C. SEETHAHAMA REDDY v. H. T. SHANKARA REDDY — 1974 DIGILAW 8 (KAR)

( 1 ) THIS is the second time the petitioner is approaching this Court under s. 115 CPC. This petition is to revise an appellate order of the District judge, Bellary, dismissing an application under S. 34 of the Arbitration Act for stay of further proceedings in OS. No. 38 of 1966 in the Court of the civil Judge, Bellary. ( 2 ) THE parties to the suit are partners of a firm called "rayalaseema automobiles" The Respondents before me instituted the suit for dissolution of partnership and rendition of accounts. Though the suit was instituted on 4-10-1966, it is most unfortunate that it should still remain at the preliminary stage because of the recalcitrant attitude taken by the petitioner who is defendant 1 in that suit. ( 3 ) THE facts leading to the petition are: The parties were carrying on transport business under the name and style of Rayalasema Transport service and deling in motor accessories, keresone, petrol and other lubricants. The terms of the partnership were reduced intq writing by the partnership deed dated 1-4-1951; again on 2-f-1959, a second deed qf partnership was executed. Cqnsequent on the retirement of one of the partners a third deed of partnership dt. 1-4-1961 was executed. Under the said deed, the petitioner was constituted as the managing partner of the firm. The relationship of the partners was embittered by several acts of omissions and commissions of the petitioner. The respondents, therefore, instituted the suit for dissolution of the partnership levelling several charges against the petitioner. They are : (1) The petitioner is not carrying on business in petrol, kerosene and other lubricants as per terms of the partnership (2) Without the consent of the partners, the petitioner has gradually increased his remuneration and even though his remuneration was fixed at Rs. 3,000 per annum, he has now been drawing Rs. 4,800 per annum. (3) The petitioner was directed to deposit all daily receipts excepting necessary cash balance into the bank and he has not been doing so. (4) The petitioner has overdrawn Rs. 15,000 and has allowed his friend to overdraw a sum of Rs. 5,029. (5) The audited report of 1965 showed that M. G. Brothers qwed "rs. 6,113 and MIS. Asquith and Co. owed Rs. 830 to the partnership concern and on information the plaintiffs learnt that the above-named firms did net qwe any amount to the firm. 15,000 and has allowed his friend to overdraw a sum of Rs. 5,029. (5) The audited report of 1965 showed that M. G. Brothers qwed "rs. 6,113 and MIS. Asquith and Co. owed Rs. 830 to the partnership concern and on information the plaintiffs learnt that the above-named firms did net qwe any amount to the firm. (6) The petitioner has given loans to the extent of Rs,24,000 to individuals. He has been purchasing shares from other companies and selling them in violation of the terms of partnership. (7) The petitioner purchased a Jeep for the sole use and benefit of the legal adviser of the firm Linga Reddy, whq is in league with the 1st defendant and meddling with the affairs of the partnership concern. The said jeep was placed at the exclusive service of the said Linga Reddy in 1962 elections and thq expenses of its maintenance were met out of the partnership funds. (8) The petitioner posed himself as the sqle proprietor of the partnership firm in about November 1965 and bqrrowed moneys from the Bellary Branch of the Indian Bank declaring himself as the sole proprietor of the partnership firm. On receipt of the notice of the suit, the petitioner filed an application under S. 34 of the, Arbitration Act to stay further proceedings of the suit, pending reference to arbitration. He contended that the deed of partnership contains a clause stating that all disputes between the partners shall be referred to arbitrament. The application was opposed by the plaintiffs. The trial Court after considering the matter allowed the application by its order dt 7. 3-1968 staying further proceedings in the suit. Being aggrieved by the order the plaintiffs preferred Mis. A. No. 3 of 1968 in the Court of the District Judge Bellary. The appellate Court by its judgment dt. 25-11-1968 allowed the appeal setting aside the order of the trial Court with a direction to it to proceed with the suit. Against the said order the petitioner filed CRP. No. 1896 of 1968 in this Court. This Court by the order dt. 29-7-69 allowed the revision petition and set aside the appellate order remanding the matter to the appellate Court for fresh disposal according to law. Pursuant to the direction of this Court the learned District Judge heard the parties again and allowed the miscellaneous appeal by the judgment dt. 6-9-73. This Court by the order dt. 29-7-69 allowed the revision petition and set aside the appellate order remanding the matter to the appellate Court for fresh disposal according to law. Pursuant to the direction of this Court the learned District Judge heard the parties again and allowed the miscellaneous appeal by the judgment dt. 6-9-73. Again the first defendant has challenged the said judgment in the present reyision petition ( 4 ) THE first contenion urged by Sri R. M. Patil learned Counsel for the petitioner related to the jurisdiction of the appeallate Court to reverse the decision of the trial Court. Counsel said that the order made by the trial Court staying proceedings in the suit for dissolution was a discretionary order and in the appeal against such order the appellate Court has exceeded its jurisdiction in re-appreciating the facts and circumstances which formed the basis of the decision of the trial Court. ( 5 ) BEFORE I go to the other contentions it is better that I dispose of this contention. It is now well established that where the discretion vested in the court under S. 34 of the Arbitration Act has been exercised by the trial court the appellate Court should be slow to interfere with the exercise of that discretion. In dealing with the matter raised before it the appellate court would normally not be justified in interfering with the exercise of the discretion under appeal solely on the ground that if it had considered the matter at the trial stage it may have come to a contrary conclusion. If the discretion has been exercised by the trial Court reasonably and in a judicial manner the fact that the appellate Court would have taken a different view may not justify interference. In Printers (Mysore) P. Ltd. v. Pothan Joseph, AIR 1960 SC. 1156 . If the discretion has been exercised by the trial Court reasonably and in a judicial manner the fact that the appellate Court would have taken a different view may not justify interference. In Printers (Mysore) P. Ltd. v. Pothan Joseph, AIR 1960 SC. 1156 . Gajendragadkar J. as he then was speaking for the Court qbserved at page 1159 of the report as follows :" As is often said it is ordinarily nqt open to the appellate Court to substitute its own exercise of discretion for that of the trial Judge; but if it appears to the appellate Court that in exercising its discretion the trial Court has acted un-reasonably or capriciously or has ignored relevant facts and has adopted an un-judicial approach then it would certainly be open to the appellate Court and in many caes it may be its duty to interfere with the trial Court's exercise of discretion. In cases' failing under this class the exercise of discretion by the trial court is in law wrongful and improper and that would certainly justify and call for interference from the appellate Court. "the same principle has been reiterated by the Supreme Court in v. P. Co-operative Federation Ltd v. Sunder Bros. , AIR 1967 SC. 249 . The above principles are well established but as has been qbserved by Viscount Simon LC. in Charles Ostention and Co. v. Johnston, (1942) App. Case 130 aa p. 138. " The law as to the reversal by by Court of appeal of an order made by a Judge below in the exercise of his discretion is well established and any difficulty that arises is due only to the application of well settled principles in an individual case. " ( 6 ) LET me now find qut whether the appellate Court has exercised its jurisdiction in reversing the discretionary order of the trial. Court. Both the Courts have proceeded on the ground that the allegations in the plaint may be considered as disputes to be decided by an arbitrator. The trial Court has stated that there is a prima facie case made out by the plaintiffs on the question of charges of fraud and dishonesty against the first defendant. The trial Court has observed thus :" We may assume for the present that the plaintiffs have made out a prima facie case of fraud and dishonesty etc. The trial Court has stated that there is a prima facie case made out by the plaintiffs on the question of charges of fraud and dishonesty against the first defendant. The trial Court has observed thus :" We may assume for the present that the plaintiffs have made out a prima facie case of fraud and dishonesty etc. on the part of the first defendant in carrying on the business of partnership but still in my opinion such charges as are made by the plaintiffs in the suit dq fall under the express clause and particularly under clause no. 12 of the partnership agreement. In asmuch as the facts alleged to constitute fraud and other charges against the first defendant will have merely evidentiary value in the investigation of the disputes and in my view they will nqt in themselves be a grqund for refusing the stay of the further proceedings of the suit. The 1st defendant is objecting for holding public inquiry in Court and he wants the dispute in suit to be settled by private arbitration as provided in the partnership agreement. In the face of such express clause I dq not think it reasonable and justifiable to refuse the prayer for stay of the further proceedings of the suit. "the appellate Court has found fault with the trial Court for staying the further proceedings in the suit even after coming to the conclusion that the plaintiffs have prqved the case of fraud and dishonesty against the first defendant. The appellate Court was of the view that it is for the court to try the suit when charges of fraud qr want of good faith are made by one partner against the other and not to drive the parties to an arbitration. The appellate Court has further held that the plaintiffs have a right to invoke the protection of the Court for dissolution of the firm on equitable grounds. In that view it reversed the order of the trial Court. ( 7 ) IN my opinion the appellate Court was right in approaching the problem in this manner. ( 8 ) IN para 1103 Vol. 28 3rd Edn. of Halsbury's Laws of England "it is staged :"___but the Court has complete discretion in the matter. In that view it reversed the order of the trial Court. ( 7 ) IN my opinion the appellate Court was right in approaching the problem in this manner. ( 8 ) IN para 1103 Vol. 28 3rd Edn. of Halsbury's Laws of England "it is staged :"___but the Court has complete discretion in the matter. Therefore if charges of fraud or dishonesty or of want of good faith are made bona fide by one partner against the other or if questions of law arc likely to arise which are more fit for the Court than a lay tribunal or if the action claims dissolution on a ground the power of determining the existence of which is expressly within the discretion of the court or if the attempted reference is made vexatiously a stay of the action for dissolution may and generally will be refused. "the following passage in Russel on Arbitration 17th Edn. at page 83 will be of great assistance :" Where there is an agreement to submit future disputes to arbitration, and a dispute involving a charge of fraud arises under it the court is expressly empowered to refuse to stay an action brought in breach of the agreement. " ( 9 ) IN the instant case the opinion expressed by the appellate Court that the plaintiffs have proved a prima facie case of fraud and dishonesty appears to me to be correct. The Court therefore was well within its power in reversing the order of the trial Court as the discretion exercised by the latter was wrongful and improper. ( 10 ) I may add one more reason in support of the order of the appellate court. In my view most of the allegations made by the plaintiffs against the first defendant cannot be said to be disputes falling either under clause 14 or under clause 12 of the partnership agreement. Clause 12 of the deed stages :" 12. All the partners shall faithfully diligenty and honestly carry on the business of the partnership. "clause 14 reads :" 14. All disputes which may arise between the partners shall be referred to arbitration and settled in aecordance with the decision of arbitration. "clause 12 is only a restatement of the law stated in S. 9 of Partnership act. 1932. The said section provides :" 9. "clause 14 reads :" 14. All disputes which may arise between the partners shall be referred to arbitration and settled in aecordance with the decision of arbitration. "clause 12 is only a restatement of the law stated in S. 9 of Partnership act. 1932. The said section provides :" 9. General duties of partners.-Partners are bound to carry on the business of the firm to the greatest common advantage to be just and faithfull to each other and to render true accounts and full information of all things affecting the firm to any partner or his legal representative. "a reference to the allegations in the plaint attributed against the first defendant pertain to his guilty conduct or wilful breach of agreements relating to the management of the affairs of the firm or the condut of its business. They could properly fqrm the basis of a suit for dissolution under S. 44 of the. Partnership Act 1932. The relevant portion of S. 44 reads :" 44. Dissolution by the Court.-At the suit of a partner the court may dissolve a firm on any of the following grounds namely : * * * * * (c) that a partner other than the partner suing is guilty of conduct which is likely to affect prejudicially the carrying on of the business regard being had to the nature of the business; (d) that a partner other than the partner suing wilfully or persistently commits breach of agreements relating to the management of the affairs of the firm or the conduct of its business or otherwise sq cqnducts himself in matters relating to the business that it is not reasonably practicable for the other partners to carry on the business in partnership with him;. . . . . "a partner's claim to a decree for dissolution under-S. 44 does not rest on a contract between the parties Every partner has a right to invoke the Court's protection on equitable grounds. In Rehmatunnissa Begum v. Price, AIR. 1917 PC. 116. Sir Lawrence Jenkins observed :" 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 obligation of the partners may have been regulated and defined by the partnership contract. 1917 PC. 116. Sir Lawrence Jenkins observed :" 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 obligation of the partners may have been regulated and defined by the partnership contract. "the power of the Court to order dissolution is under S. 44 of the Partnership Act and is solely in its judgment and judicial discretion. The plaintiffs have in the instant case invoked that power of the Court. It would be better therefore that the suit should be left in the hands of the Court. The appellate Court has not committed any error of jurisdiction calling for interference in this revision petition. ( 11 ) IN the result this revision petition fails and is dismissed with costs. The trial Court is directed to expedite the disposal of the suit. --- *** --- .