In a recent judgement the Supreme Court upheld the judgement of Gauhati High Court that arbitration agreements are enforceable against the legal representatives of a deceased partner of a partnership firm.

The issues for determination were;

(i) Whether the legal heirs of a deceased partner in a partnership firm, being non-signatories to the partnership deed and in the absence of their explicit consent, can still be bound by the arbitration agreement prescribed therein?

(ii) Whether the right to sue for the rendition of accounts survive to the legal heirs of the deceased partner, entitling them to invoke the arbitration clause in the partnership deed?

The bench comprising Justice JB Pardiwala and Justice R Mahadevan referred to the case of Jyoti Gupta v. Kewalsons & Ors, where Delhi High Court also held that an arbitration agreement does not stand discharged on the death of a partner and it can be enforced by the legal heirs of the deceased-partner. The High Court had categorically held that merely because the arbitration agreement refers to the disputes between ‘partners’, it cannot bar the legal heirs from seeking their remedies by virtue of the arbitration agreement.

This litigation originates from a dispute between a partner of a partnership firm consisting the legal heirs of another deceased partner. The partnership firm consisted of three partners. It so happened that two of them passed away on 24.12.2022 and 21.11.2023, respectively. It appears from the materials on record that the respondents herein preferred a petition before the Commercial Court for dismissal of the suit and a reference to arbitration.The said petition was dismissed by the Civil Judge.

Aggrieved by the dismissal of their petition the respondents preferred an arbitration appeal. The High Court vide the impugned judgment held that a reading of clause no. 2 of the partnership deed makes it evident that the partnership deed is binding upon the heirs of the deceased partner.

Referring also to the decision in the case of Ravi Prakash Goel v. Chandra Prakash Goel & Anr the Court held that an arbitration agreement does not cease to exist on the death of any party and the arbitration agreement can be enforced by or against the legal representatives of the deceased.

After evaluating the case , the bench concluded that no error of law could be said to have been committed by the High Court in passing the impugned judgment. The Special Leave Petition was thereby dismissed.

Case Title : Rahul Verma & Ors Vs Rampat Lal Verma & Ors.

Advocates For Petitioners: Adv.Shagufa Salim

Advocates For Respondents : Adv Pavan Kumar Chaturvedi