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Sushil Majumdar Vs. Sova Rani Biswas - Court Judgment

LegalCrystal Citation
SubjectArbitration;Civil
CourtKolkata High Court
Decided On
Case NumberF.M.A. No. 644 of 1981
Judge
Reported inAIR1983Cal57,86CWN947
ActsArbitration Act, 1940 - Section 20
AppellantSushil Majumdar
RespondentSova Rani Biswas
Appellant AdvocateM.N. Ghosh, ;Dhruba Bhattacharjee and ;H.P. Roy, Advs.
Respondent AdvocateRanjit Kumar Banerjee, ;Ashis Kumar Banerjee and ;P.B. Chakrabarti, Advs.
DispositionAppeal allowed
Cases ReferredNarayanappa v. Bhas
Excerpt:
- .....of the plaintiff-appellant it was contended that the application was to all intents and purposes a suit for accounts and as such the provisions of section 7(iv)(c) of the court-fees act read with section 8 of the suits valuation act would apply to the case. the learned judge held that in the application under section 20 of the arbitration act the subject-matter of the dispute between the parties as also the assets of the partnership business had been admittedly valued at above of rs. 50,000/- which is beyond the limit of pecuniary jurisdiction of the court. in that view of the matter the learned judge ordered the application to be returned to the filing advocate for presentation before the appropriate court. hence the appeal.6. mr. ghosh appearing on behalf of the appellants contended.....
Judgment:

B.C. Chakrabarti, J.

1. This appeal by the plaintiff arises out of a petition under Section 20 of the Arbitration Act registered as Title Suit No. 1085 of 1981 of the City Civil Court at Calcutta.

2. The plaintiff-appellant's case as made out in the application under Section 20 is as follows :--

The plaintiff and the 3 defendants were co-partners carrying on business under the name and style of M/s. New Book Agency as publishers and book sellers each having 1/4th share in respect of the profits and losses of the said business. Originally this partnership was in the name of Hem Chandra Biswas since deceased, the plaintiff and defendants 2 and 3. A partnership agreement by and between them was executed on 2lst April, 1975. After the death of Hem Chandra Biswas, his widow defendant No. 1 was taken in as a partner and a new agreement was executed on Dec. 29, 1978 for carrying on the same business. Clause 10 of the deed of partnership provides that no partner shall be competent to connect or associate himself with any other business of like nature. There is an arbitration clause being Clause No. 28 which provides that any dispute or difference that may arise between the partners or their representatives with regard to the construction of the instrument or inspection of accounts, profits and losses of the business, or rights and liabilities of the business or dissolution or winding up of the firm, shall be referred to 4 arbitrators, one to be nominated by each partner and the proceeding shall be governed by the Partnership Act. Defendants 1, 2 and 3 having 3/4th share in the business have been acting arbitrarily and in gross violation of the terms of the partnership deed. They started a similar trade in publishing and selling of books under the name and style of M/s. Standard Library, by making a false representation to the customers that it was only a sister concern of the firm M/s. New Book Agency. In Jan., 1981 the plaintiff having come to know of this, at once protested against the illegal activities of the defendant. This resulted in serious disputes amongst the partners. Plaintiff's request for production of the books of accounts for the last three years for inspection and for settlement of accounts proved futile, the defendants being in the custody of the same. Finding no other way the plaintiff served notices upon the defendants requesting them to nominate their representative arbitrators so that the dispute between them may be referred to arbitration. After having received the notices the defendants served the plaintiff with a notice dated 20th May, 1981 for dissolution of partnership instead of nominat-ing their representative arbitrators. The further case of the plaintiff is that the defendants are not interested to refer the dispute to arbitration notwithstanding the provisions for such reference in the deed of partnership. In para 8 of the plaint it is then stated 'the plaintiff further states that the assets, the stock in trade, furniture, books, papers and blocks comprise a value of Rs. 50,000/-. Besides this there is also a bank account under the control of the defendants in the United Industrial Bank, College Street Branch. The plaintiff has no knowledge about the exact amount lying in the bank'. The disputes raised by the plaintiff relate to the question as to when. M/s. Standard Library was established, the nature of its business, the stock in trade of the business of M/s. New Book Agency, amount due and payable by the firm M/s. New Book Agency to the plaintiff, the net profit and loss of the firm and the amount due and payable to the firm from the market as also the liability of the firm, In para 13 it is stated 'For the purpose of the valuation of this application the same is valued at Rs. 50,000/- (Rupees Fifty thousand) only and the court-fee stamps upon the same is filed herewith accordingly'. On such allegations the plaintiff claimed for an order that the agreement dated 29-12-1978 entered into by and between the plaintiff and the defendants be filed in Court, and reference to arbitration be made under Section 20(4) of the Arbitration Act.

3. Defendants 2 and 3 filed a joint written statement disputing the allegations of the plaintiff. Amongst other points the defendants raised an objection that the Court had no pecuniary jurisdiction to entertain the application. The other objections need not be adverted to at this stage.

4. The learned Chief Judge of the City Civil Court disposed of the objection regarding jurisdiction by the order impugned. It was contended before him that in view of the averments in paragraph 8 of the application under Section 20 of the Arbitration Act the value of the assets of the partnership firm was more than Rs. 50,000/- which was beyond the limit of pecuniary jurisdiction of the Court the valuation for purposes of jurisdiction being dependent on the total value of the assets of the firm. It was further submitted before him that the application was not really one for accounts or for dissolution of the firm.

5. On behalf of the plaintiff-appellant it was contended that the application was to all Intents and purposes a suit for accounts and as such the provisions of Section 7(IV)(c) of the Court-fees Act read with Section 8 of the Suits Valuation Act would apply to the case. The learned Judge held that in the application under Section 20 of the Arbitration Act the subject-matter of the dispute between the parties as also the assets of the partnership business had been admittedly valued at above of Rs. 50,000/- which is beyond the limit of pecuniary jurisdiction of the Court. In that view of the matter the learned Judge ordered the application to be returned to the filing advocate for presentation before the appropriate Court. Hence the appeal.

6. Mr. Ghosh appearing on behalf of the appellants contended that the figure stated in paragraph 8 of the application could not determine the valuation of the suit which is in substance a suit for accounts either upon dissolution or without such dissolution together with other reliefs. It was argued that a suit for a claim of what has been prayed for by way of reference to arbitration in the present action if brought in a Civil Court could not have been valued at more than the value of the present application and as such the view taken by the learned Court below was erroneous.

7. Mr. Banerjee in opposing the appeal supported the judgment on the view that the value of the subject-matter being admittedly the value of the assets plus the bank accounts was beyond the jurisdiction of the Court.

8. In order to appreciate the respective contentions of the parties it would be convenient to bear in mind the following provisions of the Arbitration Act. Section 20(1) reads as follows :--

'20 (1) Where any persons have entered into an arbitration agreement before the institution of any suit with respect to the subject-matter of the agreement or any part of it, and where a difference has arisen to which the agreement applies, they or any of them, instead of proceeding under Chap. II, may apply to a Court having jurisdiction in the matter to which the agreement relates, that the agreement be filed in Court'.

9. Section 31(1) provides : 'subject to the provisions of this Act, the award may be filed in any Court having jurisdiction in the matter to which the reference relates.'

10. The expression 'Court' has been defined in Section 2(c) as follows :--

'2 (c) Court means a Civil Court having jurisdiction to decide the question forming the subject-matter of the reference if the same had been the subject-matter of a suit, but does not except for the purpose of arbitration proceedings under Section 21, include Small Cause Court.'

11. The combined effect of these provisions appears to be that in order to determine which is a Court having jurisdiction in the matter, one should first enquire what the disputes are, which form the subject-matter of the reference to arbitration and then proceed to consider that had the disputes been raised in a suit which is the proper Court having jurisdiction to entertain such a suit (See M. Venkata Samiappa v. Srinidhi, (1950) 1 Mad U 709). This, however, was a case where the question involved was one of territorial jurisdiction.

12. In order to invoke Section 20 the essential ingredients necessary are (1) the parties must have entered into an arbitration agreement, (2) the agreement must have been entered into before a suit with respect to its subject matter or any part of it is filed in Court, (3) a difference contemplated in the agreement must have arisen.

13. It is significant to note that in Section 20 the expression 'the subject-matter of the agreement' and 'the matter to which the agreement relates' have been used in different contexts. The expression 'subject-matter of the agreement' is couched in the alternative to 'any part of it' and both have been used with reference to the institution of a prior suit while the expression 'matter to which the agreement relates' has been used for determining the jurisdiction of the Court to which the application under Section 20 may be filed. The latter expression means not the property involved but the difference which has arisen and consequently the relief claimed. It is, therefore, the value of such relief that determines the jurisdiction. Read in that context, in order to determine what is the value of the matter to which the agreement relates, one has to look to the substance of the relief or reliefs claimed and not the mere form in which it is couched. (See Municipal Board v. E. U. P. E. Supply Co., : AIR1958All506 ).

14. Suits between partners are generally suits for account and dissolution or for accounts of an already dissolved firm. Even if the suit is only for accounts, the Courts generally like to treat it as one for accounts and dissolution. The Court may do so irrespective of the state of the party's pleadings or may even call upon the plaintiff to amend his plaint suitably so as to include the prayer for accounts and dissolution. It seems therefore that without showing of a factual dissolution or seeking a dissolution, accounts cannot be demanded. Whatever may be the nature of the claim of a partner against his co-partners -- whether it is to recover an advance to the firm or share of profits, -- dissolution is considered necessary. This is so because to settle anything between the partners their relative position has to be ascertained and this would involve very much the same things as are consequential to a dissolution.

15. In the instant case the plaintiff's claim virtually is for accounts so that he may participate in the share of his profits, his share in the profits being only 1/4th. It is also the case of the plaintiff that the defendants have served a notice upon the plaintiff dissolving the partnership. Therefore, the suit is really in the nature of a suit for accounts either of a dissolved firm or upon dissolution of the same. The matter which is sought to be referred to arbitration is the taking of accounts of the firm, the plaintiff claiming that he has been deprived of it and has not even been given any access to the account books either- In such a situation it is difficult to say that the matter to which the agreement relates means the subject-matter of the agreement or in other words the total assets of the firm.

16. In the case of Narayanappa v. Bhas-kara Krishnappa, : [1966]3SCR400 it has been observed that whatever may be the character of the property which is brought in by the partners when the partnership is formed or which may be acquired in the course of the business, it becomes the property of the firm and what a partner is entitled to is his share of profits, if any, accruing to the partnership from the realisation of this property and upon dissolution of the partnership, to a share in the money representing the value of the property. Lindley on Partnership says : ''What is meant by the share of a partner is his proportion of the partnership assets after they have been all realised and converted into money and all the partnership debts and liabilities have been paid and discharged'. Looking at the scheme of the Partnership Act it seems that the items of the property which become the assets of the firm, from whatever sources they may have come, no partner can claim any exclusive right over the same. He has only certain limited rights, namely, right to profit and to property on dissolution or retirement and the property is nothing more than his share in the same.

17. Considered in that light it seems to us upon a reading of the case as made out in the application under Section 20 and the substance of the reliefs claimed that it is a suit for accounts. If that be so I do not see why the City Civil Court would have no jurisdiction to entertain the suit when it has been valued by the plaintiff at Rs. 50,000/-for purposes of court-fees and jurisdiction. The fact that the assets of the firm include besides this sum of Rs. 50,000/-, a bank account the amount in the account being not known to the plaintiff, would not determine the valuation for the purpose of jurisdiction.

18. Learned advocates for both sides, however, referred to several other decisions which we have carefully considered. We do not consider it necessary to make any special reference to them for they do not really touch the issue involved in the present con-troversy before us.

19. It is true that in a suit for accounts the Court can go behind the tentative valuation put by the plaintiff on the ground that such valuation is grossly unfair and arbitrary and on correct valuation return the plaint for presentation to the proper Court. But such is not the case here. In a partnership suit the subject-matter would be severance of the relationship and fixing of shares of the partners. And that alone is the matter to which the dispute and the reference relate. In the instant case the plaintiff has valued the assets at more than 50,000/- but he does not claim anything more than 1/4th share of the profit and loss. Therefore, it is not possible to say, on the averments in the application, that the application has been undervalued or that the City Civil Court would have no jurisdiction if a suit for similar relief has been filed in Court. In that view of the matter we are inclined to think that the learned Judge in the Court below fell into an error in thinking that the value of the matter to which the reference relates is beyond the limits of his pecuniary jurisdiction. Accordingly, we are unable to sustain the order impugned. The appeal, therefore, succeeds and is hereby allowed. The impugned order is set aside and the objection as to pecuniary jurisdiction raised by the respondent is overruled.

20. There will be no order for costs.

Let the order be communicated to the Court below forthwith. No formal decree need be prepared in this appeal.

Anil K. Sen, J.

21. I agree.


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