Indian Arbitration and Conciliation Act, 1996: Section 11(5)-Appointment of arbitrator-Application by the legal heir of the deceased partner-Held, maintainable. Indian Partnership Act, 1932; Section 46-Rendition of accounts-Legal representative of a deceased partner-Right to sue-Held, survives on the legal representative. The Short questions involved in the appeals were: (a) Where right to sue for rendition of accounts survives on the legal representative of a deceased partner, are the legal representative not entitled to invoke arbitration clause contained in the Partnership Deed? (b) Whether the arbitration can be commenced by the heirs after the death of partner especially where the dispute had arisen during the life time of the partner? (c) Whether in view of section 46 read with section 48 of the Indian Partnership Act, 1932 as well as section 40 of the Arbitration Act, 1996. The legal representative of the deceased partner is entitled to claim appointment of arbitrator under the arbitration clause of the Partnership Deed? =2007 AIR 1517, 2007(4 )SCR295 , , 2007(4 )SCALE562 , 2007(4 )JT523

CASE NO.:

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Appeal (civil) 1526 of 2007

PETITIONER:
Ravi Prakash Goel

RESPONDENT:
Chandra Prakash Goel & Anr

DATE OF JUDGMENT: 21/03/2007

BENCH:
Dr. AR. Lakshmanan & Altamas Kabir

JUDGMENT:
J U D G M E N T
(Arising Out of SLP (C) NO. 6723 OF 2006)

Dr. AR. Lakshmanan, J.

Leave granted.
The above appeal is directed against the final 
judgment and order dated 10.02.2006 passed by the 
Chief Justice of the High Court of Judicature at 
Allahabad in Arbitration Application No. 7 of 2005 
dismissing the application moved by the appellant under 
Section 11 of the Arbitration and Conciliation Act, 1996 
for appointment of arbitrator. 

BACKGROUND FACTS:
Respondent Nos. 1 and 2 - Chandra Prakash Goel and 
Rakesh Aggarwal along with Dulari Devi, mother of the 
appellant - Ravi Prakash Goel and Pushplata were 
carrying on business of sale and purchase of sanitary 
goods in the name and style of M/s Kumar and Company 
under the Partnership Deed dated 09.08.1983. 
Pushplata retired from partnership w.e.f. 31.03.1992. 
Thereafter, other partners carried on the business and a 
new partnership deed was executed on 01.04.1992. 
Clause 5 of the same provided that the net profits of 
the partnership business as per accounts maintained 
after deduction of all necessary expenses shall be divided 
and distributed amongst the partners at the close of each 
accounting year in the following ratio:

1) Sri Chandra Prakash Goel, Respondent No.1- 31%
2) Sri Rakesh Kumar, Respondent No.2- 34%
3) Smt. Dulari Devi, Petitioner's Mother- 35%

Clause 13 of the Partnership Deed refers to 
arbitration clause. It reads as under:-
"That all the disputes touching the affairs of the 
partnership firm shall be referred to arbitrator in 
accordance to the provisions of the Indian Arbitration 
Act and the award of such Arbitrator shall be final and 
binding on the parties."

When the respondents did not render accounts of 
the partnership firm to the appellant's mother despite 
repeated verbal requests, she on 05.06.2004 sent a 
notice to the respondents raising dispute regarding 
accounts of the partnership firm and informed them that 
on account of her illness she has authorized her son, 
Ravi Prakash Goel, the appellant herein to look into the 
accounts of the partnership business on her behalf and 
requested them to explain the accounts to her son on any 
working day between 05.06.2004 to 16.06.2004, but they 
did not respond. 
The appellant visited the office of the firm but the 
respondents refused to permit him to have access to the 
accounts of the firm. On 05.09.2004, Smt. Dulari Devi 
the mother of the appellant executed her last will in 
favour of the appellant to her only son bequeathing her 
estate in appellant's name including the instant 
partnership business. Dulari Devi expired on 06.10.2004 
leaving her last will dated 05.09.2004 which was 
registered after publication in the daily newspaper and 
also after due notice to all the other legal heirs of the 
deceased who categorically stated that they have no 
objection and accepted due execution of the will before 
the Sub-registrar, Dehradun. 
On 15.12.2004, the appellant sent notice to the 
respondents to the effect that his mother had sent notice 
to them regarding dispute in relation to the accounts by 
partnership firm and despite her request, accounts were 
not shown to her authorized agent, namely, her son, 
hence as per the terms of the partnership deed, the 
disputes are to be decided by arbitration. He suggested 
the name of Shri P.C. Agrawal, a retired District Judge 
and further informed that if they are not agreeable, they 
may suggest the name of their own Arbitrator. 
When no reply of the notice dated 15.12.2004 was 
received, the appellant filed application under Section 11 
of the Arbitration and Conciliation Act, 1996 before the 
Hon'ble Chief Justice, Allahabad High Court under the 
scheme called the appointment of Arbitrators by the 
Chief Justice of Allahabad High Court, 1996, vide High 
Court of Judicature at Allahabad Notification No. 
11448/Rules dated 18.05.1996 published in the U.P. 
Gazette Pt 1-KA dated 16.11.1996. 
The learned Chief Justice of the High Court on 
10.02.2006 has dismissed the appellant's application 
concluding that the applicant has no presently 
establishable binding arbitration agreement with the 
respondents. The order passed by the Hon'ble Chief 
Justice reads as under: -
"Hon'ble Ajoy Nath Ray, C.J.

This is an application for an Arbitrator by the son of 
one of the deceased partners of the Firm.

The partnership deed is annexed. The lady died on 
6.10.2004. If an arbitration has been commenced by 
the lady during her lifetime, it might have been 
continued by the son who is applicant before this 
court, by obtaining substitution. However, the 
arbitration is being attempted to be commenced now. 
Whether the heirs of a deceased partner or parties, are 
to be deemed as parties, to an arbitration agreement 
contained in a partnership deed, is a question of 
intention and construction in every different cases. 
The deed annexed does not show that any of the 
parties mentioned was to be construed by contract as 
including his/her heir, successor or assignee. That 
usual clause is absent. Furthermore the son claims as 
legatee of a will not yet probated. It is well known that 
Courts of law cannot look into unprobated wills. In 
these circumstances I am of the opinion that the 
applicant has no presently establishable binding 
arbitration agreement with the respondent.

The application is, therefore, dismissed. A suit might 
be filed.

Sd/-
Ajoy Nath Ray, C.J 
10.2.2006"

As stated earlier, the present appeal has been filed 
against the above judgment. 
We heard Mr. Rakesh Dwivedi, learned senior 
counsel for the appellant and Mr. Chandra Shekhar, 
learned counsel for the respondents. 
Mr. Rakesh Dwivedi, learned senior counsel for the 
appellant submitted that that High Court overlooking the 
provisions of Section 46 read with Section 48 of the 
Partnership Act and Section 40 of the Arbitration Act, 
has erred in dismissing the application under Section 11 
of the Arbitration Act as in law arbitration could be 
commenced by the heirs of the deceased partners and 
since right to sue survives on the appellant as sole son 
and legal representative of the deceased partner is 
entitled to invoke clause 13 of the arbitration contained 
in the Arbitration Agreement. According to him, the view 
taken by the learned Chief Justice is wholly contrary to 
the earlier decision of a Single Judge of the same High 
Court in Sundar Lal Haveliwala vs. Smt. Bhagwati 
Devi reported in AIR 1967 Allahabad 400 as such the 
Chief Justice ought to have referred the matter to a larger 
Bench. He would further submit that the views 
expressed in the impugned order is contrary to the 
principles laid down by this Court in the case of 
Premlata & Anr. Vs. Ishwar Dass Chamanlal and 
Ors., AIR 1955 SC 714. 
Mr. Chandra Shekhar, learned counsel appearing 
for the respondent submitted that the partnership deed 
which is unique in its character cannot be ignored as the 
arbitration clause is contained therein and the disputes 
referable for arbitration are the disputes touching upon 
the affairs of the partnership firm and that the 
partnership deed while describing three parties confined 
the extent of the respective partners to their respective 
individual person alone, namely, not extending the same 
nomenclature to the legal heirs, representatives, assigns 
or even legatees etc. This fact, according to the learned 
counsel for the appellant, is evident from annexure-P1 to 
the petition and have also been noted by the High Court 
of Allahabad while passing the impugned order in the 
following words: 
"The deed enclosed does not show that any of the 
parties mentioned was to be construed by contract as 
including his/her heir, successor and assignee. The 
usual clause is absent."

Mr. Chandra Shekhar further submitted that the 
Partnership Act and the Arbitration and Conciliation Act, 
1996 are characterized by "party autonomy" and 
accordingly are founded upon the contract giving pre-
eminence to the will of the parties and even the 
interference of the Court has been curtailed to the 
minimum possible level. It is the contention of the 
learned counsel that the rights of the legatee under the 
Partnership Act are regulated and conditioned by Section 
29 of the Indian Partnership Act and on the said strength 
he is only entitled to receive the share of the assets of the 
firm to which the testator, his predecessor was entitled. 
It is further submitted that the answering respondents 
have never denied the rendition of the deceased partner's 
account to her share as per the deed and that the 
respondents have always been ready and willing to pay 
her share if so ordered by the Court. 
Mr. Chandra Shekhar further submitted that no 
dispute have ever arisen during the lifetime of Dulari 
Devi and she was the tax payer, all the accounts were 
conducted in her presence and with her consent during 
her lifetime and that no dispute was ever even alluded 
during her lifetime. Accordingly, the appellant as a 
legatee on her behalf can continue the claiming for 
resolution of the disputes which arose during her 
lifetime. No certificate of service, not even the receipt of 
registration have ever been filed. In view of the fact Mr. 
Chandra Shekhar submitted that it is clear that the 
appellant by no stretch of imagination can claim to be the 
party to the Agreement of Arbitration contained in the 
partnership deed. According to Mr. Chandra Shekhar 
the will of the parties is pre-eminent and the same is to 
be given effect to by all means and, therefore, the 
appellant cannot be said to be a party to the Arbitration 
Agreement and accordingly, cannot avail mode of 
alternative resolution of disputes by way of arbitration as 
claimed. The learned counsel has also made submission 
under Section 29 of the Partnership Act. According to 
him, that the right of the appellant as legatee/legal 
representative of Dulari Devi are conditioned by Section 
29 of the Partnership Act and in case if Section 40 of the 
Arbitration and Conciliation Act is read along with 
Section 29 of the Partnership Act, it becomes clear that 
the appellant's right of account is confined to rendition of 
accounts as permitted by Section 29 of the Partnership 
Act. So far as the appellant's right to claim arbitration is 
concerned, the same cannot be taken benefit of 
particularly in view of the unusual character of the 
partnership deed where the definition of party 
deliberately excludes legal heirs, legal representatives 
and legatees. According to him, it is also relevant to 
mention that the commencement of arbitration 
proceedings is the judicially recognized and statutorily 
defined concept as is evident from Section 21 of the 
Arbitration and Conciliation Act and if the proceedings 
had commenced, the right of the legal heir would remain 
to carry on the same further but in the instant case, the 
proceedings have not commenced during the lifetime of 
Smt. Dulari Devi. In view of the submissions made 
above, learned counsel for the respondent submitted that 
the petition deserves to be dismissed as the appellant is 
not a party to the arbitration agreement. 
On the above pleadings, the following questions of 
law emerge for our consideration. 
a) Where right to sue for rendition of accounts 
survives on the legal legal representative of a 
deceased partner, are the legal representatives not 
entitled to invoke arbitration clause contained in 
the Partnership Deed?
b) Whether the arbitration can be commenced by the 
heirs after the death of partner especially where the 
dispute had arisen already during the life time of 
the partner?
c) Whether in view of section 46 read with section 48 
of the Indian Partnership Act as well as section 40 
of the Arbitration Act, 1999, the petitioner is 
entitled to claim appointment of arbitrator under 
the arbitration clause of the Partnership Deed and 
the Hon'ble Chief Justice of the Allahabad High 
Court has erred in overlooking these provisions?
Before we proceed further, it is useful to reproduce 
Section 40 of the Arbitration Act and Sections 46, 47 and 
48 of the Indian Partnership Act. 
"40. Arbitration agreement not to be discharged by 
death of party thereto.- (1) An arbitration agreement 
shall not be discharged by the death of any party 
thereto either as respects the deceased or as respects 
any other party, but shall in such event be enforceable 
by or against the legal representative of the deceased. 

(2) The mandate of an arbitrator shall not be 
terminated by the death of any party by whom he was 
appointed. 

(3) Nothing in this section shall affect the operation of 
any law by virtue of which any right of action is 
extinguished by the death of a person."

"46. Right of partners to have business wound up 
after dissolution.  On the dissolution of a firm every 
partner or his representative is entitled, as against all 
the other partners or their representatives, to have the 
property of the firm applied in payment of the debts 
and liabilities of the firm, and to have the surplus 
distributed among the partners or their 
representatives according to their rights.

47. Continuing authority of partners for purposes 
of winding up.- After the dissolution of a firm the 
authority of each partner to bind the firm, and the 
other mutual rights and obligations of the partners, 
continue notwithstanding the dissolution, so far as 
may be necessary to wind up the affairs of the firm 
and to complete transactions begun but unfinished at 
the time of the dissolution, but not otherwise:

Provided that the firm is in no case bound by the 
acts of a partner who has been adjudicated insolvent; 
but this proviso does not affect the liability of any 
person who has after the adjudication represented 
himself or knowingly permitted himself to be 
represented as a partner of the insolvent.

48. Mode of settlement of accounts between 
partners.- In settling the accounts of a firm after 
dissolution, the following rules shall, subject to 
agreement by the partners, be observed :-

(a) losses, including deficiencies of capital, shall be 
paid first out of profits, next out of capital, and 
lastly, if necessary, by the partners individually in 
the proportions in which they were entitled to 
share profits;

(b) the assets of the firm, including any sums 
contributed by the partners to make up 
deficiencies of capital, shall be applied in the 
following manner and order-

(i) in paying the debts of the firm to third 
parties;
(ii) in paying to each partner rateably what is 
due to him from the firm for advances as 
distinguished from capital;

(iii) in paying to each partner rateably what is 
due to him on account of capital; and

(iv) the residue, if any, shall be divided among 
the partners in the proportions in which 
they were entitled to share profits."

It is clear from Section 40 of the Arbitration Act that 
an arbitration agreement is not discharged by the death 
of any party thereto and on such death it is enforceable 
by or against the legal representatives of the deceased, 
nor is the authority of the arbitrator revoked by the death 
of the party appointing him, subject to the operation of 
any law by virtue of which the death of a person 
extinguishes the right of action of that person. 
Section 2(1)(g) defines "legal representative" which 
reads thus:
"Legal Representative" means a person who in law 
represents the estate of a deceased person, and 
includes any person who intermeddles with the estate 
of the deceased person , and, where a party acts in a 
representative character, the person on whom the 
estate develops on the death of the party so acting."

The definition of 'legal representative' became 
necessary because such representatives are bound by 
and also entitled to enforce an arbitration agreement. 
Section 40 clearly says that an arbitration agreement is 
not discharged by the death of a party. The agreement 
remains enforceable by or against the legal 
representatives of the deceased. In our opinion, a person 
who has the right to represent the estate of deceased 
person occupies the status of a legal person. Section 35 
of the 1996 Act which imparts the touch of finality to an 
arbitral award says that the award shall have binding 
effect on the "parties and persons claiming under them". 
Persons claiming under the rights of a deceased person 
are the personal representative of the deceased party and 
they have the right to enforce the award and are also 
bound by it. The arbitration agreement is enforceable by 
or against the legal representative of a deceased party 
provided the right to sue in respect of the cause of action 
survives. 
We have already extracted Sections 46, 47 & 48 of 
the Partnership Act. Section 46 provides two things, 
namely, 1) first is to realize the assets of the business 
and then to apply the same for discharge of liabilities and 
finally to distribute the surplus, if any, among the 
partners. All that Section 46 empowers is that every 
partner shall claim that this is to be done for ultimate 
distribution of the surplus to the partners according to 
their shares. A suit to enforce the latter right relating to 
the distribution of surplus is generally called a suit for an 
account which means account taken up accordingly. 
This right to a partner to file a suit for account is not 
affected by the fact that the retiring partner has already 
inspected the accounts of the firm. Section 46 is, 
however, merely declaratory of the rights of the partners 
or their legal representatives in the surplus and does not 
set out the mode of calculating the surplus. The share of 
a partner upon the winding up of a dissolved firm, is only 
in the residue which is left after the liabilities mentioned 
in the various clauses of Section 48 have been paid out. 
Payment of capital and advances to partners is not out of 
the residue. The amount paid as capital investment to a 
partner will have to be deducted in order to find the value 
of the residue, because the value of a partner's share is 
only his proportion of the residue. 
"Right of Representative of a Partner:

The right of a representative of a partner is really a 
claim against the surplus assets on realisation- 
whether the surplus consists entirely of the proceeds 
of realisation or whether they include some specific 
items of property, which existed on the death of the 
partner. The proper remedy of a partner in the 
circumstances is to have accounts taken to ascertain 
his share and if the right to sue for accounts is barred 
by limitation, the partner cannot sue any partner in 
possession of the assets for a share therein, and the 
limitation will be governed by Art.5 of the Limitation 
Act." On the dissolution of the firm, the arbitration clause 
does not come to an end and so if a dispute had arisen 
during the lifetime of the deceased partner, his legal 
representatives would be entitled to take proceedings 
under Section 20 of the Arbitration Act, 1940. 
When a partner dies and the partnership comes to 
an end it is not only right but also the duty of the 
surviving partner to realize the assets for the purpose of 
winding up of the partnership affairs including the 
payment of the partnership debts. However, it is true 
that in a general sense the executors or administrators of 
the deceased partner may be said to have a lien upon the 
partnership assets in respect of his interest in the 
partnership and taking the partnership account. 
Section 47: It is clear that the commencement of 
the dissolution does not at once terminate the authority 
of the partners. Such authority continues at least for 2 
purposes, namely, 1) so far as necessary to wind up the 
affairs of the firm; and 2) to complete the transaction 
begun but had not yet been completed. 
Section 48: It lays down two fundamental 
propositions which are in line of the provisions of Section 
46 of the Partnership Act, namely, 1) as to the payment 
of the losses; and 2) as to the application of the assets. It 
is to be noted that the provisions of Section 48 are the 
culmination of the provisions of Section 46 of the 
Partnership Act. Therefore, both the sections have to be 
harmoniously read together and interpreted. 
We are of the opinion that in view of the provisions 
of Section 46 read with Section 48 of the Indian 
Partnership Act as well as Section 40 of the Arbitration 
and Conciliation Act, 1996, the application for 
appointment of an arbitrator under the arbitration clause 
of the partnership deed was liable to be allowed and the 
learned Chief Justice has erred in overlooking the said 
provisions. While right to sue for rendition of accounts of 
partnership firm survives on the legal representative of a 
deceased partner, he is also entitled to invoke the 
arbitration clause contained in the partnership deed. In 
the instant case, the appellant being the only son of his 
deceased mother, undisputedly a partner in the 
partnership firm with the respondents especially where 
the dispute concerning the partnership affairs had arisen 
already during her life time. The view taken in the 
impugned order with the appellant has no presently 
establishable binding arbitration agreement with the 
respondent is erroneous in law and facts. The impugned 
order is also bad in law in the teeth of the law laid down 
by this Court in Smt. Premlata & Anr. Vs. M/s Ishwar 
Dass Chamanlal & Ors. AIR 1955 SC 714. This apart, 
the appointment of arbitrator could not be rejected on the 
ground of non-production of the will executed by the 
mother when no family member is disputing the will and 
the appellant's claim vis-`-vis the partnership firm, even 
otherwise also the appellant is the legal heir of the 
deceased partner being her only son. In our view, non-
probate of will is not a germane factor to be considered at 
the time of appointment of arbitrator under Section 11 of 
the Arbitration Act. In our opinion, the partnership deed 
clearly recites that all the disputes touching the affairs of 
the partnership firm were referable to arbitrator and it 
cannot be gainsaid that the dispute regarding accounts 
of the partnership firm is a dispute touching the affairs of 
the firm. As already stated, it was not legally essential to 
specifically make a mention that the partners included 
their legal heirs, representatives, assigns or legatees etc. 
and the arbitration clause could be invoked by the 
appellant as the legatee as well as the legal heir/legal 
representative of the deceased Dulari Devi particularly 
where the dispute had arisen during her life time. The 
appellant's claim in the instant case is based on the will 
as well as being a legal heir of the deceased Dulari Devi. 
The appellant, in our opinion, possessed a legal and 
enforceable right to invoke arbitration clause and moved 
application under Section 11 of the Arbitration Act before 
the High Court for appointment of arbitrator. The word 
"party" as used in the partnership deed does not exclude 
inclusion of legal heirs, legal representatives etc. as being 
canvassed by the respondents. Thus, in our opinion, in 
view of the provisions of Sections 40 and 46 of the 
Partnership Act read with Section 40 of the Arbitration 
Act, the appellant has a legal right to commence 
arbitration by moving an application under Section 11 of 
the Arbitration Act in the High Court as in our view, the 
right to sue survives on him as legal representatives of 
the deceased Dulari Devi and he is entitled to invoke 
clause 13 of the partnership deed. Moreover, the dispute 
referable to arbitration had already arisen during the life 
time of Dulari Devi which is also well settled that where a 
dispute is referable to arbitration, the parties cannot be 
compelled to take recourse to in the civil courts. 
In view of the aforesaid facts, the civil appeal filed 
by the appellant stands allowed. However, there will be 
no order as to costs. 

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