INDIA BUSINESS WORLD - APRIL 2007
The Month that was ...

ARBITRATION CLAUSE STAYS EVEN IF CO'S DISSOLVED: SC

The Supreme Court has ruled that even after the dissolution of a firm, the arbitration clause doesn't come to an end and the legal representatives of the deceased partner in the firm can invoke arbitration proceedings for redressal of the disputes.

A bench comprising Justice A R Lakshmanan (who retired on Thursday) and Justice Altamas Kabir said, "Section 40 of the Arbitration Agreement clearly says that an arbitration agreement is not discharged by the death of a party. The agreement remains enforceable by or against the legal representatives of the deceased."

The apex court quashed the judgment of the Allahabad High Court, which had dismissed the application of the appellant (legal heir of a deceased partner in a firm) on the grounds that he had no binding arbitration agreement with the company.

The verdict came in appeal of Ravi Prakash Goel whose mother Dulari Devi was a partner in the M/S Kumar and Co. The partnership deed referred to an arbitration clause. But when the other two partners did not render accounts of the partnership firm to Dulari Devi, she raised a dispute and authorized her appellant son into the matter. She executed her Will in favour of the appellant to bequeath her estate including the partnership business. She died in 2004. The appellant then moved the high court and filed an application under Section 11 of the Arbitration and Conciliation Act, 1996 which was turned down against which he moved the apex court.