IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE K.M.JOSEPH & THE HONOURABLE MR. JUSTICE M.L.JOSEPH FRANCIS MONDAY, THE 27TH JULY 2009 / 5TH SRAVANA 1931 Arb.A.No. 38 of 2008 A ---------------------------------------- OP.ARB.236/2006 of II ADDL.DISTRICT COURT,ERNAKULAM .................... APPELLANT/PETITIONER:- -------------------------------------- D.P. BALACHANDRAN, S/O. LATE E.A. PARAMESWARAN, M/S SBP FIBRE GLASS PRODUCTS, PLOT NO.15,AROOR INDUSTRIAL ESTATE, AROOR, PIN 688 534, BY ADV. SRI.K.RAMAKUMAR, SENIOR ADVOCATE SRI.J.R.PREM NAVAZ SMT.SMITHA GEORGE RESPONDENT(S): RESPONDENT: ----------------------------------------------- S.PARTHASARATHY, S/O. LATE VENKATA RANGAN CHETTY, AGED 72 YEARS, T-45, ANNANAGAR, CHENNAI. ADV. SRI.S.SREEKUMAR FOR R1 THIS ARBITRATION APPEAL HAVING BEEN FINALLY HEARD ON 06.7.2009, THE COURT ON 27/07/2009 DELIVERED THE FOLLOWING: K. M. JOSEPH & M. L. JOSEPH FRANCIS, JJ. -------------------------------------------------- ARB. APPEAL NO. 38 OF 2008 A --------------------------------------------------- Dated this the 27th July, 2009 JUDGMENT K.M.Joseph, J. Appellant challenges the order passed by the District Judge under Section 34 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the Act). By the impugned order, the District Judge has rejected the petition filed by the appellant seeking to set aside the Award passed by the Arbitrator. 2. By the Award, the Arbitrator directed the appellant to surrender vacant possession of a plot in the Aroor Chemical Industrial Estate to the respondent who was the claimant before the Arbitrator, within one month from the date of the Award. The claim of the respondent, in brief, is as follows: The respondent and the appellant were Partners of a Firm. Arb. Appeal.38/08 2 The plot of land which is directed to be surrendered was originally allotted to one Shri V.A.A. Menon by the Government. He was conducting business in the plot in the name and style “Kerala Pesticides” which was a proprietory concern. Later, the respondent along with Shri V.A.A. Menon and one Govindaraj formed a partnership in 1981. Later, Shri V.A.A. Menon retired. But, the partnership continued under a re-constitution. On 15.1.1987, there was a re-constitution. The said firm was dissolved on 27.2.1987. An extent of 40 cents of land and the building measuring 1850 Sq.Feet was allotted to the respondent and he became absolute owner thereof. On 10.5.1987, another partnership was constituted, the Partners of which were the appellant herein, the respondent, the respondent's son Shri G. Suresh and one Shri G. Sreenivasan. The firm was one at will. The recitals of the partnership deed made it clear that the respondent is the owner of Plot No.15 and Arb. Appeal.38/08 3 he is entitled to obtain vacant possession in the event of dissolution. The respondent and his son retired on 7.12.2002 and the other partner retired with effect from 23.6.2003. By relying on Clause 15 of the partnership deed, the respondent revoked the licence in respect of the plot and demanded vacant possession. This is followed by a lawyer's notice and ultimately in view of the response of the appellant, the respondent invoked the arbitration clause. It was accordingly that the Arbitrator came to be appointed. It is this claim which is accepted and allowed by the Arbitrator. 3. We heard Shri K. Ramakumar, learned senior counsel appearing for the appellant and also the learned counsel appearing on behalf of the respondent. Learned senior counsel for the appellant would contend that the award is unsustainable. He would contend that the Arbitrator has proceeded to decide the dispute and on the said basis, pass an award in respect of a Arb. Appeal.38/08 4 matter which is not covered by the arbitration clause. He would hence submit that the award is illegal and it ought to have been set aside by the court below. He also relied on the decisions of the Apex Court in Security Printing and Minting Corporation of India Limited and Another v. Gandhi Industrial Corporation ((2007) 13 SCC 236), ONGC Limited v. Garware Shipping Corporation Limited ((2007) 13 SCC 434) and Addanki Narayanappa And Another v. Bhaskara Krishnappa (dead) and thereafter his heirs and Others (AIR 1966 SC 1300). Per contra, learned counsel for the respondent would contend that the impugned order is not liable to be overturned. He would reiterate the facts. He would submit that the award is in accordance with Clause 15 of the Partnership Deed. 4. In order to appreciate the contentions of the parties, it is necessary to refer Clause 15 of the Partnership Deed which is extracted hereunder: Arb. Appeal.38/08 5 “15. The land and building bearing plot No.15/II/AP/252, in Aroor Industrial Estate, Alleppey District (hereinafter referred to as the Industrial premises), owned by M/s. Kerala Pesticides of which the second Partner, is a partner will be used by the Partnership for their business activities including Research and Development work by the first Partner, only as a licensee and no rent shall be payable either to M/s. Kerala Pesticides or to the second Partner. The maintenance and repairs of the Industrial Premises shall be borne by the Partnership. The Industrial Premises shall be surrendered to M/s. Kerala Pesticides or to the second partner on the second Partner ceasing to be a partner of the partnership. M/s. Kerala Pesticides or the second Partner shall be entitled to revoke the licence and the partnership shall be obliged to hand over vacant possession of the Industrial premises on such revocation of licence, however 6 months written notice of such revocation shall be given to the partnership.” Arb. Appeal.38/08 6 The second Partner referred to in Clause 15 is the respondent. Learned counsel for the respondent would point out that this is a case where the respondent has retired from the Firm. Still further, he issued a notice within the meaning of Clause 15 terminating the licence and demanding vacant possession of the property within the meaning of Clause 15. The period of six months had run out. All that the Arbitrator has done is to pass the award in terms of Clause 15. 5. Shri K. Ramakumar, learned senior counsel for the appellant would submit that the property belonged to the State and it is not open to the Arbitrator to decide this dispute or pass an award as he has done. He would contend, in other words, that the claim for recovery of a piece of land cannot be the subject matter of arbitration. He also would contend that the arbitration clause did not empower the Arbitrator to pass an award as the dispute which is arbitrarible must be one touching Arb. Appeal.38/08 7 the partnership affairs. He would submit that when the Firm is dissolved, thereafter it is not open to the Arbitrator to find jurisdiction in himself to direct surrender of vacant possession of the property. 6. The Arbitrator has referred to the contention of the appellant that it is only the civil court which has jurisdiction. In the course of the discussion, the Arbitrator has held, inter alia, as follows: “Ext. A7 is the partnership agreement. As per Clause 26, all disputes which may arise between the partners whether during or after the dissolution of partnership in relation to any matter touching the partnership affairs shall be referred to arbitration. As per Clause 15, it is made clear that the plot No.15/II/AP/252 in the Aroor Industrial Estate is held by M/s. Kerala Pesticides of which the claimant is a partner and the said item of property is made available to the partnership only Arb. Appeal.38/08 8 as a licensee for being used for the business activities of the partners. It empowers the claimant to revoke the licence and on revocation, the partnership will be obliged to hand over vacant possession of the premises to the claimant.” In view of the specific terms of Clause 15, which we have already adverted to and by which both the appellant and the respondent are bound, we do not see any reason to hold that the decision of the Arbitrator could be challenged on the ground that it is only a civil court which could decide the dispute. Quite clearly, the title to the property in question appears to be recognised unambiguously by the partners with the respondent under the partnership deed. It is not open to an Arbitrator to ignore the terms of the agreement, when he takes a decision. In this case, if the contention of the learned senior counsel is accepted, we would have to countenance the position that the Arbitrator must overlook the terms of the contract and refuse to Arb. Appeal.38/08 9 enforce the contract. If, in fact, the Arbitrator has passed an award refusing to recognise the title of the respondent, it would have been a case of an award oblivious to the terms of the contract and hence bad for the said reason. 7. No doubt, learned senior counsel would attempt to contend that having regard to the arbitration clause in this case, the Arbitrator should have declined to consider and decide the claim of the respondent. It is his contention that accepting the position that the Firm stood dissolved, it is not open to the Arbitrator to award surrender of the plot on the basis of Clause 15 of the partnership deed. This is for the reason that it would not be a dispute touching upon the affairs of the Firm, the Firm having been dissolved. Therefore, it is a matter where if at all, it is for the respondent to resort to the civil court to resolve the dispute. We do not see any substance in this plea either. No doubt, it is true that a person by merely participating in the Arb. Appeal.38/08 10 proceedings for appointment of an Arbitrator is not precluded from questioning the jurisdiction of the Arbitrator passing the award. It is open to the parties to question it as is contemplated under Section 16 of the Act. Section 16 of the Act reads as follows: “16. Competence of arbitral tribunal to rule on its jurisdiction: (1) The arbitral tribunal may rule on its own jurisdiction, including ruling on any objections with respect to the existence or validity of the arbitration agreement, and for that purpose,- (a) an arbitration clause which forms part of a contract shall be treated as an agreement independent of the other terms of the contract; and (b) a decision by the arbitral tribunal that the contract is null and void shall not entail ipso jure the invalidity of the arbitration clause. (2) A plea that the arbitral tribunal does not have jurisdiction shall be raised not later than the submission of the statement of defence; however, a Arb. Appeal.38/08 11 party shall not be precluded from raising such a plea merely because that he has appointed, or participated in the appointment of, an arbitrator. (3) A plea that the arbitral tribunal is exceeding the scope of its authority shall be raised as soon as the matter alleged to be beyond the scope of its authority is raised during the arbitral proceedings. (4) The arbitral tribunal may, in either of the cases referred to in sub-section (2) of sub- section (3), admit a later plea if it considers the delay justified. (5) The arbitral tribunal shall decide on a plea referred to in sub-section (2) or sub-section (3) and, where the arbitral tribunal takes a decision rejecting the plea, continue with the arbitral proceedings and make an arbitral award. (6) A party aggrieved by such an arbitral award may make an application for setting aside an arbitral award in accordance with Section 34.” Arb. Appeal.38/08 12 No doubt, the learned District Judge has proceeded to note that when the reference petition was filed under Section 11 of the Act seeking appointment of the Arbitrator, the appellant did not raise any objection and the only objection raised was regarding the non-impleadment of the other partners, which was found not sustainable. The learned District Judge further proceeds to note that a question of jurisdiction was found raised as a preliminary issue so as to obtain an interim order. But, the maintainability was considered together with the other issues and decided by the Arbitrator. The court proceeded to hold that the question regarding jurisdiction cannot be raised at this stage. Then, of course, the District Judge proceeded to consider the plea and found that the arbitral tribunal had jurisdiction. 8. It may be true, as held in Addanki Narayanappa and Another v. Bhaskara Krishnappa (AIR 1966 SC 1300), that generally when a person brings in any property as the property Arb. Appeal.38/08 13 of the Firm, he will not be able to claim or exercise any exclusive right over any property which he has brought in. But, in this case, Clause 15 of the partnership deed clearly contemplates that the land and building is to be used by the Firm for their business activities only as a licensee and no rent is to be payable either to M/s. Kerala Pesticides or to the respondent (second partner). Thus, it cannot be treated as a case where the property could be treated as the property of the Firm. It is only a case of mere licence and this is what the Arbitrator also has found. So, the decision in Addanki Narayanappa and another v. Bhaskara Krishnappa (AIR 1966 SC 1300) has no application. 9. There cannot be any doubt that the disputed question arose out of the claim by the second partner for surrender of the property on the strength of the right created in him by Clause 15 of the partnership deed. Clause 26 of the Arbitration Clause reads as follows: Arb. Appeal.38/08 14 “26. All disputes which may arise between the Partners whether during or after the dissolution of the partnership and whether in relation to the interpretation of these presents or to any act or omission of any party to the dispute or any of them in relation to any other matter whatsoever touching the partnership affairs shall be referred to the Arbitration of a single arbitrator to be appointed by the parties hereto and the decision of such arbitrator shall be final and binding on all the parties hereto. The arbitrator shall act in accordance with the subject to the provisions of the Arbitration Act, 1940 and any statutory modification thereof for the time being.” The arbitration clause clearly contemplates disputes which arise, whether it is before or after the dissolution of the partnership. It may relate to the interpretation of the terms of the partnership deed, or to any act or omission of the party or in relation to any other matter whatsoever touching the partnership affairs. There can be no doubt that the dispute can arise from the stage prior to Arb. Appeal.38/08 15 dissolution as also after the dissolution. The dispute in this case can be said to emanate from out of the interpretation of Clause 15 of the partnership deed, for the reason that the claim of the respondent is based on the said terms. Secondly, this can also be treated as a situation where the dispute arose in relation to the act on the part of the respondent in seeking surrender of the property raising his claim under Clause 15 of the Agreement. Also, this can be treated as a case where the dispute is one in relation to the omission on the part of the appellant to act in terms of Clause 15. Any other matter whatsoever touching the partnership affairs would also fall within the ambit of the jurisdiction of the Arbitrator. The parties intended to resolve all the disputes arising under the partnership agreement by an Arbitrator. No doubt, when there is dissolution, the affairs of the Firm can go on till it is finally wound up. No doubt, the arbitration clause will apply in such a situation also. It is clear Arb. Appeal.38/08 16 that the Arbitrator would have jurisdiction in view of the fact that it involves the interpretation of the partnership agreement, namely Clause 15 thereof. It is also clear that the words “touching partnership affairs” read in conjunction with “after the dissolution of the partnership” would show that the dispute of the kind raised in this case would also be covered by the arbitration clause. Apparently, the reference to partnership affairs is only to take out of the purview of the Arbitrator, disputes which arise between the partners in relation to matters not arising out of the affairs of the Firm. For instance, if there is any dispute between the partners, but not in their capacity as partners, certainly it would not be covered by the arbitration clause. We do not see any merit in the contention raised by the appellant that notice was not issued to the Firm, and that necessary persons were not parties. This Court, dealing with the argument that all the Partners are not impleaded and request is made only to the Managing Partner, did not accede to the said contention, holding that when there is a clause in the Deed to Arb. Appeal.38/08 17 resolve all the disputes by an Arbitrator, it is not necessary that all the Partners should be requested for appointment of an Arbitrator. The Arbitrator has found that Shri G. Sreenivas, who was one of the Partners, has filed an Affidavit to the effect that he retired on 23.6.2003, since he has migrated to Canada in the year 2001. The other Partner is Shri S. Suresh, who is none other than the son of the respondent. The Arbitrator has also found that all the Partners other than the appellant have withdrawn from the partnership. Notice was given to the Managing Partner. It is also to be noted that the Arbitrator has found that the Firm is dissolved. Certainly, at any rate, the view taken by the court below regarding the presence of jurisdiction with the Arbitrator is a possible view. The view taken by the Arbitrator as regards his jurisdiction appears unassailable. At any rate, it is certainly a view which is possible. There is no palpable illegality. It cannot also be said that there is any perversity and, therefore, the decisions of the Apex Court cited at the Bar in Security Printing and Minting Corporation of India Arb. Appeal.38/08 18 Limited and Another v. Gandhi Industrial Corporation ((2007) 13 SCC 236) and ONGC Limited v. Garware Shipping Corporation Limited ((2007) 13 SCC 434) do not appear to advance the case of the appellant. We see no reason to interfere. The Appeal is dismissed. Sd/= K.M. JOSEPH, JUDGE Sd/= M. L. JOSEPH FRANCIS, JUDGE kbk. // True Copy // PS to Judge