Judgment:
R.C. Jain, J.
1. By means of this petition under Article 227 of the Constitution the petitioner seeks to assail the order dated 24th January, 2001, passed by the learned Additional District Judge, Delhi, thereby dismissing tow applications under Section 8 of the arbitration and Conciliation Act, 1996 (hereinafter referred to as Act) made on behalf of the petitioner-defendant No. 3 and defendant No. 2 seeking a reference of the dispute to arbitration in terms of the arbitration agreement between the parties.
2. Briefly stated the relevant facts leading to the present petition are that the respondent-plaintiff had filed the suit for rendition of accounts and recovery of outstanding dues in respect of a partnership executed between the plaintiff and defendant Nos. 2 and 3 vide a partnership deed dated 1st July, 1976 which came to an end on 30th September, 1997 by efflux of time and, thereafter, became partnership at will. The defendant did not rendered the account to the plaintiff despite service if two notices dated 19.9.2000 and 10.12.2000. After the service of the summons of the suit, the petitioner-defendant No. 3 instead of filing of his written statement filed an application under Section 8 of the Act pleading existence of arbitration agreement in the partnership deed and, thereforee, the suit filed by the plaintiff was not maintainable and the subject matter of the sit was liable to be referred to arbitrator in terms of the arbitration agreement. The application was opposes by the plaintiff-respondent. Execution of the partnership deed dated 1.6.1995 containing arbitration clause was not disputed but it was denied that the petitioner-defendant No. 3 was entitled to invoke the said arbitration agreement for reference of dispute to arbitration mainly on the ground that their existed no dispute and in fact none was raised which required to be referred to arbitrator. The learned trial court found the existence of the arbitration agreement contained in tem partnership deed but still declined to accede to the prayer of the petitioner for making a reference to arbitrator on the ground that on the dissolution of the partnership at will, a partner had statutory right to maintain a suit for rendition of account and the provision of Section 34 of the Arbitration Act 1940 could not be invoked for staying the proceedings in the suit.
3. I have heard the learned counsel for the parties and have given my thoughtful consideration to their respective submission. Learned counsel for the petitioner has emphatically urged that once the trial court found the existence of an arbitration agreement for the resolution of the dispute between the parties through arbitration, there was no escape from the conclusion that the provisions of Section 8 of the Act would come into play and the matter ought to have been referred to the arbitrator. In support of this contention he has heavily relied upon to a Supreme Court decision on the case of P. Anand Gajapathi Raju and Ors. v. P.V.G. Raju (dead) and Ors. : [2000]2SCR684 . In the said case the Supreme Court has more fully examined the scope of provisions of Section 5 and Section 8 of the Act and for the purposes of invoking Section 8 of the Act laid down as under:-
'The conditions which are required to be satisfied under Sections 8(1) and 8(2) of the Arbitration and Conciliation Act, 1996 before the court can exercise its powers are:-
(1) there is an arbitration agreement; (2) a party to the agreement brings an action in the court against the other party;
(3) subject-matter of the action is the same as the subject matter of the arbitration agreement.
(4) the other party moves the court for referring the parties to arbitration before it submits his first statement on the substance of the dispute.
This last provision creates a right in the person bringing the action to have the dispute adjudicated by the court, once the other party has submitted his first statement of defense. But if the party, who wants the matter to be referred to arbitration applies to the court after submission of his statement and the party who has brought the action does not object, as is the case before us, there is no bar on the court referring the parties to arbitration.
The phrase 'which is the subject of an arbitration agreement' does not, in the context, necessarily require that the agreement must be already in existence before the action is brought in the court. The phrase also connotes an arbitration agreement being brought into existence while the action is pending.'
4. As against the above submission of the petitioner, learned counsel for the respondent urged that the petitioner was not entitled to invoke Section 8 of the Act because he did not raise any dispute to the claim made by the petitioner either by the notice dated 19.9.2000 or 6.12.2000 and in any case their exits no dispute which is required to e referred to arbitrator. He wants to support his contention from a decision of this court in the case of M/s National Small Industries Corporation Ltd. v. M/s Punjab Tin Printing & Metal Industries and Ors. : AIR1979Delhi58 wherein the court while considering the scope of Section 34 of the old Act (Arbitration Act 1940) laid down as under :
'To stay suit, there must be an existing dispute between the parties, If there was no dispute, there is nothing to arbitrate. It is for the applicant to plead that there was a dispute and that he was ready and willing at all relevant times to do all things necessary for the proper conduct of arbitration. For proper conduct of arbitration he has to allege the dispute or disputes which he was ready and willing to refer to arbitration. The suit could not be stayed if there was no dispute between the parties, at the commencement of the proceedings. In the instant case there was no allegation in the application as to what dispute or difference was existing between the parties which the applicant was ready and willing to refer to arbitration at the time the suit was filed. The applicant had also not mentioned the dispute or difference which he was still ready and willing to refer to arbitration. In the absence of such allegations regarding the disputes it could not be said that the applicant was ever ready and willing to do everything necessary for the proper conduct of arbitration. thereforee, the suit could not be stayed.'
5. In my view the respondent cannot seek any assistance from the above authority. tem contention raised by the respondent holds no water. Merely because the petitioner-defendant No. 3 had not replied to the notices sent by the plaintiff-respondent and the partnership stood dissolved or deemed to have been dissolved by efflux of time it cannot be said that no dispute was raised or none existed. The arbitration agreement contained in the partnership deed is comprehensive enough in its application and cannot restrict only to the disputes which arise during the subsistence of the partnership. More often such an arbitration agreement in a partnership deed is meant for the resolution of disputes and differences which might arise amongst the partners on the dissolution of the partnership rather than during its existence. There is no dispute to the legal proposition that a aggrieved partner or ex-partner is entitled to ask for the rendition of accounts and amounts due to him from the remaining partners and to seek its adjudication if the other partner is not ready and willing to render the accounts or make the payment claimed from him. However, the important question is about the forum viz. a civil court or the mechanism of arbitration which would resolve the said dispute particularly when there exists an arbitration agreement between the parties for reference of the disputes(s) to the arbitration. The answer is simple and clear and it is only the forum of arbitration which can be legally resorted to. Section 5 and 8 of the Act clearly brings out the object of the Act and the Supreme Court has more that once construed the said provision and held that the same have been enacted with the clear object of encouragement of expeditious and less expensive resolution of disputes with minimum interference by the court.
6. Keeping in view that aforesaid statutory object of this Act, this court is of the clear opinion that once the existence of arbitration agreement is admitted. by the parties, the petitioner-defendant No.3 is within his rights to invoke the provisions of Section 8 of the Act for seeking reference of the dispute to arbitration. In the opinion of this court, the learned trial court has erred in declining the prayer of the petitioner on wholly untenable premises.
7. For the above said reasons I find force in the present petition. The petition is as such allowed and the impugned order of the learned Additional District Judge dated 24-1-2001 is hereby quashed/set aside and the application of the petitioner-defendant under Section 8 of the Act is hereby allowed. The matter is remanded back to the learned trial court for reference of the dispute to arbitration in terms of the arbitration agreement. Parties are directed to appear before the learned trail court on 10-05-2002 for receiving further directions in the matter.
8. Parties are left to bear their own costs in these proceedings.