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Sailendra Nath Komar and ors. Vs. Chillar Ram and anr. - Court Judgment

LegalCrystal Citation
SubjectArbitration
CourtKolkata High Court
Decided On
Case NumberA.F.O.D. No. 11 of 1951
Judge
Reported inAIR1955Cal251,58CWN807
ActsCode of Civil Procedure (CPC) , 1908 - Section 11; ;Arbitration Act, 1940 - Section 34; ;Partnership Act, 1932 - Section 11
AppellantSailendra Nath Komar and ors.
RespondentChillar Ram and anr.
Appellant AdvocateSita Ram Banerjee and ;Sambhunath Banerjee, Advs.
Respondent AdvocateRanajit Kumar Banerjee and ;Rama Prosanna Bagchi, Advs. for Respondent Nos. 1 and 2 respectively
DispositionAppeal allowed
Cases ReferredVawdri v. Simpson
Excerpt:
- .....master to take the action he did or they may-do it on the ground which seems to have induced the learned judge to take the view he did.'13. the supreme court while dealing with the judgment of the fatna high court in -- 'state of bihar v. gaya electric supply co. ltd., : air1951pat157 , which was under appeal in the decision referred to above, pointed out that the very point which would be the issue in the suit itself was wrongly considered and decided in course of the enquiry under section 34, indian arbitration act.as a matter of fact although the final decision was limited to the point whether the dispute between the parties was covered by the arbitration clause and whether the latter was still effective or not, the learned judge in the high court went into the merits of the issue.....
Judgment:

R.P. Mookerjee, J.

1. This is an appeal on behalf of three of the defendants, in a suit brought by the plaintiff for the dissolution of a partnership business, for taking accounts and for the appointment of a Receiver for the collection and distribution of the assets of the partnership. The suit has been decreed. Hence this appeal.

2. As the learned Subordinate Judge has disposed of the case on a short point that the observation by this Court in -- 'Sailendra Nath v. Chittar Ram', A. P. O. O. No. 151 of 1949 (Cal) (A) is binding on the 'Court at this stage the suit has to, be decreed accordingly; many of the points which arise for decision were not accordingly considered on the merits. It will not be necessary, therefore, to refer at this stage to all the points raised in the pleadings.

3. To appreciate the point in issue we may refer to the salient facts only. The plaintiff and the defendants 1 to 4 were partners in a business for running a talkie house - called the 'Mahalakshmi Talkie House' situated in a village in the District of Hooghly. The terms of the partnership were recorded in a registered deed executed on 23-1-1947. The plaintiff's case 'inter alia' was that one of the defendants who had been in charge of the business along with two other defendants had been acting in a manner prejudicial to the interest of the partnership and had gone against the terms of the agreement. He prayed for dissolution of partnership and for accounts etc.

4. Three of the defendants who are the appellants before this Court entered a joint defence controverting the allegations made in the plaint and pleading 'inter alia' that there had been no breach of the terms of the agreement, and a dissolution at this stage would be in violation of the terms contained in para. 14 of the partnership deed.

5. Defendants 1, 2 and 4 had immediately after entering their appearance filed a petition under Section 34, Arbitration Act praying that as the dispute was covered by an arbitration clause in the partnership deed, further proceedings in the suit should be stayed so that the dispute might be laid before the arbitrators as under the said arbitration clause.

The learned Subordinate Judge held on an interpretation of the terms of the deed of partnership that the suit was not one for the settlement of any difference between the parties, but for the dissolution of the partnership itself, and this was not within the ambit of the arbitration clause. The Court refused to stay the suit.

6. An appeal was taken to this Court (in Appeal from Original Order No. 151 of 1949 (Cal) (A)) against this decision. By a judgment delivered on 30-5-1950, a Division Bench of this Court dismissed the appeal, and it will be necessary to revert to the terms of this order at a later stage.

According to the learned Subordinate Judge, the observations of this Court while disposing of the application under Section 34, Indian Arbitration Act covered the principle point in issue between the parties in the suit itself, and the decision has been given accordingly.

7. As stated already, written statements were filed by the parties and various defences were raised and a number of issues were set down for decision. At the trial, however, no witnesses were examined. Just before the suit was taken up for final hearing on 29-11-1950, applications had been filed by the parties for summoning witnesses. Certain documents had been filed previously and some other documents were attempted to be put in at the last stage. On the date fixed for hearing 'hajira' was filed on behalf of both the parties, but no oral evidence was adduced. From Order No. 58, dated 29-11-1950, in the order-sheet it appears that the learned Subordinate Judge recorded that no oral evidence was adduced, followed by the words, 'It is necessary'. The last word is presumably a slip of the pen for the word unnecessary'.

8. It was contended before us on behalf of the plaintiff that the defendants did not adduce any evidence, while on behalf of the defendants-appellants it was urged that the view of the Court being that the decision of the High Court while disposing of the application under Section 34, Arbitration Act was binding, on the Court, no other evidence was necessary, the parties were not allowed any opportunity to adduce any evidence. The fact remains that no evidence was adduced by either of the parties, whether of their own volition, or because of the attitude taken up by the Court at the final hearing.

The learned Subordinate Judge in the judgment which was ultimately delivered pointed out that it was idle for the defendants at the final hearing to persist in their contention that the plaintiff's claim for dissolution of the partnership was untenable inasmuch as the High Court had at the earlier stage definitely held that the partnership was a partnership at will and the partnership could be dissolved by a 'mere notice; and such a notice was deemed to have been given by the plaintiff ,by filing the present suit. The learned Subordinate Judge also remarked that the judgment of the High Court 'was of a most comprehensive character' after 'all aspects of the case were placed before their Lordships' though their Lordships were only considering whether or not there should be a stay of the suit.

9. On behalf of the appellants it is contended before us that the observations of this Court at the earlier stage did not and could not bind the Court while finally disposing of the suit. This contention is a well founded one. An attempt was made on behalf of the plaintiff respondent to support the decision of the Lower Court on the ground that the decision disposing of the application under Section 34, Indian Arbitration Act operated as 'res judicata' between the parties.

10. The provisions of Section 11, Civil P. C. were not attracted in terms, but the underlying principles would bar the reopening of the decision made at an earlier stage of the proceedings. The rule of conclusiveness of judgment as to all the points decided is really one of convenience and rest and not of absolute justice. It is also unquestionable that a previous order at an earlier stage of the proceedings if deciding a relevant issue raised in the case would bar a reconsideration of the same point at a later stage of the suit. Reference may in this connection be made to the series of decisions. Vide -- 'Ram Kripal Sukul v. Mt. Rup Kuari', 11 Ind App 37 (PC) (B); -- Hook v. Administrator General of Bengal', AIR 1921 PC 11 (C).

11. We have, however, to consider what was the nature of the proceedings initiated by an application under Section 34, Indian Arbitration Act (10 of 1940).

As has been observed by a Division Bench of this Court in -- 'Birla Jute . v. Dulichand Pratapmull', : AIR1953Cal450 , the whole scope of Section 34, Indian Arbitration Act is an enquiry as to whether the suit will be stayed and the moment it appears that the suit cannot be stayed because the dispute raised by it is not a dispute agreed to be referred, the section exhausts itself, and there is no warrant in its provisions for proceeding further to decide any other issue. So long as any one of the conditions laid down in Section 34 remains unsatisfied' the suit cannot be stayed.

It has further to be remembered, that the provisions contained in this section undoubtedly confer a discretion on the Court though the point of time and the manner in which such discretion can be exercised is regulated by the provisions' contained in that section, and on principles enunciated in a number of decisions. There is no doubt that the Court exercises a judicial discretion as to whether a pending suit is to be stayed or not. It is not necessary for us in the present case to consider the various circumstances under which the Court can or should exercise the discretion is not staying the suit.

12. The scope of Section 34, Indian Arbitration Act was recently considered by the Supreme Court in --- 'Gaya Electric Supply Co. Ltd. v. State of Bihar', : [1953]4SCR572 . Their Lordships have pointed out that the only point which the Court exercising Jurisdiction under Section 34, Indian Arbitration Act can decide is whether the claim brought in the suit sought to be stayed comes within the submission to arbitration. Relying on the observations of the Court of Appeal in --'Monroe v. Bogner Urban District Council', 1915 3 KB 167 (H), it was pointed out that the Court could not go into the validity of that claim in the proceedings under Section 34 of the Act. The observations of Banks L. J. at p. 173 of the report, were quoted with approval:

'The only point is whether the claim which is brought -- whether it is good, bad or indifferent-- comes within the submission to arbitration. I am not saying by way of encouragement, but it may be that there are grounds upon which the defendant could satisfy the appropriate tribunal that the plaintiff's claim was frivolous & vexatious. They may be able to do so upon the ground which seems to have induced the Master to take the action he did or they may-do it on the ground which seems to have induced the learned Judge to take the view he did.'

13. The Supreme Court while dealing with the judgment of the Fatna High Court in -- 'State of Bihar v. Gaya Electric Supply Co. Ltd., : AIR1951Pat157 , which was under appeal In the decision referred to above, pointed out that the very point which would be the issue in the suit itself was wrongly considered and decided in course of the enquiry under Section 34, Indian Arbitration Act.

As a matter of fact although the final decision was limited to the point whether the dispute between the parties was covered by the arbitration clause and whether the latter was still effective or not, the learned Judge in the High Court went into the merits of the issue which would ultimately have to be decided in the suit itself. It was with reference to this method of approach and treatment by the High Court that the Supreme Court observed:

'The validity of the plaintiff's contention in the suit cannot be gone into by that Court exercising jurisdiction under this section as its intention is a very limited one. The only point in such cases to be decided is whether the claim which is brought -- whether it is good, bad or indifferent -- comes within the submission to arbitration.'

This was the expression which had been used by Banks L. J. in 1915 3 KB 167 (F) referred to above.

It should be pointed out that if the Court, at this stage, when it is called upon to decide whether a private, forum or the ordinary Civil Court is to ultimately decide the issues between the parties, is to finally dispose of one of the material issues on the case as made in the plaint only, which document alone is before the Court and without the assistance of any evidence which may be adduced or be available at the final stage, such an act would not only be a hazardous one but would be a highly undesirable one.

14. If we refer to the provisions of Section 34, Indian Arbitration Act, it will be manifest that the Legislature took care to have the question of the venue being fixed at the earliest possible opportunity for deciding whether the proceedings in the Civil Court are to be stayed or not. Such an application has to be filed before the defendant files the written statement or takes any other steps in the proceeding. It is not for him to disclose at this stage his defence in the case. The dispute as described by the plaintiff in the body of the plaint has to be examined with a view to find out whether it is covered by the Arbitration clause, and whether the conditions under which the Court may stay legal proceedings are satisfied.

If the dispute, as may be ascertained from the plaint only, is covered by an existing arbitration clause and the other conditions are satisfied, and the Court finds that there is no sufficient reason why the matter should not be referred to in accordance with the arbitration agreement, the Court may make an order staying the proceedings.

15. Under Section 11, Partnership Act the mutual rights and duties of the partners of a firm may be determined by a contract between the partners, and the provision for arbitration in a partnership agreement is valid and binding. Vide --'Pini v. Roncoroni', (1892) 1 Ch 633 (H); --'Draupadi v. Bakelal : AIR1939All548 .

16. Keeping in view the principles enunciated by the Supreme Court referred to before we proceed to, consider the effect of the decision of this Court while disposing of the application under Section 34, Arbitration Act. The Trial Court rightly or wrongly held that the dispute between the parties as disclosed in the plaint, was not covered by the arbitration clause as the application was one for dissolution of partnership. It may be that the learned Subordinate Judge was not quite correct in the interpretation of the arbitration clause in the agreement. Reference may in this connection be made to -- 'Vawdri v. Simpson', (1896) 1 Ch 166 (J). The High Court on appeal interpreted the partnership to be one at will and by virtue of Section 43, Partnership Act the partnership might be dissolved by a partner giving noticein writing to the other partners of the intentionto dissolve the firm. On the filing of the plaintwhich was served upon all the defendants such anotice was given. The partnership was accordinglydissolved as soon as the summons in the suit hadbeen served on the defendants.

Though the Court was simply considering the question whether the suit should be stayed or not, their Lordships proceeded to express themselves as if the suit itself was being disposed of by them and stated:

'All that the-Court will have to do now is to declare that the partnership has been dissolved and to pass the usual preliminary decree in a partnership action to appoint a receiver, if necessary, and thereafter when accounts have been taken to pass the final decree and to grant other ancillary reliefs which the case may require.'

The High Court further observed at, a later stageof the judgment that the arbitration clauserelated to disputes between parties 'inter se',which they wished to have settled without recourse to dissolution. The plaintiff having prayedfor dissolution the 'arbitration clause was notattracted.

These observations of the High Court at the initial stage were unnecessary as the Court had to consider merely whether the suit was to be stayed or not.

17. As has been observed by this Court In : AIR1953Cal450 , to which reference has already been made, there is no warrant in the provisions of Section 34, Indian Arbitration Act to decide any issue in the case which the learned Judges were purporting to do on the present occasion. Such observations, therefore, cannot be taken to have decided the issue in the case and cannot bar the Jurisdiction of the Court when the suit is heard on the merits. The Only decision at that stage was that the hearing of the suit be not stayed. The grounds mentioned or the reasons given, even before the filing of the defence for the limited purpose cannot be regarded as finally disposing of a vital issue in the case.

18. It was contended on behalf of the plaintiff respondent before us that if it were held that the observations of the High Court on the previous occasion were not binding on the Court at the time of its final disposal it was possible to support the decision of the lower Court from the pleadings themselves. We do not think that we can dispose of or would be justified in disposing of the case on the pleadings themselves without giving, an opportunity to the parties to adduce evidence in the case. As a matter of fact, during the argument we asked the learned Advocate for the respondent as to whether he would agree to have the suit tried without any evidence and rest his case on the partnership agreement and on the pleadings only without any proof of the allegations and the counter allegations made in the plaint and the written statement. He could not and would not take that risk on behalf of his client.

From the fact that the parties had filed hajiras' and were ready to examine witnesses, and the manner in which the learned Subordinate Judge had dealt with the question in the judgment, we have no doubt that in spite of the fact that the parties were willing to adduce evidence, the learned Subordinate Judge held that no such evidence was necessary. In this view we think that it is only fair and reasonable that the parties should have an opportunity of adducing relevant materials before the Court before the suit is disposed of. We would not be justified in disposing of the case without any evidence and on the partnership deed alone.

19. The result, therefore, is that this appeal is allowed and the judgment and decree passed by the lower Court are set aside and the case is remitted to the trial Court for hearing according to law after the parties are given opportunities to adduce such evidence as they may think necessary. The costs of this hearing will abide the final result of the suit, hearing fee being assessed at ten gold mohurs.

20. During the pendency of the appeal in this Court the property in suit was placed in charge of a Receiver appointed by this Court. On the prayer of the Receiver and in view, of the present condition of the business we have discharged the lawyer Receiver and have appointed the plaintiff respondent as Receiver without remuneration. He will continue to act as Receiver for such time as the learned Subordinate Judge may ultimately decide and subject to such directions as may be given by him from time to time.

The Receiver will also submit his report and accounts before the lower Court. The question of his final discharge will also be dealt with by the learned Subordinate Judge when this question comes up. This is subject to such directions as may be given by this Court from time to time pending the final discharge of Mr. Haridas Chatterjee, Advocate, as Receiver, passing of his accounts and the payment of such costs as may be found necessary.

Renupada Mukherjee, J.

21. I agree.


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