Unregistered partnership firms can be referred to arbitration, there is no contrary statutory provision. Mere non filing of deed not make arbitration application liable to dismiss–Supreme Court
ABCAUS Case Law Citation:
1055 (2016) (11) SC
Important Case under consideration:
Atul Singh & Othes Vs. Sunil Kumar Singh & Others 2008 (2) SCC 602
Bharat Sewa Sansthan Vs. U.P.Electronics Corporation Ltd. 2007 (7) SCC 737
Hindusthan Commercial Bank Ltd. Vs. Punnu Sahu 1971 (3) SCC 124
Martin and Harris Ltd. Vs. VIth Additional District Judge and others 1998 (1) SCC 732
Brief Facts of the Case:
A partnership firm was constituted by six sons after the demise of the father who had started a business for manufacture and sales of ‘Beedi’.With the passage of time, all the six partners died and the firm was re-constituted from time to time to include sons and/or legal representatives of the demised sons as partners.
Subsequently, the dispute arose among the existing stakeholders of the firm and a suit was filed by three Plaintiffs (appellants) against six defendants praying for restraining the defendants or anyone claiming through them for transferring or alienating the property of the firm. The Defendant also invoked section 8(1) of Arbitration and Conciliation Act, 1996 (Act) seeking order referring the parties to the arbitration. Accordingly the District Judge referred the suit to the Arbitration to settle their disputes and differences, in view of the Arbitration Agreement.
Contentions of the Appellant:
(i) The application praying for referring arbitration was not accompanied by the original retirement deed.
(ii) All the parties to the suit were not parties to the arbitration agreement
(iii) The firm being an unregistered firm, no reference to the arbitration can be made with regard to the dispute relating to unregistered firm.
Questions framed by the Apex Court:
(i) Whether non-filing of either original or certified copy of retirement deed and partnership deed along with application entailed dismissal of the application as per section 8(2) of 1996 Act.
(ii) Whether the fact that all the parties to the suit being not parties to the retirement deed/ partnership deed, the Court was not entitled to make the reference relying on arbitration agreement.
(iii) Whether dispute pertaining to unregistered partnership deed cannot be referred to an arbitration despite there being arbitration agreement in the deed of retirement/partnership deed.
Observations made by the Supreme Court:
The Court observed that it was only after filing of original deeds that the District Judge proceeded to decide the application. Section 8(2) has to be interpreted to mean that the court shall not consider any application filed by the party under Section 8(1) unless it is accompanied by original arbitration agreement or duly certified copy thereof. The filing of the application without such original or certified copy, but bringing original arbitration agreement on record at the time when the Court was considering the application shall not entail rejection of the application under Section 8(2).
The Supreme Court noted that as per the findings returned by the Trial Court, only one defendant was not party to the retirement deed or partnership deed. The Court opined that merely because one of the defendants was not party to the arbitration agreement, the dispute between the parties which essentially relates to the benefits arising out of Retirement Deed and Partnership deed could not be referred. It was also observed that the District Judge had noted that the lone defendant in question had not inherited any share either in Partnership deed or in the schedule property and hence there was no question of bifurcation of either cause of action or parties.
The Apex Court observed that there was no dispute between the parties that both Retirement deed and Partnership deed contained an arbitration clause. In Retirement deed which had been signed by retiring partners, continuing partners and concurring partners.
According to the Court, when the partners and those who claimed through partners agreed to get the dispute settled by arbitration, it was not open for the appellants to contend that partnership being unregistered partnership, the dispute could not be referred.
Furthermore, the petitioners were not able to show any statutory provision either in 1996 Act or in any other statute from which it could be said that dispute concerning unregistered partnership deed cannot be referred to arbitration.
Held:
The appeal was dismissed
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