Introduction
Arbitration has become a preferred method for resolving disputes, particularly in business and partnership agreements. In the present case, it is titled Prikshit Wadhwa and Ors. v. Vinod K. Wadhwa explored the legal issues surrounding the invocation of arbitration clauses after the dissolution of a partnership firm. The case addresses the continuation of arbitration proceedings despite the termination of the firm and highlights the procedural flexibility under the Arbitration and Conciliation Act, of 1996. The Hon’ble Punjab and Haryana High Court’s decision underscores the importance of arbitration clauses surviving post-dissolution and reinforces arbitration’s role in resolving disputes efficiently.
Facts
The petitioners and respondent were partners in a firm. Allegedly, the respondent engaged in actions detrimental to the firm, including starting a similar proprietorship. When the petitioners objected, the respondent dissolved the firm in April 2022 without settling accounts. The petitioners invoked the arbitration clause in May 2022 through a legal notice, but the respondent argued that the clause was inapplicable due to the dissolution.
The respondent filed a civil suit for the rendition of accounts, while the petitioners sought referral to arbitration through an application under Section 8 of the Arbitration Act. They had previously filed a Section 9 petition, which was later withdrawn. An interim court order in June 2022 restrained the petitioners from using the partnership’s name, accessing its assets, or transferring funds. The respondent also contended that the arbitration clause could not survive the firm’s dissolution and that the petition was invalid since only petitioner No. 2 had served the notice.
View of the Court
The Hon’ble High Court referred to Section 21 of the Arbitration and Conciliation Act, which deems arbitral proceedings to commence when the respondent receives the notice invoking the arbitration clause. The Hon’ble High Court emphasized that this provision is procedural and does not require strict scrutiny of the notice’s form or terms, as attaching technicalities would hinder the Arbitration Act’s objective of expediting dispute resolution.
The Hon’ble High Court clarified that the arbitration clause does not require all parties to serve the notice; one party’s notice is sufficient to comply with the statutory provision. It further ruled that the arbitration clause survives even after the dissolution of the partnership, making disputes concerning the firm’s affairs still referable to arbitration. The pendency of civil or criminal litigation between the parties does not bar invoking the arbitration clause.
In conclusion, the Hon’ble High Court allowed the petition, affirming that arbitration clauses remain valid post-dissolution and that arbitration should proceed without being obstructed by procedural issues or ongoing litigation.
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