Partnership; Columbia Holdings Vs. SSP Developers [Delhi High Court, 11-08-2016]

Contents

Arbitration and Conciliation Act, 1996 – Section 11 – Partnership Act, 1932 – Section 69 (3) – Effect of non-registration – dissolution of partnership firm – Appointment of Arbitrators – It is only because there is an arbitration agreement between the parties, instead of filing a Suit for rendition of accounts and dissolution under Section 69(3) (a), a petition under Section 11 has been moved for appointment of an arbitration and under Section 9 for interim measures. The petitions under Section 9 and Section 11 (6) are liable to be tried on their merits as the bar under Section 69 (3) of the Partnership Act is not attracted in the present case.


IN THE HIGH COURT OF DELHI AT NEW DELHI

CORAM: HON’BLE MR. JUSTICE V.KAMESWAR RAO

Judgment delivered on August 11, 2016

+ ARB.P. 212/2016, IAs 6012-6013/2016 COLUMBIA HOLDINGS PRIVATE LIMITED ….. Petitioner Through: Mr. Harish Malhotra, Sr. Adv. with Mr. Anil Sharma, Mr. N.S. Bajwa, Mr. Pramod Saigal, Mr. Shikhar Sareen & Mr. Jaskaran, Advs. versus SSP DEVELOPERS PVT. LTD. ….. Respondent Through: Mr. Ravi Gupta, Sr. Adv. with Mrs. Shally Bhasin, Mr. Raghav Pandey, Ms. Bhoomija Verma, Mr. Yudhishthir Singh & Mr. Lakshmeesh Kamath, Advs. for R-1 to 3 AND + ARB.P. 213/2016, IAs 6014-6015/2016 COLUMBIA HOLDINGS PRIVATE LIMITED ….. Petitioner Through: Mr. Harish Malhotra, Sr. Adv. with Mr. Anil Sharma, Mr. N.S. Bajwa, Mr. Pramod Saigal, Mr. Shikhar Sareen & Mr. Jaskaran, Advs. Versus SSP DEVELOPERS PVT. LTD. ….. Respondent Through: Mr. Ravi Gupta, Sr. Adv. with Mrs. Shally Bhasin, Mr. Raghav Pandey, Ms. Bhoomija Verma, Mr. Yudhishthir Singh & Mr. Lakshmeesh Kamath, Advs. for R-1 to 3 AND + O.M.P.(I) (COMM.) 94/2016, IAs 5957-5958/2016 M/ S COLUMBIA HOLDINGS PRIVATE LIMITED ….. Petitioner Through: Mr. Sudhir Nandrajog, Sr. Adv. with Mr. Anil Sharma, Mr. N.S. Bajwa, Mr. Pramod Saigal, Mr. Shikhar Sareen & Mr. Jaskaran, Advs. versus M/ S SSP DEVELOPERS PVT. LTD. ….. Respondent Through: Mr. Ravi Gupta, Sr. Adv. with Mrs. Shally Bhasin, Mr. Raghav Pandey, Ms. Bhoomija Verma, Mr. Yudhishthir Singh & Mr. Lakshmeesh Kamath, Advs. for R-1 to 3 AND + O.M.P.(I) (COMM.) 96/2016, IAs 5959-5960/2016 COLUMBIA HOLDINGS PRIVATE LIMITED ….. Petitioner Through: Mr. Sudhir Nandrajog, Sr. Adv. with Mr. Anil Sharma, Mr. N.S. Bajwa, Mr. Pramod Saigal, Mr. Shikhar Sareen & Mr. Jaskaran, Advs. versus SSP DEVELOPERS PVT. LTD. ….. Respondent Through: Mr. Ravi Gupta, Sr. Adv. with Mrs. Shally Bhasin, Mr. Raghav Pandey, Ms. Bhoomija Verma, Mr. Yudhishthir Singh & Mr. Lakshmeesh Kamath, Advs. for R-1 to 3.

V.KAMESWAR RAO, J.

1. By this order, I shall decide a preliminary objection taken by the respondents on the maintainability of the four petitions which have been filed by the petitioner under

# Section 11 (5) and 11 (6) of the Arbitration and Conciliation Act, 1996

(„Act of 1996‟ in short) being Arbitration Petitions No. 212/2016 and 213/2016 and Petition under Section 9 of the Act of 1996 being OMP (I) (COMM) Nos. 94/2016 and 96/2016 on the ground that the petitions are hit by

# Section 69 (3) of the Partnership Act, 1932

(„Partnership Act‟ in short).

2. The Arbitration Petition 212/2016 and OMP (I) (COMM) 96/2016, the relevant facts are, a fresh partnership deed dated April 1, 2005 was signed between MGF Development Ltd. and Columbia Holdings Pvt. Ltd in the partnership firm of MGF Mall Management to share the profits and losses as under:-

M/s MGF Development Ltd- 50%

M/s Columbia Holdings Pvt. Ltd.- 50%

Thereafter, on 6th June, 2012 M/s SSP Developers Pvt Ltd. respondent No.1 through its Director Mr. Siddharth Gupta was introduced in the partnership firm and the profits and losses under new partnership were agreed to be shared as under with effect from October 1, 2009.

M/s MGF Development Ltd- 25%

M/s Columbia Holdings Pvt. Ltd.- 50%

M/s SSP Developers Pvt. Ltd.- 25%

Similar is the position in Arbitration Petition No.213/2016 and OMP (I) (COMM) No.94/2016. In the said cases, the partnership firm is MGF Event Management.

3. It is the case of the petitioner that, the petitioner sought disbursal of profits and the amount lying in the capital account vide legal notice dated 31st March, 2015 to the respondents. It is stated by the petitioner, a reply dated 14th April, 2015 was sent by the respondents through their lawyer. A counter-reply dated 28th April, 2015 was sent by the petitioner to the aforesaid reply of the respondents. A further counter-reply was given by the respondents dated 14th May, 2015 which also resulted in a further reply on behalf of the petitioner dated 2nd June, 2015. It is the case of the petitioner that the petitioner through its advocate got issued legal notice dated 26th October, 2015 called upon the respondents to make a reference to the disputes arising out of and in relation to the business of the partnership firm M/s MGF Event Management through anyone of the suggested persons named in the said notice. Identical are the facts in Arbitration Petition No.212/2016 and OMP (I) (COMM) No.96/2016. The firm being MGF Mall Management.

Submissions:-

4. Mr. Ravi Gupta, learned Sr. Counsel for the respondents would submit the following facts needs to be considered for appreciating the aforesaid issue:

31st March, 2015 – Notice given by the petitioner seeking rendition of accounts and return of his capital.

14th April, 2015 – Reply given by the petitioner inter alia denying the contention of the petitioner in the aforesaid notice.

28th April, 2015 – A rejoinder notice given by the petitioner inter alia reiterating its earlier stand.

14th May, 2015 – The facts again denied by the respondents.

2nd June, 2015 – Another notice issued by the petitioner.

26th October, 2015 – Again a notice issued by the petitioner inter alia seeking appointment of an Arbitrator.

5. It is his submission that the aforesaid correspondence/notices exchanged show that the petitioner has throughout been asking for rendition of accounts, its share of profits and return of its capital. The firm has never been dissolved nor any intention to dissolve the firm has ever been made. The petitioner cannot now claim that they were praying for the dissolution of the partnership firm. Such a contention is misconceived and merely an afterthought. Reference is made to

# Iqbalnath Premnath Anand Vs. Rameshwarnath Premnath Anand & Anr., AIR 1976 Bom 405

wherein the Supreme Court held :

“The partnership being at will ….. “was sufficient to disclose to the court the intention of the parties that the partnership constituted by the deed of 4th December, 1967 was a partnership at will within the meaning of the Act and that in view of such an express declaration by the parties there would be no question of a contrary implication.”

6. The present petitions under Sections 9 and 11 of the Act of 1996 having been filed in the month of March, 2016, i.e., after nearly a year of the first notice of 31st March, 2015 also do not whisper of any dissolution of the firm. It is evident that the petitioner was never interested in dissolution of the firm and has never intended to do so. If the relationship between the parties was so bitter, the petitioner ought to seek the relief of dissolution in the present proceedings. However, its intention is not to dissolve the firm but to see that the firm in question continues with its business. The present claim of the petitioner is to retire from the business and not to dissolve the same. This fact is evident from the bare reading of the petitions whereby the petitioner has specifically averred that he wants to retire from the firm after taking its capital account. Thus, it isnobody‟s case that the firm should dissolve. Reference is made to various averments made in the petitions and more specifically Paragraph No. 7.36 of Arb. Pet. No. 212 of 2016 and 7.37 of Arb. Pet. No. 213 of 2016 under Section 11 of the Act and Paragraph No. 7.41 of OMP (I) (COMM) No. 94/2016 and 7.44 of OMP (I) (COMM) No. 96/2016 under Section 9 of the Act, whereby the petitioner has pleaded cause of action of December, 2014 when it desired to retire from the partnership firm. Thus, in the present facts and circumstances, it is not a case of dissolution of partnership firm and hence all the petitions under Section 9 and 11 are hit by Section 69 (3) of the Partnership Act. The proviso of Section 69 (3) of the Act is of no help to the petitioner.

7. The case of the petitioner that the averments made in the petition and the grievances as raised by them would cover and impliedly include the relief of dissolution of firm is misconceived for the reasons:

(i) Clause 9 of the partnership deed dated 6th June, 2012 reads as under:

“(9) That the firm shall not dissolve by the death, insolvency or retirement of any of the partners and will continue as a going concern as per remaining partners, as they may agree.”

(ii) The facts as pleaded and placed on record would show that none of the parties have ever intended to dissolve the firm.

(iii) Petitioner itself is not interested in dissolving the firm; rather it wants to retire from the firm inter alia leaving the business of the firm in the hands of the other two partners.

(iv) Petitioner is only interested in its profit share, return of capital if any.

8. Mr. Ravi Gupta, learned Sr. Counsel for the respondents would submit that the judgments relied upon by the petitioner are not applicable to the facts of the present case for the reason that either in the facts of the said judgments respective firms already stands dissolved either by the act of the party or by the death of any of the partner. The present case being of a retirement of the partner from the firm, the principles of dissolution of the firm cannot be applied to the same. He would submit that the contention of the petitioners to the effect that retirement of a partner from a partnership firm amounts to the dissolution of the firm in question is erroneous for the following reasons:

(i) The law of partnership draws a distinction between retirement of a partner and dissolution of a firm as dissolution of partnership between all the partners. These terms are not synonymous either in their judicial content or their legal implications and consequences.

They are treated separately by the law of partnership: one is dealt with in Section 32 while the other is dealt with in Chapter VI commencing with Section 39.

(ii) Partnership is the jural relationship between partners who are collectively called a firm and when this jural relation is snapped between all the partners inter se, that constitutes dissolution of the firm. But as in the present petitions, there may be cases where a partner may wish to withdraw from the firm without affecting the jural relation subsisting between the other partners. He may wish to sever his relation as a partner with the other partners leaving the jural relation to the other partners inter se unaffected. He can do so in the cases set out in Section 32 and when he does so, he is to retire from the firm, thus leaving the said partnership firm to continue and be run by the other remaining partners. When a partner retires from a firm there is no dissolution of partnership between all the partners; there is no severance of the jural relationship of partnership inter se between all the partners; the only alternation of jural relationship which takes place is that the jural relation of the retiring partner with the other partners is severed but the jural relation of partnership subsisting between the other partners remains unaffected andcontinues.

9. The petitioner has erroneously contended that retirement from a partnership is covered under the definition of „dissolution‟ of the firm. Section 39 of the Partnership Act defines „dissolution‟ of a firm as under:

“39. The dissolution of partnership between all the partners of a firm is called the „dissolution of the firm.”

Therefore, the dissolution involves the end of the partnership between “all” the partners. Retirement of a partner from a partnership in which there are more than 2 partners cannot amount to dissolution of a firm. Reference is made to Para 9 of

# Pamuru Vishnu Vinodh Reddy v. Chillakuru Chandrasekhara Reddy (2003) 3 SCC 445

and Para 5 of

# Vishnu Chandra v. Chandrika Prasad Agarwal and Ors. (1983) 1 SCC 22

10. The submission of the petitioner that it‟s right to file the present petition is coming from a statute and not from the contract is also misconceived for the reason that the provisions of Section 41, 42, 43, 45 and 46 are not applicable to the facts of the present case since the same pre-suppose and proceed with the dissolution of the firm. Unless the firm is dissolved, various duties and rights of the partners after dissolution of the firm as envisaged under the Partnership Act are not attracted. In the present case neither in the facts or in law the firm is dissolved, the firm is still operating and hence these sections are not applicable to the case. Even the averments made in the petition would show that the petitioner in the present proceedings is enforcing its rights under a contract of a Partnership Deed. Its grievance is that the respondents are allegedly acting in breach of the terms of the Partnership Deed and are acting detriment to its interest and, therefore, it is entitled to maintain the present proceedings. Hence, the petitioner by way of the present proceedings is enforcing its contractual rights which otherwise is not permissible in law and there is a specific bar to the same under Section 69 of the Partnership Act. The petitioner has relied upon

# M/s. Haldiram Bhujiawala v. M/s. Anand Kumar Deepak Kumar, JT 2000 (2) SC 596

which is not applicable in the facts of the present case as it was a suit based on infringement of statutory rights under the Trade Marks Act. In the present case, the petitioner is seeking retirement from the firm, rendition of the accounts and return of its capital, which are all rights arising out of the contract, i.e., the partnership deed.

11. The submission of the petitioner that its petition under Section 9 is maintainable at present as it may come with a petition under Section 11 in future may not be a case since Section 11 petition has already been filed by the petitioner and in the said petition too, the petitioner is not claiming any relief for dissolution of the partnership. Therefore, the submission of the petitioner is made in air or in anticipation and these petitions are to be governed by the law and the facts as of today.

12. Mr. Ravi Gupta would submit that the judgment of the Supreme Court in the case of

# Firm Ashoka Traders v. Gurumukh Das Saluja, (2004) 3 SCC 155

is not a precedent for the reason that it is just an opinion given by the Hon‟ble Court without necessity. The same was not required to be decided on merits. It is only an opinion with no binding effect. No law has been laid down by Hon‟ble Supreme Court. Reference is made to

# Balwant Rai Saluja v. Air India Ltd., (2014) 9 SCC 407

(Paras 22-26) wherein it is held that “judgment has to be considered in the context in which it was rendered and that a decision is authority for what it decides and it is not everything said therein that constitutes a precedent….In our view, the binding nature of a decision would extend to only observations on points raised and decided by the Court and not on aspects which it has neither decided nor had occasion to express its opinion upon.”

13. In Para 15 of

# Arvind Constructions Co. (P) Ltd. v. Kalinga Mining Corporation (2007) 6 SCC 798

reference made to Firm Ashoka Traders v. Gurumukh Das Saluja, the Supreme Court held that the reliance placed on Firm Ashoka Traders v. Gurumukh Das Saluja in that behalf does not help much, since this Court in that case did not answer that question finally but prima facie felt that the objection based on Section 69(3) of the Partnership Act may not stand in the way of a party to an arbitration agreement moving the Court under Section 9 of the Act. In Para 45 in

# Tapadiya Construction Ltd. v. Sanjay Suganchand Kasliwal 2015 SCC Online Bom 6781

the plea that the opinion of the Supreme Court in the case of Firm Ashoka Traders (supra) was prima facie and the view was tentatively taken, was found appealing.

14. The submission of the petitioner that the law concerning the old Arbitration Act of 1940 does not hold any good in the present proceedings is also misconceived and not sustainable. The relevance of Section 5 of the Arbitration and Conciliation Act is neither of any consequence nor of any help to the petitioner. The provisions of Section 5 does not exclude applicability of other laws and statues which may be applicable in the facts of the case like a Partnership Act which governs the rights and responsibilities of the parties in the present proceedings. The dispute between the parties is to be decided in accordance with the said Act. Section 69 and the Order 7 Rule 11 CPC clearly bars the maintainability of the present petition and hence all the petitions filed by the petitioner are liable to be rejected. The issue here is not of the locus standi of the petitioner but whether it is entitled to file and maintain the present proceedings in view of the fact that the partnership firm is not registered. The provisions of CPC are applicable to the Part I of the Arbitration and Conciliation Act and hence, the present proceedings are liable to be rejected under Order 7 Rule 11 CPC read with Section 69 (3) of the Partnership Act. Reference is made to Paras 11 and 18-21 of

# Adhunik Steels Ltd. v. Orissa Manganese and Minerals (P) Ltd, (2007) 7 SCC 125

and Paras 6 and 10-12 of

# (2002) 5 SCC 510 ITI Ltd. v. Siemens Public communications Network Ltd, (2002) 5 SCC 510

5. It is the submission of learned Sr. Counsel for the respondents that in case Section 11 petition is itself not maintainable and liable to be dismissed, then Section 9 petition cannot independently be maintained. Section 9 is in aid of Section 11 and if the main petition itself is not maintainable then the interim application too is not maintainable and no interim relief can be granted by the Court. The respondent submits that in the present case both the petitions being Section 11 as well as Section 9 are independently liable to be dismissed.

16. It is further submitted that if the present petitions under Sections 9 and 11 are dismissed as being barred under Section 69 (3) of the Partnership Act, it won‟t render the petitioner remediless as the phrase “other proceedings” does not cover reference to arbitration de hors the Court. In other words, the bar under Section 69 (3) is not attracted to arbitration proceedings without the intervention of the Court.

17. In any event, Clause 13 of the Partnership Agreement dated 6 th June, 2012 clearly stipulates that all accounts of the partnership firm would be settled on the retirement of any of the partners or dissolution of the firm, within 6 months from the said retirement or dissolution. The said clause 13 of the Partnership deed dated 6th June, 2012 is reproduced herein below for ready reference:-

“(13) That accounts will be closed / settled on the retirement / dissolution of the firm within six months as per Balance Sheet, profit and Loss of account of the firm as on that date of retirement / dissolution.”

18. It is also submitted that the bar under Section 69 of the Partnership Act applies to all court proceedings, whether it is an Arbitration proceeding or a Civil Suit. The rigours of Section 69would apply to the given facts of the case „as it is.‟ „Leaving the party with no relief‟ is no ground to maintain the petitions even when the partnership firm is unregistered; for otherwise, the provision of Section 69 of the Partnership Act would become otiose and redundant. The very purpose of the statute would be defeated if the petitions are entertained even against the principles of Section 69. Therefore, the petitioner cannot claim that it will be remediless if the present petitions are dismissed.

19. In support of his submission Mr. Ravi Gupta, learned Sr. Counsel has relied upon (i) Paras 7 and 9

# Jagdish Chandra Gupta v. Kajaria Traders (India) Ltd. (1964) 8 SCR 50

(ii) Paras 15, 22-24 and 26-28 in

# Vanita Gambhir v. District Judge, Delhi 2005 (1) Arb. L.R. 166 (Delhi) (DB)

(iii) Paras 4-8 of

# Ess Vee Traders v. Ambuja Cement Rajathan Ltd. 2006 (9) DRJ 293

(iv) Paras 3-5 of

# Delhi Development Authority v. Kocchar Construction Work (1998) 8 SCC 559

and (v) Paras 4-6 of

# M/s. Shreeram Finance Corporation v. Yasin Khan (1989) 3 SCC 476

20. On the other hand, Mr. Harish Malhotra, learned Sr. Counsel appearing for the petitioner in Arb. Petition nos. 212-213/2016 and Mr. Sudhir Nandrajog, learned Sr. Counsel appearing for the petitioner in OMP (I) (COMM) 94/2016 and 96/2016 would submit that the plea taken by the respondents that the petitions filed by the petitioner are barred by the provisions of Section 69 of the Partnership Act because of the firm being not registered is devoid of any merit and substance and is liable to be rejected. It is submitted that all the aforesaid petitions are under the provisions of the Act of 1996. In terms of Section 5 of the said Act, it has been clearly stated that notwithstanding anything contained in any other law for the time being in force, any matter governed by this part, no judicial authority shall intervene, except where so provided in this part.Section 9 which deals with the power of the Court to grant interim measures and Section 11 which deals with the powers of the Chief Justice to appoint an arbitrator and both the said sections are covered under the said part, as mentioned in Section 5. It is submitted that in the entire Act of 1996, there is no restriction on any party under the said Act from filing a Petition under Section 9or Section 11 if that party is not registered under the Partnership Act, more particularly Section 69, is not liable to be looked into. Under Section 9 of the Arbitration Act, a right has been given to a party to the arbitration to approach the Court for grant of interim measures, either before or during the pendency of the arbitral proceedings, or at any time after making of arbitral award, but before its enforcement in accordance with Section 36. This right is a statutory right granted under the Act of 1996 and is not a right arising out of any contract. Consequently, the provisions of Section 69 of the Partnership Act will not be applicable.

21. It is submitted that the Hon‟ble Supreme Court in the case titled Firm Ashoka Traders (supra) has categorically held that the right being exercised under Section 9 is not a right arising out of a contract, but a right under a statute and therefore, the bar contained under Section 69 of the Partnership Act cannot be attracted. Reference is made to Paras 11 to 14 of the said judgment. Reference is also made to the judgment of the Division Bench of this Court in the case of Vanita Gambhir (Supra) wherein it has been held that petition under Section 11 of the Act of 1996 is maintainable without there being any registration of the firm, provided it is for dissolution of the firm and settlement of accounts. Reference is also made to a judgment reported as

# Mulakh Raj vs. Shashi Rani and Anr., 2006 (1) ALR 126 (Delhi) (DB)

which clearly say that invoking arbitration and appointment of an arbitrator in terms of Section 11 of the Arbitration Act, would be an application for dissolution of the firm or having his share from the assets of the firm thus covered under the exception of Section 69 (3) of the Partnership Act.

22. Even otherwise, if the provisions of Section 69 are looked into, a bare reading of that section clearly shows that Section 69 (1) and (2) are not applicable to the facts of the present case, as the proceedings under Sections 9 and 11 are not Suits. Section 69 (3) covers the word “proceedings” but shall not affect the enforcement of any right to sue for dissolution of a firm, for accounts of a dissolved firm or the power to realize the properties of the partnership firm. A bare perusal of the aforesaid petition would show that the allegations in the petition is regarding misappropriation of funds by the other partners and breach of the partnership deed, introduction of Mr. Sidharth Gupta as a partner without the consent of the petitioner as envisaged under Section 31 under „Notes to the Accounts‟ of documents file in OMP (I) (COMM) 94/2015 and it clearly shows that there is mistrust and the petitioner is asking for dissolution of the firm and rendition of account and this is otherwise covered under Section 69(3) of the Partnership Act. It is only because there is an arbitration agreement between the parties, instead of filing a Suit for rendition of accounts and dissolution under Section 69(3) (a), a petition under Section 11 has been moved for appointment of an arbitration and under Section 9 for interim measures.

23. In support of their submissions learned Sr. Counsels for the petitioner would rely upon the following judgments:

# 1. M/s. Jayamurugan Granite Exports v. M/s. SQNY Granites and Anr. AIR 2015 Madras 266

# 2. Mahan Traders v. Amar Singh 2006 (4) Arb. L.R. 320 (DB)

# 3. M/s. Krishna Motor Service v. H.B. Vittala Kamath AIR 1996 S.C.2209

# 4. Jagat Mittar Saigal v. Kailash Chander Saigal and Anr. AIR 1983 DELHI 134

# 5. Rajinder Singh and Ors. v. Kartar Singh and Ors. 2001 (VII) AD (Delhi)

# 6. Haldiram Bhujiawala and Anr. v. M/s. Anand Kumar Deepak Kuma and Anr. JT 2000 (2) SC 596

# 7. Vanita Gambhir v. District Judge Delhi 2005 (1) ALR 166 (Delhi)

# 8. Mulakh Raj v. Shashi Rani and Anr. 2006 (2) ALR 126 (Delhi) (DB)

# 9. Firm Ashoka Traders vs. Gurumukh Das Saluja 2004 (3) SCC 155

# 10. Neeraj Khullar & Anr vs. Virender Kumar Khullar 2012 Law Suit (Del) 714.

24. While concluding, they would submit that judged from any angle whatsoever, the pleas taken by the respondents are totally misconceived and not maintainable. Thus, the petitions under Section 9 and Section 11 (6) are liable to be tried on their merits as the bar under Section 69 (3) of the Partnership Act is not attracted in the present case.

25. Having heard the learned counsel for the parties and perused the written submissions filed by them, for determining the question as noted above, it is necessary for this Court to look into the legal notices exchanged between the parties to determine whether the petitioner had only sought his retirement/ settlement of his account as a partner of a firm or the same was seeking dissolution of the partnership firm. As determination of this aspect would be relevant to determine whether the bar under Section 69 (3) of the Partnership Act would operate. Noting the position of law as relied upon by the counsel for the parties, the following position emerges:-

(i) If the request of the petitioner was for seeking of the dissolution of the firm then the bar underSection 69(3) may not operate, if not then the bar would operate;

(ii) The concept of retirement from partnership firm does not amount to dissolution of a firm as the firm continues to be in existence.

26. On perusal of the legal notice dated 31st March, 2015 it is revealed that the petitioner has in substance asked for profits, remuneration and interest on the capital account apart from huge sums of money from the firm as partners. A perusal of the legal notice does not reveal that the petitioner has expressed for dissolution of the partnership deed. The legal notice was replied by the respondents on 14th April, 2015, wherein respondents have taken a stand that the share of the profits can be disbursed for the year 2014-2015 after the statutory audit and signing of the financial statements without accumulating to the petitioner‟s capital account. It was also stated that the petitioner will have to bring into the firm separately its share and additional capital as and when required. Respondents in their reply has stated that the profits from the firm shall be paid as per clause 18 of the partnership deed, which stipulates that the amounts drawn by each of the partners for their personal expenses shall be to their respective drawings account. Further it was stated that the partners have to infuse separate adequate capital in the firm. It was also stated that the petitioner has to give suitable assurance for infuse of additional capital, if required.

27. In the rejoinder, the petitioner has stated that as and when the funds are required to be infused in the firm with the object of furthering the business of the firm, all partners are obliged in terms of the Partnership Act & Partnership Deed equivalent amount of funds. But in no way entitles to adjust all the profits of Capital Account of SSP Developers Pvt. Ltd. and Sh. Siddharth Gupta. Suffice to state that the communication dated 2nd June, 2015 from the petitioner does not reflect that the petitioner has expressed itself for the dissolution of the firm.

28. There is no doubt on the proposition of law that where one of the partners has sought for dissolution of the partnership, exception under Section 69 (3) of the Partnership Act shall come into play.

29. Now the question which would arise even if the dissolution of the firm has not been sought for, a petition under Sections 9 and 11 of the Act would mean that the same arises from the contract, i.e., partnership deed or it is a statutory right available to a party to the arbitration agreement separable from the partnership deed. The issue was first considered by the Supreme Court in the case of Jagdish Chandra Gupta (Supra). In Para 5 of the said Judgment, the Supreme Court held that the proceedings under Section 8 of the Arbitration Act has its genesis in the Arbitration Clause because without an agreement to refer the matter to arbitration that section cannot possibly be invoked. The Supreme Court held since the arbitration clause is a part of the agreement constituting the partnership, it is obvious that the proceeding which is before the court is to enforce a right which arises from a contract. The Court held whether we view the contract between the parties as a whole or view only the clause about arbitration, it is impossible to think that the right to proceed to arbitration is not one of the rights which are founded on the agreement of the parties. The Supreme Court held that the words of section 69 (3) “a right arisen from contract” are in either sense sufficient to cover the said matter. In other words, it was the view of the Supreme Court that such a right to file an application under Section 8 of the Arbitration Act, 1940 arises from the contract. Later in the year 2004, a similar issue arose before the Supreme Court in Firm Ashoka Traders (Supra). The Supreme Court in Para 10 had recorded its prima facie opinion on the issue and in Para 12 has concluded that the bar enacted underSection 69 (3) of the Partnership Act does not affect the maintainability of an application underSection 9 of the Act of 1996. In any case in Para 13, the Supreme Court had carved out the reason for holding so, but the plea of the learned counsel for the respondents that the same being a prima facie opinion is appealing. In fact the Bombay High Court in the case of Tapadia Constructions Ltd. (Supra) while referring the judgment of the Supreme Court upheld the plea of the learned counsel for the respondent that it was only a prima facie and tentative opinion as appealing.

30. I note, for benefit the Supreme Court in the case of Arvind Constructions Pvt. Ltd. (supra) has in Para 15 held that the reliance placed on the judgment of Firm Ashoka Traders (supra) does not help much, since the Court in that case did not answer that question finally but prima facie felt that the objection based on Section 69(3) of the Partnership Act may not stand in the way of a party to an arbitration agreement moving the Court under Section 9 of the Act. If that be so, the position of law which holds the field is the one decided by the Supreme Court in the case of Jagdish Chandra Gupta (supra). The judgment of the Jagdish Chandra Gupta (supra) was followed by the Single Bench of this Court in the case of ESS VEE Traders & Ors. V. Ambuja Cement Rajasthan Ltd (supra).

31. Having said so, the question is, whether the petitions filed under Sections 11 and 9, need to be dismissed, the answer is „No‟ as the ratio of the judgment of this Court in Mulakh Raj vs. Shashi Rani and Anr (supra), can‟t be overlooked. The Division Bench of this Court, in the said case held as under:-

“10. These exceptions are basically carved out to meet such kind of exigencies where a partner of an unregistered firm files certain proceedings for enforcement of any right to sue for the dissolution of the firm or for accounts of a dissolved firm or any proceedings to realise the property of a dissolved firm. The legislature in its wisdom has created these exceptions because the disability which will operate qua an outsider or third party will not operate with regard to the filing of a suit to enforce a right arising from a contract on behalf of any person suing as a partner in a firm against the firm or any person alleged to be or to have been a partner in the firm. Therefore, the application for arbitration invoking arbitration and appointment of an arbitrator in terms of Section 11 would be an application for dissolution of the firm or for having his share from the assets of the firm. (emphasis supplied by this Court). Similar is the view taken by Supreme Court in Smt. Premlata and Anr. Vs. Ishar Dass Chaman Lal and Ors., which is reproduced hereunder :-

“8. It is seen that with the demise of the partners, ipso facto, the partnership stood dissolved. What the legal representatives of the deceased partner is seeking to enforce is for accounts of a dissolved firm or any right or power to realise the property of the dissolved firm. The right ‘to sue’ for the dissolution of the firm must, of necessity, be interpreted to mean the right to enforce the arbitration clause for resolution of the disputes relating to dissolved firm or for rendition of accounts or any right or power to realise the property of the dissolved firm.

xxx xxx xxx

10. It is fairly stated by Shri Satish Chandra that the party can enforce the right by a suit for rendering accounts and for realisation of the property of the dissolved firm pro rata. When that is permissible by an exception carved out by sub-section (3)(a) to S. 69, we are of the view that there is no prohibition to invoke arbitration clause under the deed of partnership, agreed to by and between the parties to invoke S.20 of the Act. Thus considered, we are of the view that the suit under S. 20 of the Act is maintainable. The High Court has, therefore, committed manifest error of law in holding otherwise.”

In view of the above, the petitions also being under Section 11 of the Act of 1996, it must be construed, the petitions are for dissolution of the firms, and as such the bar of Section 69(3) of the Partnership Act shall not be applicable.

32. That apart, it is also relevant to note, in the submissions filed by learned counsel for the petitioner in these proceedings wherein in Para 2 it is stated that the breach of partnership deed having been committed by the respondent and the allegations are direct that the respondent has misappropriated the funds of the partnership business and that despite the fact that the petitioner is a partner of 50% in the firm and it is being deprived of its share in the profit and loss, it is a clear case of mistrust between the parties and consequently it is clear from the wordings that the petitioner has indicated that it is not possible for the petitioner and the respondent to continue with the partnership business.

33. This Court in the case of Neeraj Khullar & Anr vs. Virender Kumar Khullar Case No.201, 313 of 2011 decided on 30th March, 2012 by referring to the judgment of the Supreme Court in the case of Premlata v. M/s Ishar Dass Chaman Lal 1995 (2) SCC 145; Prabhu Shankar Jaiswal v. Sheo Narain Jaiswal 1996 (11) SCC 225; and V.H. Patel & Company vs. Hirubhai Himabhai Patel 2000 (4) SCC 368, has held as under:-

“27. It is also evident that over the past one year, the attempts at having the parties settle the disputes through mediation or otherwise have not proved successful. There seems to be a complete breakdown of trust. Therefore, although, at the stage of filing of O.M.P. No.313 of 2011, the dissolution of the partnership was not being contemplated by the Petitioner, the subsequent events have led to the Petitioners to realize that there is no option but to seek dissolution of the partnership. The respondent has, by running another proprietorship concern, from the said business premises, made it appear that he too is not interested in the partnership continuing as such. It is, therefore, understandable that the disputes between the parties are essentially about the dissolution of the partnership firm. Although, Arb. P. No. 201 of 2011 has not been formally amended to seek reference of such dispute. It is plain that the main claim in the arbitration proceedings by the Petitioners will be to seek dissolution of the firm. Learned counsel for the Petitioners also made this explicit in his submissions.

28. In that view of the matter, the bar under Section 69 of the PA will not operate. The legal position was explained in Premlata v. M/s Ishar Dass Chaman Lal as under:

8. It is seen that with the demise of the partners, ipso facto, the partnership stood dissolved. What the legal representatives of the deceased partner, is seeking to enforce is for accounts of a dissolved firm or any right or power to realise the property of the dissolved firm. The right ‘to sue’ for the dissolution of the firm must, of necessity, be interpreted to mean the right to enforce the arbitration clause for resolution of the disputes relating to dissolved firm or for rendition of accounts or any right or power to realise the property of the dissolved firm.

9. Indisputably the first appellant is the widow of Chaman Lal – one of the partners. Therefore, she steps into the shoes of the deceased partner who had a right to the dissolved partnership firm. Sub-section (3)(a) carves out three exceptions to Subsections (1) and (2) of Section 69 and also to the main part of Sub-section (3) of Section 69, namely, (1) the enforcement of any right to sue for the dissolution of firm; (2) for accounts of the dissolved firm; and (3) any right or power to realise the property of the dissolved firm. Having excluded from the embargo created by the main part of Sub-section (3) or Sub-sections (1) and (2) of Section 69, the right to sue would not again be construed to engulf the exceptions carved out by Sub- section (3) or Sub-section (4) of Section 69 of the Act. Any construction otherwise would render the exceptions, legislature advisedly has carved out in Sub-sections (3) and (4) of Section 69, otiose. The object appears to be that the partnership having been dissolved or has come to a terminus, the rights of the parties are to be worked out in terms of the contract of the partnership entered by and between the partners and the rights engrafted therein. The exceptions carved out by Sub-section (3) are to enforce those rights including the rights to dissolution of the partnership despite the fact that the partnership firm was an unregistered one. Having kept that object in view, we are of the considered opinion that the alternative resolution forum agreed by the parties, namely, reference to a private arbitration is a mode of enforcing the rights given under Clause (a) of Sub- section (3) of Section 69 of the Act and gets excluded from the main part of Sub- section (3) and Sub-sections (1) and (2) of Section 69. The enforcement of the right to sue for dissolution includes a right for reference to an arbitration in terms of the agreement of the partnership by and between the parties. Therefore, there is no embargo for filing a suit under Section 20 of the Act.”

29. The above legal position was subsequently explained further in Prabhu Shankar Jaiswal v. Sheo Narain Jaiswal as under:

“5. Under Section 69(1), a suit, inter alia, to enforce a right arising from a contract cannot be filed by a person suing as a partner in a firm against the other partners of the firm unless the firm is registered. Under Sub-section (3) any other proceeding to enforce a right arising from a contract by a person suing as a partner against the other partners of an unregistered firm is also barred. Since the right to resort to arbitration flows from the contract between the parties contained in the partnership deed, a suit or any other proceeding by a partner to enforce this term in the contract against the other partners would, therefore, normally be barred under the first part of Sub-section (3) of Section 69. [Vide Jagdish Chandra Gupta v. Kajaria Traders (India) Ltd.] Sub-section (3), in its later part, however, carves out certain exceptions to the bar contained in Sub- sections (1), (2) and the first part of Sub-section (3).

6. Under Sub-section (3)(a) this bar will not affect the enforcement of any right to sue for the dissolutions of a firm or for accounts of a dissolved firm or any right or power to realise the property of a dissolved firm. Therefore, although the partnership firm may be unregistered, one partner can sue other partners for dissolution of the firm and for accounts. The words “to sue” used in Sub-section (3)(a) cannot be construed narrowly to refer only to suits for dissolution of partnership and accounts. The exception contained in Sub-section (3)(a) applies not merely to Sub-sections (1) and (2) but also to the first part of Sub-section (3) which deals with proceedings other than suits. Therefore, in order that Sub-section (3)(a) would apply to all these provisions, the words “to sue” in Sub-section (3)(a) must be understood as applying to any proceedings for dissolution of partnership or for accounts of a dissolved firm or to realise the property of a dissolved firm. This proceeding may be either by way of a suit or it can even be a proceeding under the Arbitration Act to secure these rights through arbitration. (Vide

# Prem Lata v. Ishar Dass Chaman Lal, [1995] 2 SCC 145

a judgment to which one of us was a party). Therefore, an arbitration clause in a partnership deed of an unregistered partnership can be enforced for the purpose of securing, inter alia, a dissolution and accounts of the partnership or for enforcing any right or power for obtaining the property of a dissolved firm. (emphasis supplied by this Court)”

30. The Supreme Court reiterated the above position in V.H. Patel & Company v. Hirubhai Himabhai Patel where it was emphasized that where there is no mutual trust remaining between the parties, and the idea is to settle all the disputes between them, it will be open to any of them to claim dissolution of the partnership and seek reference of such dispute to arbitration. (emphasis supplied by this Court)”

34. In view of the discussion above, the fact that the petitioner has filed applications under Section 11 of the Act of 1996 and noting the stand of the petitioner and the mistrust between the parties and taking the stand of the petitioner as seeking dissolution of the firms, this Court is of the view, additionally on this ground as well that petitions under Section 11 of the Act of 1996 are maintainable.

35. In view of the fact, petitions under Section 11 of the Act of 1996 are maintainable, the petitions under Section 9 of the Act of 1996 are also maintainable. Accordingly, I decide the preliminary issue in favour of the petitioner.

36. The petitions are listed before the Roster Bench for further proceedings, on August 29, 2016.

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