criminal litigation inter se partners cannot stop one of the partners from invoking the arbitration clause or bar reference of dispute for adjudication to an arbitrator for determination.
Judgment dated 7.1.2025 of the High Court of Punjab and Harayana in ARB-241-2022 (O&M) of Prikshit Wadhwa and others Vs. Vinod K Wadhwa
