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Gujarat High Court
Judgename :A.M.AHMADI
MANIBHAI SHANKERBHAI PATEL - Appellant
Versus
SWASHRAY CONSTRUCTION COMPANY - Respondent
A.F.O. 261 of 1978
Decided On : 04/03/1981
Arbitration Act - Section 39 - Partnership deed - Appellant is the original plaintiff - He filed a suit in the Court of the learned Civil Judge for dissolution of the partnership and accounts - On the service of the summons of that suit respondent No. 2 filed an application under protest and without submitting to the jurisdiction of the Court for stay of proceedings under sec. 34 of the Arbitration Act on the basis of Clause 16 of the partnership deed - Held, There is also substance in the contention that one of the requirements of sec. 34 of the Arbitration Act is that the party applying for stay of proceedings under sec. 34 must show that he was at the time when the proceedings were commenced ready and willing to do all things necessary to the proper conduct of the arbitration and that he continues to remain ready and willing to do so at the date of the disposal of the application - Nowhere in Exhibit 16 has the respondent No. 2 while applying for stay of proceedings under sec. 34 of the Arbitration Act stated that he was at the date of the making of that application ready and willing to do all things necessary to the proper conduct of arbitration - Even after the appellant in his reply Exhibit 26 averred that the respondent No. 2 was not ready and willing to do all things necessary to the proper conduct of arbitration not only at the date of the presentation of Exhibit 16 but even thereafter respondent No. 2 did not file any affidavit-in-rejoinder denying that allegation - Therefore having regard to this fact also Court thinks that the learned trial Judge was not justified in the background of the facts placed before him in directing stay of proceedings under sec. 34 of the Arbitration Act - Appeal allowed.
Key Points: - The court analyzes whether Clause 16 of the 1973 partnership deed can bar court litigation by requiring arbitration, while considering the at-will nature of the partnership and the right to dissolution under Sec. 43 read with Sec. 7 (at will) [13000027100004]. - The appellant argues that readiness and willingness to arbitrate must be proven at the time of applying for Sec. 34 stay, which was not shown in Exhibit 16, and no rejoinder denied the allegation [13000027100006]. - The appellate court held that Clause 16 does not override the right of a partner to dissolve a partnership at will under Sec. 43, and therefore stay under Sec. 34 was not justified; the suit should proceed [13000027100005][13000027100007]. - The decision emphasizes that Sec. 34 discretionary stay must consider prior arbitration efforts and whether the party was ready and willing to conduct arbitration [13000027100006][13000027100005]. - The suit was for dissolution of the partnership and accounts, and the court directed expeditious disposal of the suit; the stay order was set aside [13000027100007]. - Background facts include multiple prior arbitration attempts and continued non-cooperation by one partner hindering arbitration [13000027100003][13000027100005]. - The Partnership Act provisions cited: Sec. 7 (partnership at will), Sec. 43 (dissolution by notice), implications for arbitration clauses during subsistence of the partnership [13000027100004]. - The Court addresses that a partner’s right to dissolve cannot be taken away by an arbitration clause when the partnership is at will [13000027100004].
( 1 ) THE appellant is the original plaintiff. He filed a suit in the Court of the learned Civil Judge (Senior Division) Baroda for dissolution of the partnership and accounts. On the service of the summons of that suit respondent No. 2 filed an application under protest and without submitting to the jurisdiction of the Court for stay of proceedings under sec. 34 of the Arbitration Act on the basis of Clause 16 of the partnership deed (mark-4/3 ) That application was resisted by the present appellant by his reply Exhibit 26. The learned Judge however came to the conclusion that Clause 16 of the partnership deed was wide enough to take into its fold any and every dispute between the partners and accordingly directed stay of proceedings. It is against this order passed by the learned trial Judge that the present appeal is filed under sec. 39 of the Arbitration Act.
( 2 ) IT transpires from the averment made in the plaint that a part- nership firm under the name and style of Swashray Construction Company was floated some time in October 1967 and thereafter there were changes in the constitution of the firm on two occasions and with every change a new partnership deed came to be executed. The last deed of partnership is dated 27/10/1973. Clause 16 of the said document which is in Gujarati language provides that if there is any dispute in regard to any matter concerning the firm the same shall be resolved under the provisions of the Arbitration Act without resort to Court and the decision of the arbitrator on such dispute shall be binding on all the partners. The plaintiff-appellant contends that before the institution of the suit efforts were made to resolve the disputes concerning accounts between the partners through arbitration but because of the non-co-operation of respondent No. 2 even though two precious years were lost the dispute could not be settled one way or the other and hence the plaintiff-appellant was constrained to sue for dissolution of the partnership and rendition of accounts. Allegations have been made in the plaint to the effect that respondent No. 2 who was in the management of the business of the firm was guilty of misappropriation of partnership funds and had also resorted to forgery for the purpose of defeating the rightful claims of the appellant. On the basis of these allegations which need not be set out in detail the suit was instituted in October 1976 for the dissolution of the firm and for taking accounts particularly from respondent No. 2.
( 3 ) AS stated earlier immediately after the summons of the suit was served on respondent No. 2 he filed an application Exhibit 16 under protest and without submitting to the jurisdiction of the Court for stay of proceedings under sec. 34 or the Arbitration Act on the basis of clause (16) of the partnership deed dated 27/10/1973. In that application Exhibit 16 respondent No. 2 has referred to the earlier efforts made to resolve the disputes by arbitration. These averment are to be found in clauses (c) to (i) of the application Exhibit 16. It was therefore contended by respondent No 2 that the appellant having alre- ady submitted to arbitration twice before the institution of the suit was not entitled to have recourse to Court and hence the proceedings in the suit were required to be stayed under sec. 34 of the Arbitration Act. It may however be mentioned that in the application Exhibit 16 respondent No. 2 has nowhere stated that he is ready and willing to do everything that is necessary for the proper conduct of arbitration proceedings if any issue is referred to arbitration.
( 4 ) THE appellant filed a detailed reply Exhibit 26 pointing out how his earlier efforts to have the disputes resolved by arbitration were thwarted because of want of co-operation from respondent No. 2. He also emphasises in the said reply that respondent No. 2 was never ready and willing to have the disputes resolved by arbitration either in the past or at the date of the
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