P. Seshama Naidu vs P. Sanjeeva Naidu

S. Dasaradha Rama Reddy, J.—The short point that arises in this revision petition is whether relief of injunction sought for by one of the partners against another restraining the latter from interfering with carrying on the business of the partnership firm by the former is a dispute that can be referred to arbitration as per the clause in the Partnership Deed agreeing to refer all disputes and questions arising between parties to arbitration. The petitioner and respondent are partners along with three others of Vijayalakshmi Picture Palace, a firm carrying on the business of exhibiting films. Clause 18 of the deed says that "all disputes and questions arising in between the parties hereto shall be referred to arbitration by arbitrators, one to be appointed by each party for settlement". One of the partners, respondent herein, filed suit in the Court of Principal District Munsif, Srikalahasti, against another partner, who is the petitioner herein, for permanent injunction restraining the petitioner from interfering with running and management of the theatre. In the plaint he alleged that the petitioner never evinced any interest in the affairs of the firm, that he did not sign the accounts which are periodically submitted to the Income Tax Department and other tax authorities and that the petitioner has no right to demand to handover the management of the theatre to him. In Para 6 of the plaint, he states that if the defendant has got any grievance, he has to seek the help of either Court or arbitration. He also alleges that the petitioner due to family disputes and due to vengence tried to close the theatre by locking the front gate preventing the audience from entering into the theatre on 30-6-1993. The petitioner filed I.A.No. 279 of 1993 u/s 34 of the Arbitration Act (for short ''the Act'') invoking Clause 18 of the Partnership Agreement. While the trail Court allowed the I.A., the appellate Court dismissed it upholding the contention of the respondent-plaintiff that the arbitration clause can be invoked only if there is a dispute and that it is nowhere stated in the petition for stay whether any particular dispute is in existence between the parties so that it can be referred to arbitration. Aggrieved by this, the defendant has come up in this revision.

Shri. A. Chandraiah Naidu, learned counsel for the petitioner, submits that from the allegations in the plaint, it is dear that there is dispute between the parties regarding management of the theatre and that the lower appellate Court has erred in holding that there is no dispute to refer to arbitration. He also submits that in order to invoke arbitration clause, the dispute need not be raised by the person invoking arbitration clause and that it is enough if there is a dispute. In support of his plea, he relies on a decision of Calcutta High Court in Governor General v. Associated Live-Stock Farm AIR 1948 Cal 239. This is opposed by the learned counsel for the respondent, Sri. P. Gangarami Reddy, relying on Hindustan Copper Ltd. v. Assam Bearing Agencies AIR 1988 Delhi 238 and Vasanji Navji and Co. Vs. K.P.C. Spinners and Others, .

In Governor General v. Associated Live-Stock Farm AIR 1948 Cal 239, a Company which submitted its tender for supply of meat for troops and hospitals, filed suit claiming certain sum for the supply at market rate including damages and losses. The Government sought stay of the suit invoking arbitration clause. This was opposed by the Company on grounds inter alia it has not been alleged or proved that there was any dispute between the parties before the suit was filed. Rejecting this objection, the Calcutta High Court held that the party applying for stay is not precluded from doing so even if it did not raise the dispute before action and that stay cannot be refused, as otherwise it will encourage the plaintiff to rush to the Court without giving an opportunity to defendant to raise the dispute before suit and deprive the defendant of the valuable right of arbitration and thereby cause great hardship and inconvenience. However, it was held that such an omission to raise dispute before suit may be taken into consideration along with other facts in exercising discretion of the Court in the matter of stay of the suit. On the facts of that case, application filed u/s 34 was allowed. I respectfully agree with the decision of Calcutta High Court. The learned counsel for the respondent relies on decisions in Hindustan Copper Ltd. v. Assam Bearing Agencies AIR 1988 Delhi 238 and Vasanji Navji and Co. Vs. K.P.C. Spinners and Others, . In Hindustan Copper Limited''s case AIR 1988 Delhi 238, the claim of the plaintiff was for payment of price of goods preceded by a legal notice to which no reply was given. The defendant did not take any steps to refer the dispute to arbitrator, but sought stay of suit proceedings u/s 34. Following the decision of the Supreme Court in Union of India (UOI) Vs. Birla Cotton Spinning and Weaving Mills Ltd., , the learned Judge of Delhi Court dismissed the petition u/s 34 of the Act on the ground no dispute or difference is alleged or proved in the application filed for stay and that the allegations in the legal notice cannot be read to show that a plea of set off had been either raised by the defendant or was available to it to seek stay of the suit. Thus it can be seen that in that case, the defendant did not reply to legal notice demanding him to pay the amounts for the price of the goods and even in the application filed for stay there was no reference to any dispute between the parties. In those circumstances, it was held that he was not entitled to invoke arbitration clause and that one of the ingredients of Section 34 is that defendant must show that he was ever ready and willing to do everything necessary for the proper conduct of arbitration, which he cannot do without specifying the dispute. This decision is distinguishable. In the present case, in the plaint the respondent has himself referred that the petitioner never cared to take interest in the affairs of the firm and that he has no right to demand the respondent to handover the management of the theatre to him and that his act of locking the gate resulting in closure of the theatre is illegal. Thus, the plaint itself refers to the dispute. It may also be noticed that the petitioner in the application filed u/s 34 of the Act said that he is always ready and willing to refer the dispute to arbitration. Thus, this decision does not help the respondent. The decision in Vasanji Navji & Co. (3 supra), equally does not apply to the facts of this case. In that case, the defendant who received the goods issued cheques which have been dishonoured. It was held that the suit was not for recovery of price but in substance a suit on dishonoured cheques and is not liable to be stayed u/s 34 of the Act as there is no dispute as regards either quality of the goods or as regards quantum of sale consideration.

The learned counsel for the respondent has submitted relying on a decision of Division Bench of this Court in T. Premkumar v. R. Anjaneyulu 1980 (1) ALT 233 : AIR 1980 A.P. 255, that when the trial Court has taken all the relevant considerations into account in coming to the conclusion that discretion vested in it u/s 34 of the Act should not be exercised, it would be proper for the appellate court to interfere with that discretion. I am afraid, this is not at all applicable. The question raised before the Courts below and here is a question of law viz., that as the petitioner has not raised the dispute, he cannot apply for stay. In facts, the trial Court exercised its discretion and allowed the I.A., while there was no occasion for the appellate Court to consider the case on merits. Agreeing with the decision of Calcutta High Court in Governor General v. Associated Live-Stock Farm (1 supra), I hold that the suit is liable to be stayed.

For the above reasons, the Civil Revision Petition is allowed. No costs.