Prabhu
Shankar Jaiswal Vs. Sri Sheo Narain Jaiswal & Ors [1996] INSC 1348 (29 October 1996)
A.M.
Ahmadi, Sujata V. Manohar
ACT:
HEAD NOTE:
presents:
Hon'ble
the chief Justice Hon'ble Mrs. Justice Sujata V. Manohar Vikas Singh, Adv, for
L.R. Singh, Adv. for the appellant V.A.Mohta. Sr. Adv., A.K. Choudhary., Advs.
for Manoj Prasad, Adv. with him for the Respondents.
The
following Judgement of the court was delivered:
Mrs. Sujata
V.Manohar.J.
Leave
granted.
The
appellant and respondents 1 to 5 were partners in an unregistered partnership
firm by the name of M/S. Lakshmi Narain a Sons which was constituted under a
deed of partnership dated 4/6.11.1967. The first respondent brought Title Suit
No.71 of 1991 against the appellant and respondent 2 to 5 for dissolution of the partnership firm and for accounts in
the Court of the Sub-Judge, Ranchi. As the
deed of partnership contained an arbitration clause, the appellant made an
application before the Sub-Judge under Section 34 of the Arbitration Act for
stay of the Title Suit No.71 off 1991. This application was granted. In appeal
before the High Court being Misc. Appeal No.13 of 1992, the High Court has
ultimately by its order dated 16.12.1992 upheld the order of the Sub-Judge
granting a stay under Section 34 of the Arbitration Act. The appellant filed
Misc. Case No.11 of 1992 before the Sub-Judge, Ranchi under Section 8 of the Arbitration Act for appointment of
an arbitrator. The first respondent raised a preliminary objection contending
that the partnership firm was unregistered, and by reason of Section 69 of the
Indian Partnership Act, a petition under Section 8 of the Arbitration Act was
not maintainable. The Sub-Judge, however, held that the petition was
maintainable. In Civil Revision No.19O of 1993 which was filed by the first
respondent against his order, the High Court, by its order dated 6.8.1993, has
allowed the revision and held that by reason of Section 69 of the Indian
Partnership Act, a petition under Section 8 of the Arbitration Act is not
maintainable.
The
present appeal is form the order of the High court dated 5.8.1993. The relevant
provisions of Section 69 of the Indian Partnership Act are as follows:
"69
Effect of non-registration-
(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.
(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 firm.
(3)
The provisions of sub-sections (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 (b) the powers of an official assignee,
receiver or Court under the Presidency-towns Isolvency Act, 1909, or the
Provincial Insolvency Act, 1909, to realise the property of an, insolvent
partner.
Under
Section 69(1), a suit, inter alia to enforce right arising from a contract
cannot be filed by a person Suing as a partner in a firm against the other partners
of the firm unless the firms registered. Under sub-section (3) any other
proceeding to enforce a right a arising from a contract by a person suing as a
partner against the other parnters of an unregistered Firm is also barred.
Since the right to resort to arbitration flows from the contract between the
parties contained in the partnership deed, a suit or any other proceeding by a
partner to enforce this term in the contract against the other partners would,
therefore, normally be barred under the first part of sub- section (3) of
Section 69. (Vide Jagdish Chandra Gupta v. Kajaria Traders (India) Ltd. [AIR
1964 SC 1882 infra]). Sub- section (3) in its later part, however, carves out
certain exceptions to the bar contained in sub-sections (1), (2) and the first
part of sub section(3).
Under
sub-section (3)(a) this bar will not affect 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.
Therefore,
although the partnership firm may be unregistered, one partner can sue other
partners for dissolution of the firm and for accounts. The words "to
sue" used in sub-section (3)(a) cannot be construed narrowly to refer only
to suits for dissolution of partnership and accounts. The exception contained
in sub-section (3)(a) applies not merely to sub-sections (1) and (2) but also
to the first part of sub-section (3) which deals with proceedings other than
suits. Therefore, in order that sub- section (3)(a) would apply to all these
provisions, the words "to sue" section (3)(a) must be understood as
applying to any proceedings for dissolution of partnership or for accounts of a
dissolved firm or to realise the property OF a dissolved firm. This proceeding
may be either by way of a suit or it can even be a proceeding under the
Arbitration Act to secure these rights through arbitration. [Vide Prem Lata (Smt)]
& Anr. v. M/s Ishar Dass Chaman & Ors. (1995 2 SCC 145), a judgment to
which one of us was a party.] Therefore, an arbitration clause in a partnership
deed of an unregistered partnership can be enforced for the purpose of
securing, inter alia, a dissolution and accounts of the partnership or for
enforcing any right or power for obtaining the property of a dissolved firm.
Our
attention was drawn to the case of Jagdish Chandra Gupta v. Kajaria Traders
(India) LTD (AIR SC 1882) where this Court has held that the word
"proceedings' in the first part of sub-section (3) must be widely
construed to include proceedings in arbitration. The exception carved out under
sub-section (3)(a) would edually apply to such proceedings.
The
dispute, however, in that case between the partners did not relate to
dissolution or accounts of the partnership firm. Hence a resort to the exception
under sub-section (3)(a) was not required. In fact, this aspect was neither
argued nor considered by this Court in that case. This question directly arose
in Prem Lata's case (supra). This Court has held that a suit under Section 20
of the Arbitration Act was maintainable under the exception carved out in
sub-section (33(a) of Section 69 of the Indian Partnership Act. Hence where
arbitration is sought under the arbitration clause in a partnership deed of an
unregistered firm for the of dissolution and accounts of the partnership Firm,
the partners can maintain all applications/petitions under the Arbitration Act
for the purpose of enforcing their right to secure dissolution and accounts of
the partnership firm through aribitration. In fact, in the present case the
suit for dissolution and accounts of the partnership firm has been stayed under
Section 34 of the Arbitration Act at the instance of respondent No.1. The
petition of the appellant, therefore, under Section 8 of the Arbitration Act is
maintainable in the present case.
The
Judgment and order of the High Court dated 6.8.1993 is set aside. The appeal is
allowed with cost.
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