Rajasthan High Court - Jodhpur
Jagdish Chandra & Anr vs Hari Narayan & Anr on 11 February, 2010
Equivalent citations: AIR 2010 (NOC) 1005 (RAJ.), 2010 AIHC (NOC) 1093 (RAJ.)
Author: Prakash Tatia
Bench: Prakash Tatia
1
IN THE HIGH COURT OF JUDICATURE FOR RAJASTHAN AT
JODHPUR.
JUDGMENT
Jagdish Chandra & anr. vs. Hari Narain & anr.
S.B. Civil Misc. Appeal No.492/94 under Section
39(v) of the Indian Arbitration Act, 1940 against the
order dated 2.3.1994 passed by the learned District
Judge, Bikaner in Civil Suit No. 184/92.
Date of JUDGMENT:- February 11,2010.
PRESENT
HON'BLE MR.JUSTICE PRAKASH TATIA
Mr.BL Purohit and Mr. Rajeev Purohit for the appellant.
Mr. GR Singhvi and Mr. MR Singhvi for the respondents.
REPORTABLE
BY THE COURT:
A question of law has been raised by the learned counsel for the appellants that whether seeking dissolution of partnership firm through the court under Section 44 of the Indian Partnership Act, 1932 is statutory right and not an issue which can be referred to the arbitrator ?
The facts of the case are that the plaintiffs-appellants filed 2 one suit on 23.10.1992 seeking decree for dissolution of the partnership firm M/s Vishva Jyoti Theater and for rendition of account in the court of District Judge, Bikaner . According to the appellants in the firm M/s Vishva Jyoti Theatre of Bikaner, the plaintiffs' share is 1/3rd and for this partnership, a partnership deed was executed on 4.10.1983. Defendant no.1, one of partner in the firm, is the uncle of the plaintiffs and another is defendant no.2 who is cousin elder brother of the plaintiffs. According to the plaintiffs, all the books of account are lying with the defendants and in fact they were managing the affairs of the firm being eldest in the family also. In the year 1972, when the plaintiffs enquired about the financial position of the firm then the defendants orally informed the plaintiffs that the firm is running in losses and all capital has already perished and the firm is in debt. However, the plaintiffs were not shown the books of account etc. The plaintiffs pleaded that since 1983 till the suit was filed in the year 1992, picture hall of the firm never remained closed and some times it earned rent of Rs.19,000/- per week and then Rs.8000/- per week, against total expenditure of Rs.20,000/- per month and in view of that the cinema hall was giving income of Rs.56,000/- per month 3 and there was no question of loss to the firm. The plaintiffs on 4.10.1983 again demanded the accounts from the defendants but they avoided to show the books of accounts and complete accounts. The plaintiffs tried to take help of other relatives but that effort also failed. Ultimately, the plaintiffs served notice dated 17.3.1990 through their advocate upon defendants asking them to dissolve the firm and give the accounts. Said notice was received by the defendants on 19.3.1990, but they by their goody- goody talks, misled the plaintiffs and did not give the accounts to the plaintiffs, however, on 20.3.1991 the defendants with the help of the relatives, pressed upon the plaintiffs to settle in the manner that the defendants by 19.6.1991 will give Rs.25,00,000/- which shall be against the account of the firm's good will etc. also, the defendants will show the books of accounts to the plaintiffs and satisfy with the accounts, the defendants will pay the remaining amount as per the accounts if there will be any dues of the plaintiffs in the firm. The plaintiffs contended that inspite of that settlement, the defendants neither paid any amount to the plaintiffs nor shown the accounts and, therefore, the subsequent agreement which was obtained by misrepresentation of facts and 4 law came to an end.
The plaintiffs thereafter pleaded that the defendants excluded the plaintiffs from the firm and earning the profits from the business of the firm and they opened new bank account with their own signatures. With this allegation, the plaintiffs pleaded that now it is necessary to obtain the dissolution of the firm through the court decree under Section 44 of the Indian Partnership Act, 1932 and to get the rendition of accounts. The plaintiffs, therefore,filed the suit for dissolution of the firm with declaration of date of dissolution of the firm and with decree for rendition of accounts and appointment of receiver etc. The defendants submitted an application under Section 34 of the Arbitration Act and prayed for stay of the proceedings of the suit. The defendant's contention is that the plaintiffs, by notice dated 20.3.1991, retired from the firm. The defendants denied that any settlement was arrived on 20.3.1991 as stated by the plaintiffs and since 20.3.1991 the plaintiffs stand retired from the firm. The plaintiffs have no concern with the firm and its assets and accounts. It is submitted that since the defendants have raised dispute in their notice, therefore, a dispute has arisen which can 5 be referred to the arbitrator. The defendants submitted that on 7.10.1992, they sent a letter of request for settlement of dispute through arbitration. The defendants then appointed Dwarka Prasad Joshi Advocate as their arbitrator. In view of the condition of arbitration available in the deed of partnership, the plaintiffs appointed their arbitrator Hardwari Lal Sharma resident of Bhopal, which was not acceptable to the defendants. It is submitted by the defendants that as per the deed of partnership dated 4.10.1983, each of partner was required to appoint one arbitrator. The defendants denied the contention of the plaintiffs that the plaintiffs cancelled their notice to withdrew their notice to retire from the firm and in fact the plaintiffs continued to accept their position as of retired partner and they took the cheques from the plaintiffs and after expiry of validity of the cheques, notice was given by the plaintiffs demanding the amount of the cheques with threat to initiate criminal case under Section 131 of the Negotiation of Instruments Act.
The plaintiffs submitted reply to the defendants' application filed under Section 34 of the Arbitration Act, 1940 and disputed the contention of the defendants that the plaintiffs already retired 6 or the matter was referred to the arbitrator etc. The defendants submitted rejoinder to the reply filed by the plaintiffs.
The trial court after hearing arguments of the parties, by impugned order dated 2.3.1994, stayed the suit proceedings filed under Section 34 of the Arbitration Act. Hence this appeal has been preferred by the plaintiffs.
The learned counsel for the appellants has raised legal issue that a partner's claim to a decree for dissolution rests, in its origin, not on contract, but on his inherent right to invoke the Court's protection on equitable grounds, in spite of the terms in which the rights and obligations of the partners may have been regulated and defined by the partnership contract. In support of said plea, the learned counsel for the appellants relied upon the judgment of the Privy Council delivered in the case of Rehmatunnissa Begum and others v. Prince and others (AIR 1917 PC 116). According to the learned counsel for the appellants, any partnership firm can be dissolved by serving a notice by any of the partners provided the partnership is at will. However, a partnership can be dissolved by the court if suit is filed by the partner of the firm and Section 44 of the Act of 1932 empowered the court to dissolve a firm on any of 7 the grounds referred in sub-clauses (a) to (g) under Section 44 of the Act of 1932. The learned counsel for the appellants vehemently submitted that this statutory right of seeking dissolution of firm through court's decree is not dependent upon contract of partnership and, therefore, the appellants have inherent right apart from any clause in the arbitration to seek decree for dissolution of partnership. Meaning thereby, this right is not controlled and limited by the clause of the arbitration made in the partnership deed.
The learned counsel for the appellants also submitted that Hon'ble the Apex Court in the case of I.T.C. Ltd.v.George Joseph Fernandes and another (AIR 1989 SC 839), after considering the earlier judgments of the Hon'ble Supreme Court held that contract (of partnership ) is a outcome of the agreement between the parties. It is equally open to the party thereto and to court to bring to an end or to treat it as if it never existed. It has also been observed that it may also be open to the parties to terminate previous contract or alter the original contract in such a way that it cannot subsist. In that situation also, since the entire contract is put to an end to, the arbitration clause, which is a part of it, also 8 perishes along with it. In that situation Hon'ble the Apex Court held that where dispute between the parties is that the contract itself does not subsist either as a result of its being substituted by a new contract or by rescission or alteration, that dispute cannot be referred to the arbitration as the arbitration clause itself would perish. The Hon'ble Apex Court held that the very jurisdiction of the arbitrator is dependent upon the existence of the arbitration clause under which he is appointed and the parties have no right to invoke a clause which perished with the contract. Another question decided by the Hon'ble Apex Court in the case of I.T.C. Ltd.(supra) is that a dispute as to the binding nature of the contract cannot be determined by referring to the arbitration because the arbitration clause itself stands or falls according to the determination of question in dispute. In sum and substance, in the case of I.T.C. Ltd.(supra), Hon'ble the Apex Court held that the question as to legality or ab initio invalidity of main contract is de hors and independent of contract, would not be referable under arbitration clause.
The learned counsel for the appellants also submitted that in the facts of the case, the dispute is not covered by any arbitration 9 agreement and further the applicants in this case failed to satisfy the court that he was willing to get the matter decided by arbitration and for this, the learned counsel for the appellants relied upon the judgment of this Court delivered in the case of D.C.M. Ltd. v. Rajasthan State Electricity Board (AIR 1992 Raj.
138). However, in this very case of D.C.M. Ltd., this Court held that the point in issue is is purely legal then it is to be decided by the Court and not by an arbitrator and finding the case involving a pure legal question, this Court interfered in the order of the trial court granting stay of the suit under Section 34 of the Act of 1940. In view of that, the learned counsel for the appellants submitted that all the issues raised by the appellants can be decided by the court and not by the arbitrator. The learned counsel for the appellants also relied upon the judgment of the Hon'ble Apex Court delivered in the case of Food Corporation of India v. M/s Thakur Shipping Co. and others (AIR 1975 SC 469) wherein a question of ready and willingness with reference to Section 34 has been considered by the Hon'ble Apex Court in detail and submitted that in the facts of the case, the defendants were ready and willing to get the dispute settled through arbitration and, therefore, their 10 application under Section 34 should have been rejected by the court below.
The learned counsel for the appellants submitted that the question of rendition of accounts must be decided by the court and not by the arbitrator, as has been held by the Punjab and Haryana High Court in the case of Narinder Singh Randhawa and another vs. Hardial Singh Dhillon and others ( AIR 1985 P & H 41).
The learned counsel for the appellants also submitted that Hon'ble the Supreme Court in the case of Gaya Electric Supply Co. Ltd. vs. State of Bihar ( AIR 1953 S.C. 182) held that where the party seeks to avoid the contract for reasons de hors it, the arbitration clause cannot be resorted to as it goes along with other terms of the contract. The learned counsel for the appellants also submitted that the application under Section 34 of the act of 1940 must be self-content and must satisfy the dispute that is referable to the arbitration and if the appellants failed to so do, the suit proceedings cannot be stayed under Section 34 of the Act of 1940.
The learned counsel for the appellant invited my attention to the partnership deed dated 4.10.1983 containing the arbitration clause 15, which reads as under:-
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"(15) That all disputes and questions in connection with the Partnership or interpretation of this DEED arising between the Partners of this partnership or between any one of them and the legal representative of the other or between their respective legal representatives and whether during or after the termination of this Partnership shall be referred to the arbitration or the four arbitrators, one to be appointed by each partner."
Then invited my attention to the agreement dated 20.3.1991 which was executed between the plaintiffs with the help of which the defendants are claiming that the plaintiffs retired from the firm and at the same time, are not in position to dispute that none of the amount mentioned in the deed dated 20.3.1991 has in fact been paid to the plaintiffs. In the deed dated 20.3.1991, there is further clause which is claimed to be another agreement between the parties for referring the matter to the arbitrator .Clause (10) in the deed dated 20.3.1991 is as under:-
"(10) यह क इस इ र रन म म वर त तथय बर म
यद ई ववव हआ त उस ननपट र हररद र#ल लज& व
दर पस ज श& एडव ट रग एव, न द र द य गय
नन य पक रन ललए तई ह ग तथ इस स,ब,ध म ई
12
पक र नय य लय म यव ह# नह#, र स ग ।"
The learned counsel for the appellants submitted that clause 15 in the partnership deed dated 4.10.1983 does not cover petitioners' claim and relief as claimed in the suit because of the reason that the petitioners have inherent right to seek dissolution of the firm and seeking dissolution of firm is not a claim covered under clause 15 of the partnership deed. The agreement dated 20.3.1991 has been executed by the plaintiff alone and not executed by all the parties to the partnership firm and further more defendants did not act upon this agreement and, therefore, this agreement is of no use. In the alternative, clause(10) of the deed dated 20.3.1991 is the clause for referring the dispute between the parties to the two named arbitrators, who now cannot arbitrate and scope under clause (10) is only limited to settlement of dispute through arbitration which is in relation to the deed dated 20.3.1991 and, therefore, the question of dissolution cannot be decided by the arbitrator nor the arbitrator can decree the dissolution of the firm as it can be done by the court under Section 44 of the Act of 1932.
The learned counsel for the appellant relied upon the recent 13 judgment of the Hon'ble Supreme Court delivered in the case of N. Radhakrishnan vs. M/s Maeestro Engineers (2010 AIR SCW 331), wherein the Hon'ble Supreme Court held that the case relating to allegations of fraud and serious malpractices on part of respondents in account books and finances of partnership firm are the issue which can only be settled in the Court and cannot be by way of arbitration. However, it was case under the Arbitration and Conciliation Act, 1996.
The learned counsel for the respondents vehemently submitted that the jurisdiction of this Court is limited and once the the trial court held that there is arbitration agreement between the parties then this Court may not interfere in that finding of fact recorded by the court below. It is also submitted that the trial court once has exercised discretion in favour of staying the suit and referring the matter to the arbitrator, then also there is no reason for this Court to upset that decision because the trial court has not rejected the suit of the plaintiffs but asked the plaintiffs to approach for settlement of their dispute and determination of their claim through different form in accordance with law. The learned counsel for the respondents relied upon the judgment of 14 the Hon'ble Supreme Court delivered in the case of Uttar Pradesh Co-operative Federation Ltd. vs. Sunder Bros.,Delhi (AIR 1967 SC
249), wherein Hon'ble the Apex Court held that where the discretion vested in the court under Section 34 has been exercised by the lower court, the appellate court would be slow to interfere with the exercise of that discretion. It has been also observed that the appellate court would normally not be justified in interfering with the exercise of discretion in appeal solely on the ground that if it had considered the matter at the trial stage, it may have come to contrary conclusion.
The learned counsel for the respondents relied upon the judgment of the Hon'ble Apex Court delivered in the case of Erach F.D. Mehta v. Minoo F.D. Mehta (AIR 1971 SC 1653), wherein Hon'ble the Supreme Court held that the question that, whether parties agreed that partnership be dissolved is covered by the clause and can be referred to arbitration.
The learned counsel for the respondents also relied upon the judgment of the Hon'ble Apex Court delivered in the case of V.H. Patel & company & others vs. Hirubhai Himabhai Patel & ors. ( (2000) 4 SCC 368), wherein the arbitrator made an award but 15 held the issue of dissolution beyond his jurisdiction and that award was confirmed by the High Court, however, set aside the finding regarding dissolution, then the Hon'ble Supreme Court held that High Court rightly remitted the matter to the arbitrator to decide the issue of dissolution afresh.
I considered the submissions of the learned counsel for the parties and perused the record of the case and considered the judgments referred above.
It has been contended by the learned counsel for the appellant that the partnership at will may be dissolved by any partner by giving notice in writing to all the partners of his intention to dissolve the firm as per sub-section(1) of Section 43 and as per sub-section (2), the firm is dissolved as from the date mentioned in the notice as the date of dissolution or if no date is so mentioned, as from the date of the communication of the notice and, therefore, in the suit for dissolution of partnership, substantial dispute survives for rendition of accounts and the dissolution takes place when the act of one partner for partnership is at will. It is also submitted that the Madras High Court in the case of Arunachalam & Co. and others v. M. Sadasivam ( AIR 1985 16 Madras 354), after considering the judgment of Banarsi Das v. Seth Kanshriram (AIR 1963 SC 1165), held that the term notice used in Section 43 is vide enough to include within it a plaint filed in a suit for dissolution of partnership and, therefore, the partnership would be deemed to be dissolved when the summons as accompanied by the copy of the plaintiff, is served on the defendant. In view of the above, so far as dissolution of partnership is concerned, it already stands dissolved in present case also. Therefore, there is no dispute about the dissolution of partnership and, therefore, when there is no dispute, the matter cannot be referred to the arbitrator. The argument is hollow inasmuch that what deemed to have been taken place is the plea in a case then it is is required to be decided by the adjudicatory authority or the court if suit is filed, and it is required to be declared by that adjudicatory authority or the court that so has happened and if, defendant's plea is accepted then to declare that so has not happened. The provisions of the partnership Act clearly provides that the partnership shall stand dissolved when one of the partners gives notice in writing to all other persons of his intention to dissolve the firm then it can be a plea taken before various 17 authority and such authority, depending upon facts of each case, may recognise the dissolution of such firm but when a suit is filed in the court of law with this plea, then the fact is required to be pleaded that notice for dissolution has been served and it is required to be proved by evidence if denied by the defendant and, thereafter, the firm has already been dissolved is required to be declared. The court in a suit even for consequential relief of rendition of account also have to arrive at conclusion that whether the firm stands dissolved by service of the notice as required under sub-section (1) of Section 43 of the Indian Partnership Act, 1932. If the fact of dissolution of firm is disputed by the defendant on the ground that no such notice weas given and in the facts the plea is taken that service of copy of the plaint upon the defendant be treated as notice of dissolution of the firm, but that is also required to be recognised by the court of law (or arbitrator if the matter is before arbitrator). Therefore, this fact itself that the summon has been served upon the defendant of seeking dissolution of the firm, results into dissolution of firm, cannot be separated from the relief and instantly the court cannot declare the firm dissolved on first date of hearing when after service of plaint upon 18 the defendant, the defendant enters his appearance in the suit. If the plea of learned counsel for the appellant is accepted then a partner in a firm can file a suit (if he is in advantageous position) only for decree for dissolution of a firm and may withdraw the suit immediately after service of summon upon defendant with the only plea that since plaint for dissolution of firm has been served upon the defendant, therefore, no decree is needed. Service of summon of such suit cannot be equated with dissolution of firm by service of notice in undisputed case of acceptance of dissolution of firm by other partners.
However, the facts of this case are different than the arguments advanced. In this case, the plaintiff sought decree for dissolution of firm in question specifically. The plaintiff in this case, specifically sought declaration of the date of dissolution of firm. Further more, it will be suffice to state that, since the application under Section 34 has been filed by the defendant, therefore, the defendant, at this stage, could not have submitted his defence to the suit of the plaintiff. Therefore, the issue as presented by the learned counsel for the appellant that with the service of summon with copy of plaint upon the defendant, seeking 19 relief of dissolution of firm, already resulted into dissolution of the firm, cannot arise because it would be travesty of judgment that the defendant be deprived to dispute the fact of the dissolution of the firm and he deprived to take his defence to plaintiffs' suit and from all other defences. The view of the Banarsi Das's case (supra) cannot be stressed to this extent that with the service of plaint upon the defendant containing the relief of dissolution of the firm results into decree for dissolution of the firm automatically and for this issue, there cannot be defence of the defendant and the court is not required to declare the firm dissolved and fix the date for dissolution of the firm.
The learned counsel for the appellant heavily relied upon the judgment of the Privy Council delivered in the case of Rehmatunnissa Begum & ors. vs. Prince and others (AIR 1917 Privy Council 1917), which may not detain this Court, in view of the judgment delivered in the case of V.H. Patel & Company and others v. Hirubhai Patel & others ((2000) 4 SCC 368), wherein the judgment of Rehmatunnissa Begum's case (supra) has been considered by the Hon'ble Supreme Court in detail. The relevant fact of the said case are in para 4 of the judgment of V.H. Patel & 20 Company's case (supra), which are as under:-
"Another ground is raised in support of this contention that the terms of partnership do not contemplate dissolution of the firm "at will" but by "mutual agreement". Therefore, it is pointed out that dissolution of the firm is based only on just and equitable ground and, therefore, partners' claim for a decree for dissolution of the firm rests in its origin not on contract but on the inherent right to invoke the courts' jurisdiction on equitable grounds in spite of the terms in which the right and obligation of the parties may have been regulated and defined by the partnership contract. Our attention is drawn to a decision in Rehatunnissa begum v. Prince and the commentary made by Pollock and Mulla (5th Edn. At p.
147) which reads as follows:-
"Although the arbitration clause in a partnership agreement may be sufficiently wide to include the question whether the partnership should be dissolved, the court in its discretion may not stay a suit for dissolution, if dissolution is sought under Section 44(g)(e). In the undermentioned cases the view taken is that whenever dissolution of partnership is sought under Section 44(g), then it is for the court to decide, whether it would be just and equitable 21 to dissolve the partnership or not and such a matter cannot be left to be gone into and decided by the arbitrator in pursuance of the arbitration clause contained in the partnership deed."
Hon'ble the Supreme Court even after considering the arguments that the arbitrator has no power to dissolve the partnership specifically on the ground that such dissolution based on a ground or any other ground which renders it just and equitable to dissolve and that is the power of the court, held that :-
"12.So far as the power of the arbitrator to dissolve the partnership is concerned, the law is clear that where there is a clause in the articles of partnership or agreement or order referring all the matters in difference between the partners to arbitration, the arbitrator has power to decide whether or not the partnership shall be dissolved and to award its dissolution (see Phoenix v. Pope.) Power of the arbitrator will primarily depend upon the arbitration clause and the reference made by the court to it. If under the terms of the reference all disputes and difference arising between the 22 parties have been referred to arbitration, the arbitrator will, in general, be able to deal with all matters, including dissolution. There is no principle of law or any provision which bars an arbitrator to examine such a question. Although the learned counsel for the petitioner relied upon a passage of Pollock & Mulla, quoted earlier, that passage is only confined to the inherent powers of the court as to whether dissolution of partnership is just and equitable, but we have demonstrated in the course of our order that it is permissible for the court to refer to arbitration a dispute in relation to dissolution as well as on grounds such as destruction of mutual trust and confidence between the partners which is the foundation therefor."
It is clear from the said judgment that Hon'ble Supreme Court in V.H.Patel & Co.'s case(supra) that specific issue which was is Rehmatunnissa Begum's case(supra) about the jurisdiction of the arbitrator of dissolution of the partnership firm in the light of the reasonings given by the Privy Council was taken note of and then upheld the decision of the High Court whereby the High Court 23 set aside the arbitrator's decision holding that the issue of dissolution of partnership is beyond his jurisdiction is the correct law and the High Court rightly remitted the matter to the arbitrator to decide the issue of dissolution afresh. Therefore, it cannot be said that the arbitrator cannot decide the issue which otherwise the court is required to decide in the suit for dissolution of the partnership and at the cost of repetition, it may be stated that the plaintiff himself in the suit claimed decree for dissolution of partnership as well as for fixing the date from which that partnership stands dissolved.
The another contention of the learned counsel for the appellant, based on the judgment delivered in the case of N.Radhakrishnan(supra), is that when there is allegation of fraud and serious mal-practice on the part of the respondent, then the arbitrator cannot have jurisdiction and is is required to be settled in the court after detail evidence which may be led by the parties, as these allegations cannot be properly gone by the arbitrator in the arbitral proceedings, but here in this case, it is clear that the plaintiffs are closely related to each other. They entered into the 24 partnership business and some dispute cropped up and thereafter also they amicably decided to settle the dispute by entering into another agreement which is dated 20.3.1991. The plaintiffs in the plaint specifically stated that with the intervention of relation, the dispute was settled putting some liability upon the plaintiffs and defendants with further stipulation that the defendants will render the accounts to the plaintiffs and will pay the due amounts of the plaintiff which may be found due. The plaintiffs' contention is that that subsequent agreement was not honoured by the defendants and, therefore, the said agreement has already come to an end, as it was obtained by misrepresentation of facts and law. The plaintiffs' further alleged that the defendants excluded the plaintiffs from the business and its profit and, therefore, it became necessary for the plaintiffs to seek relief(decree) of dissolution of the firm. The plaintiff, in fact has no knowledge of any malpractice or fraud as he yet to see the books of account and particularly in the background that he himself was not very much active partner so as to know detail facts of any misrepresentation by the defendants or particulars of fraud which may have been played by the defendants. The plaintiff's' own case is that he has 25 not seen the books of accounts and, therefore, also at this stage, the plaintiff could not have levelled specific allegations of misrepresentation and fraud in maintaining the accounts and, therefore, the petitioner sought relief of rendition of accounts and for that purpose also, he prayed that Commissioner may be appointed, obviously, so that the plaintiff may understand the accounts. If that can be done by the Commissioner or with the help of the Commissioner, obviously, this can be well done through the arbitrator, agreed by the parties and he would be the better person because the arbitrator is appointed by mutual consent and because of faith reposed upon the arbitrator by the parties who acquires a special position and whose decision cannot be challenged otherwise than on the ground provided under the Arbitration Act and, therefore, in the facts of the case, the judgment of N.Radhakrishnan(supra) has no application. In the judgment of N.Radhakrishnan(supra), even the Hon'ble Supreme Court has referred several facts in relation to the financial transactions of the firm which clearly distinguishes the present case from the facts of N.Radhakrishnan's case.
One of the grounds of the learned counsel for the appellants, 26 with the judgment delivered in the case of I.T.C. Ltd(supra) of the Hon'ble Supreme Court, is that whereby because of substitution, a new contract came into existence and where by virtue of that substitution of new contract, the arbitration clause itself falls and became non-existent then, no one can rely upon the contract which the parties agreed to bury. How this proposition has any application to the facts of the case, is not clear and rather say, do not support the appellant because of the plain and simple reason that the partnership deed is admitted document wherein there is a clause for arbitration. The appellants' own contention is that the second contract is result of misrepresentation of facts and law and that has come to an end automatically as pleaded in para 17 of the plaint then how, the plaintiffs-appellants can say that the earlier agreement (partnership deed) has come to an end wherein clause of arbitration is there. If second agreement, which admittedly has been executed, also contains the clause of settlement of dispute through arbitration. However, both of the named arbitrators have died, is a subsequent event, therefore, in both the contracts, the parties agreed for settlement of dispute through arbitrator and it is not a case where the arbitration agreement has been substituted 27 by a new contract for limited purpose and under the new contract, provision has been made for referring the matter to the arbitrator. Therefore, the judgment of I.T.C. Ltd.(supra) has no application to the facts of the present case.
With the help of judgment of this Court delivered in the case of D.C.M. Ltd.(supra), it was submitted that when point in issue is purely a legal question then it is to be decided by the court and not by the arbitrator. However, from the argument of the learned counsel for the appellant, is is clear that it is not a suit wherein only a pure question of law is involved even from the plaint's averments. The appellants' contention before this Court itself clearly demonstrates that the plaintiffs in the plaint has based the claim on the basis of fact. The misrepresentation and playing fraud upon the plaintiffs are allegations of facts and cannot be a question of law, rather say, it may always be question of fact. Therefore, the case of D.C.M. Ltd.(supra) has no application to the facts of the present case.
It will be appropriate to notice at this stage that the decision of the Punjab and Haryana delivered in the case of Narinder Singh Randhawa & anr. v. Hardial Singh Dhilon and others (AIR 1985 P & 28 H 41) cannot be accepted to be correct view in the light of decision of the Hon'ble Supreme Court delivered in the case of V.H. Patel & Co.'s case(supra). In V.H.Patel & Co.'s case(supra), there was plea that one of the parties-respondent no.1 sought to establish that he has not retired from the partnership and the party was entitled to raise this question even then the award of the arbitrator was upheld and here in this case also, there is contract for retiring some of the partners of the firm and that is also not in dispute, therefore, the Hon'ble Supreme Court held that so far as the power of the arbitrator to dissolve the partnership is concerned, the law is clear that where there is a clause in the articles of partnership or agreement or order referring all the matters in difference between the partners to arbitration, the arbitrator has power to decide whether or not the partnership shall be dissolved and to award its dissolution.
The appellants also submitted that from the facts it is clear that the defendants were not ready and willing to perform their part of the contract, obviously, for referring the matter to the arbitrator. This plea, in appeal can also be raised but in view of the emphasis for settlement of dispute through alternative dispute 29 of dissolution of the firm, the old concept of residuary to proposition cannot be applied now and an order passed by the trial court staying the proceeding of the suit need not to be interfered by the appellate court lightly because of the further reason that the order staying the suit under Section 34 of the Arbitration Act is substantially not an adverse order affecting the rights of the parties as such except affecting his right to choose the forum for redressal of his grievance. The stay of the dispute is not destruction of right of the party. Normally it is presumed that if the court refers the matter to the arbitrator, then the party gains out of it because of the reason that the parties may get dispute settled through arbitration expeditiously with less chance of further litigation and that too from a person in whom they have reposed faith.
Therefore, I do not find any reason to interfere in the order dated 2.3.1994 passed by the trial court. Hence the appeal of the appellants is dismissed.
( PRAKASH TATIA ),J.
mlt.