2002 (9) TMI 759 - HC - Companies Law

Summary

Issues Involved:
1. Validity of the arbitration clause after the dissolution of the partnership firm.
2. Right of the respondent to appoint an arbitrator.
3. Applicability of the Privy Council decision in Bhagwanji Morarji Goculdas v. Alembic Chemical Works Co. Ltd.
4. Maintainability of the writ petition.

Detailed Analysis:

1. Validity of the arbitration clause after the dissolution of the partnership firm:
The court held that despite the dissolution of the partnership firm, the arbitration clause contained in the agreement to sell dated 15-4-1995 survived. The assets and liabilities of the dissolved firm were taken over by the respondent, making it a continuing partner. The court referenced section 40 of the Partnership Act to affirm that the dissolution was effective and that the arbitration clause remained binding on the parties.

2. Right of the respondent to appoint an arbitrator:
The court concluded that the respondent, having taken over the assets and liabilities of the dissolved firm, was entitled to enforce the arbitration agreement, including the right to appoint an arbitrator. The court cited various legal texts, including "Russell on the Law of Arbitration" and "The Law and Practice of Commercial Arbitration in England," to support the notion that an arbitration clause binds a valid assignee of a contract containing it. The court emphasized that the arbitration agreement should not be construed in a pedantic manner and should be interpreted to give efficacy to the contract.

3. Applicability of the Privy Council decision in Bhagwanji Morarji Goculdas v. Alembic Chemical Works Co. Ltd.:
The court found that the decision in Bhagwanji Morarji Goculdas's case was not applicable to the present case. The Privy Council decision involved a scenario where all members of a firm ceased to be members, resulting in no privity between the company and the firm. In contrast, in the present case, the respondent was a partner of the dissolved firm and had taken over its business, assets, and liabilities, maintaining privity.

4. Maintainability of the writ petition:
The court dismissed the writ petition, stating that the learned Single Judge had directed the respondent to appoint an arbitrator within one month, failing which the petitioner could approach the court for the appointment of an independent arbitrator. The court referenced the Supreme Court decisions in Konkan Railway Corpn. Ltd. v. Mehul Construction Co. and Konkan Railway Corpn. Ltd. v. Rani Construction P. Ltd. to support the view that the mechanism for appointing an arbitrator had not failed and that the respondent retained the right to appoint an arbitrator as per the agreement.

Conclusion:
The court dismissed the writ petition with costs quantified at Rs. 5,000, affirming that the arbitration clause survived the dissolution of the partnership firm, the respondent had the right to appoint an arbitrator, and the Privy Council decision in Bhagwanji Morarji Goculdas's case was not applicable.