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IN THE HIGH COURT OF BOMBAY
(K. N. Wanchoo, M. Hidayatullah, K.C. Das Gupta and N. Rajagopala Ayyangar JJ.)
JAGDISH CHANDER GUPTA - Appellant
V.
KAJARIA TRADERS (INDIA) LTD. - Respondent
Advocates appeared
For appellant - S.T. Desai and I.N. Shroff.
For respondent -B.C. Mina.
ARBITRATION ACT, 1940 - SECTION 8(2) - PARTNERSHIP ACT, 1932 - SECTION 69(3) - INTERPRETATION - APPLICATION FOR APPOINTMENT OF ARBITRATOR - BAR OF SECTION 69(3) - SCOPE AND APPLICABILITY.
Fact of the Case:
A partnership agreement between Messrs. Kajaria Traders (India) Ltd. (respondent) and Messrs. Foreign Import and Export Association (appellant) contained an arbitration clause providing for arbitration in accordance with the Indian Arbitration Act. A dispute arose, and the respondent appointed an arbitrator and asked the appellant to either agree to the appointment or appoint his own arbitrator. The appellant failed to do so, and the respondent filed an application under section 8(2) of the Indian Arbitration Act for the appointment of an arbitrator.
Finding of the Court:
The High Court held that section 8(2) of the Indian Arbitration Act was applicable and that the Court had the power to appoint an arbitrator. However, the High Court disagreed on the issue of whether section 69(3) of the Indian Partnership Act barred the application, with one judge holding that it did and the other holding that it did not.
Issues: 1. Whether section 8(2) of the Indian Arbitration Act was applicable to the case. 2. Whether section 69(3) of the Indian Partnership Act barred the application for the appointment of an arbitrator.
Ratio Decidendi: 1. The Court held that section 8(2) of the Indian Arbitration Act was applicable to the case, as the arbitration clause in the partnership agreement provided for arbitration in accordance with the Act. 2. The Court held that section 69(3) of the Indian Partnership Act did not bar the application for the appointment of an arbitrator. The Court interpreted the words "other proceeding" in section 69(3) to mean any proceeding to enforce a right arising from a contract, and held that the application under section 8(2) of the Arbitration Act was not such a proceeding. The Court reasoned that the right to proceed to arbitration was a right arising from the contract between the parties, but that the application under section 8(2) was not a proceeding to enforce that right, but rather a proceeding to enforce the right to have the dispute resolved through arbitration.
Final Decision: The appeal was allowed, the decision of the High Court was set aside, and the application under section 8(2) of the Arbitration Act was dismissed with costs.
HIDAYATULLAH J. -This appeal by special leave is directed against an order of the High Court of Bombay dated Maroh 22, 1960, in its ordinary original civil jurisdiction. The facts are simple. By a letter dated July 30, 1955, Messrs. Kajaria Traders (India) Ltd., who is the respondent here and Messrs. Foreign Import and Export Association (sole proprietary 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 is 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. Kolahs 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 bad failed to appoint an arbitrator within 15 clear days they were appointing Mr. Kolah as sole arbitrator. Jagdish Chander Gupta disputed this and the company filed on March 28, 1959, an application under section 8 (2) of the Indian Arbitration Act, 1940, for the appointment of Mr. Kolah or any other person as arbitrator.
2. Jagdish Chander Gupta appeared and objected inter alia to the institution of the petition. Two grounds were urged: (i) that section 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 section 69 (3) of the Indian Partnership Act, 1932, affords 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 Naik. The two learned Judges agreed that in the circumstances of the case an application under section 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 section 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.
3. In this appeal it wail not contended that the conclusions of the learned Judges in regard to section 8 (2) were erroneous. The decision was challenged only on the ground that section 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.
(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 affect -
(a)
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