1979 Supreme(MP) 375

IN THE HIGH COURT OF MADHYA PRADESH
M. L. MALIK, J.
Kanchan Sahela - Appellant
Versus
Phulchand Chopra - Respondent
Cr. Revn. No. 118 of 1979 (J)
Decided on : 06-12-1979

Headnote:(1) Partnership Act, 1932 – S. 69 (3) – Suit for accounts on dissolution of an unregistered firm – cannot be stayed under section 34 of the Arbitration Act, 1940.

       (2) Arbitration Act, 1940 – S. 34 – suit for accounts after dissolution of an unregistered firm – cannot be stayed under section 34 – partnership Act, 1932 – S. 69 (3).

        Short Note

       1. The plaintiff and the defendant entered into partnership to carryon business in the name and style of "Anurag Traders". The partnership was unregistered. In the deed of partnership, was incorporated an arbitration clause; which reads as under : –

       "That all the disputes and questions in connection with the partnership or this deed arising between the partners and whether during or after the partnership shall be referred to the Arbitration of one or more arbitrators to be appointed by the mutual consent of all the partners whose decision shall be final and binding on all the parties and their legal representatives."

       2. The partnership was dissolved by mutual consent but the accounts were not settled. The plaintiff, therefore, brought a suit for taking accounts of the dissolved firm.

       3. On service of the writ of summons, the defendants made an application under section 34 of the Arbitration Act for stay of the suit. The trial Court refused to stay the suit. But in appeal the order of stay has been passed by the District Judge, Bilaspur hence this revision.

       4. After the decision of the Supreme Court in Jagdish Chandra Gupta v. Kajaria Traders (India) Ltd., AIR 1964 SC 1882, the law is settled that partner of an unregistered firm cannot apply under section 8 (2) or under section 20 of the Arbitration Act for appointment of an arbitrator since that is a right arising out of a contract which is sought to be enforced and such a proceeding would be barred under section 69 (3) of the Partnership Act.

       5. The question is whether an application under section 34 of the Arbitration Act for stay of a suit which cannot be said to be a proceeding "arising out of a contract" within the meaning of section 69 (3) of the Partnership Act, would equally be barred.

       6. In my view the tenor of the authority in Jagdish Chandra Gupta v. Kajaria Traders, does not approve of staying of a suit under section 34 of the Arbitration Act when appointment of an arbitrator thought the intervention of the Court is not possible at the instance of a partner of an unregistered firm. The stay of the suit would be meaningless unless the partner could as well initiate proceeding for appointment of an arbitrator under the provisions of the Arbitration Act. If recourse of those provisions is barred, the stay under section 34, through such a proceeding of the Partnership Act, should as well notice granted. It would not be a proper exercise of judicial discretion that a suit for accounts of a dissolved firm though maintainable under section 69 of the Partnership Act, should stay on a remote possibility of the partners mutually agreeing to arbitration which terms of the contract none of them could lawfully enforce.

       Appeal allowed.