Supreme Court of India
RAHUL VERMA & ORS.versusRAMPAT LAL VERMA & ORS.
- Citation
- 2025 INSC 296
- Decided
- 21 February 2025
- Disposal
- Dismissed
Holding
An arbitration agreement in a partnership deed remains enforceable by and against the legal heirs of a deceased partner, and the right to sue for rendition of accounts survives with them.
Summary
The dispute involved a partnership firm where two of the three partners had died, and the legal heirs of one deceased partner sought to enforce an arbitration clause in the partnership deed to resolve a claim for rendition of accounts. The respondents argued that the heirs, being non‑signatories to the deed and without explicit consent, could not be bound by the arbitration agreement. The Supreme Court examined whether an arbitration agreement survives the death of a partner and whether the right to sue for accounts passes to the legal heirs. Relying on Section 40 of the Arbitration and Conciliation Act, 1996 and precedents such as Ravi Prakash Goel and Jyoti Gupta, the Court held that the term “partners” includes legal heirs and that the arbitration agreement remains enforceable by or against them. Consequently, the High Court’s decision was affirmed and the Special Leave Petition was dismissed.
Issues considered
- 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?
- Whether the right to sue for the rendition of accounts survives to the legal heirs of the deceased partner, entitling them to invoke the arbitration clause in the partnership deed?
Legislation cited
- Arbitration and Conciliation Act, 1996s. 11, s. 2(1)(g), s. 35, s. 37(1)(a), s. 40, s. 8
- Partnership Act, 1932s. 42(c), s. 46, s. 48
Headnote
Issue for Consideration Issue arose 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; and whether the right to sue for the rendition to the legal heirs of the deceased partner, entitling them to invoke the arbitration clause in the partnership deed. Headnotes† Arbitration and Conciliation Act, 1996 – Arbitration agreement – Invocation of the arbitration clause in the partnership deed, by the legal heirs of a
Subjects
Legal heirs of a deceased partner in partnership firmNon-signatories to partnership deedArbitration agreementRight to sue for rendition of accountsInvocation of arbitration clause in the partnership deedTerm ‘Partner’Enforcement of arbitral awardExistence of arbitration agreement
Judgment
[2025] 2 S.C.R. 1713 : 2025 INSC 296
Rahul Verma & Ors.
v.
Rampat Lal Verma & Ors.
(Special Leave Petition (C) No. 4330 of 2025)
21 February 2025
[J.B. Pardiwala and R. Mahadevan, JJ.]
Issue for Consideration
Issue arose 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; and 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.
Headnotes†
Arbitration and Conciliation Act, 1996 – Arbitration agreement –
Invocation of the arbitration clause in the partnership deed,
by the legal heirs of a deceased partner in a partnership firm,
being non-signatories to the partnership deed – Entitlement –
Right to sue for the rendition of accounts to the legal heirs
of the deceased partner – Availability:
Held: Term ‘partners’ extends to and would include their legal
heirs, representatives, assigns or legatees, etc – Persons claiming
under the rights of a deceased person are the representatives of
the deceased party, and thus, both the parties to the agreement
and their legal heirs entitled to enforce an arbitral award and are
bound by it – Existence of an arbitration agreement is not affected
by the death of a party to the arbitration agreement – Thus, the
right to sue for rendition of account also survives, ensuring that
the legal representatives can assert or defend claims arising from
the partnership agreement – On facts, since the legal heirs of the
deceased partner, have stepped into the shoes of the deceased, the
partnership agreement would operate to bind both the petitioners
and the respondents – No error of law committed by High Court
in passing the impugned judgment. [Paras 10-12]
1714 [2025] 2 S.C.R.
Supreme Court Reports
Case Law Cited
Ravi Prakash Goel v. Chandra Prakash Goel & Anr. [2007] 4 SCR
295 : (2008) 13 SCC 667 – referred to.
Jyoti Gupta v. Kewalsons & Ors., 2018 SCC OnLine Del
7942 – referred to.
List of Acts
Arbitration and Conciliation Act, 1996; Partnership Act, 1932.
List of Keywords
Legal heirs of a deceased partner in partnership firm; Non-signatories
to partnership deed; Arbitration agreement; Right to sue for rendition
of accounts; Invocation of arbitration clause in the partnership
deed; Term ‘Partner’; Enforcement of arbitral award; Existence of
arbitration agreement.
Case Arising From
EXTRAORDINARY CIVIL JURISDICTION: Petition for Special
Leave to Appeal (Civil) No. 4330 of 2025
From the Judgment and Order dated 22.10.2024 of the High Court
of Gauhati High Court in ARBA No. 6 of 2024
Appearances for Parties
Adv. for the Petitioners:
Ms. Shagufa Salim.
Advs. for the Respondents:
Pavan Kumar Chaturvedi, Nitish Kumar Since, Abhishek Raj, Amit
Kumar Thakur, Pavan Kumar Chaturvedi.
Judgment / Order of the Supreme Court
Order
1. This petition arises from the judgment and order passed by the
Gauhati High Court in Case No. Arb. A./6/2024 dated 22.10.2024
whereby the High Court allowed the appeal filed by the respondents
herein under Section 37(1)(a) of the Arbitration and Conciliation Act,
1996 (for short, “Act of 1996”) and thereby quashed and set aside
[2025] 2 S.C.R. 1715
Rahul Verma & Ors. v. Rampat Lal Verma & Ors.
the order dated 09.08.2024 passed by the Civil Judge (Sr. Div.),
Dibrugarh in Misc. (J) Case No. 206/2024 arising out of Commercial
Suit No. 02/2024 (“impugned judgment”).
2. We heard Ms. Shagufa Salim, learned counsel appearing for the
petitioners and Mr. Pavan Kumar Chaturvedi, learned counsel
appearing for the respondents.
3. 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 (original defendants in Commercial Suit
No. 02/2024) preferred a petition under Section 8 of the Act of 1996
as Misc. (J) Case No. 206/2024 in Commercial Suit No. 02/2024
before the Commercial Court, at Dibrugarh for dismissal of the suit
and a reference to arbitration. The petition was filed on the basis of
an arbitration clause in the partnership deed. The said petition was
dismissed by the Civil Judge.
4. Aggrieved by the dismissal of their petition under Section 8 of the
Act of 1996, the respondents preferred an arbitration appeal in Case
No. Arb. A./6/2024. 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. The said clause reads as follows:-
“2. The partnership came into existence on and from 1st
day of April 1984 and continued and that the changed
constitution came into existence on and from 18th day
of September 1989 on the terms as mentioned therein
and henceforward with effect from 1st day of April 1992
shall continue in future in accordance with the terms and
provisions of this instrument and shall be AT WILL and may
be carried on for any time till it is agreed to be carried on by
the partners and determinable nevertheless as hereinafter
provided. The death or retirement of any partner shall not
have the effect of dissolving the partnership which will
continue between the other partners and one of the heirs
or one of the representatives of the deceased partner if
so agreed. This partnership can be dissolved by any party
1716 [2025] 2 S.C.R.
Supreme Court Reports
giving two months’ notice in writing to the other of his/her
intention to do so, by common consent the partnership
can be dissolved at any time.”
5. It further observed that clause no. 15 of the partnership deed specifies
the circumstances under which the parties may resort to arbitral
proceedings. It held that the dispute between the parties pertains to
the affairs of the partnership firm, specifically its dissolution. Since
this particular circumstance is addressed in the partnership deed,
Section 42(c) of the Partnership Act, 1932 would not impede the
court from referring the matter to arbitration. The legal heirs of the
deceased partner are entitled to invoke the arbitration clause and
the sole surviving partner is also entitled to invoke the arbitration
clause against the legal heirs of the deceased partner. The said
clause reads as follows:-
“15. In case of any dispute or difference of opinion
regarding the partnership affairs or regarding dissolution or
discontinuance of the partnership business or at any time
the matter shall be to referred to arbitration. The award of
the arbitrator of the Board of arbitrator so given shall be
final and binding on the parties.”
6. In such circumstances, referred to above, the petitioners-legal heirs
of the deceased partner are here before this Court with the present
petition.
7. Having gone through the materials on record, two questions fall for
our consideration:
(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?
8. The decision in the case of Ravi Prakash Goel v. Chandra Prakash
Goel & Anr., reported in (2008) 13 SCC 667, squarely covers the facts
of the present case. This 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
[2025] 2 S.C.R. 1717
Rahul Verma & Ors. v. Rampat Lal Verma & Ors.
of the deceased. The Court emphasized on the definition of a ‘legal
representative’ under Section 2(1)(g) of the Act of 1996 to hold that
an arbitral agreement and the award is enforceable by or against
the legal representatives of the deceased. The relevant observations
are reproduced hereinbelow:-
“18. It is clear from Section 40 of the Arbitration Act that
an arbitration agreement is not discharged by the death of
any party thereto and on such death it is enforceable by
or against the legal representatives of the deceased, nor
is the authority of the arbitrator revoked by the death of
the party appointing him, subject to the operation of any
law by virtue of which the death of a person extinguishes
the right of action of that person.
19. Section 2(1)(g) defines “legal representative” which
reads thus:
“2. (1)(g) ‘legal representative’ means a person who
in law represents the estate of a deceased person,
and includes any person who intermeddles with the
estate of the deceased, and, where a party acts in
a representative character, the person on whom the
estate devolves on the death of the party so acting;”
20. The definition of “legal representative” became
necessary because such representatives are bound by
and also entitled to enforce an arbitration agreement.
Section 40 clearly says that an arbitration agreement is
not discharged by the death of a party. The agreement
remains enforceable by or against the legal representatives
of the deceased. In our opinion, a person who has the right
to represent the estate of the deceased person occupies
the status of a legal person (sic representative). Section
35 of the 1996 Act which imparts the touch of finality to
an arbitral award says that the award shall have binding
effect on the “parties and persons claiming under them”.
Persons claiming under the rights of a deceased person
are the personal representatives of the deceased party
and they have the right to enforce the award and are also
bound by it. The arbitration agreement is enforceable by
or against the legal representative of a deceased party
1718 [2025] 2 S.C.R.
Supreme Court Reports
provided the right to sue in respect of the cause of action
survives.
xxx
27. We are of the opinion that in view of the provisions
of Section 46 read with Section 48 of the Partnership Act
as well as Section 40 of the Arbitration and Conciliation
Act, 1996, the application for appointment of an arbitrator
under the arbitration clause of the partnership deed was
liable to be allowed and the learned Chief Justice has
erred in overlooking the said provisions. While right to
sue for rendition of accounts of partnership firm survives
on the legal representative of a deceased partner, he is
also entitled to invoke the arbitration clause contained in
the partnership deed.
xxx
29. As already stated, it was not legally essential to
specifically make a mention that the partners included their
legal heirs, representatives, assigns or legatees, etc. and
the arbitration clause could be invoked by the appellant as
the legatee as well as the legal heir/legal representative
of the deceased Dulari Devi particularly where the dispute
had arisen during her lifetime. The appellant’s claim in
the instant case is based on the will as well as being a
legal heir of the deceased Dulari Devi. The appellant,
in our opinion, possessed a legal and enforceable right
to invoke arbitration clause and move application under
Section 11 of the Arbitration Act before the High Court
for appointment of arbitrator. The word “party” as used in
the partnership deed does not exclude inclusion of legal
heirs, legal representatives, etc. as being canvassed
by the respondents. Thus, in our opinion, in view of the
provisions of Sections 40 and 46 of the Partnership Act
read with Section 40 of the Arbitration Act, the appellant
has a legal right to commence arbitration by moving an
application under Section 11 of the Arbitration Act in the
High Court as in our view, the right to sue survives on him
as legal representative of the deceased Dulari Devi and
he is entitled to invoke Clause 13 of the partnership deed.
[2025] 2 S.C.R. 1719
Rahul Verma & Ors. v. Rampat Lal Verma & Ors.
Moreover, the dispute referable to arbitration had already
arisen during the lifetime of Dulari Devi which is also well
settled that where a dispute is referable to arbitration,
the parties cannot be compelled to take recourse to in
the civil courts.”
(Emphasis supplied)
9. In Jyoti Gupta v. Kewalsons & Ors., reported in 2018 SCC OnLine
Del 7942, the High Court of Delhi 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.
It 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.
The relevant observations are reproduced hereinbelow:-
“12. A reading of the above judgments would clearly
show that it is no longer res integra that upon death of a
partner, the arbitration agreement between the partners
shall survive and can be enforced by the legal heirs of the
deceased partner. Whether upon the death of a partner,
the surviving partners were under an obligation to induct
one of the legal heirs of the deceased partner or not
into the partnership as also whether such decision can
be challenged by the legal heirs, and in case the legal
heirs accept the decision of the surviving partners not to
induct any legal heirs of the deceased partner into the
partnership, what would be the effect, are all questions to
be determined by the Arbitral Tribunal constituted in terms
of the arbitration agreement between the parties. Further,
merely because the arbitration agreement refers to the
disputes between ‘partners’, the same cannot debar or
take away the right of enforcement of such an arbitration
agreement vested in the legal heirs of the deceased partner
in view of Section 40 of the Act.”
(Emphasis supplied)
10. It is a well-established position of law that the term ‘partners’ extends
to and would include their legal heirs, representatives, assigns or
1720 [2025] 2 S.C.R.
Supreme Court Reports
legatees, etc. Persons claiming under the rights of a deceased
person are the representatives of the deceased party, and therefore,
both the parties to the agreement and their legal heirs are entitled to
enforce an arbitral award and are bound by it. In light of Section 40
of the Act of 1996 the existence of an arbitration agreement is not
affected by the death of a party to the arbitration agreement. As a
consequence, the right to sue for rendition of account also survives,
ensuring that the legal representatives can assert or defend claims
arising from the partnership agreement.
11. Applying the above exposition of law in the facts of the present case,
since the legal heirs of the deceased partner, namely, Sampat Lal
Verma, have stepped into the shoes of the deceased, clause 15 of
the partnership agreement will operate to bind both the petitioners
and the respondents.
12. For all the aforesaid reasons, we have reached the conclusion that
no error not to speak of any error of law could be said to have been
committed by the High Court in passing the impugned judgment.
13. As a result, the special leave petition stands dismissed. Parties shall
bear their own costs. Pending application(s), if any, stand disposed of.
Result of the case: Special Leave Petition dismissed.
†
Headnotes prepared by: Nidhi Jain
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