IN THE HIGH COURT OF ALLAHABAD
M. L. Chaturvedi and Chowdhry, JJ.
GODHU MAL - Appellant
Versus
GANGA HASSO MAL IDNANI - Respondents
F. A. F. O. 220 Of 1951
Decided On : 01/07/1957
ARBITRATION - AGREEMENT TO REFER - DISPUTE AS TO EXISTENCE OF AGREEMENT - JURISDICTION OF COURT.
Fact of the Case:
A partnership agreement was entered into between the parties, with an arbitration clause. The respondent filed an application under Section 20 of the Arbitration Act, 1940, for filing the agreement and appointment of an arbitrator. The appellant objected, claiming that the partnership agreement had been terminated by a subsequent oral agreement, and therefore the arbitration clause was no longer enforceable.
Finding of the Court:
The court held that the issue of whether the partnership agreement had been terminated was a matter for the court to decide, not the arbitrator. The court distinguished between the question of whether a particular dispute is within the jurisdiction of the arbitrator or the court, and the question of who is to decide this question of jurisdiction. The court held that the latter question is for the court to decide.
Issues: 1. Whether the issue of termination of the partnership agreement was a matter for the court or the arbitrator to decide.
Ratio Decidendi: The court held that the issue of termination of the partnership agreement was a matter for the court to decide, not the arbitrator. The court reasoned that if the original contract containing the arbitration clause is said to have been superseded by a subsequent one, the question of its supersession is a question which falls for determination by the court, not the arbitrator.
Final Decision: The court allowed the appeal and set aside the order of the lower court, remanding the case for determination of the issue of termination of the partnership agreement by the court. If the issue was decided in favor of the appellant, there would be no reference to arbitration, but if it was decided against him, the court could then refer the case to arbitration.
( 1 ) THIS is an appeal against an order of the learned First Civil Judge of Kanpur referring a dispute to arbitration.
( 2 ) ON the 20th April, 1947, the parties entered into a partnership and a deed was drawn up whereby the respondent, Smt. Ganga Hasso Mal Indnani, agreed to finance the venture and the appellant was to be the working partner of the concern. The partnership business was to be carried on at Matli, District Hyderabad (Sind), The respondent was to get Rs. 100/- per month for a period of eight months or six annas in a rupee in the profits, whichever was the larger sum, though she was not to be liable for any losses incurred in the business. It appears that the deed of partnership also contained an arbitration clause. The respondent advanced a sum of Rs. 5000/- to the appellant. After a few months, communal trouble started in Pakistan and the respondent shifted first to kanpur in India, and the appellant followed her sometime later. In 1950 she filed an application under Section 20 (4) of the Arbitration Act, for filing an agreement of reference and for the appointment of an arbitrator. The appellant took a number of objections to the application and one of the objections taken was, that due to communal trouble the respondent left everything she had in Pakistan and entrusted the entire business to the appellant revoking the agreement of partnership entered into on 20th April, 1947.
( 3 ) THE learned Civil Judge over-ruled all the objections taken by the appellant and passed an order directing the agreement to be filed. The first issue was whether the agreement In question came to an end as alleged by the appellant. The learned Judge did not decide this issue but has considered the matter while discussing issue No. 4, which was to the effect whether the objection that the partnership agreement had come to an end could be entertained in the proceedings before the learned Civil Judge. He referred to the decision of a Division Bench of this Court in the case of Lachmi Narain Anand Swaroop v. Raja Ram Tamesh Chand, 1949 All WR 509 (A), and held that the issue No. 1 was to be decided by the arbitrator and not by the court.
( 4 ) THE only point urged by the learned counsel for the appellant before us is, that this decision of the learned Civil Judge is incorrect and it was for the learned Civil Judge to decide whether by the subsequent agreement, said to have been entered into in November, 1947, the previous agreement of partnership had come to an end and with it the arbitration clause. His argument is that the previous agreement having been substituted by the latter one of November, 1947, the arbitration clause contained in the previous agreement is no longer enforceable, and the subsequent agreement contained no such arbitration clause. I think that there is force in this contention.
( 5 ) CLAUSE 16 of the agreement of 20th April, 1947, provided that any dispute arising out of the partnership whether regarding the partnership accounts or payment of share, or any other point relating to the agreement, should be referred to the sole arbitration of one arbitrator if the parties agreed upon one name, otherwise the question or questions were to be decided by two arbitrators jointly.
( 6 ) THE wording of this clause is quite wide and all disputes regarding partnership, as well as those relating to the partnership agreement were to be decided by arbitration, but the point raised by the appellant in the court below was that the entire partnership egreement had come to an end and was substituted by another oral agreement in November, 1947, and what is to be decided under this issue is the question of the existence of the subsequent agreement and not any matter relating to the partnership agreement of 1947. The law is clear on the point that a defence to the effect that an agreement was never entered into or that it was void for some reason is a matter exclusively for the determination of the court and not o
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