Gauhati High Court Appoints Arbitrator Amid Dispute Over Partnership Deed

Court exercises power under Section 11(6) of Arbitration and Conciliation Act, 1996 to resolve business conflicts involving alleged fraud.

In a significant ruling on September 17, 2025, the Gauhati High Court, led by Justice Soumitra Saikia, addressed a contentious dispute between Sushila Devi Beria and Ashok Kumar Beria concerning their partnership agreement. The court exercised its authority under Section 11(6) of the Arbitration and Conciliation Act, 1996, to appoint an arbitrator despite allegations of fraud associated with the partnership deed.

The dispute originated from a partnership deed executed on January 11, 2020, which included a clause stipulating arbitration for resolving conflicts. Tensions escalated when the petitioner, Sushila Devi Beria, issued a notice under Section 21 of the Arbitration and Conciliation Act, 1996, on January 28, 2025, inviting the respondent to agree on an arbitrator. However, Ashok Kumar Beria contested the receipt of this notice, claiming he was out of station and therefore unaware of the communication.

The petitioner, asserting that the notice was properly delivered via postal service, moved the court under Section 11(6) seeking the appointment of an arbitrator. Both parties acknowledged the validity of the partnership agreement and its arbitration clause, despite allegations of fraud not directly impacting the arbitration agreement itself.

The court referred to precedents, including the Supreme Court's decision in Managing Director Bihar State Food and Civil Supply Corporation Limited v. Sanjay Kumar, 2025 SCC Online SC 1604, which clarifies the arbitrability of disputes even amid allegations of fraud, provided these do not concern the arbitration agreement directly.

Given the situation, the Gauhati High Court appointed Smt. Chaya Rani Goswami, a retired District and Sessions Judge of Assam, as the sole arbitrator. This appointment is contingent upon a declaration of impartiality under Section 12(1)(b) of the Arbitration and Conciliation Act, 1996. The parties are scheduled to appear before the appointed arbitrator on September 20, 2025, to commence proceedings.

This ruling underscores the judiciary's commitment to upholding arbitration as a viable resolution mechanism, even amidst complex allegations, ensuring disputes are addressed within the framework of legal agreements.

Bottom Line:

Arbitration - Disputes arising under a partnership deed with an arbitration clause - Court has the power under Section 11(6) of the Arbitration and Conciliation Act, 1996 to appoint an arbitrator when disputes arise, even if notice under Section 21 of the Act is contested for non-receipt. 

Statutory provision(s): - Arbitration and Conciliation Act, 1996, Sections 11(6), 12(1)(b), 21

Sushila Devi Beria v. Ashok Kumar Beria, (Gauhati) : Law Finder Doc id # 2782817