The Chief Justice:—
1. This appeal by defendant 1 and 3 to 8 is from an order of the Subordinate Judge, Vellore. He declined to grant stay under S. 34 of the Arbitration Act, 1940. On 5th March 1972, a partnership deed was entered into between the parties which provided for settlement, by arbitration, of all disputes arising between the parties in the partnership. The husband of one of the partners was named as the Arbitrator. This relationship, and there is no dispute about it, was known to all the parties concerned at the time the partnership agreement was entered into. Notwithstanding the arbitration clause, the plaintiffs-respondents instituted a suit for partition and also dissolution of the partnership. The appellants have no objection to the suit being proceeded with so far as it related to partition but resisted the suit in respect of the relief of dissolution of the partnership, on the ground that it should be dealt with in arbitration. The Subordinate Judge declined to grant stay, as in his view, the arbitrator's wife, who was one of the partners, according to the plaintiffs was responsible for expelling the plaintiffs from the firm and the arbitrator was not likely to be impartial and also that the suit was a composite one since there was also the relief for partition asked for.
2. In our opinion, the order of the Subordinate Judge cannot be supported. As we already indicated, the partners knew full well when the partnership agreement was entered into the relationship between the Arbitrator and one of the partners. Nothing has been said or proved against the named Arbitrator either by his conduct or by expression or other circumstances that he would be partial or would act with bias—as arbitrator. The allegation that the arbitrator's wife, as a member of the partnership was responsible for expelling the plaintiffs, could not reasonably give rise to the inference that her husband would not act impartially when he was called upon to serve as an arbitrator. U.P Co-operative Federation v. Sunder Bros, Delhi(1) relied on by the respondents is distinguishable. In that case, the Registrar of Co-operative Societies himself was the ex-officio President of the Society and it was with his approval the agreement in dispute there was terminated. That being so, the Supreme Court was of opinion that the Registrar could not possibly be impartial as he was a party to the cancellation of the relationship, which was already known, there is nothing to point to the Arbitrator being likely to be biased in any way against the plaintiffs. We cannot assume from the mere relationship of the Arbitrator with one of the members of the partnership that the Arbitrator would act otherwise than impartially. Printers (Mys) Ltd. v. P. Joseph(2) to which our attention was invited for the respondents, lays down the general principles which should govern exercise of the discretionary power under S. 34 of the Arbitration Act. In that case the following observation is pertinent to the view we have taken in this case.
“In exercising its discretion under S. 34 the court should not refuse to stay the legal proceedings merely because one of the parties to the arbitration agreement is unwilling to go before an arbitrator and in effect wants to resile from the said agreement nor can stay be refused merely on the ground that the relations between the parties to the dispute have been embittered.”
In this case, there is not even an allegation that there was any such embitterment. The parties have, with open eyes and knowing the fact of the relationship, named the husband of one of the partners as arbitrator, and we do not see why the plaintiffs-respondents could be allowed to get out of the agreement. If any foundation had been laid for their alleged apprehension that the arbitrator might not be impartial, one can understand that. But that is not the case here.
3. The other ground is that the suit is a composite one and, therefore, no stay should be granted. But that circumstance, in our opinion, will not help the plaintiffs. As already mentioned, the appellants have no objection to the suit being proceeded with in so far as it related to partition. If there should be any difficulty in making partition without the dissolution of the partnership is decided upon and the rights are arbitrated, that part of it will, of course, have to wait. On the ground, we do not see why stay should be refused. The appeal is allowed with costs.
V.C.S