One Partner Cannot Refer Dispute To Arbitration In Absence Of Others: Bombay HC

The Bombay High Court recently held that a partner of a firm cannot solely decide and refer a dispute to an arbitrator without the consent of the other partners of the firm.

The Court further stated that the implied authority which is bestowed on the partners cannot be invoked for referring the dispute to Arbitration sans the remaining partners.

Bench of Justice Manish Pitale held that the petition arising out of the referral by the partner was illegal.

The Court noted that, "A bare reading of Section 19(2)(a) of the Partnership Act shows that implied authority of a partner in a partnership firm does not empower such a partner to submit a dispute relating to the business of the firm, to arbitration. In other words, one set of partners cannot submit a dispute relating to business of the partnership firm to arbitration, in the absence of the other partners joining them."

Henceforth, the Court dismissed the application under Section 11 of the Arbitration and Conciliation Act 1996 on the ground that the notice for referral issued by the partner was illegal.