Himachal Pradesh High Court | Interim Relief Under Section 9 A&C Act Cannot Extend to Suspending Partnership Operations Pending Dissolution Proceedings
Safiya Malik
The High Court of Himachal Pradesh Single Bench of Justice Jyotsna Rewal Dua held that interim relief under Section 9 of the Arbitration and Conciliation Act, 1996 cannot extend to shutting down the business or manufacturing operations of a partnership when the central dispute itself concerns the conduct of that business. The Court reasoned that granting such a measure would effectively nullify the subject matter of the arbitration and undermine the legislative objective of Section 9, which is to preserve, and not extinguish, the contested rights pending arbitral adjudication.
The dispute arose from a partnership firm established on 24 June 2014 under the name M/s Vidhyasha Pharmaceuticals. Initially, three individuals, Parkash Chand Bansal, Nitin Gupta, and Arrpit Aggarwal, constituted the firm. Upon the retirement of Parkash Chand Bansal, the firm was reconstituted on 6 January 2015 with Nitin Gupta and Arrpit Aggarwal as partners, each holding 50% shares in profits and losses. Both were cousins, and the firm was engaged in manufacturing pharmaceutical products, medicines, tools, dyes, and service job work.
The petitioner issued a notice of dissolution of the partnership under Section 43 of the Partnership Act on 26 May 2025. A public notice followed through publication in the Himachal Tribune and Delhi Tribune on 15 June 2025. According to the petitioner, the partnership firm stood dissolved from either 26 May 2025 or 15 June 2025. Arbitration Case No. 203 of 2025 was filed seeking appointment of an arbitrator.
The petitioner sought interim measures under Section 9 of the Arbitration and Conciliation Act to restrain the respondent from conducting business operations in the name of the firm, close production activities, restrain sale or transfer of stock-in-trade, raw materials, finished goods, and freeze the bank accounts of the partnership firm. Appointment of a receiver was also prayed for, to take possession of all assets and inventory of the firm.
Counsel for the petitioner relied upon Sections 43, 46, 47, and 53 of the Partnership Act. It was argued that upon dissolution, a partner is entitled to restrain the other partner from continuing business in the firm’s name or using its property until final winding up. Reliance was placed on precedents including Ashok Kumar Mittal v. Ashwani Kapoor and Ravinder Singh Ahluwalia v. Kuljinder Singh Ahluwalia.
The respondent opposed the petition, contending that the partnership was not a firm “at will.” Clause 8 of the partnership deed prohibited partners from selling, assigning, transferring, or otherwise parting with their share without written consent of the other partner. It was argued that this clause required mutual consent for dissolution, making Sections 44(c) and (d) of the Partnership Act applicable rather than Section 43. Respondent contended that closure of the firm would cause irreparable loss, affect more than one hundred employees, and render about eleven hundred approvals and licenses useless.
Both sides levelled allegations against each other. The petitioner accused the respondent of diverting business to another entity where he was a partner, causing loss to the firm. Allegations of competing interests and unjust enrichment were also made. The respondent alleged that the petitioner diverted business to another entity incorporated in his wife’s name, withdrew funds from partnership accounts, and concealed financial transactions. Each party accused the other of misconduct and mismanagement.
Justice Jyotsna Rewal Dua noted that the primary issue was whether interim relief could be granted pending arbitration proceedings. The Court examined the partnership deed dated 6 January 2015. Clause 10 described the partnership as “at will,” while Clause 8 restrained any partner from transferring or parting with their share without written consent of the other.
The Court referred to Section 43 of the Partnership Act regarding dissolution by notice and Sections 46, 47, and 53 concerning rights after dissolution. It was observed that the respondent argued the firm was not “at will” due to Clause 8, making dissolution possible only under Section 44 of the Partnership Act.
The Court quoted from Supreme Court precedents. In M.O.H. Uduman v. M.O.H. Aslum, it was held: “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 Court further recorded: “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.”
The Court also cited Karumuthu Thiagarajan Chettiar v. E.M. Muthappa Chettiar: “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 partnership is not at will.”
Considering the large number of employees and approvals, the Court observed: “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.”
It was further recorded: “Till dissolution of firm is 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.”
The Court directed: “All interim orders stand vacated. Petitioner shall be at liberty to move for appropriate reliefs before the learned Arbitrator/competent forum.”
“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.”
“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.”
Advocates Representing the Parties
For the Petitioner: Mr. Mohit Chadha, Advocate (through Video Conference) and Mr. Shubham Sood, Advocate.
For the Respondent: Mr. Desh Raj Thakur, Advocate and Mr. Ravneet Kumar, Advocate.
Case Title: Nitin Gupta v. Arrpit Aggarwal
Neutral Citation: 2025: HHC:28281
Case Number: Arb. Case No. 116 of 2025
Bench: Justice Jyotsna Rewal Dua
