In ARB.P. 137/2019-DEL HC- Combined interpretation of Sec.16(1)(a) & Sec.40(1) of A&C Act demonstrates unequivocally that arbitration provision will continue in effect even after death of partner causes dissolution of partnership, clarifies Delhi HC Justice Chandra Dhari Singh [18-01-2023]

Read Order: M/S SHYAMJEE PREPAID SERVICES v. M/S TOP STEELS AND MRS. RENU DEVI & ANR 

Mansimran Kaur

New Delhi, January 19, 2023: In a case pertaining to the Arbitration & Conciliation Act, 1996, while dismissing with the review petition seeking cancellation of the order pertaining to the appointment of a Sole Arbitrator, the Delhi High Court has observed that the respondent / applicant in this case did not contest the presence of the arbitration clause or the section 21 notice. 

Justice Chandra Dhari Singh dismissed the instant review petitions preferred under Section 114 read with Section 151 of the Code of Civil Procedure, 1908 on behalf of the partners of the respondent-firm and opined that the respondent/ applicant failed to point out any ground for review in the instant applications.  

Facts of the case were such that the petitioner firm i.e. M/s Shyamjee Prepaid Services was a partnership firm, duly registered with the registrar of firms as a trader who imports hot-rolled steel wires in coils, rods, thermax bars, M.S. ingots, M.S. billets, and other forms.

The respondent, a partnership firm, is a manufacturer of hot-rolled steel wires in coils, rods, Thermax bars, M.S. ingots, M.S. billet, and other products. The parties executed an agreement whereby the petitioner was appointed to be the respondent’s agent in the State of Haryana to market the products that are hot Rolled steel wires in coils, rods/ thermax bars /M.S. ingot /M.S. billet etc. in accordance with the said agreement.

However, disputes started arising between the parties, and due to daily quarrels and disputes between the parties, the erstwhile partner of the Petitioner firm, Mr. Vinod Kumar Goel committed suicide. 

 In view of the foregoing facts, the petitioner firm was therefore constrained to invoke the arbitration clause. Awaiting the reply of respondent firm, the petitioner firm came before this court by virtue of Section 11 of the Act, 1996.

Being aggrieved by the said order the respondent firm through its partners had filed the present application for review.

After considering the submissions, the Court dealt with three issues mainly, whether dissolution of partnership firm will bar the erstwhile partner to invoke Section 11 of the Act, 1996, in case of a disagreement with a third party. The other two issues were whether appointment of an arbitrator by the virtue of Section 11 be reviewed and whether the present application seeking review of Order could be allowed. 

Referring to “Doctrine of Severability” of an arbitration clause, the Bench opined that  the arbitration provision will remain in effect notwithstanding the contract's termination, breach, or invalidity, since it is treated as a stand-alone agreement. 

Thus in view of the statutory provisions, judgments and submissions made by the parties, it was noted that a partnership firm is nothing more than a compendium of the partners' individual names. An act done by a firm is an act done by its partners. 

Moreover, for the purposes of winding up or dissolution, it is necessary to complete the entire transaction pending between the firm and third party. Consequently, the said firm shall not be barred from invoking the arbitration clause, the Court observed. 

With respect to the second issue, the Court noted that the Act 1996 does not contain any legislative provisions for reviewing the order recorded by the Court according to Section 11(6) of the Act, 1996. Further references were made to the cases namely, S.B.P. & Co. vs. Patel Engineering Ltd. & Anr ,  Jain Studios Ltd. vs. Shin Satellite Public Co. Ltd.

Courts can examine orders with procedural irregularities. Furthermore, the Courts' competence to review Section 11 orders is unaffected by substantive concerns like a Tribunal's jurisdiction or the authenticity of evidence, the Bench stated.

With respect to the third issue, the Court stated, “It has been settled time and again that the power of review is distinct from the Court's power to hear appeals, i.e., the appellate jurisdiction. The power to review is not an inherent power. It must be granted by legislation, either expressly or obliquely. The review is not a covert appeal either”.

Reliance at this stage was placed on the case of Raja Prithwi Chand Lall Choudhary v. Sukrai and on the case of  Kamlesh Verma vs. Mayawati .

The Court further stated that  it was  essential to take note of the fact that the respondent / applicant in this case did not contest the presence of the arbitration clause or the section 21 notice dated December 12, 2019 that was served upon the respondent by the petitioner.

In addition to this, despite the factum of death of the former partner Goel was mentioned in the petition by the petitioner, the respondent chose to keep silent with respect to the dissolution of the partnership on said account, and the respondent is presenting the said basis for the first time in the current review petitions. 

The Court thus observed that the respondent/ applicant failed to point out ground for review in the instant applications and thus, the instant applications for review were liable to dismissed.