RAHUL VERMA & ORS. VS RAMPAT LAL VERMA & ORS.
The case is between Rahul Verma and Rampat Lal Verma, embodying a critical question of Law, i.e., 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 as stated in the Agreement. Further, 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.
The fact of the case was that the partnership deed came into existence on 01.04.1984. However, the partnership deed can be dissolved by any party 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. Furthermore, Clause No. 15 of the partnership deed specifies the circumstances under which the parties may resort to arbitral proceedings.
The Supreme Court of India has upheld the high court decision to allow the arbitration appeal. The Hon’ble Court held that an arbitration agreement does not cease to exist upon the death of a party and is enforceable by or against the legal representatives of the deceased. The term “partners” includes legal heirs, representatives, assigns, or legatees. Persons claiming under the rights of a deceased person are representatives of the deceased party, and both parties and their legal heirs are entitled to enforce and are bound by an arbitral award. Further, Section 40 of the Arbitration and Conciliation Act, 1996, ensures that the arbitration agreement’s existence is unaffected by a party’s death. The right to sue for rendition of accounts also survives, allowing legal representatives to assert or defend claims arising from the partnership agreement.
The significance of this case lies in clarifying the legal standing of arbitration agreements concerning legal heirs of deceased partners. The Supreme Court’s decision reinforces the principle that arbitration agreements persist beyond the death of a signatory, ensuring continuity in dispute resolution mechanisms. This ruling provides much-needed certainty in partnership law, affirming that legal heirs, despite being non-signatories, are bound by and can invoke the arbitration clause. By upholding the High Court’s decision, the judgment underscores the importance of balancing contractual obligations with the rights of successors, fostering a stable and predictable legal framework for partnerships.
JUDGEMENT LINK- https://api.sci.gov.in/supremecourt/2025/3623/3623_2025_13_22_59643_Judgement_21-Feb-2025.pdf