Mr Ca Mukunda vs. Mr. Ca. Shiva Prakash H S

Facts

The petitioners, partners of the chartered accountancy firm Mukunda Shiva and Associates, filed a writ petition challenging an order dated September 17, 2026, passed by the Commercial Court in an arbitration application. The dispute arose between the petitioners and respondent partners (respondent Nos. 1 and 2) regarding the management of the firm. Respondent No. 1 issued a notice dated September 12, 2026, dissolving the firm, contending it was a partnership at will. This led to a letter from respondent No. 1 to HDFC Bank and an intimation from the bank on September 15, 2026, placing a debit freeze on the firm's accounts. The partnership deed contains an arbitration clause. Applications under Section 9 of the Arbitration and Conciliation Act, 1996, were filed before the Commercial Court, which remained inconclusive for want of further arguments, leading to the present writ petition.

Held

The Court held that the dispute concerning the dissolution of the partnership firm, including whether it is a partnership at will or a matter of retirement, is an arbitrable issue under Clause 36 of the partnership deed. The Court found that Section 9 of the Arbitration and Conciliation Act, 1996, empowers it to grant necessary interim measures. Recognizing the firm's role as an auditor for various companies and its statutory obligations, including GST compliances and income-tax return filings, the Court deemed an interim arrangement warranted to protect the interests of third parties like employees and clients. The Court permitted the petitioners to continue the firm's professional activities as they were prior to the dissolution notice, operate bank accounts for essential payments like salaries and statutory dues, and discharge contractual and professional obligations, subject to the outcome of proceedings before the Commercial Court. The bank accounts were de-freezed. The Commercial Court was directed to decide the pending applications independently and expeditiously.

Key Issues

1. Whether the dispute regarding the dissolution of the partnership firm, specifically whether it is a partnership at will or involves retirement of partners, is an arbitrable dispute under Clause 36 of the partnership deed? Petitioner's arguments: The petitioners contended that the questions of whether the partnership is at will and whether it continues despite partner retirement are arbitrable disputes. They argued that until these are adjudicated by the Arbitral Tribunal, the firm's status should be maintained, allowing it to continue operations to fulfill statutory obligations to over 185 employees and clients, including timely filing of income-tax returns and GST compliances. They asserted that respondent Nos. 1 and 2 had expressed a desire to retire, and the issue should be treated as retirement, not dissolution. Revenue/State's arguments: The judgment does not record specific arguments from the revenue or state. However, the context implies that respondent Nos. 1 and 2, through their counsel, likely argued for the validity of the dissolution notice and the consequences thereof.