TMI Blog2002 (7) TMI 814X X X X Extracts X X X X X X X X Extracts X X X X ..... agreed upon between them. The deed contained an arbitration clause, which reads as under: 31. That in the event of any dispute with regard to any matter (sic) relating to the firm, its affairs and its partners, the matter shall be referred to the sole arbitration of Shri M.C. Setalvad, failing him Shri C.K. Daphtary and in the event of both of them refusing, then to an arbitrator mutually agreed upon, failing which to an arbitrator appointed by the Court. 2. The original Deed of Partnership was modified from time to time but the arbitration clause remained unchanged. 3. A new firm under the name and style of D.B. Dadachanji Ravinder Narain Mathur and Co. was constituted by means of another Deed of Partnership dated 1 April 1979 between the aforenoted three persons and four others. This Deed of Partnership also contained an arbitration clause, which was in the following terms: 25. Any dispute arising out of or in relation to the Partnership shall be resolved by Arbitration and the parties hereto agree to refer the same to the Sole Arbitrator who shall be Mr. S.P. Mehta, failing him Mr. F.S. Nariman and failing him Mr. S.J. Sorabjee or such other person as may be m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, it can only be adjudicated upon in a properly constituted suit under Section 44 of the Partnership Act, 1932, more so when RN has already sought dissolution under the said provision; (iii) the afore-mentioned Modification Deed dated 1 April 1997 having been signed and acted upon by all the parties, it cannot be invalidated by the arbitrator; (iv) since the applicant seeks to refer the question of validity of the Modification Deed dated 1 April 1997 for arbitration, the dispute cannot be covered by the arbitration clause because it is rested on allegation of fraud, coercion, misrepresentation and collusion, which cannot be tested by an arbitrator; and (v) as the arbitration agreement was entered into with the provisions of the Arbitration Act, 1940 (for short the old Act) in mind, there have never been ad idem between the parties for arbitration under the new Act and, Therefore, the present application under Section 11 of the Act is not maintainable. 10. In his reply affidavit, OCM supports the prayer for appointment of an independent arbitrator. In an additional affidavit dated 17 August 2001, filed by JBD, it is stated that he does not press for appointment of receiver or ev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y Hon'ble Mr. Justice M.J. Rao (as his Lordship then was), as a designate of the Chief Justice of India, in Wellingon Associates Ltd. v. Kirit Mehta AIR2000SC1379 , it is urged that while deciding an application under Section 8 of the new Act, unlike Section 11, this court is exercising judicial function and, Therefore, it must decide the question whether at all the dispute raised by the applicant is referable to arbitration or not. 13. Mr. Rajiv Nayar, learned senior counsel for JBD and Mr. O.C. Mathur, have, on the other hand, submitted that Section 5 read with Section 8 of the new Act casts a mandatory duty on a court before whom an action is brought to refer the parties to arbitration, if the matter before the court is the subject matter of an arbitration agreement. In support, reliance is placed on a decision of the Supreme Court in Kalpana Kothari v. Sudha Yadav Ors ., AIR2002SC404. Relying on Konkan Railway Corporation Limited Ors. v. Mehul Construction Co., AIR2000SC2821 and Konkan Railway Corporation Ltd. v. Rani Construction Pvt. Ltd., [2002]1SCR728 , it is vehemently contended that while deciding an application under Section 11 of the Act, the court is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the parties, a party may request the Chief Justice or any person designated by him to take the necessary measures for securing the appointment of arbitrator. The scope and ambit of Section 11 of the new Act has been succinctly explained by the Apex Court in the case of Konkan Railway Corporation Limited v. Mehul Construction Co. case (supra), as follows: .............When the matter is placed before the Chief Justice or his nominee under Section 11 of the Act it is imperative for the said Chief Justice or his nominee to bear in mind the legislative intent that the arbitral process should be set in motion without any delay whatsoever and all contentious issues are left to be raised before the Arbitral Tribunal itself. At that stage it would not be appropriate for the Chief Justice or his nominee to entertain any contentious issue between the parties and decide the same. A bare reading of Sections 13 and 16 of the Act makes it crystal clear that questions with regard to the qualifications, independence and impartiality of the arbitrator, and in respect of the jurisdiction of the arbitrator could be raised before the arbitrator who would decide the same. It was further o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) of the Act. In view of the aforenoted settled legal position, this court is not competent to go into the objections raised on behalf of RN in opposition to the application. All these issues are to be raised before to be considered by the arbitrator. 20. Having come to the aforenoted conclusion, it is unnecessary for me to go into the issues raised by RN opposing the applications under Section 8 of the Act, but since learned counsel for him has addressed me on these issues at some length, I shall briefly deal with them. 21. Section 8(1) of the new Act, relevant for our purpose, lays down that a judicial authority before which an action is brought in a matter, which is subject of an arbitration agreement shall, if a party so applies not later than when submitting his statement on the substance of the dispute, refer the parties to arbitration. As noted above, objection of RN for referring the parties to arbitration is mainly on two counts, namely: (i) the arbitrator does not have jurisdiction to dissolve the firm on just and equitable ground in terms of Section 44(g) of the Partnership Act and (ii) the arbitrator cannot adjudicate on the validity of the Modification Deed dated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that on the filing of an application under the said provision, before referring the parties to arbitration, the court must adjudicated whether disputes raised fall within the ambit of the arbitration clause or not. 24. Similarly, the argument in opposition taken on behalf of RN that the arbitrator has no power to dissolve a partnership, especially when dissolution is sought on just and equitable ground and, Therefore, the dispute, subject matter of the suit cannot be adjudicated by the arbitrator, is devoid of any force. Dealing with a similar situation, in V.H. Patel's case (supra), the Supreme Court observed as under (p. 379): 12. So far as the power of the arbitrator to dissolve the partnership is concerned, the law is clear that where there is a clause in the articles of partnership or agreement or order referring all the matters in difference between the partners to arbitration, the arbitrator has power to decide whether or not the partnership shall be dissolved and to award its dissolution. (See: Phoenix v. Pope). Power of the arbitrator will primarily depend upon the arbitration clause and the reference made by the court to it. If under the terms of the referen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e partnership deeds dated 1 July 1961 and 1 April 1979, as amended from time to time. The learned arbitrator shall fix his own fees in consultation with counsel for the parties. The fees so fixed shall be shared, in the first instance, by all the three aforenoted parties in equal proportion, subject to determination of costs by the arbitrator. 28. Any observation above, touching upon the merits of the case, shall not be construed as expression of final opinion on the merits of the case of either of the parties and it goes without saying that it will be open to the parties to raise before the arbitrator any objection, including the one raised in the present proceedings, as may be available to them in law. 29. In view of the above order, Suit No. 1084/2000 shall be treated as disposed of and consequently no further orders are required in is Nos. 6989/2000 and 8913/2000 , filed for rejection of the plaint and is Nos. 4878/00, 11226/00, 2540/00 and 8678/01 , seeking interim reliefs. These applications also stand disposed of accordingly. The next date (15.7.02) fixed in the Suit and IAs stands cancelled. 30. Insofar as OMP No. 60/2000 is concerned, interim orders passed b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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