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Banwari Lal and ors. Vs. the Pilibhit Co-operative Development Federation Ltd. and ors. - Court Judgment

LegalCrystal Citation
SubjectArbitration
CourtAllahabad High Court
Decided On
Case NumberSpecial Appeal No. 143 of 1968
Judge
Reported inAIR1974All269
ActsArbitration Act, 1940 - Sections 33; Uttar Pradesh Co-operative Societies Act; Uttar Pradesh Co-operative Societies Rules - Rules 115, 116 and 117
AppellantBanwari Lal and ors.
RespondentThe Pilibhit Co-operative Development Federation Ltd. and ors.
Appellant AdvocateDeoki Nandan, Adv.
Respondent AdvocatePrakash Gupta, Adv.
DispositionAppeal dismissed
Excerpt:
.....before the learned single judge as well as before us that when the parties entered into a deed of dissolution, the deed of partnership stood abrogated and substituted by it and no part of the deed of partnership survived. this provision clearly shows that even after the dissolution of the partnership consequent on the execution of a deed of dissolution, the earstwhile partners continue to remain entitled to certain rights with regard to the liquidation of the debts and liabilities of the erstwhile partnership and to the distribution of the surplus. the dispute related to proceedings for liquidation of the assets, debts and liabilities of the firm as well as adjustment of rights between the partners of the firm, while it lasted, inter se. it was claimed that since the arbitrator..........(hereinafter referred to as the rules) in accordance with arbitration clause contained in the deed of partnership. by an order dated 5th may, 1962, the deputy registrar, cooperative societies, uttar pradesh, bareilly, to whom the matter had been forwarded by the registrar, appointed one sri r. s. dubey, assistant registrar, co-operative societies, pilibhit, as sole arbitrator under rule 116 of the rules. the deputy registrar directed that the arbitrator appointed shall hear and decide the dispute within two months. sometime on the 20th february, 1963, the appellant filed an application under section 33 of the indian arbitration act for a declaration that clause 12 of the agreement had become inoperative and ineffective after execution of the deed of dissolution. by his order dated.....
Judgment:

Yashoda Nandan, J.

1. The relevant facts giving rise to this appeal are that the appellant agreed to carry on business in partnership with the Pilibhit Co-operative Development Federation Ltd., Pilibhit, which figures as respondent No. 1 in the appeal relating to the sale of petroleum products as agent of Standard Vacuum Oil Company. An agrecinent between the parties was executed on the 1st of November, 1953. One of the terms of the partnership agreement was that if any dispute arose between the parties, the said dispute shall be referred to the Registrar, Co-operative Societies, Uttar Pradesh, Luck-now for decision in accordance with Rules 115, 116 and 117 framed under the Co-operative Societies Act (hereinafter referred to as the Act). Disputes arose between the partners and ultimately by a deed dated 31st May, 1960, the partnership was dissolved. On the 15th of November, 1960. Bhagwan Singh, Honorary Secretary of respondent No. 1 filed an application before the Registrar, Cooperative Societies, Uttar Pradesh, Lucknow, alleging that the appellant had misappropriated a certain amount of money of the Cooperative Development Federation during the subsistence of the partnership. It was claimed that in all a sum of Rs. 31,660.32 p. was due to the Co-operative Federation (respondent No. 1) from the appellant. The prayer was that the dispute between the parties regarding the recovery of Rs. 31,660.32 p. be referred to arbitration under Rules 115 to 117 of the U. P. Co-operative Societies Rules (hereinafter referred to as the Rules) in accordance with arbitration clause contained in the deed of partnership. By an order dated 5th May, 1962, the Deputy Registrar, Cooperative Societies, Uttar Pradesh, Bareilly, to whom the matter had been forwarded by the Registrar, appointed one Sri R. S. Dubey, Assistant Registrar, Co-operative Societies, Pilibhit, as sole arbitrator under Rule 116 of the Rules. The Deputy Registrar directed that the Arbitrator appointed shall hear and decide the dispute within two months. Sometime on the 20th February, 1963, the appellant filed an application under Section 33 of the Indian Arbitration Act for a declaration that Clause 12 of the agreement had become inoperative and ineffective after execution of the deed of dissolution. By his order dated 10th September, 1966, the learned Civil Judge, Pilibhit dismissed the application and ordered that the arbitration clause in the partnership deed had not become inoperative after the dissolution of the partnership. Subsequently in modification of the order dated 5th May, 1962, by which Sri R. S. Dubey has been appointed sole arbitrator, the Deputy Registrar, Co-operative Societies, Bareilly, appointed as sole arbitrator one Sri A. S. Verma, Assistant Registrar, Co-operative Societies, U. P., Lucknow. Aggrieved by the two orders passed by the Deputy Registrar on 5th May, 1962 and 15th November, 1966 as well as the order passed by the learned Civil Judge on the application under Section 33 of the Arbitration Act, the appellant filed a writ petition in this Court challenging the validity of the three orders. The learned single Judge, who heard the petition, held that the learned Civil Judge in deciding the application under Section 33 of the Arbitration Act did not commit any manifest error apparent on the face of the record. He further held the two orders passed by the Deputy Registrar, appointing the Assistant Registrar as Arbitrator for deciding the dispute between the appellant and respondent No. 1 were not illegal and liable to be quashed. In the alternative, the learned single Judge held that the first of the two orders appointing the Assistant Registrar, Co-operative Societies, Pilibhit, as the sole. Arbitrator having been passed by the Deputy Registrar in the year 1962, there was no justification for the petitioner not having challenged it till as late as in 1966. The delayed petition did not, in his opinion, call for interference with the order passed in 1962 and the one passed in modification of it. In this view of the matter, the learned single Judge dismissed the petition with costs.

2. We have heard the learned counsel appearing for the appellant and, in ous opinion, there is no merit in this appeal which must fail. In our Judgment the view taken by the learned Civil Judge is not erroneous and the order does not show that any patent error of law was committed by him in arriving at the conclusion that he did.

3. It was contended before the learned single Judge as well as before us that when the parties entered into a deed of dissolution, the deed of partnership stood abrogated and substituted by it and no part of the deed of partnership survived. It was submitted that after the execution of the deed of dissolution, if there was any dispute between the parties, it could only be settled with reference to terms of the deed of dissolution itself. It was urged that since the deed of dissolution itself contained no arbitration clause reference to arbitration on the basis of Clause 12 of the parternership deed was incompetent and the learned Civil Judge committed a patent error of law in taking a contrary view. There is, in our opinion, no force in this contention. The deed of dissolution no doubt brought about an end to the relations of the partners as such but in our view did not abrogate all the terms of the partnership deed. Paragraph 2 of the deed of dissolution merely contains an assurance by the appellant to respondent No. 1 that except as recorded in the books and papers of the partnership, he had not either received, discharged or compromised any claim, demand or the other credit due to partnership or contracted or otherwise incurred any liability, debt or obligation that might directly or Indirectly charge or effect the partnership business. Paragraph 4 of the deed of dissolution provides that an account of the entire assets and liabilities of the partnership business shall be made and completed within a month and the assets and liabilities of the partnership would be taken over by the first party, namely the Co-operative Federation, respondent No. 1. Paragraph 8 of the deed of dissolution provides that the appellant would be bound, to render active help to respondent No. 1 in realisation of debts, failing which the appellant would be responsible to respondent No. 1 for the amount left unrealised. According to Paragraph 9, if any amount shown as outstanding against any customer turned out to be bogus, the appellant would be liable to pay that to respondent No. 1 to the extent to which it was so found. The document shows that while the partnership had been dissolved, the rights and liabilities of the parties in relation to the partnership agreement incurred during the continuance of the partnership had not ceased to exist. All that had happened as a result of the deed of dissolution was that further carrying on business of the partnership came to an end. While the partnership was dissolved, partnership accounts remained to be taken and liquidation proceedings remained to be completed. The registered deed of dissolution merely contained assurances from one party to the other regarding the fashion in which they had acted during the subsistence of the partner-ship, the manner in which they would conduct themselves during the liquidation proceedings, the period within which the accounting in respect of the assets and liabilities of the partnership would be completed and the consequences to follow completion, of the accounting. The deed of dissolution did not in any way either affect the rights off liabilities incurred by the parties as partners while the partnership lasted or provide how disputes if any arising in respect of such rights or liabilities were to be resolved. In such a situation it is not possible to say that as a result of the execution of the deed of dissolution, all the terms of the deed of partnership became ineffective and inoperative even in respect of rights and liabilities that had arisen, while the partnership was still subsisting. The partnership deed was not, in our opinion, substituted wholly by the deed of dissolution subsequently executed and the one was to supplement the other.

4. Section 46 of the Indian Partnership Act provides:

'On the dissolution of a firm every partner or his representative is entitled as against all the other partners or their representatives to have the property of the firm applied in payment of the debts and liabilities of the firm, and to have the surplus distributed among the partners or their representatives according to their rights.'

4-A. This provision clearly shows that even after the dissolution of the partnership consequent on the execution of a deed of dissolution, the earstwhile partners continue to remain entitled to certain rights with regard to the liquidation of the debts and liabilities of the erstwhile partnership and to the distribution of the surplus. Section 47 of the Indian Partnership Act also leads to the same conclusion. This was a case where a dispute had been raised by respondent No. 1 that the appellant had embezzled considerable funds belonging to the partnership while the partnership was still existing. The dispute related to proceedings for liquidation of the assets, debts and liabilities of the firm as well as adjustment of rights between the partners of the firm, while it lasted, inter se. The resolution of such a dispute was not contemplated by the deed of dissolution at all. In the absence of any provision to the contrary in the deed of dissolution, we see no reason why in the event of a dispute between the erstwhile partners regarding rights and liabilities that arose while the partnership lasted, it should not be resolved in the manner provided for in the deed of partnership by recourse to the arbitration clause therein. We are consequently in agreement with the view taken by the learned single Judge that the learned Civil Judge committed no error of law apparent on the face of the record in dismissing the application under Section 33 of the Indian Arbitration Act.

5. Learned counsel invited our attention to Clause 12 of the partnership agreement which runs as follows:

'Any dispute touching the business of patroleum distribution between the Federation and the appellant shall be referred to the Registrar, Co-operative Societies, Uttar Pradesh, Lucknow for the decision by arbitration in accordance with Government Rules No. 115 to 117 for Co-operative Societies, and both the parties shall be bound by this decision.'

Rule 115 of the Rules provides that

'any dispute touching the business of a registered society (i) between members or past members of a society or persons claiming through a member or past member, (ii) or between a member or a past member or persons so claiming and the society or its committee or any officer of the society (iii) between the society or its committee and any officer of the society, and (iv) between two or more registered societies shall be decided either by the Registrar or by arbitration and shall for that purpose be referred in writing to the Registrar ........'

Relying on Rule 115, Learned counsel urged that the dispute between appellant and respondent No. 1 referred to arbitration by the Deputy Registrar, Co-operative Societies, Bareilly, was not between such parties as are envisaged by that Rule and consequently it could not be treated as a statutory reference to arbitration under the Act and the Rules framed thereunder. It was submitted that the reference to arbitration in the instant case was based merely on the agreement between the parties and to it any of the provisions of the Act and Rules other than Rules 115 to 117 were not attracted. He went on to contend that the parties had specifically agreed to decision of their disputes by the Registrar, Co-operative Societies, Uttar Pradesh, Lucknow, in accordance with Rules 115 to 117. It was submitted that when the parties agreed to arbitration by the Registrar, Co-operative Societies in accordance with Rules 115 to 117 they did not contemplate arbitration either by the Deputy Registrar or by arbitrators appointed by him. It was claimed that since the arbitrator in the present case both by the order of 1962 as well as by the order of 1966 had been appointed not by the Registrar but by the Deputy Registrar, the arbitration proceedings before these officers were incompetent and invalid.

6. There can be no dispute that the arbitration in the present case was not statutory but was as a result of the arbitration agreement entered into between the parties. As a result of Clause 12 itself, Rules 115 to 117 must be read as having become incorporated therein. According to Rule 116, reference of which has been made in Clause 12 of the agreement, on receipt of a reference, the Registrar could either decide the dispute himself, or refer it for decision to an arbitrator or to two joint arbitrators appointed by him or to three arbitrators, of whom one had to be nominated by each of the parties to the dispute and the third by the Registrar who could also appoint one of the arbitrators to act as Chairman.

7. Thus there can be no doubt that the Registrar was competent to appoint an arbitrator for deciding the dispute that had been referred to him. The partnership agreement does not define 'the Registrar, Co-operative Societies'. In order to find out who the Registrar mentioned in the agreement is one necessarily has to refer to the Act itself. Clause (f) of Section 2 defines the Registrar as under :--

' 'Registrar' means a person appointed to perform the duties of Registrar of Cooperative Societies under this Act.'

Section 3 of the Act is in the following terms:

'The State Government may appoint a person to be Registrar of Co-operative Societies for the State or any portion of it and may appoint persons to assist such Registrar, and may, by general or special order, confer on any such person all or any of the powers of the Registrar under this Act.'

8. The Act does not provide for appointment of Deputy Registrars who have any specified power. The Deputy Registrars are persons appointed to assist the Registrar who may be, by general or special order, conferred all or any of the powers of a Registrar, under the Act.

9. Annexure 'G' annexed to the counter-affidavit which is an office memorandum under the signature of the Personal Assistant to the Registrar, Co-operative Societies, discloses that the Deputy Registrar, Cooperative Societies U. P., Bareilly, does exercise all the powers of the Registrar under the Act. The assertion made in this annexure as well as the assertion made in paragraph 19 of the counter-affidavit, which makes a reference to annexure 'G', have not been denied. There is no specific assertion in the re-joinder-affidavit that the statement contained in annexure 'G' to the effect that the Deputy Registrar has exercised all powers of the Registrar is incorrect. In the circumstances of the case, it cannot be accepted that the Deputy Registrar, Co-operative Societies, U. P., Bareilly, who appointed on two different occasions Assistant Registrar, Co-operative Societies, Pilibhit, to act as arbitrator for decision of the dispute between the parties had not been conferred all the powers of the Registrar in accordance with Section 3 of the Act. The orders appointing the Assistant Registrar, Co-operative Societies, were consequently passed by a person who was a 'Registrar', Co-operative Societies, within the meaning of Section 2(f).

10. No other contention has been raised.

11. The appeal lacks merit and is hereby dismissed with costs to respondent No. 1.


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