Vijay Sondhi heirs v L&L Partners: Mediation fails, Delhi High Court refers dispute to arbitration

The Delhi High Court on Wednesday referred the dispute between the heirs of Vijay Sondhi and L&L Partners to arbitration before a retired Supreme Court judge..Justice Prateek Jalan passed an order to this effect after being told by counsel for both sides that the attempt at resolving the dispute through mediation had failed. The order dictated by the Court today stated,"The induction of any new individual in the equity partnership of the firm will be subject to the prior approval of the learned arbitrator. It is made clear that in the event that any of the existing equity partners seeks to resign from the firm, they may do so, and their pro rata share which would have gone to Mr Sondhi's share will also be maintained undisturbed. No other change in the structure of the firm is contemplated.".The Court also recorded that the parties agreed not to sell, transfer or create any lien, encumbrance or third party interest on properties owned by the firm pending the outcome of the arbitration.It was also made clear that the Court's directions would be subject to the orders passed by the arbitrator, who was free to modify the directions, which are intended to preserve the positions of the parties..It was also noted in the order,"In the event, any of the existing partners seeks to resign from the partnership firm, they may do so, and the proportion of their share which would have gone to Mr. Sondhi will also be maintained undisturbed. Learned counsel for the respondents states that no other change in the structure or constitution of the respondent No. 6 firm is contemplated at present.".The Court was hearing a petition filed by the siblings of the late Sondhi claiming the illegal apportionment of his 18.5% equity stake in the firm by the existing Partners.Sondhi's brother Ajay and sister Sangeeta have demanded that they be inducted into the equity partnership of the firm, and in the meantime, for Sondhi's share to not be diluted by the Partners..Today, counsel for the Sondhis claimed that the existing Partners had not shared certain documents related to the firm for them to make an assessment of what they were owed. Senior Advocate Ashwini Kumar Mata said that Founding Partner Rajiv Luthra was reluctant to share certain documents, citing a conflict of interest.Mata said that the Sondhis had asked for a certain figure to settle the dispute, which the Partners did not agree upon. In this light, he said that the mediation would be rendered futile.He thus sought the interim protection to the extent that there would be no modification of the firm's partnership structure in terms of inducting new equity partners; that the share of Sondhi would be undiluted; and a restraint on selling, transferring or creating any lien, encumbrance or third party interest on properties owned by the firm..Justice Jalan at this point suggested that the matter be sent for arbitration before a retired Supreme Court judge.Senior Advocate Rajiv Nayar, appearing for Partners Bobby Chandhoke and Sudhir Sharma, argued that this dispute does not fall within the four corners of the arbitration clause in the firm's partnership deed, since the Sondhis were not partners.The Court then said that it did not intend to close any of the issues raised, which would be determined by the arbitrator..Interestingly, Chandhoke said during the hearing that Vijay Sondhi's actual share in the partnership was 20.8%, and not 18.5% as claimed by his heirs."You are saying something in their favour, that is actually good," Justice Jalan observed..Eventually, the parties agreed to arbitration, and concurred that any change in the partnership or any new induction to the equity partnership shall be subject to the permission of the arbitrator.When Justice Jalan suggest that Justice AK Sikri be the sole arbitrator, the parties pointed out that he was already part of the arbitral tribunal that was hearing the dispute between Rajiv Luthra and former L&L Partner Mohit Saraf. The Court then left it to the parties to decide on an arbitrator, who would be a retired Supreme Court judge who was not from Delhi..It is the Sondhis' case that as per the 2002 partnership deed signed by the Founding Partners, upon the death of one of them, their stake would devolve to their legal heirs.Sondhi, who passed away in January this year, had bequeathed his share in the firm to Ajay and Sangeeta equally. Since the succession took effect from January 28, they claimed that they had a right to take part in the conduct of business of the firm, as per the provisions of the Partnership Act.The Sondhis claimed that Rajiv Luthra had assured them that their rights will be duly honoured, and at their option, they would either be absorbed in the firm as Partners, or be transferred business and clients to the extent of their share.However, they claim that Chandhoke and Sharma, under the guise of amicably resolving the issues, have deliberately delayed the process, as well as the rights and benefits due to them. Despite the passage of more than two months since obtaining assurances from Luthra, the petitioners stated that they have not been given their legitimate legal rights..On the last date of hearing, the Court was told that mediation proceedings before former Delhi High Court judge, Justice Jayant Nath, were underway..Heirs of Vijay Sondhi v. L&L Partners: Delhi High Court told that Mediation proceedings are underway .[Read Order]