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2024 SCC OnLine Del 5473

In the High Court of Delhi at New Delhi

(BEFORE NEENA BANSAL KRISHNA, J.)

Akshay Chaturvedi … Petitioner;

Versus
Ayush Chaturvedi and Another … Respondents.
Arb.P. 228/2024
Decided on August 7, 2024, [Reserved on : 29th April, 2024]
Advocates who appeared in this case:
Mr. Vishesh Kanodia & Mr. Pradeep Kanodia, Advocates.
Mr. Sanat Kumar, Sr. Advocate with Mr. Vinayak Batta, Advocate.
The Judgment of the Court was delivered by
I.A. 4103/2024 (u/S 5 of Limitation Act, 1963 r/w Section 151 of
CPC, 1908)
NEENA BANSAL KRISHNA, J.:— By way of present Application, the
applicant/petitioner seeks condonation of 257 days' delay in re-filing
the present petition.
2. For the grounds and reasons stated in the present Application, the
Application is allowed. The delay of 257 days in re-filing the present
petition is hereby condoned.
3. The Application is disposed of.
ARB.P. 228/2024
4. The present Petition under Section 11(6) of the Arbitration and
Conciliation Act, 1996 (hereinafter referred to as “the Act, 1996”) has
been filed on behalf of the petitioner seeking appointment of a sole
Arbitrator for adjudication of the disputes that have arisen between the
parties in respect of Partnership Deeds dated 06.06.2021 and
01.01.2022.
5. Briefly stated, the original Proprietor, Shri Ashwini Chaturvedi, the
paternal uncle (brother of petitioner's father) of the petitioner was
assigned the Dealership of Indian Oil Corporation Limited (hereinafter
referred to as “IOCL”) Petrol Pump vide Letter of Intent dated
04.06.1991 issued by the Chief Divisional Manager, IOCL, allotting him
a Petrol Pump in Kanpur. A fresh Letter of Intent substituting the earlier
one, for a Petrol Pump in New Delhi was issued to the original
Proprietor, Shri Ashwini Chaturvedi in the year 1995 which
subsequently culminated into a Dealership.
6. It is asserted by the Petitioner that the said Dealership got
originally assigned to Shri Ashwini Chaturvedi purely at the instance of
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petitioner's father, Shri Arvind Chaturvedi. Since the inception, the

original Proprietor was always dependent upon the petitioner's father
who not only received the Dealership of the Petrol Pump because of the
efforts of the petitioner's father but was able to run the business solely
because of the petitioner's father's money and investments. Moreover,
the charge of running the Petrol Pump was often left to the petitioner's
father who was instrumental in its success.
7. The petitioner has claimed that since the original Proprietor did
not have the requisite finances, he constantly corresponded with IOCL
requesting the reconstitution of the Dealership from sole Proprietorship
to Partnership between himself and his brother, Shri Arvind Chaturvedi.
8. In September, 1999, the original Proprietor, Shri Ashwini
Chaturvedi as well as the father, Shri Arvind Chaturvedi, of the
petitioner wrote separate letters to the Chief Divisional Officer, IOCL
requesting the permission for conversion of sole Proprietorship into the
Partnership.
9. On 29.09.1999, the Petrol/HSD Pump Dealership Agreement
(hereinafter referred to as the “Dealership Agreement”) was executed
between the original Proprietor and the IOCL, assigning the original
Proprietor the Dealership of the Petrol Pump.
10. On 06.06.2021, a Partnership Deed was executed between the
petitioner and the original Proprietor and the petitioner became the
partner instead of his father. Thereafter, the petitioner and the original
Proprietor submitted the Partnership Deed to IOCL along with the Letter
dated 07.12.2021 to the Chief Divisional Manager, IOCL requesting him
to reconstitute the Dealership in the name of Partnership Firm which
was duly acknowledged by IOCL.
11. It is submitted that the physical meetings were held and before
the Dealership could be transferred in the name of Partnership Firm,
the family decided that the original Proprietor would retire from the
business because of his health issues and his son, Sh. Ayush
Chaturvedi/the respondent No. 1 herein, would take over the position of
his father, the original Proprietor under the Partnership which had been
constituted on 06.06.2021.
12. A fresh Partnership Deed dated 01.01.2022 was thus, executed
between the petitioner and the respondent No. 1 and the share of
original Proprietor was transferred to him, the respondent No. 1 herein.
13. Since the first Reconstitution Application, wherein the petitioner
and the original Proprietor were the partners, was still under
consideration, the IOCL rejected the reconstitution based on the first
Partnership Deed dated 06.06.2021 because of change of partners via E
-mail dated 21.01.2022. On 21.02.2022, a second reconstitution
proposal was filed along with the Partnership Deed dated 01.01.2022 to
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reconstitute the Dealership in favour of the petitioner and the

respondent No. 1.
14. Before in-principle approval for reconstitution of the Dealership
could be obtained, the original Proprietor died on 01.02.2022. Since the
original Proprietor had died in the middle of the reconstitution
formalities, the Firm could not be reconstituted and the petitioner and
the respondent No. 1 were left to operate the business and share profits
without reconstitution from IOCL.
15. The petitioner has asserted that to his utter shock, the
petitioner's aunt, wife of original Proprietor, the respondent No. 2
herein, in collusion and in connivance with the respondent No. 1 staked
claim to the Dealership in place of original Proprietor which was
accepted by IOCL and the temporary operational rights to the Petrol
Pump were granted to the respondent No. 2, on 24.02.2022. The IOCL
also granted time to the respondent No. 2 to submit the reconstitution
proposal within three months.
16. Discovering the breaches committed by the respondent Nos. 1
and 2, the petitioner and his father addressed a joint Letter dated
26.04.2022 to the Chief Retail Sales Manager, IOCL presenting him the
entire facts and circumstances concerning the Petrol Pump, M/s.
Sushanti Filling Station in order to bring to his attention to the disputes
regarding the same so that the Dealership may not be reconstituted in
favour of the respondent No. 2 and be kept in abeyance till the disputes
are resolved.
17. The IOCL vide Reply dated 05.05.2022 rejected the objections of
the petitioner and his father by stating that upon the death of original
Proprietor, the respondent No. 2, his wife, has become entitled to
reconstitution of the Dealership in her favour and the earlier
reconstitution proposals that were submitted, have become invalid on
the demise of original Proprietor.
18. The petitioner has claimed that the respondent No. 2, being
bound by the Contract entered into between the original Proprietor, has
no authority to request the reconstitution of Dealership in her sole
name. The respondent No. 2 is bound by the Arbitration Clause in the
two Partnership Deeds as they both were signed by the original
Proprietor, who was her predecessor-in-interest. Reliance has been
placed on the decision in Jyoti Gupta v. Kewalsons, 2018 SCC OnLine
Del 7942, wherein it has been observed that upon the death of a
partner, the Arbitration Agreement between the partners shall survive
and can be enforced by the legal heirs of the deceased partner.
19. In order to secure the amounts and the dues of the petitioner,
the petitioner had filed Petition bearing No. OMP(I)(COMM) 187/2022
under Section 9 of the Act, 1996 which is still pending.
20. It is submitted that as per the two Partnership Deeds, the
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petitioner is entitled to receive a salary of Rs. 1,00,000/- per month,

20% bonus of total salary, and 30% of firm income before charging
salary and bonus in excess of Rs. 3,00,000/-. This amount roughly adds
upto Rs. 45,00,000/- a year and approximately Rs. 2,70,00,000/- over
an average estimate of six years.
21. It is further submitted that the Partnership Deeds can only be
terminated by mutual consent of the parties, the respondents are in
breach of their obligations under the said two Partnership Deeds to pay
the said sum to the petitioner.
22. A Notice dated 03.04.2023 through the counsel for the petitioner
was served by the petitioner on the respondents to invoke the
Arbitration Clause in the two Partnership Deeds calling upon the
respondents to appoint a sole Arbitrator.
23. The respondents in the Reply, through their counsel,
disagreed to the appointment of the Arbitrator claiming that there was
no enforceable contract between the parties.
24. The petitioner has submitted that the respondents have failed to
fulfil their obligations under the Partnership Deeds to pay the lawful
dues of the petitioner under the said two Partnership Deeds and are
continuing to be in breach. Therefore, the present petition has been
filed on behalf of the petitioner seeking appointment of a sole
Arbitrator.
25. The respondents in their Reply have claimed that the present
petition is not maintainable as it is based on two proposed Partnership
Deeds which never came into force and do not have any legal effect.
26. The first proposed Partnership Deed was rejected by IOCL via E-
mail dated 21.01.2022 and the same became non-est by virtue of
novation.
27. The other proposed Partnership Deed dated 01.01.2022 was
signed with different partners, namely, the petitioner and the
respondent No. 1. Further, in regard to the second proposed
Partnership Deed, before a decision could be taken upon on it, the sole
Proprietor died. Accordingly, the second proposal also got rejected by
IOCL as is evident from its Letter dated 05.05.2022.
28. The respondents have asserted that the documents relied upon
by the petitioner were only proposals as is evident from the heading of
both these documents which read as “Proposed Partnership Deed” and
they never fructified into the Partnership Deeds.
29. Moreover, Clause 4 of both the proposals makes it even more
clear that prior written approval of IOCL would be required in order to
change the constitution of the Firm. Thus, the two documents were only
a proposal which is contingent upon the receiving the approval of IOCL
and these documents never got so approved. The partnership never got
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fructified and no rights flow from the same and there is no legally
enforceable Agreement.
30. It is contended that the petitioner cannot claim any relief
against the respondent No. 1 and he does not have any right, title or
interest in the Retail Outlet/Dealership of the Petrol Pump.
31. It is further asserted that the respondent No. 2 has been
wrongly made a party in the present petition as she was not a party to
the two proposed Partnership Deeds dated 06.06.2021 and 01.01.2022
respectively. There is no Agreement between the petitioner and the
respondent No. 2 having a valid Arbitration Clause.
32. It is further submitted that it was only the sole Proprietor who
was the Dealer of the Retail Outlet and the ultimate owner is the IOCL.
The Dealer cannot enter into the independent Agreement regarding its
Retail Outlet of its own without the approval of IOCL. Therefore, even if
it is assumed that the Dealer enters into an Agreement with the
petitioner but it is still required the approval of IOCL, which in the
present case has been rejected vide Letter dated 05.05.2022. The
proposals never attained finality and no legally enforceable Agreement
ever came into existence.
33. It is further asserted that the Proprietor of the Retail Outlet
Petrol Pump never got reconstituted as the proposals got rejected by
IOCL. The petitioner himself admits that he does not have any right in
the Retail Outlet. Also, the claim of the petitioner is based on the said
two proposed Partnership Deeds, is completely misconceived as there is
no concluded Agreement.
34. Moreover, the submissions made by the petitioner are contrary
to the Dealership Agreement which provides that the Dealership shall
not enter into any Agreement, Contract or understanding whereby the
operations of the Dealership are or may be controlled or carried out and
or financed by any other person/Firm or Company whether directly or
indirectly, whether in whole or in part.
35. The respondents have placed reliance on the decision in M.V.
Shankar Bhat v. Claude Pinto, (2003) 4 SCC 86, wherein it has been
observed that if an Agreement entered into is subject to ratification by
another party, then the same is not a concluded Contract.
36. Reliance has also been placed on the decision in Magic Eye
Developers Ltd. v. Green Edge Infrastructure Private Ltd., (2023) 8 SCC
50, wherein it has been held that it is the duty of the Referral Judge to
first determine the validity of the Arbitration Agreement, if raised at a
pre-referral stage and it should not be left to be determined by the
Arbitral Tribunal.
37. It is claimed that before there could be any concluded
Partnership Deeds and assignment of the Dealership, the original
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Proprietor, Shri Ashwini Chaturvedi died of a massive heart attack on

01.02.2022. Upon his demise, IOCL vide its Letter dated 24.02.2022
asked the legal heirs of Late Shri Ashwini Chaturvedi to submit the
reconstitution proposal, since as per its Policy, only legal heirs were
entitled to be inducted as the Dealers on the demise of sole Proprietor.
38. The petitioner along with his father, Shri Arvind Chaturvedi
wrote a Letter dated 24.02.2022 to IOCL requesting that the
reconstitution proposal may be kept in abeyance to which IOCL replied
vide its Order dated 05.05.2022 that as per its Policy, upon the demise
of sole Proprietor, the steps were to be undertaken as per the details
therein. It was also explained that the proposed Partnership Deeds
became invalid on the demise of sole Proprietor of the Petrol Pump. It
was also explained why the proposal had been rejected.
39. As per the guidelines of IOCL, the respondent No. 2 submitted
the proposal for reconstitution on 29.03.2022 that all the legal heirs of
Late Shri Ashwani Chaturvedi, the original Proprietor, including the
respondent No. 1 relinquished their rights in favour of their mother i.e.,
the respondent No. 2 herein for being appointed as the sole Proprietor
of the Retail Outlet. This Proposal dated 29.03.2022 has been approved
by the IOCL and the respondent No. 2 has been appointed as the sole
Proprietor by virtue of the Dealership Agreement dated 28.07.2022.
40. On merits, all the averments made by the petitioner have been
denied.
41. Learned counsel for the petitioner has submitted that there
was a Partnership Agreement entered into between the parties which
contained a valid Arbitration Clause and therefore, the present petition
is maintainable.
42. The arbitral disputes have been raised by way of present
petition, for which a Notice had also been given and therefore, the
present Petition under Section 11 of the Act, 1996 is maintainable.
43. Learned counsel on behalf of the petitioner on the decision in In
Re : Interplay between Arbitration Agreements under the Arbitration
and Conciliation Act, 1996 and the Indian Stamp Act, 1899, 2023 SCC
OnLine SC 1666, wherein it has been observed that existence of valid
Arbitration Agreement is a pre-requisite of invoking Section 11 of the
Act, 1996. Learned counsel for the petitioner has also placed reliance on
the decisions in Ashapura Mine-Chem Limited v. Gujarat Mineral
Development Corporation, 2015 SCC OnLine SC 356, Umesh Goel v.
Himachal Pradesh Cooperative Group Housing Society Limited, 2016
SCC OnLine SC 624, Jyoti Gupta v. Kewalsons, 2018 SCC OnLine Del
7942 and Ved Gupta v. Apsara Theatres, Jammu, (1983) 4 SCC 323,
wherein also similar propositions have been laid down.
44. Learned Senior Advocate on behalf of the respondent has,
however, vehemently opposed the present petition and has asserted
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that there is no reconstitution Policy of IOCL. Clause 11 specifically

provides that there cannot be any reconstitution of the Dealership
without prior approval of Zonal Head/State Head. There is also
reconstitution fee which is liable to be paid. The Application for
reconstitution though filed in the name of the proposed Partnership
with IOCL, but it was never approved. In fact, prior to the approval of
this reconstitution Application, the original Proprietor, Shri Ashwani
Chaturvedi expired on 01.02.2022 and consequently, in terms of the
Policy, it is his wife to whom the Dealership has been transferred as a
‘No Objection’ has been given by respondent No. 1 and other legal heir
of deceased Shri Ashwani Chaturvedi, in favour of the respondent No.
2, their mother.
45. It is submitted that there being no Dealership transferred in the
name of proposed Partnership, there is no question of the Partnership
having been given effect to. Also, it is evident that no Partnership got
constituted but only the proposed Partnership was there which was to
be given effect to.
46. Learned Senior Advocate on behalf of the respondent further
submits that there is no valid Arbitration Clause between the parties
and therefore, the disputes if any, inter se the parties, cannot be
referred to arbitration.
47. Learned Senior Advocate on behalf of the respondent has placed
reliance on the decision in U.P. Rajkiya Nirman Nigam Ltd. v. Indure
Pvt. Ltd., (1996) 2 SCC 667 to assert that when there is only a draft
Agreement between the parties, the same cannot be termed as a
binding Agreement between the parties for referring their disputes to
arbitration. Section 2(a) of the Act envisages a written agreement for
arbitration and that written agreement to submit the existing or future
differences to arbitration; when the original contract itself was not a
concluded contract, then there is no Arbitration Agreement invoking the
arbitration.
48. Reliance has also been placed on the decision in Magic Eye
Developers Ltd. (supra), wherein a reference has been made to N.N.
Global Mercantile Private Limited v. Indo Unique Flame Ltd., (2023) 7
SCC 1, wherein it has been observed that while considering the referral
of the disputes to arbitration under Section 11(6) of the Act, 1996, the
Court must examine and ascertain about the existence of the
Arbitration Agreement.
49. Learned Senior Advocate on behalf of the respondent has also
placed reliance on the decision in M.V. Shankar Bhat (supra).
50. Submissions heard.
51. The Court while considering an Application under S. 11 of the
Act, has a limited scope of considering whether there exists a valid
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Arbitration Agreement between the parties.

52. t is a settled proposition of law which has been defined by the
Constitution Bench of the Apex Court in N.N. Global Mercantile Private
Limited, (supra) that the intention behind insertion of Section 11(6) of
the Act, 1996 was to confine the Court acting under Section 11 of the
Act, 1996 to examine and ascertain about the existence of an
Arbitration Agreement.
53. The Apex Court in Duro Felguera, SA v. Gangavaram Port Ltd.,
(2017) 9 SCC 729 had held that the referral Court only needs to
consider one aspect to determine the existence of an Arbitration
Agreement i.e., whether the underlying contract contains an Arbitration
Agreement which provides for arbitration pertaining to the disputes
which have arisen between the parties to the Agreement. The validity of
an arbitration agreement should be restricted to the requirement of
formal validity such as the requirement that the agreement must be in
writing. This interpretation also gives true effect to the doctrine of
kompetenz-kompetenz by leaving the issue of substantive existence
and validity of an Arbitration Agreement to be decided by arbitral
tribunal under Section 16 of the Act, 1996. It was further observed that
the scope of the authority of an arbitral tribunal under Section 16 of the
Act, 1996 is wide because it can deal with issues pertaining to the
existence and validity of an Arbitration Agreement. Section 11 of the
Act, 1996 only deals with existence, the former should be given more
weight. Post the 2015 Amendment Act, the referral Courts are only
required to prima facie determine the existence or validity of an
Arbitration Agreement. The basis for such prima facie determination lies
in the fact that the Arbitral Tribunal will later have the competence to
rule on the issue of existence and validity of the Arbitration Agreement.
Therefore, the separability principle applies at the referral stage.
54. In the case of Vidya Drolia v. Durga Trading Corporation, (2021)
2 SCC 1, it was observed that when an Application under Section 11(6)
of the Act, 1996 is made, two facts which are essential to be considered
by the referral Court are firstly, whether there is an Arbitration Clause
and secondly, whether the disputes are arbitrable. Issue of limitation
should be left for the Arbitrator, except when the claims are blatantly
on the face barred by limitation.
55. The Supreme Court in its recent judgment in In Re : Interplay,
(supra) held that in Section 11(6) of the Act, 1996, the use of the term
“examination” in itself connotes that the scope of the power is limited
to a prima facie determination. Since the Act, 1996 is a self-contained
Code, the requirement of “existence” of an Arbitration Agreement draws
effect from Section 7 of the Act, 1996.
56. The core question which thus arises before this Court is whether
there existed any valid Arbitration Agreement inter se the parties. The
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first document relied upon by the petitioner is the “Proposed

Partnership Deed” dated 06.06.2021 between the original Proprietor,
Shri Ashwini Chaturvedi, the paternal uncle of the petitioner, who was
holding the Dealership of the Petrol Pump of IOCL, and the petitioner-
Akshay Chaturvedi.
57. It is not in dispute that the original Proprietor, Shri Ashwini
Chaturvedi who had the Dealership of a Petrol Pump from IOCL and was
running it in the name of M/s. Sushanti Filling Station, was the paternal
uncle of the petitioner and the brother of the petitioner's father, Shri
Arvind Chaturvedi.
58. Moreover, the petitioner has asserted that there was some
substantial contribution of efforts by his father, Shri Arvind Chaturvedi
who had supported the original Proprietor, Shri Ashwini Chaturvedi in
setting up of this business which was always acknowledged by Late
Shri Ashwini Chaturvedi. It is in recognition of this support extended to
Late Shri Ashwini Chaturvedi, the original Proprietor, throughout by the
father of the petitioner that Late Shri Ashwini Chaturvedi (who had the
Dealership of the Petrol Pump of IOCL) entered into a Partnership Deed
dated 06.06.2021 with the petitioner, Akshay Chaturvedi. Though the
said Partnership Deed dated 06.06.2021 has a title of “Proposed
Partnership Deed”, but its terms need to considered in order to
ascertain whether it was a proposed Partnership Deed or not. It was
clearly stipulated “that both the parties have agreed to carry on the
business of Petrol Pump in the name of M/s. Sushanti Urjalaya at LSC
Sector 6 Dwarka, New Delhi in Partnership w.e.f. 06.06.2021”. Further,
terms were specified in regard to the investments/profit sharing and
the remuneration and maintenance of the books of account. It was also
agreed in the Partnership Deed dated 06.06.2021 that the first account
st
year of the Partnership shall close on 31 day of March, 2022. Clause
25 of the Partnership Deed dated 06.06.2021 provided as under:—
“25. That if any time, any question of dispute arise among the
partners relating to or meaning thereof effects of any clause of the
agreement of the partnership deed in question it shall be referred to
the arbitration under the Indian Arbitration Act then in force and
decision arrived at by the Arbitrator as appointed shall be binding on
all partners.”
59. It is also pertinent to mention here that the business of
Partnership may have been in the name of the original Proprietor, Shri
Ashwini Chaturvedi, but it is nowhere the requirement of a Partnership
Firm that the assets/business must be owned by the Partnership Firm.
Here, it is quite evident that the propriety of Dealership was in the
name of the original Proprietor, Shri Ashwini Chaturvedi who agreed to
put his resources in the name of Partnership Firm to be run jointly by
the partners of the Partnership Firm in accordance with the terms and
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conditions as agreed therein. The partnership came into existence w.e.f.

06.06.2021. The parties may have intended the transfer of the
Dealership in the name of the constituted Partnership, but till such time
there was nothing which prevented the original dealer to enter into the
Partnership for the management of the business of the Petrol Pump by
the partnership Firm and to share its profits in the manner agreed in
the Partnership Deed.
60. From the various terms of this Partnership Deed dated
06.06.2021, it is absolutely clearly that it was a Partnership which got
constituted which defined obligations, rights and liabilities of each
partner. It gave the date of commencement and also the date of
closure of the first accounting year. There is nothing in the Partnership
Deed dated 06.06.2021 which suggests that it was to come into
existence on a subsequent date or its existence or is dependent upon
the happening of any event. The Partnership Deed dated 06.06.2021,
though described as proposed, was, in fact, a Partnership duly entered
into between the original Proprietor, Shri Ashwini Chaturvedi and the
petitioner-Akshay Chaturvedi. The disputes are claimed to have arisen
in respect of this partnership business and there being a valid
Arbitration Clause, the disputes which have arisen therein are liable to
be referred to arbitration for adjudication 61. Therefore, the claim of the
respondents that it was only a proposed Partnership which never came
into existence, is not tenable at this stage while holding an inquiry
under Section 11 of the Act, 1996.
62. Learned counsel for the petitioner has further relied upon the
second Partnership Deed dated 01.01.2022, which again was termed as
“proposed Partnership Deed” between the petitioner-Akshay Chaturvedi
and the respondent No. 1-Ayush Chaturvedi, son of the original
Proprietor, Shri Ashwini Chaturvedi who was the partner in the first
Partnership. Herein again, it was recited that Shri Ashwini Chaturvedi
had been allotted a Petrol Pump of IOCL and was functioning it as a
proprietorship business in the name and style of M/s. Sushanti Filling
Station at Sector 6 Dwarka, New Delhi. Shri Ashwini Chaturvedi had
made a request for resignation from the Proprietorship Firm and the
first and second party to the Partnership Deed have been invited to join
as partners to carry on the business of running the said Petrol Pump in
Partnership. This proposal had been accepted by both the parties who
have agreed to carry on the business of running the said Petrol Pump in
the name of M/s. Sushanti Filling Station at Sector 6 Dwarka, New Delhi
in Partnership w.e.f. 01.01.2022. The remaining terms and conditions
are essentially the same as were in the first Partnership Deed dated
06.06.2021 and the closing date of the accounting year had been
provided as 31st day of March of the next year. This Partnership has
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also been duly signed by both the partners.

63. What emerges from the recitals in the Partnership Deed is that
after the first Partnership which was not dissolved, the petitioner
constituted another Partnership Deed with the son Shri Ashwini
Chaturvedi, respondent No. 1. From the recital of the Partnership Deed
dated 01.01.2022, it also emerges that Shri Ashwini Chaturvedi, the
sole Proprietor of the business of Petrol Pump, had already moved an
application for transfer of the Dealership in the name of Partnership
constituted between respondent No. 1-Ayush Chaturvedi and the
petitioner-Akshay Chaturvedi.
64. Pertinent it is to note here that there are two different aspects
for consideration. One is the existence of the Partnership Deeds and the
other is the Petrol Pump business. The original Proprietor, Shri Ashwini
Chaturvedi had separately applied to IOCL for transfer of Dealership in
the name of Partnership, of which the petitioner and the respondent No.
1-Ayush Chaturvedi were the partners.
65. What business got transferred in the name of partnership and
what was the earnings of the Partnership are questions independent of
the Partnership which got duly constituted. Therefore, a valid
Partnership Deed was duly constituted; whether any business of Petrol
Pump as indeed taken up by the Partnership and what was the business
conducted by the Partnership is a moot point, which is a dispute to be
decided by the Arbitrator.
66. Here at the stage of Section 11 of the Act, 1996, the only
question to be considered whether there is a valid Arbitration
Agreement. As discussed in detail, both the Partnership Deeds got
validly executed and came into existence and each contained the
Arbitration Clause, which is binding upon the parties.
67. It is therefore, held that there was a valid subsisting
Partnership and Arbitration Agreement between the parties.
68. The second aspect which may be referred to is that though there
is nothing to show that the first Partnership Deed between the
petitioner-Akshay Chaturvedi and the original Proprietor, Shri Ashwini
Chaturvedi ever got dissolved, but it cannot be overlooked that since it
was a Partnership of two persons, it got dissolved on the demise of Shri
Ashwini Chaturvedi 01.02.2022. However, even after the demise of Shri
Ashwini Chaturvedi, it is his legal heirs who are liable to honour his
obligations, responsibilities and liabilities under the Partnership Deed
dated 06.06.2021. For this, reliance may be placed on the decision in
Smt. Prem Lata v. Ishar Dass Chaman Lal, (1995) 2 SCC 145, the
Supreme Court while considering the effect of death of a partner on an
Arbitration Agreement, observed that though on the demise of the
partner ipso facto the partnership stands dissolved, but the legal
representatives of the deceased partner who was seeking to enforce for
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the accounts of the dissolved firm or any other right or power to realise
the property of the dissolved Firm, cannot be prevented. The right to
sue for the dissolution of the Firm must of necessity be interpreted to
mean the right to enforce the Arbitration Clause for resolution of
disputes relating to the dissolved firm, of rendition of accounts or any
right or power to realise the property of the dissolved Firm. The Apex
Court had also observed that where the Partnership Deed clearly recites
that all the disputes touching the affairs of the Partnership Firm were
referable to the Arbitrator. It cannot be challenged that the disputes
regarding the accounts of the Partnership Firm, is the dispute touching
the affairs of the Firm. A reference was made to Section 40 of Act, 1996
to observe that it is clear from Section 40 that an Arbitration
Agreement is not discharged by the death of any party and on such
death, it is enforceable by or against the legal representatives of the
deceased. Furthermore, authority of the Arbitrator does not get revoked
by the death of a party appointing it subject to the operation of any law
by virtue of which the death of a person extinguishes the right of action
of that person.
69. In Smt. Parwati Devi v. Kesarwani & Company, Sahson, 2011
SCC OnLine All 786, the Hon'ble Supreme Court observed that Section
40 of Act, 1996 and Sections 46, 47 and 48 of the Indian Partnership
Act entitle the legal representative of a deceased partner to enforce the
Arbitration Agreement which may be contained in a Partnership Deed
even after the partnership stands dissolved.
70. In Jyoti Gupta v. Kewalsons, ARB.P. 599/2017 decided on
19.03.2018, Coordinate of this Court considered the similar question
and after making a reference to the above-mentioned judgments,
concluded that the death of a partner does not bring to an end the
provision pertaining to arbitration and the legal heirs would be entitled
to invoke the Arbitration Clause.
71. In Ravi Prakash Goel v. Chandra Prakash Goel, Appeal (Civil)
bearing No. 1526/2007 decided on 21st March, 2007, the Hon'ble
Supreme Court while addressing the question of referring the disputes
to arbitration under the Partnership Deed by the legal heirs of any of
the partners, held that the arbitration can be commenced by the legal
heirs of any of the deceased partners, since Section 46 of the
Partnership Act, 1932 provides for the right of the partners on
dissolution of a Firm and states that each partner or his representative
on the dissolution of the firm would be entitled to have surplus of the
property of the Firm distributed, after payment of debts and liabilities,
amongst the partners or their representatives according to their
respective right.
72. Likewise, coordinate bench of this Court in Jyoti Gupta, (supra)
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while considering the Petition under Section 11 of the Act, 1996

observed that the third party as used in the Partnership Deed, does not
exclude inclusion of legal heirs, legal representatives etc. The right to
sue or be sued survives in favour of/against the legal heirs of the
persons suing or being sued. So long as the disputes which have arisen
during the lifetime of a deceased partner, they are referrable to
Arbitration.
73. Therefore, it has to be held that the disputes under the first
Partnership Deed dated 06.06.2021 are referable which have arisen
during the life time of Late Shri Ashwini Chaturvedi. Insofar as the
second Partnership Deed dated 01.01.2022 is concerned, it is still
subsisting inter se the partners.
74. The next aspect for consideration is that whether the bar
of Section 69 Partnership Act, is attracted because both the
Partnership Deeds are not registered. This aspect has been considered
in detail by the Apex Court in Umesh Goel, (supra), wherein it was
observed that the prohibition contained in Section 69 is in respect of
instituting a proceeding to enforce a right arising from a contract in any
Court by an unregistered firm, and it had no application to the
proceedings before an Arbitrator. If the bar engrafted in Section 69 is
absolute in its terms and is destructive of any and every right arising
under the contract itself and not confined merely to enforcement of a
right arising from a contract by an unregistered firm by instituting a
suit or other proceedings in Court only, it would become a jurisdictional
issue in respect of the Arbitrator's power, authority and competency
itself, undermining thereby the legal efficacy of the very Award, and
consequently furnish a ground by itself to challenge the Award when it
is sought to be made a rule of Court. The Award cannot either rightly or
legitimately sought to be vitiated on account of the prohibition
contained in Section 69 of the partnership Act, 1932 since the same
has no application to proceedings before an Arbitrator.
75. Therefore, the bar of Partnership Deeds not being registered
would not be an impediment to the referral of the present dispute to
the arbitration.
76. It is, therefore, held that there is a valid Arbitration Clause inter
se the parties and prima facie, it has been disclosed that there are
arbitrable disputes. It is thus, concluded that there exists a valid
written Arbitration Agreement between the parties and the arbitrable
disputes have been raised by the petitioner.
77. Without prejudice to the rights and contentions of the parties to
raises all their contentions and defences before the Ld. Arbitrator, the
present petition is allowed. Ms. Ruchi Narula, Advocate, Mobile No.
9810084123, is hereby appointed as the Arbitrator to adjudicate the
disputes between the parties.
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78. The fees of the Arbitrator would be fixed in accordance with the
Fourth Schedule of the Act, 1996 or as consented by the parties.
79. This is subject to the Arbitrator making necessary disclosure as
under Section 12(1) of the Act, 1996 and not being ineligible under
Section 12(5) of the Act, 1996.
80. The arbitration shall be conducted under the aegis of Delhi
International Arbitration Centre, Delhi High Court.
81. The parties are directed to contact the Arbitrator within one
week of being communicated a copy of this Order to them by the
Registry of this Court. A copy of this Order be also communicated to the
Ld. Arbitrator.
82. The discussion made hereinabove is for the purpose of
appointment of the Arbitrator and is not a reflection on the merits of
the case.
83. Accordingly, the present petition is disposed of in the above
terms.
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