TaxTMI 
TaxTMI 
2009 (10) TMI 534
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....l, 2003, to constitute a partnership firm for the purpose of carrying on the business of engineering works under the name and style of 'Maestro Engineers'. The abovementioned firm had initially commenced its functioning from the premises situated at 41, KPR Lay Out 5th Street, Nanda Nagar Singanallur, Coimbatore-5, (in short the 'suit premises'), which belonged to the father of the appellant. The appellant took active part in setting up the firm and was instrumental for the construction of the same. Differences started creeping up between the appellant and the respondents and the appellant sent a notice dated 3 November, 2005, to the respondents, being dissatisfied with their conduct. The appellant had asserted in the notice that the firm was set up by a partnership deed dated 7 April, 2003, and that he and the respondent No 3 had initially invested a sum of Rs. 2,70,000 each for the capital investment of the firm but in the partnership deed it was only mentioned as Rs. 1,00,000 against the name of the appellant. He had further asserted malpractices happening inside the firm, which were supported by the respondents. There were also allegations of collusion amongst the respondents f....
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....ivil revision case being CRP (PD) No. 1246 of 2006 along with a petition for stay being MP No. 1 of 2006 in the High Court of Judicature at Madras. The High Court, by its order dated 8 January, 2007, affirmed the aforesaid order of the District Munsif at Coimbatore and dismissed the civil revision petition and also the petition for stay filed by the appellant. It is against this order of the High Court in respect of which the instant special leave petition was filed by the appellant, which on grant of leave was heard by us in the presence of the learned counsel for the parties. 4. We have heard the learned counsel appearing for the parties and perused the materials on record. The learned counsel appearing for the appellant at the first instance contended that the dispute was relatable to the factum of retirement of the appellant from the partnership firm and its reconstitution after the respondents had created a new partnership deed to that effect without the appellant being a part of it, was unfair and not proper. It was his contention that the appellant had only made a conditional offer to retire from the firm provided his dues were settled and the respondents had grossly made a....
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....ccording to the respondents. Further, it was his contention that the partnership deed dated 6 December, 2005, was not a valid one as it was not framed in compliance with the requirements under the Partnership Act. Therefore, the argument of the respondents that the subject matter of the suit did not fall within the ambit of the arbitration clause of the original partnership deed dated 7 April, 2003, cannot be sustained. We are in agreement with the contention of the appellant to this effect. It is clear from a perusal of the documents that there was a clear dispute regarding the reconstitution of the partnership firm and the subsequent deed framed to that effect. The dispute was relating to the continuation of the appellant as a partner of the firm, and especially when the respondents prayed for a declaration to the effect that the appellant had ceased to be a partner of the firm after his retirement, there is no doubt in our mind that the dispute squarely fell within the purview of the arbitration clause of the partnership deed dated 7 April, 2003. Therefore, the arbitrator was competent to decide the matter relating to the existence of the original deed and its validity to that e....
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.... parties and such a situation cannot be properly gone into by the arbitrator. 8. Reliance was placed by the learned counsel for the appellant on a decision of this court in the case of Hindustan Petroleum Corpn. Ltd. v Pinkcity Midway Petroleums (2003) 4 Comp Lj 311 (SC): (2003) 6 SCC 503, wherein this court in paragraph 14 observed: "If in an agreement between the parties before the civil court, there is a clause for arbitration, it is mandatory for the civil court to refer the dispute to an arbitrator. In the instant case the existence of an arbitral clause in the agreement is accepted by both the parties as also by the courts below, i Therefore, in view of the mandatory language of section 8 of the Act, the courts below ought to have referred the dispute to arbitration." 9. The learned counsel for the appellant relying on the above- mentioned observations of this court in the aforesaid judgment submitted that the High Court was wrong in ignoring the ratio of the case and should have accordingly allowed the petition of the appellant for setting aside the order of the trial court. 10. The learned counsel appearing on behalf of the respondents, on the other hand, contended that....
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....ceeding with the suit despite an arbitration clause if dispute involves serious questions of law or complicated questions of fact adjudication of which would depend upon detailed oral and documentary evidence. ..Civil court can refuse to refer matter to arbitration if complicated question of fact or law is involved or where allegation of fraud is made Allegations regarding clandestine operation of business under some other name, issue of bogus bills, manipulation of accounts, carrying on similar business without consent of other partner are serious allegations of fraud, misrepresentations etc., and therefore application for reference to arbitrator is liable to be rejected." 13. We are in consonance with the above-referred decision made by the High Court in the concerned matter. In the present dispute faced by us, the appellant had made serious allegations against the respondents alleging him to commit malpractices in the account books and manipulate the finances of the partnership firm, which, in our opinion, cannot be properly dealt with by the arbitrator. As such, the High Court was justified in dismissing the petition of the appellant to refer the matter to an arbitrator. In th....