Not Proper to Entertain Arbitration Application Filed Later In Time When Another Party Has Invoked Arbitration Clause In Relation to Disputes Arising Out of Partnership Deeds: Telangana High Court
The Telangana High Court was considering an application whereby the applicant sought the appointment of an independent arbitrator.
Chief Justice Aparesh Kumar Singh, Telangana High Court
In a case where the respondent had preferred an arbitration application prior in point of time before the Karnataka High Court, the Telangana High Court has held that it would not be proper to entertain the application filed later in point of time in relation to the dispute between the parties arising out of the partnership deeds in question.
The High Court was considering an application whereby the applicant invoked the jurisdiction of the Court under Section 11(6) of the Arbitration and Conciliation Act, 1996 seeking the appointment of an independent arbitrator for adjudication of the dispute arising in connection with the Reconstituted Partnership Deed.
The Single Bench of Chief Justice Aparesh Kumar Singh held, “Therefore, going by the settled principles and the plain language of Section 11(11) of the Act, this Court is of the firm view that it would not be proper to entertain the present application before this Court filed later in point of time in relation to the dispute between the parties arising out of the partnership deeds in question. Therefore, this Court refrains from entertaining this arbitration application.”
Advocate M. Naga Deepak represented the Applicant while Senior Counsel Vikram Pooserla represented the Respondent.
Factual Background
The application was limited to the dispute raised in relation to the Reconstituted Partnership Deed, dated June 18, 2018, as the respondent had falsely represented himself as partner in the firm and that he was holding 50% of the share of the firm. Reconstitution was done pursuant to the resignation tendered by the respondent from the original partnership deed.
Arguments
The case as set up by the applicant was that the Reconstitution of the Partnership Deed provided for an arbitration clause and because of the reconstitution, the original Partnership Deed had been novated. The Partnership Deed was entered into in the State of Telangana and registered before the Registrar of Firms. The application was filed in relation to the dispute arising under the reconstituted Partnership Deed. It was submitted that the cause of action, the place of business and the execution of the reconstituted Partnership Deed, were within the territory of the State of Telangana. The applicants claimed that the dispute raised by the applicants under the reconstituted partnership deed are separate and segregable from the dispute raised by the respondent under the partnership deed.
Reasoning
On a perusal of the facts of the case, the Bench noted that the Original Partnership Deed, Reconstituted Partnership Deed, and the Joint Development Agreements, all contained arbitration clause. It was also not in dispute that the execution of the Joint Development Agreements was being carried out within the territory of the State of Karnataka.
The Bench was prima facie of the view that the dispute raised by the applicants on the basis of the reconstituted partnership deed could not be segregated or dealt with in isolation from the original partnership deed. There were averments and denials on the part of the respective parties as to the reconstitution of the partnership deed and on the question of the retirement of the respondent from the original partnership deed.
The Bench further noticed that the dispute raised by the respondent related not only to the original partnership deed, but also in connection with the Joint Development Agreements executed by the partners of the original firm before the partnership was reconstituted. The Bench thus stated, “In such a case, the subject matter of the present application based upon reconstituted partnership deed, dated 18.06.2018 cannot be read in isolation for appointment of an arbitrator to independently adjudicate the dispute between the parties in relation thereto. On the other hand, question relating to reconstitution of the partnership deed by the applicants herein on the alleged resignation of the respondent is a matter which falls within the jurisdiction of the arbitrator to be appointed by the competent Court where the respondent has moved prior in point of time invoking the arbitration clause and under Section 11(11) of the Act.”
Holding that the dispute between the parties were interconnected and could not be segregated for entertaining the arbitration application before the Court, the Bench dismissed the arbitration application and clarified, “...applicants are at liberty to raise all available grounds of law before the competent Court and the proceedings initiated before the concerned arbitrator.”
Cause Title: A.M. Emanuel and two others. v. Vinay Palaparth (Case No.: Arb Appl. No.259 of 2025)
Appearance
Applicant: Advocate M. Naga Deepak
Respondent: Senior Counsel Vikram Pooserla, Advocate Manasvi Reddy Jakka