Smt. Prem
Lata & Anr Vs. M/S. Ishar Dass Chaman Lal & Ors [1995] INSC 23 (10 January 1995)
Ramaswamy,
K. Ramaswamy, K. Manohar Sujata V. (J)
CITATION:
1995 AIR 714 1995 SCC (2) 145 JT 1995 (1) 557 1995 SCALE (1)145
ACT:
HEAD NOTE:
ORDER
1.
Application for substitution is allowed.
2.
This appeal by special leave, arises from the judgment of the learned Single
Judge of the Punjab and Haryana High Court in Civil
Revision No.660/85, dated May 7,1985.
3.
M/s. Ishar Das Chaman Lal partnership firm consists of Ishar Das, the father, Chaman
Lal and Om Prakash, his sons. By a deed of partnership dated 13.12.965 the
aforesaid partnership firm was constituted but the firm was not 558 registered
under s.69 of the Indian Partnership Act. Chaman Lal, the eldest son died
6.3.1978, by obvious reasons of which the partnership stood dissolved. By the
death of one of the members, it is no longer possible to adhere to the original
contract. The appellants the widow and alleged son of the deceased Chaman Lal
called upon the respondents to render the accounts of the firm. Since they did
no do so, invoking Clause (16) of the partnership deed, the appellants had
called upon the respondents to refer the dispute to M/s. Tara Chand and Hans Raj
Jain, Income-tax practitioners, the named arbitrators in the contract, to
resolve the dispute. Since the respondents had refused to refer the dispute,
the appellants invoked the jurisdiction of the civil court under s.20 of the
Arbitration Act 1940 for short the Act. The respondents resisted the claim
contending that since the partnership firm was an unregistered one, by
operation of s.69 of the Partnership Act, the application under s.20 of the Act
would not lie.
The
trial court negatived the contention of the respondents.
But,
on appeal and in revision, ultimately, the High Court held that sub-s. (1) of
s.69 and main part of sub-s.(3) of s.69 exclude the application of s.20 of the
Act and consequently, the suit is not maintainable. Thus, this ap- peal, by
special leave.
4. Shri
Dhruv Mehta, the learned counsel appearing for the appellants neatly contended
that the appellants arc only seeking to enforce the rights of the parties
arising from the dissolution of the firm for rendition of accounts of the
dissolved firm and to take the property or the rights therein as per the terms
of tic contract to which Chaman Lal was entitled to. Instead of filing a suit
they invoked the arbitration clause 16 for reference to resolve the dispute by
an alternative resolution forum created by the parties.
Since
sub-s.3(a) of s.69 of the Partnership Act carved out an exception to the main
part of sub-ss.(1) and (2) of s.69, there is no prohibition for the appellants
to invoke clause 16 of the partnership deed and that therefore, the suit filed
under s.20 of the Act is maintainable.
5. Shri
Satish Chandra, the learned Senior counsel for the respondents contended that
"to sue", as envisaged in sub- s.(1) and main part of sub-s.(3) of
s.69, includes entitlement to enforce the right created under the contract.
Since
the partnership firm was an unregistered one, the rights arising under the
contract, namely, reference to the arbitration under clause 16 of the contract
itself is a right to sue under The content and that therefore, the suit under
s.20 of the Act is not maintainable.
6. The
question, therefore, is whether the suit filed under s.20 of the Act is
maintainable to work out the rights given to the parties under clause (a) to
sub-s.(3) of s.69 of the Partnership Act? Section 20 of the Arbitration Act
provides that:
"20.
Application to file in Court arbitration agreement (1) Where any have entered
into an arbitration agreement before the institution of any suit with respect
to the subject-matter of the agreement or any part of it, and where a
difference has arisen to which the agreement applies, they or any of them
instead of proceeding under Chapter II, may apply to a Court having
jurisdiction the be filed in court (2) xxxxxx 559 (3)xxxxxx (4)x x x x x x, the
Court shall order the agreement to be filed, and shall make an order of
reference to the arbitrator appointed by the parties, whether in the agreement
or otherwise, or, where the parties cannot agree upon an arbitrator, to an
arbitrator appointed by the Court." Clause 16 of the partnership deed
provide that:
"
16. That any dispute or question in connection with the partnership firm or
this deed shall be referred to arbitration of Shri Tarachand and Shri Hansraj
Jain, Income-tax Practitioner, and they shall be the arbitrators on behalf of
the panics under the provision of the Indian Arbitration Act of 1940, or any
statutory modification or re- enactment thereof for the time being in
force."
7. The
question, therefore, is whether s.69 prohibits the reference by the Court under
s.20 of the Act? Section 69(3)(a) of the Partnership Act reads thus:
"69.
Effect of non-registration. -- (1)x x x (2) x x x (3) The provisions of sub-ss.
(1) and (2) shall apply also to a claim of set-off or other proceeding to
enforce a right arising 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 x x x x x x. " Undoubtedly, s.69(1) prohibits laying
the suit to enforce a right arising from a contract or conferred by the Act by
or on behalf of a person suing as a partner in the firm against the firm or any
person alleged to be or to have been a partner in the firm. Ibis Court in Jagdish
Chander Gupta v.
Kajaria
Traders (India) Ltd., 1964 (8) SCR 50, considering the words 'other
proceedings' in sub-s.(3) of s.69, held that the doctrine of ejusdem generis
would not apply and the words 'other proceedings' include the right arising
under an arbitration agreement between the parties is a right arising under the
contract. The words 'other proceedings' in sub- s.(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
proceedings'. In that case, since the parties sought to avail the remedy under
s.8 of the Act, this Court held that the words 'other proceedings' include the
proceedings under s.8 of the Act and that, therefore, the application would not
lie. How ever, this Court had expressly laid thus:
"In
our judgment, the words 'other pro- ceedings' in s.(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
proceedings'. 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 en- forcement of any right arising
from contract except those expressly mentioned as exceptions in sub-s.(3) and
sub-s.(4)." Thus this Court also had given effect to the exceptions carved
out by sub-ss.(3) and (4) of s.69 of the Partnership Act from the prohibition
imposed by sub-ss. (1) and (2) and main part of sub-s.(3) even though 560 the
firm was not registered under s.69.
8.It
is seen that with the demise of the partners, ipso facto, the partnership stood
dissolved. What the legal representatives of the deceased partner, is seeking
to enforce is for accounts of a dissolved firm or any right or power to realise
the property of the dissolved firm. The right 'to sue' for the dissolution of
the firm must, of necessity, be interpreted to mean the right to enforce the
arbitration clause for resolution of the disputes relating to dissolved firm or
for rendition of accounts or any right or power to realise the property of the
dissolved firm.
9.
Indisputably the first appellant is the widow of Chaman Lal one of the
partners. Therefore, she steps into the shoes of the deceased partner who had a
right in the dissolved partnership firm. Sub-s.(3)(a) carves out three
exceptions to sub-s.(1) and (2) of s.69 and also to the main part of sub-s.(3)
of s.69, namely, (1) the enforcement of any right to sue for the dissolution of
firm (2) for accounts of the dissolved firm and (3) any right or power to realise
the property of the dissolved Ems Having excluded from the embargo created by
the main part of sub-s.(3) or sub-s.(1) and (2) of s.69, the right to sue would
not again to be construed to engulf the exceptions carved out by sub- s.(3) or
subs.(4) of s.69 of the Act. Any construction otherwise would render the
exceptions, legislature advisedly has carved out in subss.(3) and (4) of s.69,
otiose. The object appears to be that the partnership having been dissolved or
has come to a terminus, the rights of the parties are to be worked out in terms
of the contract of the partnership entered by and between the partners and the
rights engrafted therein. The exceptions carved out by sub- s.(3) are to
enforce those rights including the rights to dissolution of the partnership
despite the fact that the partnership firm was an unregistered one. Having kept
that object in view we are of the considered opinion that the alternative
resolution forum agreed by the parties, namely, reference to a private
arbitration is a mode of enforcing the rights 'given under clause (a) of sub.s.(3)
of s.69 of the Act and gets excluded from the main part of sub-s.(3) and sub-ss.(1)
and (2) of 69. The enforcement of the right to sue for dissolution includes a
right for reference to an arbitration in terms of the agreement of the
partnership by and between the parties. Therefore, there is no embargo for
filing a suit under s.20 of the Act.
10. It
is fairly stated by Shri Satish Chandra that the party can enforce the right by
a suit for rendering accounts and for realisation of the property of the
dissolved firm pro-rata. When that is permissible by an exception carved out by
sub-s.(3)(a) to s.69, we are of the view that there is no prohibition to invoke
arbitration clause under the deed of partnership, agreed to by and between the
parties to invoke s.20 of the Act. Thus considered, we arc of the view that the
suit under s.20 of the Act is maintainable. The High Court has, therefore,
committed manifest error of law in holding otherwise.
11.
The appeal is allowed with costs of Rs.5,000/-
12.
Since we have allowed the appeal we direct the trial court to send the
reference immediately to the named arbitrators and we do hope that the
arbitrators would immediately enter upon the reference and 561 decide the
dispute as expeditiously as possible within a period of 6 months from the date
of the receipt of this order as this is a matter pending for long time.
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