Jagannath Das v. Gokal Das — 1970 DIGILAW 445 (ALL)

JUDGMENT S.D. Khare, J. - These are two connected appeals arising out of the orders passed by the learned Second Additional Civil Judge, Varanasi, on 20th April, 1970. 2. An application under Section 34 of the Arbitration Act was moved by Jagannath Das (defendant) for stay of proceedings of the regular suit No. 38 of 1969 instituted by Gokul Das against the Banaras Electric light and Power Company Ltd. and four of his brothers, including Jagannath Das. It was alleged by him that on 12th February, 1969, all the seven brothers, including the plaintiff of the suit, had agreed that all disputes between them regarding their common business be referred to the arbitration of three persons, named in the deed. It was therefore, prayed that the dispute which was the subject matter of original suit No. 38 of 1969 need not be adjudicated upon as the matter was already before the arbitrator. The learned Civil judge, after considering the objections of the parties dismissed the application. This has given rise to First appeal from order No. 134 of 1970. 3. A misc. application was moved under Section 41 of the Arbitration Act by Narain Das (Misc. No. 31 of 1969) that a receiver be appointed and the opposite party be restrained from alienating or damaging the properties, articles, cash or any other thing pertaining to Vishambhari Card-board Factory and for appointment of a vakil commissioner to prepare inventory of all the articles belonging to the business. The application was dismissed by the learned Second Additional Civil Judge, Varanasi, because of his findings arrived at in the misc. case under Section 34 of the Arbitration Act and after observing that the business of the Vishambhari Cardboard Factory was the exclusive business of Gokul Das. First appeal from order No. 154 of 1970 is directed against that order. 4. The facts of the case leading to the orders appealed against might be briefly stated as follows :- Gokul Das and his six brothers, belonging to one and the same family, had several partnership firms of some or all the brothers. Vishambhari Cardboard Factory was one of such businesses and the partners of the firm were Jagannath Das, Gokul Das, Narain Das, Chunni La1 and Moti Lal, that is, five out of the seven brothers of Gokul Das, including Gokul Das himself. The partnership deed contained an arbitration clause. Vishambhari Cardboard Factory was one of such businesses and the partners of the firm were Jagannath Das, Gokul Das, Narain Das, Chunni La1 and Moti Lal, that is, five out of the seven brothers of Gokul Das, including Gokul Das himself. The partnership deed contained an arbitration clause. On or about 23rd January, 1969, the Banaras Electric Light and Power Co. Ltd., cut off the electric supply to Vishambhtri Cardboard Factory. The case of Gokul Das was that prior to that date the brothers had practically separated their business and Vishambhari Cardboard Factory had fallen to the exclusive share of Gokul Das. It was, however, conceded by him that accounting among the partners with regard to this business had not been done. The contention of Gokul Das was that it was at the instance of his four brothers, namely, Jagannath Das, Moti Lal, Chunni Lal and Narain Das, that the electric connection to Vishambhari Cardboard Factory had been cut off. 5. On 12th February, 1969, Gokul Das and his remaining six brothers executed an agreement for arbitration. They appointed three arbitrators, and it was stated therein that the disputes which had arisen with regard to their common business should be settled by him. The arbitrators entered into they reference and Gokul Das filed his claim before the arbitrators. However, on 11th March, 1969, Gokul Das filed a suit against the Banaras Electric Light and Power Co. Ltd. and his four brothers, who were originally his partners in Vishambhari Cardboard Factory on the ground that there had been a division of assets between them and Vishambhari Cardboard Factory had fallen to his exclusive share and damage had been caused to him because at the instance of the remaining four defendants the Banaras Electric Light and Power Co. Ltd. had cut off the electric connection. 6. There was a compromise between Gokul Das and the Banaras Electric Light and Power Co. Ltd., and the Electric Company is no longer to be affected with the result of the appeal. For all practical purposes. the Banaras Electric Light and Power Co. is no longer a party to the suit. The dispute now is between Gokul Das and his four brothers who were originally partners in the Vishambhari Cardboard Factory. Ltd., and the Electric Company is no longer to be affected with the result of the appeal. For all practical purposes. the Banaras Electric Light and Power Co. is no longer a party to the suit. The dispute now is between Gokul Das and his four brothers who were originally partners in the Vishambhari Cardboard Factory. According to the affidavit filed on behalf of Gokul Das he has become the exclusive owner of the said Factory with effect from the month of July, 1968, and the other partners in that business have no longer any concern with the said factory. On the other hand, according to the counter affidavit filed by the defendants who were brothers of Gokul Das, they still continue to be partners in the business of Vishambhari Cardboard Factory. 7. The learned Additional Civil judge, after taking into consideration the affidavits and other documents filed on behalf of the parties, arrived at the conclusion that the Vishambhari Cardboard Factory had fallen to the share of Gokul Das. He did not stay the suit under Section 34 of the Arbitration Act on the finding that the terms of agreement to refer disputes to arbitration executed on 12th February, 1969, could not include the dispute which was the subject matter of controversy in original suit No. 38 of 1969. 8. It was upon these findings that the stay application under Section 34 of the Arbitration Act and the connected miscellaneous application filed by Narain Das for the appointment of receiver and other connected matters were dismissed. 9. The main point for consideration in these connected appeals is whether the agreement for reference to arbitration arrived at between Gokul Das and his brothers on 12th February, 1969, included also the subject-matter of dispute in suit No. 38 of 1969. 10. Translated into English the agreement dated 12th February, 1969, reads as follows :- "We, namely, Panna Lal Parshottam Das, Chunni Lal, Moti Lal, Gokul Das, Narain Das and Jagannath Das sons of Sri Mathura Das are residents of mohalla Govindji Naik Lane, Varanasi. Inasmuch as differences have arisen regarding our common business. Therefore, we, out of our free consent are appointing Jhingan Sahu alias Vishwanath Prasad resident of CK 17/5, Narotam Das son of Mukand Das Bhatki Gali, and Baldeo Das son of Hari Das, r/o Phatak Rangil Das, Varanasi as arbitrators to settle those disputes. Inasmuch as differences have arisen regarding our common business. Therefore, we, out of our free consent are appointing Jhingan Sahu alias Vishwanath Prasad resident of CK 17/5, Narotam Das son of Mukand Das Bhatki Gali, and Baldeo Das son of Hari Das, r/o Phatak Rangil Das, Varanasi as arbitrators to settle those disputes. Whatever they decide shall be binding on us and the decision given by them shall be final. Dated 12th February, 1969." 11. A mere perusal of the terms of reference would indicate that all the existing disputes regarding the common business of the executants of the agreement had been referred to the arbitrators for their decision. Obviously no difference relating to any common business of the parties was left out. The reference made to the arbitrators appears to be comprehensive with regard to the common business of the parties. 12. It has come in evidence that the electric connection had been completely disconnected by 23rd January, 1969. Therefore, this dispute amongst the parties must also be in contemplation of the executants of the deed of reference to arbitration when the document was executed more than two weeks later. 13. The contention of the learned counsel for the respondents is that the business of Vishambhari Cardboard Factory was the exclusive business of Gokul Das and therefore, the agreement to refer the dispute to arbitration could not be in respect of any dispute regarding this business. This contention presupposes that the business of Vishambhari Cardboard Factory was the exclusive business of Gokul Das. No such presupposition can be made at this stage. There is dispute between the parties on that point. The contention of Gokul Das was that the business of Vishambhari Cardboard Factory was his exclusive business, but the contention of the remaining four brothers, who were previously his partners, was that the business of Vishambhari Cardboard Factory had continued to be joint till 12th February, 1969. It would not at this stage be possible for the court to decide this question one way or the other. Inasmuch as there was dispute between the parties regarding the business of Vishambhari Cardboard Factory also and they could not agree whether or not it was the exclusive business of Gokul Das, the reference to arbitration prima facie must have been with regard to the entire business of all the seven brothers including the business of Vishambhari Cardboard Factory. Inasmuch as there was dispute between the parties regarding the business of Vishambhari Cardboard Factory also and they could not agree whether or not it was the exclusive business of Gokul Das, the reference to arbitration prima facie must have been with regard to the entire business of all the seven brothers including the business of Vishambhari Cardboard Factory. In the circumstances there could be no force in the contention that the agreement to refer the disputes to arbitration could not have included all disputes regarding the business of Vishambhari Cardboard Factory which Gokul Das claimed to be his exclusive business. 14. It was held in the case of Anderson Wright Ltd. v. Moran and Co., A.I.R. 1955 S.C. 53, that the first and essential pre-requisite to making an order to stay under Section 34 is that there is a binding arbitration agreement between the parties to the suit which is sought to be stayed. The question whether the dispute in the suit falls within the arbitration clause presupposes that there is such an agreement and involves consideration of two matters, viz., (1) what is the dispute in the suit, and (2) what disputes the arbitration clause covers. 15. In the present case we find that the dispute between the parties related to the business of Vishambhari Cardboard Factory on the allegations that at the instance of some of the partners of the business the electric connection of that factory had been cut off, thus causing a loss to the business. Another and more material dispute with regard to the same business between the parties was whether or not the said business was the exclusive business of Gokul Das. The agreement arrived at between the parties on 12th February, 1969, therefore, would clearly by implication include in its term this dispute also. No, particular dispute concerning any business has been mentioned in the deed of agreement but it has to be assumed that all the disputes arising between the parties concerning all common businesses were intended to be referred to the arbitration of the three arbitrators named. Obviously the dispute the subject matter of original suit no. 38 of 1969 of the court of Civil Judge, Varanasi, which had arisen prior to 12th February, 1969, must also have been one of the disputes contemplated to be settled by the arbitrators. 16. Obviously the dispute the subject matter of original suit no. 38 of 1969 of the court of Civil Judge, Varanasi, which had arisen prior to 12th February, 1969, must also have been one of the disputes contemplated to be settled by the arbitrators. 16. If the damages were to be recovered from a third party, namely, the electric supply company, it is obvious that the arbitrators could have no jurisdiction to determine those damages for the simple reason that the electric supply company was not a party to the deed of reference to arbitration. However, after the Benaras Electric Light and Power Co. has caused to be a party to the dispute and now the controversy is confined between the partners of the firm only who are signatories to the deal of agreement dated 12th February, 1969, there can be no difficulty in getting the matters settled by the arbitrators who are seized of other disputes concerning the common business of the executants of the deed of reference to arbitration. 17. The court below has relied on the cases of Johurmull Parasram v. Louis Dreyfuls and Co. Ltd., AIR 1949 Calcutta 179, and Gauri Shankar and sons v. Union of India, AIR 1953 Allahabad 446, for the proposition that no order for stay under Section 34 of the Arbitration Act need be passed where the dispute in the suit was based on tortious act of the defendants, as in the Calcutta case, or defamation made by the defendants, as in the Allahabad case. A careful examination of the cases relied upon by the court below will show that after interpreting the agreement of reference to arbitration in each case it was held that the disputes which fell for decision in the suit based on tortious act or defamation could not fall within the ambit of the reference made to arbitration. If a suit could be filed for damages for tortious act, there could be no, reason why the same matter could not be decided by the arbitrator also, provided the same could be deemed to be included in the terms of reference to arbitration. The test in such cases is not whether the act of the defendants amounts to a tortious act. The test in such cases is not whether the act of the defendants amounts to a tortious act. On the other hand, the test is whether the dispute between the parties in the suit, the proceedings of which are sought to be stayed under Section 34 of the Arbitration Act, are included in the terms of reference to arbitration. 18. It has been contended by the learned counsel for the respondents that it is not at all incumbent on the court to pass an order for stay when an application under Section 34 of the Arbitration Act has been moved, and where the circumstances so warrant the stay order should not be passed. It is further contended that the circumstances of the present case are such that no stay order under section 34 of the Arbitration Act should be passed. 19. In our opinion there is no force in this contention. The arbitrators are already seized of the matter. They have entered into arbitration, and it is on record that Gokul Das has also filed a claim before the arbitrators in respect of the dispute which is the subject matter of original suit no. 38 of 1969. Some of the questions that will arise for determination will be common and it is just and proper that all such questions should be considered by one and the same forum. 20. It is, in our opinion, a fit case where the application under Section 34 of the Arbitration Act should have been allowed. 21. The court below has summarily dismissed the connected application under Section 41 of the Arbitration Act on the strength of the finding that Gokul Das was the exclusive owner of the business of the Vishambhari Cardboard Factory. We have already observed that such categorical finding could not be given at this stage of the suit. The application under Section 41 of the Arbitration Act moved by Narain Das will have to be examined by the court below on merits and order shall have to be passed thereon in accordance with law. 22. In the result both the connected appeals are allowed with costs. The proceedings of regular suit no. 38 of 1969 (Gokul Das v. Banaras Electric Light and Power Co. Ltd. and others) shall remain stayed under Section 34 of the Arbitration Act. The application moved by Narain Das under Section 41 of the Arbitration Act (Misc. 22. In the result both the connected appeals are allowed with costs. The proceedings of regular suit no. 38 of 1969 (Gokul Das v. Banaras Electric Light and Power Co. Ltd. and others) shall remain stayed under Section 34 of the Arbitration Act. The application moved by Narain Das under Section 41 of the Arbitration Act (Misc. case no. 31 of 1969 of the court of Civil Judge, Varanasi) will now be disposed of in accordance with law in the light of the observations made above. The case is, therefore, remanded to the court below for disposal of Misc. Case No. 31 of 1969 in accordance with law. 23. Let the records of the case be sent down to the court below as early as possible.