Arbitrator's Decision To Postpone Issue Of Partnership Firm's Dissolution To Stage Of Final Hearing Not Perverse: Bombay High Court

Brief Facts:

The parties entered into four Deed of Partnerships dated 16th January 1996, for the purpose of manufacturing and trading of textile fabrics. There were arbitration clauses in each of the Deed of Partnership. There were three partners in the said partnership firm, all having equal share i.e. 33.33%.

As disputes arose between the partners, the respondent herein invoked Arbitration proceedings. By an order dated 15th October, 2003, the parties were referred to Arbitral Tribunal.

As the proceedings were pending before the Sole Arbitrator, the Appellants issued dissolution notice on 4th April, 2008 on the ground that the partnerships were at will as regards all the four partnership firm. The respondent by her reply dated 10th April 2008 objected to the dissolution notice.

By a common order dated 20th April, 2023 the learned Single Judge of this Court dismissed the Petitions filed under Section 34 of the Arbitration Act upholding the interim award of the learned Sole Arbitrator.

Contentions:

The Appellant submitted that retirement has no bearing on dissolution. A partnership-at-will is constructed so that the partners can dissolve the partnership when they desire. Therefore, a plain reading of Section 40 of the Partnership Act would have no application.

It was further argued that Clauses 13 and 14 of the Deeds of the Partnership can at all be read to determine the true nature of the said Firms, even then the same do not show any intention of the said Firms to continue, notwithstanding the death or retirement of the partners.

It was also argued that in the present case, there are three partners out of which two have given their notice to dissolve the firm and one partner alone cannot continue or insist on continuation of the firm.

It was also submitted that Death and Retirement are just methods through which a partnership can be dissolved if indicated in the Partnership Deed, whereunder in the facts of that case, the Court inferred intention when there was no direct clause.

Lastly, it was submitted that it was not available on the one side hold that the firm could not be dissolved by notice of dissolution, and on the other hand, to defer the issue on determining the date for later.

Per contra, the Respondent submitted that the Appellants challenged the interim award on merits, seeking a declaration that the partnership was at will. Determining this issue requires interpreting the terms of the Partnership Deed.

It was also argued that no arguments were advanced by either party on what alternative date should be fixed as the date of dissolution in the event the Hon'ble Tribunal decides that the partnerships were not at will. The Appellants, therefore, cannot now find fault with the Hon'ble Tribunal for not determining a date of dissolution.

Lastly, it was argued that the partners could dissolve the partnership only by mutual consent, as the intent was for the business to continue as long as possible with surviving partners and nominees or legal heirs of retiring or deceased partners.

Observations:

The court noted that while clause 13 of the partnership deed deals with the retirement of the partners, the absence of a specific duration clause did not make it the partnership at will. After 12 years of Arbitration, it was decided by the Arbitrator that the question of dissolution of the partnership firm can be considered at the final hearing.

It further added that therefore, in the real sense, after having participated in the arbitration proceedings for last more than 12 years at the stage of evidence being completed and matter posted for final hearing, the appellants have raised an issue about the death and retirement clauses being equated to determination of the partnership.

Based on the above, the court said that the view taken by the learned Sole Arbitrator cannot be said to be not a possible view of facts and law.

The Supreme Court in Wander Limited v Antox India Pvt Ltd. (1990) held that “Appellate Court will not reassess the material and seek to reach a conclusion different from the one reached by the court below if the one reached by the court was reasonably possible on the material.”

The court concluded that since the Arbitrator's view was plausible and not arbitrary, capricious, or perverse, it could not substitute its own view for that of the Arbitrator, given the limited scope of interference under Section 37 of the Arbitration Act.

Accordingly, the present appeal was dismissed.

Case Title: Suresh Raithatha Adult and Anr. VERSUS Bharti Navnit Raithatha

Citation: 2025 LiveLaw (Bom) 114

Mr. Simil Purohit, Senior Advocate with Mr. Gauraj Shah & Ms. Nirali Atha i/b Dua Associates, for Appellants.

Ms. Ayesha Damania i/b Ms. Sonal Mishal & Co.,