Partnership Dispute Isn't Non-Arbitrable Just Because Parties Are Family Members: Bombay High Court

The Bombay High Court has recently held that a dispute between family members does not fall outside an arbitration clause merely because the parties are related. This applies when the rights being claimed arise from their partnership relationship.

Justice Amit Borkar made the observation while allowing a Section 11 application. He appointed Advocate Abhishek Kothari as the sole arbitrator to adjudicate disputes arising out of and in connection with Clause 18 of a Partnership Deed dated October 9, 1992.

“The dispute sought to be referred is still concerning the partnership, the partnership funds and the alleged share of one of the partners. Therefore, merely because the parties are related to each other, it cannot be said that the dispute falls outside the arbitration clause,” the court held.

The dispute arose between the applicant and the firm's other partner. They became the only partners of Narbheram Narsidas after another partner retired in 2017. Each held a 50% share in the firm.

The firm received ₹25 lakh on December 10, 2024, in connection with the surrender or transfer of tenancy rights of Godown No.20 at Sewri, Mumbai. A Deed of Transfer of Tenancy was executed the following day.

The applicant claimed a 50% share in the amount, or ₹12.5 lakh. He also sought accounts of the firm. After the amount was not paid and the accounts were not furnished, the applicant invoked arbitration on January 6, 2026.

In response, the firm's other partner acknowledged receipt of approximately ₹25 lakh. However, he did not agree to the appointment of an arbitrator. The firm's other partner argued that the claims arose from a family dispute rather than a partnership dispute. He therefore contended that they did not fall within the arbitration clause.

Rejecting the objection, the court observed that what mattered was the right being claimed and the relationship from which that right arose.

“Merely because the parties are members of the same family, every dispute between them does not become a family dispute. What is required to be seen is what right is claimed and from which relationship that right is claimed. In the present case, the Applicant claims his rights as a partner of Respondent No.2 firm. He relies upon the Partnership Deed,” the court held.

The court noted that the applicant was claiming a share in money received by the partnership firm. He was also seeking its accounts. These claims, it observed, had a direct connection with the partnership relationship.

At the Section 11 stage, the court was not required to decide whether the applicant was ultimately entitled to exactly 50% of the amount or ₹12.5 lakh. It observed that questions concerning the alleged appropriation of partnership funds, correctness of accounts and the partners' respective obligations would require consideration of evidence before the arbitral tribunal.

The court also found that the dispute over the ₹25 lakh was a genuine dispute and not merely speculative. Whether the applicant was ultimately entitled to the claimed amount was left for determination in arbitration.

The court rejected the limitation objection at this stage. It observed that the monetary dispute arose in December 2024, the arbitration notice was issued on January 6, 2026, and there was no apparent delay making the Section 11 application obviously beyond limitation.

Detailed questions concerning limitation, including the claim for rendition of accounts, were left to the arbitral tribunal.

The court ultimately found that Clause 18 contained an arbitration agreement. He also found that genuine disputes had arisen concerning the firm's affairs, the receipt and accounting of ₹25 lakh, the applicant's alleged share and rendition of partnership accounts.

The court accordingly appointed Advocate Kothari as the sole arbitrator. He will adjudicate the disputes and differences arising out of and in connection with Clause 18 of the Partnership Deed dated October 9, 1992.

For Applicant: Advocate Ramiz Shaikh with Rishi Bindra, and Aradhya Sharma i/by Ramiz Shaikh

For Respondents: Rashesh Gandhi, Omprakash Tiwari