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2019 DIGILAW 316 (KAR)

Vishal Bhavan v. H. N. Jayashankar S/o Late H. Nagesha Rao

2019-02-01

ALOK ARADHE

body2019
ORDER : Mr.Sunil S. Rao, learned counsel for the petitioners. Mr.B.S.Aravinda Babu, learned counsel for the respondent. 2. The writ petition is admitted for hearing. With consent of the parties, the same is heard finally. 3. In this petition under Section 11(6) of Arbitration and Conciliation Act, 1996 (hereinafter referred to as ‘the Act’ for short) petitioners seeks appointment of an Arbitrator to adjudicate the dispute between the parties. 4. Facts giving rise to filing of this petition briefly stated are that the mother of petitioner No.2 and the respondent viz., Smt.Vishalakshamma purchased the property in question on 28.11.1968. She passed away on 29.01.1994. Thereafter, the petitioner No.2 and the respondent have constituted a partnership firm on 01.04.1994 in the name and style of petitioner No.1 and have started a convention hall in the schedule property. A dispute had arisen between the parties. The petitioner No.2 sent a notice to the respondent to settle the dispute. Thereafter, an application under Section 9 of the Act was also filed by the petitioners against the respondent. Thereafter, this petition has been filed seeking appointment of an Arbitrator under Clause 12 of the partnership agreement for resolution of the dispute. 5. Learned counsel for the respondent at the outset has raised an objection with regard to maintainability of the petition at the instance of petitioner No.1 and has submitted that since petitioner No.1 is an unregistered firm therefore, they cannot maintain a petition under Section 11(6) of the Act. In support of aforesaid submission, reference has been made to a decision rendered by four Judge Bench of the Supreme Court in the case of ‘JAGADISH CHANDRA GUPTA vs. KAJARIA TRADERS’, AIR 1964 SC 1882 . It is further submitted that in case there are two conflicting decisions of the Supreme Court, one given by larger bench should be followed. In support of aforesaid submission reference has been made to decision of Supreme Court in ‘STATE OF BIHAR vs. KALIKA KUER ALIAS KALIKA SINGH AND OTHERS’, (2003) 5 SCC 448 and a decision of this court in ‘GOVINDANAIK G. KALAGHATIGI vs. WEST PATENT PRESS COMPANY LTD., AND ANR’, AIR 1980 KAR 92 . 6. On the other hand, learned counsel for the petitioners has submitted that the issue raised by learned counsel for the respondent with regard to maintainability of this petition at the instance of petitioner No.1 is no longer res integra. 6. On the other hand, learned counsel for the petitioners has submitted that the issue raised by learned counsel for the respondent with regard to maintainability of this petition at the instance of petitioner No.1 is no longer res integra. In support of aforesaid submission, learned counsel for the petitioners has placed reliance on a decision of Supreme Court in ‘UMESH GOEL VS. HIMACHAL PRADESH COOPERATIVE GROUP HOUSING SOCIETY LIMITED’ (2016) 11 SCC 313 . It is further submitted that in paragraphs 25 to 30 of the aforesaid decision, the Supreme Court has explained the principles laid down in JAGADISH CHANDRA Case and has taken a view that Arbitral proceeding do not fall within the purview of the expression ‘other proceeding’ as used in Section 69(3) of the Partnership Act, 1932. 7. I have considered the submissions made by both the sides. Admittedly, the petitioner No.2 and the respondent are parties to the partnership deed. Clause 16 of the partnership deed contains an arbitration clause which reads as under: Arbitration - If there were to be any disputes amongst the parties which cannot be resolved by themselves the same shall be referred to an arbitration of three arbitrators, each party being entitled to nominate one arbitrator on his behalf. The decision of the majority of the arbitrators shall be binding on all the parties. Thus, there is an agreement between the parties which contains an arbitration clause. Admittedly, the dispute has arisen between the parties. However, the only objection, which has been taken to the maintainability of the petition is that this petition at the instance of petitioner No.1is not maintainable as it is an unregistered firm. It is trite law that in case of two conflicting decisions of the Supreme Court, the decision rendered by the larger bench of the Supreme Court is binding. 8. The Supreme Court in JAGADISH CHANDRA Gupta supra has held that bar contained in Section 69(3) of the Act applies to all proceeding including the one under Section 8(2) of the Act. The aforesaid bar applies in respect of a proceeding to enforce a right arising from a contract between the partners. 8. The Supreme Court in JAGADISH CHANDRA Gupta supra has held that bar contained in Section 69(3) of the Act applies to all proceeding including the one under Section 8(2) of the Act. The aforesaid bar applies in respect of a proceeding to enforce a right arising from a contract between the partners. Thereafter, a two Judge Bench of the Supreme Court considered and explained the decision of the Supreme Court in the case of JAGADISH CHANDRA supra in paragraphs 25 to 28 and has held that the view taken by Four Judge Bench of the Supreme Court is in no way in conflict with the view taken by the two Judge Bench of the Supreme Court having regard to the advent of 1996 Act under which the nature of arbitration proceeding a sea change as compared to the 1940 Act. The Supreme Court in UMESH GOEL supra held that arbitration proceeding do not fall within the bar contained in Section 69(3) of the Partnership Act and therefore section 69 shall have no application to the arbitral proceeding. The relevant extract of the aforesaid judgment which is contained in paragraphs 27 & 28 are reproduced below: “27. The scope and ambit of the power and jurisdiction of “court” defined under Section 2(e) of the 1996 Act is circumscribed to certain specified extent as set out in Sections 8, 9, 14, 27, 34, 36, 37, 39, 42, 43, 47, 48, 49, 50, 56, 58 and 59. A comparative consideration of the 1940 Act and the 1996 Act disclose the extent of control and operation of a court under the former Act was far more intensive and elaborate than the latter Act. The more significant distinction as between the 1940 Act and the 1996 Act is clear to the position that the former Act does not merely stop with the initiation and enforcement of an arbitration and its award, but effectively provides for intervention at every stage of the arbitral proceedings up to its final consideration and enforcement as if it were a regular civil suit, whereas under the 1996 Act, the scope of intervention is not that of a civil court as it could do in the matter of a suit. Such clear distinction could be discerned from the reading of the various provisions of both the Acts. Such clear distinction could be discerned from the reading of the various provisions of both the Acts. Therefore, in the light of such distinctive features that prevail in respect of an arbitral proceeding which emanated under the 1940 Act, this Court held inJagdish Chander case [Jagdish Chander Gupta v. Kajaria Traders (India) Ltd., AIR 1964 SC 1882 : (1964) 8 SCR 50 ] to the effect that an arbitral proceeding governed by the 1940 Act would squarely fall under the category of “other proceedings” as specified in Section 69(3) of the Partnership Act. To be more precise, in Jagdish Chander case [Jagdish Chander Gupta v. Kajaria Traders (India) Ltd., AIR 1964 SC 1882 : (1964) 8 SCR 50 ] , inasmuch as the initiation of the proceedings were under Section 8 of the 1940 Act before a civil court having jurisdiction to decide the question forming the subjectmatter of suit and the respondent therein being an unregistered partnership firm, the ingredients set out in Sections 69(1) to (3) of the Partnership Act applied in all force and consequently, held that the prohibition set out in the said section squarely applied. 28. We only wish to add that though in the said decision in Jagdish Chander case[Jagdish Chander Gupta v. Kajaria Traders (India) Ltd., AIR 1964 SC 1882 : (1964) 8 SCR 50 ] , this Court did not specifically mention as to the requirement of pendency of a proceeding in the nature of a suit in a civil court as the basic ingredient to be satisfied as stipulated in subsections (1) and (2) of Section 69 in order to extend the specific prohibition even to “other proceedings” under subsection (3), this Court was fully aware of the fulfillment of those mandatory requirements having regard to the nature of proceedings that existed under the provisions of the 1940 Act. Therefore, our conclusion based on the interpretation of Section 69 on the whole as set out in paras 10 to 18, are fully supported by the above decision. Therefore, our conclusion based on the interpretation of Section 69 on the whole as set out in paras 10 to 18, are fully supported by the above decision. We have, therefore, no hesitation to hold that the ratio laid down in Jagdish Chander case [Jagdish Chander Gupta v. Kajaria Traders (India) Ltd., AIR 1964 SC 1882 : (1964) 8 SCR 50 ] does not in any way conflict with the view which we have taken herein, having regard to the advent of the 1996 Act, under which the nature of arbitration proceedings underwent a sea change as compared to the 1940 Act, what is stated in Jagdish Chander case[Jagdish Chander Gupta v. Kajaria Traders (India) Ltd., AIR 1964 SC 1882 : (1964) 8 SCR 50 ] can have application in the special facts of that case and that it can have no application to a proceeding which emanated under the 1996 Act, for which the interpretation to be placed on Section 69(3) will have to be made independently with specific reference to the provisions of the 1996 Act, where the role of the Court is limited as noted earlier to the extent as specified in Sections 8, 9, etc.” 9. Thus the decision rendered by Supreme Court in JAGADISH CHANDRA has been considered and explained by Two Judge bench in the case of UMESHGOEL supra and therefore the aforesaid decision is binding on this Court under Article 141 of Constitution of India. Therefore, it is held that the petition at the instance of the petitioners under Section 11 (6) of the Act is maintainable. [See: SUPREME COURT ADVOCATES ON RECORD ASSOCIATION VS. UNION OF INDIA’, (2016) 5 SCC 1 ] 10. In view of preceding analysis, and taking into account the fact that Mr.I.S.Antin is already appointed as the Sole Arbitrator to resolve the dispute between the same parties in respect of another dispute. I deem it appropriate to appoint Mr.I.S.Antin, Retired District Judge, as sole Arbitrator to adjudicate the dispute between the parties. Office is directed to transmit a copy of the order passed today to the sole Arbitrator. Accordingly this petition is disposed of.