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Sohan Lal Vs. Firm Madho Ram Banwari Lal and ors. - Court Judgment

LegalCrystal Citation
SubjectArbitration
CourtPunjab and Haryana High Court
Decided On
Case NumberFirst Appeal No. 13 of 1949
Judge
Reported inAIR1952P& H240
ActsPartnership Act, 1932 - Sections 18, 19 and 19(2); Arbitration Act, 1940 - Sections 39; Code of Civil Procedure (CPC) , 1908 - Sections 100
AppellantSohan Lal
RespondentFirm Madho Ram Banwari Lal and ors.
Appellant Advocate Dwarka Nath Aggarwal and; Roop Chand, Advs.
Respondent Advocate Kundan Lal Gosain, Adv.
DispositionAppeal dismissed
Cases ReferredHardial Singh v. Jaswant Kaur
Excerpt:
.....it is not open to the courts to take judicial notice of any such usage or custom unlessthe usage or custom or trade is so well establishedas to justify the course of action followed in'firm khalsa brothers agency v. clearly it was not open to sohan lal to plead usage of trade in the replication without amending the original application. clearly, the argument based on ratification of the agreement referring the dispute to arbitration cannot be allowed to be raised in these proceedings......one partner of a firm has implied authority to submit a dispute relating to the business of the firm to arbitration. upon the pleadings of the parties the trial court fixed the following issues:(1) whether the reference to arbitration made by banwari lal partner of firm madho ram- banwari lal was valid and binding on the said firm? (2) whether there was no such dispute betweenthe parties that could be referred to arbitration and what is its effect? (3) if issue no. 2, is found against the respondents, were the arbitrators validly appointed in accordance with the terms of the agreement of reference? (4) is the award valid when it was not given by the arbitrators within 4 months of the reference? (5) whether the award was given by one arbitrator only and what is its effect? (6) were the.....
Judgment:

Harnam Singh, J.

1. On the 26th of May 1947, Sohan Lal applied under Section 14 of the Indian Arbitration Act, 1940, hereinafter referred to as the Act, for the filing of the award given by respondents Nos. 6 and 7 and for a decree of the Court in accordance with that award.

2. On the 30th of April 1948, Ram Parshad Chanan Ram, Sri Bam and Bholu Ram respondents Nos. 2 to 5 objected to the filing of the award 'inter alia' on the ground that Banwari Lal partner of firm Madho Ram-Banwari Lal, had no power to submit the dispute to the arbitration of Munshi Ram and Tara Singh, respondents Nos. 6 and 7.

3. On the 22nd of July 1948, Sohan Lal put in his replication and in that replication pleaded that according to the usage of trade governingforward contracts one partner of a firm has implied authority to submit a dispute relating to the business of the firm to arbitration. Upon the pleadings of the parties the trial Court fixed the following issues:

(1) Whether the reference to arbitration made by Banwari Lal partner of firm Madho Ram- Banwari Lal was valid and binding on the said firm?

(2) Whether there was no such dispute betweenthe parties that could be referred to arbitration and what is its effect?

(3) If Issue No. 2, is found against the respondents, were the arbitrators validly appointed in accordance with the terms of the agreement of reference?

(4) Is the award valid when it was not given by the arbitrators within 4 months of the reference?

(5) Whether the award was given by one arbitrator only and what is its effect?

(6) Were the arbitrators guilty of misconduct?

(7) Is the application barred by time?

(8) What is the effect of the award in dispute having been made in Farid Kot State.

4. After fixing the issues set out above, the trial Court expressly recorded that the parties to the dispute did not claim any other issue.

5. Issues Nos. 2, 3, 5, 6, 7 and 8 were decided against the respondents. In deciding Issue No. 4 the trial Court found that it was a fit case for extending the time for making the award.

6. On Issue No. 1, the trial Court found that Banwari Lal, partner of flrm Madho Ram-Banwari Lal, could not refer the dispute of forward contracts to arbitrators so as to bind his co-partners. That being so, the trial Court while decreeing a sum of Rs. 9,568/12/6 against respondent No. 1 in accordance with the award has set aside the award against respondents Nos. 2 to 5.

7. From the order passed by the Court on the 23 of December 1948, setting aside the award so far as the respondents Nos. 2 to 5 are concerned, Sohan Lal applicant has come up in appeal under Section 39 of the Act.

8. Mr. D. N. Aggarwal, learned counsel for the appellant, contends that each partner is 'praposi-tus negotiis sociatatis' and binds the other partners by his acts in all matters which are within the scope and objects of the partnership and has authority to submit a dispute relating to the business of the firm to arbitration.

9. Sections 18 and 19 of the Indian Partnership Act 1932, are relevant to the argument raised. Section 18 and the material portion of Section 19 read : '18. Subject to the provisions of this Act, apartner is the agent of the firm for the purposesof the business of the flrm.

'19 (1) Subject to the provisions of Section 22 the act of a partner which is done to carry on, in the usual way, business of the kind carried on by the firm, binds the firm.

The authority of a partner to bind the firm conferred by this section is called his implied authority.'

(2) In the absence of any usage or custom of trade to the contrary, the implied authority of a partner does not empower him to:

(a) submit a dispute relating to the business ofthe firm to arbitration.'

10. Clearly the provisions of Section 18 of the Act are subject to the provisions of Section 19 and other provisions of the Act and the authorityof a partner to bind the firm conferred by Section 19(1) of the Act is controlled by the limitations specified in Section 19(2) of the Act. In plain English Sub-section (2) of Section 19 of the Act enumerates acts in respect of which a partner has no 'implied authority' to bind his co-partners while purporting to act on behalf of the firm without their express authority or a usage or custom of trade empowering him to bind his co-partners by acts specified in Sub-section (2) of Section 19 of the Act. In other words, while a partner is the agent of the firm and the act of a partner which is done to carry on in the usual way, the business of the kind carried on by the firm, binds the firm, in the absence of usage or custom of trade to the contrary, a partner has no authority to submit a dispute relating to the business of the firm to arbitration. That being so, I see no force in the contention raised.

11. Mr. D. N. Aggarwal then contended that considering the nature of the business the trial Court ought to have presumed the existence of a usage or custom of trade empowering Banwari Lal to submit the dispute in question to arbitration in support of this contention counsel cites 'Firm of Khalsa Brothers Agency v. Hariram Sriram & Co.', AIR 1924 Sind 29 and 'Madangopal Radheylal v. Sanwaijdas Madhavdas'. AIR 1948 Sind 79, decisions under Section 251 of the Indian Contract Act, 1872.

12. In 'Firm of Khalsa Brothers Agency v. Hariram Sriram & Co.', AIR 1924 Sind 29, Raymond, J., said:

'No doubt one partner has no power in the absence of a special authority to bind the firm by submission to arbitration, but Section 251, Indian Contract Act, provides that each partner, who does any act necessary for or usually' done in carrying on business of such a partnership as that of which he is a member binds his copartners to the same extent as if he were their agent duly appointed for that purpose and Section 188 Indian Contract Act, gives an agent having authority to carry on a business power to do anything necessary for the purpose or usually done in the course of conducting such business. In the case of 'Shimwell v. Bani Ram Govind Ram', I Ind Cas 937 (Sind), it was held that the Courts would take judicial notice of the custom of European importing firms not to do business with any firm consisting of one or more persons unless he or they agree to refer matters in dispute, if any, to arbitration and the Court will therefore presume that an agent or partner of a firm dealing with the importing European (merchant?) of Karachi has authority to bind his firm by agreeing to refer disputes to arbitration.'

13. In my opinion 'Firm of Khalsa Brothers Agency v. Hariram Sriram & Co.', AIR 1924 Sind 29' is no authority for the proposition that the Courts should presume the existence of usage or custom of trade empowering Banwari Lal of Moga 'Mandi' to submit disputes relating to the business of Messrs. Madho Ram Banwari Lal to arbitration. The usage of trade empowering one partner of a firm dealing with the importing European merchant of Karachi to bind his firm by agreeing to refer disputes to arbitration does not govern Indian merchants carrying on business at Kot Kapura or Moga 'Mandi'. In any case, considering that in the Indian Partnership Act, 1872, there was no provision corresponding to Sub-section(2) of Section 19 of the Act I find that AIR 1924 Sind 29 does not govern the case. Indeed, subsection (2) of Section 16 of the Act has no statutory precedent and the Legislature appears to have reproduced in Section 19(2)(a) of the Act the rule laid down in 'stead v. salt', (1825) 28 RR 602, in enacting that in the absence of usage or custom of trade to the contrary one partner of a firm has no power to submit a dispute relating to the business of the firm to arbitration. In (1825) 28 R R 602, Best, Ch. J., said:

'Now to enter into a submission for arbitration is no part of the ordinary business of a trading firm, and there is nothing in the present case to show that either of the parties had authority to bind the others to such a submission.'

14. In 'Madan Gopal Radheylal v. Sanwaldas Madhavdas', AIR 1948 Sind 79, the question for decision was whether one partner of a firm could bind the firm by submission of a dispute relating to the business of the firm to arbitration. Dealing with this point in paragraphs Nos. 17, 18 and 19 of the judgment, Thandani, J., said:

'17. The question arises, whether the so-called submission clause contained in the letter of 14-7-1937, is one which can bind respondent 2.

18. Sub-section (2) of Section 19, Partnership Act, says:

'In the absence of any usage or custom of trade to the contrary, the implied authority of a partner does not empower him to--(a) submit a dispute relating to the business of the firm to arbitration.

* * * * 19. Now, so far as the three contracts which weremade at Karachi in March and April 1937 areconcerned they contain a valid submission clausebecause the implied authority to refer the matterto arbitration is derived from the custom of tradein Karachi'.'

15. In deciding 'Madan Gopal Radheylal v. Sanwaldas Madhavdas', AIR 1948 Sind 79, Thadani J., found for the validity of the submission clause as the authority to refer the matter to arbitration was derived from the custom of trade in Karachi. In the present case there is not a syllable of evidence on the record to show that there was a usage or custom of trade in Kot Kapura or Moga 'Mandi' empowering one partner to submit a dispute relating to the partnership business to arbitration.

16. Indeed, Section 19(2) of the Act itself showsthat a dispute as to the existence of usage or custom of trade must always be in itself a disputeof fact and it is not open to the Courts to take judicial notice of any such usage or custom unlessthe usage or custom or trade is so well establishedas to justify the course of action followed in'Firm Khalsa Brothers Agency v. HariRam Sriram & Co.', AIR 1924 Sind 29 and'Madan Gopal Radheylal v. SanwaldasMadhavdas', AIR 1948 Sind 79.

17. Before leaving this point I may mention that the usage of trade empowering Banwari Lal to refer the dispute in question to arbitration was not mentioned in the application under Section 14 of the Act and was mentioned for the first time in the replication. At the time of the fixation of issues, Sohan Lal, however, did not claim an issue on the point of usage of trade.

18. In the first place, it was not open to Sohan Lal to plead usage of trade except by way of amendment. Rule 7 of Order VI of the Code of Civil Procedure provides 'Inter alia' that no pleading shall, except by way of amendment, raise any new ground of claim. Clearly it was not open to Sohan Lal to plead usage of trade in the replication without amending the original application.For an authority on this point 'Hardial Singh v. Jaswant Kaur', AIR 1943 Lah 159 may be seen. Then at the time of the fixation of issues Sohan Lal applicant did not claim an issue on the usage or custom of trade empowering Banwari Lal to submit the dispute in question to arbitration.

19. For the foregoing reasons, I find that the trial Court would not have been justified in presuming the existence of usage or custom of trade empowering Banwari Lal to submit the dispute in question to arbitration, and that the question did not arise on the original pleadings of Sohan Lal who did not claim an issue on the point when the issues were fixed.

20. A forlorn attempt was then made by Mr. Aggarwal to sustain that respondents Nos. 2 to 5 had ratified the act of Banwari Lal in submitting the dispute in question to the arbitration of respondents 6 and 7. In the trial Court the position taken up by the applicant was that Banwari Lal being the partner of firm Madtio Ram-Banwari Lal had authority to submit the dispute in question to arbitration. At no stage was it suggested in the trial Court that respondents Nos. 2 to 5 had ratified the act of Banwari Lal in submitting the dispute to arbitration. A reference to the issues fixed by the trial Court shows that the question or ratification now raised is not covered by any of the tesues fixed by the trial Court and the point of ratification is not mentioned in the memorandum of appeal filed in this Court. Ratification is a question of fact and such a question has to be raised and proved at the trial. Even in the replication put in the trial Court it was not said that the contract of submission to arbitration was ratified by the firm. Clearly, the argument based on ratification of the agreement referring the dispute to arbitration cannot be allowed to be raised in these proceedings.

21. Mr. Dwarka Nath Aggarwal then urges that the trial Court ought to have framed issues on the point of usage or custom of trade within the meaning of Section 19(2) of the Act and on the point of ratification. As stated above, issues were fixed in the trial Court on the 23rd of July 1948 and after fixing the issues the trial Court expressly recorded in the proceedings that the parties did not claim any other issue. Indeed, during the proceedings before the trial Court, the respondent did not urge at any stage that it was necessary to put the question of usage or custom of trade and ratification now raised in issue. From the judgment under appeal it then appears that no complaint was made on these points in that Court. In the memorandum of appeal filed in this Court there is no objection that proper issues were not framed in the trial Court. In civil cases the rule is firmly established that a party can only succeed according to what is alleged and proved: 'secundum allegata et probata.' That being so, I find that the trial Court did not omit to put any matter in issue which was really in dispute between the parties.

22. No other point was raised in these proceedings.

23. For the foregoing reasons, the appeal fails and is dismissed with costs.


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