Mere Pendency Of A Civil Suit Is Not An Absolute Bar To A Petition Under Section 11 Of The A&C Act: Bombay High Court
[20 June 2022] The High Court of Bombay has held that mere pendency of a Civil Suit is not an absolute bar to a petition under Section 11 of the A&C Act as long as the petitioner can withdraw its suit before the defendant file its statement on the issue. The Single Bench of Justice G.S. Kulkarni held that it is also permissible for the Civil Court to consider an application of the plaintiff to permit withdrawal of the suit when there is an arbitration agreement and refers the parties for arbitration.
Analysis By The Court
The Court observed that the opening paragraph of the partnership deed referred to the legal heirs of deceased partners as the partners in the firm. Further, Clause 17 also provided that on the death of a partner, the legal heir of that partner would be inducted as the new partner and lastly, Clause 19 also recognized the right of a legal heir of a partner to raise any dispute for settlement via arbitration.
The Court held that the applicants are persons as recognized by the deed of partnership, who have been conferred an interest in the partnership firm in the capacity as legal heirs. The Court held that such a right is recognized under three different clauses of the partnership deed, i.e., opening paragraph, Clause 17, and Clause 19.
The Court held that on a cumulative reading of all the three clauses, it becomes explicitly clear that the legal heir of a deceased partner could invoke the arbitration clause for the settlement of any dispute or difference under the partnership deed dated 12.03.2012.
The Court rejected the argument of the respondent that by choosing the remedy of civil suit, the applicants would be prohibited from seeking any reference to arbitration. The Court held that the rights accrued to the applicants as legal heirs of their deceased parents in their estate stand completely independent from the rights of these legal heirs, which the partnership deed would recognize.
The Court further held that even if assuming that the cause of action for the Civil Suit, as well as the present arbitration application, is overlapping, nonetheless as Section 8 of the Act would postulate and as a general principle in law, it is always open to the plaintiffs to withdraw the suit by making such application in the suit, not later than the date the defendants submitting their first statement on the substance of the dispute.
The Court held that there cannot be an absolute bar on the appointment of an arbitrator merely because the petitioner had filed a Civil Suit regarding the same dispute. It would be permissible for the petitioner to file an application for appointment of an arbitrator provided he can withdraw his suit before the other party files its statement on the substance of the matter.
The Court also relied on Section 40 of the A&C Act to hold that an arbitration agreement survives the death of a party and the legal heirs of that party can step into its shoes to invoke the arbitration agreement.
Accordingly, the Court allowed the arbitration petition and appointed a sole arbitrator to adjudicate the dispute arising out of the partnership deed dated 12.03.2012.