Tasleem Ahmad vs. Masaarur Ahmad

Facts

The applicant, Tasleem Ahmad, a partner in a brick kiln business, filed an application under Section 11(6) of the Arbitration and Conciliation Act seeking the appointment of a sole arbitrator. Disputes had arisen between the five partners concerning their partnership deed dated 19.09.2021. The partnership deed contained an arbitration clause. The applicant had previously invoked the arbitration agreement and nominated an arbitrator. He also sought interim measures under Section 9 of the Act. The respondents were served, and one respondent (Respondent No. 2) filed a reply contesting the application. Respondent No. 2 contended that a compromise deed dated 29.11.2022 had been executed by all partners, rendering the application non-maintainable. This compromise deed addressed the sale of existing bricks to pay GST dues and the distribution of remaining funds.

Held

The Court held that the application for the appointment of an arbitrator is maintainable. The Court reasoned that the scope and effect of the compromise deed on the inter se rights and obligations of all partners could only be determined through arbitration. While the compromise deed addressed the sale of existing bricks to settle GST dues, it did not necessarily resolve all disputes related to the partnership's assets and accounts. Therefore, the arbitration clause in the partnership deed remained operative for these unresolved matters. The Court allowed the application and appointed Mr. Sandeep Kothari, Advocate, as the sole arbitrator to adjudicate the disputes between the parties. No issue was expressly left undecided.

Key Issues

1. Whether the disputes between the partners, as arising out of the partnership deed, have been fully settled by the compromise deed dated 29.11.2022, thereby rendering the application for appointment of an arbitrator under Section 11(6) of the Arbitration and Conciliation Act, 1996, non-maintainable? The applicant argued that the compromise deed only pertained to the sale of existing bricks and did not settle outstanding disputes concerning partnership assets and the taking of accounts. Therefore, the arbitration agreement remained alive for these unresolved issues. The respondent (Respondent No. 2) argued that the compromise deed, executed by all five partners, resolved all disputes, making the present application for arbitration unnecessary and thus non-maintainable. The respondent relied on the compromise deed itself.