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IAAP/68/2009 14/ 14 JUDGMENT
IN
THE HIGH COURT OF GUJARAT AT AHMEDABAD
PETN.
UNDER ARBITRATION ACT No. 68 of 2009
With
PETN.
UNDER ARBITRATION ACT No. 69 of 2009
To
PETN.
UNDER ARBITRATION ACT No. 72 of 2009
For
Approval and Signature:
HONOURABLE
MR.JUSTICE M.R. SHAH
=========================================================
1
Whether
Reporters of Local Papers may be allowed to see the judgment ?
2
To
be referred to the Reporter or not ?
3
Whether
their Lordships wish to see the fair copy of the judgment ?
4
Whether
this case involves a substantial question of law as to the
interpretation of the constitution of India, 1950 or any order
made thereunder ?
5
Whether
it is to be circulated to the civil judge ?
=========================================================
SUDIP
DILIPBHAI KINARIWALA - Petitioner(s)
Versus
RAMNIKLAL
JIVANLAL KINARIVALA & CO & 9 - Respondent(s)
=========================================================
Appearance
:
HL PATEL ADVOCATES
for Petitioner(s) : 1,
MR SUJAL S
SHAH for Respondent(s) : 1 -
10.
=========================================================
CORAM
:
HONOURABLE
MR.JUSTICE M.R. SHAH
Date
: 22/01/2010
ORAL
JUDGMENT
As
common question of law and facts arise in all this group of
petitions and as the same are between the same parties, they are
being disposed of by this common judgment and order.
In
all these petitions, respective petitioners have prayed for an
appropriate writ, direction and order to appoint sole arbitrator in
the matters of (1) M/s.Ramniklal Jivanlal Kinarivala &
co. (2) M/s.RJK Automatics, (3) M/s.Pradip Engineering Works, (4)
M/s.Sharad Knotters and (5) M/s RJK Machine Products respectively
with respect to settlement of accounts of the respective partnership
firms
Heard,
Shri Asim Pandya, learned advocate has appeared on behalf of the
respective petitioners and Shri Sujal Shah, learned advocate has
appeared on behalf of the respective respondents inclusive of
respective partnership firm.
It
is the case on behalf of the petitioner that he is one of the
partners in the respective respondent No.1-firm and rest of the
respective respondents are partners of the respective firms. That
the petitioner wanted to retire from the respective partnership firm
as there were differences between the petitioner and other partners
and therefore, by letter dated 1st September, 2008, he
expressed his wish to retire from the respective partnership firm.
That in the said letter, petitioner also requested the respondents
to settle his account. It is the case on behalf of the petitioner
that thereafter, by letter dated 4th October, 2008, he
informed the respondents that no decision or action has been taken
by the firm in respect of the request made by him and he may be
relieved from the respective firm with effect from 1st
October, 2008 and settle his account, as per his desire expressed in
earlier letter. That the communication dated 4.10.2008, was
responded by respective respondent No.1 vide letter dated 7th
October, 2008, informing the petitioner that the petitioner is
relieved as a partner from 1.10.2008, by further informing the
petitioner that books of accounts of the firm for the year ended on
31.3.2008 are ready and petitioner can verify the same and the books
of account for the period from 1.4.2008 to 30.9.2008 will be given
to the petitioner as and when it will be ready. The petitioner was
further informed to discuss the terms and conditions of the
retirement from the firm so that mutually acceptable retirement deed
can be prepared to settle the petitioner’s debit/ credit account and
liabilities of the firm. It is the case on behalf of the petitioner
that despite the above, nothing further was done in respect of
settlement of account and therefore, by communication dated 26th
December, 2008, petitioner informed the respective respondents that
despite his repeated requests, as nobody in the firm is taking
interest to settle his account, he was invoking arbitration clause
of the Deed of Partnership, which provided appointment of Arbitrator
in the event of any dispute or differences among the partners. That
the petitioner appointed one Shri Nimish Vayawala, Chartered
Accountant as his Arbitrator. It is the case on behalf of the
petitioner that in response to the letter dated 26th
December, 2008, the petitioner has informed that they have appointed
one Shri Nilay B.Desai, Chartered Accountant, as sole Arbitrator.
That the petitioner by letter dated 10th February, 2009,
informed the said Shri Nilay B.Desai, Chartered Accountant that it
would be improper for him to accept the work of Arbitrator on behalf
of the respondent to resolve the disputes raised by the petitioner
as he is the person who is the Chartered Accountant of the
partnership firm and he has prepared the accounts and has audited
the same and is getting the remuneration from the partnership firm.
Therefore, it was pointed out that he was having pecuniary and other
bias, and therefore, he cannot be accepted as Arbitrator to resolve
the dispute. That in response to the same, by letter dated 16th
February, 2009, the said Shri Nilay B.Desai, Chartered Accountant
informed the petitioner that petitioner should not have reservation
for his appointment as sole Arbitrator. It is the case on behalf of
the petitioner that thereafter, by letter dated 14th
March, 2009, petitioner informed the respondent that if there was no
consensus on the point of appointment of sole Arbitrator, he
would be suggesting three names for selection, out of which, any of
the Arbitrators could be considered. However, the
respondents, by communication dated 21st March, 2009,
informed the petitioner that they would continue with Shri
N.B.Desai. Chartered Accountant, as their Arbitrator and the
petitioner should select any one out of three persons as named
therein as 3rd Arbitrator for resolving the disputes.
It
is also the case on behalf of the petitioner that in the meantime,
the offer came up from the respondent that dispute will be resolved
by holding a joint meeting. Therefore, petitioner wrote letter dated
25th March, 2009 showing his desire to have joint meeting
on any suitable time and date convenient to all and pursuant to
which, there was joint meeting to resolve the dispute between them.
However, there was no fruitful result and therefore, by letter dated
8th April, 2009, petitioner informed the respondent that
petitioner would be approaching the Hon’ble High Court for the
appointment of Arbitrator as parties have failed to invoke
Arbitration Clause. Hence, the common petitioner has preferred the
present applications to appoint the Arbitrator to resolve the
disputes between the petitioner and the respondents and to refer the
dispute to the Arbitrator as per the Arbitration clause of
respective partnership deed.
Shri
Asim Pandya, learned advocate appearing on behalf of the respective
petitioners has stated that there is a dispute with respect to
settlement of accounts of the petitioner with respective partnership
firm and despite effort by the petitioner to resolve the dispute
mutually, the same could not be resolved and therefore, as per the
Arbitration Clause in the respective partnership deed, dispute with
respect to settlement of accounts is required to be referred to
Arbitration. It is submitted that as such, respective respondents
did appoint the sole Arbitrator, Shri N.B.Desai, Chartered
Accountant, and even the respondents are insisting to continue with
the appointment of Shri N.B.Desai, Chartered Accountant, as the sole
Arbitrator. However, as Shri N.B.Desai, Chartered Accountant of the
partnership firm is taking remuneration from the partnership firm
and in-fact, has audited the books of accounts of the partnership
firm, he would have the pecuniary and other bias and therefore, he
cannot be accepted as sole Arbitrator to adjudicate the dispute. It
is submitted by Shri Asim Pandya, learned advocate appearing on
behalf of the petitioner that said Shri N.B.Desai, Chartered
Accountant, who has audited the books of accounts, is required to be
and can be cross-examined by the petitioner. It is, therefore,
submitted by Shri Asim Pandya,learned advocate appearing on behalf
of the petitioner that as the respondents have appointed the sole
Arbitrator, meaning thereby, there is a dispute which is required to
be referred to Arbitration and therefore, it is requested to allow
the present applications and to appoint the sole Arbitrator to
adjudicate the disputes between the parties, more particularly,
settlement of account of respective partnership firm.
All
these petitions are opposed by Shri Sujal S.Shah, learned advocate
appearing on behalf of the respective respondents. Shri Shah,
learned advocate appearing on behalf of the respective respondents
has submitted that as such, the claim of the petitioner is too vague
and there is no mention of an entry which is disputed by the
petitioner in the books of accounts. Therefore, it is submitted that
for such a vague claim, the matter is not required to be referred to
Arbitration. Therefore, it is submitted that as such, there is no
live claim and/or claim at all, which is required to be referred to
Arbitration. It is submitted that in absence of any particular entry
in the books of accounts the petitioner is disputed, this Court
would not be in position to give finding with respect to live claim
or the claim which is required to be referred to Arbitration. It is
submitted that in view of the decision of the Hon’ble Supreme Court
in the case of Shree Ram Mills Ltd. V/s. Utility Premises (P)
Ltd. reported in (2007) 4 SCC 599 for such a vague claim
that the dispute is not required to be referred to Arbitration. Shri
Shah, learned advocate appearing on behalf of the respective
respondents has heavily relied upon paragraph No.24 of the aforesaid
decision.
On
the point of the appointment of Shri N.B.Desai, Chartered Accountant
as the sole Arbitrator to adjudicate the dispute between the parties
and the contention on behalf of the petitioner that the respondents
have admitted that there is a dispute which is required to be
referred to Arbitration, Shri Shah, learned advocate appearing on
behalf of the respondents has relied upon the decision of the
Hon’ble Supreme Court in the case of Ram Bharose Sharma V/s. Mahant
Ram Swaroop and Others reported in (2001) 9 SCC 471 (paragraph
No.18), and submitted that any admission on the question of law
would not be binding to the respondents. It is submitted that the
existence of dispute is a mixed question of law and fact and
therefore, such an attempt which is contrary to the law is not
binding upon the respondents. It is further submitted that even such
an attempt can be said to be an attempt with respect to existing
dispute. By making above submissions, it is requested to dismiss the
present petitions.
Heard
the learned advocates appearing on behalf of the respective parties
at length.
At
the outset, it is required to be noted that dispute between the
petitioner and the concerned respondents is with respect to
settlement of accounts of the respective partnership firm. It is
also required to be noted that even as per the Arbitration clause in
the partnership deed of the respective partnership firms, all
disputes and questions whatsoever which shall arise during the
continuance of the partnership or thereafter between the partners or
their legal representatives concerning this indenture or the
construction or application there of or of any clause of thing
contained therein or any account, valuation, division of assets,
debts and liabilities of the firm or any other matter in any way
relating to the partnership or the affairs of the partnership or the
rights and duties or liabilities of any person hereunder shall be
referred to a single arbitrator if the parties agree upon one or if
not two arbitrators one to be appointed by each of the parties to
the dispute or difference in accordance with and subject to the
provisions of the Indian Arbitration Act, 1940 or any other
subsisting statutory modification thereof or substituted enactment
thereof. It is to be noted that after the joint meeting when the
parties could not settle the dispute, and when the petitioner
invoked the Arbitration Clause by appointing an Arbitrator,
respondents appointed Shri N.B.Desai, Chartered Accountant to the
sole Arbitrator. However, for the reasons stated, said Shri
N.B.Desai, who is the Chartered Accountant of the partnership firm
and is getting remuneration from the respective partnership firm, he
himself has audited the books of account of respective partnership
firm, he would have a pecuniary and other bias, the same was not
accepted by the petitioner. Therefore, the existence of the dispute
between the parties, which is required to be referred to Arbitration
is not disputed by the respondents otherwise they would not have
appointed Shri N.B.Desai, Chartered Accountant as sole Arbitrator.
In view of the above, now it is not open for the respondents to
contend that there is no dispute and/or the claim is too vague and
therefore, the dispute is not required to be referred to
Arbitration. The existence of dispute is the question of fact and
cannot be considered as question of law. In view of the above,
decision of the Hon’ble Supreme Court in the case of Ram Bharose
Sharma (supra) (2001) 9 SCC 471 shall not be of any assistance
to the respondents. The facts before the Hon’ble Supreme Court were
all together different. In the present case, by appointing the sole
Arbitrator, the thing which is admitted by the respondents is the
existence of dispute which is required to be referred to Arbitrator.
Respondents cannot now be permitted to say that dispute is not
required to be referred to Arbitration at all.
Now
so far as the reliance placed upon the decision of the Hon’ble
Supreme Court in the case of Shree Ram Mills Ltd. V/s. Utility
Premises (P) Ltd. reported in
(2007) 4 SCC 599 is concerned, as such, entire paragraph
No.27 is required to be considered as a whole. Paragraph No.27 of
the said decision is as under:
27. We shall take
up the last contention raised by the appellant regarding the scope of
the order passed by the Chief Justice or his Designate Judge. It was
contended that since the Designate Judge has already given findings
regarding the existence of live claim as also the limitation, it
would be for this Court to test the correctness of the findings. As
against this it was argued by the respondent that such issues
regarding the live claim as also the limitation are decided by the
Chief Justice or his Designate not finally but for the purpose of
making appointment of the Arbitrators under Section 11(6) of the Act.
In our opinion what the Chief Justice or his Designate does is to put
the arbitration proceedings in motion by appointing an Arbitrator and
it is for that purpose that the finding is given in respect of the
existence of the arbitration clause, the territorial jurisdiction,
live issue and the limitation. It cannot be disputed that unless
there is a finding given on these issues, there would be no question
of proceeding with the arbitration. Shri Salve as well as Shri
Venugopal invited our attention to the observations made in para 39
in SBP & CO. vs. Patel Engineering Ltd. & Anr. which are as
under (SCC pp.660-61).
” 39. It is
necessary to define what exactly the Chief Justice, approached with
an application under Section 11 of the Act, is to decide at that
stage. Obviously, he has to decide his own jurisdiction in the sense
whether the party making the motion has approached the right High
Court. He has to decide whether there is an arbitration agreement,
as defined in the Act and whether the person who has made the request
before him, is a party to such an agreement. It is necessary to
indicate that he can also decide the question whether the claim was a
dead one; or a long-barred claim that was sought to be resurrected
and whether the parties have concluded the transaction by recording
satisfaction of their mutual rights and obligations or by receiving
the final payment without objection. It may not be possible at that
stage, to decide whether a live claim made, is one which comes within
the purview of the arbitration clause. It will be appropriate to
leave that question to be decided by the Arbitral Tribunal on taking
evidence, along with the merits of the claims involved in the
arbitration. The Chief Justice has to decide whether the applicant
has satisfied the conditions for appointing an arbitrator under
Section 11(6) of the Act. For the purpose of taking a decision on
these aspects, the Chief Justice can either proceed or get such
evidence recorded, as may be necessary. We think that adoption of
this procedure in the context of the Act would best serve the purpose
sought to be achieved by the Act of expediting the process of
arbitration, without too many approaches to the court at various
stages of the proceedings before the Arbitral Tribunal.”
A glance on this
para would suggest the scope of order under Section 11 to be passed
by the Chief Justice or his Designate. In so far as the issues
regarding territorial jurisdiction and the existence of the
arbitration agreement are concerned, the Chief Justice or his
Designate has to decide those issues because otherwise the
arbitration can never proceed. Thus the Chief Justice has to decide
about the territorial jurisdiction and also whether there exists an
arbitration agreement between the parties and whether such party has
approached the court for appointment of the Arbitrator. The Chief
Justice has to examine as to whether the claim is a dead one or in
the sense whether the parties have already concluded the transaction
and have recorded satisfaction of their mutual rights and obligations
or whether the parties concerned have recorded their satisfaction
regarding the financial claims. In examining this if the
parties have
recorded their satisfaction regarding the financial claims, there
will be no question of any issue remaining. It is in this sense that
the Chief Justice has to examine as to whether their remains anything
to be decided between the parties in respect of the agreement and
whether the parties are still at issue on any such matter. If the
Chief Justice does not, in the strict sense, decide the issue, in
that event it is for him to locate such issue and record his
satisfaction that such issue exists between the parties. It is only
in that sense that the finding on a live issue is given. Even at the
cost of repetition we must state that it is only for the purpose of
finding out whether the arbitral procedure has to be started that the
Chief Justice has to record satisfaction that their remains a live
issue in between the parties. The same thing is about the limitation
which is always a mixed question of law and fact. The Chief Justice
only has to record his satisfaction that prima facie the issue has
not become dead by the lapse of time or that any party to the
agreement has not slept over its rights beyond the time permitted by
law to agitate those issues covered by the agreement. It is for this
reason that it was pointed out in the above para that it would be
appropriate sometimes to leave the question regarding the live claim
to be decided by the Arbitral Tribunal. All that he has to do is to
record his satisfaction that the parties have not closed their rights
and the matter has not been barred by limitation. Thus, where the
Chief Justice comes to a finding that there exists a live issue, then
naturally this finding would include a finding that the respective
claims of the parties have not become barred by limitation.
In
view of the above, and particularly, the appointment of Shri
N.B.Desai, Chartered Accountant, as the sole Arbitrator by the
respondents meaning thereby, there exist dispute which is required
to be referred to Arbitration and even otherwise, the dispute with
respect to settlement of accounts of respective partnership firm is
required to be referred to Arbitration. In view of the respective
Arbitration clause in the partnership deed of the respective
partnership firms, the dispute is required to be referred to
Arbitration and for which, the Arbitrator is to be appointed as
there is no consensus between the petitioner and the respondent with
respect to appointment of Arbitrator. As such, petitioner is
justified in not accepting the appointment of Shri N.B.Desai,
Chartered Accountant as sole Arbitrator to adjudicate the dispute
between the parties as the said Shri N.B.Desai, who is the Chartered
Accountant of the respective firm and he himself has audited the
books of accounts of the respective partnership firm and is getting
remuneration from the partnership firms and therefore, he would have
pecuniary and other bias.
In
view of the above and for the reasons stated above, all these
petitions are allowed and disputes between the petitioner and the
respective respondents are referred to the Arbitration and
accordingly Hon’ble Mr.Justice C.K.Buch, (Retired), residing at 20
– Judges Bungalow, Nr. Lad Society, Premchand Nagar Road, Vastrapur,
Ahmedabad: 380 054 is hereby appointed as sole Arbitrator to
adjudicate and decide the dispute between the petitioner and the
respective respondents, more particularly, with respect to the
settlement of account of the respective respondent No.1
partnership firm. The name of the sole Arbitrator is opposed by the
learned advocates appearing on behalf of the respective parties. It
is hoped and expected that the sole Arbitrator appointed to
adjudicate and decide and dispute between the parties will declare
the award within a period of 1 (one) year from today and all
concerned are directed to cooperate with the sole Arbitrator in
adjudication and deciding the dispute between the parties and
Arbitrator shall declare the award within the stipulated time stated
herein above.
All
these petitions are accordingly allowed. No costs.
(M.R.SHAH,
J.)
(ashish)
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