Manohar Lal And Another v. Moti Lal And Another

R.S Narula, J.:— This is a petition for revision, for setting aside and reversing the order of the Court of Shri G.S Sandhu, Senior Subordinate Judge, Ludhiana, dated July 19, 1973 whereby he upheld the order of the Court of Shri N.S Sawaraj, Subordinate Judge First Class, Jagraon, dated March 7, 1973, dismissing the application of Sahib Chand defendant-petitioner for stay of the suit instituted against him and three other persons by Moti Lal respondent under section 34 of the Arbitration Act (hereinafter called the Act) on the allegation that the dispute involved in the suit was covered by an arbitration agreement.

2. The learned Senior Subordinate Judge dismissed the appeal of the present petitioners on four grounds, namely:—

(i) whereas the application for stay under section 34 of the Arbitration Act had been given by Sahib Chand defendant alone, the appeal before him had been filed by one Manohar Lal defendant and not by Sahib Chand;

(ii) the arbitration agreement between the parties covered only such disputes which might have arisen during the existence of the partnership and not after its dissolution, and inasmuch as the firm was not working any more and was not in existence, the disputes between the parties after the firm ceased to work did not come within the ambit of the arbitration agreement;

(iii) the relief under section 34 of the Act for staying a suit being discretionary, this suit could not be stayed as a decree for dissolution had been claimed on the ground that it was just and equitable to order dissolution of the firm and it is primarily for the Court to decide whether it is or it is not just and equitable to do so; and

(iv) the dispute in the instant case is not covered by the arbitration agreement as it is not regarding business of the firm.

3. Whereas the first three out of the above-mentioned four grounds have been clearly mentioned in the order under revision, the fourth ground has merely to be spent out of it. Mr. M.L Satin, learned counsel for the petitioners, submitted that in spite of the fact that relief under section 34 of the Act is discretionary, it is apparent from a perusal of the order under revision that the said discretion has not been exercised judicially by the lower appellate Court, inasmuch as it has gone wrong on facts and has assumed certain things contrary to the record of the case. His first submission is that the observation of the learned Senior Subordinate Judge to the effect that the appeal before him had not been filed by Sahib Chand, but only by one Manohar Lal, was factually wrong. This is not only apparent from the certified copy of the order under revision itself, but has also been verified by me from the record of the lower appellate Court.

4. The record has been shown by me to Mr. G.S Chawla, learned counsel for the plaintiff-respondent. He also submits that there is a factual error in the appreciation of the facts by the lower appellate Court on this score. Sahib Chand was appellant No. 2 before the Senior Subordinate Judge. The first ground on which relief was refused to the defendant-petitioner must, therefore, be kept out of consideration.

5. Mr. M.L Sarin is also on firm ground in submitting that the lower appellate Court has misread and misconstrued the arbitration agreement by confining it to disputes arising during the existence and working of the firm. The arbitration agreement is contained in paragraph 12 of the deed of partnership Exhibit R. 1. That paragraph reads:—

“that any dispute regarding the partnership business or the interpretation of this partnership-deed shall be referred to an arbitrator to be chosen by the partners and his decision shall be binding on the partners.”

6. Even Mr. G.S Chawla could not support the argument which found favour with the lower appellate Court in this regard. Mr. Chawla is correct in conceding that the admitted arbitration agreement contained in the above-quoted stipulation in the partnership-deed does not confine the scope of reference to arbitration of dispute arising during the existence and working of the firm. The second basis of the order under revision must also, therefore, be held to be incorrect.

7. Mr. Sarin is no less correct in his attacking the validity of the third argument on which the order has been passed against his clients by the lower appellate Court. It appears to have weighed with the learned Senior Subordinate Judge that the discretion vested in a Court under section 34 of the Act must be exercised against the person applying for stay in a case where dissolution of firm is claimed in a suit (which is sought to be stayed) filed for dissolution of a firm under the Page: 254just and equitable clause. Mr. Sarin referred to the dictum of their Lordships of the Privy Council in Ram Singh v. Ram Chand AIR 1924 FC 2, in order to lay emphasis on the fact that a partnership-at-will can be dissolved at the instance of any of the partners and that no one has any discretion in that matter. In fact section 43 of the Partnership Act itself provides that any partner may dissolve a partnership-at-will by merely serving a notice of his intention to do so on all other partners. It is also well-settled that even if no such notice is given, a partnership-at-will is automatically deemed to have been dissolved with effect from the date on which a partner of such a firm files a suit for its dissolution. There was, therefore, no question of any discretion being exercised by the Court in dissolving or not dissolving the firm constituted by the parties to this litigation. The deed Exhibit R-1 itself says that the partnership is at will. This fact is again reiterated in so many words in paragraph 1 of the plaint. The dissolution of the firm in this case is therefore, not being sought by the plaintiff-respondent under section 44(g) of the Partnership Act, that is under the just and equitable clause. The third consideration which also appears to have weighed with the learned. Senior Subordinate Judge for dismissing the appeal of the present petitioners was also, therefore, in fact non-existent.

8. Since I was prima facie not inclined to agree with Mr. M.L Sarin on his fourth contention, I allowed Mr. Harbans Lal Sarin, the learned senior counsel for the petitioners in this case, also to make his submission regarding that ground. The learned senior counsel has submitted that there being no dispute regarding the dissolution of the partnership-at-will, the claim for rendition of accounts and for payment to the plaintiff-respondent of such an amount as may be found due to him from the defendant-petitioners on taking such accounts is “a dispute regarding the partnership business” within the meaning of the arbitration clause. I regret my inability to agree with him. Counsel submits that it was the real intention of the parties who were father and sons that they should not be driven to vexatious, lengthy and costly Court proceedings and should be able to settle every possible dispute arising between, them relating to the partnership by reference to arbitration. That might or might not have been the intention of the parties, but it is apparent from a reading of the arbitration clause that it was confined to merely two possible contingencies, namely (i) disputes relating to the interpretation of the partnership-deed; and (ii) disputes relating to “partnership business”. Admittedly no dispute relating to interpretation of the partnership-deed has arisen between the parties so far. The rendition of accounts was not the partnership business. I have gone through the plaint of the suit. The allegations made therein do not reveal that the contentions of the parties on the was is of which outstanding amounts have been claimed by the plaintiff-respondent relate to any dispute relating to the business of the partnership. The claim has been made on the basis of the allegations made against the other partners. In these circumstances I am inclined to think that notwithstanding the fact that most of the grounds on which the order under revision has been passed have been successfully assailed by Mr. M.L Sarin, he cannot succeed in the ultimate analysis on account of this insurmountable hurdle in his way. Moreover, the application for stay which was given in the trial Court does not, in my opinion, satisfy Page: 255the strict requirements of section 34 of the Act. It has been held by Grover, J. (as he then was) in Dwarka Nath Kapur v. Rameshwar Nath, (1968) 59 PLR D 91 that where the dispute between the parties was not mentioned in the application under section 34 of the Arbitration Act, the proceedings in Court could not be stayed as there was no point of difference on which any reference could be made to arbitration before the filing of the suit. All that has been stated in the application after referring to the pendency of the suit and the arbitration agreement is that the remaining partners have all along been ready and willing, and were even now ready to refer the dispute to an arbitrator chosen by the petitioners, but that the plaintiff wanted to avoid reference to arbitration as the account books were in his possession. The application does not at all reveal as to what were the points of difference between the parties or what was the “dispute relating to the partnership business” which the defendant-applicant had all the time been ready and willing to refer to arbitration. For this additional reason, the application of Sahib Chand defendant-petitioner had to fail.

9. This being the situation, this revision petition cannot be allowed. Since, however, the petitioner has succeeded in successfully assailing most of the grounds on which the order under revision was passed, he cannot be burdened with costs. I, therefore, leave the parties to bear their own costs while dismissing this petition.

10. Order accordingly.