A) ABSTRACT / HEADNOTE

Rahul Verma & Ors. v. Rampat Lal Verma & Ors., SLP (C) No. 4330 of 2025, Supreme Court of India (21 Feb. 2025). This dispute concerned whether the legal heirs of a deceased partner, who were not original signatories to a partnership deed, could be bound by and could invoke the arbitration clause contained in that deed; and whether the right to sue for rendition of accounts survived to those legal heirs so as to permit invocation of arbitration.

The Gauhati High Court had allowed an appeal under Section 37(1)(a) of the Arbitration and Conciliation Act, 1996 and directed reference to arbitration; the Civil Judge had earlier refused such reference. Relying on settled authorities, notably Ravi Prakash Goel v. Chandra Prakash Goel & Anr. ((2008) 13 SCC 667) and a Delhi High Court decision (Jyoti Gupta v. Kewalsons & Ors., 2018 SCC OnLine Del 7942), the Supreme Court reiterated 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 Court held that the term partners in a partnership instrument generally embraces legal heirs, representatives, assigns or legatees, and that the right to sue for rendition of accounts survives to the legal heirs under Sections 40 and 46 of the Partnership Act, 1932 read with Section 40 of the Arbitration Act. Applying these legal principles to the partnership deed clauses (clause 2 and clause 15), the Court dismissed the Special Leave Petition and upheld the High Court’s order referring the dispute to arbitration.

Keywords: legal heirs, partnership deed, arbitration clause, rendition of accounts, legal representative

B) CASE DETAILS 

C) INTRODUCTION AND BACKGROUND OF JUDGEMENT

The litigation arises from a partnership firm comprising three partners, two of whom died (24.12.2022 and 21.11.2023). Disputes emerged between the surviving partner and the legal heirs of a deceased partner, culminating in Commercial Suit No. 02/2024 where respondents (original defendants) sought dismissal and reference to arbitration under Section 8 of the Arbitration and Conciliation Act, 1996, relying on an arbitration clause in the partnership deed.

The Civil Judge dismissed that Section 8 petition. On appeal the Gauhati High Court allowed the arbitration appeal (Arb. A./6/2024), interpreting the partnership deed (notably clause 2 and clause 15) to bind heirs and permit arbitration of partnership affairs including dissolution. The High Court therefore quashed the Civil Judge’s order and directed arbitration. The surviving partner and other appellants before the Supreme Court challenged that High Court decision by Special Leave Petition. The Supreme Court framed two central questions: whether non-signatory legal heirs can be bound by/invoke the arbitration agreement; and whether the right to sue for rendition of accounts survives to the legal heirs enabling invocation of arbitration.

The Court reviewed Ravi Prakash Goel v. Chandra Prakash Goel & Anr. ((2008) 13 SCC 667) and Jyoti Gupta v. Kewalsons & Ors. (2018 SCC OnLine Del 7942) and applied statutory provisions to conclude the arbitration clause survives death and the heirs can both be bound by and invoke it. The SLP was dismissed.

D) FACTS OF THE CASE

A partnership firm consisted originally of three partners. Two partners died in succession: one on 24.12.2022 and another on 21.11.2023. The partnership deed contained specific operative clauses. Clause 2 provided that the partnership would continue AT WILL and expressly stated that “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.”

Clause 15 provided that any dispute regarding partnership affairs, dissolution or discontinuance “shall be referred to arbitration” and that the arbitrator’s award shall be final and binding on the parties. During the subsistence of the partnership and after the deaths, disputes concerning the partnership’s affairs (including alleged entitlement to rendition of accounts) arose between the surviving partner and the legal heirs of one deceased partner.

The respondents filed an application under Section 8 of the Act of 1996 for dismissal of suit and reference to arbitration; the Civil Judge dismissed it. On appeal the High Court allowed the appeal, holding the deed bound heirs and that Section 42(c) of the Partnership Act would not bar arbitration where the deed deals with dissolution. The heirs invoked the High Court order and the matter reached the Supreme Court by Special Leave Petition.

E) LEGAL ISSUES RAISED

i. Whether the legal heirs of a deceased partner, who are non-signatories to the partnership deed and who have not given explicit consent, can nonetheless be bound by and invoke the arbitration clause in that partnership deed?
ii. Whether the right to sue for rendition of accounts of the partnership survives to the legal heirs such that they may invoke the arbitration clause contained in the partnership deed?

F) PETITIONER / APPELLANT’S ARGUMENTS

The counsels for Petitioner / Appellant submitted that the legal heirs were not parties to the partnership deed and that without explicit incorporation or consent they could not be compelled to arbitration, particularly where the partnership’s constitution did not clearly extend contractual obligations to heirs. It was contended that admission of heirs into the partnership is a matter of election by surviving partners and that any attempt to bind non-consenting heirs to arbitration impinges on their substantive rights.

The petitioners further argued that the Civil Court’s dismissal of the Section 8 petition was correct because the heirs had not been shown to have stepped into the shoes of the deceased partner in a manner that would make the arbitration clause enforceable against them.

G) RESPONDENT’S ARGUMENTS

The counsels for Respondent submitted that an arbitration agreement is not extinguished by death and is enforceable by or against legal representatives under Section 40 of the Arbitration Act. They relied on binding precedent (Ravi Prakash Goel) to contend that persons claiming under the rights of a deceased party stand as representatives and can both enforce and be bound by arbitration agreements. It was urged that the partnership deed itself contemplates continuity post-death (clause 2) and clause 15 specifically mandates arbitration for partnership disputes; therefore heirs, as representatives of the deceased partner’s estate, are entitled to invoke and be bound by the clause including in suits for rendition of accounts.

H) RELATED LEGAL PROVISIONS 

i. Section 40, Arbitration and Conciliation Act, 1996 (arbitration agreement not discharged by death; enforceable by/against legal representatives).
ii. Section 2(1)(g), Arbitration and Conciliation Act, 1996 (definition of legal representative).
iii. Section 35, Arbitration and Conciliation Act, 1996 (binding effect of arbitral award on parties and persons claiming under them).
iv. Section 42(c) and Section 46, Partnership Act, 1932 (survival of rights and circumstances relating to continuation of partnership after death; right to account).

I) JUDGEMENT 

The Supreme Court affirmed the High Court’s conclusion that the arbitration clause is enforceable by and against the legal heirs of a deceased partner. Relying on Ravi Prakash Goel v. Chandra Prakash Goel & Anr. ((2008) 13 SCC 667), the Court reiterated that Section 40 of the Arbitration Act preserves an arbitration agreement despite death of a party and that the definition of legal representative under Section 2(1)(g) includes persons who represent the estate or intermeddle with it.

The Court emphasised that Section 35 contemplates that awards bind “parties and persons claiming under them”, thereby covering successors. The textual construction of the partnership deed aided this conclusion: clause 2 expressly contemplated the partnership’s continuation with an heir or representative “if so agreed”, and clause 15 directed disputes to arbitration. The Court found that the heirs had effectively stepped into the deceased’s shoes with respect to claims including rendition of accounts. The Court observed that the right to sue for rendition of accounts survives under the Partnership Act and therefore the heirs hold both the right and the corresponding obligation to submit disputes to arbitration.

The bench rejected the contention that absence of original signature by heirs defeats enforceability, noting it was not legally essential to specifically enumerate heirs in the deed to render arbitration binding on their representatives. On the facts, the Court concluded there was no error in the High Court’s referral to arbitration and dismissed the SLP.

a. RATIO DECIDENDI

The controlling legal principle is that an arbitration agreement does not terminate on the death of a party and remains enforceable by or against that party’s legal representatives under Section 40 of the Arbitration Act, 1996. Where the cause of action survives to the representative, that person may invoke or be bound by the arbitration clause.

The partnership deed’s language and the surviving right to seek rendition of accounts under the Partnership Act make arbitration the appropriate forum for resolution of partnership disputes involving heirs. Precedent in Ravi Prakash Goel is dispositive and applicable.

b. OBITER DICTA

The Court observed (following Delhi High Court authority Jyoti Gupta) that mere reference to disputes between “partners” cannot be read to exclude heirs; questions regarding induction of heirs into partnership or consequences of non-induction are matters for the arbitral tribunal to decide. The bench noted that practical ends of justice and commercial efficacy favour that contractual dispute resolution clauses survive succession events so that continuity and finality of dispute resolution are preserved.

c. GUIDELINES 

i. When a partnership deed contains an arbitration clause and contemplates continuation after death, courts should ordinarily give effect to the clause in favour of or against legal representatives where the substantive right or cause of action survives.
ii. The threshold enquiry under Section 8 or Section 11 should focus on whether the dispute is referable to arbitration and whether the right in dispute survives to the representative; absence of original signature by heirs is not determinative.
iii. Matters of induction of heirs into partnership, valuation of interest, or entitlement to accounts are factual/contractual questions to be resolved by the arbitral tribunal rather than by refusing reference on technical non-party pleas.

J) CONCLUSION & COMMENTS

The Supreme Court’s decision reaffirms settled arbitration doctrine: succession does not efface an arbitration agreement and legal representatives who step into the deceased party’s estate may enforce and be bound by arbitration clauses when underlying rights survive. This approach advances commercial certainty by preventing deaths from nullifying dispute resolution mechanisms agreed by commercial actors. Practically, the ruling emphasises close textual analysis of the partnership instrument and statutory survival provisions; it avoids elevating formalism (such as absence of signature) over substantive continuity.

For practitioners, the judgment underscores careful drafting: if partners intend to exclude heirs from dispute resolution obligations, the deed must provide clear language to that effect. Conversely, where a partnership wishes disputes involving estates to go to arbitration, explicit mention of heirs and representatives strengthens enforceability, though the Court confirms such explicitness is not strictly necessary. The decision also highlights the tribunal’s role as primary fact-finder on issues of induction, valuation and entitlement to accounts, thereby promoting arbitration as the designated forum for internal partnership controversies.

Finally, the ruling aligns arbitration jurisprudence with succession law by treating representatives as persons claiming under the deceased and recognising the survival of statutory rights such as rendition of accounts.

K) REFERENCES

a. Important Cases Referred

i. Ravi Prakash Goel v. Chandra Prakash Goel & Anr., (2008) 13 SCC 667.
ii. Jyoti Gupta v. Kewalsons & Ors., 2018 SCC OnLine Del 7942.
iii. Rahul Verma & Ors. v. Rampat Lal Verma & Ors., SLP (C) No. 4330 of 2025, Supreme Court of India, 21 Feb. 2025.

b. Important Statutes Referred

i. Arbitration and Conciliation Act, 1996 (Sections 2(1)(g), 35, 40).
ii. Partnership Act, 1932 (Sections 42(c), 46).