V.H. PATEL AND COMPANY AND ORS. versus HIRUBHAI HIMABHAI PATEL AND ORS.

Citation: [2000] 3 S.C.R. 113 · Decided: 18-04-2000 · Supreme Court of India · Bench: S. RAJENDRA BABU · Disposal: Dismissed

Cited by 1 judgment(s) · cites 1 · see the full citation network in Lexace

Judgment (excerpt)

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V.H. PATEL AND COMPANY AND ORS. 
v. 
HIRUBHAI HIMABHAI PATEL AND ORS. 
APRIL 18, 2000 
[S. RAJENDRA BABU AND S.N. PHUK.AN, JJ.] 
Arbitration Act, 1940: 
Arbitration-Reference of disputes-Scope of~Parties filed claims be-
fore Arbitrator in pursuance to consent order passed by Supreme Court-But 
one parly filed a counter claim seeking dissolution of partners/zip finn-Such 
a dispute not specifically within the scope of the said consent order-Arbitrator 
gave the award on all issues except issue of dissolution on the gmund that it was 
beyond his jurisdiction~orrectness of-Held: As there was strained relation-
s/zip between the partners it is certainly open to them to claim dissolution-Idea 
is to settle disputes and not confine the same to one or the other issues-Hence, 
High Court rightly remitted the issue of dissolution to Arbitrator for decision 
afresh. 
Arbitration-Power of Arbitrator-To dissolve partnership finn-Part-
nership deed pmvided for arbitration in respect of disputes regarding partner-
ship-Held: Under these circumstances Arbitrator has such power. 
Section 39-Appeal-Single Judge remitted an issue to arbitration for 
decision afresh-Appeal to Division Bench of High Court-Whether lies-
Question left open. 
Partnership Act, 1932: 
Section 39-Dissolution of finn-Due to breach of agreement and con-
duct destructive of mutual confidence-Held : Such conduct gives rise to a 
ground for dissolution of partnership. 
A 
B 
c 
D 
E 
F 
Respondent No. 1 and his three brothers constituted a partnership 
G 
I 
. 
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firm, which was engaged in the business of manufacture, storage, sales and 
marketing of different variety of tobacco and tobacco preparations. The 
. partnership deed contained an arbitration clause in respect of disputes 
concerning the partnership. The said firm had three registered trade-
marks. As disputes arose between the partners an 'Agreement of Mutual 
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113 
114 
SUPREME COURT REPORTS 
(2000) 3 S.C.R. 
A 
Understanding' was executed between them stating that the trademarks 
were to be owned by all the partners. However, the trademarks were to be 
used separately by the partners only in the territories allotted to them 
under the agreement. 
B 
c 
D 
E 
F 
Thereafter, a Deed of Retirement was executed by all the partners of 
the firm providing for retirement of respondent No. 1 as a partner. Subse-
quently, respondent No. 1 filed a Civil Suit for a declaration that the said 
retirement deed was ineffective, inoperative, unenforceable, null and void 
and that he continued to be the partner of the firm. The petitioners also 
filed a suit under the Trade and Merchandise Marks Act, 1958 for injunc-
tion against respondent No. 1 and his two sons not to use and exploit the 
three trademarks, which belonged to the partnership firm. The trial court 
passed an order of injunction against respondent No. 1. However, the High 
Court allowed the appeal and the petitioners filed a Special Leave Petition 
(SLP) before this Court against the order of the High Court. 
This Court in that SLP passed a consent order stating that the parties 
had agreed to have their disputes resolved through sole arbitration of a 
retired High Court Judge. The consent-terms provided that all the disputes 
raised in the pleadings of the Declaratory and Injunction suits be referred 
to the sole arbitrator. 
Claims were preferred before the sole arbitrator by all parties. The 
arbitrator made an award, which declared that (i) the agreement of mutual 
understanding and the retirement deed were invalid, void and not binding 
on the parties; (ii) respondent No. 1 had not retired but continued as a 
partner subject to his paying a certain sum and (iii) the three registered 
trademarks continued to be the assets of the partnership firm and that no 
other person or firni including that of respondent No. 1 had any right, title 
or interest in the trademarks. However, the arbitrator did not entertain the 
counterclaim ofrespondentNo.1 seeking for dissolution of the partnership 
firm on the ground that it was beyond the scope of reference. 
G 
The award was filed in the High Court. Respondent No. 1 filed 
objections to certain parts of the award and prayed for partial decree in 
terms of the accepted part of the award. A Single Judge of the High Court 
confirmed the award of the sole arbitrator so far as the declaration relating 
to the agreement and the retirement deed was concerned and set aside the 
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finding that the arbitrator did n

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