Bombay HC – Composite Contract Doctrine Applied – Arbitration Clause in Retirement Deed Governs Disputes Across Entire Transaction and the MOU

The petitioner was admitted as partner of the respondent no.1 firm on 11.2.2015 (notarized partnership deed) and retired on 16.10.2017 with execution of four documents.  The retirement deed has contained arbitration clause no.13.  However, the MoU dated 10.10.2017 has no arbitration clause.

whether the Deed of Retirement and MOU are executed for effecting a common transaction and whether arbitration clause contained in the Deed of Retirement can be invoked for the purpose of claiming any rights flowing out of the MOU.

the prayers sought in Section 9 Petition essentially relate to performance of contractual obligations under the MOU, which does not contain arbitration clause. However, the Deed of Retirement contains arbitration clause and therefore it is necessary to examine whether absence of arbitration clause in the MOU would come in the way of Petitioners seeking adjudication of disputes relating to non-payment of consideration while exiting the Partnership Firm through the mechanism of arbitration.

the MOU did not bring to an end the contractual obligations under the Deed of Retirement. On the contrary, MOU contains a covenant for restitution of partnership of retiring partners in the event of failure to pay in accordance with the MOU. Thus, the jural relationship between the partners and their connection to the business of the firm was not brought to end by the MOU. It merely provided for the modalities by which consideration was to be paid arising out of the Retirement Deed.

Judgment dated 4.3.2026 of the High Court of Bombay in Commercial Arbitration Application (L) No.12427 of 2025 (OS) of Mahindra Mangilalji Jain Vs. M/s Radha Construction Co and others with connected petitions