The vexed issue of whether a partner who resigns from a
partnership firm remains bound by an arbitration clause in a
contract executed between the firm and a third party, to which such
partner is not a direct signatory, raises complex questions at the
intersection of contract, partnership, and arbitration law.
Partnerships are frequently the medium through which business is
conducted, and agreements with third parties, almost invariably
incorporating arbitration clauses, form the bedrock of such
transactions. When disputes emerge after a partner's
resignation, third parties often seek to bind the former partner to
arbitral proceedings, arguing that the liability subsists for
obligations incurred during tenure. Conversely, the retiring
partner may invoke the doctrines of privity and novation to resist
being drawn into arbitration, particularly in respect of
post-resignation obligations.
