Case Note & Summary
The applicant, Ezra Victor Aboody, and the respondent, H. Dhanrajgir Estate Pvt. Ltd., entered into a partnership deed on 14 February 2003 for coaching services and software development, with equal profit and loss sharing. The firm was not registered. The applicant alleged repudiation and breach by the respondent, leading to termination of the partnership and a legal claim for damages. By notice dated 13 November 2003, the applicant invoked arbitration claiming Rs. 4.77 crores. An arbitral tribunal was constituted, but the respondent objected that the claim exceeded the notice. The tribunal accepted the objection, and the applicant withdrew the reference on 11 September 2006, seeking leave to file a fresh claim. The tribunal noted Order XXIII CPC was inapplicable but granted leave. A fresh invocation followed on 12 September 2006. The respondent replied on 4 October 2006, arguing that since the firm was unregistered, the applicant could not refer to arbitration under Section 69(3) of the Partnership Act, 1932. The applicant then filed this application under Section 11(6) of the Arbitration and Conciliation Act, 1996 for appointment of an arbitrator. The court analyzed the interplay between Section 69(3) of the Partnership Act and arbitration law, holding that Section 69(3) bars only the enforcement of rights arising from a contract in a court, not arbitration proceedings. The court distinguished between a proceeding to enforce a right and a proceeding to settle disputes through arbitration. It concluded that the bar under Section 69(3) does not apply to arbitration references, as arbitration is an alternative dispute resolution mechanism. The court allowed the application and appointed an arbitrator to adjudicate the disputes.
Headnote
A) Arbitration Law - Appointment of Arbitrator - Section 11(6) Arbitration and Conciliation Act, 1996 - Unregistered Partnership Firm - The court considered whether an unregistered partnership firm can seek appointment of an arbitrator under Section 11(6) of the Arbitration and Conciliation Act, 1996, despite the bar under Section 69(3) of the Partnership Act, 1932. The court held that Section 69(3) does not bar arbitration proceedings for claims arising out of partnership disputes, as arbitration is a mode of settlement and not a proceeding to enforce a right arising from a contract. The court allowed the application and appointed an arbitrator. (Paras 1-4)
Issue of Consideration
Whether an unregistered partnership firm can refer disputes to arbitration under Section 11(6) of the Arbitration and Conciliation Act, 1996, in light of Section 69(3) of the Partnership Act, 1932.
Final Decision
The court allowed the application and appointed an arbitrator to adjudicate the disputes between the parties.
Law Points
- Section 69(3) of the Partnership Act
- 1932 does not bar arbitration proceedings for claims arising out of partnership disputes
- Section 11(6) of the Arbitration and Conciliation Act
- 1996 empowers court to appoint arbitrator when party fails to concur
- Order XXIII CPC not applicable to arbitral proceedings
Case Details
2010 LawText (BOM) (11) 42
Arbitration Application No. 4 of 2007
Mr. Hiroo Advani with Mr. Dinesh Pednekar and Mr. Deepak Lad i/by Advani & Co. for the Applicant, Mr. Iqbal Chagla, Sr. Advocate with Mr. Lynn Perreira, Mr. Farhan Dubash, Mr. C. Rashmikant with Ms. Pooja Kothari i/by Federal & K Rashmikant for the Respondent
H. Dhanrajgir Estate Pvt. Ltd.
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Nature of Litigation
Application under Section 11(6) of the Arbitration and Conciliation Act, 1996 for appointment of an arbitrator.
Remedy Sought
The applicant sought appointment of an arbitrator to adjudicate disputes arising from a partnership deed.
Filing Reason
The respondent failed to concur in the constitution of an arbitral tribunal after the applicant invoked arbitration.
Previous Decisions
An earlier arbitral tribunal had allowed the applicant to withdraw the reference with leave to file a fresh claim, but the respondent objected to the fresh invocation on the ground that the partnership firm was unregistered.
Issues
Whether an unregistered partnership firm can refer disputes to arbitration under Section 11(6) of the Arbitration and Conciliation Act, 1996, in light of Section 69(3) of the Partnership Act, 1932.
Submissions/Arguments
The applicant argued that the bar under Section 69(3) of the Partnership Act does not apply to arbitration proceedings.
The respondent contended that since the firm was unregistered, the applicant was not entitled to make a reference to arbitration.
Ratio Decidendi
Section 69(3) of the Partnership Act, 1932 bars only the enforcement of rights arising from a contract in a court of law, not arbitration proceedings. Arbitration is a mode of settlement of disputes and does not constitute a proceeding to enforce a right under the contract. Therefore, an unregistered partnership firm can refer disputes to arbitration under Section 11(6) of the Arbitration and Conciliation Act, 1996.
Judgment Excerpts
This proceeding has arisen in an application under section 11(6) of the Arbitration and Conciliation Act, 1996.
The applicant has averred that as a result of a continuing repudiation and material breach committed by the respondent, the applicant was compelled to end the partnership agreement and to institute a legal action for damages and for the recovery of amounts invested towards initiation of the business.
By a reply dated 4 October, 2006, the Advocate for the respondent stated that the erstwhile partnership had not been registered. In view of the circumstance that the firm had not been registered, the defence that was sought to be raised was that the applicant shall not be entitled in law to make a reference to arbitration.
Procedural History
The applicant and respondent entered into a partnership deed on 14 February 2003. The applicant invoked arbitration on 13 November 2003 claiming Rs. 4.77 crores. An arbitral tribunal was constituted, but the respondent objected that the claim exceeded the notice. The tribunal allowed the applicant to withdraw the reference on 11 September 2006. The applicant issued a fresh invocation on 12 September 2006. The respondent replied on 4 October 2006, objecting on the ground of unregistered partnership. The applicant then filed this application under Section 11(6) of the Arbitration and Conciliation Act, 1996 on an unspecified date. The court heard the matter and delivered judgment on 19 November 2010.
Acts & Sections
- Arbitration and Conciliation Act, 1996: Section 11(6)
- Partnership Act, 1932: Section 69(3)
- Code of Civil Procedure, 1908: Order XXIII
