1. ' SAJJAD ALI, SHAH, J.---Through this application under section 34 of the Arbitration Act defendant seeks stay of the proceedings and directions to the parties to have recourse to envisaged in the Partnership Agreement.
2. ' Briefly stated the facts of the case are that the predecessor-ininterest of the plaintiffs and defendant No,1 being real brothers were A carrying business in partnership under the name and style of `Memon Housing Services' in terms of Partnership Agreement, dated 5-11-1992. The predecessor-in-interest of the plaintiffs died on 2-10-2006. The plaintiffs, thereafter, have filed the instant suit for rendition of accounts and pleaded that after the death of their predecessor-in- interest, the defendant No,1 has excluded them from the management of the dissolved partnership and is not rendering the accounts and despite dissolution of the partnership is carrying on the business in the name of the partnership illegally and unauthorizedly.
3. ' Mr. Haroon Inshaque Jangda, learned counsel for defendants Nos. 1 and 3, has contended that the partnership agreement contained an B arbitration clause, therefore the instant suit may not be proceeded and the dispute be referred to the Arbitration. Learned counsel, relying upon section 6 of the Arbitration Act, 1940, has contended that death of a party to the arbitration agreement does not absolve his legal heirs from the arbitration clause which is enforceable by or against the legal representatives of the deceased. It was next contended by the learned counsel that, in fact, after the death of the deceased partner, his successor-in-interest viz, the present plaintiffs had agreed to refer the dispute to an arbitrator i,e, defendant No,3 by executing an undertaking on 1st October, 2007. It was, therefore, prayed that the proceedings of the instant suit be stayed and the matter be referred to the arbitration.
4. ' On the other hand, Mr. Nadeem Akhtar, learned counsel for the plaintiffs, has contended that there was no dispute between the partners during the life-time of plaintiffs predecessor-in-interest and the present suit is for rendition of accounts after the dissolution of partnership, therefore, the question of referring the matter to the arbitration does not arise. As to the application of section 6 of the Arbitration Act, learned counsel, while relying on following paragraph of a Division Bench Judgment from the Indian jurisdiction in the case of Mst. Sughra and others v. Babu (AIR 1952 A4lah Abad 506), has contended that the provisions of section 6 of the Arbitration Act are attracted only to cases where there are more than two partners in the partnership and not to the cases of like nature where there are only two partners:- "(8) It appears to us that the view taken by the Court below cannot be supported. The general rule is that a partnership is dissolved after the death of a party. This rule is, however, subject to a contract to the contrary. When it is said that a partnership will not be dissolved by the death of one party, what is meant is that the partnership will continue between the surviving partners even after the death of a partner. It follows that in order that the exception to the general rule may apply the original partnership must consist of more than two partners. In the case of a partnership consisting of only two partners, no partnership remains on the death of one of them and, therefore, it is a contraction in terms to say that there can be a contract between two partners to the effect that on the death of one of them the partnership will not be dissolved but will continue. Nor is the position affected by bringing in the heirs of a deceased partner on the scene. One partner cannot, by his own contract, impose a partnership upon his heirs or legal representatives. Partnership is not a matter of status, it is a matter of a contract. No heir can be said to become a partner with another person without his own consent, express or implied."
5. ' It was next contended that since the dissolved partnership was constructing a project in partnership with defendant No,2 from whom the plaintiffs are also seeking accounts and who are not a party to the arbitration, therefore, not bound by the arbitration clause and in such cases our Supreme Court in the case of M.A. Zawar and Co. (Regd.) and 5 others v. National Bank of Pakistan (1970 SCM R 234) has held that in such eventuality the matter may not be referred to arbitration. It was further contended that jurisdiction under section 34 of the Arbitration Act is only discretionary and in the circumstances of the present case where one of the defendants is alien to the arbitration clause and the other defendant being the real brother of plaintiffs predecessor-in- interest in command and control of the entire business as well as information would not be just to exercise such discretionary jurisdiction by referring the matter to the arbitration. It was, lastly, contended that the plaintiffs never agreed to arbitration and a perusal of the undertaking, dated 1st October, 2007 pertains to the family dispute between the plaintiffs Nos. 1 and 2 and defendants Nos.1 and 3 other brothers of plaintiffs' predecessor-in-interest. In the circumstances, it was prayed that the application is liable to be dismissed.
6. ' In rebuttal, Mr. Haroon Ishaque Jangda has contended, that the partnership agreement further contains a clause which contemplates that in the event of death incapacity or insolvency of any partner, the heirs etc., of such partner can be admitted into the partnership business on the same terms and conditions in order to assert continuation of the partnership. However, learned counsel, candidly, concedes that there is nothing on record to show that the plaintiffs being the legal heirs of the deceased partner were admitted to the partnership nor their consent as partners was ever obtained.
7. ' Mr. Khalid Jawed Khan, learned counsel appearing for defendant No,2 states that defendant No,2 is constructing one project in partnership with "Memon Housing Services" and is ready to deposit the share of the said partnership out of profits of the project with the Nazir of the Court for distribution amongst the plaintiffs and defendant No,
1. Learned counsel further, while assisting the Court, has contended that a bare reading of section 6 of the Arbitration Act envisages a dispute existing before the death of a partner.
8. ' I have heard the learned counsel appearing for the respective parties and have perused the record of the case.
9. ' Since the dispute between the parties revolves around clauses (12) and (15) of the partnership agreement which provide that in case of death of any partner his legal heirs can be admitted to the partnership business and reference to arbitration, therefore, the same are reproduced for the sake of convenience; "(12) In the event of death, incapacity of insolvency of any one partner, the heirs etc. Of such partner can be admitted into the partnership business on the same terms and conditions as if such partner is continuing, or otherwise the account of such partner will be settled as per clause
(9) of this agreement."
10. "(15) In case of any difference of opinion amongst the partners, the case will be referred to an arbitrator or arbitrators as decided by the partners and the decision of the arbitration will be binding on both the partners. The arbitration shall be governed by the Arbitration Act."
11. ' Admittedly, there were only two partners of "Memon Housing Services", one the predecessor-in- interest of the plaintiffs and the other being the defendant No,1 and there was no dispute between them during the life time of predecessor-in-interest of the plaintiffs. In the circumstances, in my view there could be two situations where thel E plaintiffs could be forced to arbitration:--
(i) That the plaintiffs were admitted to partnership after the death of their predecessbr-in-interest in terms of clause (12) of the Partnership Deed and a dispute has arisen thereafter.
(ii) Upon coming to the conclusion that despite death one out of two partners, the legal heirs of the deceased partner under section 6 of the Arbitration Act can be forced to arbitration despite the fact that during the lifetime of the partners there was no dispute amongst them.
12. ' As to the first eventuality, learned counsel for defendant No,1 has very candidly conceded that there is nothing on record to show that after the death of plaintiffs' predecessor-in-interest, the plaintiffs were admitted to partnership or they consented to such status in terms of clause (12) of the Partnership Deed, even otherwise I find myself fully in agreement with the observations of the Division Bench in the case of Mst. Sughra (supra) to the extent that one partner cannot, by his own contract, impose a partnership upon his heirs or legal representatives. Partnership is not a matter of status, it is matter of contract, therefore, the arbitration clause in my view on this count cannot be enforced against them.
13. ' Regarding the undertaking whereby per Mr. Haroon the parties had appointed the defendant No,3 as an arbitrator. A perusal of the undertaking reveals that two out of the four legal heirs have not signed it and further it refers to a dispute between defendant No,1, his three brothers with widow i,e, plaintiff No,1 and his son i,e, plaintiff No,2 regarding distribution of properties and share in the business of building construction. Admittedly, the three brothers of defendant No,1 were not partners in Memon Housing Services' nor there could be any dispute between the plaintiffs and the said three brothers regarding the distribution of assets of partnership therefore such undertaking cannot be construed as reference under clause (15) of the arbitration agreement.
14. ' As to the second proposition that the legal heirs of deceased partner could be forced to arbitration by extending the provisions of the section 6 of the Arbitration Act despite the fact that there was no dispute between the partners during their lifetime.
15. ' The provisions of section 6 of the Arbitration Act appear to be based on principle underlying in Order XXII Rule 1 of the Code of Civil Procedure which read as follows:-- "The death of a plaintiff or defendant shall not cause the suit to abate, if the right to sue survives."
16. ' Previous to the enactment of this section an arbitration agreement came to an end on the death of any party thereto as there was no corresponding provision in the Indian Arbitration Act, 1899, and the purpose of the enactment appears to keep the arbitration proceedings alive by joining the legal representative of the deceased.
17. ' A minute perusal of section 6 of the Arbitration Act reveals that it pre-supposes a dispute between the partners before the death of any one of them or in cases where a dispute comes on surface after the death of a partner for a cause arisen during the life time of the deceased H partner and in such eventuality prevent the legal heir of the deceased partner from wriggling out of the arbitration clause or resist arbitration merely on the ground of his death. In the case of Ramjee v.
18. Aligram (11 IC 481) it was held:-- "Whether a legal representative of a deceased party is or is not bound by or entitle to enforce the contract to refer to arbitration must depend upon the nature of the right which forms subject matter of the reference, i,e,, upon the question whether the right is purely personal or survives to the legal representative."
19. ' The representatives are not bound by the arbitration clause when the right is merely personal. In the instant case it is an admitted position that there was no dispute between the partners during the life time nor any dispute has come on surface after the death of partner, the cause whereof had arisen during the lifetime of the deceased partner and in my view the legal heirs of the deceased partners are just enforcing their personal right acquired upon the death of deceased partner.
20. ' In view of what has been discussed, in my view, the plaintiffs/legal heirs of the deceased partner cannot be forced to arbitration. These are the reasons for the short order, dated 9-10-2008 whereby the application was dismissed.