Company Related Claims Are Still Arbitrable Even Though It Is Non-Signatory To The Arbitration Agreement – M/S Opuskart Enterprises & ORS V. Kaushal Kishore Tyagi

Summary:

The Delhi High Court has held that disagreements between the partners related to the partner’s business activities fall within the scope of arbitrable matters even though it is non-signatory to an arbitration agreement. The Delhi High Court bench comprising Justice Pratibha M. Singh rejected that the firm or company can’t do arbitration proceedings just because the firm or company has not signed the arbitration agreement.

Facts Of The Case:

The case involves a partnership dispute among five individuals Mr. Prashant Sharma, Mr. Jayant Bhandari, Mr. Jayant Sati, Mr. Mohit Sharma (petitioners) and Mr. Kaushal Kishore Tyagi (respondent). They entered into a partnership deed on June 27, 2016, intending to engage in the trading, and import-export of books, and other businesses under the name M/s Opuskart Enterprises. The partnership deed specifies the business’s location in New Delhi, its commencement date, and the respective shares of the partners. The petitioners allege that Mr. Kaushal Kishore Tyagi, one of the partners, has misappropriated funds of the firm. A notice raising a claim of Rs.60,50,000 is issued to Mr. Tyagi, who responds by accusing the petitioners of attempting to take over both the firm and the associated company, M/s Opuskart India Pvt. Ltd.

Disputes escalate, leading the petitioners to invoke the arbitration clause in the partnership deed. The respondent raises objections to the arbitration, including concerns about the reference to the Indian Arbitration Act, stamping of the arbitration agreement, variance in claimed amounts, inclusion of company-related claims, and the issue of limitation. The court examines the partnership deed’s arbitration clause, emphasizing its broad scope. Ultimately, the Court appointed Mr. Justice V.K. Jain (Retired) as the sole arbitrator to resolve the disputes between the parties. The case’s facts are intertwined with allegations of misappropriation, objections to arbitration, and the application of the partnership deed’s clauses in a business contextinvolving both the firm and the associated company.

Issue:

Whether the order dated 10^th January 2024, mentioning that company claims are still arbitrable even though it is non-signatory to the arbitration agreement, carried out by the Delhi High Court, was in consonance with principles set in law.

Judgement:

The court, in this case, addressed a petition arising from a partnership deed and invoked under Section 11(6) of the Arbitration and Conciliation Act, 1996. The dispute centered around allegations of misappropriation of funds by Mr. Kaushal Kishore Tyagi, a partner in M/s Opuskart Enterprises. The respondent raised several objections, including references to the outdated Indian Arbitration Act, 1940, an unstamped arbitration agreement, variance in claimed amounts, non-arbitrability of claims related to the company, and claims being barred by limitation. The court, emphasizing the broad nature of the arbitration clause in the partnership deed, ruled that disputes regarding the business between the partners, conducted through both the firm and the company, were arbitrable. Referring to the Group of Companies doctrine (GOC), the court stated that non-signatory affiliates could be parties to an arbitration agreement if mutual intention existed. The court appointed Mr. Justice V.K. Jain (Retired) as the sole arbitrator, emphasizing that its observations wouldn’t bind the arbitrator in subsequent proceedings. The decision underscores the significance of a well-drafted arbitration clause and addresses objections, facilitating dispute resolution through arbitration.

Analysis:

This case involves a significant legal analysis of a partnership dispute brought under Section 11(6) of the Arbitration and Conciliation Act, 1996. The core contention revolves around allegations of financial mismanagement by one of the partners, Mr. Kaushal Kishore Tyagi, prompting the petitioners to invoke the arbitration clause. The court carefully addressed objections raised by both parties, emphasizing the expansive scope of the arbitration clause in the partnership deed. Notably, it dismissed objections related to outdated references, unstamped agreements, and variations in claimed amounts, asserting that the disputes, encompassing both the firm and the company, were arbitrable. The court’s reliance on the Group of Companies doctrine is noteworthy, establishing that non-signatory affiliates can be parties to an arbitration agreement based on mutual intent. The appointment of a sole arbitrator, Mr. Justice V.K. Jain (Retired), reflects the court’s commitment to resolving the disputes through arbitration. This case underscores the importance of a well-drafted arbitration clause in partnership deeds and provides valuable legal insights into addressing objections and facilitating effective dispute resolution.