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Rajasthan High Court · body

1996 DIGILAW 926 (RAJ)

Heera Lal Ramji Lal Industrial Mills v. Food Corporation of India

1996-08-14

P.C.JAIN

body1996
Honble JAIN, J. – The appellants-petitioners have filed this appeal under Sec. 13(1) (iv) of the Indian Arbitration Act, 1940 (for short the Act) against the judgment of Shri Amar Singh Godara, learned Addl. Distt. Judge No.1, Hanumangarh dated 30/6/1981 passed in Civil Misc. Application No. 40/78, whereby the learned Addl. Distt. Judge allowed the application filed by the respondent under Sec . 20 of the Act and made an order of reference of the dispute to the arbitration in terms of clause (19) of the agreement to have been executed between the parties. (2). The relevant facts, in so far as they are relevant for the disposal of this appeal, may be stated as follows. The respondent, a statutory body, invited tenders for appointing a contractor for loading/unloading and transportation of food grains etc. in and round Hanumangarh town for a period of two years from 1/5/75 on the conditions mentioned in the notice inviting tenders. It is alleged that Shri Balkishan appellant, on behalf of the partnership firm Ms. Heera Lal Ramji Lal Industrial Mills, Hanumangarh Town, submitted his tender quoting the rate 231% above the scheduled rates to the Senior Regional Manager, Jaipur of the Corporation by putting his signature as also the seal of the firm alongwith a D/D No. H 0968482 dated 14/2/75 of a sum of Rs. 3,000/-. On scrutiny the rates of tender quoted by the appellant Shri Balkishan on behalf of the above partnership firm were found the lowest. The Corporation respondent, therefore, accepted the tender submitted by Shri Balki- shan in the aforesaid manner for the contracted period of two years and the above firm was appointed contractor for execution of the above work. Information of this acceptance was conveyed by telegram to the appellant firm on 4/3/75. Vijay Kumar, partner of the appellant firm, by his letter dated 13/3/75 acknowledged the receipt of the acceptance. In pursuance of the compliance of the formalities asked by the Corporation, Shri Vijay Kumar sent a D/D of Rs. 3,000/- on 12/3/75. Regarding the remaining amount of earnest money namely, Rs. 3,000/-, Shri Vijay Kumar put in an application praying that the above amount may be adjusted from the payment to be made by the Corporation to the above firm. Shri Vijay Kumar further sought 15 days time to produce the copy of the partnership deed and the other documents. Regarding the remaining amount of earnest money namely, Rs. 3,000/-, Shri Vijay Kumar put in an application praying that the above amount may be adjusted from the payment to be made by the Corporation to the above firm. Shri Vijay Kumar further sought 15 days time to produce the copy of the partnership deed and the other documents. Accordingly, the copy of the partnership deed dated 24/3/75, Income-Tax Certifica- te and other documents were filed in the office of the Corporation. After completion of the above formalities, the appellant firm commenced the work but the appellant firm committed breach of the conditions of the contract and did no work for the period from 8/11/75 to 30/4/77. The Corporation, therefore, by telegram dated 15/11/76 and letter dated 4/12/75 asked the appellant firm to complete the above work as per the terms of the contract. It is alleged that despite the above notice the plaintiff firm did not commense the execution of the above work for the above period. The Corporation was, therefore, obliged to rescind the contract and forfeit the security of Rs. 6,000/- deposited by the appellant firm for due performance of the work. It is further alleged that on account of the appellant firm backing out from its obligation to perform the above contract, Corporation had to engage other agencies to undertake the above work for the above period and in that connection, the Corporation incurred a loss of Rs. 1,47,595/-. The Corporation raised the above demand and asked the appellant firm to reimburse the former for the above loss by a registered notice. The plaintiff firm, however, did not care to reply to the notice and the demand was also not respected. The Corporation, therefore, invoked the arbitration clause No.19 of the agreement between the parties. The Corporation, by notice, asked the firm to comply with the above condition for appointing of an arbitrator, but, the latter did not reply. The Corporation, therefore, filed an application under Sec. 20 of the Act before the learned Addl. Distt. Judge No.1. The Corpo- ration authorised the District Manager, Sri Ganganagar to present the above petition. It may be stated that in the above application, the respondent has arrayed M/s. Heera Lal Rami Lal Industrial Mills, Hanumangarh (registered partnership firm) as non-petitioner No.1 and Balkishan, Ramji Lal, Vijay Kumar, Banwari Lal and Jagdish Prasad as partners of the above firm. (3). The Corpo- ration authorised the District Manager, Sri Ganganagar to present the above petition. It may be stated that in the above application, the respondent has arrayed M/s. Heera Lal Rami Lal Industrial Mills, Hanumangarh (registered partnership firm) as non-petitioner No.1 and Balkishan, Ramji Lal, Vijay Kumar, Banwari Lal and Jagdish Prasad as partners of the above firm. (3). The above application was stoutly resisted by the non- petitioners. It was specifically and categorically denied that the non-petitioner firm ever entered into any contract with the petitioner Corporation or executed the above agreement. There is a total denial of the case of the petitioner. It was further averred that Shri Balkishan was neither a partner nor was he authorised by any partnership firm to enter into a contract with the Corporation in respect of the above work on behalf of the firm. The defendant further challenged the maintainability of the application on the ground that the District Manager was not authorised and competent to present the application under Sec. 20 of the Act on behalf of the Corporation. (4). Now, I may make a brief reference to the documents produced before the learned Addl. Distt. Judge : 1. Agreement regarding the above work executed by Shri Balkishan on behalf of M/s. Heera Lal Ramji Lal Industrial Mills alongwith relevant annexures. 2. Letter dated 13/3/75 of Shri Vijay Kumar Gupta, Partner of the above firm by which a sum of Rs. 3,000/- was deposited as security for due performance of the contract and a prayer was made authorising the Corporation to deduct the remaining Rs. 3,000/- from the further payments made to the above firm for the execution of the work. 3. Copy of the telegram conveying acceptance of the Corporation to the tender submitted by Shri Balkishan on behalf of the above firm. 4. Letter dated 24/5/75 on the letter-pad of M/s. Heera Lal Ramji Lal Industrial Mills signed by Shri Balkishan as partner by which the Income-Taxt Clearance Certi- ficate was submitted to the Corporation. 5. Letters and notices sent to M/s. Heera Lal Ramji Lal Industrial Mills conveying the breach of contract committed by the above firm and asking to resume the same and/or to compensate the Corporation for the loss incurred by it as a result of the breach of the contract committed by the firm. 6. 5. Letters and notices sent to M/s. Heera Lal Ramji Lal Industrial Mills conveying the breach of contract committed by the above firm and asking to resume the same and/or to compensate the Corporation for the loss incurred by it as a result of the breach of the contract committed by the firm. 6. Telex message sent by the Corporation authorising the District Manager, Sri Ganganagar to file an application under Sec. 20 of the Act and to take necessary and legal steps in that regard. 7. Copy of partnership deed dated 24/3/75 executed between Banwarilal, Balkishan and Jagdish Prasad with regard to the execution of the contract in ques- tion. This is a true copy attested by the District Manager, Food Corporation of India, Sri Ganganagar. The copy does not contain any endorsement whether this document was registered or not. 8. Another deed of partnership dated 15/3/70 made between Kailashchand, Vijay Kumar, Ramji Lal, Banwarilal, Balkishan and Jagdish Prasad. Under this part- nership deed the name and style of the firm has been shown as M/s. KailashChand Industrial Mill. 9. Copy of certificate issued by Registrar of Firms, Rajasthan, Jaipur certifying that M/s. Kailashchand Industrial Mills, Hanumangarh was duly registered in pursuance the provisions of the Indian Partnership Act, 1932. Obviously it has got referen- ce to the partnership deed dated 15/5/70. (5). I may also refer to the proceedings taken by the learned Addl. Distt. Judge. The order sheet dated 11/7/70 shows that on that day all the non-petitioners filed reply to the petition filed by the Corporation, the presiding officer was out in connection with tendering evidence in some case. The case was then fixed for arguments. Thereafter, the case was adjourned from time to time for arguments. Eventually, arguments were heard and the case was decided. What I want to mention is that neither of the parties exercised its legal right to produce evidence. The Court also did not ask the parties whether they want to produce any evidence or not. It may further be pointed out that even in the memo of appeal or during arguments no such grievance was made. Before the learned Addl. Distt. Judge, the non-petitioner vehemently challenged the maintainability of the application on the ground that the District Manager, Sri Ganganagar was neither competent nor authorised to present the above application on behalf of the Corporation. The learned Addl. Distt. Before the learned Addl. Distt. Judge, the non-petitioner vehemently challenged the maintainability of the application on the ground that the District Manager, Sri Ganganagar was neither competent nor authorised to present the above application on behalf of the Corporation. The learned Addl. Distt. Judge, however, relying on the telex message, held that the presentation of the application was in accordance with the provisions of law. (6). It was challenged that no such agreement was executed between the ap- pellant firm and the Corporation and that Shri Balkishan was not authorised to enter into the agreement with the Corporation containing arbitration clause. It was further challenged that Shri Balkishan was not competent under Sec. 19 of the Partnership Act to enter into an agreement on behalf of the firm agreeing to refer the dispute to arbitration. The learned Addl. Distt. Judge also over-ruled this objec- tion and allowed the application. (7). I have heard the learned counsel for the appellant. Learned counsel for the respondent did not appear at the time of arguments but he was allowed to submit the written arguments which he filed. I have also perused the written arguments submitted by the learned counsel for the respondent. (8). Learned counsel for the appellants has challenged the judgment of the learned Addl. Distt. Judge firstly on the ground that the application filed by the District Manager, Food Corporation of India, Sri Ganganagar was not a proper presentation inasmuch as he was not competent to present the same on behalf of the Corporation under Order 29 Rule 1 C.P.C. The District Manager is neither the Secretary nor the Director nor any other Principal Officer of the Corporation. For the above reasons the advocate who was authorised to present this application on behalf of the Corporation by the District Manager was also not in accordance with the provisions contained in Order 3 Rule 1. Learned Addl. Distt. Judge relied on the telex message produced by the respondent. The above telex message could not have been considered and relied upon because the same was not proved. (9). Learned counsel for the respondent submitted that since both the parties did not lead any evidence, the learned Addl. Distt. Judge considered the documents produced by the respondent as well the appellants and after ascertaining the prima facie value of such documents disposed of the application. (9). Learned counsel for the respondent submitted that since both the parties did not lead any evidence, the learned Addl. Distt. Judge considered the documents produced by the respondent as well the appellants and after ascertaining the prima facie value of such documents disposed of the application. Hence, technically it is correct that neither of the parties produced evidence. Hence, the learned Addl. Distt. Judge did not commit any error if he relied on the telex message. District Manager is one of the Principal Officers of the Corporation and as such he was competent to act on behalf of the Corporation and also to engage an attorney to represent the Corporation and present the application. Hence, the application pre- sented by the Advocate and authorised by the District Manager on behalf of the Corporation cannot be said to have violated the provisions of Order 29 Rule 1 or Order 3 Rule 1 C.P.C. (10). The telex message, which has been filed by the respondent, shows that the District Manager was authorised to file an application under Sec. 20 of the Arbi- tration Act, to engage counsel and to sign and verify pleadings and other connected papers on behalf of the Corporation. Hence, in my opinion, the District Manager, Food Corporation of India, Sri Ganganagar being the Principal Officer of the Corporation was duly authorised by the Corporation to file application under Sec. 20 of the Act as also to engage a counsel to represent the Corporation in the court of law. He was further authorised to sign and verify the pleadings and other documents. Hence, the learned Addl. Distt. Judge has not committed any error in overruling the objection of the appellants. (11). The second material ground, on which the appellants has challenged the impugned order, is that the learned Addl. Distt. Judge did not correctly appreciate the facts. It is on record that the document or tender form was signed by Shri Balkishan and also submitted by him. It is correct that he put in the seal of the firm M/s. Heera Lal Ramji Lal Industrial Mills but it has been denied specifically and cate- gorically by the appellant firm and other partners that Balkishan was ever authorised to make any agreement with the respondent containing a clause regarding arbitration in case any dispute arose between the parties relating to the matters embodied in the contract. It may also be mentioned that the last form of the tender does not contain the signature of Shri Balkishan, though, the seal of M/s. Heera Lal Ramji Lal Industrial Mills is affixed on the form. The learned counsel has made reference to clause 3(b) (i) (ii) of the agreement in question which provides the mode of signing of tenders. It has been provided, inter-alia, that in case the tender is submitted by a partnership firm, it shall be signed by all the partners or their attorney having authority to bind all the partners in all matters pertaining the con- tract including the arbitration clause. It is further provides that the original or attested copy of the partnership deed shall be furnished alongwith the tender. All these conditions were violated. In this connection, learned counsel has very powerfully contended that in the instant case reference of two firms, M/s. Heera Lal Ramji Lal and M/s. Heera Lal Ramji Lal Industrial Mills is available and it is very un- fortunate that even the respondent or its responsible officers were not clear that as to which firm made the agreement with the Corporation. It appears that the respondent treated both the firms inter-changeable without appreciating difference in their nomenclature and identity. No partnership deed was produced alongwith the tender agreement which was executed by Balkishan. Other partners also did not sign the same. There is a reference that the partnership deed was produced by M/s. Heera Lal Ramji Lal. A perusal of the above document shows that this so called partnership deed was executed on 24/3/75 after the submission of the tender agreement by Shri Balkishan allegedly on behalf of the firm. The important thing to be noted is that this partnership deed is of the firm M/s. Heera Lal Ramji Lal. The another registered partnership deed was produced is of the firm having name and style ``M/s. Kailashchand Industrial Mill. It contains six partners. The certificate issued by the Registrar of Firms distinctly relates to the partnership deed of M/s. Kailashchand Industrial Mill. All the correspondence and letters produced by the respondent are of M/s. Heera Lal Ramji Lal. The documents are not of M/s. Heera Lal Ramji Lal Industrial Mills. The application was filed against M/s. Heera Lal Ramji Lal Industrial Mills. Hence, the application was mis-conceived and filed against the wrong person or wrong parties. All the correspondence and letters produced by the respondent are of M/s. Heera Lal Ramji Lal. The documents are not of M/s. Heera Lal Ramji Lal Industrial Mills. The application was filed against M/s. Heera Lal Ramji Lal Industrial Mills. Hence, the application was mis-conceived and filed against the wrong person or wrong parties. Even if it is assumed that Shri Balkishan was a partner. He was not having any authority to submit dispute to arbitration. Sec. 19(2) of the Act contains a total prohibition against such implied authority of a par- tner. Learned counsel has placed reliance on Gulam Abbas vs. Modi Finance. Co. (1). Hence, the whole application was mis-conceived and filed under total confusion and was not maintainable. (12). Learned counsel for the respondent, on the other hand, submitted that admittedly Balkishan put his signature on every page of tender agreement except last page. However, even if the last page is not signed by the partner, its true execution is proved. Regarding the fact that all the partners have not signed will not make any difference if it is proved that the action of Balkishan executing the above tender agreement in favour of the Corporation containing a clause for reference to arbitration of disputes arising between the parties relating to the above agreement is subsequently ratified by other partners of the firm. Learned counsel has referred to the partnership deed dated 24/3/75. It shows that all the partners herein made an agreement, in which they endorsed or ratified the act of Shri Balkishan, partner of the firm. Such a ratification is permissible and can be taken to be in exception of Sec. 19 of the Act. Learned counsel has referred to M/s. Lodharam Ved Prakash vs. M/s. Maharani of India & Anr. (2). Learned counsel has also submitted that there is no distinction between ``M/s. Heera Lal Ramji Lal and ``M/s. Heera Lal Ramji Lal Industrial Mills. Both the above firms are infact one and the same. In his written arguments, learned counsel has stated that there are vari- ous instances which show that all the partners ratified the action of Balkishan in executing the tender agreement in favour of the respondent. The power of attorney was filed. A bank draft of Rs. 3,000/- was filed. No-due certificate from Income-Tax was also filed. Copy of the above partnership deed was also filed. The power of attorney was filed. A bank draft of Rs. 3,000/- was filed. No-due certificate from Income-Tax was also filed. Copy of the above partnership deed was also filed. The work was started and was executed for a few months. (13). I have considered the rival contention and perused the documents. It may be stated that Sec. 19 of the Partnership Act deals with the implied authority of a partner as an agent of the firm. Sec. 18 lays down that a partner is the agent of the firm for the purposes of the business of the firm. Hence, every partner is accor- ding to law, the accredited agent of the partnership firm and in exercise of his im- implied authority may bind the other partners by his acts in all matters which are within the scope of the partnership. However, Sub-Section (2) of Sec. 19 contains restriction on such implied authority in certain matters specified therein. For example in the absence of any usage or custom of trade to the contrary, the implied authority of a partner does not empower him to submit a dispute relating to the business of the firm to arbitration. The Gulam Abbas vs. Modi Finance Co. (supra) lays down the above principle which has been relied upon by the learned counsel for the appellants. However, the arbitration agreement made by one of the partners of the firm can always be ratified by the other partners later on. Such ratification must be alleged and proved. The proof may be either direct or by conduct of the partners of the firm. The above principle was laid down in M/s. Lodharam Ved Prakashs case referred to above. (14). Now, I would advert to the facts of the case and ascertain from the facts that what is the legal position subsisting on the record of this case. At the very out- set, it may be stated that the above tender agreement was executed by Balkishan alone. He signed all the pages except the last one. One the last Page the also affixed the seal of M/s. Heera Lal Ramji Lal Industrial Mills but did not sign above the seal in the capacity of a partner, Further, no partnership deed or agreement was filed alongwith the tender agreement as was essential as per condition 3(b) (i) (ii). He signed all the pages except the last one. One the last Page the also affixed the seal of M/s. Heera Lal Ramji Lal Industrial Mills but did not sign above the seal in the capacity of a partner, Further, no partnership deed or agreement was filed alongwith the tender agreement as was essential as per condition 3(b) (i) (ii). It is, thus, clear that initially all the partners of the firm did not collectively entered into an agreement with the respondent. Further, from the tender agreement that was filed, it is clear that Balkishan was not authorised by the partners when he executed the above agreement. It is also settled law that Balkishan had no implied authority to bind the said firm with an agreement to refer the dispute to arbitration. The agreement, which was later on filed, is not the agreement made between the part- partners of M/s. Heera Lal Ramji Lal Industrial Mills. The agreement, which was executed later on and filed on the record, shows the name of firm ``M/s. Heera Lal Ramji Lal only. I am not prepared to accede to the contention of the learned counsel for the respondent that firm M/s. Heera Lal Ramji Lal and M/s. Heera Lal Ramji Lal Industrial Mill are identical and inter-changeble. The documents contai- ning letters, copies of telegram etc. are of M/s. Heeralal Ramji Lal only and not of M/s. Heera Lal Ramji Lal Industrial Mills. It is not clear to me that why two agreements were filed on the record. The first agreement has already referred is of 24/3/75 and the other is of M/s. Kailashchand Industrial Mill. This partnership deed was made on 15/3/70. It contains six partners. The certificate of Registrar of Firms relates to the registration of this firm. It is also not clear whether the partnership deed dated 24/3/5 was executed between the parties and registered under the Partnership Act. Merely on the basis of a copy it cannot be inferred that there was a partnership consisting of all the partners appellants and having a name and style ``M/s. Heera Lal Ramji Lal Industrial Mills merely from the copy produced in the case. Moreover, the burden lay on the respondent to clarify that the two firms namely ``M/s. Heera Lal Ramji Lal and ``M/s. Heera Lal Ramji Lal Industrial Mills are not different and distinct but one and the same. Moreover, the burden lay on the respondent to clarify that the two firms namely ``M/s. Heera Lal Ramji Lal and ``M/s. Heera Lal Ramji Lal Industrial Mills are not different and distinct but one and the same. It further shows that when Shri Balkishan executed the tender agreement, the firm was not in existence. It was allegedly constituted later on but proof is totally lacking whether all the partners made any such contract on partnership and the same was reduced into black & white. (15). I cannot help to observe that right from the inception the tender agreement was executed by Balkishan upto the end the officers of the Corporation which I hope were responsible and vigilant did not bestow their attention to the requirements of the agreement. They did not insist upon the fact that the document be signed by all the partners and that a copy of the partnership deed be produced at the time of the execution and submission of the agreement. Had it been done, it would have been clear that no such firm existed at that time. It appears that the officers rest contended that a letter-pad having a printed name of M/s. Heera Lal Ramji Lal was sufficient proof that the agreement was with the above firm and their partners. It is also not clear whether the officers of the Corporation ever saw the original partnership deed dated 24/3/75. The copy which has been filed on the record has not been properly attested. It is thus clear that no such firm as M/s. Heera Lal Ramji Lal Industrial Mills existed at the relevant time which comprised the partners appellants and they ratified the above agreement. The learned Addl. Distt. Judge while referring to the documentary evidence did not scrutinise them properly and did not notice the above salient features pointed out above. His order is, therefore, erroneous and not based on evidence. (16). I, therefore, allow the appeal set aside the judgment of the learned Addl. Distt. Judge and the application filed by the respondent under Sec. 20 of the Act is hereby dismissed. The costs made easy.