RAM KISHAN MIMANI Vs. GOVERDHAN DAS MIMANI

JUDGEMENT

(1.) The petitioners seek reference of the disputes relating to a partnership firm to arbitration. THE petitioners say that the respondents have siphoned off funds by causing interest-free loans to be made available from the till of the partnership firm to the near relatives of the respondents. THE petitioners claim that upon the petitioners' refusal to approve the accounts prepared by the respondents, the partnership accounts have been unilaterally prepared and filed by the respondents.

(2.) The respondents do not dispute the existence of the arbitration clause contained in the partnership deed. THE respondents say that they have instituted a suit in the City Civil Court complaining of the illegal acts and conduct of the petitioners herein. THE respondents submit that upon an application under section 8 of the Arbitration and Conciliation Act, 1996 being allowed in respect of the suit, being TS No.2962 of 2007, such judgment of December 10, 2008 has been challenged in proceedings under Article 227 of the Constitution and certain interim orders have been passed therein. THE respondents refer to the recent judgment of the Supreme Court (N. Radhakrishnan vs. Maestro Engineers and Ors., 2010 1 SCC 72) where it has been held that if a matter involves substantial questions relating to facts which would entail detailed material evidence (both documentary and oral) and where serious allegations pertaining to fraud and malpractice have been raised, then the matter ought to be tried in a Court rather than before an arbitrator. THE facts as noticed by the Supreme Court in that case related to the alleged retirement of one of the partners from the firm following a discussion between the partners. THE Supreme Court held that the disputes between the parties were covered by the arbitration agreement but relied on judgments [Abdul Kadir Samsuddin Bubere vs. Madhav Prabhakar Oak, 1962 AIR(SC) 406) and (Haryana Telecom Limited vs. Sterlite Industries(I) Limited, 1999 5 SCC 688] and a judgment of the Madras High Court to hold that where serious charges alleging malpractice in account books and manipulation of finances of a partnership firm have been made, such matter "cannot be properly dealt with by the arbitrator."

(3.) The petitioners refer to the Abdul Kadir case where notwithstanding the earlier observations that where serious allegations of fraud and malpractice had been levelled the person against whom such allegations had been made would prefer a trial in open Court, the Supreme Court found, as a matter of fact, that the allegations in that case were not of such serious nature that would warrant the refusal of a reference. THE Court observed, inter alia, as follows: