TMI Blog1961 (9) TMI 86X X X X Extracts X X X X X X X X Extracts X X X X ..... be mentioned that Gajanan's share was purchased by the appellant in November 1944. On October 22, 1948, a partnership agreement was arrived at between Babaji, Oak and the appellant for cutting the forest. The value of the forest for the three owners was fixed at ₹ 60,000/- which was to be divided amongst them according to their shares. The work of cutting was to be done by the appellant who appears to be an experienced forest contractor. Any income over and above the expenditure incurred in the cutting and the value of the forest was to be divided equally amongst the three partners; if there was any loss that was also to be born equally by them. It appears, however, that nothing was done in pursuance of this agreement, apparently because a suit had been filed by two persons with whom there was an earlier agreement of 1939 about the cutting of this very forest. It appears also that in March 1951 Gajanan and the appellant executed another document in which the price of Gajanan's share to be paid by the appellant was raised. In May 1951 Babaji died. Consequently in May 1952 another agreement was executed between the appellant and the heirs of Babaji, namely, Anant Yeshwa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t carry out the terms of the agreement of 1953 and showed the statements of accounts intermittently to the respondents. It was alleged that the accounts were not made up to date, and inspite of the respondents' demand that the account should be made up to date, the appellant did not do so. The respondents also demanded that the goods remaining to be sold should be disposed of with the consent of all; but this was also not agreed to by the appellant. The statement of accounts shown to the respondent was not complete and correct. The whole stock of goods was not to be found in the statement of accounts and the debit items seems the have been exaggerated and were not correct; and consequently it was not possible to carry on the business of partnership with the appellant and it was necessary to dissolve the partnership and take accounts of the partnership. It was also said that the appointment of a receiver had become necessary in order to protect the interest of the respondents and that an injunction should be granted restraining the appellant from removing the stock in balance so as to avoid misappropriation thereof pending the appointment of a receiver. The respondents prayed th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... before the arbitrator. On the question of fraud, the High Court took the view that the allegations made in this case were not allegations of fraud at all and in any case were not such allegations of fraud as would make it incumbent on the court to exercise its discretion in favour of the appellant and refuse to refer the dispute to arbitration. An argument was also raised before the High Court that the appellant was challenging the very existence of partnership between the parties and this question could not be referred to arbitration. The High Court, however, repelled this contention and held that the existence of the arbitration agreement was never challenged by the appellant. It therefore allowed the appeal and ordered that the arbitration agreement be filed in court and consequent proceedings be taken thereafter. As the judgment was of reversal, the amount involved was more than ₹ 20,000/- and the order was a final order, the High Court granted a certificate; and that is how the matter has come up before us. 8. Learned counsel for the appellant has urged four points before us, which we have already indicated earlier. We propose to deal with these points one by one. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er section 20 was that she was not a party to the agreement of February 1953 and could not therefore apply under section 20; but that is no reason why the dispute between the appellant and the two respondents should not be referred to arbitration, particularly when there is no dispute as to the share of Ambikabai in this forest. All that would happen would be that the arbitrator would decide the dispute between the appellant and the respondents and give an award leaving out the share of Ambikabai, the extent of which is not in dispute. The matter might have been different if the share of Ambikabai was in dispute; but as the share of Ambikabai and its extent are not in dispute, the arbitrator can go into accounts and give an award with respect to the parties before him, leaving out the four annas share of Ambikabai. We see no reason why where parties entered into an arbitration agreement of this nature knowing fully well that there was another person who was interested but leaving her out, the court should not send the parties to the forum chosen by them, even if the other person who might be interested and whose share is not in dispute cannot be made party before the arbitrator. We ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of all disputes arising out of agreements of October 22, 1948, May 5, 1952 and February 27, 1953. It also provides for reference of all disputes arising out of the jungle cutting or export or in any other way. In view of this wide language of the arbitration clause it cannot be possible said that the dispute which has been raised in the present case is outside the terms of the arbitration clause. Reliance in this connection was however placed on the opening words of clause 6 of the agreement of February 1953, which say that the agreement was arrived at without prejudice to the contents of the letter sent by the first party (namely, the appellant) to the second and third parties (namely, the respondents) on the date 7th of February, 1953, and without the first party (namely, the appellant) withdrawing the said letter . This letter contained certain contentions of the appellant based on the agreements between the parties. Those words do not in our opinion in any way cut down the wide amplitude of the arbitration clause; at the best they can only mean that the appellant was free to raise the contentions which he had raised in this letter for the decision of the arbitrator. Nor do th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in general refuse to send the dispute to arbitration if the party charged with the fraud desires a public inquiry. But where the objection to arbitration is by the party charging the fraud, the court will not necessarily accede to it, and will never do so unless a prima facie case of fraud is proved. 10. This case certainly lays down that where allegations of fraud are made, the party against whom such allegations are made may successfully resist the reference to arbitration. 11. The principle of this case was followed in Charles Osenton and Company v. Johnston [1942] A. C. 130. In that case a firm of estate agents and surveyors resisted the reference to an official referee under section 89 of the Judicature Act of 1925. The decision of an official referee could not be called in question by appeal or otherwise except on a point of law as provided by section 1 of the Administration of Justice Act, 1932. The firm therefore contended that as their professional reputation was involved the matter should not be referred to the official referee and the House of Lords held that as the professional reputation of the appellants was involved, that question should not be left to the fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly in cases of allegations of fraud of a serious nature that the court will refuse as decided in Russel's case [1880] 14 Ch. D. 471 to order an arbitration agreement to be filed and will not make a reference. We may in this connection refer to Minifie v. The Railway Passengers Assurance Company (1881) 44 L. T. 552. There the question was whether certain proceedings should be stayed; and it was held that notwithstanding the fact that the issue and the evidence in support of it might bear upon the conduct of a certain persons and of those who attended him and so might involve a question similar to that of fraud or no fraud, that was no ground for refusing stay. It is only when serious allegations of fraud are made which it is desirable should be tried in open court that a court would be justified in refusing to order the arbitration agreement to be filed and in refusing to make a reference. 15. Let us therefore turn to the allegations in this case to see what their nature is. There allegations are that (i) the accounts were not made up to date, and even on demand by the respondents, the appellant did not bring them up to date; (ii) the statements of accounts which were shown b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed. A perusal therefore of the application under section 20 and the affidavit filed in support of the application for appointment of receiver does not disclose any serious allegations of fraud against the appellant. What it discloses is that the respondents were not satisfied with the accounts submitted to them and were suspicious that they did not disclose the true and complete state of affairs. Such allegations, as we have already remarked are often made in account suits and if they were to be sufficient ground for not referring an account suit to arbitration on the ground of fraud, hardly and arbitration agreement in a matter in which accounting would be necessary could be referred to arbitration. That is why we emphasise that even in the leading case of Russel, [1880] 14 Ch. D. 471 the learned Master of the Rolls was at pains to point out that it could not necessarily be said in a case of accounts that no reference to arbitration should be made, even though questions relating to accounts which might involve misconduct amounting even to dishonesty on the part of some partner might arise in the arbitration proceedings and even cases where moral dishonesty or moral misconduct is ..... X X X X Extracts X X X X X X X X Extracts X X X X
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