Arbitration clause limited to subsisting partnership disputes cannot be invoked after dissolution, especially with fraud and non-signatory claims.

An arbitration clause confined to disputes arising during the continuance of a partnership cannot be invoked after the partnership has been dissolved. Reference under Section 8 may also be declined where the pleadings disclose prima facie allegations of fraud, collusion, misappropriation, diversion of funds, and account manipulation requiring detailed oral and documentary evidence, and where claims are pressed against non-signatories concerning separate businesses and assets outside the partnership arrangement. In such circumstances, the dispute falls outside the scope of the arbitration agreement and is more appropriately examined by a civil court.

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Issues: Whether the dispute arising from a dissolved partnership and the connected claims against non-signatories to the partnership deed were liable to be referred to arbitration under Section 8 of the Arbitration and Conciliation Act, 1996.

Analysis: The arbitration clause was confined to disputes arising during the continuance of the partnership, and the partnership had already been dissolved before the application for reference was moved. The pleadings also disclosed prima facie allegations of fraud, collusion, misappropriation, diversion of funds, and manipulation of accounts, which required detailed oral and documentary evidence and were more appropriately examined by a civil court. In addition, defendants who were not parties to the partnership agreement were impleaded, and specific reliefs were sought against them in respect of separate businesses and assets outside the partnership arrangement. The court held that the Arbitration and Conciliation Act, 1996 did not abolish the civil court's power to decline reference in such circumstances, particularly where the dispute involved substantial questions of fact and law and claims beyond the scope of the arbitration clause.

Conclusion: The dispute was not referable to arbitration and the refusal to invoke Section 8 was justified.

Ratio Decidendi: An arbitration clause limited to disputes arising during the subsistence of a partnership cannot be invoked after dissolution, and reference to arbitration may be refused where the dispute involves serious allegations of fraud and claims against non-signatories that fall outside the scope of the arbitration agreement.

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