Ramji Dass and others vs Durga Dass

Gokal Chand Mital, J.—Under partnership deed dated 17th of June 1963. Durga Dass respondent entered into partnership with Ramji Dass, Baldev Chand and Bishamber Sarup partners, for carrying on business of a cloth shop at Nangal Township. The partnership agreement contained an arbitration clause to the effect that in case any dispute amongst the partners arises regarding the partnership business or the conditions of partnership, the same shall be referred to and decided by the arbitrator according to the Arbitration Act. The arbitration clause is contained in para 11 of the partnership agreement, which fact is not disputed between the parties.

The partnership was admittedly dissolved with effect from 19th of November. 1967, but the accounts were not settled between the two partners On 1st of January, 1969, Durga Dass gave notice to other partners for reference of the dispute to the arbitrator. On 23rd of April, 1970, he filed an application u/s 8 of the Arbitration Act which was dismissed as incompetent by the Subordinate Judge, on 20th of October as withdrawn.

On 2nd of September, 1975, Durga. Dass filed an application before the Subordinate Judge, Anandpur Sahib u/s 20 of the Arbitration Act and impleaded the remaining three partners as respondents. The remaining partners resisted the application contending that the partnership was not registered and as such the application u/s 20 was barred u/s 69 of the Partnership Act. It was also pointed out that the firm had already been dissolved with effect from 19th of November, 1967, and since the claim for rendition of accounts was barred before civil Court, the application u/s 20 of the Arbitration Act to obtain the same relief could Dot be filed, On the pleadings of the parties, the following issues were framed:�

Whether there is an arbitration clause in the agreement dated 27. 6 6 and dispute is liable to be decided by the arbitrator ? O P A.

Whether the partnership between the parties has been dissolved on 19. 11. 67 ? O.P.R.

Whether application is not maintainable and liable to be dismissed ? O.P.R.

Whether application is barred by time ? O.P.R.

Relief.

The trial Court by order dated 2nd or March, 1978, held that since the partnership was not registered, the application u/s 20 of the Arbitration Act was barred by section 69(3) of the Partnership Act and in this regard followed Jagdish Chandra Gupta v. Kajaria Traders (India) Ltd. A.I.R.1964 S.C. 1832 and Syed Wahid Hussain Vs. Maharajkumar Mahmud Hasan Khan and Others, . It also held that the application was barred by time as the same was not filed within three years of the dissolution of the partnership and in this regard relied on The Union of India and others v. Bimal Kumar Kar AIR 1963 Gah 100 and Article 137 of the Limitation Act. In the result, the application u/s 20 of the Arbitration Act filed by Durga Dass was dismissed. He took an appeal against the order of the trial Court to the appellate Court which came up for final hearing before Additional District Judge, Ropar, who by order dated 22nd of September, 1978, maintained the findings of the trial Court under issues Nos. 1 and 2 that there was an arbitration clause and that the partnership stood dissolved with effect from 19th of November, 1967. However, he reversed the findings of the trial court under issues Nos. 3 and 4 and held that the application was neither barred by dimidiation nor by virtue of section 69(3) of the Partnership Act Against the order of the Additional District Judge, Ramji Dass and others have come up in revision to this Court.

After hearing the learned counsel for the parties at length, I am of the view that the appellate Court was in error in reversing the well considered findings recorded by the trial Court.

As regards the applicability of section 69(3) of the Partnership Act, this matter is concluded by the decision of the Supreme Court in Jagdish Chandra Gupta v. Kojaria Traders (Supra), and it is surprising how the appellate Court did not appreciate the same in spite of the fact that it was relied upon by the trial Court. A reading of the Supreme Court judgment clearly shows that there also the dispute was between the partners between whom a partnership agreement was written containing a similar clause like the present one regarding arbitration and the partnership was not registered. When the dispute arose between the partners, one of the them made an application u/s 8 of the Arbitration Act for the appointment of an Arbitrator for setting the dispute between she partners in pursuance of the arbitration clause. The appeal before the Supreme Court came from a decision of the Bombay High Court where on difference of opinion between a Divison Bench of the High Court the matter came up for consideration before a third Judge. The opinion of the majority was that application u/s 8 of the Arbitration Act was not a bar u/s 69(3) of the Partnership Act and was maintainable in spite of the fact that the partnership was not registered. The Supreme Court did not agree with the majority view of the High Court and while reversing the view, Hidayatullah, J. considered two points which have been detailed in the last portion of para 3 of the report. The first was with regard to the meaning to be given to the expression "other proceedings" and the second was whether application u/s 8(2) of the Arbitration Act can be regarded as a proceedings "to enforce a right arising from a contract" and, therefore, within the bar of section 69 of the Partnership Act. The second point was considered in para 5 of the report and it was ruled that the proceeding which is before the Court is to enforce right which arises from a contract and ft is impossible to think that the right to proceed to arbitration is not one of the rights which are founded on the agreement of the parties and, therefore, the words of section 69(3) "right arising from a contract" are in every sense sufficient to cover the present matter, meaning there by that an arbitration clause which arises out of arbitration agreement was covered by section 69(3) of the Partnership Act.

The first point was dealt with in para 6 of the report and the result of that discussion was that "other proceedings" included the arbitration proceedings. In the result, the Supreme Court allowed the appeal, set aside the decision of the High Court and dismissed the application u/s 8(2) of the Arbitration Act as not being competent since the partnership was not registered. Same view has been taken by a Division Bench of the Allahabad High Court in Syed Wahid Hussain v. Maharajkumar Mahmud Hasan Khan (Supra) It is surprising that she appellate Court followed Navinchandra Jethabhai and Another Vs. Moolchand Sadaram Gindodiya, in reversing the well considered judgment of the trial Court in this matter. A reading of the Bombay decision show that this also supports the case of the petitioner although that decision is not on all fours. Before the Bombay Court, the only point was that if a dispute arises between two partners of an unregistered partnership and in case the dispute falls within the exception, whether a suit would be competent or not. The answer was in the affirmative but the result of this answer is not that the dispute can be settled in "other proceedings", namely, arbitration proceedings. For that we find the answer in the Supreme Court decision in Jagdish Chander Gupta v. Kajaria Traders (supra).

In fairness, one decision cited by Ch. Roop Chand, appearing on behalf of the respondent, may be noticed and that is Paras Ram Darshan Lal Vs. Union of India and Another, That case arose with regard to an unregistered partnership on an application filed u/s 8 and 20 of the Arbitration Act which was opposed by the respondent on the ground that the same is not maintainable as the partnership is not registered, by virtue of section 69(3) of the Partnership Act After following the Supreme Court decision in Jagdish Chandra Gupta v. Kajaria Traders (Supra), the Delhi High Court, in paras 7 and of the judgment, clearly ruled that a petition u/s 8 and 20 of the Arbitration Act is a proceeding within the meaning of section 60(3) of the Partnership Act and section (9)(1) is applicable with the result that, according to para 9 of the judgment, the petition under sections 8 and 20 of the Arbitration Act was dismissed as not maintainable in view of sub-section (2) and (3) of section 69 or the Partnership Act What Ch. Roop Chand revision is some lines in para 8 which do cause some confusion while reading the same but in view of the clear verdict in paras 7 and that application for arbitration under sections 8 and 20 of the Arbitration Act is not competent with regard to an ministered partnership in view of sub sections (2) and (3) of section 69 of the Partnership Act, I have no option but to hold in this case as well that the application u/s 20 of the Arbitration Act filed by the respondent was not maintainable as the partnership was not registered.

Coming to the point of limitation, I find merit in the submission of the learned counsel for the petitioners also. There se no article applicable for filing an application u/s 20 of the Arbitration Act. Under the circumstances, we will have to revert back to the residuary article, Article 137 of the Limitation Act, where the maximum period of limitation fixed for filing an application is three years and that starts from the date the right to apply accrues. Here the right to apply accrued on the dissolution of the partnership, that is 19th of November, 1967, whereas tie application u/s 20 of the Arbitration Act was filed on 2nd of September, 1975, that is, after a lapse of more than seven years. The decision in Union of India v. Bimal Kumar Kar (supra), fully supports the petitioners. No decision showing a contrary view has been cited before me. Consequently, I hold that the application was barred by time and reverse the finding of the appellate Court on this point as well.

In the result, this revision is allowed with costs, the order of the appellate Court is set aside and that of the trial Court is restored.