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H.C. Chopra (Retired) (Col.) and anr. Vs. Shri V.C. Mehra - Court Judgment

LegalCrystal Citation
SubjectArbitration
CourtDelhi High Court
Decided On
Case NumberI.A. No. 1184/99 In Suit No. 2515 of 1998
Judge
Reported in1999VAD(Delhi)574; 81(1999)DLT937; 1999(51)DRJ156
ActsArbitration and Conciliation Act, 1996 - Sections 8(1); Indian Partnership Act, 1932 - Sections 69(1)
AppellantH.C. Chopra (Retired) (Col.) and anr.
RespondentShri V.C. Mehra
Appellant Advocate Mr. C.P. Wig, Adv
Respondent Advocate Mr. Haqrdeep Wirk, Adv.
Excerpt:
.....working hours. this is because attributability to military service is a factor which is required to be established. - in such circumstances, it is evident that the requirements of section 69 of the partnership act that the partnership firm itself should be registered first and the persons suing should be registered partners are not being satisfied and fulfillled in this case......arbitration act, and observed as under : 'now, a question arises whether a registered partner of a dissolved partnership firm, who has joined the new partnership firm after dissolution, can maintain the petition in respect of his rights arising out of the partnership agreement entered in between the parties after dissolution. it is evident that the registered partnership firm had become extinct on its dissolution whether in 1990 or earlier in 1988. the firm which has, now, existence is certainly not a registered firm nor the present petitioner a registered partner of the newly constituted firm after its dissolution. the petitioner could have certainly maintained this petition in respect of rights and liabilities arising out of the contract in between the partners in case the same old.....
Judgment:
ORDER

Vikramajit Sen, J.

1. This application under Section 8(1) of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as 'the Act') has been filed in a suit for dissolution of an unregistered firm and for rendition of accounts. Plaintiff Nos. 1 and 2 and the Defendant are the erstwhile partners of this firm. Reliance has been placed by the Learned Counsel for the Defendant/Applicant on a decision of the Apex Court in Smt. Premlata and another Vs . M/s. Ishar Dass Chaman Lal and Ors., : [1995]1SCR168 . By way of answer the learned counsel for the Plaintiffs has cited a decision of this Court in Kanahi Ram Vs . Kartar Singh : 72(1998)DLT740 .

2. The Partnership Deed itself contained the following clauses :

'Any dispute and difference and questions arising in connection with the partnership or this deed or any affairs or the partnership between the partners or between any of them and the legal representatives of the others or between their respective of the others or between their respective representatives and whether during or after the partnership, shall be settled by arbitration according to the law relation to arbitration for the time being in force.'

3. In Kanahi Ram's case (supra) S.N. Kapoor, J. rejected an application, under Section 20 of the Arbitration Act, and observed as under :

'Now, a question arises whether a registered partner of a dissolved partnership firm, who has joined the new partnership firm after dissolution, can maintain the petition in respect of his rights arising out of the partnership agreement entered in between the parties after dissolution. It is evident that the registered partnership firm had become extinct on its dissolution whether in 1990 or earlier in 1988. The firm which has, now, existence is certainly not a registered firm nor the present petitioner a registered partner of the newly constituted firm after its dissolution. The petitioner could have certainly maintained this petition in respect of rights and liabilities arising out of the contract in between the partners in case the same old firm would have continued without having been dissolved. In such circumstances, it is evident that the requirements of Section 69 of the Partnership Act that the partnership firm itself should be registered first and the persons suing should be registered partners are not being satisfied and fulfillled in this case. Consequently, the petition appears to be barred under Section 69(1) or the Partnership Act, 1932.'

4. Although the learned Judge has considered various decisions on the point, the decision in Smt. Premlata's case (supra) was not mentioned before him. The following observations in Jagdish Chander Gupta Vs . Kajaria Traders (India) Ltd., : [1964]8SCR50 had weighed heavily in his mind, in arriving at the decision in that case.

'In our judgment, the words 'other proceedings' in Sub-sec (3) must receive their full meaning untrammelled by the words 'a claim of set-off. The latter words neither intend nor can be construed to cut down the generality of the words `other proceeding'. The sub-Section provides for the application of the provisions of Sub-secs. (1) and (2) to claims of set-off and also to other proceedings of any kind which can properly be said to be enforcement of any right arising from contract except those expressly mentioned as exceptions in Sub-sec. (3) and Sub- sec.(4).'

5. This very paragraph was relied upon by the Apex Court in paragraph 7 of the decision in Smt. Premlata's case (supra) which is a judgment of K. Ramaswamy and Mrs. Sujata V. Manohar JJ. and was dealt with in the following manner :

'Thus this court also had given effect to the exceptions carved out by sub-sections (3) and (4) of S. 69 of the Partnership Act from the prohibition imposed by sub-sections (1) and (2) and main part of sub-section (3) even though the firm was not registered under Sec. 69.'

6. Thereafter the Apex Court observed as follows :

'8. It is seen that with the demise of the partners, ipso facto, the partnership stood dissolved. What the legal representatives of the deceased partner is seeking to enforce is for accounts of a dissolved firm or any right or power to realise the property of the dissolved firm. The right `to sue' for the dissolution of the firm must, of necessity, be interpreted to mean the right to enforce the arbitration clause for resolution of the disputes relating to dissolved firm or for rendition of accounts or any right or power to realise the property of the dissolved firm.

9. Indisputably the first appellant is the widow of Chaman Lal, one of the partners. thereforee, she steps into the shoes of the deceased partner who had a right to the dissolved partnership firm. Sub-section (3)(a) carves out three exceptions to sub- sections (1) and (2) of S. 69 and also to the main part of sub- section (3) of S. 69, namely: (1) the enforcement of any right to sue for the dissolution of firm; (2) for accounts of the dissolved firm; and (3) any right or power to realise the property of the dissolved firm. Having excluded from the embargo created by the main pat of sub-section (3) or sub-sections (1) and (2) of S. 69, the right to sue would not again be construed to engulf the exceptions carved out by sub-section (3) or sub-section (4) of S. 69 of the Act. Any construction otherwise would render the exceptions, legislature advisedly has carved out in sub-sections (3) and (4) of S. 69, otiose. The object appears to be that the partnership having been dissolved or has come to a terminus, the rights of the parties are to be worked out in terms of the contract of the partnership entered by and between the partners and the rights engrafted therein, the exceptions carved out by sub- section (3) are to enforce those rights including the frights to dissolution of the partnership despite the fact that the partnership firm was an unregistered one. Having kept that object in view, we are of the considered opinion that the alternative resolution forum agreed by the parties, namely, reference to a private arbitration is a mode of enforcing the rights given under clause (a) of sub-section (3) of S. 69 of the Act and gets excluded from the main part of sub-section (3) and sub-sections (1) and (2) of S. 69. The enforcement of the right to sue for dissolution includes a right for reference to an arbitration in terms of the agreement of the partnership by and between the parties. thereforee, there is no embargo for filing a suit under S. 20 of the Act.

10. It is fairly stated by Shri Satish Chandra that the party can enforce the right by a suit for rendering accounts and for realisation of the property of the dissolved firm pro rata. When that is permissible by an exception carved out by sub-section (3)(a) to S. 69, we are of the view that there is no prohibition to invoke arbitration clause under the deed of partnership, agreed to by and between the parties to invoke S. 20 of the Act. Thus considered, we are of the view that the suit under S. 20 of the Act is maintainable. The High Court has, thereforee, committed manifest error of law in holding otherwise.'

7. The earlier decision of the Supreme Court in Jagdish Chander's case (supra) which is a judgment delivered by Hidayatullah, J. on behalf of a Bench comprising of himself, K.N. Wanchoo, K.C. Das Gupta and N. Rajagopala Ayyangar, JJ. appears to set down a ratio which is different to that propounded in Smt. Premlata's case (supra). In the earlier case the question before the High Court of Bombay was whether (i) Section 8(2) of the Indian Arbitration Act was not applicable as it was not expressly provided in the arbitration clause quoted above that the arbitrators were to be by consent of the parties and (ii) that Section 69(3) of the Indian Partnership Act, 1932 operated as a bar to the petition because the partnership was not registered. As there was a divergence of opinions in respect of the consequences of Section 69 of the Indian Partnership Act, the case was referred to a third learned Judge and the majority decision was to the effect that this Section of the Partnership Act did not bar the entertainment of an application under Section 8(2) of the Arbitration Act. It was in these circumstances that this vexed question of law fell for determination by the Supreme Court. The portion of the judgment in Jagdish Chander's case (supra) which appears to have been followed by the subsequent judgment in Smt. Premlata's case (supra) has already been extracted above. Prior to laying down the proper interpretation of the words 'other proceedings' in Section 69(3) of the Indian Partnership Act i.e. whether these words had to be construed ejusdem generis or not, the Supreme Court had made the following observations which appears to have not been given its complete significance and application:

'The first question to decide is whether the present proceeding is one to enforce a right arising from the contract of the parties. The proceeding under the eighth section of the Arbitration Act has its genesis in the arbitration clause, because without an agreement to refer the matter to arbitration that section cannot possibly be invoked. Since the arbitration clause is a part of the agreement constituting the partnership it is obvious that the proceeding which is before the court is to enforce a right which arises from a contract. Whether we view the contract between the parties as a whole or view only the clause about arbitration, it is impossible to think that the right to proceed to arbitration is not one of the rights which are founded on the agreement of the parties. The words of s. 69 'a right arising from a contract' are in either sense sufficient to cover the present matter.'

8. The Supreme Court after the detailed consideration of all the aspects dismissed the application under Section 8(2) of the Arbitration Act with costs throughout. In my respectful and humble opinion the decision in Smt. Premlata's case (supra) runs counter to the earlier decision of a larger Bench of the Supreme Court in Jagdish Chander's case (supra).

The decision of my learned brother S.N. Kapoor, J. in Kanahi Ram's case (supra) supports my understanding of the ratio established in Jagdish Chander's case (supra).

9. In Smt. Premlata's case (supra) the learned Judges had observed that since the right to seek rendition of accounts and dissolution of partnership was available to parties even in the case of unregistered partnerships the same right should be available through the arbitration avenue. However, pronouncements in Jagdish Chander's case (supra) preclude a consideration of this attractive argument.

10. I am bound by the earlier decision rendered by four learned Judges of the Supreme Court in Jagdish Chander's case (supra). As was decided by them, I also dismiss the present application under Section 8(1) of the Arbitration and Conciliation Act, 1996 with costs which are assessed at Rs. 2,000/-.


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