Skip to content


Firm Khetu Ram Bashamber Dass Vs. Kashmiri Lal Rattan Lal - Court Judgment

LegalCrystal Citation
SubjectArbitration
CourtPunjab and Haryana High Court
Decided On
Case NumberF.A.F.O. No. 127 of 1954
Judge
Reported inAIR1959P& H617
ActsArbitration Act, 1940 - Sections 21 and 24; Contract Act, 1872 - Sections 196
AppellantFirm Khetu Ram Bashamber Dass
RespondentKashmiri Lal Rattan Lal
Appellant Advocate D.K. Mahajan and; Manmohan Singh Gujral, Advs.
Respondent Advocate Shamair Chand, Adv. with; P.C. Jain and G.C. Mittal
DispositionAppeal dismissed
Cases ReferredFirm Joint Hindu Familv Gogan Ram Lachhmi Narain v. Narsingh Das.
Excerpt:
.....partnership act, it is clearly said therein that the implied authority of a partner does not empower him to submit a dispute relating to the business of the firm to arbitration......petition? (5) relief? it found that firm kashmirilal-rattanlal was a registered partnership firm. rattan lal and his four sons were members of this partnership firm. as the reference to arbitration was made only by rattan lal, the award by the arbitrator was liable to be set aside. for this conclusion, reliance was placed on section 19 (2) of the indian partnership act, it is clearly said therein that the implied authority of a partner does not empower him to submit a dispute relating to the business of the firm to arbitration. the trial court, therefore, held that reference to arbitration was invalid. coming to this conclusion, it set aside the award and the reference to the arbitration. the present appeal is directed against the order dated 30-7-1954 of the subordinate judge 1st.....
Judgment:
ORDER

Gurnam Singh, J.

1. A suit for the recovery of Rs. 6,000/- was instituted in the Court of Subordinate Judge, Muktsar, by Firm Kheturam Bashamberdas through Pritam Das, one of the share-holders, against Firm Kashmirilal-Rattanlal through Rattan Lal son of Kashmiri Lal. Rattan Lal appeared in the Court of the Subordinate Judge and submitted the written statement. However., the parties agreed to refer the dispute to the sole arbitration of Bawa Niranjan Singh retired Senior Subordinate Judge, Ferozepore. The agreement for reference was signed by Rattan Lal alone on behalf of Firm Kashmirilal-Rattanlal.

During the pendency of the arbitration proceedings, Rattan Lal submitted an application with a prayer that the proceedings be stayed as the Court at Muktsar had no jurisdiction in the matter. This application was rejected first by the trial Court and then by the High Court in revision. The arbitrator then filed the award in Court on 10-2-1954. By means of this award, a decree for Rs. 3,929/6/9, as principal and Rs. 280/- as interest total Rs. 4,209/6/9, with proportionate costs was given in favour of the plaintiff-firm.

The defendant submitted objections against the award. Four sons of Rattan Lal submitted separate objections against the award. Their objections were that besides Rattan Lal, they were also partners in the firm, which was registered. In such a situation, Rattan Lal defendant alone was not competent to refer the dispute to arbitration on their behalf. There was also another objection regarding jurisdiction. The Court below framed the following issues :

(1) Whether the defendant-firm is a registered firm?

(2) If so, whether Vimal Parshad, Anant Par-shad, Chander Sen, Shesh Chapdar Sen petitioners were not competent to prefer objections against tho award?

(3) If issue No. I is not proved and the defendant-firm is proved to be the coparcenery property of the joint Hindu family of which Rattan Lal is the karta, whether the petitioners Vimal Parshad etc. were competent to file objections against the award, in the presence of the Karta Rattan Lal, who had also filed objections against the award?

(4) Whether the award of the arbitrator was liable to be set aside for the reasons and on the grounds urged in the objection petition?

(5) Relief?

It found that Firm Kashmirilal-Rattanlal was a registered partnership firm. Rattan Lal and his four sons were members of this partnership firm. As the reference to arbitration was made only by Rattan Lal, the award by the arbitrator was liable to be set aside. For this conclusion, reliance was placed on Section 19 (2) of the Indian Partnership Act, It is clearly said therein that the implied authority of a partner does not empower him to submit A dispute relating to the business of the firm to arbitration. The trial Court, therefore, held that reference to arbitration was invalid. Coming to this conclusion, it set aside the award and the reference to the arbitration. The present appeal is directed against the order dated 30-7-1954 of the Subordinate Judge 1st Class, Muktsar.

2. The fact that the defendant-firm is a registered partnership firm is not seriously disputed before me. The principal contention raised by Mr. Indar Dev Dua, learned counsel for the- appellant, is that the act of Rattan Lal referring the dispute to arbitration was later ratified by his sons, who are other members of the partnership. In such a situation, learned counsel argues that the award cannot be set aside on the ground that the dispute was not referred at the outset by all the interested parties. In support of his contention, he has cited a Single Bench authority of this Court reported in Shankar Das Rup Lal v. Governor-General in Council, 53 Pun LR 231 : (AIR 1953 Punj 234) by Kapur J. in which it was held-

'Under Section 19 of the Indian Arbitration Act, IX of 1932, a partner has no authority to submit a dispute relating to the business of the firm to arbitration. But if the other partners raised no objection during the arbitration proceedings, and the conduct of the case shows, acquiescence on their part, then this would amount to ratification which may be express or implied.'

Before the trial Court, the appellant produced a copy of the accounts of defendant-firm. These accounts show some expenses incurred by Rattan Lal at Muktsar and Ferozepore. It may be mentioned hero that the case was filed in the Court of Subordinate Judge at Muktsar and the arbitrator was residing at Ferozepore. On the basis of these accounts and placing reliance on the authority cited above, learned counsel argues that the partners ratified the act of Rattan Lal for referring the dispute to arbitration. They were keeping the accounts of the expenses relating to arbitration and knew that the arbitration was pending before the arbitrator. It is, therefore, urged that the act of Rattan Lal, a partner in the firm, was ratified and approved of by the remaining partners.

3. Another authority on the same question is reported in the above volume of 53 Pun LR 28 : (AIR 1952 Punj 240) and is by Harnam Singh J., Sohan Lal v. Firm Madho Ram Banwari Lal. It was held therein :

'In the absence of a usage or custom of trade, one partner cannot submit a dispute relating to the business of the firm to arbitration. Such an usage or custom of trade must be alleged and proved. It cannot be presumed to exist at Kot Kapura or Moga Mandi.'

In that case a decree as given in the award was passed by the Subordinate Judge against the partner who had agreed to make reference to arbitration. As the question of ratification was not raised or put into issue at any stage before the trial Court, it was not permitted to be argued in the High Court.

4. In Hanuman Chamber of Commerce Ltd, Delhi v. Jassa Ram Hiranand, AIR 1949 E.P. 46, Achhru Ram J. held :

'Where the initial reference to arbitration on behalf of his firm is made by one of the partners without any express or implied authority from his other partners, there is nothing to prevent such other partners from ratifying his act, which was unauthorised at its inception. Ratification need not he by any express act or declaration and may be implied from conduct. It may be inferred from mere acquiescence or silence or inaction on the part of such other partners.'

Learned Judge came to this conclusion on consideration of Section 196 of the Contract Act, which provides that where an act is done by one person on behalf of another without that other's know-ledge or authority the latter can ratify that act and on such ratification, the same effects will follow as if the act had been performed by his authority. On the question of ratification in such circumstances no other authority contrary to the view has been cited before me. Learned counsel for the respondents, however, places reliance on a Division Bench authority of this Court, Narsingh Das v. Firm Joint Hindu Family Gogan Ram Lachmi Narain, 5R Pun LR 304 : (AIR 1955 Punj 31). This was a decision in Letters Patent Appeal against the judgment of Mr. Justice Kapur in Firm Joint Hindu Familv Gogan Ram Lachhmi Narain v. Narsingh Das. 55 Pun LR 231: (AIR 1953 Punj 216). The judgment of Single Bench was reversed by the Division Bench and it was held :

'Section 21 of the Indian Arbitration Act provides that where in any suit, all the parties interested agree that any matter in difference between them in the suit shall be referred to arbitration, they may apply in writing to the Court for an order of reference. This means that for a valid reference it is necessary that all the interested parties should join the application for reference. If a party interested in the dispute is not a party to the application for reference, the reference is void and without jurisdiction.'

The view of the Division Bench was that such a reference was void ab initio. In this case, however, question of ratification was neither placed nor determined by the Bench. Even the two Single Bench authorities, cited above, of Mr. Justice Kapur and Mr. Justice Achhru Ram were not brought to the notice of the Division Bench, So really the question of ratification or acquiescence was not determined by the Division Bench. On the other hand the effect of that decision is that reference to arbitration by one of the persons is void ab initio.

It follows therefrom impliedly that ratification in such a case can be of no use. However, the point was not specifically argued before or determined by the Bench. The point involved in the case is of considerable importance. At least two Single Bench decisions are found to support the view that by ratification the act of one partner can be legalised. In view of the Division Bench authority, I do not consider proper to determine the point finally. I, therefore, order that the following questions be referred to a larger Bench ;

(1) Whether a reference to arbitration by one partner alone can be legalised by subsequent acquiescence and ratification by other partners?

(2) Whether the award is binding on the person who is party to a reference in spite of Section 19 (2) of the Indian Partnership Act and Section 21 of the Arbitration Act?

The question whether there is a ratification or acquiescence is a question of fact, which can be determined on particular, facts of each case. The case be laid before tho Hon'ble the Chief Justice for the constitution of the Bench.


Save Judgments// Add Notes // Store Search Result sets // Organizer Client Files //