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Brahm Nath Datt Vs. Dhani Ram S/O L. Kirpa Ram - Court Judgment

LegalCrystal Citation
SubjectArbitration;Limitation
CourtPunjab and Haryana High Court
Decided On
Case Number First Appeal from Order No. 38 of 1955
Judge
Reported inAIR1956P& H125
ActsLimitation Act, 1908 - Sections 3 - Schedule - Article 106; Arbitration Act, 1940 - Sections 2 and 37(1)
AppellantBrahm Nath Datt
RespondentDhani Ram S/O L. Kirpa Ram
Appellant Advocate F.C. Mital, Adv.
Respondent Advocate Roop Chand, Adv.
DispositionAppeal dismissed
Cases ReferredHeyman v. Darwins Ltd.
Excerpt:
.....no writ appeal will lie against a judgment/order/decree passed by a single judge in exercising powers of superintendence under article 227 of the constitution. - it was further laid down in this document that dhani ram was entitled to share in the good-will of the firm and was not liable to losses......per rupee while dhani ram was the working partner and his share was fixed at four annas.in the deed of partnership there is an arbitration clause in these terms--'all disputes and questions, connecting with the partnership or this deed, arising between the parties, whether during or after the partnership shall be referred to the arbitration of two arbitrators, one to be appointed by each party and in case of disagreement to an umpire appointed by the said arbitrators and in case of their default by the parties'.on 13-11-1953, dhani ram made an application under section 20, arbitration act, to the senior subordinate judge, amritsar, to have the arbitration agreement filed in court as there were disputes between the parties within the arbitration clause. the dispute was thus stated in.....
Judgment:

Bishan Narain, J.

1. Brahm Nath Datt and Dhani Ram entered into a partnership to carry on the business of piece-goods under the name of Shankar Das Vishwa Nath. This business was started from 18-6-1942, but the partnership deed was executed by both the parties on 1-10-1942. According to the partnership deed Brahm Nath Datt was the financing partner investing entire capital required in the business and his share in profits and losses was fixed at twelve annas per rupee while Dhani Ram was the working partner and his share was fixed at four annas.

In the deed of partnership there is an arbitration clause in these terms--

'All disputes and questions, connecting with the partnership or this deed, arising between the parties, whether during or after the partnership shall be referred to the arbitration of two arbitrators, one to be appointed by each party and in case of disagreement to an umpire appointed by the said arbitrators and in case of their default by the parties'.

On 13-11-1953, Dhani Ram made an application under Section 20, Arbitration Act, to the Senior Subordinate Judge, Amritsar, to have the arbitration agreement filed in Court as there were disputes between the parties within the arbitration clause. The dispute was thus stated in this application--

'Parties to the contract, petitioner and respondent, are at difference as to the existing partnership business and to its mode and carrying on in future and to the settlement of full and final accounts, assets and liabilities pertaining to the partnership till this day'.

2. The application was contested by Brahm Nath Datt mainly on two grounds and they were (1) that the original agreement of 1942 was not In force as it was superseded by another agreement executed by Dhani Ram on 3-5-1943, and there was no arbitration clause in the new agreement, and (2) that the partnership had been dissolved by consent since long.

It was stated in the reply that the accounts were to be rendered by Dhani Ram when the assets of the firm had been completely realised. It was alleged by him that there were no disputes still existing or so subsisting which could be referred to arbitration and, therefore, the arbitration agreement could not be filed. Dhani Ram in replication denied dissolution of the firm and reiterated his claim for accounts.

After recording the statement for Brahm Nath Datt the Court framed three issues and held that the execution of the agreement dated 3-5-1943, was not proved and that in any case it had not been acted upon. It was also held that there was a subsisting arbitration agreement and that the petitioner's claim was not barred by time as the firm was not dissolved in 1945 and it continued to run business after 1945 also.

On these findings the trial Court ordered the filing of the arbitration agreement in Court and Brahm Nath Datt has filed this appeal under Section 39(1)(iv), Arbitration Act, against the order of the trial Court.

3. Shri Faqir Chand Mital has argued on behalf of the appellant that the partnership deed of 1-10-1942, was superseded by the agreement of 8-5-1943, and as the later document does not contain any arbitration clause, the application for filing the arbitration agreement contained in the superseded deed cannot be filed under Section 20 Arbitration Act. He has challenged the finding of the trial Court regarding the execution of the document. Exhibit D. 2, dated 3-3-1943.

It is, however, not necessary to decide in these proceedings whether the 1943 document was executed by Dhani Ram or not or whether it had been acted upon or not as I am clear in my mind that assuming that Exhibit D. 2 was, in fact, executed by Dhani Ram and was acted upon, the arbitration agreement in the 1942 partnership deed is not superseded by the later document.

The partnership deed of 1942 gives all the terms of partnership between the parties. The document of 1943 refers to the previous document and does not expressly or impliedly' supersede it. On the contrary it states that one of the clauses In the document is not correctly recorded and then proceeds to give the amended version of it. In the 1943 document it is stated that as a matter of fact the agreement of the parties at that time was that the share of Brahm Nath Datt should be fourteen annas instead of twelve annas and that of Dhani Ram two annas instead of four annas. It was further laid down in this document that Dhani Ram was entitled to share in the good-will of the firm and was not liable to losses. The subsequent document docs not refer to other terms of the partnership deed at all and if it be considered that the first document has become inoperative in view of the execution of the second document, then all the terms of partnership cannot be ascertained. To discover all the terms of partnership it is necessary to refer to the 1942 agreement. It is also to be noticed that the later document does not purport to have been signed by Brahm Nath Datt at all.

As far as I can see, the two documents have to be read together to find out the terms of the partnership and that being so, it cannot be said that the arbitration agreement mentioned in the first document has been superseded by the subsequent document. I may state here that while discussing this matter I have not applied my mind to the facts whether Exhibit D.2 was actually executed by Dhani Ram or not or whether it had been acted upon or not. I, therefore, hold that there is an existing arbitration agreement between the parties relating to the partnership firm Sankar Dass Vishwa Nath started in 1942.

4. It was next argued that on 27-6-1945, Brahm Nath Datt gave notice of dissolution to Dhani Ram as provided in Clause 11 of the partnership deed and that a claim for rendition of accounts could be made only within three years of dissolution and, therefore, there was no subsisting dispute between the parties as a suit for rendition of accounts had become barred by time under Article 106, Limitation Act.

According to learned counsel it is for the Court to decide in these proceedings whether the dispute raised in this case is a subsisting dispute, i.e. within time and the arbitrator has no jurisdiction to decide this matter.

5. There can be no doubt that in the present case the language used in the arbitration agreement is very wide. It not only covers all disputes relating to partnership or the deed of partnership that may arise during partnership but covers even those disputes that may arise after partnership. The present dispute in substance is about dissolution of partnership and about rendition of accounts.

Taking the dissolution of partnership the case of Dhani Ram is that the partnership has not yet been dissolved while the case of Brahm Nath Datt is that it was dissolved in 1945. Thus there is a claim by one party which is denied by the other party.

The assertion by one party that under the partnership deed the firm has not yet been dissolved denied by the other party is obviously a dispute in connection with the partnership and partnership deed. Therefore, this dispute is covered by the arbitration agreement. As regards the claim of Dhani Ram for rendition of accounts the case of Brahm Nath Datt in the pleadings is that the accounts can be gone into only after all the assets of the partnership have been realised and that these assets are in the process of realisation. This is almost a plea that the time has not yet arisen for going into the accounts and therefore, the appointment of arbitrators at this stage is premature. The case of Dhani Ram is that he is entitled to rendition of accounts on dissolution of partnership while the case of Brahm Nath Datt is that the partnership had been dissolved in 1945 and the accounts are to be rendered only after all the assets have been realised. This is obviously a dispute and this dispute is in connection with the partnership and is covered by the arbitration agreement. On the facts of this case, therefore, it is clear that both disputes must be decided by the arbitrators appointed under the arbitration agreement.

6. It was, however, argued that regarding accounts the plea of Brahm Nath Datt in substance is that the relief claimed is barred by time under Article 105. Limitation Act, and, therefore, there is no subsisting dispute which can be decided by arbitrators. It was also urged that this dispute can be decided only by the Court in these proceedings.

The limitation under Article 106 does not start till the date of dissolution of partnership is fixed and that, in my opinion, must be done by the arbitrators under the arbitration clause. If after fixing the date of dissolution the arbitrators come to the conclusion that the claims for accounts are barred under Article 106 then it is open to them to refuse that relief to Dhani Ram.

It was agreed between the parties that they entered into partnership on the terms of the deed of partnership and it appears to me that a difference has arisen between them as to whether rights and liabilities under the partnership deed or deeds have come to an end by flux of time or not and whether Brahm Nath Datt is discharged from complying with the terms of arbitration agreement or not. I see no reason why these disputes should not be considered to arise in connection with the partnership or partnership deed particularly when one side is asserting discharge under Article 106, Limitation Act, and the other party is denying it.

The language used in the arbitration agreement includes such a dispute and in any case it does not exclude it. It was open to the parties to so frame the arbitration agreement as to exclude its operation after dissolution or after the expiry of some period shorter than that applicable under the statute in relation to accounts and if that was done then its operation would have been restricted to the period mentioned therein.

In this case, however, this has not been done. In fact, the arbitration agreement is applicable even 'after the partnership'. I may point out that before the enactment of the Indian Arbitration Act, 1940, their Lordships of the Privy Council had held in -- 'Ramdutt Ramkissen Das v. E. D. Sassoon & Co., AIR 1929 PC 103 (A), that--

'Although the Limitation Act does not in terms apply to arbitrations, they think that in mercantile references, of the kind in question it is an implied term of the contract that the arbitrator must decide the dispute according to the existing law of contract, and that every defence which would have been open in a Court of law can be equally proponed for the arbitrator's decision unless the parties have agreed (which is not suggested here) to exclude that defence.

Were it otherwise a claim for breach of a contract containing a reference clause could be brought at any time, it might be 20 or 30 years after the cause of action had arisen 'although the legislature has prescribed a limit of three years for the enforcement of such a claim in any application that might be made to the law Courts'.

Their Lordships in the course of this Judgment approved of the decision in -- 'Astley and Tyldesley Coal and Salt Co. v. Tyldesley Coal Co.', (1899) 68 LJ QB 252, (B), wherein it was held--

'A submission to arbitration does not per se exclude the right of either party to raise the defence of the Statute of Limitations, but if it be intended to exclude such a defence an express term to that effect must be imported into the agreement of submission.'.

This view of the law was accepted by the Indian Legislature and Section 37(1) was introduced in the Indian Arbitration Act, 1940, laying down that all the provisions of the Indian Limitation Act shall apply to arbitrations as they apply to proceedings in Court. This statutory provision shows that it is for the arbitrator to decide whether a disputed claim is within time or not.

7. The learned counsel for the appellant, however, relied on two decisions of the Sind Court in support of his argument. It was no doubt observed by Rupchand Bilaram, A.J.C., in -- Official Receiver v. Kesondas Mavji', AIR 1926 Sind 209 (C), that a party cannot be compelled to refer a dispute which is statute barred to arbitration. No reason was given in support of this remark which was in any case obiter as the case had been decided on another ground.

This remark was not accepted as correct by Tyabji, A.J.C., in -- S. L. Balmokand v. Uttamchand Brijlal', AIR 1927 Sind 177 (D). This later case was taken to a Division Bench of which Rupchand Bilaram, A.J.C., was a member. The decision of this Division Bench is reported in --'Uttamchand Brijlal v. S. L. Balmokand', AIR 1929 Sind 55 (E), Percival, J. C., held that it was not necessary to decide this matter while Rupchand Bilaram, A.J.C., reaffirmed his previous view that a dispute which is barred by time is not a dispute which is within the arbitration agreement and expressed the opinion that in view of the decision in -- 'Hirji Mulji v. Cheong Yue Steamship Co.', 1926 AC 497 (P), it is doubtful if the case reported as (1899) 68 LJ QB 252 (B), has been rightly decided, though he observed in the judgment that this point had been left undecided in 1926 AC 497 (F)

It is not clear from the Sind cases, it was disputed, whether the claim was barred by time or not. If the decision in AIR 1929 PC 103 (A), had been brought to the notice of the Court then it would have become clear to Rupchand Bilaram. A.J.C., that according to the Privy Council the decision in (1899) 68 LJ QB 252 (B) laid down the law correctly.

I am, therefore, of the opinion that the view expressed by Rupchand Bilaram. A.J.C., in this mutter, with due respect, is not sound. It will be noticed that since 1929 the view expressed in 1926 AC 497 (P) has not been accepted as correct by the House of Lords in -- 'Heyman v. Darwins Ltd.', (1942) 1 All ER 337 (G).

In any case Legislature has now laid down in Section 37(1) that the arbitrator must give his award in consonance with the provisions of the Limitation Act and, therefore, the view of Rupchand Bilaram, A.J.C., has not been accepted by the Legislature and has become obsolete.

IN this view of the matter it is not necessary to decide whether, in fact, the partnership was dissolved in 1945 or not and whether the relief of accounts is open to Dhani Ram or not.

8. Before parting with this judgment I may say that my remarks on the facts of the case and legal position are limited to the decision whether the arbitration agreement should be filed in Court or not under Section 20(1), Arbitration Act.

These remarks are not final decisions on the questions of facts and law involved in this case and it is open to the arbitrators or umpire to decide these points as they consider proper if and when they are raised before them without being influenced by any observation of mine in this Judgment.

9. For these reasons, this appeal fails andis dismissed with costs. It is now for the trialCourt to take proceedings under Section 20(4). Arbitration Act. The parties have been directed toappear before the trial Court on 16-1-1956.


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