Case Brief: Atul Singh vs Sunil Kumar Singh Appeal (civil) 10 of 2008

CASE BRIEF: ATUL SINGH VS SUNIL KUMAR SINGH, APPEAL(CIVIL) 10 OF 2008
 
Deciding authority:  Supreme Court of India.
Case No                 :  Appeal ( civil) 10 of 2008
Bench                    :  Justice G.P. Mathur & Aftab Alam
Date of Judgement: 04/01/2008.
FACTS:
The appeal was by special leave whereby for setting aside the judgement and order of the Patna High Court. A partnership firm in the name and 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 executed on 20.12.1972. The partnership was reconstituted on 21.5.1976, in which the share of Shri Rajendra Prasad Singh was 21% and on the death of Brij Mohan Prasad Singh, his widow Smt. Sona Devi was inducted as a partner and a fresh deed was executed on 13.1.1989 in which Shri Rajendra Prasad Singh continued to be a partner having 21% share. Shri Rajendra Prasad Singh died on 5.9.1992 leaving behind appellants nos.2, 3, 5 and 7, who are his grandsons, as his heirs. The case of the appealants 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 appealants made a request to the defendants to give the accounts of the partnership firm and give them their share of profits, but the defendants refused to do so on the ground that they or their predecessor-in-interest viz. Shri Rajendra Prasad Singh were not partners in the partnership deed which was executed on 17.2.1992. The suit was accordingly filed on 1.8.1998 before the trial court of Patna for the declaration of the reconstituted partnership deed dated 17.2.1992 (effective from 1.4.1992) 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 to the plaintiffs their share of the profits of the partnership as well as interest and principal amount of unsecured loan advanced by the firm. A further relief for grant of an ad-interim injunction restraining the respondents from mismanaging and misappropriating the funds of the firm was also sought, besides appointment of a Receiver during the pendency of the suit to manage the firm. It was decided ex- parte by the trial court due to the absence of the defendants. On an appeal made by the defendants to the High Court of Patna the petition for the reference to arbitration under S. 8 of the Arbitration and Conciliation act was allowed.
 
JUDGEMENT:
The learned counsel for the appellants submitted that the appellants are not parties to the deed executed in 17.2.1992, which was referred by the defendants to have an arbitration clause before the High Court of Patna. By S. 8 of the 1996 Act the arbitration clause or the agreement can be upheld by the parties to the arbitration agreement. With regard to the facts of the declaration of the partnership deed dated 17.2.1992 to be declared as null and void , which could be done only by the Civil Court and not the arbitrator. The learned counsel relied upon the judgement in Khardah Company Ltd. v. Raymon & Company (India) Pvt. Ltd., AIR 1962 SC1810 , “ arbitration clause cannot be enforced when it forms the integral part of the void agreement.” (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).
In the light of the arguments of the learned counsels the Court with reference to S.7, S.8 of the 1996 Act, the arbitration clause or the agreement applies only to the parties to the respective agreement and with reference to the parties to arbitration by the court in the presence of an arbitration agreement, the party claiming it should comply with the provision in S.8(2) of the 1996 Act, however the defendants herein has not submitted any certified copy or the original copy of the arbitration agreement. Moreover the deed in which the arbitration clause was mentioned the appellants were not party to such agreement. The prayer of rendition of accounts by the plaintiff on the deed dated 13.1.1989 is possible only when the partnership deed dated 17.2.1992 is declared illegal and void which could be done only by the Civil Court and not the arbitrator. Therefore, no order for referring the dispute to arbitration could have been passed in the suit.
 
DECISION:
The appeal was allowed with costs and the impugned order dated 4.8.2005 passed by the High Court in Civil Revision No.1010 of 2005 was set aside.
 
BY
A.SRI RAMYA, V year BA.BL(HONS), SCHOOL OF EXCELLENCE IN LAW.