K.S. Krishnan vs S. Ravichandra and Another

This appeal is directed against the order dated 23-8-1995 passed by the XII Additional City Civil Judge, Bangalore in O.S. No. 423 of 1995 allowing I.A. II filed by the respondent u/s 34 of the Arbitration Act.

The appellant and the respondents are the partners. The appellant-plaintiff has filed the suit for injunction. Before filing the written statement, the respondents-defendants have filed an application u/s 34 of the Arbitration Act, 1940 stating that both the appellant and the respondents are party to the agreement to be referred to the Arbitration in the event of any dispute. Taking the advantage of this clause, the defendants filed the application and the lower Court has allowed this application stating that there is a dispute between the partners as such, it should be referred to the arbitrator and inter alia suit is also stayed.

Mr. Visweswara, learned Counsel for the appellant submitted that since it is only a suit for bare injunction; there is no dispute except the grievance that the appellant was not allowed to participate in the day-to-day affairs of the company. He also relied upon two decisions viz., Banwarilal Aggarwal and Others v Subhas Gupta (unreported) and also another decision in the case of National Small Industries Corporation Limited, New Delhi v M/s. Punjab Tin Printing and Metal Industries, Ajraunda and Others . On the other hand Mr. Yeshumishra vehemently argued that since the appellant has filed the suit, it presupposes that there is a dispute and moreover according to him there is a clause in the agreement that in case of any dispute arising between the partners, the matter should be referred to the Arbitrator. He also relied upon the decision in the case of Jammu Forest Company v State of Jammu and Kashmir , wherein it is stated as follows:

"If one party asserts a right and other repudiates the same, that is a dispute. Similarly any question on which parties join issue whether the Court can legally enquire into it is a dispute. This is analogous to a cause of action before a Civil Court. Where there is a difference between the parties about the liability of each other a dispute is clearly made out in terms of Section 2(a)".

In view of these rival contentions, now it is to be seen that whether there was a dispute to be referred to the arbitrator. Nowhere appellant has taken up the contention that there was a dispute regarding the liability or otherwise in respect of the company. The main grievance of the appellant is that he was prevented from participating in the day-today affairs. Since he is a partner, he has got a right to participate in day-to-day affairs of the company, otherwise he will be kept in the dark as far as the activities of the other partners are concerned. His only grievance is that he was prevented. In the unreported decision cited supra already a view is taken that the other partners have no right to prevent the partners to participate in the proceedings. Another crucial point that is to be examined is that in the application filed by the defendants for the said proceedings, whether there is any recital or whisper regarding the dispute. Perusal of this application does not show any dispute except stating that there is an arbitration clause. As far as this clause is concerned, there is no second opinion. Even assuming that such clause is existing the nature of the dispute should be mentioned in the application in clear terms. This is the tenor of the decision in the case of M/s. National Small Industries Corporation Limited, supra, it is clearly held as follows:

"To stay a suit, there must be an existing dispute between the parties. If there was no dispute, there is nothing to arbitrate. It is for the applicant to plead that he was ready and willing at all relevant times to do all things necessary for the proper conduct of arbitration. For proper conduct of arbitration he has to allege the dispute or disputes which he was ready and willing to refer to arbitration. The suit could not be stayed if there was no dispute between the parties, at the commencement of the proceedings. In the instant case there was no allegation in the application as to what dispute or difference was existing between the parties which the applicant was ready and willing to refer to arbitration at the time the suit was filed. The applicant had also not mentioned the dispute or difference which he was still ready and willing to refer to arbitration. In the absence of such allegations regarding the disputes it could not be said that the applicant was ever ready and willing to do everything necessary for the proper conduct of arbitration. Therefore, the suit could not be stayed".

At the cost of the repetition, it has to be stated that the nature of the dispute is not at all stated. When such is the situation, what is to be decided by the arbitration? The burden is on the defendants to show the nature of the dispute arising between the partners. In view of these two decisions, I am left with no option otherwise than not accepting the decision in the case of Jammu Forest Company, supra. Hence, the impugned order suffers from infirmity.

In the result, the following order is passed:

The appeal is allowed. The impugned order dated 23-8-1995 is set aside. The lower Court is also directed to hear on I.A. I as expeditiously as possible.