Kerala High Court Dismisses Arbitration Request Filed Without Partner's Consent

Arbitration request by M/s. P.K.Chandrasekharan Nair & Co. deemed non-maintainable due to lack of express authority under Section 19(2)(a) of the Indian Partnership Act, 1932.  

In a significant ruling, the Kerala High Court, presided over by Mr. S. Manu J., dismissed an arbitration request filed by M/s. P.K.Chandrasekharan Nair & Co., a partnership firm, against M/s. Hindustan Petroleum Corporation Limited. The arbitration request was filed by one of the partners without the express consent of the other partner, which was a pivotal point in the court's decision.  

The case revolved around an arbitration request filed under Section 11 of the Arbitration and Conciliation Act, 1996, seeking the appointment of an arbitrator to resolve disputes between the firm and Hindustan Petroleum Corporation Limited. The court examined whether the request was maintainable in light of the statutory provisions governing partnerships in India.  

Central to the court's decision was Section 19(2)(a) of the Indian Partnership Act, 1932, which stipulates that a partner cannot submit a dispute relating to the business of the firm to arbitration without express authority, unless there is a usage or custom of trade to the contrary. The court found that the express authority from the other partner was lacking in this case.  

The petitioner argued that the arbitration request was maintainable and that the scope of inquiry under Section 11 should be limited to verifying the existence of a valid arbitration agreement. However, the court held that it has the authority to scrutinize the maintainability of an arbitration request and that express authority is indispensable for such submissions under the Partnership Act.  

In its deliberations, the court referenced several precedents, including judgments from the Supreme Court and High Courts, which emphasized the requirement for express authority in submitting disputes to arbitration. The court rejected the petitioner's reliance on a general clause in the partnership deed and underscored that specific authorization was necessary for arbitration requests.  

This judgment underscores the importance of adhering to statutory requirements in partnership agreements, particularly concerning the submission of disputes to arbitration. The ruling serves as a precedent for similar cases, affirming that arbitration requests filed without the requisite authority are not maintainable under Indian law.  

Bottom Line:

Arbitration - Maintainability of arbitration request under Section 11 of the Arbitration and Conciliation Act, 1996 - Filing of arbitration request by one partner of a partnership firm without explicit authority of the other partner is not maintainable as per Section 19(2)(a) of the Indian Partnership Act, 1932.

Statutory provision(s): Arbitration and Conciliation Act, 1996, Section 11; Indian Partnership Act, 1932, Section 19(2)(a).  

M/s. P.K.Chandrasekharan Nair & Co. v. M/s. Hindustan Petroleum Corporation Limited, (Kerala) : Law Finder Doc Id # 2815723