Broad arbitration clauses in partnership deeds can cover dissolution disputes, fraud allegations, and tribunal jurisdiction questions.

Broadly drafted arbitration clauses in partnership deeds may extend to disputes over dissolution of the firm, validity of a modification deed, and allegations of fraud or misrepresentation. The text notes that questions on the scope of the arbitration agreement and the arbitrator's jurisdiction are ordinarily for the arbitral tribunal under the Arbitration and Conciliation Act, 1996, rather than for the court at the appointment stage. It also states that an arbitration clause entered into under the Arbitration Act, 1940 does not prevent appointment under Section 11 of the 1996 Act where the dispute is invoked after its commencement, as the earlier regime stood repealed.

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Issues: (i) Whether disputes arising out of the partnership deeds, including the question of dissolution of the firm and challenge to the modification deed on allegations of fraud and misrepresentation, were referable to arbitration under the arbitration clause and the Arbitration and Conciliation Act, 1996. (ii) Whether the fact that the arbitration agreement had been entered into under the Arbitration Act, 1940 prevented appointment of an arbitrator under Section 11 of the Arbitration and Conciliation Act, 1996.

Issue (i): Whether disputes arising out of the partnership deeds, including the question of dissolution of the firm and challenge to the modification deed on allegations of fraud and misrepresentation, were referable to arbitration under the arbitration clause and the Arbitration and Conciliation Act, 1996.

Analysis: The arbitration clauses were couched in wide terms and covered all disputes relating to the firm, its affairs and the partners. The Court held that, under Sections 8 and 11 of the Arbitration and Conciliation Act, 1996, contentious questions as to the scope of the arbitration clause, the validity of the deed, and the arbitrator's jurisdiction are to be left for decision by the arbitral tribunal. The Court further held that dissolution of a partnership is not, by itself, beyond arbitral adjudication where the agreement refers all matters in difference between the partners to arbitration. The allegation of fraud and misrepresentation did not, on the facts, exclude the dispute from arbitration.

Conclusion: Yes. The disputes were held to be arbitrable and were directed to be decided by the arbitrator.

Issue (ii): Whether the fact that the arbitration agreement had been entered into under the Arbitration Act, 1940 prevented appointment of an arbitrator under Section 11 of the Arbitration and Conciliation Act, 1996.

Analysis: The Court held that the Arbitration and Conciliation Act, 1996 applied to disputes raised after its commencement, and that the earlier arbitration regime stood repealed by Section 85 of the Act. Since the arbitration clause was invoked after the new Act came into force, no fresh agreement under the new Act was necessary. The Court also applied the settled principle that the Chief Justice or his designate under Section 11 is not to decide contentious jurisdictional objections, but only to secure appointment where the agreed procedure has failed.

Conclusion: No. The application under Section 11 was maintainable and the objection based on the old Act failed.

Final Conclusion: The disputes between the partners were referred to arbitration, the sole arbitrator was appointed, and the connected suit and interlocutory applications were disposed of in accordance with that reference.

Ratio Decidendi: Where an arbitration clause is broadly worded, disputes concerning dissolution of partnership and challenge to partnership documents are ordinarily for the arbitral tribunal to decide, and the court acting under Sections 8 and 11 of the Arbitration and Conciliation Act, 1996 should not adjudicate contentious jurisdictional objections at that stage.

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