TaxTMI 
TaxTMI 
2007 (2) TMI 714
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....ht the settlement of accounts of the partnership firm and demanded payment of 50% share out of the proceeds and assets of the partnership firm. In para 12 of the notice, the respondent enlisted various machineries and equipments belonging to the partnership firm and desired that the value of the items be quantified and the proceeds shared equally between the partners. 4. In response, the petitioner vide a communication dated 10-04-02, while disputing various allegations made against him by the respondent agreed that the assets and the plant and machinery should be valued. He agreed that the partnership firm be dissolved w.e.f. 27-03-02. The petitioner also proposed mutual appointment of an arbitrator to resolve the disputes amicably at the earliest. The petitioner thereafter sent three communications dated 29-04-02, 04-05-02 and 08-05-02 reminding the respondent to respond to the request for arbitration and seeking her early response. The petitioner filed the present petition on 13-10-05. 5. The respondent filed her objections/reply to the present petition. While it is not disputed that an arbitration agreement exists between the parties under Clauses 16 and 17 of the partner....
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....l within period of limitation of three years. 8. On the other hand, submission of learned Counsel for the respondent is that the limitation for filing the present petition arose immediately upon dissolution of the firm on 27-03-2002 or, in any event, when the first notice seeking appointment of an arbitrator was issued by the petitioner on 10-04-2002. The statutory period of 30 days for appointment of an arbitrator, by mutual consent expired on 10-05-2002, and the petitioner ought to have filed the present petition within three years from 10.05.2002. Learned Counsel for the respondent relying on the judgment of Hon'ble the Supreme Court in SBP & Co. v. Patel Engineering Ltd. and Anr. 2005 SCC 618, submitted that there has to be a "live claim" at the time when jurisdiction of the Court to appoint an arbitrator is invoked, to enable the Court to exercise its jurisdiction under Section 11 of the Act. He submits that the Hon'ble Supreme Court in that decision has also held that the appointment of an arbitrator, where such an appointment is not justified, would cause prejudice to the opposite party in terms of unnecessary costs and expense of time and money. It is, Therefore,....
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....at before the expiration of the prescribed period for a suit in respect of any right, upon acknowledgment of liability in respect of such right made in writing and signed by the party against whom such right is claimed, a fresh period of limitation shall be computed from the time when the acknowledgment was so signed. An acknowledgment may be sufficient though it omits to specify the exact nature of the right or is accompanied by refusal to perform the obligation corresponding to the right claimed by the other party. 13. Every partner of a dissolved firm, is vested with the right as against all other partners of the firm, to have the property of the firm applied in the payment of the debts and liabilities of the firm, and to have the surplus distributed among the partners according to their rights. (Section 46 of the Indian Partnership Act). The Mode of settlement of the accounts is prescribed under Section 48 of the Partnership Act. It is these rights that a partner of a dissolved firm exercises, when he asks for rendition of accounts of the partnership business from the other partners. 14. To determine whether Section 18 of the Limitation Act applies to the present case, on....
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....; Anuradha R. 16. On a complete reading of the said communication, and particularly the above extracted position, it is clear: A. that the respondent was seeking disclosure of information and accounts of the partnership business from the petitioner. The respondent had even sent its agent to the petitioner on 7.10.2002 for this purpose. B. the petitioner had made disclosures and furnished some accounts. C. the respondent itself rendered some accounts, inter alia, by giving details of cheques received by the partnership, and enclosing copies of 25 pages of the accounts. The respondent admits the existence of accounts of partnership business. D. the respondent demanded further disclosure of information and furnishing of accounts. 17. To the same effect is the communication issued by the respondent on 23.11.2002 and the two communications issued by the petitioner on 7.11.2002 and 8.12.2002. It would Therefore be seen that both the parties acknowledged their respective liability in respect of the other to render accounts, in relation to the partnership business, by rendering accounts and offering to render further accounts. Bot....
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.... be correct. 21. Section 11(2) of the Act states that the parties are free to agree on a procedure for appointing the arbitrator or arbitrators. Such an agreement would, however, be subject to Sub-section (6). In the present case the agreement of the parties is to appoint the arbitrator with mutual consent. The arbitration agreement contained in the partnership deed reads as follows: 16. That during the continuance of partnership or any time after wards any dispute touching the partnership arises between the same shall be mutually decided by the partners or shall be referred to the Arbitration. 17. All disputes and question in connection with the partnership of this deed arising between the partners or legal representatives of either parties shall be referred to one Arbitrator mutually agreed by both the parties. 22. There is no specific procedure prescribed for the appointment of the Sole Arbitrator. Sub-section (5) of Section 11 states that failing an agreement referred to Sub-section (2), in an arbitration with a sole arbitrator, if the parties fail to agree on the arbitrator within 30 days from the receipt of a request by one party from the other, the appointment sh....
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....he reminders sent in April/May 2002 on the ground that the petitioner had not invoked the arbitration agreement after 8.12.2002? 25. In my view, in a case like the present, where the petitioner had already made a request for appointment of the sole arbitrator with mutual consent, to which there had been no response from the respondent it was not necessary for the petitioner to have once again undergone the formality of issuing a fresh notice seeking consent of the respondent for appointment of a mutually acceptable sole arbitrator. The respondent had made its intention (of not agreeing to mutually appoint an arbitrator ) known, by not responding to the notice dated 10.4.2002 and the subsequent reminders thereto. No useful purpose would have been served by issuance of a fresh notice to the respondent. Such a strict interpretation to Section 11(5) of the Act, in the facts of this case, would not even be in consonance with the object and purpose of the Act, which is to have expeditious disposal of disputes between the parties to the Arbitration Agreement. Strict adherence to the said provision would only entail avoidable delays. 26. One cannot also loose sight of the fact that w....
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....g served after 8.12.2002) would have to be excluded in computing the period of limitation for filing any other proceeding in relation to the same matter in issue/for the same relief. Since his claim was live on 13.10.2005, the petitioner may be able to file a civil suit on the same matter (i.e for rendition of accounts) or, he may be able to, yet again, serve a notice seeking appointment of an arbitrator by mutual consent and thereafter, if necessary, file an application under Section 11(5) of the Act. Since it would be open to him to claim the benefit of Section 14(1) and 14(2) of the Limitation Act and it would also be open to him to file a fresh application under Section 11(5) of the Act, to my mind it makes no sense in rejecting the present application which is pending since October, 2005 on the ground that the petition is barred by limitation. Consequently, Morena Mandal S.S.K. Ltd (supra) cannot be applied in the facts of this case. Mohta Alloys Steel Works (supra) was a case relating to objections under Section 33 of the Arbitration Act, 1940, and has no application to the present case. Similarly Pawan Aggarwal (supra) has no application to the facts of this case, since the ....
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....the period around 15-5-2002 to 13-10-2002, which means the delay of about five months. 32. Considering the facts that the parties were till as late as December, 2002 exchanging documents and furnishing and demanding accounts from each other, I am of the view that the petitioner has made out sufficient cause for not making the application within three years of the middle of May, 2002. Both the parties were communicating the each other, exchanging information and documents, and they were respecting the right of the other to demand the rendition of accounts and were, in their own way, complying with the request of the other to render accounts. The petitioner could, Therefore, have legitimately hoped and waited for the disputes to get resolved without in fact having to move for arbitration. The petitioner cannot be faulted for not having filed the arbitration application earlier. 33. In my view, the reliance placed by the petitioner on the decision of the Hon'ble Supreme Court in Hari Shankar Singhania and Ors. (supra) is well placed. In the present case, though the petitioner had invoked the arbitration agreement at the time of dissolution of the partnership firm, negotiatio....