Iqbal Singh And Others v. Ram Narain And Others

J.M.L Sinha, J.:— This is a First Appeal from order dated December 20, 1975, passed by the Civil Judge, Allahabad in proceedings under Section 20 of the Arbitration Act.

2. The factor of the case, briefly, stated are as under: The parties entered into a partnership business to carry out contract work of the Government and in that connection an agreement was entered into between them. One of the clauses in the agreement provided for settlement of all disputes between the parties by arbitration. Dispute having arisen, the respondents gave notice to the appellants determining the partnership and asking for appointment of arbitrations. That having proved abortive, the plaintiff appellants moved an application under Section 20 of the Arbitration Act. The application was resisted by the respondents inter alia, on the ground that, the partnership, being unregistered, the application under Sec. 20 of the Arbitration Act was barred by Section 69 of the Indian Partnership Act. This objection found favour with the learned Civil Judge with the result that the application under Section 20 of the Arbitration Act was dismissed as not maintainable. Feeling aggrieved against that order the plaintiffs have come up in appeal before this Court.

3. The limited question for consideration in this appeal is whether the application under Section 20 of the Arbitration Act, that was moved by the plaintiff appellants, was bit by Section 69 of the Partnership Act.

4. Sub-section (1) of Section 69 of the Partnership Act states that no suit to enforce a right arising from a contract or conferred by the Partnership Act can be instituted in any court by or on behalf of any person suing as a partner in a firm against the firm, or any person alleged to be or to have been a partner in the firm unless the firm is registered and the person suing is shown in the Register of Firms as a partner. Sub-section (2) of Section 69 states that no suit to enforce a right arising from a contract can be instituted in any court by or on behalf of a firm against any third party unless the firm is registered and the persons suing are or have been shown in the Register of firms as partners. sub-section (3) of Section 69 states that the provisions of sub-section (1) and sub-section (2) shall also apply to a claim of set-off or other proceedings to enforce a right arising from a contract but nothing contained in sub-sections (1) and (2) shall affect the einforcement of any right to sue for the dissolution of a firm or for accounts of a dissolved firm or any right to realise the property of a dissolved firm.

5. Now, in the instant case, it was admitted on both hands that there was a partnership between the parties which was not registered. It was also not disputed that the application under Section 20 of the Arbitration Act was moved by the appellants in pursuance of an arbitration clause contained in the agreement executed between the parties. By sub-section (3) of Section 69 the legislature made applicable the provisions contained in sub-sections (1) and (2) also to proceedings are instituted to enforce a right arising from a contract. Now, since the application under Section 20 of the Arbitration Act was filed by the appellants in view of the arbitration clause existing in the agreement executed between the parties, it is manifest that the proceedings arising out of the application under Section 20 were proceedings to enforce the right arising from the contract as envisaged in sub-section (3) of Section 69.

6. Some effort was initially made by the learned counsel for the appellants to urge that the proceedings under Section 20 of the Arbitration Act would not be ‘proceedings’ within the meaning of that expression used in sub-section (3) of Section 69. However, for the reasons already stated, that argument is without any substance. It may not be out of place to mention here that the point also stands concluded by a couple of decisions.

7. In the case of Jagdish Chandra v. Kataria Traders (India) Ltd. . A.I.R 1964 S.C 1882., in view of an agreement between the parties for settlement of dispute by arbitration, an application was moved under Section 8 of the Arbitration Act to set an arbitrator appointed for the settlement of the dispute between the parties. It was urged in that case that Section 69(3) of the Indian Partnership Act afforded a bar to the petition because the partnership was not registered. After taking into account the language used in Section 69 of the Partnership Act, the Court held that the proceedings arising out of the application under Section 8 of the Arbitration Act were covered by the expression ‘other proceedings’ contained in sub-section (3) of Section 69. It was further held that the proceedings were to enforce a right arising from the contract of the parties. Now, if the proceedings under Section 8, which are of a limited nature, would be covered by sub-section (3) of Section 69, we see no reason whatsoever why proceedings under Section 20 of the Arbitration Act should be covered by that provision. The point came in directly for consideration before a Division Bench of this Court in F.A.F.O No. 19 of 1961 decided by N.U Beg and G.D Sahgal, JJ. of Lucknow Bench on April 15, 1966—Relying on the decision of the Supreme Court in the case of Jagdish Chandra v. Kataria Traders (India) Ltd. (supra) this Court held that the proceedings arising out of the application under Section 20 of the Arbitration Act in the case of an unregistered Partnership were barred by Section 69(3) of the Partnership Act.

8. Learned counsel for the appellants then invited our attention to clause (a) to sub-section (3) of Section 69 which engrafts an exception to sub-sections (1) and (2) thereof. It was urged that, if the proceedings under Section 20 of the Arbitration Act are for dissolution of any firm or for accounts of a dissolved firm, they would be protected by clause (a) of sub-section (3) of Section 69. Learned counsel contended that in the instant case, the firm had already been dissolved and proceedings under Section 20 had been instituted for accounts and, consequently, the application under Section 20 could not be thrown out as not maintainable. We have given our careful thought to the contention rasied, but we find ourselves unable to accept the same.

9. For a proper appreciation of the contention raised, it will be necessary to reproduce the relevant part of sub-section (3) of Section 69 of the Partnership Act. It reads as under:—

“(3) The provisions of sub-sections (1) and (2) shall apply also to a claim of set-off or other proceedings to enforce a right arising from a contract, but shall not effect:—

(a) the enforcement of any right to sue for the dissolution of a firm or for accounts of a dissolved firm, or any right or power to realise the property of a dissolved firm, or

(b) .............”

10. As already stated earlier, sub-sections (1) and (2) of Section 69 refer exclusively to suits. By sub-section (3) of Section 69, the legislature only made applicable the provisions of sub-sections (1) and (2) of Section 69 to a claim of set-off or other proceedings. The legislature then proceeded to say that nothing contained in sub-sections (1) and (2) shall affect the enforcement of any right to sue for the dissolution of a firm or for accounts of a dissolved firm. In the juxtaposition in which sub-section (3) has been placed by the legislature, it is clear that the expression ‘to sue’ contained in clause (a) of Sub-section (2) of Section 69 has to be read in the context of the provisions contained in sub-sections (1) and (2). In other words, the expression ‘to sue’ contained in clause (a) of sub-section (3) takes ciear from the word ‘suit’ used in sub-sections (1) and (2). Clause (a) of sub-section (3), in our opinion, only excludes, from the ambit of sub-section (3) of Section 69, suits for the dissolution of a firm or for accounts of a dissolved firm. Clause (a) would not, in our opinion, protect from the bar of Section 69 proceedings other than suits.

11. But even assuming for a moment that the expression ‘to sue’ in clause (a) of sub-section (3) shall include proceedings other than suits, those proceedings should be for the dissolution of a firm or for the accounts of a dissolved firm. The application under Section 20 of the Arbitration Act in the instant case was neither for the dissolution of a firm nor for the accounts of a dissolved firm. It was only for the enforcement of the rights of getting the dispute settled by arbitration. The matter of dissolution or accounting lay within the power of the arbitrator after one was appointed. We are fortified in this conclusion by the decision of this Court in F.A.F.O No. 19 of 1961 decided by N.U Beg and G.D Sahgal, JJ. On April 15, 1966. In that case an identical argument was raised and the Court observed:

“On behalf of the appellants strong reliance has been placed on clause (a) of sub-section (3) of Section 69 of the Partnership Act which exempts proceedings relating to the enforcement of a right to sue for accounts of a dissolved firm from the ban imposed by Section 69(1) and (2) of the Act. The learned counsel for the appellants had argued that the application for arbitration is substantially an application seeking to enforce a right to obtain accounts of a dissolved firm. It is no doubt true that the firm was dissolved. We, however, find it difficult to accept the contention that an application for arbitration in which a question of accounting might arise for decision by the arbitrator is tantamount to an application seeking to have accounts of a dissolved firm. It is no doubt true that the question of accounting might arise in the proceedings. That, however, may arise at a subsequent stage. The basic question in the case would be whether the arbitration clause is attracted, and, as a result of the application of the arbitration clause, the parties would be entitled to have an arbitrator appointed. Under the circumstances, we are of opinion that the application under Section 20 of the Arbitration Act would be hit by the prohibitory provisions of Section 69(1) read with sub-section (3) of the same section of the Partnership Act.”

12. Learned counsel for the appellants also urged that, if we take the above view of the provisions contained in Section 69(3) of the Partnership Act, it would leave the appellants without any remedy whatsoever. It was urged that this could never be the intention of the legislature. Learned counsel further urged that the decision of this Court in F.A.F.O No. 19 of 1961, therefore, require reconsideration. We respect our inability to accept that argument as well. It is well established that, if the language of any provision of law is clear, the mere fact that it causes hardship to any particular party can be no ground to interprets it in a manner not consistent with the language thereof. Further, as already indicated earlier, the Court in reaching its conclusion in F.A.F.O No. 19 of 1961 (supra) placed reliance on the decision of the Supreme Court in the case of Jagdish Chandra v. Majaria Trandara (India) Ltd. (supra). The question does not, therefore, call for an reconsideration.

13. In passing we may add that we also do not agree with the learned counsel for appellants that, if we interpreted Section 69(3) in the manner proposed above, the appellants would be left without any remedy. In the case of Smt. Panna Devi v. Bishambhar Nath Puri . A.I.R 1976 All. 19. the appellants first filed in application under Section 20 of the Arbitration Act which was dismissed as barred by Section 69(3) of the Arbitration Act. The appellants then filed a suit for rendition of accounts. The respondents there filed an application under Section 34 of the Arbitration Act and there upon the suit was stayed. The plaintiffs then came up in appeal before this Court and the Court held that the suit being for rendition of accounting was not hit by Section 69 of the Partnership Act. Court, however, upheld the order of the court below in view of the fact that there was an agreement for arbitration between the parties which was neither invalid nor void and there was nothing to show that the respondents were not agreeable to the settlement of dispute by arbitration at the time when the suit was filed. It was represented before the Court that an application under Section 20 of the Arbitration Act had already been presented earlier by the plaintiff-appellants which was dismissed as not maintainable. To this the Court replied in the following terms:

‘But, this did not mean that the plaintiffs and the defendants could not refer the dispute to arbitration without the intervention of the court. They had agreed that ‘in case of any dispute between the partners relating to partnership, the matter shall be referred to arbitration and the award of the arbitrator will be binding on all partners.’ In terms of this agreement the parties thereto could appoint an arbitrator and refer the dispute to him. This, they could do outside the court and without seeking any help of the court. The defendants pleaded in their application under Section 34 of the Arbitration Act that ‘even at the time of the commencement of the proceedings in the above noted suit and also at present the applicants are ready and willing to settle the dispute or disputes, if any, through arbitration as laid in the partnership agreement dated October 23, 1952’. The plaintiffs having failed to give any notice to the defendants to appoint an arbitrator and to refer to the dispute to an arbitrator so appointed, could not, in our view, resist the claim set up under Section 34 of the Arbitration Act by the defendants.”

14. In view of the aforesaid observations made by this court in the case of Smt. Dhara Devi v. Bishambhar Nath Puri (supra) the contention raisd by the learned counsel that the appellants would be left with no remedy whatsoever, if we interpret Section 69 of the Partnership Act, as proposed earlier, does not appear to be correct. Thus having given our most careful thought to the contentions raised by the learned counsel for the appellants, we find that this appeal must fail.

15. The appeal accordingly failed is hereby dismissed with costs.