P. Subba Rao and others vs M. Veeraiah

Alladi Kuppuswami, J.—The appellants are the defendants in O.S. No. 27 of 1979. Sub-Court, Warangal. The sail was filed by the respondent herein for dissolution of partnership, for rendition of accounts and other consequential reliefs. The Plaintiff and the defendants had executed a partnership deed on 16th July, 1976 and were carrying on the business running a temporary Cinema theatre and display of films in the village of Govindaraopet, Mulug Taluk, Warangal District The case of the respondent-plaintiff was that in view of the various facts and circumstances set out in the plaint and the hostile conduct of the defendants, the business of the firm could not be carried on and the firm could not be continued with the plaintiff and defendants as partners, and it was therefore necessary that the firm should be dissolved. The suit was filed on 9-3-1979. On the 19th of March, 1979, the defendants filed I.A. 256 of 1979 praying that the Court may stay all proceedings in the suit in exercise of its power u/s 34 of the Arbitration Act. The defendants stated that Clause 18 of the partnership deed provided that any dispute arising between the partners in regard to any matter connected with the partnership business or any incidents of the arbitrators elected jointly by all the partners and the Award of the Arbitrators shall be final and binding on all the partners. The defendants therefore submitted that the matter should be referred, in accordance with the arbitration clause in the partnership deed, to arbitration, and as the petitioners were ready and willing to do all things necessary for the proper conduct or the arbitration, the Court may make an order staying the further proceedings in the suit. The learned Subordinate Judge dismissed the said application and the defendants preferred this appeal against the said order.

The older of the Court below dismissing the application for stay is rattier confusing and it is difficult to understand the exact grounds on which the application was dismissed. In the operative portion of the order, the Court below stated that the petitioners cannot ask the plaintiff to place the matter before the arbitrators under clause 18 when his act is contrary to Clause 11 of the partnership deed which provides that no partner shall have the powers to dissolve the partnership without the consent of the others. The Court below therefore held that it was not safe, considering the difficult situation that had arisen in view of Clause 11 of the partnership deed, to leave the matter to be decided by two arbitrators who were not at all named either in the agreement or in the present application by the petitioners. It also added that the petitioners'' contention to have the matter referred to an even number of arbitrators between rival parties for arbitration, sought for under Clause 11 of the partnership deed is not a workable one. The learned counsel for the respondent was unable to support the order of the Court below on any of these grounds stated in the order. The fact that the names of the arbitrators were not mentioned in the arbitration clause or that the arbitration clause provided for appointment of an even number of arbitrators cannot stand in the way of the arbitration clause being given effect to. In the Arbitration Act, there are provisions which enable the Court to appoint an arbitrator in case of disagreement between the parties also the appointment of an umpire when there is a disagreement between an even number of arbitrators, Therefore, the Court below was wrong in considering that the arbitration clause was unworkable on these grounds. The further ground, viz. that the arbitration clause (No. 18) is opposed to Clause 11 is understandable. Merely because one of the partners has no powers under Clause 11 to dissolve the partnership without the consent of the other we fail to see how a partner cannot ask for the appointment of an arbitrator under Clause 18 of the partnership deed.

Sri Jagannadha Rao, however, submitted that the ultimate conclusion of the Court below can be supported on other grounds. He sought to argue that the arbitration clause is not wide enough to cover the case of dissolution of the partnership. As stated earlier, Clause 18 provides for reference to an arbitration of any dispute arising between the partners in regard to any matter connected with the partnership business or any incidents thereof. These words are, in our view are wide enough to cover a case of dissolution of partnership. As pointed out by Russell in his book on ''Arbitration'' 18th Edition, at page 166, there is nothing in law to prevent aft arbitrator awarding a dissolution of partnership if the submission is sufficiently wide to enable him to do so. This is in accordance with the general proposition that questions should be left to the tribunal selected by the parties. As a matter of fact one of the decisions relied upon by the respondent Padmanabhan vs. Srinivasan AIR 1967 Mad. 201 proceeded on the footing that it is open to the parties to provide for arbitration even in cases of dissolution of partnership. The learned counsel for the respondent did not seriously persist in pressing this contention

Sri Jagannadha Rao, however, submitted that the Court should not ordinarily grant a stay of the suit in a suit for dissolution of partnership. He submitted that u/s 44 of the Partnership Act, it is the Court that is to dissolve a firm at the suit of the partner on any of the grounds mentioned in that section: in a particular u/s 44 (J) and (g), the Court may dissolve a firm on the ground that the business of the firm cannot be carried on save at a loss or on any other ground which renders it just and equitable that the firm should be dissolved. The Court is, therefore, entrusted with the duty determine whether it is just and equitable that the firm should be dissolved or that the business of the firm cannot be carried on save at a loss. The Court will not therefore normally stay the proceeding in such a suit and allow such matters left to the jurisdiction of the Court to be decided by an arbitrator.

In Joplin vs. Postlethwaite (1896) 61 L.T. 629 it was held that a question of dissolution was not a suitable one to be left to arbitrators to decide. In Russel on Arbitration at page 167, it is observed that while this is not a proposition of law it might perhaps be regarded as a "Proposition of good sense" and the principle is frequently found persuasive In Oliver vs. Hillier (1959) 2 All. E.R. 220 the partnership agreement provided that all disputes or questions whatsoever which shall arise between the parties touching this agreement, etc., or as to any other matter in any way relating to the partnership business shall be referred. The defendant therein moved to refer the dispute to arbitration. It was held that the dissolution of a partnership which involved the exercise of a power expressly conferred on the Court under that section and which further might involve the appointment of a receiver and manager was a matter which was more conveniently left in the hands of the Court.

In Halsbury''s laws of England (Fourth Edition) in Paragraph 566 it is stated that stay may be refused where a question can only be decided effectively in the first instance by the Court, as where the plaintiff''s claim is based upon a statute which gives a particular discretion to the court and only to the court, and in support of this proposition, the decision in Oliver vs. Hillier (1959) 2 All. E.R. 220 it cited.

These passages from Russel on ''Arbitration'' as well as the decision in Oliver vs. Hillier (1959) 2 All. E.R. 220 were referred to in Padmanabhan vs. Srinivasan AIR. 1967 Mad. 201 and it was held whenever a plaintiff seeks dissolution on grounds coming u/s 44 (f) and (g) of the Partnership Act the power of deciding whether the firm should be dissolved is expressly conferred on the Court under Sec. 44 and that such a power cannot be exercised by an arbitrator. It was held that the lower Court was therefore right in exercising its discretion in refusing to stay the suit for dissolution of the partnership, u/s 34 of the Arbitration Act. The same view was taken in Bhagbati Builder vs. Kariam Bux AIR 1971 Calcutta 317. The decision in Padmanabhan vs. Srinivasan AIR. 1967 Mad. 201 was referred to with approval. We therefore agree with the submission made by Sri Jagannadha Rao that the Court below has rightly exercised its discretion in refusing to stay the suit and this Court ought not interfere with the said decision in appeal.

It is well settled that it is entirely a matter of discretion of the Court whether or not it should exercise the power to grant stay. This discretion must no doubt be judiciously exercised, but where it has been so exercised it will no trendily be interfered with, even though the tribunal which is asked to review it, may fell that, if the decision had rested with them, their own conclusion might have been different. (Vide Russel on ''Arbitration'' at page 150).

Sri Rama Sarma, learned counsel for the appellants however sought to argue that this is not a case where the Court below had, in exercise of its discretion refused to grant stay. He submitted that this is a case where the Court took the view that the application under Sec. 34 of the Arbitration Act was not maintainable at all. Hence the principle that the appellate Court cannot interfere with the exercise of the discretion vested in the lower Court is not applicable. We are afraid, we are unable to agree with this submission that the Court below held that the application for stay was not at all maintainable u/s 34 of the Arbitration Act The Court below held that it is not safe to leave the matter to be decided by two arbitrators who were not at all named and the petitioner''s contention to have the matter referred to an even number of arbitrators is not tenable. Thus it is seen that the Court below felt that this is not a case where the matter should be left to be decided by the arbitrators. In other words, it exercised its discretion and held that the suit need not be stayed.

Sri Rama Sarma also contended that the Court below did not exercise its discretion not to stay the Bait on the ground advanced by Sri Jagannadha Rao before us namely, that the suit is one for dissolution, but on other grounds He therefore submitted that it is not open to the respondent to contend that as the Court below bad exercised its discretion this court ought not to interfere with the exercise of such discretion. We fail to see any force in this submission. The fact remains that ultimately the Court below refused in the exercise of its discretion to stay the suit u/s ?4 of the Arbitration Act as it felt that it was not a fit case for being decided by the arbitrators. For these reasons, we are of the view that the order of the Court below should stand though we may repeat that we are not at all satisfied with the way in which the matter has been dealt with by the Court below. The appeal is dismissed, but in the circumstances, without costs.