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Allahbad High Court
D.S.MATHUR
Sundarlal Haveliwala - Appellant
Versus
Bhagwati Devi - Respondent
Decided On : 09/07/1965
ARBITRATION - Appointment of Receiver - Maintainability of application under section 20 of the Arbitration Act - Scope of section 20 - Powers of the Court under section 41 of the Act - Appointment of Receiver in a proceeding under section 20 - Whether permissible - Circumstances justifying appointment of Receiver - Interpretation of clause 9 of the partnership agreement.
Fact of the Case:
A partnership firm consisting of three brothers, Sunder Lal, Madan Lal, and Sarju Prasad, ran a sugar mill. Madan Lal died, and his legal representatives, Smt. Bhagwati Devi and Madho Lal, filed an application under section 20 of the Arbitration Act to enforce an arbitration agreement contained in the partnership agreement. The Civil Judge appointed two senior Advocates as Receivers of the sugar mill. Sunder Lal appealed, challenging the maintainability of the application, the appointment of Receivers, and the necessity for such appointment.
Finding of the Court:
The High Court held that the application under section 20 of the Arbitration Act was maintainable, as the legal representatives of the deceased partner could enforce the arbitration agreement after the dissolution of the firm. The Court also held that the appointment of Receivers was permissible in a proceeding under section 20, as it was a proceeding related to the arbitration proceeding. The Court further held that the appointment of Receivers was justified in the circumstances of the case, as the parties were on bad terms and the legal representatives had been deprived of their right to participate in the management of the sugar mill.
Issues: 1. Whether an application under section 20 of the Arbitration Act is maintainable by the legal representatives of a deceased partner after the dissolution of the firm? 2. Whether a Receiver can be appointed in a proceeding under section 20 of the Arbitration Act? 3. Whether the appointment of a Receiver was justified in the circumstances of the case?
Ratio Decidendi: 1. Section 6(1) of the Arbitration Act provides that an arbitration agreement shall not be discharged by the death of any party thereto, and shall be enforceable by or against the legal representatives of the deceased. Therefore, the legal representatives of the deceased partner could enforce the arbitration agreement after the dissolution of the firm. 2. Section 41(a) of the Arbitration Act provides that the provisions of the Code of Civil Procedure, 1908, shall apply to all proceedings before the Court and to all appeals under the Act. Section 41(b) provides that the Court shall have the same power of making orders in respect of the appointment of a Receiver as it has for the purpose of, and in relation to, any proceedings before the Court. Therefore, the Court could appoint a Receiver in a proceeding under section 20 of the Arbitration Act. 3. The appointment of a Receiver was justified in the circumstances of the case, as the parties were on bad terms and the legal representatives had been deprived of their right to participate in the management of the sugar mill.
Final Decision: The High Court dismissed the appeal and upheld the order of the Civil Judge appointing Receivers of the sugar mill.
MATHUR, J :- This is an appeal by Sunder Lal Haveliwala against the order dated 26-9-1964 of the Civil Judge of Dehradun, allowing the application of Smt. Bhagwati Devi and Madho Lal Haveliwala, plaintiffs, for appointment of a Receiver and appointing two senior Advocates of Dehra Dun, namely, Sri. Chamaa Lal Singal and Sri B. B. Saran, as Receivers of Sri Janki Sugar Mills and Co., Doiwala.
2. The material facts of the case are that on October 25, 1952, seth Sunder Lal, appellant, seth Madan Lal, husband of Smt. Bhagwati Devi and father of Madho Lal, and Seth Sarju Prasad entered into partnership to run the above sugar Mills at Doiwala. The three partners were brothers and the share of each was one-third. The partnership agreement executed by the three partners is on the record and clause 9 there of provided.
"That in case of any dispute amongst the partners the matter shall be referred to an arbitration and the award of the arbitrator or the arbitrators as the case may be shall be final and binding on the partners.
3. Seth Madan Lal died on April 24, 1964, and the partnership automatically stood dissolved. There was no fresh partnership ; but since after the death of seth Madan Lal, the other two brothers continued to run the Sugar Mills at Doiwala except for a short period when under the interim order of the High Court Seth Sarju Prasad and Madho Lal were allowed to run the Sugar Mills. This interim order was passed after the operation of the order of the Civil Judge under appeal was stayed and the Receivers appointed by him could not function as such. Madho Lal had a cause of grievance and moved the High Court for vacating the above interim order and it was then that the F. A. F. O. was, with the consent of the parties listed for hearing in place of interim matters being decided and the F. A. F. O. taken up in due course for hearing.
4. Disputes appear to have arisen during the life-time of Seth Madan Lal, but the present application under section 20 of the Arbitration Act (to be hereinafter called as the Act) was, however, moved by his legal representatives namely, Smt. Bhagwati Devi and Madho Lal, about two months after his death.
5. Three points had been raised by Sri. Jagdish Swarup, Advocate, appearing for Sunder Lal : firstly that the present application under section 20 of the Act was not maintainable; secondly that in a proceeding under section 20 no Receiver could be appointed, and thirdly, that the present was not a fit case in which the court should appoint a Receiver.
6. Munshi Ambika Prasad, Advocate appearing for Sarju Prasad, opposite-party no. 3 has raised an additional ground, namely, that in the present proceeding no Receiver could be appointed as the scope thereof was a limited one and could not justify the appointment of a Receiver.
7. Clause 9 of the partnership agreement has been reproduced above. This clause contemplates arbitration where there exists a dispute amongst the partners. Naturally the disputes must pertain to the partnership business. On account of the use of the words "amongst the partners" it was strongly contended that arbitration was possible only for so long as the partnership was not dissolved. It was suggested that after the dissolution no partnership firm was in existence and there could not be partners of a non-existing firm. The other point urged in this connection is that partnership firm stands dissolved on the death of a partner unless there be a contract to the contrary, and in the instant case, there being no contract to the contrary the partnership firm sood dissolved on the death of Seth Madan Lal, and consequently the legal representatives of Seth Madan Lal could in no case be treated as partners and they had no remedy under section 20 of the Act.
8. In view of S. 6 of the Act the rights of the legal representatives to make an application under section 20 shall depend upon whether the deceased could have moved the Courts of law for the filing of the arbitration agreeme
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