Patna High Court
Rajmani Sinha And Ors. vs Basant Sinha And Ors. on 11 May, 1972
Equivalent citations: AIR1973PAT26, AIR 1973 PATNA 26, ILR (1972) 51 PAT 658
JUDGMENT Shambhu Prasad Singh, J.
1. By a registered deed of partnership (Ext. 13) dated 27th of December, 1960, the three appellants and respondents 1 and 2 constituted a partnership. The firm was to carry the name M/s. Bharat Engineering Company. Differences arose between them and as per Clause 18 of the deed of partnership, they were referred to arbitration of respondent No. 3. He made his award (Ext. 10) on 22-4-1967 and it was filed in court. Appellant No. 1 prayed for pronouncing judgment according to the award and preparing a decree. Appellants 2 and 3 supported him. Respondents 1 and 2 took objection to the award on various grounds. The court below by the order under appeal has refused to make the award a rule of the Court. It has set aside the award and superseded the reference. Hence the appeal
2. In order to appreciate the controversies between the parties, some facts may briefly be stated. On 3rd of August, 1959, respondent No. 2, Surya Kumar Singh, appellant No. 3--Someshwar Kumar Singh and three others, Jang Bahadur Singh, Ram Ayodhya Singh and Ram Narain Singh, executed a partnership agreement, Ext. 13 (a), which was also registered. That firm too was to have the name of M/s. Bharat Engineering Company. The partnership business was deemed to have commenced on and from 3rd of January, 1959. The share of the partners was Surya Kumar Singh 25 per cent, Someshwar Kumar Singh 23 per cent, Jang Bahadur Singh 22 per cent, Ram Ayodhya Singh 10 per cent. and Ram Narain Singh 20 per cent. It is not in dispute that Jang Bahadur Singh and Ram Narain Singh did not contribute towards - the capital of the partnership firm or towards its labour. Only Ram Ayodhya Singh contributed a sum of Rs. 500/-. Subsequently this amount Was paid back to Ram Ayodhya Singh and all the three executed a registered deed of retirement from partnership. The deed was in favour of the appellants and respondents 1 and 2, the new partners of the firm. In the partnership deed (Ext. 13) dated 27th of December, 1960, it was stated under Clause (3)--"This partnership business shall be deemed to have commenced on and from the third January, Nineteen Fifty Nine, and shall continue till it is dissolved in the manner mutually decided by the partners." The share of the new partners in the firm, according to paragraph 5 of the deed, was respondent No. 1 25 per cent, respondent No. 2 35 per cent, appellant No. 1 18 per cent, appellant No. 2 10 per cent and appellant No. 3 12 per cent. Paragraph 5 further recited that the amounts of money already contributed towards capital of the firm in pursuance of the terms of the previous agreement by respondent No. 2 and appellant No. 3 would be adjusted towards their shares according to the new agreement. Paragraphs 14 and 15 of the agreement ran as follows:--
"14. If any of the partners wants to retire from the firm, he shall give a written notice of his intention to do so to all his co-partners and thereupon the 'Managing Partners' shall arrange to prepare a statement of accounts within three months of receiving such notice and it shall be the duty of all the partners to arrange to pay as early as possible either in one lump sum or in suitable instalments the proportionate amount of money remaining due to the retiring partners after necessary reasonable adjustment of expenses, losses and profits. If, however, any partner gives notice of his retirement at a time when the firm is going to incur losses in contract or other business, reasonable adjustments shall be made in respect of the estimated loss in respect of undertaking during his continuance as a partner, for ascertaining the amount of money due to or from the retiring partner. God forbid, if any partner dies, the other partners shall carry on the business as usual and they may admit the wife, son or other legal heirs of the deceased as a partner in his place, but only if mutually agreed upon by all the surviving partners. If the remaining partners would not agree to admit the legal successor of the deceased partner, they shall arrange to settle the account of the deceased partner in a reasonable manner and as agreed upon by them mutually.
15. The 'Good-will' of the firm shall be the exclusive property of Sri Surya Kumar Singh, Party of the second part, and in case he intends to retire from the firm at any time due to any reason or in case, he is compelled to retire by the other partners he shall be fully entitled to charge reasonable value of the 'Good-will' of the firm from the other partners. In case, the value of the "Good-will" is not amicably settled upon by the other partners and the other partners be not ready to satisfy Sri Surya Kumar Singh, he (Sri Surya Kumar Singh) shall have the power to debar the partners from carrying on the business in the name of this firm as the 'Good-will' belongs exclusive to him alone."
3. It is also not in dispute between the parties that before the execution of Ext. 13, appellant No. 13 with respondent No. 1 on behalf of the firm had executed a registered mortgage deed (Ext. 2), dated 15th of May, 1960 and granted a stamped receipt (Ext. 4) dated 26th of August, 1960 for Rs. 22,269/- in favour of appellant No. 1. The amount mentioned in the receipt was not the consideration for the mortgage deed. According to appellant No. 1, he paid this amount as contribution towards the capital of the firm in pursuance of an understanding that he would be admitted to the partnership. According to respondents 1 and 2 it was a mere loan to the firm. It may be stated here that respondent No. 1 is father of respondent No. 2.
4. The firm was carrying on business of taking contracts from the Government for construction of bridges, roads etc. After some time differences arose between various partners and on 23rd of May, 1966, appellant No. 2 sent a notice of his intention to retire from the firm with effect from 1-7-1966. On 6-7-1966 appellant No. 1 also wrote a letter (Ext. D) to respondent No. 1 for rendering up-to-date account of the firm within a month from the receipt of the notice and to pay the outstanding income therefrom to him with respect to his share. By a letter dated 21st of July, 1966, Ext. 1 (e), respondent No. 1 called upon appellant No. 1 to contribute a sum of Rupees 18,000/- which was required as additional capital for carrying on the business of the firm. A similar letter, Ext. D-l (c), of the same date was sent to appellant No. 3. On 23rd of July, 1966, respondent No. 1 wrote another letter, Ext. 1 (a), to appellant No. 1. The subject of the letter was stated to be 'clearing of accounts for the firm M/s. Bharat Engineering Co." However, in the body of the letter it was staled "to avoid all controversies, Sri Rama Nand Sinha, Advocate, Ram Krishna Avenue, Patna-3, has been requested to arbitrate in the dispute or difference and whatever any other matter which may crop up concerning the firm and the partners. He is acceptable to all the partners as arbitrator". By his letter dated 24th of July, 1966, Ext. D (1), appellant No. 1 asked respondent No. 1 to refrain from embarking upon any new venture till the accounts of the firm were cleared up, On 27th of July, 1966, appellant No. 3 wrote a letter. Ext. D-l (1) to respondent No. 1 complaining against the conduct of the latter as Managing Partner. On the same date, appellant No. 1 also wrote a letter, Ext. 1 (h) to respondent No, 1. This was in reply to the letter, Ext. 1 (a). Appellant No. 1 stated that since the accounts had not been prepared and shown to the partners, question of reference to arbitration was premature. On 2nd of August, 1966, an arbitration agreement (Ext. K) was drawn up, but it was signed only by respondent No. 1 and not by all the partners. In this deed the dispute was described as "accounts of the Bharat Engineering Company, Lalji Tola, P. O. 1, P. S. Kotwali, Patna, 1". It was further slated that dispute had arisen between the partners in the matter of accounting between them in respect of their respective dues, assets and liabilities. On 8th of September. 1966, appellant No. 3 wrote another letter, Ext. D-1 to respondent No. 1 calling upon him to expedite settlement of accounts. On 5th of December, 1966, appellant No. 1 gave notice (Ext. H) through a lawyer to the firm, respondent No. 1 and other partners. The notice called upon respondent No. 1 to explain all accounts and give income and assets of the firm to appellant No. 1 according to his share immediately. It also informed the partners of the intention of appellant No. 1 to dissolve the firm with effect from 5th of December, 1966, i.e., the date of the notice. On the same date, appellant No. 1 gave another notice, Ext. H (1), through his lawyer to the firm and the other partners stating that serious disputes and differences had arisen between the partners "relating to the income and assets and other affairs" of the firm and, therefore, 'all their differences and disputes" should be referred to arbitrator to be appointed by them. He concurred in the appointment of Shri Ramanand Sinha, Advocate as sole arbitrator to decide 'all matters in dispute between the partners'. On the same date, appellants 3 and 2 also sent notices through lawyers, Exts. H (3) and H (2) respectively. The notice on behalf of appellant No. 2 is similar to the notice by appellant No. 1. The only difference in the notice on behalf of appellant No. 2 and the notices on behalf of appellants 1 and 3 is that this notice, Ext. H (2) does not talk of the dissolution of the firm. On 22nd of December, 1966, respondent No. 1 on behalf of the firm sent a reply, Ex. 1 (d) through a lawyer to the advocate of appellant No. 1. In paragraph 4 of this letter, the right of appellant No. 1 or any other partner to dissolve the firm at his sweetwill was challenged. On 23rd of December, 1966 the partners, all the three appellants and respondents 1 and 2, executed an arbitration agreement, Ext. 9. Description of dispute in this deed is same as in Ext. K, but in the second paragraph of the preamble after the words 'in the matter of accounting' the words 'and other affairs' were added. In paragraph 4 of the preamble the word 'all' was added before the words 'the dispute' 'and differences' were added after the word 'dispute'.
5. In paragraph 30 of his written statement (Ext. 11) before the Arbitrator appellant No. 1 stated that in the circumstances mentioned in the written statement he had no option but to dissolve the partnership business through letter dated 5th of December, 1966. In paragraph 13 of his written statement, Ext. D (2), respondent No. 1 challenged the assertion of appellant No. 1 in paragraph 30 of his written statement and again said that he had no right to dissolve the partnership business nor it could be dissolved at the option of any other partner. In his petition dated 26th of January 1967, Ext. 3 (c), appellant No. 1 again reiterated that the firm stood dissolved with effect from 5th of December, 1966 and claimed that an order should be passed for joint supervision of the outstanding work of the firm. The reply by respondent No. 1 to this petition of appellant No. 1 is Ext. F (1) and was filed on 31st of January, 1967. Paragraph 4 of it runs as follows:--
"The demand for the dissolution of the firm is an entirely different question and may lead to many unnecessary complications. Our purpose is a proper settlement of the accounts between all the partners of the firm and not the dissolution of the firm and as such it is deemed unnecessary to go into that matter here."
On 19th of February, 1967, respondent No. 3, the Arbitrator heard the parties also on the point whether or not the firm was subsisting or stood dissolved.
6. The award (Ext. 10) is sufficiently long. The main findings recorded by the Arbitrator, however, are:--
(1) It was established that appellant No. 1 was introduced in the firm as a partner during the continuance of the first agreement.
(2) Appellant No. 1 contributed Rupees 22,269/- towards the capital of the firm during the continuance of the first agreement.
(3) Appellant No. 1 lent Rs. 25,000/-to the firm as alleged by him. (It may be stated here that the case of respondents 1 and 2 in this respect was that really appellant No. 1 advanced no money and the mortgage deed was a sham transaction).
(4) Appellant No. 3 contributed Rupees 20,000/- towards the capital of the firm during the continuance of the first agreement of the partnership.
(5) During the second agreement appellant No. 2 contributed Rs. 15,000/- towards capital. (This fact was not disputed.) (6) Respondents 1 and 2 and Ashwini Kumar Singh, another son of respondent No. 1, were joint in mess, property and the business. (The case of the appellants in this respect was that respondents 1 and 2 were partners of the firm as members of the joint family which they constituted. This assertion was challenged on behalf of respondents 1 and 2).
(7) The clause with respect to the salary of the managing partner in the deed of agreement was entered to ventilate the prestige and honour of the managing partners. It was not given effect to.
(8) As admitted appellant No. 2 retired from the firm from 1-7-1966. Appellants 1 and 3 did not retire. (It was the case of respondents 1 and 2 that appellants 1 and 3 also agreed to retire with effect from the same date).
(9) The firm was a partnership at will and stood dissolved from 5th of December, 1966.
(10) The firm having been dissolved, no question of goodwill of it arises.
Other findings of the arbitrator are mainly with regard to the accounting and if necessary, they will be referred to at appropriate places.
7. The Court below has recorded the following findings:--
(i) The point of dissolution or otherwise of the partnership was not a point referred to the arbitrator and it was only the point of accounting which was the subject matter of arbitration agreement by the parties.
(ii) The partnership was not partnership at will and, therefore, could not be dissolved in the manner claimed by appellants 1 and 3.
(iii) The decision of the arbitrator that appellant No. 1 became a partner of the firm during the continuance of the first partnership agreement is not good as the reasonings advanced by the arbitrator do not stand to reason.
(iv) The question of jointness of respondent No. 1 and his sons was not one of the points referred to arbitration. Hence the decision of the arbitrator on this point cannot be said to be a decision within his jurisdiction.
(v) The entire calculation of the accounts and the apportionment of the profits and loss being based on the fact that appellant No. 1 was a partner from the beginning, of the firm established by the first partnership agreement, the decisions on the points referred to him and on the points not referred to him could not be separated. The award, therefore, could not be corrected and bad to be set aside.
8. Mr. Lal Narain Sinha appearing for the appellants challenged the decision of the Court below on all points. He advanced the following main arguments:--
(1) The question since when appellant No. 1 became a partner was a question of fact and decided as one of fact by the arbitrator. It was not open to the Court below to go into the question whether the reasonings advanced by the arbitrator in support of that finding of fact were reasonable, or not. Even if it were to be considered a question of interpretation of the agreement (Ext. 13) and thus a question of law, there was no error committed by the arbitrator which was apparent on the face of the award and, therefore, it was not open to the court below to set aside that finding.
(2), (a) Antecedent correspondence between the parties clearly disclosed that some of them claimed to have dissolved the partnership which was contested on behalf of respondent No. 1. A dispute in this respect was thus in existence on the date of the reference. Such a dispute was within the arbitration clause and the arbitration agreement (Ext. 9) was comprehensive enough to include such a dispute.
(b) The arbitrator rightly held that the partnership was a partnership at will and, therefore, could be dissolved in the manner claimed by appellants 1 and 3.
(c) Even if there was an error of law by the arbitrator in deciding that the partnership was a partnership at will, that question of law having been specifically referred to the arbitrator, his award on that question could not be challenged.
(d) Parties without objection put forward their written statement on the aforesaid controversy. Before the arbitrator they made submissions on the merit of the matter. Having taken the chance of a favourable judgment respondents 1 and 2 could not be allowed to resile and challenge the finding of the arbitrator on that point.
(e) The court below was not entitled to retry the issue about dissolution nor there was any error of law in the award of the kind which vitiated it.
(3) The question whether respondents 1 and 2 were members of a joint family was incidental to the question referred to the arbitrator. It was a question of fact" and the award of the arbitrator on that question could not be challenged. Even if the award on that question suffers from any error of law, that part of the decision was severable and the award could not be set aside on account of that error.
(4) After having held that the partnership has been dissolved, it was not necessary for the arbitrator to value the goodwill because no question as to goodwill of a dissolved firm could arise. Even if the arbitrator would have held that the firm was not dissolved, it would not have been necessary for him to value the goodwill for, according to the deed of partnership, good will was the property of respondent No. 2 and Was to remain with him. Hence, it was not necessary to value it for the purposes of accounting.
9. Mr. J.C. Sinha appearing for respondents 1 and 2 challenged the correctness of the aforesaid submissions of Mr. Lal Narain Sinha and contended--
(1) There was an error of law committed by the arbitrator in finding that appellant No. 1 was a partner in the first partnership. He was a mere creditor.
(2). (a) Reference was only in respect of accounts; question of dissolution of the firm was not referred to the arbitrator.
(b) Even if question of dissolution was referred the question whether the partnership Was a partnership at will, a question of law, was not specifically referred to the arbitrator. There was an error of law in the finding of the arbitrator that the partnership was a partnership at will and the firm could be dissolved at the instance of any of the partners. The Court below has rightly set aside that finding.
(3) The question of jointness of respondents 1 and 2 was not referred to the arbitrator and his finding on that question is bad both for want of reference and on account of other errors of law.
(4) The award was bad for failure on the part of the arbitrator to value the goodwill.
(5) The award was bad and liable to be set aside as the arbitrator misconducted the proceedings.
10. As noticed earlier, the Court below has set aside the award on the ground that the finding of the arbitrator that appellant No. 1 was a partner from the beginning of the firm established by the first partnership agreement was wrong and that the entire calculation of the accounts and the apportionment of the profits and loss being based on that finding, it was not possible to separate parts of the award from each other. In the opinion of the Court below, therefore, the award could not be corrected and had to be set aside. In my opinion, the Court below has erred in holding that the finding of the arbitrator on this question was not correct and could be disturbed by it. The arbitrator relied on a letter dated 1-12-1959, Ext. 1 (g), from respondent No. 2 to appellant No. 1. The letter runs as follows:--
"I went to the Secretariat today and had talks with the Chief Engineer. He has telephonically called the Executive Engineer from Chapra to discuss our matter i.e., about the alignment of the bridge. The Executive Engineer is reaching here from Chapra on 3rd December with all the papers and hence, we must postpone our departure till the matter has been finalised between the Chief Engineer, Executive Engineer and me here at Patna.
I hope we shall be in a position to depart for Chainpur on the night of 3rd December or 4th December. Our departure today postponed."
According to the arbitrator, had not there been an agreement between respondent No. 2 and appellant No. 1 that the latter would be admitted as a partner of the first partnership itself, the latter would not have written such a letter to the former. The arbitrator also relied on Ext. 4 which shows that the amount of Rs. 22,269/- was not advanced on one day, but it was really amount spent by him for the firm from 17-1-1960 to 26-8-1960. The receipt itself shows that appellant No. 1 submitted accounts for the aforesaid sum. Had it really been a loan, appellant No. 1 would have advanced this sum in a lump and would have got a registered deed executed similar to one which he got executed for the loan of Rs. 25,000/-which he advanced to the firm. These were strong circumstances supporting the contention of appellant No. 1 that he was admitted as a partner of the first partnership itself. Mr. J.C. Sinha submitted that the inferences drawn by the arbitrator were not the inferences which could necessarily be drawn from these documents. According to him, respondent No. 2 might have asked appellant No. 1 to accompany him to some places where the firm was doing some contract work because they were close relations and appellant No. 1 might have advanced the loan of Rs. 22,269/- in instalments. Mr. Sinha may or may not be right, but it cannot be said that the inferences drawn by the arbitrator from these documents were also not the possible inferences. Further Ext 5 accounts in the pen of appellant No. 1 from 22-12-1959 to 1-1-1960 which was filed by respondent No. 1 also indicates that the former was a partner of the first partnership. Even if two views were possible and the arbitrator has taken one of them, his finding cannot be set aside by a court.
11. Mr. J.C. Sinha submitted that so long Jang Bahadur Singh, Ram Ayodhya Singh and Ram Narain Singh did not retire from the contract, no new partner could be admitted to it without their consent. According to him, appellant No. 1 was admitted as a partner only after they executed the deed of relinquishment. Therefore, he could not be, in the eye of law, a partner of the firm before the date of the deed of relinquishment. It has already been noticed that the deed of relinquishment or retirement by the aforesaid three persons of the first partnership was not only in favour of respondent No. 2 and appellant No. 3, but it was also in favour of the new partners of the firm. The new partnership deed (Ext. 13) itself provided, in paragraph 3 of it. "This partnership business shall be deemed to have commenced on and from the 3rd January, 1959." This shows that the new partners had agreed that irrespective of the date of their signing of the deed of partnership, they would be deemed to be partners of the firm from 3rd January, 1959. According to Mr. J.C. Sinha Clause 3 of the partnership docs not say that the partnership would be deemed to have commenced from that date, but it merely says that partnership business would be deemed to have commenced on and from that date. The arbitrator has taken the view that according to this clause the partnership itself would be deemed to have commenced on and from the 3rd January, 1959, from which date the first partnership had also commenced. The view taken by him cannot be said to be suffering from an error of law as to justify a court to take a different view from one taken by him. The view taken by the arbitrator is not an unreasonable view. It is the case of respondents 1 and 2 that from the very inception of the firm it was one of the terms that the partnership would not be dissolved unless all the partners agreed, but if any one of them liked, could retire. In other words, the partnership business which commenced from 3rd January, 1959 was to continue. In such a case, there could be no occasion for adding a deeming clause about the business. The clause therefore means that the partnership itself shall be deemed to have commenced from the aforesaid date.
12. Mr. J.C. Sinha also drew our attention to the concluding portion of Clause 5 of the agreement which runs as follows:--
"Be it noted that the amounts of money already contributed towards the capital of the firm in pursuance of the terms of the previous agreement by the two partners viz., Sri Surya Kumar Singh and Sri Someshwar Kumar Singh shall be adjusted towards their shares according to this present agreement."
Surya Kumar Singh is respondent No. 2 and Someshwar Kumar Singh is appellant No. 3. According to Mr. Sinha, had really appellant No. 1 been admitted as a partner to the first partnership, there would have been a similar provision in the deed as to the capital contributed by him. The above sentence Was incorporated in Clause 5 as respondent No. 2 and appellant No. 3 were mentioned as partners in the first deed of partnership. Only because of the presence of this sentence in the partnership deed, it cannot be said that the view taken by the arbitrator is wrong. Subsequent conduct of the partners of the second deed is also relevant in this respect. It is admitted case of all the partners that after the execution of the second partnership deed, appellant No. 2 contributed Rs. 15,000/- towards capital. No demand was made before 21st of July, 1966 on appellant No. 1 to contribute towards the capital of the firm. That demand too, as evidenced by the letter Ext. 1 (e), was for contribution towards the additional capital and not the original capital. It is manifest, therefore, that the sum of Rs. 22,269/- of appellant No. 1 was contribution towards capital of the partnership. The same was admittedly given to the firm before the coming into being of the second partnership, i.e., in the continuance of the first partnership itself. The arbitrator, therefore, also cannot be said to be unreasonable in holding that the aforesaid amount was a contribution from appellant No. 1 towards the capital of the firm during the continuance of the first agreement of the partnership. It was contended by Mr. J.C. Sinha that conduct of the partners antecedent or subsequent to the date of the agreement could not be taken into account for interpreting the terms inasmuch as they were inadmissible in evidence under Section 91 of the Indian Evidence Act. In my opinion, there is no substance in this contention. If the term with which we are concerned is ambiguous but not patently, then certainly the conduct of the parties is relevant for finding out how they understood it. If it is to be held that it is not ambiguous, then the conduct may not be relevant and the term itself shows that the partnership would be deemed to have commenced from 3rd of January, 1959. It is well settled that a court while dealing with an award is not to act as if it were a court of appeal of the arbitrator. Whether the reasonings of the arbitrator appealed to the court or not is not relevant. The award or even a finding of the arbitrator on which the award is based can be set aside only on grounds which are permissible under the law. In my opinion, the court below has erred in holding that the aforesaid finding of the arbitrator was wrong and setting aside the award on that ground.
13. I next take up for consideration the question whether the partnership was a partnership at will or not. In this connection Clauses 3 and 14 of the agreement (Ext. 13) are relevant. These clauses have already been quoted in extenso while stating the facts of the case. Clause 3, inter alia, says that the partnership business shall continue till it is dissolved in the manner mutually decided by the partners. According to Mr. J.C. Sinha, learned counsel for respondents 1 and 2, this meant that the partnership could not be dissolved unless all the partners agreed to the dissolution. According to Mr. Lal Narain Sinha, since the agreement (Ext. 9) did not provide for the manner in which the partnership was to be dissolved, the aforesaid clause was too vague to be enforced upon with the result that there being no provision for duration or determination of the partnership, it remained a partnership at will. Mr. Lal Narain Sinha drew our attention in support of his arguments to Section 29 of the Indian Contract Act and Section 7 of the Indian Partnership Act. Section 29 of the Indian Contract Act lays down that agreement the meaning of which is not certain or capable of being certain are void. According to him, the meaning of the clause 'shall continue till it is dissolved in the manner mutually decided by the partners' was neither certain nor capable of being certain. Section 7 of the Indian Partnership Act defines partnership at will and runs as follows:--
"Whether no provision is made by contract between the partners for the duration of their partnership, or for the determination of their partnership, the partnership is partnership at will".
According to Mr. Lal Narain Sinha, if the aforesaid clause was to be excluded from Clause 3 on the ground that its meaning was not certain or capable of being certain, the partnership agreement does not provide for duration of the partnership or for determination of it; hence it was a partnership at will. On the other hand, Mr. J. C. Sinha pointed out that the partnership deed (Ext. 13) had to be read as a whole and if Clauses 3 and 14 were read together, it was manifest that unless all the partners agreed, the partnership could not be dissolved, in the event one of the partners did not like to continue as a partner, he could retire as provided for in Clause 14. According to him, the partnership deed did provide for the duration of it, namely, it was to continue so long all the partners did not agree for its dissolution. He relied on a decision in Abbott v. Abbott, (1936) 3 All ER 829. One of the clauses of the partnership deed which was under consideration in that case, after stating the date from which the partnership was to commence, further stated that the death or retirement of any partner would not terminate the partnership. Another clause stated that if any partner would do or suffer any act which would be a ground for the dissolution of the partnership by a Court, then he would be considered as retired from the partnership. Yet another clause stated that if any partner died or retired during the partnership, the surviving or continuing partners would have the option of purchasing the deceased or retiring partner's share in the partnership. It was held that this was not a partnership at will; the partnership could not be determined by a single partner although he could determine the partnership as between himself and the other partners. In my opinion, the decision in this case is applicable to the facts of the present case. Even if the contention of Mr. Lal Narain Sinha be accepted that the clause 'shall continue till it is dissolved in the manner mutually decided by the partners could not be a term of the contract which could bind the parties, it shall have to be treated as non-existent. The result will be that the partnership deed will be a partnership deed of the nature which was under consideration in the aforesaid case which provides for the date of the commencement of the partnership and that one of the partners would only retire in the manner provided in Clause 14. This decision was referred to with approval by our Supreme Court in Karumuthu Thiagarajan Chettiar v. E.M. Muthappa Chettiar, AIR 1961 SC 1225.
14. According to Mr. Lal Narain Sinha, Abbott's case was distinguishable on the ground that whereas the English Partnership Act does not define 'partnership at will', the Indian Partnership Act does define it. He referred us to Clause 9 of the report of the Special Committee on the Indian Partnership Act which states the reason why 'partnership at will' was defined. Clause 9 of the report of the Special Committee is as follows:--
"The English law uses the expression 'partnership at will' in Section 27, but does not contain any definition of 'partnership at will' in Section 26, it merely paraphrases the expression in these terms where no fixed term has been agreed upon for the duration of the partnership; and in Section 32 (c) as 'entered into for an undefined term'. The contrasted wording of Sections 26 and 32 has given rise to considerable difficulty in practice. On the language of Section 26 it has been contended that even where an agreement of partnership provided that a partnership would be terminated by mutual agreement only, the partnership must be taken to be a case where no fixed term was agreed upon for its duration, and that, therefore, the partner would under the terms of section retire by merely giving notice to the other partners notwithstanding the terms of the articles of partnership. The Court of Appeal in England, however, rejected the contention and held that as the duration of the partnership was provided for in the partnership agreement, it was a partnership for a fixed term (Moss. v. Elphick, (1910) 1 KB 846). To get over the difficulty felt in England, we have inserted a definition of 'partnership at will'."
In my opinion, the Special Committee does not say that it wanted to differ from the decision in Moss v. Elphick, (1910) 1 KB 846, as to what was a partnership at will. Since there was some divergence of judicial opinion earlier in England as to interpretations of two sections of the Partnership Act of that place, to avoid similar controversy in our country the term was defined. The decision in Abbott's case, therefore, cannot be distinguished on this ground. I am of the view that the deed (Ext. 13) read as a whole shows that the partnership can be determined only when all the partners to it agree for such determination and its duration will be as long as it was not so determined. In my opinion, therefore, the deed was not a partnership at will even according to definition of the term in Section 7 of the Indian Partnership Act. The Court below is, therefore, right in holding that the partnership as contained in Ext. 13 was not a partnership at will and the arbitrator was wrong in holding that it was a partnership at will.
15. The next question which arises for consideration is whether it was open to the court below to correct the finding of the arbitrator on the question whether the partnership was a partnership at will. According to Mr. Lal Narain Sinha, the Court below could not correct the finding. According to Mr. J.C. Sinha, it would. In support of his contention Mr. Lal Narain Sinha relied on the decision of the Judicial Committee in Durga Prasad Chamria v. Sewkishendas Bhattar, AIR 1949 PC 334. It has been held in that case that where a question of law is specifically referred to arbitrator for decision and he decides it, it would be contrary to well established principles for a court of law to interfere with the award even if the court would have taken a different view of the point of law had it been before it. It appears that it was contended before the Judicial Committee that the arbitrator had erred on two questions of law, i.e., admissibility of certain documents in evidence and limitation. That was a case of reference to arbitration with the intervention of the Court. Before the reference was made, issues on these two questions had been framed by the Court. In the circumstances it was held that the two questions of law were specifically referred to the arbitrator and even if he decided them wrongly, the Court could not interfere with his award. This decision was referred to with approval in Thawardas Therumal v. Union of India, AIR 1955 SC 468. After noticing various decisions placed before them, their Lordships of the Supreme Court laid down the law on the subject as follows:--
"An arbitrator is not a conciliator and cannot ignore the law or misapply it in order to do what he thinks is just and reasonable. He is a tribunal selected by the parties to decide their disputes according to law and so is bound to follow and apply the law, and if he does not, he can be set right by the courts provided his error appears on the face of the award. The single exception to this is when the parties choose specifically to refer a question of law as a separate and distinct matter."
Their Lordships further observed:--
"If, therefore, no specific question of law is referred either by agreement or by compulsion, the decision of the arbitrator on that is not final however much it may be within his jurisdiction, and indeed essential, for him to decide the question incidentally".
16. The real question which, therefore has to be decided in this connection is was the specific question of law whether the partnership was a partnership at will referred for the decision of the arbitrator either by agreement or by compulsion. Let me proceed now to find out with reference to the evidence on the record what was the reference to the arbitrator. As already noticed while stating the facts it was respondent No. 1 who in his letter Ext. 1 (a) initiated the suggestion that to avoid all controversy respondent No. 3 had been requested to arbitrate in the dispute or difference and whatever any other matter which may crop up concerning the firm of the partners. Of course, in Ext. K which was signed only by respondent No. 1, the reference was limited to accounting between the partners in respect of their respective dues, assets and liabilities. Thereafter by Ext. H appellant No. 1 informed respondent No. 1 and other partners that he was dissolving the firm with effect from 5th of December, 1966. Similar statement was made in Ext. H (3) by appellant No. 3. Both appellants 1 and 3 wanted that all their differences and disputes should be referred to arbitrator, respondent No. 3. By Ext. 1 (d) respondent No. 1 challenged the right of appellant No. 1 or any other partner to dissolve the firm at his sweet will. Then came the arbitrator agreement (Ext. 9) by which reference was made to respondent No. 3. The words 'and other affairs' were added after the words 'in the matter of accounting' in the second paragraph of the preamble as it was in Ext. K. Similarly in paragraph 4 of the preamble the word 'all' was added before the words 'the dispute' and 'and differences' were added after those Words. A comparison of Exts. K and 9 leaves no room for doubt that the scope of the reference was widened by Ext. 9 that what it was in Ext. K. Our attention was drawn by Mr. J.C. Sinha to Ext. F (1) a petition of respondent No. 1 which was filed on 31st of January, 1967. Relevant paragraph from this petition has already been quoted in paragraph 5 of this judgment earlier and it is true that by that petition respondent No. 1 contended that the question of dissolution of the firm was not the subject-matter of the reference. This stand of respondent No. 1 on 31st of January, 1967 is not of much consequence in deciding what Was referred to by Ext. 9. From the documents referred to above, it is manifest that a difference had already arisen between the appellant Nos. 1 and 3 on one side and respondent No. 1 on the other as to whether they could dissolve the firm or not and as all the differences between the partners were referred for the decision of the arbitrator by Ext. 9, there can be no doubt that the question whether there was a dissolution of the firm or not else referred to the arbitrator for his decision.
17. It was contended, however, by Mr. J.C. Sinha that the question whether the partnership was a partnership at will was distinct and separate question from the question whether the firm was dissolved or not and, therefore, even if it was held that the latter question was referred for the decision of the arbitrator, it did not follow that the former, which is a question of law, was specifically referred to the arbitrator for his decision. The difference between appellants 1 and 3 on the one hand and respondent No. 1 on the other was not whether appellants 1 and 3 as a matter of fact had expressed their intention to dissolve the firm, but it was whether they could do it in law. It has already been noticed that after appellants 1 and 3 gave the notices, Exts. H and H (3), stating that they had dissolved the partnership, respondent No. 1 by Ext. 1 (d) challenged their right to dissolve the firm at their sweet will. The use of the expression 'Sweet will' in the said letter clearly indicates that respondent No. 1 wanted to emphasise that the partnership was not a part-ship at will and unless all the partners agreed to its dissolution, it could not be dissolved by any one of the partners alone. This was one of the differences between the parties is also apparent from the subsequent conduct of the parties as to how they understood what were the differences between them. In reply to the claim of appellant No. 1 made in paragraph 30 of his written statement that the partnership stood dissolved, respondent No. 1 in paragraph 13 of his written statement, Ext. D (2), stated that neither appellant No. 1 had right to dissolve the partnership business nor it could be dissolved at the option of any other partner. Again the use of the word 'option' indicates that respondent No. 1 was emphasing the stand taken by him in Ext. 1 (d) that it was not a partnership at will. I am, therefore, of the opinion that the question whether the partnership was at will or not was specifically referred to the arbitrator. The decision of the Judicial Committee in Durga Prosad Chamria's case does support this view.
18. Mr. J.C. Sinha laid much emphasis on the decision of the Supreme Court in Thawardas Pherumal's case. That was a case of contract between the appellant before their Lordships who was a contractor and Additional Chief Engineer, C. P. W. D. representing Dominion of India for supply of bricks. One of the clauses of the contract provided that the department would not entertain any claim for idle labour or for damage to unburnt bricks due to any cause whatsoever. The contractor claimed damages for unburnt bricks as well on the ground that as the C. P. W. D. failed to remove the baked bricks, unburnt bricks could not be baked and they were destroyed by rains. The arbitrator held that that clause was not meant to absolve the department from carrying out their part of the contract and so he awarded the contractor damages on the aforesaid account. One of the questions which arose for decision of their Lordships of the Supreme Court was whether there was a specific reference to the arbitrator in that case of the question of interpretation of the said clause in the deed of contract which was a question of law. They held that there was no specific reference on that point of law inasmuch as firstly the documents placed before them did not convince them that there was such a reference and secondly there was nothing to indicate that the department was also prepared to submit that question to arbitration. As already discussed earlier, in the instant case, by the agreement Ext, 9 itself parties agreed to refer all their differences to arbitrator and one of the differences was whether appellants Nos. 1 and 3 could dissolve the partnership at their sweet will without the consent of the other partners; in other words whether the partnership was a partnership at will or not. The question whether the partnership was a partnership at will or not depended on the interpretation of the deed of partnership and it is not possible to hold that the question whether the partnership is a partnership at will or not and the question of interpretation of the deed of partnership for the purposes of recording a finding on that question were separate questions. I would, therefore, hold that the decision in Thawardas Pherumal's case is not of any real help to respondents 1 and 2 and the question whether the partnership was a partnership at will or not, one of law, was specifically referred to the arbitrator for his decision. Therefore, even though I am not prepared to agree with the arbitrator as to the interpretation of the deed, I am constrained to hold that the finding of the arbitrator on this question was not open to review by the court below. In view of the finding recorded above I do not consider it necessary to go into the question whether respondents Nos. 1 and 2 on account of their conduct in the arbitration proceeding are estopped from challenging the award on the point of dissolution.
19. I am not inclined to agree with the arbitrator that it was not necessary for him to value the goodwill of the firm because he found that the partnership had been dissolved. But I am also not inclined to agree with the court below that the award of the arbitrator is vitiated for failure on his part to value the goodwill. According to Clause 15 of the agreement (Ext. 13), already quoted earlier in this judgment, goodwill of the firm was to be the exclusive property of respondent No. 2 and he could charge reasonable value thereof only if he retired himself from the firm or was compelled to retire by any other partner from the firm. The clause further provides that in case the value of the goodwill is not amicably settled upon by other partners and they be not ready to satisfy respondent No. 2 the later shall have the power to debar them from carrying on the business in the name of the firm. In view of this clause I am of the opinion that failure on the part of the arbitrator to value the goodwill has not vitiated the award. Respondent No. 2 shall be entitled, as mentioned in Clause 15, to debar other partners from carrying on the business in the name of the firm hereafter. The award cannot be said to be bad because of the failure on the part of the arbitrator to value the good will for another reason. The only person who could derive advantage of the value of the good will was respondent No. 2 and he does not appear to have actively participated in the arbitration and filed any written statement.
20. There was no difference between the parties before the reference on the question whether respondents 1 and 2 were members of a joint family or separate from each other. As both of them were mentioned as partners of the firm in the deed (Ext. 13), apparently it appears that they became partners in their individual capacity. Before the reference the appellants never asserted that respondents 1 and 2 were joint. In that view of the matter, the Court has rightly held that the finding of the arbitrator on this question cannot be supported. There can be, however, no doubt that this question as submitted by Mr. Lal Narain Sinha, was separable from other questions and the award could not be set aside on account of the aforesaid error of the arbitrator.
21. Though the question of misconducting the proceeding by the arbitrator was not expressly urged before the court below, as the matter was argued by Mr. J.C. Sinha, I would like to deal with that question at this stage. Mr. Sinha submitted that the arbitrator misconducted the proceeding because (i) he applied double standard regarding withdrawals by different partners, (ii) ignored terms of the partnership deed regarding payment of wages to the managing partner, (iii) showed undue favour to appellant No. 1 who was his son-in-law by directing that he would carry on the business of the firm and (iv) created double jeopardy for respondents 1 and 2 in respect of accounting with regard to certain sums. With reference to the materials on the record. Mr. J.C. Sinha was not able to establish the charge-sheet against the arbitrator that he applied double standards while considering withdrawals by different partners. Withdrawals from the bank by respondent No. 1 which were proved and not accounted for in the accounts, according to the findings of the arbitrator are to go in the personal name of respondent No. 1, i.e., he will be liable for that amount to the firm. The allegation of the appellants was that respondent No. 1 failed to account for Rs. 72,000/-. The arbitrator has held respondent No. 1 liable only for Rs. 10,000/- as, in his opinion, Rupees 62,000/- was accounted for. Similarly he has also held appellant No. 1 liable for the money not accounted for by him. While dealing with para 1 of the joint objection Part II, the arbitrator has held that Rupees 3,852.79 would go in the personal name of appellant No. 1. With reference to para 5 (2) of the first rejoinder he has added that Rs. 1,000/- would go in the personal name of appellant No. 1. Appellant No. 1 took Rs. 700/- from one Brijnandan Munshi. This was not accounted for by him in his accounts. Therefore, the arbitrator has made appellant No. 1 liable for this sum of Rupees 700/- personally. It is not, therefore, possible to accept the contention of Mr. J.C. Sinha that the arbitrator applied double standards in the matter of accounting.
22. So far wages of managing partner is concerned, there is provision for it in the deeds of partnership. The case of the appellants in this respect was that the clauses regarding salary of the managing partners in the deeds of partnership were entered to ventilate the prestige and honour of the managing partners and it was not given effect to. The partnership deeds were registered documents and their terms could not be changed by the partners by any agreement which was not registered. Evidence except in the shape of registered documents therefore, was not admissible to prove that the clauses with regard to salary of managing partners remained ineffective. The finding of the arbitrator in this regard is had in law on the face of the award itself and cannot be sustained. However, on account of this error on his part, it cannot be held that he misconducted the proceedings nor the award can be set aside on that ground.
23. There is also no substance in the contention of Mr. J.C. Sinha that the arbitrator has shown undue favour to appellant No. 1 who happens to be his son-in-law. I would reiterate here that respondent No. 1 who is also a close relation of appellant No. 1 himself initiated the suggestion that respondent No. 3, who was father-in-law of appellant No. 1, be appointed arbitrator. The arbitrator has nowhere said that only appellant No. 1 will look after and supervise the pending business of the firm. Rather he has directed that the incomplete work at Donk and Siwan be completed under the joint supervision of the partners including appellants 1 and 3 and all payments from the department be taken jointly by the partners including the aforesaid two appellants. This too is not a definite direction; rather the arbitrator has further observed that if any of the partners does not conform to the aforesaid direction, the partners will nominate and assign any person to get the aforesaid incomplete works done and to take all payments from the department and if they do not agree to nominate such a person, the court will appoint such a person. I do not think by these observations respondent No. 3 has shown any undue favour to appellant No. 1. Further the observation of the arbitrator that ultimately the court would appoint a person to complete the incomplete works of the firm cannot be directed. It is recommendation to the court which the court may or may not follow.
24. The submission with regard to creation of double jeopardy was made on account of the fact that at one place in the award the arbitrator has said as follows:--
"It has been found earlier that Sri Rajmani Sinha contributed Rs. 22,269/- towards the capital of the firm and paid Rs. 25,000/-as loan to the firm and Sri Someshwar Kumar Singh contributed Rs. 20,000/- towards the capital during the period of the 1st agreement. These amounts are to be deducted from the total investment during the period of the 1st agreement and the balance which remains thereafter is the total investment towards the capital by Sri Surya Kumar Singh during the period of the 1st agreement."
At another place he has made the following observations:--
"From the accounts of Sri Surya Kumar Singh, the income of the firm upto 30-6-66 comes to Rs. 6,08,247.85 vide para 24 part I of joint objection dated 31-1-67 which has not been denied. In this amount, investment of Rs. 22,269/- of Sri Rajmani Sinha, a loan of Rs. 25,000/- by Sri Rajmani Sinha and investment of Rs. 20,000/- by Sri Someshwar Kumar Singh and Rs. 14,900/- vide decision of para 14 part 1 of joint objection. Rupees 35,110/- vide decision of para 15 part I of joint objection Rs. 1,600/- vide decision of para 18 of Part I of joint objection, Rupees 20,275/- vide decision of para 19 of Part I of joint objection, Rs. 3,400/- vide decision of para 20 of Part I of joint objection, Rs. 20,500/- vide decision of para 21 of part I of joint objection Rs. 872/- vide decision of para 22 of part I of joint objection the total comes to Rs. 7,72,173.85 when added together.
From the accounts of Sri Surya Kumar Singh, the expenditure comes to Rupees 7,21,362.77 vide para 25 part I of joint objection dated 31-1-67 which is not denied. In this amount Rs. 19,300/- vide decision of para 16 part I of joint objection when added, the total comes to Rs. 7,40,662.77 in which Rs. 78,947/- vide decision of para 5 part I of joint objection, Rs. 40,450.50 vide decision of para 6 part I of the joint objection, Rs. 500/- vide decision of para 7 part I of the joint objection, Rs. 2,000/ vide decision of para 10 part I of the joint objection, Rs. 7,659.06 vide decision of para 2 part I of the joint objection, Rs. 8,500/- vide decision of para 12 part I of the joint objection, Rs. 1,167/- vide decision of para 13 part I of the joint objection, Rs. 2,208/- vide decision of para 17 part I of the joint objection totalling Rs. 1,41,431.56 will be deducted and the balance of expenditure remains Rupees 5,99,231.21 after deducting Rs. 1,41,431.56 from Rs. 7,40,662.77.
If the expenditure of Rs. 5,99,231.21 is deducted from the income of Rs. 7,72,173.85, the balance of Rs. 1,72,942.64 remains outstanding against Sri Surya Kumar Singh due to the firm. Rupees 11,074.65 vide my decision of Para 5 Part II of the joint objection, Rs. 4,600/- vide decision of para 7 Part II of the joint objection, Rs. 1,400/-vide decision of para 8 part n of the joint objection, Rs. 2,000/- vide decision of para 9 part n of the joint objection, Rupees 24,614.46 decision of para 10 part II of the joint objection, Rs. 10,000/- vide decision of para 3 of the supplementary objection, Rs. 2,500/- vide decision of para 5 of the supplementary objection, Rs. 4,000/- vide decision of para 6 of the supplementary objection, Rs. 1,482/- vide decision of para 7 of the supplementary objection, Rs. 3,858/-vide decision of para 8 of the joint objection part I, Rs. 17,220/- vide decision of para 11 of the supplementary objection, Rs. 1,67,783.46 vide decision of para 6 part I of joint objection, Rs. 10,165/- vide decision with commission to entrepreneur as spent by Sri A.K. Singh as alleged Rs. 3,500/-vide decision of para 14 of the supplementary objection.
The total of these items comes to Rs. 2,64,197.57, which is outstanding against Sri Basant Sinha due to the firm."
According to Mr. J.C. Sinha, the investment of appellants 1 and 3 and the loan by appellant No. 1 should not have been taken into consideration again as they were already taken into account earlier. The submission suffers from a fallacy. Unless it is shown that the account of respondent No. 2 showing the income of the firm Rupees 6,08,247.85 included the investment of appellants 1 and 3 and loan by appellant No. 1, the submission which has been made by Mr. J.C. Sinha could not possibly be made. He was not able to convince us with reference to the accounts that the aforesaid income of the firm includes the investments of the aforesaid two appellants and the loan to the firm by appellant No. 1. I am, therefore, of the opinion that respondent No. 3 has not misconducted the proceedings and the award is not liable to be set aside on that account
25. The finding of the arbitrator on the question of jointness of respondents 1 and 2 is upon a matter not referred to the arbitrator and that can be separated from the other part of the award as that does not affect the decision on the matter referred. The finding, if maintained, would have been relevant only on the question of future joint responsibility of respondents 1 and 2 for the individual liability of each other. This finding in the award, therefore can be corrected under Section 15 (a) of the Arbitration Act. Similarly the finding of the arbitrator in the award on the question of payment of salary to the managing partners is an obvious error which can be amended without affecting the decision of the arbitrator on main points. The award, therefore, can be modified to that extent under Section 15 (b) of the Arbitration Act. Respondents 1 and 2 are entitled to salary as managing partners at the rate of the amounts mentioned in the deeds of partnership and that is to be added to their credit while determining their liability to the firm.
26. In the result, the appeal is allowed and the order of the court below setting aside the award and refusing to make it a rule of the court is set aside. The case is sent back to the court below for making the award a rule of the court subject to correction and modification as observed in the preceding paragraph. As observed earlier, it is also made clear that in the matter of winding up of the firm, the recommendations made by the arbitrator are not necessarily binding on the court below and it may act as it thinks just and proper in that connection. The appellants will be entitled to costs of this Court. Hearing fee is assessed at Rs. 500/- only.
S.P. SINHA, J.
27. I agree.