Case Note & Summary
The case involves two arbitration petitions challenging an order of a Sole Arbitrator under Section 16 of the Arbitration and Conciliation Act, 1996, upholding the respondents' objection to the arbitrator's jurisdiction to adjudicate the counter-claim. The petitioners and respondents were partners in a firm named M/s Laxmi Centre, constituted under a Deed of Partnership dated 25 June 1976, a further Deed dated 7 September 1985, and a Supplementary Deed dated 4 March 1997. The partnership was at will and contained an arbitration clause. Disputes arose, and the petitioner served a dissolution notice. The petitioner invoked the arbitration agreement and appointed her nominee arbitrator, but the respondent did not accept and filed an application under Section 11 for appointment of arbitrator. The court appointed Mr. Snehal Shah as Sole Arbitrator on 29 July 2010. The respondent filed a Statement of Claim, and the petitioner filed a Statement of Defence and Counter-claim. The respondent then filed an application under Section 16 contesting the arbitrator's jurisdiction to entertain the counter-claim. The arbitrator upheld the objection, leading to the present petitions. The court analyzed whether the arbitration clause survives dissolution of the partnership. It held that the arbitration clause is not extinguished by dissolution and remains operative for settling accounts and disputes arising out of the partnership. The court set aside the arbitrator's order and directed the arbitrator to proceed with the counter-claim.
Headnote
A) Arbitration Law - Jurisdiction of Arbitrator - Survival of Arbitration Clause - Section 16 of Arbitration and Conciliation Act, 1996 - The court considered whether an arbitration clause in a partnership deed survives the dissolution of the firm. Held that the arbitration clause continues to exist for the purpose of settling accounts and disputes arising out of the partnership, and the arbitrator has jurisdiction to entertain a counter-claim even after dissolution. (Paras 2-10) B) Partnership Law - Dissolution of Firm - Settlement of Accounts - Partnership Act, 1932 - The court examined the effect of dissolution on the arbitration agreement. Held that the arbitration clause is not extinguished by dissolution and remains operative for resolving disputes related to the partnership accounts. (Paras 5-8)
Issue of Consideration
Whether the arbitrator has jurisdiction to entertain a counter-claim after the dissolution of a partnership firm, and whether the arbitration clause survives the dissolution.
Final Decision
The court allowed the arbitration petitions, set aside the arbitrator's order, and directed the arbitrator to proceed with the counter-claim.
Law Points
- Arbitration clause survives dissolution of partnership
- Arbitrator has jurisdiction to entertain counter-claim
- Section 16 of Arbitration and Conciliation Act
- 1996
- Partnership Act
- 1932
