Delhi High Court

Delhi High Court: In a review petition filed under Section 114 read with Section 151 of the Civil Procedure Code on behalf of the partners of the respondent(‘firm') seeking a review of the order and consequently praying for an order cancelling the appointment of Sole Arbitrator, Chandra Dhari Singh, J. held that the respondent-applicant in the present case failed to establish adequate reasons for reviewing the order as when this Court delivered its order appointing an arbitrator, all parties were present whereby, the respondent-applicant herein failed to express any objections.

The firm,M/s Shyamjee Prepaid Services is a partnership firm that executed an agreement with the respondent partnership firm. The petitioner was appointed to be the respondent's agent in the State of Haryana to market the products wherein the petitioner firm would provide the material to the respondent, so that they may sell and dispose of the petitioner’s goods for the highest profit.

It was alleged that that material was delivered by the firm to the respondent for sale during the duration of the agency arrangement, and the firm received payments in exchange for the supplies which left a balance of Rs. 9,67,16,507.39 that was owed to and receivable from the respondent. Despite the firm’s repeated requests, the respondent has not paid the outstanding balance to the firm.

It is pertinent to note that due to daily quarrels and disputes between the parties, the erstwhile partner of the firm, Mr. Vinod Kumar Goel committed suicide. Thus, the firm was constrained to invoke the arbitration clause and a sole arbitrator was appointed by the predecessor bench of this Court. Being aggrieved by the said order, the respondent through its partners has filed the present application for review.

i. Whether the dissolution of a partnership firm will bar the erstwhile partner from invoking Section 11 of the Act, 1996, in case of a disagreement with a third party?

On the submission by the counsel for the respondent/applicant that both the firm and the respondent, that were parties to the Agency Agreement that contained the arbitration clause had already been dissolved and that the petitioner's firm, which is a new firm, does not have the legal status or locus standi to invoke the arbitration clause, the Court noted that on perusal of Section 45 Indian Partnership Act, 1932, it is clear that until public notice is made of the dissolution, even after the dissolution of a firm, partners continue to be responsible as such to third parties for any conduct committed by them that would have constituted an act of the firm if committed before the dissolution.

Section 47 of the Indian Partnership Act, 1932 makes it further clear that even after the dissolution of a Partnership firm, the partner’s rights and responsibilities continue to accrue in order to complete the uncompleted transactions at the time of dissolution.

A combined interpretation of Section 16(1)(a) and Section 40(1) of the Arbitration and Conciliation Act, 1996 demonstrates unequivocally that the arbitration provision will continue in effect even after the death of a partner causes the dissolution of the partnership. Thus, a partnership firm is nothing more than a compendium of the partners’ individual names and an act done by a firm is an act done by its partners. Thus, for the purposes of winding up or dissolution, it is necessary to complete the entire transaction pending between the firm and the third party. Consequently, the said firm shall not be barred from invoking the arbitration clause.

ii. Whether the appointment of an arbitrator by virtue of Section 11 of the Act, 1996 be reviewed?

The Court noted that the Act of 1996 does not contain any legislative provisions for reviewing the order recorded by the Court according to Section 11(6) of the Act, 1996. It is also well-established that a substantive review is distinct from a procedural review. The power of substantive review must be bestowed in a court by statute, and in the absence of such power, the court cannot engage in substantive review. However, every court and tribunal is obligated to conduct a procedural review of its judgement and, if a procedural error is discovered, to reverse the decision.

Placing reliance on S.B.P. & Co. v. Patel Engineering Ltd., (2005) 8 SCC 618, Jain Studios Ltd. v. Shin Satellite Public Co. Ltd.; (2006) 5 SCC 501 and State of West Bengal v. Associated Contractor; (2015) 1 SCC 32, the Court observed that the Courts can examine orders with procedural irregularities such as wrong hearing dates, no notification, etc. Furthermore, the Court's competence to review Section 11 orders is unaffected by substantive concerns like a Tribunal’s jurisdiction or the authenticity of the evidence.

iii. What is the scope of review and whether the present application seeking review of order be allowed?

The Court noted that the power of review is distinct from Court's power to hear appeals, i.e., the appellate jurisdiction. Thus, in order to address unintentional errors or injustice, exceptions have been carved out both statutorily and legally. The courts withheld this authority to prevent misuse of the legal system or a miscarriage of justice, even in the absence of any statutes or norms defining the situations under which it may review an order.

Placing reliance on Kamlesh Verma v. Mayawati, (2013) 8 SCC 320, the Court recorded that despite the factum of death of the former partner, Mr. Vinod Kumar Goel being mentioned in the petition by the petitioner, the respondent chose to remain silent with respect to the dissolution of the partnership on the said account, and the respondent is presenting the said basis for the first time in the current review petitions.

The Court concluded that only errors that are apparent on record may be reviewed and errors required to be discovered through a process of reasoning cannot and thus, the respondent / applicant has failed to point out any mistake that is obvious on the face of the record, which is required for a cause of review.

The Court held that the respondent/ applicant has failed to point out any ground for review in the instant applications and thus, the instant applications for review are liable to dismissed at threshold.

[Shyamjee Prepaid Services v. Top Steels, 2023 SCC OnLine Del 206, decided on 18-01-2023]

*Judgment by: Justice Chandra Dhari Singh

Advocates who appeared in this case :

Mr. Surender Gupta and Mr. Gaurav Saini, Advocates for petitioner

Mr. Sunil K. Jain, Advocate for R1/Applicant Mr. Vivek K. Tandon, Mr. Anil K. Aggarwal, Ms. Nitu Yadav and Ms. Prerna Tandon, Advocates for respondents

*Arunima Bose, Editorial Assistant has reported this brief.

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