Skip to content


Brij Gopal Binani and ors. Vs. Sreelal Binani and ors. - Court Judgment

LegalCrystal Citation
SubjectArbitration
CourtKolkata High Court
Decided On
Case NumberMatter No. 66 of 1978
Judge
Reported inAIR1978Cal520
ActsArbitration Act, 1940 - Sections 2 and 34
AppellantBrij Gopal Binani and ors.
RespondentSreelal Binani and ors.
DispositionApplication dismissed
Cases ReferredBanwarilal Agarwalla v. Inderjit Singh
Excerpt:
- .....mukharji, j.1. this is an application under section 34 of the arbitration act, 1940 for stay of suit no. 229 of 1978. this is a suit by sreelal binani against 14 defendants. of the 14 defendants, the defendants nos. 1 to 10 are said to be the partners of pioneer match factory and defendants nos. 11 to 13 are alleged to be the benamdars and name lenders of the defendants nos. 1 to 10 and defendant no. 14 is said to be a concern in which the defendants nos. 11, 12 and 13 are the partners. in the plaint, it is alleged that pioneer match factory has its head office at 11, sovaram basak street calcutta and its factory is situate at 16, dum dum road, 24-parganas. the said partnership was carried on under a deed of partnership dated 7th dec. 1971. the said deed of partnership.....
Judgment:
ORDER

Sabyasachi Mukharji, J.

1. This is an application under Section 34 of the Arbitration Act, 1940 for stay of Suit No. 229 of 1978. This is a suit by Sreelal Binani against 14 defendants. Of the 14 defendants, the defendants Nos. 1 to 10 are said to be the partners of Pioneer Match Factory and defendants Nos. 11 to 13 are alleged to be the benamdars and name lenders of the defendants Nos. 1 to 10 and defendant No. 14 is said to be a concern in which the defendants Nos. 11, 12 and 13 are the partners. In the plaint, it is alleged that Pioneer Match Factory has its head office at 11, Sovaram Basak Street Calcutta and its factory is situate at 16, Dum Dum Road, 24-Parganas. The said partnership was carried on under a Deed of Partnership dated 7th Dec. 1971. The said Deed of Partnership contained, inter alia, the following clauses;

'Clause 3: That partnership shall continue till such time as the partners hereof agree to continue.

Clause 12: That all disputes and differences which may arise amongst the partners or between one of them and the personal representatives of the others or between other respective personal representatives and whether during or after the determination of the partnership or whether in relation to the interpretation of this Deed or as to any act or omission by any party to the dispute or any act which ought to have been done by the parties in disputes or in relation to any other matters whatsoever touching the partnership affairs shall be referred to a Sole Arbitrator if the parties agree upon one or in case of disagreement both the partners shall be entitled to nominate and appoint one such arbitrator. Such Arbitrator shall be governed by the Arbitration Act, 1940 and the statutory modifications thereof for the time being in force. But, in any case, the parties hereto shall not be entitled to refer their disputes and differences to any Court of Law.'

2. It is the case of the petitioner that the parties had carried on the business under the said Deed of Partnership. In or about Oct. 1972, the business of the said partnership firm was closed as it was neither practicable nor profitable to carry on the said business of manufacture and sale of matches. After the said closure of that business the machinery including the plant of the factory, according to the plaintiff, were kept in a godown within the said factory premises and a portion of the factory premises was let out, without any prior knowledge or consent of the plaintiff, to certain concerns mentioned in the plaint. Even after letting out the portion of the factory premises by the parties, a considerable portion of land in the said factory premises remained vacant, and according to the plaintiff, instead of letting out the remaining vacant portion of land at the market rate in the name of the said partnership firm, the defendants Nos. 1 to 10 took recourse to a fraudulent device, whereby a new partnership was constituted in the name of Joyshree Corporation in which defendants Nos. 11 to 13 were made partners and the partners of Joyshree Corporation, being Nos. 11 to 13, according to the plaintiff, were the name lenders of the defendants Nos. 1 to 10. Therefore, the plaintiff in this suit states that by its notice dated 11th Jan. 1978 the plaintiff has dissolved the firm and in the alternative has prayed for dissolution of the partnership and also further asked for a declaration that the said firm stood dissolved on or about 11th Jan., 1978 and alternatively a decree for dissolution of the said firm of Pioneer Match Factory and on just and equitable grounds to wind up the business of the firm. The plaintiff after coming to know of the purported tenancy as also the fact of earning profit by Joyshree Corporation by way of letting out the said factory premises has refused to ratify the same. The allegation of the plaintiff is that the defendants Nos. 1 to 10 of the said partnership firm, of which the plaintiff was the partner, are realising rent from Joyshree Corporation about Rs. 2,000 and odd and the said Joyshree Corporation is realising rents over Rupees 7,000 from different other tenants. Therefore, it is the case of the plaintiff that really the defendants Nos. 1 to 10 are realising for themselves the said amounts through Joyshree Corporation and the said Joyshree Corporation is the defendants' firm benamidar. It is this suit that is sought to be stayed in this application under Section 34 of the Arbitration Act, 1940.

3. The first question, therefore, which requires consideration is, whether there is a valid arbitration clause between the parties in respect of the matters in dispute in this suit. I have set out before the arbitration clause. The arbitration clause in the partnership deed is wideenough to include the disputes between the plaintiff and the defendants Nos. 1 to 10, here respondents Nos. 1 to 10 in this application. It was urged on behalf of the respondent that the arbitration clause was vague and uncertain. It was submitted that the clause envisaged a reference to a sole arbitrator if the parties agreed and if the parties did not agree then it was stipulated that both the partners were entitled to nominate one each arbitrator. It was urged on behalf of the plaintiff-respondent that the plaintiff was not willing to agree with the defendants to nominate an arbitrator. Then, it was submitted that the other alternative contemplated by the arbitration clause was that both the partners would be entitled to nominate. Emphasis was laid on the use of expression 'both' and it was submitted that in English language it contemplated 'two' sides. It was, therefore, submitted that in this case, as there were more than two disputing parties, the expression 'both' would not fit in. Therefore, it was urged that the arbitration clause was not workable. A clause of this nature should not be looked at from a technical point of view but a pragmatic and reasonable view of such a clause should be taken. It was in this light, the Supreme Court in the case of Union of India v. D. N. Revri & Co., : [1977]1SCR483 observed that a highly technical and doctrinaire approach should not be taken in a matter of this type and a plain and common sense view should be preferred. In that light, the expression 'both' in my opinion can be construed to mean all the disputing partners. Even, according to the dictionary meaning the expression 'both' may cover parties more than two. If that is the position, then, in my opinion, there is no uncertainty or ambiguity in the clause for arbitration so far as the appointment of the arbitrator is concerned. If there are ten parties, each party may appoint one arbitrator. On this aspect, however, it was submitted on behalf of the plaintiff respondent that in that case the plaintiff respondent would be in a minority and for that reason discretion should be exercised in favour of refusal to stay the suit. The fact that the arbitrator who would be nominated by the plaintiff-respondent might be in a minority if the other arbitrators nominated by the other parties take one view, is a mere possibility and in the background of the situation of this case it is not proper,in my opinion, to exercise judicial discretion on such a problematic possibility, and furthermore, the arbitrators are expected to act not as a representative of parties but in the best interest of all concerned. Viewed from that angle it is not possible to say that the plaintiff-respondent would be at a disadvantage by the procedure of ten or eleven different disputants each nominating an arbitrator for itself. I am, therefore, unable to accept the submission that there was no valid arbitration clause or the same was vague.

4. It was, then, urged that the stay should not be granted because the defendants have taken steps in aid of the suit and secondly the defendants were not ready or willing to go to arbitration. In support of this in para 19 onwards of the affidavit-in-opposition Shrilal Binani has stated that when the application was made before Mr. Justice Deb for appointment of Receiver, the same was opposed on the 18th Jan., 1978 and on the 8th Feb., 1978 when his Lordship had indicated that he was going to pass an order appointing an independent person as a Receiver, the parties including the defendants agreed to the appointment of a party-Receiver. It was, therefore, submitted that the defendants had taken steps in the suit disentitling them to ask for a stay. It was further submitted that the defendants were not ready or willing to go to arbitration. Now, so far as taking steps in the suit is concerned, it appears that according to the plaintiff-respondent the defendants had opposed the application for appointment of Receiver on the 8th February, 1978 and had asked for adjournment of the same. Thereupon they had agreed to the appointment of a party-Receiver. This step as is apparent was taken subsequent to the making of an application for stay under Section 34 of the Arbitration Act. Section 34 authorises a person to ask for a stay 'any time before filing written statement or taking any other steps in the proceedings.' Steps taken which are contemplated must be before the making of an application under Section 34 of the Act. Section 34 does not contemplate of the steps in the proceeding after steps have been taken for stay. Therefore the conduct of the parties on 8th Feb., 1978, after the application had been made for stay of the suit, in my opinion, would be irrelevantfor considering whether any steps had been taken in the proceeding so as to disentitle the applicant from obtaining a stay under Section 34 of the Act. Furthermore, in my opinion, by making the submission as to who should be the Receiver a party does not evince an intention to submit to the jurisdiction of the Court for adjudication of the disputes by the Court nor does the party indicate any intention not to insist on the arbitration. I think also step in aid, in my opinion, should be such an overt act which will indicate that the party intends to submit to the jurisdiction of the suit for adjudication of the disputes between the parties. Reliance in this connection may be placed on the observations in the case of Biswanath Rungta v. O. I. Engineering Co., 0043/1975 : AIR1975Cal222 .

5. It is also not possible to accept the submission that the defendants were not ready or willing to go to arbitration. Indeed it appears that in a letter dated 10th May, 1975 the defendants had written to the plaintiff's Solicitor that if there be any real grievance the same should be referred to arbitration. The plaintiff did not proceed to take any steps for arbitration thereafter. The defendant-applicants to this application under Section 34 have stated that they are ready and willing and were always ready and willing to go to arbitration. No facts have been indicated not to accept this statement of the applicant. In that view of the matter, the observations of the Supreme Court in the case of Food Corporation of India v. Thakur Shipping Company, : [1975]3SCR146 would not be applicable to the facts and circumstances of this case. Here there was not any question of maintaining a silence in the face of any request by the other party to go to the arbitration. On the other hand, the defendants had themselves suggested arbitration to which it seems the plaintiff paid no heed. I am, therefore, unable to accept this contention also.

6. It was, then, urged that in this case dissolution by the Court had also been prayed for. Therefore, it was submitted that the arbitrators would not have any jurisdiction to grant dissolution and on this ground the suit should not be stayed. It appears that in the cases of Ballavdas Acharyya v. Shyam Sundar Halwasiya, ILR (1946) 1 Cal 203 Mr. Justice Clough observed that thecontention, that the arbitrators have no power to award dissolution of a partnership, was not sound. Therefore, according to his Lordship the arbitrators had such power if the clause of arbitration was wide enough to cover such a provision. In the case of Ganesh Chandra v. Kamal Kumar, 0065/1971 : AIR1971Cal317 it was held by Mr. Justice Masud that in a suit for dissolution of partnership on the ground that it was just and equitable under Sections 44(f) and (g) of the Partnership Act, the dispute relating to the partnership should be decided by the Court. Therefore, it was held that the Court should exercise discretion in not staying the suit in respect of the arbitration in such a case. In the case Nitya Kumar Chatterjee v. Sukhendu Chandra, : AIR1977Cal130 a Division Bench of this Court observed that in a suit for dissolution of partnership on the ground that it was just and equitable, Court's jurisdiction to give appropriate relief was not ousted by the provision of arbitration in a partnership deed and it was a matter of discretion. In the case of Banwarilal Agarwalla v. Inderjit Singh, AIR 1955 NUC (Cal) 2937 a Division Bench of this Court had also observed that the arbitrators in an appropriate case have the power to grant dissolution of partnership. In the facts of this case, where the plaintiff's main basis is that the plaintiff had dissolved the partnership, which according to the partnership deed, was a partnership at will this point urged in opposition to this application cannot be of much substance. Furthermore, in view of the amplitude of the arbitration clause, if it was a matter of discretion I would have not exercised my discretion against the stay solely on the ground that the arbitrators might not have the power in certain cases to dissolve a partnership firm.

7. But this question as I shall presently note, does not arise for my consideration. The main difficulty in granting the stay in this case is that it is alleged that the defendants Nos. 11, 12 and 13 are the name-lenders and benamidars of the defendants Nos. 1 to 10 and the business carried on by the defendants Nos. 11, 12 and 13 in the name of the defendant No. 14 belonged to thedefendants Nos. 11 to 13, as name-lenders of the defendants Nos. 1 to 10 and unless the amounts realised by the defendant No. 14 are brought in, no proper accounting can be made. This is a dispute which is not covered by the arbitration clause in the sense that the defendants Nos. 11, 12 and 13 are not parties to the arbitration agreement and neither the plaintiff nor these defendants have agreed to the adjudication of this question by arbitration as to whether the defendants Nos. 11, 12 and 13 are benamdars or name-lenders of defendants Nos. 1 to 10. It is true that the defendants Nos. 11, 12 and 13 are willing to go to arbitration. But that would not make them parties to the arbitration agreement, wide though the definition of the arbitration agreement is under Section 2(a) of the Arbitration Act. If this dispute, which is intimately connected with the dispute of the dissolution of the partnership and taking of accounts, as claimed in this suit, cannot be the subject-matter of arbitration because all the parties concerned are not parties to the arbitration agreement, in my opinion, no part of the suit can really therefore, be stayed because the entire suit is a composite cause of action and the accounts cannot be taken unless this contention is decided whether the defendants Nos. 11, 12 and 13 are name-lenders of the defendants Nos. 1 to 10 and whether the amounts realised by Joyshree Corporation are to be brought into account of the partnership firm of the plaintiffs and the defendants Nos. 1 to 10. If that is the position then, in my opinion, the suit cannot be stayed.

8. It was further contended that in this case there are allegations of fraud and, therefore, the discretion should be exercised against stay. It is true that allegations have been made against the defendants and the defendants do not wish a public trial but are rather asking for stay. It is not necessary in the view I have taken, to consider whether the fraud alleged against parties who are asking for stay, is a relevant ground for the exercise of discretion in the matter of stay.

9. In the premises, this application fails and is accordingly dismissed. Costs of this application will be the costs in the suit.


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