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Kajaria Traders (India) Ltd. Vs. Foreign Import and Export Association - Court Judgment

LegalCrystal Citation
SubjectArbitration
CourtMumbai High Court
Decided On
Case NumberAward No. 18 of 1959
Judge
Reported inAIR1961Bom65; (1960)62BOMLR753
ActsIndian Partnership Act, 1932 - Sections 69, 69(1), 69(2), 69(3) and 69(4); Indian Companies Act, 1913; Indian Arbitration Act, 1940 - Sections 3, 8 and 8(2); Presidency-Towns Insolvency Act, 1909; Provincial Insolvency Act, 1920; Code of Civil Procedure (CPC), 1908 - Order 23, Rule 1; Displaced Persons (Debts Adjustment) Act, 1951; Presidency Small Cause Courts Act, 1882 - Sections 19; Provincial Small Cause Courts Act, 1887
AppellantKajaria Traders (India) Ltd.
RespondentForeign Import and Export Association
Appellant AdvocateF.S. Nariman and ;Jamshedji Kanga, Advs.
Respondent AdvocateP.N. Bhagwati and ;A.N. Mody, Advs.
Excerpt:
.....failure to supply 2,500 tons of manganese ore for shipment between january to march, 1956. the petitioners claimed a sum of rs. it was finally stated that if the respondents failed to appoint an arbitrator on their behalf within 15 clear days after the service of that notice upon them, the petitioners would appoint mr. kolah or some other fit and proper person be appointed to act as sole arbitrator for the purpose of the arbitration between the petitioners and the respondents, with like power to act in the reference and to make an award as if he had been appointed by consent of all the parties. the legislature has intervened and has by section 8 provided that in cases where an arbitration agreement provides that the reference shall be to one or more arbitrators to be appointed by..........in section 69(4) (b). by section 69(4)(b) it is provided that section 69 would not apply to any suit or claim of set-off not exceeding one hundred rupees in value which, in the presidency towns is not of a kind specified in section 19 of the presidency small cause courts act, 1882, or outside the presidency towns, is not of a kind specified in the second schedule to the provincial small cause courts act, 1887, or to any proceeding in execution or other proceeding incidental to or arising from any such suit or claim.16. no one has urged before me that the words 'other proceeding' should be construed ejusdem generis and it is not necessary for me to deal with any argument based on such a contention.17. in my view, reading the provisions of section 69 as a whole, the words 'other.....
Judgment:
ORDER

1. This matter has come up before me under Clause 36 of the Letters Patent for the determination of the questions following:--

'Whether in view of the provisions contained in Section 69 of the Indian Partnership Act, 1932, the present petition is maintainable and what provisions should be made for the costs of the parties to the Petition.'

There has been a difference of opinion between Mr. Justice Mudholkar and Mr. Justice Naik as regards the answers to be given to the aforesaid questions.

2. I shall briefly state the facts giving rise to the aforesaid questions. The Petitioners are a Company registered under the Indian Companies Act, VII of 1913. The Petitioners carry on business as dealers in Manganese Ore. In or about July 1955, the Petitioners agreed to sell to Messrs. Phillip Brothers India Ltd., an American Company, 10,000 tons of manganese ore of 16/48 grade for shipment abroad during the period January to June 1956. The terms of shipment provided that 5,000 tons of manganese ore was to be shipped between January to March 1956 and the balance of 5,000 tons of manganese ore was to be shipped before 30th June 1956. In connection with the supply of these goods a contract was entered into between the petitioners and one Jagdish Chandra Gupta, who carried on business in the firm name and style of Messrs. Foreign Import and Export Association, the respondents before me. The terms of the agreement between them have been reduced to writing. The said writing is annexed as Ex. A to the Petition. Clauses 1, 2, 3, and 4 of the said agreement provide as under:-

'1. That you (the respondents) are an equal partner in abovesaid joint venture. The profit and loss therein to be shared between you and us (the Petitioners) equally i.e. Annas 8 in a rupee to your a/c and annas 8 in a rupee to our a/c on execution of the contract in full as per terms with the overseas buyers.

2. That both of us can make purchases of thegoods for supply against the abovesaid contract at the market ruling price but the party while closing the deal finally with the local seller, should have the prior consent of the other party in writing. In case of difference of opinion in regard to price and a quantity to be purchased, the party who desires to purchase such quantity at such price can so purchase and such purchased goods will be adjusted against his share of 5,000 tons.

3. That both of us agree to invest equally. Advances, if necessary, are to be made equally to local sellers against the purchasers.

4. That we both agree to abide by the terms that are set out in the contract with the overseas buyers. That in case of dispute, the matter will be referred for arbitration in accordance with the Indian Arbitration Act.'

In connection with the shipment of 5,000 tons of manganese ore which was required to be made between January to March 1956, the Petitioners called upon the respondents to supply 2,500 tons of man' ganese ore. The Respondents did not comply with that request. Under the circumstances, the petitioners themselves had to supply the full quantity of 5,000 tons of manganese ore to the American purchasers. The Petitioners served a notice on the respondents alleging that the respondents had committed a breach of the contract between the Petitioners and the respondents and that the Petitioners were entitled to claim damages from the respondents for their failure to supply 2,500 tons of manganese ore for shipment between January to March, 1956. The Petitioners claimed a sum of Rs. 1,50,000/- from the respondents as and by way of damages. The Petitioners further stated that the contract between the Petitioners and the respondents provided that in case of dispute the matter would be referred to arbitration in accordance with the Indian Arbitration Act. It was further stated that as it was incumbent upon the petitioners to proceed to enforce their claim against the respondents without further delay, they appointed Mr. R. J. Kolab, Advocate (O. S.) as an arbitrator on their behalf and trusted that the respondents would agree that ho should be the sole arbitrator in the matter. The respondents were requested to appoint another arbitrator on their own behalf if the respondents did not agree to the appointment of Mr. Kolah as the sole arbitrator. It was finally stated that if the respondents failed to appoint an arbitrator on their behalf within 15 clear days after the service of that notice upon them, the petitioners would appoint Mr. R. J. Kolah as the sole arbitrator in the reference and proceed accordingly. The respondents declined to comply with the demands made in the aforesaid notice, contending that the arbitration clause contained in the contract was vague, uncertain and unenforceable. The respondents stated that they did not agree to the appointment of Mr. R. J. Kolah as the sole arbitrator. The Petitioners thereupon filed the present petition praying that Mr. R. J. Kolah or some other fit and proper person be appointed to act as sole arbitrator for the purpose of the arbitration between the petitioners and the respondents, with like power to act in the Reference and to make an award as if he had been appointed by consent of all the parties.

3. The partnership between the petitioners and the respondents has not been registered under the provisions contained in the Indian Partnership Act, 1932. It is contended on behalf of the respondents that having regard to the provisions contained in Section 69 of the aforesaid Act, as the partnership between the petitioners and the respondents is not registered, the present petition is not maintainable. It is urged on the other hand on behalf of the petitioners that this Section has no application at all to the present petition as it is a petition filed under the provisions contained in Section 8 of the Indian Arbitration Act, 1940. Both Mr. Justice Mudholkar and Mr. Justice Naik, who heard the matter, agreed that in the circumstances of the present case an application under Section 8 of the Indian Arbitration Act, 1940, can lie to the Court and that the Court had power to make an order under Sub-section (2) of Section 8 provided there was no other impediment in doing so. Mr. Justice Mudholkar considered that Section 69 of the Indian Partnership Act, 1932, constituted such an impediment. Mr. Justice Naik was of the contrary opinion. Sub-sections (1) and (3) of Section 69 of the Indian Partnership Act, 1932, provide as follows:--

'69(1). No suit to enforce a right arising from a contract or conferred by this Act shall be instituted in any Court by or on behalf of any person suing as a partner in a firm against the firm or any person alleged to be or to have been a partner in the firm unless the firm is registered and the person suing is or has been shown in the Register of Firms as a partner in the firm.

(3) The provisions of Sub-sections (1) x x x shall apply also to a claim of set-off or other proceeding to enforce a right arising from a contract, but shall not affect:--

(a) the enforcement of any right to sue for the dissolution of a firm or for accounts of a dissolved firm, or any right or power to realise the property of a dissolved firm, or (b) the powers of an official assignee, receiver or Court under the Presidency-Towns Insolvency Act, 1909, or the Provincial Insolvency Act, 1920, to realise the property of an insolvent partner,'

It is not disputed that the present petition is not a suit within the meaning of Section 69(1) of the Act. It is urged that it is a proceeding to enforce a right arising from a contract within the meaning of Section 69(3) of the Act.

4. Two questions arise for determination; (1) whether the petition is one to enforce a right arising from a contract and (2) if so whether the petition is a proceeding referred to in Section 69(3).

5. The contract between the parties provides that in case of dispute 'the matter will he referred for arbitration in accordance with the Indian Arbitration Act'. Having regard to the provisions contained in Section 3 of the Arbitration Act, the arbitration agreement must be deemed to include the provisions set out in the First Schedule, in so far as they are applicable to the reference. Under the provisions of Clause 1 of the First Schedule, the reference shall be to a sole arbitrator. A provision in an arbitration agreement that 'the reference shall be to a sole arbitrator' without any qualifying wordsmust mean a reference to a sole arbitrator to be appointed by consent of the parties. Having regard to the provisions contained in section 3 of the Arbitration Act, the arbitration agreement in the case before me must be deemed to provide that the disputes between the parties have been agreed to be referred to a sole arbitrator to be appointed by the parties. Mr. Justice Mudholkar in the course of his judgment states that both he and Mr. Justice Naik were agreed that 'in the circumstances of the present case an application under Section 8 can lie to the Court' provided there are no other impediments to doing so. In the circumstances of the present case, an application under Section 8 can only lie if the arbitration agreement provides that the reference shall be to an arbitrator appointed? by consent of the parties. In a case where the agreement provides that the reference shall be to an arbitrator to be appointed by consent of the parties, in the absence of any other provision of law, if the matter was merely left in the realm of contract, until the agreed arbitrator is appointed, there would be no agreement enforceable at law. It would be in substance, an agreement to agree upon an arbitrator. The legislature has intervened and has by Section 8 provided that in cases where an arbitration agreement provides that the reference shall be to one or more arbitrators to be appointed by consent of the parties, and all the parties do not, after differences have arisen, concur in the appointment or appointments, any party may serve the other parties with a written notice to concur in the appointment or appointments, and it the appointment is not made within fifteen clear days after the service of the said notice, the Court may, on the application of the party who gave the notice and after giving the other parties an opportunity of being heard, appoint an arbitrator or arbitrators, who shall have like power to act in the reference and to make an award as if he or they had been appointed by consent of all parties. The right conferred upon a party giving such notice to apply to the Court and to get an arbitrator or arbitrators appointed who would be clothed with the like power to act in the reference and to make an award as if he had been appointed by consent of all parties is a Statutory right. It is a right conferred in connection with a contract, but it is not a right which arises from the contract. The right arises from the statute. It is the imposition of the will of the legislature upon the will of the parties. In the exercise of the power conferred by See. 8, the Court may appoint any person as an arbitrator against the will of any one or more or of all the parties and the person so appointed would have power to act in the reference and make as award as if he had been appointed by consent of all the parties. In my view, the right to make an application under Section 8 of the Arbitration Act is not a right arising from a contract within the meaning of Section 69 of the Indian Partnership Act, 1932.

6. The next point to be considered is whether an application under Section 8 is covered by the words 'other proceeding' appearing in Section 69(3) of the Partnership Act, 1932. The matter, has been argued at considerable length before me and before Mr. Justice Mudholkar and Mr, Justice Naik.

7. It is urged by Mr. Nariman, the learned counsel for the Petitioners, that the words 'other proceeding' appearing in Section 69(3) have been preceded by the words 'a claim of set-off' and that the words that precede have a demonstrative or limiting effect upon the words that follow. He urges that the words used are not 'any other proceeding', but 'other proceeding' and that they cannot be interpreted to refer to every proceeding that may be instituted for the enforcement of a right arising from a contract. In my view, there is considerable force in the argument advanced by Mr. Nariman. The words 'or other proceeding' immediately follow the words 'a claim of set-off'. When words are used in such juxtaposition, the earlier words have a demonstrative or limiting effect. The earlier words are illustrative or demonstrative of the intention of the legislature.

8. In this connection, reference may be made to a judgment of the House of Lords reported in 1932 AC 328, Stag Line, Ltd. v. Foscolo, Mango and Co. Ltd. In that case the House of Lord's had to consider the words following appearing in certain Bills of Lading:

'Liberty X X X to call at any ports in any order, for bunkering or other purposes, X X X all as part of the contract voyage.'

A cargo of coal was loaded on the appellant's steamship Ixia at Swansea for carriage to Constantinople under Bills of Lading which gave the shipowners liberty in the terms set out above. The steamship having deviated from its usual route in. order to land two engineers who were on board the ship for the purpose of observing whether a superheater fitted in the interest of the shipowners was working efficiently, a question arose whether the act of deviation could be regarded as a permitted deviation within the meaning of the words 'other purposes' appearing in the bills of lading. In the course of his speech, Lord Buckmaster at page 334 observes as follows:

'With regard to the clause of the Charter-party,the contention is that to land the two engineers atSt. Ives was an 'other purpose' within the meaning of Clause 6 and consequently permitted by thecharter party itself. This argument depends uponthe view that it is impossible to get a specifiedcategory in which the words 'other purposes' maybe confined which the illustrative word at the beginning of the sentence consists only of one description. I find it difficult, and I think it is undesirable, to attempt to specify in exact languagewhat are the limitations imposed by the use of sucha word prefacing others of general import. To mymind it is impossible to frame a rule applicableto all the various documents in which such phrases are to be found. ****

The word 'bunkering' must have some demonstrative and limiting effect, and the phrase 'or otherpurposes' following it cannot be so construed asto disregard the effect of the first example andassume that any purpose is there by permitted. Ifthat were so, the word 'bunkering' might be leftout. Nor am I prepared to define what are thelimitations within which the phrase 'other purposed must be confined, but I can find nothingkindred to bunkering or associated with the opera-tion that is involved in landing two men at a port that is not on any part of the specified route.'

Some of the words in the speech of Lord Buck-master may very aptly be used in construing the provisions of Section 69(3) of the Partnership Act, 1932. Using the language of Lord Buckmaster I say that I find it difficult, and I think it is undesirable, to attempt to specify in exact language what are the limitations imposed by the use of the words 'a claim of set off' prefacing the words 'or other proceeding' which are words of general import. The-words 'a claim of set off' must have some demonstrative and limiting effect, and the phrase 'or other proceeding' following them cannot be so construed as to disregard the effect of the first example and assume that any proceeding is thereby covered.

9. Lord Russell of Killowen in his speech in the same case observes, at page 345, as under:

'While I appreciate the difficulty of applying what is called! the ejusdem generis rule where only one species is available out of which to construct the genus, nevertheless it seems clear that some limitation must be placed upon the words 'other purposes'. If they are to be read as free from any limitation, then it was unnecessary to specify the bunkering purpose. Some restriction must, therefore, exist; and for myself I am in agreement with the view that the Ixia's call at St. Ives, not being a call for the purpose of the contract venture, was not a call for 'other purposes' within the meaning of the liberty'.

10. Lord Macmillan in the course of his speech at page 348 of that case observes as under :

'........ the liberty to call at any ports 'forbunkering or other purposes' cannot be read as meaning that the ship was to be at liberty to call at any ports for bunkering purposes or any purposes other than bunkering, for that would be tantamount to saying that she might call at any port for any purpose. I read the words as meaning 'for the purpose of bunkering or for any similar purpose'. What purposes are similar to the purpose of bunkering I shall not attempt to define.'

11. The ratio of this decision is that the words which precede must have a limiting effect upon the words of general import which follow. There is hardly anything common between a claim of set off and an application under Section 8 of the Indian Arbitration Act, 1940. In my view, an application under Section 8 of the Indian Arbitration Act, 1940, is not a proceeding covered by the words 'other proceeding' appearing in Section 69(3) of the Indian Partnership Act, 1932.

12. My attention was called to a decision of the Full Bench of this Court, reported in : AIR1940Bom121 , Ramrao Bhagwant rao v. Appanna Samage. In that case, the Full Bench had to consider the language used in Order XXIII, Rule 1 of the Code of Civil Procedure, 1908. The words therein used are the following :

'...... (2) Where the Court is satisfied

(a) that a suit must fail by reason of some formal defect, or

(b) that there are other sufficient grounds for allowing the Plaintiff to institute a fresh suit for the subject matter of a suit or part of a claim, it may, on such terms as it thinks fit, grant the Plaintiff permission to withdraw from such suit or abandon such part of a claim with liberty to institute a fresh suit in respect of the subject matter of such suit or such part of a claim......'

The question in that case was whether the words 'by reason of some formal defect' had any limiting effect upon the words 'other sufficient grounds' following. After referring to the decision of Chief Justice Sir John Beaumont in the case of Bai Mahakor v. Bhikabhai Sakalchand, reported in ILR 59 Bom 114 : AIR 1935 Bom 28, Mr. Justice Lokur, observes at p. 160 (of Bom LR) : at p. 125 of AIR as follows :

'The learned Chief Justice, however, has added that 'the two clauses must be read together' and one has in Clause (a) an illustration of the sort' or reason which the legislature thought would be sufficient, and in that way Clause (a) may, to some extent, limit the generality of the words in Clause (b).

With great respect, we concur in this view, which is exactly what we mean by saying that Clause (a) is illustrative of the 'grounds' referred to in Clause (b), and although the 'grounds' need not be ejusdem generis with the grounds mentioned in Clause (a), they must be 'at least analogous' to it. .The ground in Clause (a) requires that the suit must fail by reason of some formal defect; whereas the grounds contemplated in Clause (b) need not necessarily be fatal to the suit, but must be analogous to a formal defect......'

13. Another decision to which my attention wag called is the one reported in (S) . Ram Lal Harnam Dass v. Bal Krishen. In that case, Mr. Justice Bishan Narain held that 'when general words follow particular and specific words, then the general words are to be ordinarily construed to include only those things of the same class as specifically mentioned'. In that case, the learned Judge had to, consider whether the provisions contained in Section 69 of the Partnership Act, 1932, extended to an application under the Displaced Persons (Debts Adjustment) Act, 1951. He held that the words 'or other proceeding' in Section 69(3) relate to the proceedings of the nature of set-off and nothing else. He further held that the words 'or other proceeding' should be read! to mean 'other proceedings in the suit'.

14. It was urged by Mr. Bhagwati, the learned counsel for the respondents, that the words 'a claim of set off' are wide enough to cover a claim by way of set off in any proceeding other than a suit. He says that a set off can be claimed under the provisions of the Presidency Towns Insolvency Act, 1909, and the Provincial Insolvency Act, 1920. He argues that if the words 'a claim of set off' are held not to refer merely to a claim made in a suit, then there is no reason why a limited meaning should be given to the words 'other proceeding' so as to exclude proceedings under Section 8 of the Indian Arbitration Act, 1940. Sections 69(1) and 69(2) deal with suits. When the legislature extended the provisions contained in Sections 69(1) and 69 (2) to a claim of set off, the legislature, in myview, had in mind a claim of set off that may be made in a suit. In my view, the legislature by using the words 'a claim of set off' did not intend to refer to a claim of set off in proceedings other than a suit. I am unable to accept any argument based on the assumption that the words 'a claim of set off' cover a claim made in proceedings other than a suit.

15. Some indication may be found of the intention of the legislature in using the words 'other proceeding' in Section 69(3) from the use of the same words in Section 69(4) (b). By Section 69(4)(b) it is provided that Section 69 would not apply to any suit or claim of set-off not exceeding one hundred rupees in value which, in the Presidency towns is not of a kind specified in Section 19 of the Presidency Small Cause Courts Act, 1882, or outside the Presidency Towns, is not of a kind specified in the Second Schedule to the Provincial Small Cause Courts Act, 1887, or to any proceeding in execution or other proceeding incidental to or arising from any such suit or claim.

16. No one has urged before me that the words 'other proceeding' should be construed ejusdem generis and it is not necessary for me to deal with any argument based on such a contention.

17. In my view, reading the provisions of Section 69 as a whole, the words 'other proceeding' used in Section 69(3) cannot be construed so as to embrace an application made under Section 8 of the Indian Arbitration Act, 1940.

17a. In the result, the question whether in view of the provisions contained in Section 69 of the Indian Partnership Act, 1932, the present petition is maintainable, is answered in' the affirmative.

18. As regards costs, there is no reason to depart from the usual rule that costs should follow the event. In view of the fact that the matter was argued at considerable length and has occupied considerable time, both before Mr. Justice Mudholkar and Mr. Justice Naik and before me, the fair order to make as regards costs up to date would be that the respondents would pay to the petitioners the costs of the Petition, when taxed. The matter has been heard in Court and the costs should be taxed on the footing of a hearing in Court and I answer the question accordingly.

19. Order accordingly.


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