ORDER
1. The instant application has been made by Mustt. Musarrat Jahan under Section 20 of the Arbitration Act, inter alia, praying that the Arbitration Agreement contained in the Deed of Partnership dated March 14, 1990 be filed in this Hon’ble Court, and for further and other consequential orders. The respondent is Swapan Kumar
Poddar. It is not disputed between the parties that there was a Partnership Deed as between the parties dated March 14, 1990. The said Partnership Deed also contained an Arbitration Clause which, inter alia, provided that any dispute between the partners shall be referred to the Arbitration of a common find or acquaintance for her/his decision and the decision of the Arbitrator shall be binding in all matters. The disputes which are sought to be referred to arbitration are specified in paragraph 27 of the Petition which are as follows:–
“(a) Is the partnership firm of M/s. Indian Beauty liable to be dissolved by virtue of the notice dated February 5, 1992 given by your petitioner to the respondent?
(b) Is the partnership firm of M/s. Indian Beauty, in the facts and circumstances of the case, liable to be dissolved by this Hon’ble Court at just and equitable ground and that the business of the said firm cannot be carried on, save at a loss?
(c) Has the respondent started a new partnership business under the name and style of M/s. Indian Beauty Inc. by using and utilising the assets, customers and goodwill of the partnership firm of M/s. Indian Beauty?
(d) Are the funds, assets and goodwill of the new partnership firm of M/s. Indian Beauty Inc. part and parcel of the funds, assets and goodwill of the partnership firm of M/s. Indian Beauty?
(e) Is your petitioner entitled to a sum of Rs. 50,00,000/- on account of her share of profit in the partnership firm of M/s. Indian Beauty till the date of dissolution?
(f) Is the respondent liable and accountable to your petitioner on account of her share of profit in the said partnership firm of M/s. Indian Beauty for the months of March 1990 till February 1992 @ Rs. 1,00,000/- per month?
(g) Is the respondent liable and accountable to your petitioner for a sum of Rs. 1,00,000/ -for doing business with M / s. Juscha Jochter -Recke Brandt GMbH up to February 1992 by
syphoning away the customers of the partnership firm of M/s. Indian Beauty?
(h) What amount or amounts is your petitioner entitled to receive from the respondent on account of her 50% share of profit in the said partnership firm as also its goodwill and assets?
(i) Has the respondent committed breaches of terms and conditions of the Partnership Deed dated March 14, 1990 and is the respondent liable to render true and faithful accounts to your petitioner in respect of his business?
(j) Is your petitioner entitled to claim interest@ 18% per annum on her outstanding dues and is the respondent liable to pay the same?”
2. Mr. Jayanta Mitter, the learned counsel appearing for the respondent submitted that the firm was not registered and as such Section 69 of the Partnership Act operates as a bar to the instant application. However, Section 63(3)(a) clearly provides that the bar created under sub-sections(1) and (2) of Section 69 shall not affect the enforcement of any right to sue for the dissolution of a firm/or for account of a dissolved firm or any right or power to realise a property of a dissolved firm. I am unable to accept the submissions made on behalf of the respondent that the application is barred by the provisions of Section 69 of the Indian Partnership Act.
3. The other contention of Mr. Mitter was that there are serious allegations and counter allegations made by the parties against each other and this Court in the facts and circumstances of this case should hold that sufficient cause has been shown by his client, for not directing filing of the Arbitration Agreement as provided under Section 20(4) of the Arbitration Act. The petitioner made allegations in the petition against the respondent that the respondent siphoned away the assets and goodwill of the firm of M/s. Indian Beauty. The petitioner also stated that the respondent misappropriated and misapplied the funds and assets and important documents and papers of
M/s. Indian Beauty to abolish and/or ruin the instant Partnership Firm to achieve his evil desire and for personal gain and benefit, The petitioner also stated that the said Partnership Firm of M/s. Indian Beauty was never dissolved by any document.
4. The respondent in his Affidavit-in-Opposition, inter alia, annexed a copy of the letter dated April 30, 1991 purported to have been written by the petitioner to the respondent which purports to be a Notice of Retirement by the petitioner by and of July, 1991. The said letter purports to contain an allegation that the petitioner may resign after receiving the capital which the petitioner invested. The respondent relies on another document alleged to be signed by the petitioner dated July 31, 1991 by which the petitioner is alleged to have made a statement that she has retired and relinquished all rights and interests in the firm M/s. Indian Beauty, in favour of the respondent Swapan Kumar Poddar who shall be entitled to continue with the said business of the firm in any manner as he may choose. By the said letter she is also alleged to have made a statement that the petitioner confirmed that she has received in time her capital which was invested and that she has no claim or liability about the profit and loss of the said firm M/s. Indian Beauty. Xerox copies of these documents are annexed to the Affidavit-in-Opposition and they are alleged to have been signed by the petitioner.
5. The petitioner in her reply has, inter alia, alleged as follows:–
“The respondent has manufactured and fabricated documents dated the 31-4-1991 and 31-7-1991 to deprive me of my lawful and legitimate share. The said documents and each one of them have been invented and created for the purpose of the suit and I want to take appropriate proceedings against the respondent for fabricating such documents by way of sanction of prosecution. The said letters dated 31-4-1991 and 31-7-1991 and the undated letter were never signed or initiated by me. The respondent did not in reply to my Advocate’s letter dated the 5th February, 1992 ever alleged that I have voluntarily retired from the partnership firm by taking
my share of profit therefrom. It is denied by the filing this special suit under Section 20 of the Arbitration Act and application under Section 41 thereunder, I have abused the process of this Hon’ble Court or made a mockery of the hallowed judicial system as alleged. I shall take appropriate action against the respondent for using defamatory libellous languages, wherein the respondent has alleged ‘there may be many number of innocent persons whom the petitioner may have cheated and fooled and thereafter trapped or attempt to do so by the dubious, means that he has made in the present petition’.”
“The alleged documents do not bear my signature. None of the alleged documents bear my full signature on which I used to sign documents. It is denied that I received the capital which was invested by me in the said partnership firm as alleged. I call upon the respondent to produce the original of the purported documents before this Hon’ble Court so that the same could be examined by forensic and handwriting expert. The respondent to deprive me of my lawful and legitimate share in the partnership firm has manufactured and/or fabricated the said documents. I seek leave of this Hon’ble Court to have the alleged signatures of mine tested and/or examined and to take appropriate steps against the respondent for manufacturing and fabricating the said documents.”
6. Respondent relied on the judgment of the Supreme Court (Abdul Kadir Shamsuddin Bubere v. Madhav Prabhakar Oak). The relevant portions of the said judgment as relied on by and on behalf of the respondents are as follows (at p. 410 of AIR);–
“The words of sub-section (4) of Section 20 leave a wide discretion in the Court to consider whether an order for filing the agreement should be made and a reference made accordingly. It is not desirable to lay down in general terms what would be sufficient cause which would entitle a Court to refuse to order the agreement to be filed and thus refuse to make an order of reference. The Court will have to decide on the facts of each
case whether sufficient cause has been made out for not ordering the agreement to be filed and not making the order of reference.”
“Where serious allegations of fraud are made against a party and the party who is charged with fraud desires that the matter should be tried in open court, that would be a sufficient cause for the Court not to order an arbitration agreement to be filed and not to make the reference. But it is not every allegation imputing some kind of dishonesty, particularly in matters of accounts, which would be enough to dispose a Court to take the matter out of the forum which the parties themselves have chosen. Merely because some allegations have been made that accounts are not correct or that certain items are exaggerated and so on that is not enough to induce the Court to refuse to make a reference to arbitration. It is only in cases of allegations of fraud of a serious nature that the court will refuse to order an arbitration agreement to be filed and will not make a reference. (1880) 14 Ch D 471 and (1942) AC 130 and (1881) 44 LT 552, Rel. on.”
7. In the said case, the Supreme Court also held that the principles for refusing the stay under Section 34 of the Arbitration Act and for refusing to file an Arbitration Agreement under Section 20 are mentioned in various cases as enumerated in paragraph 16 of the said judgment of the Supreme Court.
8. The respondent also relied on the judgment (Cannon Dunkerley & Co. v. Union Carbide (India) Ltd.) By the said judgment, this Court held as follows (at p. 367 of AIR):
“In my judgment the party opposing an application under Section 20 is entitled to show other causes why no order should be made and the Court is empowered to refuse the application upholding the objection. In an application for stay of a suit under Section 34 of the Act, the Court is empowered to pass a stay order “if satisfied that there is no sufficient reason why the matter should not be referred in accordance with the arbitration agreement.” It has been held in numerous decisions that the Court had full jurisdiction
to refuse to stay the suit and thereby to prevent arbitration, even if it is satisfied that there is an effective arbitration agreement and disputes between the parties are covered by the arbitration agreement. If, for instance, the dispute between the parties involve difficult questions of law or an investigation of a charge of fraud, the Court will not grant a stay of the suit, even if it is satisfied that there is an arbitration agreement and the disputes between the parties are covered by the arbitration agreement. In my judgment, the court has the same discretion under Section 20 and has jurisdiction to refuse an application for filing an agreement and directing a reference in such cases in which the court has power to refuse stay under Section 34. So also in cases in which the Court is, for one reason or other, powerless to appoint an arbitrator, the Court has jurisdiction to refuse an order of filing the agreement.”
9. The next case relied on behalf of the respondent is a judgment of Sabyasachi Mukharji, J., as his Lordship then was, (General Enterprises v. Jardine Handerson Ltd.) In the said judgment it was held as follows (at p. 418 of AIR):–
“In my opinion the fact that there are allegations of fraud is a factor which the Court should take into consideration in considering the exercise of discretion.’ The nature and type of the allegations are also relevant factors. If a party charged with fraud wants public trial stay should, subject to the above factors, be always refused. But even if the party charged with fraud does not want public trial but the party charging the fraud so wants there in appropriate cases the Court should refuse to grant stay. In my opinion this is such an appropriate case.”
10. The learned counsel for the petitioner relied on a judgment of the Division Bench of this Court (West Bengal Comprehensive Area Development Corporation v. Sasanka Sekhar Banerjee). In the said case the Division Bench held that mere allegadon of fraud unconnected with the real point at issue will not operate as a bar to the stay of the legal
proceeding. It was held that the most vital question for consideration in such matters would be whether in deciding the real dispute between the parties it would be necessary for the arbitrator to enter into the allegations of involving the reputation of a professional man. If it is necessary for the arbitrator to enter into such question for determining the real point at issue between the parties, the Court will be reluctant to allow the matter to go to arbitration and a public trial would be more appropriate. The facts of the case show that the allegations made were not required to be gone into by the arbitrator at all.
11. The next case relied on behalf of the petitioner is the Division Bench judgment of this Court (Pragati Engineering (P) Ltd. v. Tamil Nadu Water Supply & Drainage Board). In that case also, the Court was of the view that there was hardly any scope in deciding the disputes between the parties or the arbitrator to go into any question of fraud. The Court held that in deciding such disputes, the arbitrator need not have to go to the question of fraud merely because other party had made certain allegation of cheating or misappropriation against the safety that is set out in the Arbitration Clause.
12. So far as the instant case is concerned, the principal defence of the respondent is based on the three documents which are annexed to the Affidavit-in-Opposition and referred to above. One is the document dated 31st April, 1991, other is the document dated 31st July, 1991 and the third one is anundated letter purported to have been written in reply to the letter of the petitioner dated 31st April, 1991 and purporting to bear a signature of the petitioner acknowledging receipt thereof. If the said three documents are held to be genuine documents as alleged by the respondent, the same will virtually amount to a complete defence to the claims of the petitioner whereas if the said documents are held to be a forgery or as fabricated documents then the main defence of the respondent will fall and further questions as to accounts etc. for dissolution of the firm may have to be gone into. The statements and/ or admissions
which arc said to have been made in the said
documents, relied on by the respondents are
essential part of the defence of the respondent
and the genuineness and/or validity of the
said documents will be directly and substantially in issue before the arbitrator. The
petitioner has in its affidavit alleged that the
said documents are forgeries and are fabricated documents, the petitioner has also
expressed that they are manufactured documents and has even expressed the desire to
prosecute the respondent under the Criminal
Law.
13. In my opinion, this is a fit case where this Court should hold that a sufficient cause has been made out by the respondent for refusing to file the arbitration agreement.
14. The next point submitted on behalf of the respondent was that the disputes sought to be referred to arbitration clearly involve third parties and/or the rights of third parties namely the partners of the other firm under the name and style of Indian Beauty Inc. Are the partners of Indian Beauty Inc., the benamidars of the respondent or is the respondent all in all of the said firm of Indian Beauty Inc., are issues which cannot be decided in absence of the partners of the said firm of Indian Beauty Inc. The disputes which are sought to be raised and which are of necessity involved require a decision with regard to the rights of the partners of the firm of Indian Beauty Inc. Such questions or issues cannot be decided in the absence of the partners of the firm of Indian Beauty Inc. Furthermore, the said partners of the firm of Indian Beauty Inc. are not signatories to any arbitration agreement with the petitioner. The petitioner in the petition itself annexed a copy of the partnership deed of the said firm of Indian Beauty Inc. Even according to the petitioner the apparent partners are Mira Poddar and Panchanan Haldar. The said Mira Poddar is the wife of Swapan Kumar Poddar. However, if any rights of said Mira Poddar or Panchanan Haldar are to be affected they cannot be so affected in their absence or without making them a party and apparently they were not parties to any arbitration agreement. This also in my
opinion amounts a sufficient cause for not referring the alleged disputes to arbitration and to refuse the filing of the arbitration agreement.
15. One of the disputes sought to be raised is whether the partnership is liable to be dissolved under Section 44 of the Indian Partnership Act on the ground that it is just and equitable to dissolve the said partnership. That is a power which is given to Court and the Court normally is inclined to exercise its discretion against referring such question to the arbitrator. The respondent relied on the judgment (Ganesh Chandra Dey v. Kamal Kumar Agarwalla), In the said case, this Court held that in a suit for dissolution of partnership on the ground that it is just and equitable under Section 44F and G of the Partnership Act, the dispute relating to dissolution should be decided by the Court. It was held that the Court should exercise its discretion in not staying the suit in spite of arbitration clause.
16. On the grounds as aforesaid, I am of the view that this is a case where sufficient grounds have been made out for not passing any order for filing of the arbitration agreement. The petitioner, however, will be at liberty to take such legal proceedings in the nature of filing suit or otherwise as the petitioner may be advised and also for deciding anything with regard to the genuineness or otherwise of the alleged documents sought to be relied on by the respondent.
17. This application is, therefore, dismissed, I make no order as to costs.
18. So far as the application under Section 41 made by the petitioner is concerned, the same is liable to be and is hereby dismissed, in view of my judgment and order of date in the application under Section 20 of the Arbitration Act, all interim orders made in Section 41 application are vacated.
19. There will be no order as to costs.
20. Application dismissed.
