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Atul Singh & Ors. Versus Sunil Kumar Singh & Ors.

2008 (1) TMI 949 - SUPREME COURT OF INDIA

= - C.A. 10 Of 2008, Arising out of Special Leave Petition (Civil) No.24729 of 2005) - Dated:- 4-1-2008 - G.P. Mathur And Aftab Alam, JJ. JUDGMENT: G. P. MATHUR, J. 1. Leave granted. 2. This appeal, by special leave, has been preferred against the judgment and order dated 4.8.2005 of Patna High Court, by which the Civil Revision Petition preferred by Sunil Kumar Singh (defendant No.3 in the suit) was allowed and the order passed by the trial Court on 17.3.2005 rejecting his prayer for referring .....

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is illegal, void and without jurisdiction and was also without any intention or desire of Shri Rajendra Prasad Singh (who died after 17.2.1992) to retire from the partnership. A declaration was also sought that the plaintiffs being heirs of late Shri Rajendra Prasad Singh will be deemed to be continuing as partners to the extent of his share. It was further prayed that a decree for rendition of accounts of the firm from 1.4.1992 upto date may be passed and the defendants may be directed to pay t .....

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style of M/s Veena Theatres Pvt. Ltd. was formed by a deed of partnership on 25.12.1959 and the business of the firm was to book pictures with film distributors at various places and to get them screened or exhibited in the picture hall owned by M/s Veena Theatres Pvt. Ltd. The capital in the firm was invested by the members of the family of Shri Shatrughan Prasad Singh. Shri Rajendra Prasad Singh also subsequently became a partner of the firm by making investments and a deed of partnership was .....

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hri Rajendra Prasad Singh had predeceased him. The case of the plaintiffs further is that the defendants fraudulently executed another partnership deed on 17.2.1992, in which Shri Rajendra Prasad Singh was not shown as one of the partners, though he had neither given any consent nor had expressed his desire for retiring from the partnership. The plaintiffs made a request to the defendants to give the accounts of the partnership firm and give them their share of profits, but the defendants refuse .....

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g the plaint under Order VII Rule 11 CPC on 18.9.1998, which was rejected on 16.1.2002. A review petition seeking review of the aforesaid order was filed but the same was dismissed on 29.4.2004. He, thereafter, moved an application on 3.8.2004 for referring the dispute for arbitration, but subsequently his counsel conceded that the said application was not maintainable. 6. Sunil Kumar Singh (defendant no.3), who is son of Birendra Kumar Singh (defendant no.2) did not put in appearance despite se .....

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application on 25.11.2004 under Section 34 of the Arbitration Act, 1940 praying that in view of the arbitration clause in the agreement dated 13.1.1989, the proceedings in the suit may be stayed and the matter may be referred to arbitration. The plaintiffs filed an objection to the application on 1.12.2004. On 16.12.2004, defendant no.3 filed a supplementary petition in support of his earlier petition dated 25.11.2004 reiterating the prayer for referring the dispute to arbitration. Subsequently, .....

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as Shri Rajendra Prasad Singh (predecessor-in- interest of the plaintiffs) was not a party to the partnership deed which was executed on 17.2.1992, and as the main relief sought in the suit was that the said partnership deed dated 17.2.1992 was illegal and void, which question could only be decided by the civil Court, the dispute could not be referred to arbitration. The defendant no.3 challenged the aforesaid order by filing a Civil Revision Petition which was allowed by the High Court by the .....

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deed dated 17.2.1992 was illegal, void and without jurisdiction as there was no intention or desire on the part of Shri Rajendra Prasad Singh to retire from the partnership and that the plaintiffs being heirs of Shri Rajendra Prasad Singh, shall be deemed to be continuing as partners to the extent of his share. The other relief regarding rendering of accounts of all transactions from 1.4.1992 onwards was dependent upon the first relief inasmuch as Shri Rajendra Prasad Singh or the plaintiffs we .....

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er of the trial Court and allowing the revision petition filed by defendant no.3. Learned counsel has also submitted that having regard to the facts of the case, the relief of declaration that the partnership deed is illegal or void or the relief of cancellation thereof can only be granted by the Civil Court and not by an arbitrator. In support of his submission Shri Ranjit Kumar has placed reliance on the following observations made in Khardah Company Ltd. v. Raymon & Company (India) Pvt. L .....

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invalid every part of it including the clause as to arbitration contained therein must also be invalid. (1942) AC 356 and AIR 1959 SC 1362 and ILR (1948) 2 Cal 171 and AIR 1954 Mad 528(531), Rel. on; AIR 1952 SC 119, Ref. (Para 4). Accordingly, a dispute that the contract of which the arbitration clause forms an integral part is illegal and void is not one which the arbitrators are competent to decide under the arbitration clause although it is of sufficient amplitude to take in a dispute as to .....

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n, his son Sunil Kumar Singh (defendant no.3) who was set ex-parte on 28.6.1999 moved the application for staying the suit under Section 34 of Arbitration Act, 1940 on 5.11.2004 and then moved the application giving rise to the order under challenge on 28.2.2005 and such an application having been moved after an inordinate delay, it was wholly improper on the part of the High Court to have accepted his prayer. It has been further urged that there was non-compliance of Sub-section (2) of Section .....

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h was a party and the said deed contains an arbitration clause. In such circumstances, the High Court rightly referred the dispute for arbitration and the contention raised by learned counsel for the plaintiffs has no substance. 8. In order to appreciate the contention raised by learned counsel for the parties, it will be convenient to set out Sections 7 and 8 of the 1996 Act : 7. Arbitration agreement. - (1) In this Part, 'arbitration agreement' means an agreement by the parties to subm .....

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eans of telecommunication which provide a record of the agreement; or (c) an exchange of statements of claim and defence in which the existence of the agreement is alleged by one party and not denied by the other. (5) The reference in a contract to a document containing an arbitration clause constitutes an arbitration agreement if the contract is in writing and the reference is such as to make that arbitration clause part of the contract. 8. Power to refer parties to arbitration where there is a .....

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ation has been made under sub- section (1) and that the issue is pending before the judicial authority, an arbitration may be commenced or continued and an arbitral award made. Sub-section (1) of Section 8 of the 1996 Act says that a judicial authority before which an action is brought in a matter which is the subject of an arbitration agreement shall, if a party so applies not later than when submitting his first statement on the substance of the dispute, refer the parties to arbitration. There .....

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f Section 7 of 1996 Act from which it may be spelled out that either Rajendra Prasad Singh or the plaintiffs were parties to clause relating to arbitration contained in the partnership deed dated 17.2.1992. It is also an admitted fact that Shri Rajendra Prasad Singh was alive when the said partnership deed dated 17.2.1992 was executed. Therefore, on the face of it Section 8 of 1996 Act would not apply to any dispute concerning the said partnership deed dated 17.2.1992 and the matter cannot be re .....

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and their share of profits from the partnership as well as interest over the unsecured loan and the principal amount of unsecured loan on rendition of accounts. For getting this relief, the plaintiffs undoubtedly rely upon the partnership deed dated 13.1.1989. However, this deed of 1989 could be relied upon and form the basis of the claim of the plaintiffs only if the partnership deed dated 17.2.1992 was declared as void. If the deed dated 17.2.1992 was not declared as void and remained valid an .....

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ajendra Prasad Singh through whom the plaintiffs derive title, are not party to the said deed. The trial Court had, therefore, rightly held that the matter could not be referred to arbitration and the view to the contrary taken by the High Court is clearly illegal. 10. Sub-section (2) of Section 8 of the 1996 Act says that the application referred to in sub-section (1) shall not be entertained unless it is accompanied by the original arbitration agreement or a duly certified copy thereof. As alr .....

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