Jagdish Chander Gupta Vs. Kajaria
Traders (India) Ltd.  INSC 142 (29 April 1964)
29/04/1964 HIDAYATULLAH, M.
GUPTA, K.C. DAS AYYANGAR, N. RAJAGOPALA
CITATION: 1964 AIR 1882 1964 SCR (8) 50
agreement-Provision for referring to arbitration-Partnership not registeredApplication
in the High Court for appointment of arbitratorIf maintainable-Interpretation
of statute-Ejusdem GenerisNoscitur a sociis-Indian Partnership Act, 1932 (9 of
1932), s. 69-Arbitration Act, 1940 (Act 10 of 1940), s. 8(2).
The respondent entered into a partnership
agreement with the appellant. But this was not registered. There was an
arbitration clause stipulating that in case of dispute the matter will be
referred for arbitration in accordance with Arbitration Act, 1940.
Dispute having arisen between the respondent
and the appellant the former wrote to the latter stating that the dispute be
referred for arbitration and that the respondent has appointed one K as the
sole arbitrator. On the failure of the appellant to agree to this the
respondent filed an application under s. 8(2) of the Indian Arbitration Act for
the appointment of arbitrator. The application was heard by a Division Bench of
the High Court before which the appellant contended that s. 69(3) of the Indian
Partnership Act, 1932 afforded a bar to the petition because the partnership
was not registered. One of the Judges upheld the contention while the other rejected
it and the matter was referred to another Judge who held that the application
was competent. The present appeal was filed by special leave granted by this
HELD:--(i) Thai since the arbitration clause
formed a part of the agreement constituting the partnership it is obvious that
the proceeding which is before the Court is to enforce a right which arises
from a contract. Whether one views the contract between the parties as a whole
or one views only the arbitration clause it is impossible to think that the
right to proceed to arbitration is not one of the rights which are founded on
the agreement of the parties. The words of s. 69(3) "a right arising from
a contract" are in either sense sufficient to cover the present matters.
(ii) Interpretation ejusdem genuris or
noscitur a sociis need not always be made when showing particular classes are
followed try general words. Before the general words can be so interpreted
there must be a genus constituted or a category disclosed with reference to
which the general words can and are intended to be restricted. The expression
"claim of set off" does not disclose a category or a genus.
Set offs are of two kinds legal and equitable
and both are already comprehended and it is difficult to think of any right
"arising from a contract' which is of the same nature as a claim of set
off and can be raised by a dependent in suit.
Allen v. Emerson, (1944) 1 K.B. 362, referred
Hafiz Qamar Din v. Nur Din, A.I.R. 1936 Lah.
136, Babulal Dhan Dhania v. M/s. Gautam & Co. A.I.R. 1950 Cal. 341,
Kottamasu sreemannarayanmurthy v. Chokka Arjanadtu, A.I.R.
1939 Mad. 145, Jamal v. Firm Umar Haji Karim,
I.L.R. 1943 Nag. 540, and Ram Lal Harnam Das Y. Bal Kishan, A.I.R. 1957 Punj.
(iii) The words "other proceeding"
in sub-section (3) must receive their full meaning untramelled by the words
"a claim of set off. The latter words neither intend nor can be construed
to cut down the generality of the words "other proceeding".
The sub-section provides for the application
of the provisions of sub-sections (1) and (2) to claims of set off and also to
other proceedings of any kind which can properly be said to be for enforcement
of any right arising from contract except those expressly mentioned as
exceptions in subsections (3) and (4).
CIVIL APPELLATE JURISDICTION: Civil Appeal
No. 791 of 1962.
Appeal by special leave from the judgment and
order dated March 22, 1960, of the Bombay High Court in Award No. 18 of 1959.
S. T. Desai and I. N. Shroff, for the appellant.
B. C. Misra, for the respondent.
April 29, 1964. The Judgment of the Court was
delivered by HIDAYATULLAH J.-This appeal by special leave is directed against
an order of the High Court of Bombay dated March 22, 1960 in its ordinary
original civil jurisdiction. The facts are simple. By a letter dated July 30,
Kajaria rraders (India) Ltd., who is the
respondent here and Messrs. Foreign Import and Export Association (sole
proprietory firm owned by the appellant Jagdish C. Gupta) entered into a
partnership to export between January and June 1956, 10,000 tons of manganese
ore to Phillips Brothers (India) Ltd., New York. Each partner was to supply a
certain quantity of manganese ore. We are not concerned with the terms of the
agreement but with one of its clauses which provided:
"That in case of dispute the matter will
be referred for arbitration in accordance with the Indian Arbitration Act."
The company alleged that Jagdish Chander Gupta failed to carry out his part of
the partnership agreement. After some correspondence, the company wrote to
Jagdish Chander Gupta on February 28, 1959 that they had appointed Mr. R. J.
Kolah (Advocate O.S.) as their arbitrator and asked Jagdish Chander Gupta
either to agree to Mr. Kolah's appointment as sole arbitrator or to appoint his
own arbitrator. Jagdish Chander Gupta put off consideration and on March 17,
1959 the company informed Jagdish Chander Gupta that as he had failed to appoint
an arbitrator within 15 clear days they were appointing Mr. Kolah as sole
arbitrator. Jagdish Chander Gupta disputed this and the corn53 pany filed on
March 28, 1959 an application under s. 8 (2) of the Indian Arbitration Act,
1940 for the appointment of Mr. Kolah or any other person as arbitrator.
Jagdish Chander Gupta appeared and objected
inter alia to the institution of the petition. Two grounds were urged (i) that
s. 8(2) of the Indian Arbitration Act was not applicable as it was not
expressly provided in the arbitration clause quoted above that the arbitrators
were to be by consent of the parties and (ii) that s. 69(3) of the Indian Partnership
Act, 1932 afforded a bar to the petition because the partnership was not
registered. The petition was referred by the Chief Justice to a Divisional
Bench consisting of Mr. Justice Mudholkar (as he then was) and Mr. Justice
The two learned Judges agreed that in the
circumstances of the case an application under s. 8 of the Indian Arbitration Act
was competent and that the court had power to appoint an arbitrator. They
disagreed on the second point: Mr. Justice Mudholkar was of the opinion that s.
69(3) of the Indian Partnership Act barred the application while Mr. Justice
Naik held otherwise, The case was then referred to Mr. Justice K. T. Desai (as
he then was) and he agreed with Mr.
Justice Naik with the result that the
application was held to be competent.
In this appeal it was not contended that the
conclusions of the learned Judges in regard to s. 8(2) were erroneous. The
decision was challenged only on the ground that s. 69(3) was wrongly
interpreted and the bar afforded by it was wrongly disallowed. Section 69 of
the Indian Partnership Act may be reproduced here :
"69.(1) No suit to enforce a right
arising from a contract or conferred by this Act shall 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 or has been shown in the
Register of Firms as a partner in the firm.
54 (2) No suit to enforce a right arising
from a contract shall 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 in the (3) The
provisions of sub-sections(1) and (2) shall apply also to a claim of set-off or
other proceeding to enforce a rightarising from a contract, but shall not
affect(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) the powers of an official assignee, receiver or
Court under the Presidency-towns Insolvency Act, 1909, or the Provincial
Insolvency Act, 1920, to realise the property of an insolvent partner.
(4) This section shall not apply(a) to firms
or to partners in firms which have no place of business in the territories to
which this Act extends, or whose places of business in the said territories are
situated in areas to which, by notification under section 56, this Chapter does
not apply, or (b) to any suit or claim of set-off not exceeding one hundred
rupees in value which, in the Presidency towns, is not of a kind specified in
section 19 of the Presidency Small Cause Courts Act, 1882, or outside the
Presidencytowns, is not of a kind specified in the Second Schedule to the
Provincial Small Cause Courts Act, 1887, or to any proceeding in execution or
other proceeding incidental to or arising from any such suit or claim 'Me
section, speaking generally, bars certain suits and proceedings as a
consequence of non-registration of firms.
Sub55 s. (1) prohibits the institution of a
suit between partners inter se or between partners and the firm for the purpose
of .enforcing a right arising from a contract or conferred by the Partnership
Act unless the firm is registered and the person suing is or has been shown in
the Register of Firms as a partner in the firm. Sub-s. (2) similarly prohibits
a suit by or on behalf of the firm against a third party for the purpose of
enforcing rights arising from a contract unless the firm is registered and the
person suing is or has been shown in the Register of Firms as a partner in the
firm. In the third sub-section a claim of set-off which is in the nature of a
counter claim is also similarly barred. Then that subsection bars "other
proceedings". The only doubt that has arisen in this case is regarding the
meaning to be given to the expression "other proceeding". One way to
look at the matter is to give these words their full and natural meaning and
the other way is to cut down that meaning in the light of the words that
-precede them. The next question is whether the application under s. 8 (2) of
the Arbitration Act can be regarded as a proceeding "to enforce a right
arising from a contract", and therefore, within the bar of section 69 of
the Indian Partnership Act.
Mr. Justice Mudholkar in reaching his
conclusion did not interpret the expression "other proceeding"
ejusdem generis with the words "a claim of set-off". He held further
that the application was to enforce a right arising from the contract of the
parties. Mr. Justice Naik pointed out that the words used were not "any
proceeding" nor "any other proceedings" but "other
proceeding" and that as these words were juxtaposed with 'a claim of set
off' they indicated a, proceeding of the nature of a claim in defence. On the
second point Mr. Justice Naik held that this was not a proceeding to enforce a
right arising from a contract but was a claim for damages and such a claim,
could be entertained because it was based on something which was independent of
the contract to supply ore. He held that the, right which was being enforced
was a right arising from the Arbitration Act and not from the contract of the
Mr. Justice K. T. Desai agreed with most of
these conclusions and suggested that the words preceding "other proceeding",
namely, "a claim of set-off" had 'demonstrative and limiting effect'.
He seems to have ascertained the meaning of the expression "other
proceeding" by reference to the meaning of the words "a claim of set
off", which he considered were associated with it.
Ile first question to decide is whether the
present proceeding is one to enforce a right arising from the contract of the
parties. The proceeding under the eighth section of the Arbitration Act has its
genesis in the arbitration clause, because without an agreement to refer the
matter to arbitration that section cannot possibly be invoked. Since the
arbitration clause is a part of the agreement constituting the partnership it
is obvious that the proceeding which is before the court is to enforce a right
which arises from a contract. Whether we view the contract between the parties
as ;a whole or view only the clause about arbitration, it is impossible to
think that the right to proceed to arbitration is not one of the rights which
are founded on the . agreement of the parties. The words of s.
69(3) "a right arising from a
contract" are in either sense sufficient to cover the present matter.
It remains, however, to consider whether by
reason of the fact that the words "other proceeding" stand opposed to
the words "a claim of set-off" any limitation in their earning was
contemplated. It is on this aspect of the case that the learned Judges have
seriously differed. When in a statute particular classes are mentioned by name
and then are followed by general words, the general words are sometimes
construed ejusdem generis, i.e. limited to the same category or genus
comprehended by the particular words but it is not necessary that this rule
must alwavs apply.
The nature of the special words and the
general words must e considered before the rule is applied. In Allen v.
Emerson (1), Asquith J. gave interesting
examples of particular words followed by general words where the Principle of
ejusdem generis might or might not apply. We ink that the following
illustration will clear any difficulty. In the expression "books,
pamphlets, newspapers and other (1) [i944] 1 K.B. 362.
57 documents" private letters may not be
held included it 'other documents' be intepreted ejusdem generis with what goes
before. But in a provision which reads "newspapers or other document
likely to convey secrets to the enemy", the, words 'other document' would
include document of any kind and would not take their colour from 'newspapers'.
It follows, therefore, that interpretation ejusdem generis or noscitur a sociis
need not always be made when words showiig particular classes are followed by
general words. Before the general words can be so interpreted there must be a
genus constituted or a category disclosed with reference to which the general
words can and are intended to be restricted. Here the expression "claim of
set-off" does not disclose a category or a genus. Set-offs are of two
kinds-legal and equitable-and both are already comprehended and it is difficult
to think of any right "arising from a contract" which is of the same
nature as a claim of set-off and can be raised by a defendant in a suit. Mr. B.
C. Misra, whom we invited to give us examples, admitted frankly that it was
impossible for him to think of any proceeding of the nature of a claim of set
off other than a claim of set-off which could be raised in a suit such as is
described in the second sub-section. In respect of the first sub-secton he
could give only two examples. They are (i) a claim by a pledger of goods with
an unregistered firm whose goods are attached and who has to make an objection
under 0. 21 r. 58 of the Code of Civil Procedure and (ii) proving a debt before
a liquidator. The latter is not raised as a defence and cannot belong to the
same genus as a "claim of set-off". The former can be made to fit but
by a stretch of some considerable imagination. It is difficult for Lis to
accept that the Legislature was thinking of such far-fetched things when it
spoke of "other proceeding" ejusdem generis with a claim of set-off.
Mr. Justice Naik asked the question that if
all proceedings were to be excluded why was it not considered suffi cient to
speak of proceedings along with suits in sub-ss. (1) and (2) instead of framing
a separate subsection about proceedings and coupling 'other proceeding,' with
'a 58 the search for the answer in the' scheme of the section itself gives the
clue. The section thinks in terms of (a) suits and (b) claims of set-off which
are in a sense of the nature of suits and (c) of other proceedings. The section
first provides for exclusion of suits in sub-ss. (1) and (2). Then it says that
the same ban applies to a claim of set-off and other proceeding to enforce a
right arising from a contract. Next it excludes the ban in respect of the right
to sue (a) for the dissolution of a firm, (b) for accounts of. a dissolved firm
and (c) for the realisation of the property of a dissolved firm. The emphasis
in each case is on dissolution of the firm. Then follows a general exclusion of
the section. The fourth sub-section says that the section as a whole, is not to
apply to firms or to partners and firms which have no place of business in the
territories of India or whose places of business are situated in the
territories of India but in areas to which Chapter VII is not to apply and to
suits or claims of set off not exceeding Rs. 100 in value. Here there is no
insistence on the dissolution of the firm. It is significant that in the latter
part of clause (b) of that section the words are "or to any proceeding in
execution or other proceeding incidental to or arising from any such suit or
claim" and this clearly shows that the word "proceeding" is not
limited to a proceeding in the nature of a suit or a claim of set-off.
Subsection (4) combines suits and a claim of set-off and then speaks of
"any proceeding in execution" and "other proceeding incidental
to or arising from any such suit or clainm" as being outside the ban of
the main section. It would hardly have been necessary to be so explicit if the
words other proceeding in the main section had a meaning as restricted as is
suggested by the respondent. It is possible that the draftsman wishing to make
exceptions of different kinds in respect of suits, claims of set-off and other
proceedings grouped suits in sub-ss. (1) and (2), setoff and other proceedings
in sub-s. (3) made some special exceptions in respect of them in sub-s. (3) in
respect of dissolved firms and then viewed them all together in sub-s.
(4) providing for a complete exclusion' of
the section in respect of suits of particular classes. For convenience of
drafting this 59 scheme was probably followed and nothing can be spelled out
from the manner in which the section is sub-divided.
Some cases noticed by the High Court were
cited to us but none of them appears to be really in point. In Hafiz Qamar Din
v. Nur Din(') and Babutal Dhandhania v. Messrs. Gauttam and Co.(') proceedings
were started on an award, in one to make it a rule of the Court and in the
other to get it set aside. These cases are distinguishable because they deal
with awards and it is not necessary to decide whether after an award the
proceeding is one to enforce a right arising from a contract. We do not refer
to them. In Kottamasu Sreemannarayanamuthy and another v. Chakka Arjanadu() a
petition for adjudication of a partner as insolvent was held to be a right
arising not from, a contract but from statute.
Here the right that is being enforced through
the medium of the Arbitration Act arises from the contract between the parties
and is a part of it. In Jamal v. Firm Umar Haji Karim (4 ) the bar of s. 69(3)
was claimed during the execution of a consent decree and was disallowed. Grille
J. observed that the expression 'other
proceeding' indicated something which was 'sui generis of a claim of set-off'.
If the partners of an unregistered firm. go to court without either asking for
a dissolution of the firm or dissolving it themselves and enter into an
agreement and compose their differences it is possible to say that the
enforcement of the consent decree is no more than the enforcement of a right
arising from a contract and is within the ban. It is, however, not necessary to
decide this point here. in Ram Lal Harnam Das v. Pal Krishan and others() it
was expressly pointed out that the expression 'other proceeding' in the third
sub-section applied to proceedings of the nature of a claim of set-off and
nothing else. This case cannot be said to interpret the sub-section correctly.
Similarly, Mahendra v. Gurdeyal('), which lays down that s. 69 does not bar a
partner of an unregistered partnership firm from applying to the court under s.
8 of the Arbitration Act for referring the dispute (1) A.T.R 1936 Lah. 136.
(3) A.I.R. 1939 Mad. 145.
(5) A.I.R. 1917 Punjab 159.
(2) A.r.R. 1950 Cal. 391.
(4) I.L.R. 1943 Nag. 540.
(6) I.L.R. 30 Pat. 109.
60 between partners to arbitrator as provided
in the condition of their agreement, cannot be accepted as sound. The ,reason
given by the Divisional Bench that as s. 69 allows dissolution and accounts of
unregistered partnership it cannot bar such an application appears to us to be
not quite in Point.
In our judgment, the words 'other proceeding'
in subs. (3) must receive their full meaning untramelled by the words 'a claim
of set-off'. The latter words neither intend nor can be construed to cut down
the generality of the words 'other proceeding'. The sub-section provides for
the application of the provisions of sub-ss. (1) and (2) to claims of set-off
and also to other proceedings of any Kind which can properly be said to be for
enforcement of any right arising from contract except those expressly mentioned
as exceptions in sub-s. (3) and sub-s. (4).
The appeal is, therefore, allowed. The
decision of the High Court will be set aside and the application under s. 8(2)
of the Arbitration Act shall stand dismissed with costs throughout on the
applicant in the High Court.