Uttaranchal High Court: Emphasizing on the purpose and object of Section 9 of the Arbitration and Conciliation Act, 1996, Division bench of Raghvendra Singh Chauhan, CJ and Alok Kumar Verma, J., held that,
A person not a party to an arbitration agreement cannot invoke jurisdiction of the Court for interim relief under Section 9 of the Act, 1996.
Instant appeal was filed under Section 37 of the Arbitration and Conciliation Act, 1996 against the decision of Additional District Judge, whereby the application under Section 9 of the Act, 1996 filed by the appellants was dismissed on the ground that the appellants neither made out a prima facie case nor was the balance of convenience in their favour nor they would suffer any irreparable loss in the event of being denied injunction because the appellants were not “partners” in the light of the arbitration clause.
Question for Consideration:
Whether the appellants have a right to claim the said reliefs under Section 9 of the Act, 1996?
Analysis, Law and Decision
High Court expressed that a partnership business is run in accordance with the terms of the contract of partners.
Whether a retired partner has right to affect the business of the partnership?
The relation between the partners is quasi fiduciary and is expressed in the maxim in societatis contractibus fides exuberet. The relation of the partners is based on mutual confidence, and it is the duty of the partners to one another and carry on the business of the firm to the greatest common advantage, to be just and faithful to each other and to render true accounts and full information of all things affecting the firm to any partner or his legal representative. Therefore, a retired partner has no right to affect the business of the partnership.
Further, the Bench did not accept the appellant’s contention that the “Partnership Deed-Retirement cum Admission Deed” is a void document and the said void document causes harm to the appellants, therefore, the appellants wanted to refer the matter, as a party to the said Deed, to the arbitration and for the interim measure, the appellants had filed the application under Section 9 of the Act, 1996.
Court gave the reasoning for the above that on one hand the said Deed was being called void by the appellants and on the other hand Clause 22 of the same Deed was being relied upon by them.
In Clause 22 of the said Deed, there was no provision to the effect that the retiring partners can invoke the said provision for the purpose of arbitration and, secondly, Section 31 of the Specific Relief Act, 1963 provides that only “court” has jurisdiction to cancel any void or voidable document.
Section 9 of the Act
Adding to the above analysis Court expressed that Section 9 of the Act, 1996 enables the parties to arbitral proceedings to obtain interim relief from a Court.
Section 9 entitles ‘any party’ to obtain interim relief from the court at three stages i.e.
(i) before the commencement of arbitral proceedings,
(ii) during the course of the arbitral proceedings, and
(iii) after the arbitral award is made but prior to its enforcement.
Further, the Court added that Section 9 of the Act, 1996 was enacted with the intention of preserving and protecting the subject matter of the arbitral proceedings, hence for invoking the jurisdiction of the Court under Section 9 of the Act, 1996 the person should be a party to an arbitration agreement.
Therefore, a person not a party to arbitration agreement cannot invoke jurisdiction of the Court for interim relief under Section 9 of the Act, 1996.
In the matter at present appellants were not “Partners” under the “Partnership Deed-Retirement cum Admission Deed”.
Hence the appellants were not parties to the arbitration agreement to invoke the arbitration clause leading to no prima facie case.
In view of the above, present appeal was dismissed. [Mohd Yusuf v. Ashish Aggarwal, 2021 SCC OnLine Utt 1274, decided on 10-11-2021]
Advocates before the Court:
For the Appellants:
Mr Arvind Vashisth, Senior Advocate assisted by Mr Kartikey Hari Gupta, learned counsel.
For respondent 1:
Mr Rakesh Thapliyal, Senior Advocate assisted by Mr Rajat Mittal, learned counsel.