Justice J.B. Pardiwala, Justice R. Mahadevan, Supreme Court
Supreme Court: Arbitration Agreement Does Not Cease To Exist On Death Of Any Party; Can Be Enforced By Or Against Legal Representatives
|The Supreme Court dismissed an SLP against Gauhati High Court’s decision allowing an Appeal by the Respondents under Section 37(1)(a) of the Arbitration and Conciliation Act.
The Supreme Court held that an arbitration agreement does not cease to exist on the death of any party and the arbitration agreement can be enforced by or against the legal representatives of the deceased.
The Court dismissed a Special Leave Petition (SLP) against the Judgment of the Gauhati High Court which allowed an Appeal filed by the Respondents under Section 37(1)(a) of the Arbitration and Conciliation Act, 1996 (the Act). The High Court had quashed the Order of the Commercial Court which had dismissed a Petition filed by the Respondents under Section 8 of the Act.
A Bench of Justice JB Pardiwala and Justice R Mahadevan held “It is a well-established position of law that the term ‘partners’ extends to and would include their legal heirs, representatives, assigns or legatees, etc. Persons claiming under the rights of a deceased person are the representatives of the deceased party, and therefore, both the parties to the agreement and their legal heirs are entitled to enforce an arbitral award and are bound by it. In light of Section 40 of the Act of 1996 the existence of an arbitration agreement is not affected by the death of a party to the arbitration agreement. As a consequence, the right to sue for rendition of account also survives, ensuring that the legal representatives can assert or defend claims arising from the partnership agreement.”
The AOR Shagufa Salim appeared for the Petitioners, while AOR Pavan Kumar Chaturvedi appeared as party-in-person for the Respondents.
Brief Facts
The legal heirs (Respondents) of a deceased partner in a Partnership Firm had filed a Petition under Section 8 of the Arbitration and Conciliation Act, 1996, seeking reference to arbitration as per the arbitration clause in the partnership deed. The same was dismissed by the Commercial Court.
The High Court vide the impugned Judgment held that as per one of the clauses of the partnership deed, it was evident that it was binding upon the heirs of the deceased partner as well.
Court’s Reasoning
The Supreme Court had to determine whether the legal heirs of a deceased partner in a partnership firm, being non-signatories to the partnership deed and in the absence of their explicit consent, can still be bound by the arbitration agreement prescribed.
The Court referred to its decision in Ravi Prakash Goel v. Chandra Prakash Goel (2008) wherein it was held that “an arbitration agreement does not cease to exist on the death of any party and the arbitration agreement can be enforced by or against the legal representatives of the deceased. The Court emphasized on the definition of a ‘legal representative’ under Section 2(1)(g) of the Act of 1996 to hold that an arbitral agreement and the award is enforceable by or against the legal representatives of the deceased.”
Similarly, the Delhi High Court in Jyoti Gupta v. Kewalsons (2018) held that “merely because the arbitration agreement refers to the disputes between ‘partners’, the same cannot debar or take away the right of enforcement of such an arbitration agreement vested in the legal heirs of the deceased partner in view of Section 40 of the Act.”
Consequently, the Court held, “Applying the above exposition of law in the facts of the present case, since the legal heirs of the deceased partner, namely, Sampat Lal Verma, have stepped into the shoes of the deceased, clause 15 of the partnership agreement will operate to bind both the petitioners and the respondents.”
Accordingly, the Supreme Court dismissed the SLP.
Cause Title: Rahul Verma & Ors. v. Rampat Lal Verma & Ors. (Neutral Citation: 2025 INSC 296)
Appearance:
Petitioners: AOR Shagufa Salim
Respondents: AOR Pavan Kumar Chaturvedi; Advocates Nitish Kumar, Abhishek Raj, Amit Kumar Thakur and Pavan Kumar Chaturvedi