Facts of the Case

The applicant, Tasleem Ahmad, one of five partners (holding a 25% share) in M/s Welcome Brick Supply, a brick-kiln partnership formed under a deed dated 19.09.2021, sought appointment of a sole arbitrator under Section 11(6) of the Arbitration and Conciliation Act, 1996, to resolve disputes among the partners. The partnership deed contained an arbitration clause (Clause 17). A compromise deed dated 29.11.2022, executed by all five partners, had earlier recorded that the partners no longer wished to continue the business, that GST-evasion proceedings relating to the firm were pending before the Assessing Officer, Roorkee, and that goods at the brick kiln would be sold with the GST dues paid from the sale proceeds. GST features here only as one term of a broader business-winding-down compromise — this is fundamentally a partnership/arbitration dispute, not a GST law case.

Issues Involved

  1. Whether the dispute between the partners regarding partnership assets and taking of accounts survived the compromise deed dated 29.11.2022, or stood settled by it.
  2. Whether a sole arbitrator should be appointed under Section 11(6) of the Arbitration and Conciliation Act, 1996, given the partners' inability to mutually agree on one.

Petitioner's Arguments

  • The compromise deed of 29.11.2022 related only to the sale of the existing stock of bricks (and payment of GST dues from that sale); it did not settle the separate and outstanding disputes between the partners regarding partnership assets and taking of accounts.
  • Since the parties could not mutually appoint an arbitrator, the Court should exercise its power under Section 11(6) to appoint one.

Respondent's Arguments

  • Respondent no.2 contended that the parties had entered into the compromise deed dated 29.11.2022 and, therefore, the present arbitration application was not maintainable.

Court Order / Findings

  • The Court examined the compromise deed and agreed that it dealt specifically with sale of the existing bricks and clearance of GST dues from that sale, executed by all five partners.
  • It held that the scope of the compromise deed, and its effect on the inter se rights and obligations of the partners regarding partnership assets and accounts, could only be determined in arbitration, not resolved by the compromise deed itself.
  • The application under Section 11(6) was allowed, and Mr. Sandeep Kothari, Advocate, was appointed as the sole arbitrator to adjudicate the partners' disputes.

Important Clarification

This order does not decide the merits of the partnership dispute or the GST-evasion allegations against the firm — it only clears the procedural hurdle of appointing an arbitrator. Whether the compromise deed's GST/stock-sale terms bind the parties, and how the accounts are ultimately to be settled, is now for the arbitrator to decide.

Sections Involved

  • Arbitration and Conciliation Act, 1996 — Section 11(6) (appointment of arbitrator) and Section 9 (interim measures), invoked by the applicant.
  • Central Goods and Services Tax Act, 2017 — referenced only incidentally, as the compromise deed recorded pending GST-evasion proceedings and an undertaking to pay GST dues from sale of stock.

Decision – In Favour of

Decided in favour of the applicant on the narrow procedural question — a sole arbitrator was appointed; the underlying partnership and GST-related factual disputes remain to be adjudicated in arbitration.

Case Details

  • Court: High Court of Uttarakhand at Nainital
  • Case Number: Arbitration Application No. 08 of 2023
  • Coram: Hon'ble the Chief Justice Sri Vipin Sanghi
  • Date of Judgment: 19.05.2023

Link to Download the Order

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