1 acd IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION SUMMONS FOR JUDGMENT NO.403 OF 2007 IN SUMMARY SUIT NO. 1938 OF 2007 Nalin Pravin Shah & Anr. ..Plaintiffs Vs. Bhaskar Purshottamdas Upadhyaya & Ors. ..Defendants. ---- Mr. Amish Shroff i/b Rajani Assoc., for the Plaintiffs. Mr. Sunil More, for Defendant nos.1 to 5 and 7. Ms. Gayatri Sharma i/b S.K. Srivastava & Co., for Defendant no.6. ---- CORAM: S.J. VAZIFDAR, J. DATED : 6TH AUGUST 2009 P.C.: 1. The suit is filed to recover a sum of Rs.17,57,991/- together with interest at 21% p.a. from the date of filing of the suit till payment. 2. The two Plaintiffs, Defendant nos.1 to 4 and Defendant no.6 carried on business as partners in the firm name and style of Defendant no. 7,“Huxley & Co.(India)”. 3. In the year 2004, the Plaintiffs and Defendant no.6 retired from and Defendant no.5 joined the partnership firm as a partner. A Deed of 2 Partnership dated 01.04.2004 was entered into which records the same. In the said deed, Defendant no.5 was described as the incoming partner, Defendant nos.1 to 4 were described as the continuing partners and the Plaintiffs and Defendant no.6 were described as the retiring partners. Clause 2 thereof reads as under: “ The Continuing Partners along with the Incoming Partner agreed to pay the interest @ 10% p.a. to the loan account of the Retiring Partners. The balance standing to the credit of such loan accounts shall be repaid to the Retiring Partners within the period of two years from the date of retirement.” 4. A document titled “Goodwill Deed Memorandum of Understanding” was executed between the Plaintiffs, Defendant no.6 and Defendant nos.1 to 4. Clauses 1,4 and 5 thereof read as under: “1. The Goodwill of the Firm is calculated & valued at Rs. 35,000/- as on 31st March, 2003 and the same shall be credited to the capital account of all the partners including Retiring partners in their existing Profit Sharing Ratio. The balance standing to the credit of the capital accounts of Retiring partner shall be transferred to their respective loan accounts. 4. The continuing partners agree to pay interest @ 10% per annum from 01.04.2004 to the loan account of the retiring partners on the outstanding amount on the date of retirement & such loan account shall be repaid within a period of 2 years from 01.04.2004. 5. The Retiring Partners do hereby declare and confirm that they shall not have any rights, titles, interest, claim & demand whatsoever in the firm name of HUXLEY & CO.(INDIA), Brand Name- Wintogeno and in the goodwill of the firm which now exclusively belongs to the Continuing Partners. 3 The Amount outstanding in the Capital/Loan Accounts of the Retiring partners as on 31st March 2003 is as below: Mr.Nalin P.Shah Mr. Vimal P.Shah Bharat H.Amin(HUF) Capital A/c Rs.4,60,000.00 Rs.1,60,000.00 Rs.2,40,000.00 Loan/ Current A/s Rs.3,20,438.02 Rs.1,50,600.13 Rs.57,094.98 It is thus clear from the two documents that the amount payable with interest at 10% p.a. to the Plaintiffs as well as to Defendant no.6 was crystallised. 5. Thereafter, correspondence ensued between the parties. It is important to note that Defendant no.7 addressed a letter dated 18.03.2006 requesting the Plaintiffs in view of the financial condition of the firm, to extend the loan period up to 30.09.2006 and stating that arrangements were being made to pay the entire outstanding interest on or before 31.03.2006. An extension of six months was requested. 6. By a letter dated 22.11.2006, Defendant no.7 expressed their inability to pay the entire sum and requested a further extension up to 31.03.2007 assuring the Plaintiffs that this time they would arrange the funds. 7. Promissory notes were also executed by the concerned Defendant when the extensions were sought. 8. The payments not having been made despite assurances the Plaintiffs by their letter dated 30.11.2006 addressed to the concerned Defendants 4 demanded payment. The amounts still not having been paid, the present suit was filed. 9. It was contended that the promissory notes were not duly stamped. It is not necessary for me to consider this aspect. Even if it is assumed that the promissory notes are not duly stamped, it makes no difference in view of the above documents wherein the concerned Defendants have expressly undertaken to pay the dues to the Plaintiffs. 10. The suit is based not merely on the promissory notes but on the other documents referred to earlier as well. In paragraph 13 of the plaint for instance it is averred that “the said contractual dues and payments were due to the Plaintiffs under the “Goodwill Deed Memorandum of Understanding”. Moreover, in paragraph 21 of the plaint, it is averred that the concerned Defendants are jointly and severally contractually liable to pay to the Plaintiffs. 11. These documents furnish an independent and/or additional cause of action. The cause of action arising on account of these documents was neither merged in nor extinguished by the promissory notes. It was not even so contended. 12. In the circumstances, there is no defence to the Plaintiff’s claim in the suit on merits even ignoring the promissory notes and confining to the Plaintiffs’ case to the said documents including the “Goodwill Deed 5 Memorandum of Understanding” 13. Lastly it was contended that there is an arbitration clause in the partnership agreement dated 01.04.2004 and the suit is therefore not maintainable. Clause-17 reads as under: “17.ARBITRATION: All disputes which may arise out of in relation to or in connection with or under or in respect of them and the legal or personal representative of the other or between their respective representative and whether during or after the determination of the partnership and whether in relation to interpretation of this deed or to any act of omission of either party of the dispute or in relation to any matter touching or concerning with the affairs of the partnership shall be referred to arbitration with the provisions of the Arbitration Act for the time being in force.” 14. Firstly, there is no application for referring the matter to arbitration. Secondly, the clause clearly pertains to disputes between the continuing partners and the incoming partner in relation to the partnership disputes arising in future. This is clear from the expressions “and whether during or after the determination of the partnership” and “concerning with the affairs of the partnership”. The arbitration clause does not apply to the amounts due to the Plaintiffs who did not continue as partners under the said deed. 15. In the circumstances, leave to defend is granted to the Defendants conditional upon the Defendants depositing in this Court a sum of Rs. 15,00,000/- within twelve weeks from today. In the event the Defendants deposit the aforesaid amount, the suit to stand transferred to the list of Commercial Causes. The Defendants to file 6 their written statement within thirty days. Discovery and inspection within four weeks thereafter. In the event the Defendants fail to deposit the aforesaid amount, liberty to the Plaintiffs to apply for further orders. On the said deposit being made, the Prothonotary and Senior Master to invest the same in any nationalised bank initially for a period of two years and shall renew the same thereafter for a period of one year from time to time. Summons for Judgment stands disposed of accordingly.