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PATNA HIGH COURT
A V Srinivasa Reddy, J
SHEO NARAIN JAISWAL - PETITIONER
VERSUS
PRABHU SHANKAR JAISWAL AND OTHERS - RESPONDENTS
Civil Revision No. 190 of 1993
Decided on : August 6, 1993
ARBITRATION - SECTION 69, PARTNERSHIP ACT - APPLICABILITY - UNREGISTERED PARTNERSHIP - APPLICATION UNDER SECTION 8, ARBITRATION ACT - MAINTAINABILITY.
Fact of the Case:
An application was filed under Section 8 of the Arbitration Act for reference to arbitration of disputes between partners of an unregistered partnership firm. The court below held that the application was maintainable, relying on the exception provided in Section 69(3)(a) of the Partnership Act, which exempts from the bar of Section 69 suits for dissolution of a firm or for accounts of a dissolved firm.
Finding of the Court:
The court held that the application under Section 8 of the Arbitration Act was not maintainable as it was hit by the bar of Section 69 of the Partnership Act. The court held that the exception provided in Section 69(3)(a) of the Partnership Act only applies to suits for dissolution of a firm or for accounts of a dissolved firm, and not to other proceedings such as arbitration proceedings.
Issues: Whether an application under Section 8 of the Arbitration Act for reference to arbitration of disputes between partners of an unregistered partnership firm is maintainable.
Ratio Decidendi: The court held that the application under Section 8 of the Arbitration Act was not maintainable as it was hit by the bar of Section 69 of the Partnership Act. The court held that the exception provided in Section 69(3)(a) of the Partnership Act only applies to suits for dissolution of a firm or for accounts of a dissolved firm, and not to other proceedings such as arbitration proceedings. The court relied on the Supreme Court decision in Jagdish Chandra Gupta v. Kajriya Traders (India) Limited (AIR 1964 SC 1882), which held that proceedings arising out of Section 8 of the Arbitration Act are covered by the expression 'other proceeding' contained in sub-section (3) of Section 69 and are therefore barred by the general bar of Section 69.
Final Decision: The court allowed the civil revision application, set aside the order passed by the learned Subordinate Judge, and dismissed the application filed under Section 8(1) of the Arbitration Act.
Aftab Alam, J
1. This revision application is directed against an order, dated 27.4.1993, passed by Subordinate Judge, IV, Ranchi in Misc. Case No. 11 of 1992. By the order under revision the learned court below has rejected the petitioner's objection that a petition filed by opposite party No. 1 (applicant in the court below) under Section 8 of the Arbitration Act, 1940 was hit by the bar of Section 69, Partnership Act, and was therefore not maintainable.
2. The facts of the case are simple and can be stated thus : It appears that opposite party No. 1 and the petitioner who are own brothers, were in partnership along with their other brothers under an unregistered deed of partnership. It is the case of opposite party No. 1 that the partnership business, under the name and style of M/s. Lakshmi Narayan & Sons, used to be carried on mainly by the petitioner, who was the eldest amongst the brothers. It is alleged that his misconduct as a partner seriously prejudiced the partnership business and greatly under-mined the interests of the other individual partners. It is also the case of opposite party No. 1 that the petitioner's misconduct as a partner compelled the other partners to hold a meeting on 4.6.1988 from which the petitioner abstained himself. By a resolution adopted by all the members present in this meeting, the petitioner was retired from the partnership as a result of which the partnership firm M/s. Lakshmi Narayan and Sons stood dissolved with effect from 4.6.1988. It is further stated that in any event the partnership firm stood dissolved following a notice dated 1.8.1988, given by the petitioner himself purported to dissolve the firm with effect from 5.8.1988. It is also said that later the petitioner himself had instituted Title Suit No. 71 of 1991 in the court of Subordinate Judge, Ranchi praying, inter alia, for a declaration that the partnership firm in question stood dissolved with effect from 5.8.1988 and also for rendition of accounts and appoint of receiver etc. Opposite party No. 1 also gave details of some of the withdrawals made by the petitioner and mis-appropriations allegedly committed by him in respect of the partnership money. It was further the case of opposite party No. 1 that the partnership having stood dissolved either with effect from 4.6.1988 following the resolution adopted by the partners in the meeting held on that date or with effect from 5.8.1988 following the notice given by the petitioner himself opposite party No. 1 had caused a notice dated 19.10.1991, to be served on the petitioner in terms of the arbitration clause contained in the partnership deed appointing one Sri Sanwar Mal Budhiya as the sole arbitrator with regard to the disputes and differences mentioned in the said notice. Failing to get any response to that notice, the petitioner finally filed an application under Section 8 of the Arbitration Act before the court below. In this application, a prayer was made that the court may confirm the appointment of either Sri Sanwar Mal Budhiya or anyone else from amongst the several persons listed in the petition (all retired High Court Judges) as the sole arbitrator with regard the disputes and differences (specified in the petition) between the erstwhile partners.
3. The petitioner (defendant No. 1 in the court below) filed a very brief petition by way of rejoinder. In this petition as objection was taken that the petition under Section 8, Arbitration Act was barred in terms of Section 69 of the Partnership Act inasmuch as the partnership dated 4/6.11.1967 which brought the firm M/s. Lakshmi Narayan and Sons into existence was not registered under the provisions of the Indian Partnership Act.
4. The court below by an earlier order dated 7.11.1992, tentatively found the application maintainable but left it open to the petitioner to raise his objection regarding the maintainability of the proceeding at a later stage. The aforesaid order dated 7.11.1992 was challenged before
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