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Sat Pal Anand and ors. Vs. R.K. Ahuja and ors. - Court Judgment

LegalCrystal Citation
SubjectArbitration
CourtPunjab and Haryana High Court
Decided On
Case NumberFirst Appeal From Order No. 131 of 1972
Judge
Reported inAIR1973P& H197
ActsArbitration Act, 1940 - Sections 8, 14, 19, 20, 33, 34 and 41; Indian Partnership Act, 1932 - Sections 7, 43(2) and 44; ;Indian Contract Act - Sections 252; Code of Civil Procedure (CPC), 1908 - Order 5, Rules 2, 17 and 19
AppellantSat Pal Anand and ors.
RespondentR.K. Ahuja and ors.
Cases ReferredIn Ballavdas Acharjya v. Shyam Sunder Halwasiya
Excerpt:
- sections 100-a [as inserted by act 22 of 2002], 110 & 104 & letters patent, 1865, clause 10: [dr. b.s. chauhan, cj, l. mohapatra & a.s. naidu, jj] letters patent appeal order of single judge of high court passed while deciding matters filed under order 43, rule1 of c.p.c., - held, after introduction of section 110a in the c.p.c., by 2002 amendment act, no letters patent appeal is maintainable against judgment/order/decree passed by a single judge of a high court. a right of appeal, even though a vested one, can be taken away by law. it is pertinent to note that section 100-a introduced by 2002 amendment of the code starts with a non obstante clause. the purpose of such clause is to give the enacting part of an overriding effect in the case of a conflict with laws mentioned with the.....1. this is a defendants' appeal against an order of the trial court whereby their application under section 34 of the arbitration act, 1940, for stay of proceedings in a suit filed by the plaintiff-respondents for dissolution of a partnership-at-will rendition of accounts and other consequential reliefs was dismissed on the ground that the appellants had asked for an adjournment for filing a written statement and had hereby taken a step in the proceedings. a few other submissions made by the plaintiff-respondents in support of the argument that the dispute should not be referred to arbitration had, however, been negatived by the order under appeal. 2. in the trail court, the main controversy appears to have centered round the question whether the appellants had really taken a step in the.....
Judgment:

1. This is a defendants' appeal against an order of the trial Court whereby their application under Section 34 of the Arbitration Act, 1940, for stay of proceedings in a suit filed by the plaintiff-respondents for dissolution of a partnership-at-will rendition of accounts and other consequential reliefs was dismissed on the ground that the appellants had asked for an adjournment for filing a written statement and had hereby taken a step in the proceedings. A few other submissions made by the plaintiff-respondents in support of the argument that the dispute should not be referred to arbitration had, however, been negatived by the order under appeal.

2. In the trail Court, the main controversy appears to have centered round the question whether the appellants had really taken a step in the proceedings. The parties had never come to the stage of admission or denial of documents or the examination of any evidence. The appellants had not filed their written statements and the facts of the case as alleged by the plaintiff-respondents in their plaint were that the terms and conditions of the partnership had been incorporated into an agreement dated 28-4-1966 marked 'A' which had been duly registered the same day. The appellants were in possession of the account books of the firm. The business was described to be a partnership-at-will even though it was initially for a period of two years and could be dissolved at the end of this term at the sweetwill of any of the partners. Two days after the expiry of this term of two years, the plaintiff-respondents had served the appellants with notices dated 30-4-1968 of their intention to dissolve the firm on a number of grounds. These notices had been sent by registered post acknowledgment due and exhibits R-1 to R-3 are the postal receipts.

It is mentioned in these notices as well that the partnership was at will and that it could not be dissolved during its initial term of two years in spite of certain acts of omission and commission of the appellants and that the partnership, therefore, stood dissolved with immediate effect. It was also mentioned in these notices that the initial term of two years had expired on 28-4-1968 and this may appear to have been given as a ground for the dissolution of the partnership with immediate effect. According to the plaintiff-respondents' averments in the plaint, it had become impossible to carry on the business of the partnership as defendant No. 2 had been guilty of conduct which prejudicially affected the partnership business and that it could not, therefore, be carried on save at a loss. An averment was also made that it was just and equitable that the firm should be dissolved and that the defendants should render accounts and agree to a partition of the immovable property and render unto the plaintiffs whatever was found due to them in cash or kind out of joint assets. The partners were described to be in joint possession of the cinema building and equipment and material which were the main assets of the business and the plaintiffs claim to be entitled to a division and partition of all these assets. The cause of action was described to have accrued on 15-3-1971 when the defendants had refused to accept the notices sent to them by registered post. In these notices, the plaintiffs intention to dissolve the firm with immediate effect had been expressed and in case if a partnership-at-will, the services of this notice on the defendants would determine the date of dissolution of the firm in view of the provisions of Section 43(2) of the Indian Partnership Act, 1932 (hereinafter briefly referred to as 'the Act').

3. In reply to the defendants' application for stay of proceedings under Section 34 of the Arbitration Act, the plaintiff-respondents have reiterated in paragraph 2 that the dissolution of partnership is a right of any partner independently of any other disputes or differences and that the proceedings for dissolution had commenced with their sending of the notice dated 30-4-1968. It was however, asserted that independently of the contract, the plaintiffs had a substantive right to claim dissolution under Section 44 of the Act on the grounds enumerated in clauses (f) and (g) of that section. The facts have been mentioned in this judgment in detail at this stage as these would enable us to deal with all the contentions raised by the plaintiff-respondents in the trail Court.

4. The plaintiffs' contention that had succeeded in the trial Court was that the defendants had taken a step in the proceedings and had thereby lost their right to claim a stay under Section 34 of the Arbitration Act. This section runs as follows :--

'34. Powers to stay legal proceedings where there is an arbitration agreement.

Where any party to an arbitration agreement on any person claiming under him commences any legal proceedings against any other party to the agreement or any person claiming under him in respect of any matter agreed to be referred, any party to such legal proceedings may, at any time before filing a written statement or taking any other steps in the proceedings, apply to the judicial authority before which the proceedings are pending to stay the proceedings; and if satisfied that there is no sufficient reasons why the matter should not be referred in accordance with the arbitration agreement and that the applicant was at the time when the proceedings were commenced, and still remains, ready and willing to do all the things necessary to the proper conduct of the arbitration, such authority may make an order staying the proceedings.'

5. To be in a position to properly appreciate the contention, it would be necessary to mention briefly how the proceedings had progressed in the trial Court up to the stage of the filing of the stay application by the defendants. The suit was registered on 27-4-1971 and summons for filing of written statement by defendants and settlement of issues in the case had been sent for 24-5-1971. Defendant No. 1 was personally served with a copy of the summons but no copy of the plaint had been delivered to him as required by Order V. Rule 2 of the Code of Civil Procedure. The other two defendants or the inmates of the house were reported to have evaded or obstructed service of summons which were, therefore, affixed on the outer door of the house through there was no compliance with the provisions of Order V. Rule 17, Civil Procedure Code, and the requirements that somebody should identify the house and the defendants and attest the report were not carried out by the Process server. The Court had not, up to that stage, permitted substitution of a concised statement for a full copy of the plaint and no description of the nature of the suit filed against the defendants had been given in the summons. It cannot, therefore, be said that any of the defendants had been served strictly in accordance with the provisions of law for 24-5-1971 or could be presumed to know the nature of the proceedings filed against them. On the said date, Shri S.M. Anand put in appearance for defendant No.1 alone and filed a vakalatnama which was in favour of the said counsel and his father Shri J.C. Anand. As service on defendants Nos. 2 and 3 which purported to be under Order V, Rule 17, Civil Procedure Code, was not in accordance with the provisions of law and was rightly not declared by the Court as due service of summons under Order V, Rule 19 of the Code, summons were directed to be issued again to defendants Nos. 2 and 3 for 28-6-1971. Service for this date had been effected on these defendants by affixation but as copies of the plaint had already been utilised in an attempt to serve the process for an earlier date, it may appear that no copies of plaint were affixed on the house with the summons served on defendants Nos. 2 and 3 for 28-6-1971. On the said date, Shri J.C. Anand put in appearance for all the three defendants.

The order recorded by the Court does not say that the defendants' counsel had asked for the copy of the plaint or an adjournment for filing a written statement. The observations in the order under appeal that Shri J.C. Anand had appeared for defendant No. 1 on 24-5-1971 or that he had made a request for a copy of the plaint on 28-6-1971 do not appear to be accurate as these are not borne out by the record. The Court's order dated 28-6-1971 does not rule out the possibility that the copy was supplied and adjournment granted out of a feeling that the Process Serving Agency and the subordinate staff of the Court had been guilty of certain acts of omissions or defaults and that it was necessary to apprise the defendants of the nature of the suit and to given them time to file a written statement. The defendants' counsel is not recorded to have made any request on 28-6-1971 or to have conducted himself in a manner which could be described as a step taken by him in the proceedings.If the copy of the plaint was being supplied to the defendants' counsel for the first time that day, it cannot be said that he was aware of the alternative mode of settlement of the dispute by arbitration or of the fact that his accepting the copy of the plaint or the adjournment in the case was likely to prejudice the defendants' right to have resort to that alternative mode of the settlement of the dispute.

6. While rejecting the defendants' stay application under Section 34 of the Arbitration Act, the learned trial court has relied on a Single Bench decision of this Court in Amarjit Singh v. Shrimati Saroj Malik, 1971 Cur LJ 637 = (AIR 1972 Punj 21). The facts in that case are clearly distinguishable. It had been held in that case that the exact meaning of the expression 'taking a step in the proceedings' cannot possible be defined and that each case shall have to be decided on its own facts and circumstances. The material thing to keep in mind was that the defendant should know what the case against him was that with that knowledge he should conduct himself in a manner from which we could infer that he had agreed to submit to the jurisdiction of the Civil Court and to give up the right to get the differences settled by the alternative mode of arbitration. On facts almost similar to the facts of our case, a Single Bench of the Lahore High Court had held in Messrs Prem Nath Pran Nath v. Amba Parshad, AIR 1941 Lah 64, that in view of the provisions of Order V, Rule 2 of the Code and Section 19 of the Arbitration Act, proceedings can be taken to have commenced only when a defendant is supplied with a copy of the plaint and that an adjournment granted by the Court for filing a written statement after the defendent has been supplied with the said copy cannot be regarded in any sense as a step taken by the defendant in the proceedings inasmuch as time for the filing of the written statement has necessarily to be given by the Court. The same view was taken by Falshaw J.(later on C.J.) in Harbans Lal v. National Fire and General Insurance Co. Ltd., AIR 1955 NUC (Punj.) 4917, Delhi Bench.

In State of Himachal Pradesh v. Lalchand Shahi, AIR 1953 Him. Pra. 75, another Single Bench had ruled that no person can be deemed to take any steps in the proceedings who is not aware of the real nature of the proceedings against him. In that case, a prayer for adjournment made by counsel who until that moment had received no instructions from his clients was declared not to amount to taking a step in the proceedings within the meaning of Section 34 of the Arbitration Act. The counsel's request for adjournment could not be construed as meaning that he was willing that the suit should proceed. In Punjab State v. Moji Ram, AIR 1957 Punj 223, the Government Pleader had appeared voluntarily without any definite instructions in a suit filed against the Government in anticipation of the fact that he would receive instructions in due course. He had asked for an adjournment for filing a written statement. It was observed by a Single Bench of this Court that the request for adjournment in such circumstances really amounted to an application to get time to discover the exact nature of the suit and nothing more. The contention that the request had been made to take step in the proceedings was repelled.

A Division Bench of the Calcutta High Court had then in Dunichand Sons and Co. v. Fort Gloster Industries Ltd., AIR 1962 Cal 541, that the test for determining whether an act is step taken in the proceedings is to see whether the act displays an unequivocal intention to proceed with the suit and to forego the right to have the matter disposed of by arbitration. The entering of appearance by the defendants through a counsel was held not to disclose any such intention and not to amount so taking a step in the proceedings thereby precluding the party from making an application for stay of suit under Section 34 of the Arbitration Act. The English case of Ives and Barker v. Willans, (1894) 2 Ch 478, and two rulings of Calcutta and Bombay High Courts were relied upon. The following observations of their Lordships of the Chancery Division can best be reproduced in their own words:--

'The defendants entered an appearance, to the praecipe, and by formal document he required a statement of claim. That was contemporaneous with the entry of the appearance. Then he wrote a letter to the plaintiffs' solicitors, saying that he should desire a statement of claim. That is all he did. He took no other steps before he made this application for a stay under the section to which I have referred. The contention on the part of the plaintiffs is this: that the defendant was too late because he asked for, or gave notice that he should require, a statement of claim, and that is said to be taking of a step in the proceedings. Now the language of the section requires a little attention. It is quite obvious that the step to be taken must be a step to be taken by the applicant. It is not before any pleadings are delivered by anybody or any step is taken by anybody, but it is before the party applying delivers any pleadings or takes any other steps; and, therefore, the question we have consider is narrowed down to this: whether a request by one party to another to take step is taking a step himself. That is what the defendant did. He asked the plaintiffs to take a step, to deliver a statement of claim. I cannot say that is taking a step in the proceedings which precludes the defendant making the application, and I do not think it would be good sense if we held that it was. Consider what the defendant did? He had received a writ and the writ showed him that there was a claim for breach of contract. That he knew what the contract was I do not doubt, but he did not know from the writ what the particular breaches were in respect of which the plaintiffs were suing him, and until he did know that, at all events, how was he to form an opinion as to whether it would be desirable to apply for an order or not? He had not the materials before him to enable him to exercise his judgment in the matter, and it appears to me, therefore, that we should be doing an injustice to defendant if we said that he must apply under the section for an order to refer before he knows what the plaintiff is suing him for. Quite apart from the case not being within the words, therefore, it is not within the spirit or the sense of the Act. Before a man can make up his mind as to which of the alternatives he will take, he ought to know what the alternatives are, and ought to be in a position to exercise some kind of judgment in the matter, and if we were to hold that the defendant ought to have applied before, we should be saying that he should make his application in ignorance of material facts.'

7. In view of all these authorities, it cannot be said, on the facts and circumstances of the present case, that the defendant-applicants had taken any step in the proceedings before filing the stay application under Section 34 of the Arbitration Act.

8. Shri Saini, the learned counsel for the plaintiff-respondents, then argued that even if the defendants' stay application was not liable to be dismissed on the above ground, the disputes or differences between the parties should not be left to be decided by arbitration in view of the other grounds urged by his clients in the trial Court. Shri Gupta, the learned counsel for the appellants, submits that these other grounds were decided by the trial Court against the plaintiff-respondents and that as they have not filed any appeal or cross-objections, they cannot be allowed to reagitate those points in this Court. The final decision having gone in plaintiffs' favour, there was no occasion for their filing any appeal or cross-objections. No appeal may appear to be competent against a mere finding or conclusion of the lower court as long as the party is not aggrieved by any denial of a relief claimed by him or the decreeing of a relief against him claimed by the opposite party. As the plaintiff-respondents had succeeded in getting the appellants' stay application dismissed, they were not expected to file any appeal or cross-objections. If it is found that the trial court had wrongly upheld a submission made by the plaintiff-respondents, then the latter can be allowed to fall back on any of the other submission made by them in the trial Court on the ground that these submission had been wrongly rejected.

9. One of the other submission made by the respondents in the Court below and which is again being pressed here is that the arbitration clause in the Partnership Deed, Exhibit A/1, was vague and unenforceable. In this connection, two clauses of the Partnership Deed which are reproduced below and may appear relevant:--

'21 That the Hissar District Court will be the jurisdiction of all legal purposes.

22. That in case of any dispute/differences arising out of this deed about its proper performance, it will be referred to the Arbitrator or Arbitrators under the Arbitration Act, 1940, and his decision will be binding on all the parties.'

10. The stipulation in clause 21 (supra) that District Courts in Hissar would have jurisdiction does not necessarily imply that the disputes were to be settled only in a regular civil suit and that arbitration was to be ruled out. The clause that followed may seem to take the wind out of any such argument. The jurisdiction of Hissar Courts could have been mentioned for the purpose of making applications under the Arbitration Act. Applications under Sections 8, 14, 20, 33, 41 and some other provisions of the Arbitration Act have to be made to a civil Court even when no suit may be pending between the parties to the arbitration agreement. Clause 21 may appear to have been incorporated to indicate that all such applications were to be made to the District Courts at Hissar. The submission that the names or the number of arbitrators had not been specified is then completely answered by a Division Bench of the Calcutta High Court in India Hosiery Works v. Bharat Woolen Mills Ltd., AIR 1953 Cal 488, wherein it was observed that an arbitration agreement which neither specified the number of arbitrators nor the mode of appointment was perfectly effective and valid and that the incidence of such an agreement was that it was to take effect as an agreement for reference. A different view may appear to have been taken by a Single Bench of the Bombay High Court in Middle East Trading Company v. The New National Mills Limited, Ahmedabad, AIR 1960 Bom 292, but in that case the reason was that the reference was to an Arbitration Board whose identity could not be established because of the existence at the station of a large number of Boards having similar names. The parties had, therefore, never been one mind as to the real identity of the arbitrator specified and appointed by them by name.

Another ruling cited by Shri Saini is in the case of Shri Dewan Chand v. The State of Punjab, 1965 Cur LJ 799, where the parties were not found to be ad idem as to the person who was to act as the arbitrator and the arbitration clause had been left in complete and blank as regards a most important particular. These rulings are, therefore, not strictly applicable because the arbitration clause in our case does not suffer from any such ambiguity. This arbitration clause is general enough to enable the parties to get the arbitrators appointed in accordance with the provisions of Sections 8 and 20 and Rule 1 of the first Schedule of the Arbitration Act. Shri Gupta has also relied on the Union of India v. D.P. Singh, AIR 1961 Pat 228, in this connection. The argument that the arbitration clause is vague and enforceable in the present case does not hold good. This clause is couched in general terms and is wide enough to embrace all disputes arising out of the partnership business.

11. The next submission made by Shri Saini is that there is nothing on record to show that the appellants were ready and willing to have the difference settled by arbitration. According to the language of the statue, the Judicial Authority has to be satisfied about the applicant's readiness and willingness only on two crucial dates, that is to say, when the proceedings were commenced before it and when the question of stay of proceedings came up for the consideration of the said Authority. The earliest stage when the appellants could express their readiness and willingness was when they filed the application under Section 34 of the Arbitration Act before taking any steps in the proceedings and their application actually contain an averment to that effect. Nothing may appear to have happened, thereafter to suggest that the appellants' readiness and willingness has since cooled down. Their very act of filing this appeal may suggest that they are keen and eager to have the differences settled by arbitration. If there was any delay in the commencement of the proceedings, I do not see how the appellants are to be held responsible. In the first instance, Shri R.K. Ahuja plaintiff-respondent had started this cinema business. The cinema building was still incomplete when he ran short of funds. Besides the three appellants, two sons of Shri R.K. Ahuja were taken on as partners on 28-4-1966 and the partnership deed, Exhibit A/1 bearing that date recites that all partners were required to contribute equally in the capital investments. The main assets like the building, equipment and material are in the joint possession of the parties and the maintenance of accounts was under the joint control of the partners and the books were open to inspection of everyone.

The plaintiffs had waited for the initial term of two years fixed by contract to run out before they served the notices on the appellants under Section 43 of the Act for dissolution of the firm within two days for the expiry of that term. This may suggest that the plaintiffs were waiting for the automatic dissolution of the firm by virtue of the provisions of Section 42(a) of the Act. To remove all doubts, they had further served notices of dissolution of the firm under Section 43 of the Act in case it was pleaded by anyone that the business had continued even after the expiry of the term fixed by contract. Such a business would have all the incidents of a partnership-at will in view of Section 17(b) of the Act. This was in fact the position taken up by the plaintiff-respondents in the notices served by them on the appellants before the filing of the suit, in the plaint filed in the Court and in the written reply to the appellants' stay application under Section 34 of the Arbitration Act. It is obvious, therefore, that the plaintiff-respondents were either waiting for the automatic dissolution of the partnership on the expiry of its fixed term or on their absolute legal right to put an end to the partnership-at-will by serving notices under Section 43 of the Act at their own sweet will. If the plaintiffs were treating the fixed term as a bar to their filing a suit before the date of expiry of the term then the same bar could have prevented a reference to arbitration by the appellants. The plaintiffs had set the ball rolling by posting notices within two days of the removal of that bar and the appellants' inaction during those two days cannot make us conclude that the appellants had given a go bye to arbitration as a mode of settlement of the disputes. The appellants cannot, therefore, be blamed for any delay or of any conduct from which it could be inferred that they were not ready and willing to have the partnership disputes referred to the arbitrator(s).

12. In a partnership-at-will, there is no question of the grant or refusal of the relief of dissolution of the firm depending on any exercise of discretion by the Court on considerations of any just and equitable principles or on the necessary of the plaintiffs, proving any grounds enumerated in Section 44 of the Act. These grounds have, however, been mentioned by the plaintiffs in their notices and the plaint and may appear to be a mere surplusage as the plaintiffs were relying on the automatic dissolution of the firm by operation of law or by act of parties. In a partnership-at-will, the right of a partner to dissolve the firm by service of a notice under Section 43 of the Act is an absolute legal right which cannot possibly be denied to him by any Court or Judicial Authority. If the dissolution of the firm cannot be denied tot he partner filing the suit after serving such a notice, then it may appear obvious that the Court has no discretion in the matter of the grant or denial of that relief. The Court could not, therefore, refuse to pass a formal order of dissolution of the partnership-at-will. The rendition of accounts and other ministerial proceedings, which are ordinarily taken by a Local Commissioner, were consequential reliefs that were to follow as a matter of course. These observations can be supported by a ruling of the Privy Council in Ram Singh v. Ram Chand, 51 Ind App 154 =(AIR 1924 PC 2). Two other rulings which lay down the same principles of law are Pulin Bihari Roy v. Mahendra Chandra Ghosal, AIR 1921 Cal 722 and Bhagwati Pershad v. Babu Lal, AIR 1921 All 411.

In Ram Singh's case (supra), the trial Court had found that no term had been fixed for the partnership and it had been duly determined by the plaintiff by a notice. A preliminary decree for dissolution of the firm and declaring the shares of the partners had, therefore, been passed by the trial Court in spite of the fact that the appellant was found to have burnt some old account books of the firm and to have made a number of interpolations and forgeries in the books that he had produced. A Division Bench of the Lahore High Court had, on appeal, set aside this decree as in the opinion of the Hon'ble Judges, the plaintiff's conduct disentitled him to any relief. Their Lordships were surprised at the plaintiff's audacity in coming to Court with a prayer for an equitable relief when he had deprived the firm of a valuable asset. Their Lordships of the Privy Council, however, accepted the second appeal filed by the plaintiff and were pleased to observe that he was not seeking any equitable relief and that where the partnership was at will, any partner was entitled to a dissolution of the firm and that it was his legal right under the contract. The Hon'ble Judges of the Chief Court were found to have wrongly relied on certain passages from 'Lindley on Partnership' which dealt with the circumstances in which a Court was given discretion to pass an order of dissolution of partnership for a fixed term which was still running. It was observed that these passages had nothing to do with the case in hand which had arisen out of a partnership-at-will.

13. Another privy Council ruling could be cited in this connection is in the case of Rehmat-Un-Nissa Begam v. Price, 45 Ind App 61 = (AIR 1917 PC 116). That was a case where the parties had entered into a partnership for the completion of a particular enterprise or undertaking. Before the work could be completed, it was felt necessary by one of the partners to claim dissolution of the firm. It was conclusively shown by the firm's balance sheet that the business could not be carried on except at a loss. The High Court of Bombay was of the view that the plaintiff was not entitled to claim a dissolution on the date on which the suit had been filed by him; but as the work for which the partnership had come into existence had been completed after the filing of the suit, a decree for rendition of accounts had been passed. Their Lordships of the Privy Council did not agree with the High Court's view that Section 252 of the Contract Act constituted a bar to the filing of the suit. Their Lordships went on to observe as follows:--

'A partner's claim to a decree for dissolution rests, in its origin, not on contract, but on his inherent right to invoke this Court's protection on equitable grounds, in spite of the terms in which the rights and obligations of the partners may have been regulated and defined by the partnership contract.

It was not, therefore, any contravention of that section for the plaintiff to seek a dissolution or for the Court to decree it though the partnership agreement contemplated the continuance of the partnership beyond the date at which the suit was instituted. No man can exclude himself from the protection of the Courts, and yet, if the view of the appellate Bench is to prevail, this is what the Nawab has done, for a decree for dissolution would be the protection appropriate in the circumstances of this case. It is no answer to say that this partnership was not terminable at will; it is to meet that precise predicament that the Court's power to decree dissolution is conferred in the events enumerated in Section 254. For a partnership terminable at will no such provision would be required.'

14. Section 44 of the Partnership Act which gives the Court a discretion in the matter of the grant or refusal of the relief of dissolution of the firm or any of the grounds enumerated therein can, therefore, apply only in cases in which the parties have by contract provided that until the completion of the work for which the firm came into existence, such relief shall not be claimed by any party. This section would be inapplicable in a case of a partnership-at-will where the termination of the business can be claimed by any partner as an absolute legal right after serving a notice at its own sweet will without assigning or providing any reasons or grounds.

15. Shri Saini has, however, cited before me a Single Bench ruling of this Court in Dwarka Nath Kapur v. Rameshwar Nath, (1966) 68 Pun LR (D) 91. Even, though that was a case arising out of a partnership-at-will, the Hon'ble Judge had taken the view that dissolution of the partnership was relief which was within the discretion of the Court and that while exercising the discretion, the Court had to keep in mind the principles of equity and justice. This was given as a ground for declining a reference to arbitration under Section 34 of the Arbitration Act. One other ground given for declining this reference was that the case would necessitate the making of directions with regard to the appointment of a Manager or Receiver and the issue of attachments and injunctions etc. Reliance was placed on three cases decided by the English Courts. It was, however, not brought to the notice of the Hon'ble Judge that all these cases related to partnerships for fixed terms and that a termination of the partnership had been claimed in all case before the date of the expiry of the fixed term.

In Olver v. Hillier, (1959) 2 All ER 220, the partnership was for a term of seven years, In Joplin v. Postlethwaite, (1889) 61 LT 629, the partnership was for fourteen years. In Vawdrey v. Simpson, (1896) 1 Ch 166, the partnership was for the joint lives of the partners which may seem to imply that by contract only the death of one of the partners could result in a dissolution of the firm. As provision had been made by contract of parties for the determination of the business on the happening of a certain event, the firm was taken out of the definition, of a 'partnership at will' as given in Section 7 of the Act. There was nothing in these rulings to justify the extension of the ration decidendi to cases of partnerships-at-will. In its ultimate analysis, the Single Bench rulings in Dwarka Nath Kapur's case, (1966) 68 Pun LR (D) 91 may seem to lay down that no suit for the dissolution of a firm should normally be referred for the decision of the arbitrators whether it relates to a partnership-at-will or for a fixed term or for completion of a particular undertaking or enterprise. This may seem to amount to the laying down of a very broad proposition of law which has actually been discountenanced in a large number of decisions of not only the High Courts in India but of the highest Courts of the land. Two rulings of the Privy Council have already been discussed in detail earlier in this judgment.

16. Another ruling cited by Shri Saini was in the case of N.C. Padmanabhan v. S. Srinivasan, AIR 1967 Mad 201. This again was a case relating to a partnership for a fixed term of ten years. The plaintiff's counsel had realised in that case that under the contract of the parties, the appellant had no right to ask for dissolution of the partnership before the expiry of the fixed term. The Court's inherent jurisdiction to grant dissolution on equitable grounds under Section 44 had, therefore, been invoked. The Privy Council ruling in Rehmat-Un-Nissa Begam's case, 45 Ind App 61 = (AIR 1917 PC 116) was relied on. It is obvious, therefore, that the Court's discretionary powers under Section 44 can be invoked only in cases where the partners cannot claim a termination of the business as a matter of right under the terms of their contract.

17. In the present case, the plaintiff has an absolute legal right to claim a dissolution of partnership by virtue of the initial term having expired and the business having continued, if at all, as a partnership-at will. This is actually the position taken up by the plaintiff-respondents in the notices sent by them before the institution of the suit, in the plaint filed in Court and in reply to the defendants' application for reference of the dispute to arbitrator(s). The allegations of fraud, misconduct and the appeal to considerations of justice and equity have been unnecessarily added to confuse the issue. Arbitration has been allowed in such cases of partnerships-at-will by almost all High Courts as well as by the Supreme Court. Shri Gupta has cited before me Erach F.D. Mehta v. Minoo F.D. Mehta, (1970) 2 SCC 724 = (AIR 1971 SC 1653), Brahm Nath Datt v. Dhani Ram, AIR 1956, Punj 125 and Sundarlal Haveliwala v. Smt. Bhagwati Devi, AIR 1967 All 400 in this connection. In Ballavdas Acharjya v. Shyam Sunder Halwasiya, ILR (1946) 1 Cal 203, the arbitration agreement was enforced even in a case of partnership for a fixed term. The fact that the arbitrator(s) may have to seek the Court's help in the matter of appointments of Local Commissioners, Receivers or in the matter of issue of temporary injunctions etc. would be no ground for declining a reference to arbitration. Attention could in this connection be invited to Section 41 and Second Schedule to the Arbitration Act. I do not agree with Shri Saini that the present dispute between the parties is not fit to be settled by the mode of arbitration. Vague and unnecessary allegations of fraud or misconduct have no doubt been made against appellant No.2 but there is nothing on record to substantiate these allegations.

18. It was then argued by Shri Saini that the lower Court's discretion in such matter should not normally be interferred with by the appellate Court. The stay application of the appellants has been dismissed on a wrong view of the law and so far as the Court's discretion in the matter of a reference to arbitrators was concerned, it was exercised in favour of the appellants. The ruling which lay down that the lower Court's discretion should not ordinarily be interfered with by the appellate Court may, therefore, seem to go against the plaintiff-respondents.

19. For reasons given above, I accept this appeal with cots and grant the defendants' application under Section 34 of the Arbitration Act for stay of proceedings.

20. Appeal allowed.


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