- Case
- SHREEGOPAL BARASIA v. CREATIVE HOMES (Bombay High Court, 06-01-2025)
- Law
- Arbitration and Conciliation Act, Indian Partnership Act.
Facts: Shreegopal Barasia filed a petition under Section 11 of the Arbitration and Conciliation Act, 1996, seeking to refer disputes arising from an agreement dated February 19, 2007, and a subsequent cancellation deed dated August 14, 2015, to arbitration. The respondents objected, arguing that the partner who executed the agreement on behalf of the partnership firm lacked the implied authority to bind the firm to the arbitration clause, citing Section 19(2)(a) of the Indian Partnership Act, 1932. They also contended that the very existence of the agreement was in doubt.
Procedural Posture: This is an Arbitration Petition before the High Court of Judicature at Bombay under Section 11 of the Arbitration and Conciliation Act, 1996, for the appointment of an arbitrator. The respondents raised objections to the maintainability of the petition.
Issue: 1. Does a partner of a firm have implied authority to bind the firm to an arbitration agreement, particularly in light of Section 19(2)(a) of the Indian Partnership Act, 1932? 2. What is the scope of the referral court's jurisdiction under Section 11 of the Arbitration and Conciliation Act, 1996, specifically regarding the examination of the existence and validity of the arbitration agreement?
Holding: 1. The court rejected the respondents' argument that the partner lacked implied authority, stating that the issue of whether there was a custom or usage of trade allowing a partner to submit disputes to arbitration without express authority is a matter for the Arbitral Tribunal to decide. 2. The court held that its scrutiny under Section 11 is limited to ascertaining the existence of an arbitration agreement, and existential questions about the agreement's validity are to be decided by the Arbitral Tribunal.
Reasoning: The court reasoned that Section 16 of the Arbitration and Conciliation Act grants the Arbitral Tribunal the power to rule on its own jurisdiction, including objections to the existence or validity of the arbitration agreement. The court relied on the Supreme Court's judgment in In re: Interplay Between Arbitration Agreements under A&C Act, 1996 & Stamp Act, 1899 to emphasize that the referral court's role under Section 11 is restricted to determining the existence of the arbitration agreement. The court stated that the question of whether the execution of a contract containing an arbitration clause constitutes "submitting a dispute to arbitration" is a matter of evidence and custom, which falls within the purview of the Arbitral Tribunal. The court concluded that the objections raised by the respondents did not dissuade it from referring the disputes to arbitration.
