AI Structured Summary
Not yet generated for this judgment
Judgment
The present application under Section 11(4) of the Arbitration and Conciliation Act 1996 (hereinafter referred to as 'the Act of 1996' for the sake of brevity) has been filed for appointment of Arbitrator for resolution of dispute arose between the parties arising out of partnership deed dated 09.04.2020 Annexure A/1.
On the previous date the respondents have suggested that there is a chance of mediation between the parties and the matter be referred to the Mediator to resolve the dispute between the parties.
On the said date, two of the respondents were of the view of mediation and other were contesting. Now today, on the date of hearing all the respondents have unanimously submitted that the matter be referred for pre-mediation to explore the possibility of resolution of dispute.
As the matter was earlier referred to the Mediator and report has been received that none of the parties has agreed to mediation, therefore, in the considered opinion of this Court, instead of sending the matter to the Mediator, the question of referral should be decided by this Court first and thereafter, parties would have enough chance to submit their grievances as well as consensus on the issues before the Arbitrator who can also act upon as a Mediator to resolve the dispute between the parties. Therefore, this Court is adjudicating the application on the grounds submitted in the memo of application as well as on the basis of reply submitted by respondents No.1 and 2.
At the outset, learned counsel for the applicant submits that he is not pressing relief No.(a), however, prayed for liberty to raise the same before the Arbitrator.
It is contended by learned counsel for the applicant that vide partnership deed dated 09.04.2020 Annxure A/1 was executed between the parties for operating Indian Oil Petrol pump at Narmadapuram. It is submitted that in February, 2024, operation of the firm was ceased and selling of petrol/diesel was stopped because of ceasing of the firm's operation with partial closure of bank account by the SBI Bank, whereby the bank was only allowing money to be credited to the account but not withdrawal of money from the account. On 29.03.2024, applicant issued notice of dissolution vide Annexure A/9 under Section 43 of the Indian Partnership Act to be effective from 31.03.2024. It is submitted that notices to all the partners were served and acknowledged by 08.04.2024. The respondent No.1 and 2 filed reply through counsel on 08.04.2024 Annexure A/13. It is submitted that the applicants requested for accounting and handover of cash/movable assets by 30.04.2024 but same was not complied by respondent No.1. On 10.08.2024, applicants sent another notice invoking arbitration with names of proposed arbitrators to be appointed within 30 days, which was served on respondents No.3, 4 and 5, however, respondent No 1 and 2 refused the notice, which is evident from postal acknowledgment. It is submitted that a public notice of dissolution of firm was issued in two daily newspapers vide Annexure A/18 and A/19.
2- It is further submitted that Clause 15 of the partnership deed provides that all disputes and questions in connection of partnership or deed arising between the partners or between any of them or their legal representatives and whether during or after the partnership shall be referred to the arbitrator in accordance with the provisions of the Arbitration Act, which is in force. It is further submitted that the applicants vide notice dated 10.08.2024 requested to refer the matter to the Arbitrator, however, till date respondents/partners have not replied to the notice. Hence, the present application has been filed for appointment of sole arbitrator to resolve the dispute between the parties.
3- Per contra, it is contended by learned counsel for respondents No.1 and 2 on merits that the dispute cannot be referred to the Arbitrator by this Court which it is based on a partnership deed dated 09.04.2020 because it is a sham document.
4- It is submitted that though it contain signatures of respondents No.1 and 2 but as the signatures were obtained under some coercion and not in a fit state of mind, therefore, it is not enforceable against respondents No.1 and
It is further submitted that respondents No.1 and 2 had also filed a Civil Suit before the competent Civil Court to declare said document as null and void. If the dispute is referred on the basis of such document, then it will affect the civil suit as well as the rights of the parties. To bolster his submissions, learned counsel for respondents No.1 and 2 has relied on the order passed by this Court in the case of Narendra Singh vs. Ashendra Mishra AIR 2020 MP 71, wherein para 14 and 15, it has been held :
14.Though, counsel for petitioner has placed reliance upon the judgment of the Supreme Court in the matter of Abdul Kadir Shamsuddin Bubere v. Madhav Prabhakar Oak, AIR 1962 SC 406 wherein it has been held that not every allegations imputing dishonesty would be enough for court to take matters to arbitration forum but the factual position in that case was entirely different. Similarly counsel for petitioner has placed reliance upon the judgment of the Supreme Court in the matter of State of Orissa and others v. Bhagyadhar Dash (2011) 7 SCC 406:(AIR 2011 SC 3409) wherein the test has been laid down to determine the arbitration clause, but in the present case not only the existence of the arbitration clause is in dispute, but the very execution of the partnership deed containing the alleged arbitration clause has been disputed. Counsel for petitioner has also placed reliance upon the judgment of the Supreme Court in the matter of A.Ayyasamy v. A. Paramasivam and others (2016) 10 SCC 386 wherein it has been held that only in cases of serious fraud, the reference of dispute to the arbitration should be refused but in the present case not only there is allegation of fraud, but the agreement is in dispute and civil suit has already been filed.
15.Having regard to the aforesaid circumstances of the case, I am of the opinion that it is not a fit case for allowing the prayer for appointment of Arbitrator u/S.11 of the Arbitration and Conciliation Act. The proper remedy available to the applicantis to approach the civil court and establish the partnership deed by leading the oral as well as the documentary evidence and then establish the allegation of fraud.
5- Reliance has also been placed on the case of Magic Eye Developers Pvt. Ltd. vs. M/s Green Edge Infrastructure Pvt. Ltd. AIR 2023 SC 2339 wherein Hon'ble Apex Court in para 5.3 has held as under :
5.3At this stage, it is required to be noted that as per the settled position of law, pre-referral jurisdiction of the court under Section 11(6) of the Arbitration Act is very narrow and inheres two inquiries. The primary inquiry is about the existence and the validity of an arbitration agreement, which also includes an inquiry as to the parties to the agreement and the applicant's privity to the said agreement. The said matter requires a thorough examination by the referral court. [paragraph 25 ofthe decision in the case of NTPC Ltd. (supra)]. The Secondary inquiry that may arise at the reference stage itself is with respect to the non-arbitrability of the dispute. Both are different and distinct. So far as the first issue with respect to the existence and the validity of an arbitration agreement is concerned, as the same goes to the root of the matter, the same has to be to conclusively decided by the referral court at the referral stage itself. Now, so far as the non- arbitrability of the dispute is concerned, even as per the law laid-down by this Court in the case of Vidya Drolia (supra), the court at pre-referral stage and while examining the jurisdiction under Section 11(6) of the Act may even consider prima facie examining the arbitrability of claims. As observed, the prima facie review at the reference stage is to cut the deadwood and trim off the side branches in straightforward cases where dismissal is barefaced and pellucid and when on the facts and law the litigation must stop at the first stage. However, so far as the dispute with respect to the existence and validity of an arbitration agreement is concerned and when the same is raised at pre-referral stage, the referral court has to decide the said issue conclusively and finally and should not leave the said issue to be determined by the arbitral tribunal. The reason is that the issue with respect to the existence and validity of an arbitration agreement goes to the root of the matter. As observed by the Constitution Bench in the case of N.N. Global Mercantile Pvt. Ltd. (supra) Sans an agreement, there cannot be any reference to the arbitration. In the said decision this Court has also specifically observed and held that the intention behind the insertion of Section 11(6A) in the Act was to confine the Court, acting under Section 11, to examine and ascertain about the existence of an arbitration agreement. We are of the opinion that therefore, if the dispute/issue with respect to the existence and validity of an arbitration agreement is not conclusively and finally decided by the referral court while exercising the pre-referral jurisdiction under Section 11(6) and it is left to the arbitral tribunal, it will be contrary to Section 11(6A) of the Arbitration Act. It is the duty of the referral court to decide the said issue first conclusively to protect the parties from being forced to arbitrate when there does not exist any arbitration agreement and/or when there is no valid arbitration agreement at all.
6- It is further submitted that the applicant has tried to raise the dispute in regard to payments and the share involved in the partnership deed. It is further submitted that the applicant has also contended that there are some dispute in regard to payments by third party, therefore, the relief cannot be segregated as it if which were sought in the civil suit and of the Arbitration, therefore, this Court cannot refer the dispute the matter to the Arbitrator to decide the dispute. Learned counsel has relied upon judgment of Hon'ble Apex Court in the case of Sukanya Holdings Pvt. Ltd. vs. Jayesh H. Pandya AIR 2003 SC 2252, wherein Hon'ble Apex Court in para 16 and 17 has held as under :
16.The next question which requires consideration is — even if there is no provision for partly referring the dispute to arbitration, whether such a course is possible under Section 8 of the Act. In our view, it would be difficult to give an interpretation to Section 8 under which bifurcation of the cause of action, that is to say, the subject-matter of the suit or in some cases bifurcation of the suit between parties who are parties to the arbitration agreement and others is possible. This would be laying down a totally new procedure not contemplated under the Act. If bifurcation of the subject-matter of a suit was contemplated, the legislature would have used appropriate language to permit such a course. Since there is no such indication in the language, it follows that bifurcation of the subject-matter of an action brought before a judicial authority is not allowed.
17.Secondly, such bifurcation of suit in two parts, one to be decided by the Arbitral Tribunal and the other to be decided by the civil court would inevitably delay the proceedings. The whole purpose of speedy disposal of dispute and decreasing the cost of litigation would be frustrated by such procedure. It would also increase the cost of litigation and harassment to the parties and on occasions there is possibility of conflicting judgments and orders by two different forums.
7- It is further submitted that as the firm is not registered, therefore, any dispute arising between the alleged partners on the basis of a partnership deed, which is also not registered, cannot be referred to the Arbitrator as per Section 69(1) of the Partnership Act. To bolster his submissions, learned counsel has relied upon the judgment of Hon'ble Apex Court in the case of Jagdish Chandra Gupta vs. Kajaria Traders (India) Ltd. AIR 1964 SC 1882 , wherein the Hon'ble Apex Court in para 2 and 9 has held as under :
2.Jagdish Chander Gupta appeared and objected inter alia to the institution of the petition. Two grounds were urged (i) that Section 8(2) of the Indian Arbitration Act was not applicable as it was not expressly provided in the arbitration clause quoted above that the arbitrators were to be by consent of the parties and (ii) that Section 69(3) of the Indian Partnership Act, 1932 afforded a bar to the petition because the partnership was not registered. The petition was referred by the Chief Justice to a Divisional Bench consisting of Mr Justice Mudholkar (as he then was) and Mr Justice Naik. The two learned Judges agreed that in the circumstances of the case an application under Section 8 of the Indian Arbitration Act was competent and that the court had power to appoint an arbitrator. They disagreed on the second point. Mr Justice Mudholkar was of the opinion that Section 69(3) of the Indian Partnership Act barred the application while Mr Justice Naik held otherwise. The case was then referred to Mr Justice K.T. Desai (as he then was) and he agreed with Mr Justice Naik with the result that the application was held to be competent.
9.In our judgment, the words “other proceeding” in sub-section (3) must receive their full meaning untrammelled by the words “a claim of set-off”. The latter words neither intend nor can be construed to cut down the generality of the words “other proceeding”. The sub-section provides for the application of the provisions of sub-sections (1) and (2) to claims of set-off and also to other proceedings of any kind which can properly be said to be for enforcement of any right arising from contract except those expressly mentioned as exceptions in sub-section (3) and sub-section (4).
8- Reliance has also been placed on the case of U.P. State Sugar Corpn. Ltd. vs. Jain Construction Co. AIR 2004 SC 4335, wherein Hon'ble Apex Court in para 7 has held as under :
7.The question as to whether Respondent 1 firm is registered or not is essentially a question of fact. It is true that the arbitral proceedings would not be maintainable at the instance of an unregistered firm having regard to the mandatory provisions contained in Section 69 of the Indian Partnership Act, 1932. It has been so held in Jagdish Chandra Gupta v. Kajaria Traders (India) Ltd. [AIR 1964 SC 1882] We may, however, notice that this Court in Firm Ashok Traders [(2004) 3 SCC 155] despite following Jagdish Chandra Gupta [AIR 1964 SC 1882] held that Section 69 of the Indian Partnership Act would have no bearing on the right of a party to an arbitration clause under Section 9 of the 1996 Act. As correctness or otherwise of the said decision is not in question before us, it is not necessary to say anything in this behalf but suffice it to point out that in the event it is found by the High Court that the learned Civil Judge was wrong in rejecting the application for amendment of the plaint and in fact the respondent firm was registered under the Indian Partnership Act, the question of throwing out the said suit on that ground would not arise. There cannot, however, be any doubt whatsoever that the firm must be registered at the time of institution of the suit and not later on. (See Delhi Development Authority v. Kochhar Construction Work [(1998) 8 SCC 559] .)
9- Learned counsel has also relied upon the case of M/s C.M. Makhija vs. Chairm-cum-Managing Director, South Eastern Coalfields Ltd. AIR 2016 CG 63, wherein in para 13 and 14, it has been held :
13.As the facts narrated earlier would indicate in the instant case, despite the objection raised there is no document has been placed on record that on the date of filing the firm was a registered partnership. Consequently, as the law laid down by their Lordship, as has been discussed above, the bar of Section 69(3) of the Indian Partnership Act, 1932 would come into play whereby enforcement of right of arbitration proceeding would be blocked as the application itself cannot be branded as interim in nature.
14.In the result, the application for appointment of Arbitrator cannot be gone into for the bar created under Section 69(3) of the Indian Partnership Act, 1932. Consequently, the application is dismissed. No order as to cost.
10- In reply to the argument that dispute with regard to an unregistered firm cannot be referred to Arbitrator, it is submitted by learned counsel for the applicant that where the partners agreed to get the dispute settled by arbitration, it is not open for the partner to contend that the dispute cannot be referred to Arbitration as the firm is unregistered. To bolster his submissions, learned counsel has relied upon judgment of Hon'ble Apex Court in the case of Ananthesh Bhakta vs. Nayana S.Bhakta (2017) 5 SCC 185 .
11- Learned counsel for the respondents No.3 to 5 has prayed that as the petitioner is not pressing the relief of dissolution of partnership deed, therefore, it may be left open to be decided by the Arbitrator in case it is raised in the statement of claim.
12- Heard learned counsel for the parties and perused the record.
13- The Hon'ble Apex Court in the case of Vidya Drolia v. Durga Trading Corpn., (2021) 2 SCC 1 has laid down a fourfold test for determining when the subject-matter of a dispute in an arbitration agreement is not arbitrable. These were:
"(1)When cause of action and subject matter of the dispute relates to actions in rem, that do not pertain to subordinate rights in personam that arise from rights in rem.
(2)When cause of action and subject matter of the dispute affects third-party rights; have erga omnes effect; require centralised adjudication, and mutual adjudication would not be appropriate and enforceable.
(3)When cause of action and subject matter of the dispute relates to inalienable sovereign and public interest functions of the State and hence mutual adjudication would be unenforceable.
(4)When the subject-matter of the dispute is expressly or by necessary implication non- arbitrable as per mandatory statute(s)."
14- The Hon'ble Apex court in the case of Olympus Superstructures (P) Ltd. v. Meena Vijay Khetan, (1999) 5 SCC 651 has held that the right to specific performance of an agreement of sale deals with contractual rights and it is certainly open to the parties to agree with a view to shorten litigation in regular Courts to refer the issues relating to specific performance to arbitration. There is no prohibition in the Specific Relief Act, 1963 that issues relating to specific performance of contract relating to immovable property cannot be referred to arbitration. Nor is there such a prohibition contained in the Arbitration and Conciliation Act, 1996.
15- The Hon'ble Apex court in the case of Sushma Shivkumar Daga v. Madhurkumar Ramkrishnaji Bajaj, (2024) 12 SCC 253 has held that two Tripartite Agreements were the broader agreements and they formed the basis of the subsequent agreements including the Conveyance Deed and the Development Agreements signed between the appellant and the respondent. So, if there was an arbitral clause in the tripartite agreement it means that this clause applies to the Conveyance Deed as well as the Development Agreements also. There was no requirement of the two having separate arbitral clause in them. A similar reasoning was applied in the present case as well wherein the court held that the cancellation of the document related to an immovable property would amount in an action in personam and hence it is arbitral. It is further held that the suit filed by the appellants is for cancellation of a document relating to immovable property i.e. land and it therefore amounts to an action in rem and hence arbitration is not the remedy. This question however, is no more res integra. Elaborate analysis on this aspect has been done by the Hon. Apex Court in the case of Deccan Paper Mills v. Regency Mahavir Properties, (2021) 4 SCC 786 , wherein after referring to all the relevant precedents and the case laws has held that whether it is a suit for cancellation of a deed or a declaration of rights rising from the deed, it would only be an action in personam and not in rem. The decision of the Division Bench of Andhra Pradesh High Court in Aliens Developers (P) Ltd. v. Janardhan Reddy, 2015 SCC Online Hyd 370 , was held to be wrong wherein it was held that a suit under Section 31 of Specific Relief Act amounts to an action in rem and this adjudicatory function can only be done by the Competent Civil Court and the powers cannot be exercised by an Arbitrator. The basic foundation of the Court for holding that a Section 31 suit for cancellation of a document amounts to an action in rem was held to be wrong. The entire scope and ambit of the Specific Relief Act, 1963 was considered and in Deccan Paper Mills (supra), the anomalies in law for holding such to be an action in rem were discussed and it was held that a relief sought under the Specific Relief Act is nothing but an action in personam.
16- In the case of Rashid Raza v. Sadaf Akhtar, (2019) 8 SCC 710 the Hon'ble Apex Court laid down two conditions which must be satisfied before the Court can refuse to refer the matter to the Arbitrator, a forum consciously decided by parties in an agreement. The first is whether the plea permeates the entire contract and above all, the arbitration agreement, rendering it void or secondly, whether the allegation of fraud touches upon the internal affairs of the parties inter se having no implication in the public domain. The allegations must have some implication in public domain to oust the jurisdiction of an Arbitrator, if an allegation of fraud exists strictly between the parties concerned, the same will not be termed to be as a serious nature of fraud and hence would not be barred for arbitration.
17- The case of Deccan Paper Mills Co. (supra), deals with action in personam & action in rem. In the instant matter, the Hon’ble Apex Court has held that a suit for cancellation of a deed or a declaration of rights arising from the deed would only be an ‘action in personam and not in rem’.
18- From the above enunciation of law by the Hon'ble Apex Court in series of judgments, it is discerned that in any suit, if the rights/action of the parties are in personam and not in rem, then dispute arising out of such actions are arbitrable despite there being a separate remedy of filing a suit under the Specific Relief Act and agreed by the parties in the agreement.
19- However, it has also been laid down that any dispute, even if it is an action in personam, but is not arbitrable due to certain contingencies like the dispute affects the third party, have erga omnes effect, required centralized adjudication and mutual adjudication would not be appropriate and enforceable. Further, when cause of action and subject matter of the dispute relates to an action in rem, that too not pertains to subordinate rights in personam which arise from rights in rem and when the subject matter of dispute is expressly or by necessary implication non-arbitrable as per mandatory statutes, then it cannot be referred to arbitration.
20- Further the Hon'ble Apex Court in the case of Duro Felguera, S.A. v. Gangavaram Port Ltd., (2017) 9 SCC 729
48.Section 11(6-A) added by the 2015 Amendment, reads as follows:
“11.(6-A) The Supreme Court or, as the case may be, the High Court, while considering any application under sub-section (4) or sub-section (5) or sub-section (6), shall, notwithstanding any judgment, decree or order of any court, confine to the examination of the existence of an arbitration agreement.” (emphasis supplied) From a reading of Section 11(6-A), the intention of the legislature is crystal clear i.e. the court should and need only look into one aspect—the existence of an arbitration agreement. What are the factors for deciding as to whether there is an arbitration agreement is the next question. The resolution to that is simple—it needs to be seen if the agreement contains a clause which provides for arbitration pertaining to the disputes which have arisen between the parties to the agreement.
21- The Hon'ble Apex Court in the case of Interplay Between Arbitration Agreements under Arbitration Act, 1996 & Stamp Act, 1899, In re, (2024) 6 SCC 1 has held as under :
166.The burden of proving the existence of arbitration agreement generally lies on the party seeking to rely on such agreement. In jurisdictions such as India, which accept the doctrine of competence-competence, only prima facie proof of the existence of an arbitration agreement must be adduced before the Referral Court. The Referral Court is not the appropriate forum to conduct a mini-trial by allowing the parties to adduce the evidence in regard to the existence or validity of an arbitration agreement. The determination of the existence and validity of an arbitration agreement on the basis of evidence ought to be left to the Arbitral Tribunal. This position of law can also be gauged from the plain language of the statute.
167.Section 11(6-A) uses the expression “examination of the existence of an arbitration agreement”. The purport of using the word “examination” connotes that the legislature intends that the Referral Court has to inspect or scrutinise the dealings between the parties for the existence of an arbitration agreement. Moreover, the expression “examination” does not connote or imply a laborious or contested inquiry. [ P. Ramanatha Aiyar, The Law Lexicon (2nd Edn., 1997) 666.] On the other hand, Section 16 provides that the Arbitral Tribunal can “rule” on its jurisdiction, including the existence and validity of an arbitration agreement. A “ruling” connotes adjudication of disputes after admitting evidence from the parties. Therefore, it is evident that the Referral Court is only required to examine the existence of arbitration agreements, whereas the Arbitral Tribunal ought to rule on its jurisdiction, including the issues pertaining to the existence and validity of an arbitration agreement. A similar view was adopted by this Court in Shin-Etsu Chemical Co. Ltd. v. Aksh Optifibre Ltd. [Shin-Etsu Chemical Co. Ltd. v. Aksh Optifibre Ltd., (2005) 7 SCC 234].
22- The Hon'ble Apex Court in the case of SBI General Insurance Co. Ltd. v. Krish Spg., (2024) 12 SCC 1 has held as under :
117.In view of the observations made by this Court in Interplay Between Arbitration Agreements under the Arbitration Act, 1996 & the Stamp Act, 1899, In re [Interplay Between Arbitration Agreements under the Arbitration Act, 1996 & the Stamp Act, 1899, In re, (2024) 6 SCC 1 : 2023 INSC 1066] , it is clear that the scope of enquiry at the stage of appointment of arbitrator is limited to the scrutiny of prima facie existence of the arbitration agreement, and nothing else. For this reason, we find it difficult to hold that the observations made in Vidya Drolia [Vidya Drolia v. Durga Trading Corpn., (2021) 2 SCC 1 : (2021) 1 SCC (Civ) 549] and adopted in NTPC Ltd. v. SPML Infra Ltd. [NTPC Ltd. v. SPML Infra Ltd., (2023) 9 SCC 385 : (2023) 4 SCC (Civ) 342] that the jurisdiction of the Referral Court when dealing with the issue of “accord and satisfaction” under Section 11 extends to weeding out ex facie non-arbitrable and frivolous disputes would continue to apply despite the subsequent decision in Interplay Between Arbitration Agreements under the Arbitration Act, 1996 & the Stamp Act, 1899, In re [Interplay Between Arbitration Agreements under the Arbitration Act, 1996 & the Stamp Act, 1899, In re, (2024) 6 SCC 1 : 2023 INSC 1066] .
23- The Hon'ble Apex Court in the case of Central Organisation for Railway Electrification v. ECI SPIC SMO MCML (JV), (2025) 4 SCC 641 has held as under :
166.At the Section 11 stage, a referral court only has to determine the existence of arbitration agreement. The validity of the arbitration clause providing for the procedure for appointment of arbitrators will require the referral court to enter into a detailed consideration of evidence and render a finding as to law and facts. This issue should be left to be decided by the Arbitral Tribunal in view of the doctrine of competence-competence. The Arbitral Tribunal is competent to rule on its jurisdiction, including the issue of validity of the arbitration clause for violating the equality principle under the Arbitration Act.
24- The Hon'ble Apex Court in the case if Motilal Oswal Financial Services Ltd. v. Santosh Cordeiro, (2026) 2 SCC 801 has held as under :
16.There is no dispute that the leave and licence agreement of 6-10-2017, in Clause 33, contained an arbitration clause. In a proceeding under Section 11 of the A&C Act, the Court is to confine the examination to the existence of an arbitration agreement. Section 11(6-A) which was brought into force with effect from 23-10-2015, though omitted by Act 33 of 2019, the omission has not yet been notified.
25- The Hon'ble Apex Court in the case of Ananthesh Bhakta v. Nayana S. Bhakta, (2017) 5 SCC 185 has held as under :
36.When the partners and those who claim through partners agreed to get the dispute settled by arbitration, it is not open for the appellants to contend that partnership being unregistered partnership, the dispute cannot be referred.
26- In the present case at hand, the respondents have raised an objection that the dispute cannot be referred to the Arbitrator as the same is based on a partnership deed dated 09.04.2020 which is a sham document. The respondents have contended that although the document bears their signatures, however, such signatures were obtained under coercion and not in fit state of mind. On this basis, the respondents have contended that the document is a sham and cannot be treated as a binding agreement containing a valid arbitration clause. The respondents have contended that they have already instituted a civil suit before the competent Civil Court seeking a declaration that the partnership deed dated 09.04.2020 is null and void.
27- The objection raised by the respondents that the partnership deed dated 09.04.2020 is a sham document involves disputed questions of fact, particularly regarding the alleged coercion and mental state at the time of execution, which require appreciation of evidence.
28- In view of the factual matrix of the present case and above enunciation of law laid down by the Hon’ble Apex Court, this Court is of the considered opinion that there is no legal bar to refer the dispute to arbitration merely because a civil suit in respect of the partnership deed dated 09.04.2020 is pending. The pendency of such a civil suit would not, by itself, preclude arbitral proceedings, particularly where a dispute has arisen between the parties in terms of the partnership deed which contains the arbitration clause. Accordingly, the application is allowed.
29- However, the parties would be at liberty to raise their objections with regard to jurisdiction, limitation as well as any other issue which goes to the root of the matter, before the learned Arbitrator, who shall consider and decide the same in accordance with law, on its own merits, in the light of the judgment of the Hon'ble Apex Court in the cases of Uttarakhand Purv Sainik Kalyan Nigam Ltd. v. Northern Coal Field Ltd., (2020) 2 SCC 455 and Aslam Ismail Khan Deshmukh v. ASAP Fluids (P) Ltd., (2025) 1 SCC 502 .
30- Considering the list of empanelled Arbitrators issued by the M.P. Arbitration Centre, Jabalpur, following order is passed:
Shri Anil Thakre, Retd. District & Sessions Judge, Address- 36, Rachna Nagar, Govindpura, Bhopal, Contact No.94250-25431, [email protected],who has consented in terms of Section 11(8) of the Act of 1996, is appointed as sole Arbitrator to resolve the dispute between the parties in the case.
Arbitrator shall issue the notices and fix the date and suitable venue for arbitration. Said arbitration will take place at Bhopal.
Parties are directed to deposit necessary charges and fees as per M.P. Arbitration Center (Domestic and International) Rule, 2019.
Director of Madhya Pradesh Arbitration Centre, Domestic and International, Jabalpur (M.P.D.I.A.C.) shall communicate the decision of this Court to the Sole Arbitrator.
Other provisions of Section 15(3)(4) of the Arbitration and Conciliation Act, 1996 will apply to substitute Arbitrator.
30- With aforesaid directions, the Arbitration Case is disposed of.