Partly allowed

Ayamu @ Manu v. Raju

Kerala HC3 Jul 2008CRP/751/2007

Case brief

AI extract

What is this about?

The High Court allowed the revision petition held that an arbitration clause from a partnership deed and a retirement deed is incorporated into a subsequent settlement agreement because the dispute relates to the same liability arising from the retirement. It set aside the lower court order and directed a reference to arbitration.

What did the court decide?

The impugned order was set aside and the learned Sub Judge was directed to refer the dispute to arbitration.

Ayamu @ Manu Vs Raju — Arbitration | Kerala HC (2008)

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IN THE HIGH COURT OF KERALA AT ERNAKULAM

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PRESENT :

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THE HONOURABLE MR. JUSTICE M.SASIDHARAN NAMBIAR

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THURSDAY, THE 3RD JULY 2008 / 12TH ASHADHA 1930

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CRP.No. 751 of 2007(F)

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--------------------------------(O.S.33/2002 OF SUB COURT, OTTAPPALAM)

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PETITIONER/DEFENDANT:

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--------------------------------------

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AYAMU @ MANU, AGED 67 YEARS, S/O. ALAVI, KARIMPANCHOLA, KARUMENAM KURUSSI DESOM, VEERAMANGALAM DESOM IN OTTAPALAM TALUK.

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BY ADV. SRI.E.R.VENKATESWARAN, ADV. SRI.R.SREEHARI.

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RESPONDENTS/ PLAINTIFFS:

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------------------------------------------

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1. RAJU, S/O. GEORGE, ARATHI VILAYIL, VEERAMANGALAM AMSOM, CHAMMANNUR DESOM, OTTAPALAM TALUK.

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2. MAMMU HAJI, S/O. CHAKKINGAL UNNIAN, VEERAMANGALAM AMSOM & DESOM IN OTTAPALAM TALUK.

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3. HAMZA, S/O. MOIDEENKUTTY, KULUKKAMPARA, VEERAMANGALAM AMSOM & DESOM IN OTTAPALAM TALUK.

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R1 TO R3 BY ADV. SRI.SANTHEEP ANKARATH.

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THIS CIVIL REVISION PETITION HAVING BEEN FINALLY HEARD ON 03/07/2008, THE COURT ON THE SAME DAY PASSED THE FOLLOWING:

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M. SASIDHARAN NAMBIAR, J.

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C.R.P. NO. 751 OF 2007

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Dated this the 3^rd day of July, 2008

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ORDER

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Defendant in O.S.33 of 2002 on the file of Sub Court, Ottapalam is the revision petitioner. Respondents are the plaintiffs. Suit was filed for realization of the amount due under agreement dated 8.7.1999. In the written statement petitioner raised a contention that there is an arbitration clause in the agreement between the parties and therefore suit is to be referred to arbitration. Issue No.1 was framed on that contention. As per order dated 9.7.2007 learned Sub Judge answered the issue against petitioner holding that suit is maintainable and is not to be referred to arbitration. The order is challenged in the revision petition filed under Section 115 of Code of Civil Procedure.

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Learned counsel appearing for petitioner and respondents were heard.

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Suit is based on an agreement dated 8.7.1999 whereunder petitioner agreed to pay the amount shown therein to the respondents. The agreement shows that the amount so

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agreed to be paid by the petitioner is the amount due to respondents. The amount is made payable as it is the amount spent by the respondents for the benefit of the partnership firm. As per the agreement first respondent spent Rs.32,000/-, second respondent Rs.50,000/- and third respondent Rs.84,000/-. Petitioner admitting the liability, and respondents retired from the partnership firm, promised to pay the same within one year from that date under the agreement. The agreement does not contain any arbitration clause. The partnership deed dated 16.12.1995 admittedly incorporates an arbitration clause. Under clause 23 of that deed any dispute or difference of opinion between the parties thereto relating to the affairs of the partnership or in the interpretation or enforcement of any of the provisions, shall be settled by resort to Arbitration Act. It is the admitted case that thereafter respondents, who were the erstwhile partners, along with petitioner retired from the partnership firm and new partners were inducted and the partnership firm with the new partners continued. A deed of admission cum retirement was executed on 1.7.1999, wherein respondents are referred to as parties of third part being the retired partners and the newly inducted partners are referred to

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as parties of second part and petitioner was referred as the first part, being the continuing partner. Clause 24 of the said deed is an arbitration clause which provides that any dispute or difference of opinion between the parties relating to the affairs of the partnership or in the interpretation or enforcement of any of the provision of the deed shall be settled by resort to arbitration. Petitioner is contending that agreement dated 8.7.1999 was not executed by him and it was fraudulently created. It is the case that even if under the agreement any amount is payable, as is seen from the agreement it is a continuation of the earlier partnership agreement and the deed of admission cum retirement also contains an arbitration clause and therefore that arbitration clause is to be incorporated into the disputed agreement and if so the dispute is to be referred to arbitration.

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Learned counsel appearing for respondent argued that the disputed agreement is an entirely different agreement and though there is an arbitration clause in the deed of partnership, by the admission cum retirement deed respondents retired from the partnership firm and the arbitration clause provided in the said deed is limited to the disputes or differences

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of opinion relating to the affairs of the partnership firm or the interpretation or enforcement of any of the provisions therein and as the said deed does not provide for payment of any sum to the respondents, that clause cannot be incorporated into the subsequent agreement and therefore as rightly found by the trial court case is not to be referred to arbitration.

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Learned counsel appearing for petitioner pointed out that eventhough the deed of partnership, the deed of admission cum retirement and disputed agreement were all produced before the trial court, the documents, were not considered and whether the arbitration clause in the deed of partnership and the deed of admission cum retirement has to be incorporated in the disputed agreement, was not considered by the trial court and in such circumstances trial court may be directed to reconsider the question after considering the documents produced. Learned counsel appearing for respondents submitted that as the disputed agreement is entirely a different agreement and it does not contain an arbitration clause, there is no necessity to refer to the earlier documents and the finding of the trial court is to be sustained.

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It is seen from the disputed agreement that petitioner

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thereunder agreed to pay the sums named in the agreement to the respondents. But it shows that the sums so agreed to is the liability which was undertaken at the time of the deed of retirement. True, as pointed out by the learned counsel appearing for respondents, the amount due is not on account of the settlement of accounts at the time of retirement of the partnership firm, but as is clear from the agreement itself it is the amount fixed at the time of retirement as the sum respectively spent by the respondents as partners of the firm for the benefit of the firm. In such circumstances the agreement cannot be isolated or treated as a separate one from the previous agreements. If so, the third agreement could only be treated as a continuation of the deed of partnership and subsequent deed of retirement. If that be so, the arbitration clause therein has necessarily to be incorporated into the third agreement. It is more so because the liability created under the dispute is the liability which had occasioned on account of the retirement of respondents from the partnership firm and that too as the sum due to the respondents which was earlier spent by them for the benefit of the partnership firm. If so, it is a dispute which is to be referred to an arbitration as provided under the

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deed of partnership as well as the deed of admission cum retirement.

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A Division Bench of the High Court of Calcutta had considered incorporation of an arbitration clause, into a subsequent agreement in Abu Road Electricity Co. v. Industrial Gases Ltd. (AIR 1977 Calcutta 482) . Analysing the previous decisions, the principles regarding incorporation of provision of one agreement to another agreement was laid down by the Division Bench as follows:-

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“(a) a clause in an earlier contract can be imported into a subsequent contract if the language is appropriate, unambiguous and clear.

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(b) such clause in the earlier contract can be written in bodily into the later contract if there is no inconsistency or vagueness or uncertainty.

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(c) a clause in the earlier contract which is germane to the subject-matter of the later contract may be incorporated therein by general words though some degree of

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manipulation may be involved.”

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The view taken by the Division Bench fortifies the view taken by me earlier. In such circumstances the impugned order is set aside. The learned Sub Judge is directed to refer the dispute to arbitration as provided under the deed of partnership and deed of admission cum retirement.

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M. SASIDHARAN NAMBIAR, JUDGE

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Okb/-

Ayamu @ Manu v. Raju

Case brief

What is this about?

What did the court decide?

Ayamu @ Manu v. Raju

Case brief

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What did the court decide?

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