The Telangana High Court observed that the dispute on insolvency and winding-up of partnership concerning partners rights and obligations is arbitrable.
The application under Section 11(6) of the Arbitration and Conciliation Act, 1996 has been filed seeking to appoint a sole arbitrator to adjudicate the dispute between the parties as per Clause 19 of the Partnership Deed dated 01.04.1994.
A notice was issued to each of the respondents by registered post calling upon them to furnish the documents, information and clarification related to the firm. A reply notice on behalf of the respondents was sent wherein the claim of the applicant was denied. The applicant thereupon issued another notice informing the respondents that the applicant has dissolved the firm under Section 43 of the Indian Partnership Act, 1932 and called upon the respondents to settle her accounts. Respondent No.4 submitted a reply to the aforesaid notice.
Thereafter the applicant sent a notice to the respondents and nominated Mr. Chikkam Vijaymohan, a retired District Judge as sole arbitrator. Thereafter the applicant published a notice in “Deccan Chronicle, Eenadu and Sisasat” Daily Newspapers on 11.07.2023 stating that the firm has been dissolved as required under Section 45 of the Indian Partnership Act, 1932. Thereafter this application has been filed seeking appointment of an arbitrator.
The counsel for the applicant submitted that the respondents have not disputed the execution of the Partnership Deed dated 01.04.1994 and had not denied the existence of the arbitration clause and that the dispute has arisen between the parties, which is required to be resolved in the manner agreed to by the parties.
On the other hand, the counsel for respondent Nos.1 and 3 to 6 has submitted that the power of the arbitrator under the Partnership Deed dated 01.04.1994 is circumscribe and the relief to claim settlement of the accounts is outside Clause 19 of the Partnership Deed dated 01.04.1994 executed between the parties. It was further submitted that dispute relating to insolvency and winding up matters is a non-arbitrable dispute.
Section 16(1) of the Arbitration and Conciliation Act provides that the arbitral Tribunal may rule on its own jurisdiction. In Uttarakhand Purv Sainik Kalyan Nigam Limited v. Northern Coal Field Limited, a twoJudge Bench of Supreme Court held that the doctrine of kompetenz-kompetenz is intended to minimise judicial intervention, so that the arbitral process is not thwarted at the threshold when a preliminary objection is raised by one of the parties. It was further held that Section 16 of the Arbitration and Conciliation Act, 1996 is an inclusive provision of very wide ambit.
The Court of Chief Justice Alok Aradhe observed that “Applying the aforesaid legal principles to the obtaining factual matrix of the case, it can safely be inferred that all the objections with regard to jurisdiction of the arbitrator to deal with the claim made on behalf of the applicant can be raised and can be urged before the arbitral Tribunal itself. In Booz Allen & Hamilton Inc. while referring to well recognized examples of non-arbitrable disputes, the Supreme Court, by way of illustration, referred to insolvency and winding-up of a company, whereas the instant dispute is between the partners under the Indian Partnership Act, 1932.”
“For the aforementioned reasons, Mr. Justice L.Nageswara Rao, a former Judge of the Supreme Court is appointed as sole arbitrator to adjudicate the dispute between the parties” the Court noted.
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