Express Authority From Firm’s Other Partners Necessary When One Partner Invokes Section 11(6) Of Arbitration Act: Kerala High Court

The Kerala High Court held that the express authority from other partners of the partnership firm is necessary when one partner invokes Section 11(6) of the Arbitration and Conciliation Act, 1996 (A&C Act).

The Court held thus in an Arbitration Request filed by a partner of M/s. P.K. Chandrasekharan Nair and Co., a partnership firm, in its name.

A Single Bench of Justice S. Manu observed, “In the case at hand, in Annexure 5 notice issued by the Advocate, it was stated that the same was being issued under instruction from both partners. As noted above “to submit” in legal parlance denotes placing something for consideration before an authority having jurisdiction to examine the matter. Therefore, even if Annexure 5 notice was issued jointly by the partners, requirement of express authority cannot be ignored when one of the partners invokes Section 11(6) of the Arbitration and Conciliation Act, claiming that it is on behalf of the firm.”

The Bench said that if a partner is permitted to proceed with arbitration to resolve disputes arising from the business of the firm without express authority and consent of other partners, the same may not be in the interest of the partnership and may not bind the firm or remaining partners.

Advocate Reji George appeared on behalf of the Petitioner, while Senior Advocate E.K. Nandakumar appeared on behalf of the Respondent.

Brief Facts

The Petitioner firm was a dealer of the Respondent company i.e. Hindustan Petroleum Corporation Limited since 1970. The firm was operating a retail outlet of petroleum products of the Respondent in a property. An agreement was executed between the firm and the Respondent in 1970 which was renewed periodically. Last renewal was in July 2019. In 2013, the land owner had filed a suit before the Sub Court for recovery of possession of the property and other reliefs against the Respondent and the then Managing Partner of the firm. The said suit was dismissed and the dispute was referred for arbitration as there was an arbitration clause in the lease deed. After filing of the suit, the land owner had refused to renew the lease and to give consent for renewing the explosive licence.

The outlet was therefore closed in from February 2021. Dispute between the Respondent and the land owner was referred for arbitration and while so, the land owner filed a suit before the Commercial Court against the Respondent and the firm’s Managing Partner for compensation. The said suit was also dismissed and thereafter, the Respondent sent a letter instructing the firm to find an alternate site due to pending litigation. Later, the Respondent allowed another dealer to start a new retail outlet on the premises. Hence, a Writ Petition was filed. Subsequently, a notice was issued invoking the arbitration clause and an Arbitrator was nominated. However, no response was received from the Respondent and hence, the Arbitration Request was filed before the High Court.

Contentions

The Respondent stated that such arbitration request is not maintainable in view of the specific bar contained in Section 19(2)(a) of the Indian Partnership Act, 1932. It was contended that no express authority was given by the other partner to the partner who filed the arbitration request in the name of the partnership to submit disputes relating to the business of the firm to arbitration.

Court’s Reasoning

The High Court in view of the above facts and contentions, noted, “Contention on the basis of Section 19(2)(a) of the Indian Partnership Act that the express authority of a partner is mandatory to submit dispute relating to the business of the firm was accepted by the Bombay High Court in the judgment in Maharashtra State Electricity Distribution Company Ltd. (MSEDCL) (Supra), as rightly pointed out by the learned Senior Counsel for the respondent.”

The Court enunciated that impasse due to lack of consensus among the parties to the arbitration agreement regarding appointment of Arbitrator is sought to be resolved by intervention of the Court.

“Though the arbitration process in the strict sense commences thereafter before the arbitrator, by invoking Section 11(6) of the Arbitration and Conciliation Act, the party concerned is virtually submitting the disputes to the process of arbitration. Hence the filing of an application under Section 11(6) of the Arbitration and Conciliation Act would also fall within the ambit of Section 19(2)(a) of the Indian Partnership Act. Consequently, express authority is essential unless there is any usage or custom of trade to the contrary”, it added.

The Court remarked that there is no unanimity of judicial opinions regarding the validity and binding effect of an award rendered in arbitration proceedings initiated without concurrence of all partners.

Conclusion

“If one of the partners initiates arbitration proceedings without express authority or ratification by the remaining partners and the proceedings culminate in an award there is possibility of the other partners disputing the validity and binding effect of the award. It is noticed that various High Courts have taken divergent views regarding the binding nature of such awards. Some have held that if the other partners do not object, same shall be treated as deemed ratification”, it said.

The Court, therefore, concluded that this arbitration request is not maintainable as it is submitted by one of the partners without the explicit authority of the other partner.

Accordingly, the High Court dismissed the Arbitration Request, as not maintainable.

Cause Title- M/s. P.K. Chandrasekharan Nair and Co. v. M/s. Hindustan Petroleum Corporation Limited (Neutral Citation: 2025:KER:90639)

Appearance:

Petitioner: Advocates Reji George, Saisankar S., and Joseph Raju Mathews.

Respondent: Senior Advocate E.K. Nandakumar, Advocates M. Gopikrishnan Nambiar, K. John Mathai, Joson Manavalan, Kuryan Thomas, Paulose C. Abraham, Raja Kannan, Nayanpally Ramola, and Pooja Menon.

Click here to read/download the Judgment