Himachal Pradesh High Court
Nitin Gupta vs Arrpit Aggarwal on 21 August, 2025
Author: Jyotsna Rewal Dua
Bench: Jyotsna Rewal Dua
-1-
( 2025:HHC:28281 )
IN THE HIGH COURT OF HIMACHAL PRADESH, SHIMLA
Arb. Case No. 116 of 2025
.
Reserved on: August 06 , 2025
Decided on: August 21 , 2025
Nitin Gupta ...Petitioner
Versus
Arrpit Aggarwal ...Respondent
Coram:
Ms. Justice Jyotsna Rewal Dua, Judge
1
Whether approved for reporting? Yes.
For the petitioner : Mr. Mohit Chadha, Advocate (through Video
Conference) and Mr. Shubham Sood,
Advocate.
For the respondent : Mr. Desh Raj Thakur & Mr. Ravneet Kumar,
Advocates.
Jyotsna Rewal Dua, Judge
This petition moved under Section 9 of the Arbitration and
Conciliation Act, 1996 (in short the ‘Arbitration & Conciliation Act‘)
seeks:- i) To restrain the respondent/his representatives, assignees,
agents, employees or any other persons acting on his behalf from
carrying out any business operations in the name of M/s Vidhyasha
Pharmaceuticals or transacting in the name of the Firm in any
1
Whether reporters of Local Papers may be allowed to see the judgment? Yes.
::: Downloaded on – 21/08/2025 21:42:13 :::CIS
-2-
( 2025:HHC:28281 )
manner till the final adjudication of the arbitration proceedings;
ii) Closure of the production activities of the partnership firm till the
.
dissolution of the firm gets completed; iii) To restrain the
respondent from selling, transferring, alienating, encumbering or
disposing of any goods, stock-in-trade, raw materials, finished
goods, or any part of the inventory lying at the partnership firm; and
for freezing the bank accounts in the name of the partnership firm.
Further prayer has been made to appoint a Receiver to take
possession, custody and control of the entire inventory of the
partnership firm including all stock-in-trade, raw materials, finished
goods and any other assets forming part of the firm’s inventory.
2. M/s Vidhyasha Pharmaceuticals was constituted as
partnership firm on 24.06.2014 between S/Sh. Parkash Chand
Bansal, Nitin Gupta (petitioner) and Arrpit Aggarwal (respondent).
Sh. Parkash Chand Bansal retired from the partnership firm. The
firm was reconstituted on 06.01.2015 between the remaining two
partners who had 50% shares in the net profits and losses of the
partnership business. Both the partners (parties herein) are real
cousins. The partnership firm was to manufacture pharmaceutical
products, medicines, tools, dyes and also to do service job work.
2(i) The case of the petitioner is that:- (i) Partnership
constituted on 06.01.2015 was ‘at will’ governed by the Indian
::: Downloaded on – 21/08/2025 21:42:13 :::CIS
-3-
( 2025:HHC:28281 )
Partnership Act, 1932 (in short the ‘Partnership Act‘). Irreconcilable
differences have now cropped up between the two partners: On
.
26.05.2025, petitioner issued notice of dissolution of the partnership
to the respondent invoking Section 43 of the Partnership Act.
Petitioner also got the notice of dissolution of the partnership firm
published in the newspapers (Himachal Tribune & Delhi Tribune) on
15.06.2025. The partnership firm stood dissolved on the date of
publication of the notice; (ii) Respondent has got no right to carry
on business of partnership firm from 26.05.2025 or alternatively
from 15.06.2025 onwards; (iii) Petitioner has filed Arbitration Case
No. 203 of 2025 in this Court under Section 11 of the Arbitration &
Conciliation Act seeking appointment of an Arbitrator.
2(ii) Learned Counsel for the petitioner drawing support from
Sections 43, 46, 47 & 53 of the Partnership Act urged that
petitioner has a right to seek the claimed relief against the other
partner. On dissolution of the partnership firm, it’s business needed
winding up. Respondent is required to be restrained from carrying
out the partnership business till the appointment of Arbitrator/
adjudication of dispute by the competent authority. All actions
pursuant to partnership deed needed to be stopped. Production
activity in furtherance of partnership business was also required to
be halted.
::: Downloaded on – 21/08/2025 21:42:13 :::CIS
-4-
( 2025:HHC:28281 )
In support of above submissions reliance was placed upon
Ashok Kumar Mittal vs. Ashwani Kapoor & Anr.2 and Ravinder
.
Singh Ahluwalia of Mumbai Indian Inhabitant vs. Kuljinder Singh
Ahluwalia of Mumbai Indian Inhabitant & Ors.3.
a. In Ashok Kumar Mittal 2 both the partners of the
firm had filed Section 9 petitions. One partner sought
protection as an interim measure to restrain the other
partner from obstructing him in running the hotel and also
to restrain him from getting revoked the licence granted to
the partnership firm to run the hotel. The other partner had
also petitioned to restrain the first partner from running
business of the firm and using goodwill, assets &
properties, books of accounts etc. of the partnership
business, till Award was made by the Arbitrator. In the
facts of the case, Hon’ble Delhi High Court held that as per
Section 43 of the Partnership Act a partnership firm ‘at will’
may be dissolved by any partner giving notice in writing to
the other partners of his intention to dissolve the firm and
the firm shall stand dissolved from the date mentioned in
the notice as the date of dissolution or if no date is
2
AIR 2005 Delhi 323
3
Arb. Petition (Lodging) No. 375 of 2009, decided on 07.05.2009, High Court of Bombay.
::: Downloaded on – 21/08/2025 21:42:13 :::CIS
-5-
( 2025:HHC:28281 )
mentioned from the date of the communication of the
notice. According to Section 47 of the Partnership Act after
.
the dissolution of the firm, the authority of each partner to
bind the firm and the other mutual rights and obligations of
the partners continue notwithstanding the dissolution so far
as may be necessary to wind up the affairs of the firm and
to complete the transactions begun but unfinished at the
time of the dissolution but not otherwise. Section 46 of the
Partnership Act says that every partner has a right to have
the property of the firm applied in payment of debts and
liabilities of the firm and to have the surplus distributed
amongst the partners. Sections 46 & 47 convey that once
the firm is dissolved no partner has a right to take over and
continue its business to the exclusion of the others except
so far as it may be necessary to wind up the affairs of the
firm and to complete the transactions begun but not
unfinished at the time of the dissolution. Section 53 of the
Partnership Act creates a further right in every partner of
the dissolved firm or his representative, in the absence of
a contract to the contrary, to restrain any other partner or
his representative from carrying on a similar business in
the firm name or from using any of the property of the firm
::: Downloaded on – 21/08/2025 21:42:13 :::CIS
-6-
( 2025:HHC:28281 )
for his own benefit until the affairs of the firm have been
completely wound up. Following the ratio of Vidya Devi vs.
.
Mani Ram4 and Tilak Chand Jain vs. Darshan Lal Jain5 it
was held that none of the partners can be permitted to
forcibly oust other partners and take over the business
driving others to go to Courts or before the Arbitrators.
Courts cannot encourage the tendency to grab business of
a dissolved firm by some of the partners only to the
exclusion of others. Where the control of business is
forcibly retained by one of the partners to the exclusion of
others, interference of the Court is essential to put an end
to highhandedness and protect the interests of an ousted
partner, who is knocking at the doors of the Courts. In
such cases, the Receiver has to be appointed as a course.
However, exception was carved out in such cases where
the outgoing partner appears to be himself not
participating in the partnership business before the
dissolution of the partnership or holds only a minor share in
the partnership firm or where the partners under the
control of the dissolved Firm are majority share holders
4
1974 Rajdhani LR 346
5
AIR 1985 J&K 50
::: Downloaded on – 21/08/2025 21:42:13 :::CIS
-7-
( 2025:HHC:28281 )
and appear to be bonafidely trying to wind up the business
and complete the commitments of the firm prior to
.
dissolution. The appointment of a Receiver is thus
discretion of the Court. Receiver has to be appointed only
when it appears to be just and convenient but in such like
cases where one partner is taking undue advantage out of
the assets and business of a dissolved firm and is trying to
exclude other partners by show of force, appointment of
Receiver is just and convenient to make parties abide by
law and not go by their muscle power. The forcible ousting
of a partner by another and use of the assets of a
dissolved firm by one only is an ample proof of misconduct
and the intention of holding over to make undue gains for
himself and undue loss to the ousted partner. In the facts
of said case, it was concluded that one of the partners had
taken over physical control of the partnership assets
which according to the other partner was after illegally &
forcibly ousting him from the business, accordingly
receiver was appointed.
b. Ravinder Singh Ahluwalia3 was a case where a
partnership firm ‘at will’ had been dissolved by notice.
Hon’ble Bombay High Court held that Sections 43, 46, 47 &
::: Downloaded on – 21/08/2025 21:42:13 :::CIS
-8-
( 2025:HHC:28281 )
53 of the Partnership Act will take their own course as the
firm stood dissolved. Once the firm is dissolved, no
.
partner has a right to continue the business of the firm
except for winding up and to complete the commitments
prior to dissolution and not day to day business of the firm
as it was prior to the dissolution. Also the parties need to
proceed for final settlement of the accounts between the
partners and distribution of the assets/cash after
considering the liabilities of the dissolved firm. No one
partner excluding the others can do the partnership
business. Therefore, in case where there are serious
disputes and differences, it is just, convenient and
necessary to appoint a Receiver as contemplated under
Order 40, Rules 1 & 2 of the Civil Procedure Code.
2(iii) Learned Counsel for the respondent disputed the
nature of partnership firm ‘at will’ as projected for the petitioner. As
per respondent, the partnership firm was not ‘at will’. It was strongly
urged for the respondent that Clause 8 of the partnership deed
restrained the partners not only from selling, assigning or
transferring their share but also from parting with their share or
interest in the partnership business without the consent of other
::: Downloaded on – 21/08/2025 21:42:13 :::CIS
-9-
( 2025:HHC:28281 )
partner in writing. This Clause according to the learned counsel for
the respondent would imply that partnership could be dissolved by
.
one partner only with the consent of the other partner. In case one
partner wanted to opt out from the partnership firm, he was required
to take consent of the other partner, partnership firm being a family
business of two partners (two cousins), to enable the other partner
to continue with the business by adopting requisite modalities in
case he was interested to do so. According to the learned counsel
for the respondent, in view of the clauses in the Partnership Deed,
dissolution of the partnership firm was not governed by Section 43
but by Section 44(c) & (d) of the Partnership Act. Learned Counsel
also urged that neither the petitioner has established prima facie
case in his favour concerning alleged dissolution of the Partnership
firm nor balance of convenience exists in petitioner’s favour. It was
urged that irreparable loss and injury will be caused to the
partnership firm & respondent by the closure of the partnership
business altogether as prayed by the petitioner. More than hundred
employees engaged by the partnership firm will be rendered jobless.
Also about eleven-hundred approvals/licences granted to the
partnership firm over a long operation period of partnership business
would become useless causing irreparable loss and injury to the
partnership firm and consequently to the respondent as well who
::: Downloaded on – 21/08/2025 21:42:13 :::CIS
– 10 –
( 2025:HHC:28281 )
had not only been carrying on business of the partnership firm but
had been carrying it effectively & efficiently. The firm was running
.
in profit and the petitioner as partner has equal share in the same.
Petitioner was and is also equally involved in running of partnership
business. No irreparable loss and injury shall be caused to the
petitioner in case the partnership firm is permitted to continue the
partnership business with due maintenance of the accounts till the
dispute is adjudicated by the appropriate authority.
Reliance in support of the submissions was placed upon:-
Erach F.D. Mehta vs. Minoo F.D. Mehta6; Suresh Kumar Sanghi vs.
Amrit Kumar Sanghi & Ors.7; Kishore Samrite vs. State of Uttar
Pradesh & Ors.8; Arcelor Mittal Nippon Steel India Ltd. vs. Essar
Bulk Terminal Ltd.9; Kanhai Foods Ltd. vs. A & HP Bakes10.
2(iv) Apart from above, both the sides have also levelled
allegations against each other on facts. According to petitioner,
the respondent has brought the firm to losses; The act and
conduct of the respondent has been dubious; Respondent has been
instrumental in manufacturing the products under the partnership
firm for the benefit of another firm where he himself is a partner
6
AIR 1971 Supreme Court 1653
7
AIR 1982 Delhi 131
8
(2013) 2 SCC 398
9
(2022) 1 SCC 712
10
R/First Appeal No. 2638 of 2021 a/w R/First Appeal No. 2639 of 2021, High Court of Gujarat
at Ahmedabad, decided on 10.06.2022.
::: Downloaded on – 21/08/2025 21:42:13 :::CIS
– 11 –
( 2025:HHC:28281 )
alongwith his family members; The manufactured products are
being supplied by the respondent to that entity at rates causing
.
prejudice to the partnership firm with intent to have unjust
enrichment. Allegations of respondent having his own competing
interest elsewhere have also been levelled. Several other
allegations on facts have been levelled against the respondent.
These have been summed up by projecting that mutual trust
between the parties has broken down rendering continuation of
partnership untenable. Similarly, respondent has levelled
allegations against the petitioner of having incorporated competing
entity in the name of his wife and thereafter diverting the key
clientage of the partnership firm to that competing entity;
Unauthorized withdrawal of huge amount by the petitioner from the
partnership accounts has been pleaded. Several other allegations
on facts have been levelled against the petitioner.
3. I have heard learned counsel for the parties and
considered the case file.
4. Consideration
For the purpose of adjudication of this petition, it is not
necessary to decide the veracity of the allegations & counter
allegations levelled on facts by the parties against each other. The
::: Downloaded on – 21/08/2025 21:42:13 :::CIS
– 12 –
( 2025:HHC:28281 )
crucial aspect to be determined is as to whether interim reliefs as
prayed for by the petitioner are liable to be granted:-
.
4(i) It will be appropriate to first reproduce relevant Clauses of
the partnership deed dated 06.01.2015:-
“2. That the partnership firm shall be addition to the
above mentioned previous work of manufacturing of tools
and dies (sic dyes) and service job work shall alsoadditionally do the work of manufacturing of pharmaceuticals
products Medicines etc. in partnership firm.
… r … …
8. That no partner shall entitled to sell, assign and
transfer or otherwise part with his share or interest in the
same, partnership business without the consent of other
partner in writing.
9. That no outside liability of the partner was lieu (sic
due) on the assets of the partnership business.
10. That the partnership was at will and was to be
governed by the Indian Partnership Act, 1932.
11. That if during the continuance of the said partnership
business any party to this deed dies, his share in good-will
capital, assets, liabilities and undivided profit was belongs tohis legal representatives who will be deemed to continue as
partner on the same terms and conditions as the deceased.
12. That the partners were striving sincerely and honestly
for the progress and promotion of the partnership business
and no salary was paid to the partners for their working for
the partnership business.
13. That in case whenever arises any dispute in relation to
the said partnership business its was to be referred to the::: Downloaded on – 21/08/2025 21:42:13 :::CIS
– 13 –
( 2025:HHC:28281 )
sole Arbitrator under the Indian Arbitration Act, decision of
arbitrator so appointed for the purpose was be final and
binding on both the partners.”
.
4(ii) According to the petitioner, in view of Clause 10 of the
partnership deed, the partnership was ‘at will’. Therefore, as per
Section 43 of the Partnership Act, it could be dissolved by the
petitioner by giving notice in writing to the respondent of his intention
to dissolve the firm:-
“43. Dissolution by notice of partnership at will. – (1) Where
the partnership is at will, the firm may be dissolved by any
partner giving notice in writing to all the other partners of his
intention to dissolve the firm.
(2) The firm is dissolved as from the date mentioned in
the notice as the date of dissolution or, if no date is no
mentioned, as from the date of the communication of the
notice.”
It is the contention of the petitioner that he had issued
notice for dissolving the firm on 26.05.2025; The said notice was
published in the news papers on 15.06.2025; The partnership firm
stood dissolved from 26.05.2025 or alternatively from the date of
publication of the notice in the news papers on 15.06.2025.
Pressing into service Sections 46, 47 & 53 of the Partnership Act
(extracted herein after), it was contended that on dissolution of the
partnership firm the petitioner is entitled to seek the interim reliefs
::: Downloaded on – 21/08/2025 21:42:13 :::CIS
– 14 –
( 2025:HHC:28281 )
which he has prayed for in the instant petition as on dissolution of a
firm every partner in absence of a contract between the parties to
.
the contrary is entitled to restrain the other partner from carrying on
a similar business in the name of the firm or from using the property
of the firm for his own benefit until the affairs of the firm have been
completely wound up; On dissolution of the firm its property is to be
applied in payment of debts and liabilities of the firm; The surplus is
to be distributed amongst the partners according to their rights.
“46. Right of partners to have business wound up after
dissolution. – On the dissolution of a firm every partner or his
representative is entitled, as against all the other partners or
their representatives, to have the property of the firm
applied in payment of the debts and liabilities of the firm, andto have the surplus distributed among the partners or their
representatives according to their rights.
47. Continuing authority of partners for purposes of
winding up. – After the dissolution of a firm the authority ofeach partner to bind the firm, and the other mutual rights and
obligations of the partners, continue notwithstanding thedissolution, so far as may be necessary to wind up the
affairs of the firm and to complete transactions begun but
unfinished at the time of the dissolution, but not otherwise:
Provided that the firm is in no case bound by the acts
of a partner who has been adjudicated insolvent; but this
proviso does not affect the liability of any person who has
after the adjudication represented himself or knowingly
permitted himself to be represented as a partner of the
insolvent.
::: Downloaded on – 21/08/2025 21:42:13 :::CIS
– 15 –
( 2025:HHC:28281 )
... ... ...
53. Right to restrain from use of firm name or firm
property. – After a firm is dissolved, every partner or his.
representative may, in the absence of a contract between
the partners to the contrary, restrain any other partner or his
representative from carrying on a similar business in the firm
name or from using any of the property of the firm for his
own benefit, until the affairs of the firm have been completely
wound up:
Provided that where any partner or his representative
has bought the goodwill of the firm, nothing in this section
shall affect his right to use the firm name.”
4(iii) According to the respondent, in view of Clause 8 of the
partnership deed the petitioner not only could not sell, assign or
transfer his share/interest in the partnership business but also was
not even entitled to part his share or interest in the partnership
business without consent of the other partner in writing. According
to the respondent, the partnership deed though confirms infinite
duration of the partnership business but also provides the
mechanism for its determination in terms of Clause 8 of the
partnership deed which is by mutual consent. Therefore, despite
Clause 10 of the partnership deed terming it ‘at will’ it has to be
construed to be not ‘at will’ in view of Clause 8. Section 7 of the
Partnership Act lays down characters of ‘partnership at will’ as
under:-
::: Downloaded on – 21/08/2025 21:42:13 :::CIS
– 16 –
( 2025:HHC:28281 )
“7. Partnership at will. – Where no provision is made by
contract between the partners for the duration of their
partnership, or for the determination of their partnership, the.
partnership is “partnership at will”.”
According to the respondent, the partnership deed
between the parties was not ‘at will’, therefore, its dissolution in the
given facts can only be in accordance with Section 44 (c) & (d) of the
Partnership Act, which read as under:-
“44. Dissolution by the Court – At the suit of a partner, the
Court may dissolve a firm on any of the following grounds,namely:-
(a) that a partner has become of unsound mind, in which
case the suit may be brought as well by the next friend of the
partner who has become of unsound mind as by any otherpartner;
(b) that a partner, other than the partner suing, has become
in any way permanently incapable of performing his duties
as partner;
(c) that a partner, other than the partner suing, is guilty of
conduct which is likely to affect prejudicially the carrying onof the business, regard being had to the nature of the
business;
(d) that a partner, other than the partner suing, wilfully or
persistently commits breach of agreements relating to the
management of the affairs of the firm or the conduct of its
business, or otherwise so conducts himself in matters
relating to the business that it is not reasonably practicable
for the other partners to carry on the business in partnership
with him;
::: Downloaded on – 21/08/2025 21:42:13 :::CIS
– 17 –
( 2025:HHC:28281 )
(e) that a partner, other than the partner suing, has in any
way transferred the whole of his interest in the firm to a third
party, or has allowed his share to be charged under the
.
provisions of rule 49 of Order 21 of the First Schedule to the
Code of Civil Procedure, 1908, or has allowed it to be sold in
the recovery of arrears of land-revenue or of any dues
recoverable as arrears of land-revenue due by the partner;
(f) that the business of the firm cannot be carried on save at
a loss; or
(g) on any ground which renders it just and equitable that the
firm should be dissolved.”
4(iv)(a) In Adhunik Steels Ltd. vs. Orissa Manganese & Minerals
(P) Ltd.11 , Hon’ble Apex Court held that in exercise of power under
Section 9 of the Arbitration & Conciliation Act, an order, for
protection, for the preservation, interim custody or sale of any goods,
which are subject matter of the arbitration agreement and such
interim measure of protection as may appear to the Court to be just
and convenient, can be passed.
The object of Section 9 of the Arbitration & Conciliation Act
is to preserve the subject matter and secure arbitration. In the guise
of praying interim relief under Section 9 petition, relief of nature
destructive to the main subject matter cannot be granted. Filing of
an application by a party by virtue of its being a party to an
arbitration agreement is for securing a relief which the court has
11
(2007) 7 SCC 125
::: Downloaded on – 21/08/2025 21:42:13 :::CIS
– 18 –
( 2025:HHC:28281 )
power to grant before, during or after arbitral proceedings by virtue
of Section 9 of the Arbitration & Conciliation Act. The relief sought for
.
in an application under Section 9 of the Arbitration & Conciliation
Act is neither in a suit nor a right arising from a contract. The right
arising from the partnership deed or conferred by the Partnership
Act is being intended to be enforced in the Arbitral
Tribunal/competent forum; The Court under Section 9 is only to
formulate interim measures so as to protect the right under
adjudication before the Arbitral Tribunal from being frustrated.
[Reference: Firm Ashok Traders & Anr. vs. Gurumukh Dass Saluja &
Ors.12]
It is not disputed that approximately eleven hundred
approvals/licences for different medicines/pharmaceutical
formulations have been lawfully granted to the partnership firm over
the period of its operation. It is also not in dispute that more than
one hundred employees are on the rolls of the partnership firm. Both
the partners i.e. petitioner & respondent are cousins having 50%
share each in profit & loss of partnership firm.
It has been strongly emphasized for the respondent that
the partnership firm is not a loss making enterprise. Endeavour has
been made to demonstrate this on the basis of contemporary record.
12
(2004) 3 SCC 155
::: Downloaded on – 21/08/2025 21:42:13 :::CIS
– 19 –
( 2025:HHC:28281 )
This assertion has not been seriously rebutted at this stage for the
petitioner though several allegations on facts have been made
.
against respondent’s working the partnership business causing loss
to the firm. Respondent has also alleged systematic diversion of
prime clientage of the partnership firm by the petitioner to a
competitive entity i.e. M/S Kantil Pharmaceuticals Pvt. Ltd. statedly
managed by the petitioner’s family members while remaining active
partner in M/s Vidhyasha Pharmaceuticals. Petitioner has not
rebutted these assertions but has levelled his own allegations
against respondent’s having competing interest in another firm – M/S
Akkodis Pharmacia. Respondent has also alleged petitioner’s
concealing transfer of 1.58 Crore from the partnership firm’s
account to his personal account. Respondent has also refuted
petitioner’s allegation of respondent solely handing the partnership
firm. It has been asserted for the respondent that petitioner has
remained actively involved in the partnership business until just
before committing the alleged bank transaction, that the petitioner
had consented to respondent’s initiating vendors’ payments on
05.04.2025 which were eventually processed on 08.04.2025.
Petitioner has also levelled his own allegations against the
respondent of simultaneously being partner of another competitive
entity and manufacturing & supplying the products to that entity at
::: Downloaded on – 21/08/2025 21:42:13 :::CIS
– 20 –
( 2025:HHC:28281 )
rates causing loss to the partnership firm etc. Nonetheless, an
important aspect that cannot be ignored at this moment is that the
.
partnership firm – M/S Vidhyasha Pharmaceuticals is a running
concern. At this stage, it does not appear to be a case where the
respondent has forcibly ousted the petitioner from the partnership
business. It is not petitioner’s case that he is not getting his share
from partnership business. In fact, it is the petitioner who wants the
partnership business to be closed.
4(iv)(b) At this stage, it will be appropriate to refer to M.O.H.
Uduman & Ors.. vs. M.O.H. Aslum 13, wherein though a clause of
the partnership deed characterized it to be at will but while
interpreting different clauses and the deed as a whole, the Apex
Court reconciled the clauses & held that the deed expressly
provided duration namely existence of at least two partners. So long
as two partners remain the firm cannot be dissolved unilaterally, a
partner may only withdraw and receive payment of his share.
Relevant paras read as under:-
“14. It is a settled cannon of construction that a contract of
partnership must be read as a whole and the intention of the
parties must be gathered from the language used in the
Contract by adopting harmonious construction of all the
clauses contained therein. The cardinal principle is to be as13
(1991) 1 SCC 412::: Downloaded on – 21/08/2025 21:42:13 :::CIS
– 21 –
( 2025:HHC:28281 )
certain the intention of the parties to the contract through
the words they have used, which are key to open the mind
of the makers. It is seldom that any technical or pedantic
.
rule of construction can be brought to bear on their
construction. The guiding rule really is to ascertain the
natural and ordinary sensible meaning to the language
through which the parties have expressed themselves,
unless the meaning leads to absurdity.
… …
18. Giving our anxious consideration to the controversy,
we have no hesitation to reach the finding and hold that the
duration of the partnership has been expressly provided in
the deed, namely, that the partnership will continue “till there
are two partners” and that, therefore, it is not a partnership
at will. Thereby, the respondent has no right to dissolve the
partnership except to seek accounting for the period in
dispute or his right to withdraw or retire from partnership
and to take the value of his share in the partnership either
by mutual agreement or at law in terms of the partnership
deeds Exs. B-1 and B-2.”
Karumuthu Thiagarajan Chettiar & Anr. vs. E.M. Muthappa
Chettiar 14 held as under with regard to exceptions to ‘partnership at
will’:-
“(6) … … Now S. 7 contemplates two exceptions to a
partnership at will. The first exception is where there is a
provision in the contract for the duration of partnership; the
second exception is where there is provision for the
determination of the partnership. In either of these cases the
14
AIR 1961 SC 1225::: Downloaded on – 21/08/2025 21:42:13 :::CIS
– 22 –
( 2025:HHC:28281 )
partnership is not at will. The duration of a partnership may
be expressly provided for in the contract; but even where
there is no express provision, courts have held that the
.
partnership will not be at will if the duration can be implied.
See Halsbury’s Laws of England, Third Edition, Vol. 28, p.
502, para 964, where it is said that where there is no
express agreement to continue a partnership for a definite
period there may be an implied agreement to do so.” … …
Interpreting clauses of partnership deed, Hon’ble Apex Court further
held that:-
“…
r to
… It is clear that’ the partnership was for the sole
business of carrying on the managing agency and thereforeby necessary implication it must follow that the partnership
would determine when the managing agency determines.
Therefore on the terms of the contract in this case, even ifthere is some doubt whether any duration is implied, there
can be no doubt that this contract implies that the
partnership will determine when the managing agencyterminates. In this view the partnership will not be a
partnership at will as S. 7 of the Act makes it clear that a
partnership in which there is a term as to its determination is
not a partnership at will. Our attention was drawn in thisconnection to a term in the contract which lays down that
either partner may withdraw from the partnership by
relinquishing his right of management to the other partner.
That however does not make the partnership a partnership
at will, for the essence of a partnership at will is that it is
open to either partner to dissolve the partnership by giving
notice. Relinquishment of one partner’s interest in favour of
the other, which is provided in this contract, is a very::: Downloaded on – 21/08/2025 21:42:13 :::CIS
– 23 –
( 2025:HHC:28281 )
different matter. It is true that in this particular case there
were only two partners and the partnership will come to an
end as soon as one partner relinquishes his right in favour of.
the other. That however is a fortuitous circumstance; for, if
(for example) there had been four partners in this case and
one of them relinquished his right in favour of the otherpartners, the partnership would not come to an end. That
clearly shows that a term as to relinquishment of a partner’s
interest in favour of another would not make the partnershipone at will. We may in this connection refer to Abbott v.
Abbott15. That was a case where there were more than two
partners and it was provided that the retirement of a partnerwould not terminate the partnership and there was an option
for the purchase of the retiring partner’s share by other
partners. It was held that in the circumstances the
partnership was not at will and it was pointed out that onlywhen all the partners except one retired that the partnership
would come to an end because there could not be a
partnership with only one partner. We are, therefore, inagreement with the High Court that the contract in this case
disclosed a partnership the determination of which is implied,namely, the termination of the managing agency and,
therefore, under S. 7 of the Act it is not a partnership at will.
In the circumstances it is unnecessary to consider whether
the case will also come under S. 8 of the Act.”
In the instant case, no doubt Clause 10 of the Partnership
deed labels the firm to be ‘at will’ yet Clause 8 of the deed
categorically restrains either partner from selling, assigning,
15
1936-3 All ER 823
::: Downloaded on – 21/08/2025 21:42:13 :::CIS
– 24 –
( 2025:HHC:28281 )
transferring or otherwise parting with his share or interest without
written consent of the other partner. Respondent’s contention of
.
words ‘otherwise parting with’ having expansive meaning including
unilateral dissolution, retirement, withdrawal etc., assumes
significance – It will have to be adjudicated as to whether such
clause was a conscious safeguard to preserve continuity in two
partners’ firm in order to prevent surprise departure leading to
sudden collapse of business. Whether generalized ‘at will’ character
of the partnership business under Clause 10 would yield to specific
contractual bar in Clause 8 of the deed, is another question and also
whether the partnership deed confers its indefinite duration but
requires mutual consent for exit. Simply because Clause 10 of the
partnership deed refers to the partnership as ‘at will’, therefore, is
not sufficient in the given facts to conclude at this stage that it was
so and unilateral dissolution was permissible. Petitioner also
comprehends this and perhaps for this reason while issuing notice
for dissolution has prayed for a declaration for dissolving the
partnership firm alongwith rendition of accounts:-
“11. That in view of above, it is clear that disputes
between the parties pertains to financial misappropriation,
breach of fiduciary duties, and gross mismanagement by
you, the addressee, which have rendered the continuation of
the partnership Firm practically impossible and legally::: Downloaded on – 21/08/2025 21:42:13 :::CIS
– 25 –
( 2025:HHC:28281 )
untenable. Accordingly our Client in the arbitral proceedings
shall be raising claims, including but not limited to:
a. Declaration of that the Partnership Firm stands
.
dissolved, alongwith rendition of accounts;
b. A direction for refund of the amounts which have been
misappropriated and illegally withdrawn from Firm’saccount by you, the addressee, with interest from the
date of withdrawal till realization;
c. An award of damages for loss of goodwill,reputational harm, and disruption of our Client’s
business;
Our Client is reserving its rights to add any further claims
arising out of or in connection with the disputes set out
hereinabove which our Client deems necessary for proper
an complete adjudication of the present dispute.
… …
14. In view of the various disputes and events of default
attributable to you the addressee, as briefly set out
hereinabove, our Client asserts valid and enforceable claimsagainst you the addressee, arising from the losses sustained
by our Client due to the unlawful acts committed by you theaddressee. Accordingly, our Client hereby invokes the
arbitration clause as contained in Clause 13 of thePartnership Deed dated 06.01.2015, for the purpose of
adjudicating the resolving all outstanding disputes between
you, the addressee, and our Client, as enumerated above
and is seeking reference of the same to arbitration.”
Petitioner has issued notice dated 26.05.2025 inter alia for
declaration that firm stands dissolved. This declaration is yet to
come from the competent forum. Therefore, till dissolution of firm is
::: Downloaded on – 21/08/2025 21:42:13 :::CIS
– 26 –
( 2025:HHC:28281 )
declared in the appropriate proceedings, the relief claimed as an
interim measure in this petition on the count that firm stands
.
dissolved cannot be granted. Simply because Clause 10 of the
partnership firm terms the partnership to be ‘at will’ would not be
enough to hold so given the other Clauses of the partnership deed
and the factual position of the case for the purpose of granting
interim relief at this stage. Interpretation of Clauses 8, 10 & 11 of the
partnership deed may also lead to a possible inference that parties
entering into contract were aware that in case a partner is allowed
to part with his share/retire, this would automatically result into
dissolution of the firm and in order to protect continuity of the
business and save it from abrupt disruption, this Clause was
inserted restricting the partner from parting his share in the
partnership business without consent of the other partner so that
business is continued as long as possible and is not abruptly halted
at the sweet will of one of the partners. Whether Clause 10 in such
circumstances would have overriding effect over the other Clauses is
a matter that is required to be adjudicated by the
Arbitrator/competent forum where the petitioner would be seeking
declaration for dissolution of the partnership firm.
::: Downloaded on – 21/08/2025 21:42:13 :::CIS
– 27 –
( 2025:HHC:28281 )
4(iv)(c) Arvind Constructions (P) Ltd. vs. Kalinga Mining
Corporation & Ors.16 holds that power under Section 9 of the
.
Arbitration & Conciliation Act is also to be exercised on the
touchstone of principles applicable for grant of interim injunctions
under the Civil Procedure Code. Arcelor Mittal Nippon Steel India
Ltd.9 holds that:-
“88. Applications for interim relief are inherently
applications which are required to be disposed of urgently.
Interim relief is granted in aid of final relief. The object is to
ensure protection of the property being the subject-matter ofarbitration and/or otherwise ensure that the arbitration
proceedings do not become infructuous and the arbitral
award does not become an award on paper, of no real value.
89. The principles for grant of interim relief are (i) good
prima facie case, (ii) balance of convenience in favour of
grant of interim relief and (iii) irreparable injury or loss to theapplicant for interim relief. Unless applications for interim
measures are decided expeditiously, irreparable injury orprejudice may be caused to the party seeking interim relief.”
The three point test – apart from existence of prima facie
case, balance of convenience and irreparable loss to petitioner by
non grant of interim relief, is also not satisfied at this stage. It is a
running partnership concern which respondent claims of being run
profitably. Both the parties have 50% share in the profits/losses.
16
(2007) 6 SCC 798
::: Downloaded on – 21/08/2025 21:42:13 :::CIS
– 28 –
( 2025:HHC:28281 )
Respondent’s assertion of complete shutdown of partnership
business affecting its 120+ employees has not been denied.
.
Adverse impact of closure of partnership business, stopping
manufacturing processes upon its 1100+ WHO-GMP Certifications,
drug licences, approvals has also not been ruled out by the
petitioner. Freezing of operational accounts of the firm altogether
will also block legitimate transactions including payment of salaries,
vendor payments, clearing statutory dues, suspension of medicines
manufacturing, forfeiture of securities, loss of tenders, permanent
loss of clientage and goodwill etc. The interim measure prayed in
this petition would virtually paralyse day-to-day functioning of the
firm. The interim relief prayed for by the petitioner does not amount
to preservation or protection of the subject matter of the arbitration.
Grant of such relief could eventually lead to destruction of the
subject matter of the Arbitration i.e. the partnership firm. The
subject matter of arbitration is petitioner’s prayer for dissolving the
partnership firm and for rendition of accounts.
5. For the foregoing reasons, no case for appointment of
Receiver is made out at this stage. The interim reliefs as prayed for
by the petitioner cannot be allowed to him at present. All interim
orders stand vacated. Petitioner shall be at liberty to move for
appropriate reliefs before the learned Arbitrator/competent forum. Till
::: Downloaded on – 21/08/2025 21:42:13 :::CIS
– 29 –
( 2025:HHC:28281 )
such time, in view of legal notice issued by the petitioner on
26.05.2025 and for safeguarding the interest of the parties, it is
.
ordered that while carrying on partnership business, none of the
partners including the respondent shall alienate, encumber or create
charge on partnership assets as on date. Respondent shall maintain
true and correct account of all business transactions of the firm and
shall submit the same to the Court for every quarter. Such statement
of account for the period ending 30th September, 2025 be furnished
by 31st October, 2025 and the subsequent statements shall be
furnished by the end of month succeeding the quarter end.
Petition stands disposed of accordingly. It is however
clarified that observations made in this order are only meant for
deciding present petition and shall have no bearing on the merits of
rival contentions of the parties which are to be adjudicated by the
appropriate forum.
Pending miscellaneous application(s), if any, shall also
stand disposed of.
Jyotsna Rewal Dua,
Judge
August 21 , 2025 (PK)
::: Downloaded on – 21/08/2025 21:42:13 :::CIS