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2001 DIGILAW 1370 (PNJ)

Harsh Wardhan Singh v. Mahesh Wardhan Singh

2001-12-06

AMARBIR SINGH GILL

body2001
Judgment Amar Bir Singh Gill, J. 1. The plaintiff-petitioner filed a suit for dissolution of the firm and rendition of accounts claiming that under the registered partnership deed with defendant-respondents No.1 and 2. it was agreed that the partnership was at will and upto 30.9.1998 and all partners had mutually settled their accounts till that date and thereafter the business of the concern was being conducted and supervised by defendant-respondent No.2 through her husband defendant-respondent no.3 and all the books of accounts were also being maintained by defendant-respondents no.2 and 3, are now in their custody and they are the accounting parties. After 30.9.1998, defendant-respondents No.2 and 3 opened another account in the name of the firm with the Punjab National Bank, Arya chowk, Bathinda without the consent of the plaintiff-petitioner and earlier the account of the firm was opened with Canara Bank and the same was being operated jointly as per terms of the partnership deed. The business of the firm is being run by defendant-respondent No.3 who is not a partner of the firm and he along with defendant-respondent No.2 are keeping the custody of entire books of the firm with the purpose of depriving the plaintiff-petitioner of the actual account i. e. profit and loss account of the firm besides defendant-respondent No.3 has also started claiming to be the sole proprietor of the firm. These defendant-respondents No.2 and 3 have again changed the bank account and opened the same with bank of India without allowing any access to the account books and rendition of the accounts of the firm to the plaintiff-petitioner and inspite of the request of the petitioner, the defendant-respondents have not dissolved the firm so far compelling him to file a suit for dissolution of the firm and rendition of the accounts. 2. Defendant-respondents No.2 and 3 filed an application under Sec.34 of the Arbitration Act seeking the stay of further proceedings in view of clause 9 of partnership deed by which dispute between the parties was to be referred to the arbitration. It was further claimed that the dispute ought to have been referred firstly to an Arbitrator to be appointed by the parties according to clause 9 of the partnership deed but instead of referring the matter to the arbitration, the plaintiff-petitioner has initiated the legal proceedings in contravention of the arbitration clause. It was further claimed that the dispute ought to have been referred firstly to an Arbitrator to be appointed by the parties according to clause 9 of the partnership deed but instead of referring the matter to the arbitration, the plaintiff-petitioner has initiated the legal proceedings in contravention of the arbitration clause. The defendants further claimed that at the time when the proceedings were commenced they were and are still ready and willing to do all things necessary for the proper conduct of the arbitration between the parties. The application was opposed by the plaintiff-petitioner claiming that defendant respondent No.3 had no locus standi to seek the stay of further proceedings under section 34 of the Arbitration Act being not a party to the partnership. The plaintiff petitioner admitted the existence of arbitration clause 9 in the agreement. However, he claimed that he is not estopped from filling the suit in view of the circumstances and the facts alleged in the same. The civil Court can well adjudicate upon the rights between the parties and-if so considered, the Court can appoint an Arbitrator. The suit, being not in violation of the terms with regard to the arbitration is maintainable besides the defendant-respondents No.2 and 3 were never ready and willing as alleged and he prayed for the dismissal of the application. 3. Learned trial Court, after hearing the counsel for the parties and being satisfied, held that it was not a case where the arbitration clause provided reference of dispute to any particular arbitrator or the manner in which the arbitrator can be appointed. The suit, being for dissolution of the firm and rendition of accounts, can not be stayed in view of the vagueness of the arbitration clause and, thus, the application filed by defendant-respondents no.2 and 3 was dismissed. 4. The defendant-respondents No.2 and 3 filed appeal which has been allowed by the appellate Court giving rise to the present Civil revision by the plaintiff-petitioner. 5. I have heard learned counsel for the parties. Before a stay of suit can be granted under Sec.34 of the Arbitration Act, it is necessary that the following conditions are satisfied:- "1. The proceeding must have been commenced by a party to an arbitration agreement, against any other party to the agreement; 2. 5. I have heard learned counsel for the parties. Before a stay of suit can be granted under Sec.34 of the Arbitration Act, it is necessary that the following conditions are satisfied:- "1. The proceeding must have been commenced by a party to an arbitration agreement, against any other party to the agreement; 2. the legal proceedings which is sought to be stayed must be in respect of a matter agreed to be referred; 3. the application for stay must be a party to the legal proceeding and he must have taken no step in the proceeding after appearance; and 4. The Court must be satisfied that there is no sufficient reason why the matter should not be referred to an arbitration. " 6. The aforesaid conditions have been settled by Supreme Court in Gaya Electric Supply Co. Ltd. V/s. State of Bihar. In the suit for dissolution of firm and rendition of accounts by the present petitioner, what mainly was made a ground was the breach of terms of the contract by the defendants and that the partnership was not dissolved even on the request of the plaintiff-petitioner. It Was not a case where the dispute had arisen and the firm had been dissolved after filing of the suit. Even in the application filed under Sec.34 of the arbitration Act, no such plea was raised by defendant-respondent No.2. It may also be noticed that in the application, it was no where denied if defendant No.3 was running the business of the firm who was a stranger to the partnership deed and that too without any authority. The suit primarily was on account of the acts of defendant No.3 who was running the firm and had changed the bank account for more than once without allowing any access to the account books to the plaintiff-petitioner. In a suit for dissolution of the firm and rendition of accounts, the firm does not stand dissolved on the filing of the suit itself. A reference to the arbitration agreement indicates only that the partnership was at will and since the same was not dissolved at any time of filing of the suit it will not come to an end merely on the filing of the suit. A reference to the arbitration agreement indicates only that the partnership was at will and since the same was not dissolved at any time of filing of the suit it will not come to an end merely on the filing of the suit. In Narinder Singh randhawa and another V/s. Hardial Singh dhillon and others, this Court in similar case held as under:- "merely by filing a civil suit for dissolution of partnership at will, the partnership does not stand dissolved and it will stand dissolved from a date which may be fixed in the preliminary decree passed by the court unless it is found in the suit on merits that the partnership had already stood dissolved as pleaded by defendant. Hence, for the present, it is to be treated on the face of the plaint that the plaintiffs are seeking dissolution of partnership and accordingly section 44 (g) of the Partnership Act would be attracted, Since the dissolution is sought on the basis of justice and equity, this matter can only be gone into by a Civil court and not by the arbitrators. " This Court further held as under; "even if the partnership had stood dissolved, the question of rendition of accounts could not be gone into by the arbitrators after the dissolution of partnership and had to be decided by the civil Court. " 7. For the stay of legal proceedings on an application under Sec.34 of the Arbitration Act, it is a Court which has to satisfy itself if the arbitration clause in the partnership agreement was persuasive enough or staying the further proceedings in the suit which implies that the agreement clause has to be specific and over all incidental and consequential disputes arising between the partners of the firm. 8. The appellate Court relied upon the decision of the Supreme Court in Erach F. D. Mehta V/s. Minoo F. D. Mehta, to hold that arbitration clause 9 of partnership agreement was specific enough for reference of the matter to the arbitrator. It would be useful to refer to the arbitration clause in the cited decision which reads as under:- "15. The appellate Court relied upon the decision of the Supreme Court in Erach F. D. Mehta V/s. Minoo F. D. Mehta, to hold that arbitration clause 9 of partnership agreement was specific enough for reference of the matter to the arbitrator. It would be useful to refer to the arbitration clause in the cited decision which reads as under:- "15. All disputes and questions whatsoever which shall either during the partnership or afterwards arise between the partners or between one of them and the personal representatives of the other or between their respective personal representatives touching these presents or the interpretation of this deed or the construction of the application thereof or any clause or thing herein contained or any account valuation or division of assets, debts or liabilities to be made hereunder or as to any act. deed or commission of either partner or as to any act which ought to be done by the partners in dispute or as to any other matter in any way relating to the partnership business or the affairs and transactions thereof or the rights, duties or liabilities of either partner under these presents shall be referred to two Arbitrators one to be appointed by each party to the difference in accordance with and subject to the provisions of the indian Arbitration Act, or any statutory modification thereof for the time being in force. " The intention of the parties was clear enough in respect of the disputes of every nature arising out of the partnership agreement. Arbitration clause 9 of the partnership agreement between the parties reads as under:- "that in case of any dispute between the parties matter shall be referred to arbitration in accordance with law. " 9 Admittedly, the clause is not specific in terms as to who would be the arbitrator or who would appoint the same but is in general terms "it shall be referred to arbitration in accordance with law. " Admittedly, law provides in such contingency for the appointment of arbitrator through the court, if at all. Learned trial Court did observe that the matter still could be referred to an arbitrator appointed by the court if required during the pendency of the suit. The aforesaid arbitration clause in the agreement between the parties, in the circumstances, by itself was not sufficient to seek stay of the legal proceedings before the court. 10. Learned trial Court did observe that the matter still could be referred to an arbitrator appointed by the court if required during the pendency of the suit. The aforesaid arbitration clause in the agreement between the parties, in the circumstances, by itself was not sufficient to seek stay of the legal proceedings before the court. 10. It is to be noted that defendant-respondent No.3 who is the husband of defendant-respondent No.2, admittedly, is not a party to the partnership agreement. He can not claim any relief under Sec.34 of the arbitration Act in respect of stay of further proceedings in the suit and the application on his behalf was mis-conceived and not maintainable, more-so, when the dispute in the suit raised between the plaintiff-petitioner and defendant-respondent No.3 has no connection with the partnership agreement. It was no where dispute by the defendant-respondent that the bank accounts have been changed or if the account books are in the custody of defendant-respondent No.3 who is running the business as alleged by the plaintiff-petitioner. As such a stranger to the partnership agreement having no locus standi in the matter, can not seek the stay of further proceeding in the suit. 11. The suit filed by the petitioner was for dissolution of partnership firm beside rendition of account by impleading Jaswant Rai as defendant No.3. The rendition of accounts can well be gone into in the Civil suit as has been held in the case of Narinder Singh randhawas case (supra ). Yet another aspect of the matter is that a person approaching the court for stay of further proceeding in the suit under section 34 of the Arbitration Act, has to plead and satifsfy the court that he was ready and willing to refer the dispute between the parties to arbitration. A reference to the order passed by the trial Court indicates that neither there was any averment in the application under section 34 of the Arbitration act nor any affidavit was filed in its support. A reference to the order passed by the trial Court indicates that neither there was any averment in the application under section 34 of the Arbitration act nor any affidavit was filed in its support. In a case M/s. Sass Construction and Power Company (P)Ltd. V/s. Fertilizers Corporation of India Ltd. , it was observed in such a case as follows :- "before filing an application under Sec.34 the applicant must satisfy these conditions, namely, that (i) that he must file the application at any time before filing the written statement or taking any other steps in the proceedings and (ii)that he was at the time when the proceeding commenced and is still ready and willing to do all things necessary for the proper conduct of the arbitration. The applicant is also required to make necessary averments that not only he is ready at present but he was also ready and willing to participate in the arbitration at the commencement of the proceeding. These facts must be supported by an affidavit. If there is no such averment nor there is any affidavit, the application under Sec.34 must fail. " 12. For the purpose of showing readiness and willingness to participate in the arbitration, it is incumbent upon an applicant, under Sec.34 of the Arbitration Act, to seek the appointment of the Arbitrator in terms of agreement clause, simultaneously seeking stay of the suit. In the instant case, as already referred above, arbitration clause required the reference of dispute to arbitration in accordance with law and the parties were before the court. It was incumbent upon the defendants to seek the appointment of arbitrator, if they were ready and willing to abide by the arbitration clause. Learned appellate court considered that the arbitration clause was in consonance with the law laid down in Erach ED. Mehtas case (supra) and it also referred to the arbitration clause. However, as already indicated above, the arbitration clause in the agreement which was the subject matter of the decision before the Supreme Court was specific enough in relation to the appointment of the arbitrator and the consequential specific disputes. Clause 9 of the agreement between the parties, in the circumstances, does not cover the field and is not covered by the decision of the Supreme Court aforesaid. 13. Clause 9 of the agreement between the parties, in the circumstances, does not cover the field and is not covered by the decision of the Supreme Court aforesaid. 13. In the light of what has been said above, the appellate authority fell in error in staying the suit. Accordingly, this revision petition is allowed, order passed by the appellate court dated 27/3/1994 is set-aside and the order dated 18/12/1991 passed by the trial court is restored. Revision allowed.