Arbitration in dispute pertaining to unregistered partnership deed if there is arbitration clause


In a case decided by the Supreme Court today on 15 November 2016, it has been held that a dispute pertaining to unregistered partnership deed cannot be referred to an arbitration where there is arbitration agreement in the deed of retirement or partnership deed. This was held in the case of Ananthesh Bhakta Represented by Mother Usha A. Bhakta & Ors. v. Nayana S. Bhakta & Ors. [CIVIL APPEAL No.10837 OF 2016]. The case was decided by a bench of Justices R.K. Agrawal and Ashok Bhushan. Full order of the court is reproduced below.

In this case, it was submitted on behalf of the petitioner that the partnership was an unregistered partnership, and therefore, no reference can be made to the arbitration.

However, the Supreme Court noted that there was no dispute between the parties that both Retirement deed and Partnership deed contained an arbitration clause. In the Retirement deed which had been signed by retiring partners, continuing partners and concurring partners, following was stated in clause 8:

“…In case of any dispute or difference arising between the parties, regarding the interpretation of the contents of this Deed of Retirement or any other matter or transactions touching the said retirement, it shall be referred to an arbitration under the provisions of the Arbitration & Conciliation Act, 1996…”.

It was also noted that in partnership deed which was of 05.04.2006, clause 26 contained an arbitration clause which is to the following effect:

“ 26. ALL DISPUTES arising between the partners or their legal representatives about the interpretation of this Deed or their rights and liabilities there under or in relation to any other matters whatsoever touching the partnership affairs shall be decided by an Arbitration as provided by the Arbitration & Conciliation Act, 1996.”

In these circumstances, the court held that when the partners and those who claimed through partners agreed to get the dispute settled by arbitration, it was not open for the appellants to contend that partnership being unregistered partnership, the dispute cannot be referred to arbitration.  The court further noted that the petitioners were able to show any statutory provision either in Arbitration and Conciliation Act of 1996 or in any other statute from which it can be said that dispute concerning unregistered partnership deed cannot be referred to arbitration. Accordingly, this submission of the petitioners was rejected by the court.

Read full judgment of the court:

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