Shri Krishan Baldev Bansal v. Balbir Singh Tyagi & Ors.
A partner who pays a partnership's bank dues, having also guaranteed them, can claim contribution from his co-partners in arbitration under the partnership deed's arbitration clause, because the claim is between partners on the firm's liability and not a personal claim from the guarantee; and an arbitrator who decides only the claim that the parties asked him to decide, as recorded in the order-sheet, does not commit a jurisdictional error by leaving other pleaded reliefs unanswered.
By CA Nikhil Gupta · Reviewed against the retained judgment 2026-10-15
A partner in a Delhi electronics retail firm paid ₹23,90,000 to settle the firm's bank loan, on which he had also given a guarantee, and the sole arbitrator awarded him the other partners' shares with interest. The District Judge set the award aside because other reliefs had been left undecided and because the claim arose from the guarantee, but the Delhi High Court held that the parties had narrowed the arbitration to this claim and that it is a claim between the partners within the arbitration clause, and restored the award.
What happened
By a partnership deed of 15 September 2004 two families formed a firm, M/s Nova Electro World, to retail electronic goods, the first holding 55% and the second, which included the appellant, 45%, and clause 15 of the deed refers disputes in regard to the clauses of the deed or the books of accounts to arbitration. The firm took a cash-credit facility of ₹25,00,000 from Union Bank of India, for which the appellant, a partner, stood as guarantor with security of his property. The firm stopped trading in about September 2006 and disputes arose over dissolution and accounts. When about ₹23.76 lakh remained due and the bank initiated recovery under the SARFAESI Act, the appellant paid ₹23,90,000 from his own funds in full and final settlement, and the bank issued a settlement certificate of 28 April 2008 recording that he had paid, as one of the partners and guarantors of the account of the firm, towards full and final settlement of the dues of the firm. He claimed from the other partners their shares after deducting his own 10% share of ₹2,39,000, leaving ₹21,51,000.
Before the sole arbitrator the other partners did not dispute that the firm had availed the facility or that the appellant had paid the bank, saying only that the payment was subject to the final settlement of accounts, and one of them admitted in cross-examination that the firm had availed the facility, that the appellant was guarantor and that neither he nor his wife had paid. The sole arbitrator rejected a late objection that the claim, being made by a guarantor, should have been brought separately and was not arbitrable, noting that it had not been taken in the written statement and distinguishing S.N. Prasad v. Monnet Finance. On 11 December 2023 the parties and counsel stated before him that the award might be passed only on the claim made by the appellant, which the arbitrator understood, and recorded in paragraph 55 of the award, as the claim for the loan amount paid to the bank as guarantor, so the other claims and counter-claims on dissolution, accounts, goodwill and the premises were not decided. By the award of 23 December 2023 he apportioned ₹21,51,000 among the other partners in proportion to their shares, with interest at 18% from 28 April 2008. In the other partners' challenge under section 34 (OMP (COMM.) 25/2024) the District Judge set the award aside on 28 November 2025, because the arbitrator had not adjudicated the other reliefs and because the claim for the bank payment was beyond the scope of the arbitration.
Questions before the court
- Could the award be set aside because the arbitrator decided only the bank-payment claim after the parties' statement of 11 December 2023, and was a partner's claim for contribution towards the firm's bank liability outside the arbitration agreement because he had paid as a guarantor?
Why the court ruled this way
On the scope of the adjudication, the order-sheet of 11 December 2023 is a contemporaneous record that after arguments the parties submitted that the award may be passed only on the claim made by the appellant, paragraph 55 of the award explains that understanding as confined to the amount paid to the bank as guarantor, and the District Judge identified no statement or application showing otherwise (paragraphs 25–30). The absence of a separate application or statement on oath does not efface the recorded statement, the general principle that a tribunal decides all issues before it, in Order XIV Rule 2 of the Code of Civil Procedure, does not address a case in which the parties themselves confined the adjudication, and the question is whether the other reliefs remained live, which they did not, so the arbitrator did not decline jurisdiction over a live claim (paragraphs 31–36).
On arbitrability, the settlement certificate describes the account as that of the firm and the payment as towards the firm's dues, the guarantee explains why the bank could proceed against the appellant and does not determine the character of his later claim against his co-partners, and the claim was one between partners for contribution to a firm liability, quantified by deducting his own 10% and apportioning the rest in proportion to partnership shares, which falls within the dispute over the partnership accounts that clause 15 refers to arbitration (paragraphs 37–44). The facts that the appellant did not consult the other partners and that no authorisation was produced may bear on merits but do not make the claim personal, as a partner may discharge a liability of the firm without prior permission and the respondents led no evidence that the amount was not a firm liability (paragraphs 45–48 and 60). The substance of the claim and not the capacity in which the bank proceeded against him decides arbitrability (paragraphs 49–50). The arbitrator did notice and decide the objection, so the description that he simply refused to entertain it was not accurate, and the District Judge's different view of the payment was no ground under section 34 (paragraphs 51–59). Both foundations of the impugned order therefore failed (paragraphs 61–64).
Controlling point
Where the parties confine the arbitration to a claim by a statement recorded in the order-sheet, the arbitrator need not decide the other pleaded reliefs, and a partner's claim against his co-partners for contribution to a firm's bank liability that he paid is within the arbitration clause of the partnership deed even though he was also the bank's guarantor.
Order and next steps
The Court allowed the appeal, set aside the order of 28 November 2025 of the District Judge in OMP (COMM.) No. 25/2024, restored the arbitral award of 23 December 2023, and disposed of the pending application.
Practical implications
A party that wants an arbitrator to decide all the pleaded reliefs should object at the time and see that the order-sheet records the true scope of the arbitration, and a partner who pays a firm's debt on a guarantee should frame the claim against his co-partners as one for contribution on the firm's liability.
Limits of this ruling
- The Court confined its conclusion to the claim actually adjudicated and did not examine the other claims pleaded on dissolution, rendition of accounts, goodwill and the tenancy, which were not decided by the arbitrator.
Law and judgment source
- Arbitration and Conciliation Act, 1996, sections 34 and 37
- Code of Civil Procedure, 1908, Order XIV Rule 2
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Source checked: 2026-10-15 · Judgment paragraphs: paragraphs 1–67 · Later case history: not verified. Verify appeals, stays and subsequent orders before reliance.
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