1 ARP42.08.sxw IN THE HIGH COURT OF JUDICATURE AT BOMBAY CIVIL APPELLATE JURISDICTION ARBITRATION PETITION NO. 42 OF 2008 Jagdish Chimanrao Dighe ] Age 57 years, residing at 701, Sameer ] Towers, Ram Maruti Cross Road, ] Near Bededkar Hospital, Naupdada, ] Thane (W) – 400 602. ] ... Applicant Versus 1. M/s. Mayur Builders ] Archies Apartment, Shop No.34, ] Oak Baug, Kalyan – 421 301. ] 2. Shri Sharaadchandra Madhav Oak ] Oak Bunglow, Oak Baug, Opp.Kalyan ] Rly. Station, Kalyan (W) 421 301 ] 3. Jitendra Premji Thakkar ] Deceased on 12-04-2004 through his ] legal heirs ] 3-A. Jayashree Jitendra Thakkar ] 3-B. Deepa Jitendra Thakkar ] 3-C. Jagruti Jitendra Thakkar ] All residing at Usha Sankulan, “A” ] Wing, 3rd Floor, Vallipeer Road, ] Opp. Sagar International Hotel, ] Next to Archies Show Room, ] Oak Baug, Kalyan (W) ] ... Respondents Mr. Kedar Dighe with Mr. U.S. Khanavkar for the Applicant. Mr. A.A. Garge for the Respondent No.2. Mr. Mahendra Agavkar for the Respondent Nos.3-A to 3-C. CORAM : S.J. VAZIFDAR, J. DATED : 3RD AUGUST, 2010. 2 ARP42.08.sxw ORAL ORDER. : 1. This is an application under section 11 of the Arbitration and Conciliation Act, 1996, for appointment of an Arbitrator. 2. The first Respondent is a partnership firm of which the Applicant, Respondent No.2 and one Jitendra Premji Thakkar were partners. The said Jitendra Premji Thakkar expired on 12th April, 2004. Pursuant to an order dated 21st August, 2009, his heirs were impleaded as Respondent Nos.3-A, 3-B and 3-C. 3. The Applicant, Respondent No.2 and the said J.P. Thakkar carried on business as partners in the firm, name and style of the first Respondent on the terms and conditions contained in a partnership deed dated 1st April, 1993. Clause 19 thereof is an arbitration agreement which reads as under :- “19. In case of any disputes or misunderstandings between the partners or their representatives during or after the duration of the partnership, the same shall be resolved according to the Arbitration Act, 1940.” 4. As stated above, the said J.P. Thakkar expired on 12th April, 3 ARP42.08.sxw 2004. Disputes and differences arose between the Petitioner and Respondent No.2. The Applicant, by a letter dated 20th June, 2008, invoked the arbitration agreement and suggested the names of two persons to act as the Arbitrators. Respondent No.2 was called upon to choose one of them within seven days. 5. By a letter dated 30th June, 2008, addressed on behalf of all the Respondents, including the newly added Respondents, the allegations on merits were denied. It is important to note that in paragraph 4, the Respondents, in order to settle the disputes at the earliest, to conduct the partnership business effectively and to avoid delay, suggested the names of two others to be the Arbitrators. They called upon the Applicant to choose the name of one of them stating that on the Applicant failing to do so, it would be presumed that he had no objection for the appointment of any of them as Arbitrators. This stand taken by the Respondents of agreeing to refer the disputes to arbitration assumes considerable significance in view of the defence now taken to this application which I would refer to shortly. 6. The Applicant, by his advocate’s letter dated 7th July, 2008, 4 ARP42.08.sxw objected to the names suggested by the Respondents and once again called upon the Respondents to choose from one of the two names suggested by him earlier. 6(A). The Respondents advocate’s letter dated 22nd July, 2008, took a slightly different stand. It was now contended that the Applicant had not provided the details of his claim which he intended making in the arbitration proceedings and that it was not possible, therefore, for the Respondents to decide as to the arbitrability of the disputes and other issues about the appointment of Arbitrators. The Applicant was, therefore, called upon to provide a specific claim statement detailing the exact dispute he intended to refer to arbitration. (B). The only contention raised before me is that in view of certain allegations of fraud made by the Applicant, this is not an appropriate matter to refer to arbitration. Reliance was placed in this regard upon the judgment of the Supreme Court in N. Radhakrishnan v. Maestro Engineers & ors. 2010 (2) Mh.L.J. 503. It was contended that in view of this judgment, whenever there are serious allegations of fraud made against the person resisting to go to arbitration, the court ought not to 5 ARP42.08.sxw compel the parties to refer the disputes and differences to arbitration. 7. For the purpose of this judgment, I will presume this submission to be well founded although I am not at all sure it is. It would require careful analysis of the judgment and a deeper consideration of the law in this regard in an appropriate case. It is unnecessary to do so in this application as the allegations of fraud are not such as would deny the Applicant the right to have the disputes referred to arbitration. Mr. Garge relied upon the averments in the application and the correspondence in support of the submission that serious allegations of fraud have been made by the Applicant against Respondent No.2. The application and the correspondence read as a whole does not support this contention. Read as a whole, they indicate that the Applicant had actually made such allegations against the son-in-law of Respondent No.2 who is not a partner of the first Respondent-firm. Read in its correct perspective, these documents indicate that the Applicant’s grievance was that it was the son-in-law of Respondent No.2 who was responsible for the various misdeeds which were done in the name of Respondent No.2 as he was the partner of the firm. This is evident from the following. 6 ARP42.08.sxw 8. The first six paragraphs of the application indicate the nature of the business of the firm and the accounts maintained by it. The business consisted mainly of developing plots of land and selling the same. Initially, all the monetary transactions and the bank accounts were looked after by Respondent No.2 and the said J.P. Thakkar and after the demise of the latter, by Respondent No.2 solely. The Applicant, in fact, mentions more than once that the relationship between Respondent No.2 and himself went back a long way, was always very cordial and that he never doubted the conduct of Respondent No.2 and agreed to all that he suggested. After J.P. Thakkar expired and in view of the failing health and advanced age of Respondent No.2, the Applicant suggested that the firm be dissolved, accounts be taken and the profits and assets of the partnership be distributed. Alternatively he suggested that he would also now look into the monetary transactions. Respondent No.2, however, refused to accede to the suggestion. It is important to note that in paragraph 7 the Applicant states that since around August 2007, the behaviour of the second Respondent with the Applicant had changed drastically. The 7 ARP42.08.sxw Applicant thereupon started examining the monetary transactions of the firm. The Applicant alleges further that since around the end of the year 2006, the son-in-law of Respondent No.2 took voluntary retirement from his job and started interfering in the matters of the firm “which the Applicant is sure has led in the drastic change in the behaviour of the second Respondent.” This averment clearly prefaces the Applicant’s main grievance in the application against the second Respondent’s son-in-law. 9. The subsequent paragraphs refer to misappropriation of funds and the assets of the firm. The Applicant has more than once used terms such as “fraud” and “deceit”. He has alleged that there were illegal cash withdrawals from the account of the firm. Mr. Garge has referred to the correspondence prior to the invocation of the arbitration agreement including the Applicant’s advocate’s letter dated 3rd May, 2008. In this letter too, the Applicant has alleged instances of mismanagement of partnership accounts. This letter also refers more than once to the fraud played by Respondent No.2 on the Applicant. However, it is clear that even in this letter, the main grievance is against the son-in-law. 8 ARP42.08.sxw 10. One of the allegations, for instance, is that on 27th November, 2007, the Applicant and his wife visited Respondent No.2 and his wife, who were travelling abroad. The Applicant’s wife one Smt. Mrudula J. Dighe is a partner with the second Respondent and his wife in another firm viz. Omkar Builders in respect whereof a similar application has been made and is on board today, being Arbitration Petition No.43 of 2008. This application has been made by the Applicant’s wife. During this meeting, the second Respondent’s son- in-law requested the Applicant’s wife for permission to withdraw Rs. 20,00,000/- from the bank account of the sister-concern Omkar Builders for the purpose of the second Respondent’s proposed foreign tour. The Applicant’s wife refused to grant such permission. They, in fact, state that they brought to the notice of the second Respondent and his son-in-law the fact that various clarifications were needed and moneys were to be brought back to the firm and accounted for between Respondent No.2 and his son-in-law. 11. Despite the same, moneys were withdrawn from the sister-concern. In paragraph 12 of the application, however, the 9 ARP42.08.sxw Applicant stated that the second Respondent had assured the Applicant that he would reimburse the said amount and also informed the Applicant that the said moneys were withdrawn by his son-in-law and not by him. Fraud, indeed, is alleged against the second Respondent for he is ultimately responsible for the acts of his son-in- law. The nature of the allegations, however, do not cast such a slur on the second Respondent per se as to deny the Applicant the right to have the disputes referred to arbitration. 12. The Applicant’s grievance against the son-in-law is also evident from the Applicant strongly protesting about the son-in-law attending even the settlement talks. For instance, a meeting was arranged to discuss a settlement on 7th June, 2008. The Applicant found a former employee of the firm who had been removed from service and the son-in-law present at the meeting. He objected to their presence on the ground that they were not concerned with the partnership firms and the disputes in connection therewith. The same was recorded in the Applicant’s advocate’s letter dated 9th June, 2009. 10 ARP42.08.sxw 13. For the same reason, I do not consider the threats to adopt criminal proceedings for the alleged misdeeds to be sufficient for denying the Applicant the right to have the disputes and differences referred to arbitration. This is not a matter where is it necessary to give the second Respondent an opportunity of clearing his name before a public forum rather than a private forum. Indeed, looking to the nature of the matter, the disputes and differences would be more effectively decided in arbitration. 14. It was not even contended before me that the issues which are likely to arise regarding dissolving the firm and taking accounts in the present case would pose such complexities as a suitable Arbitrator would not be able to deal with. 15. In the circumstances, the application is allowed. Mr. Rahul Chitnis, an advocate of this court, is appointed as a sole Arbitrator. This order is stayed upto 30th September, 2010, to enable to Respondent to challenge the same. The Arbitration Application is, accordingly, disposed of.