TMI Blog2001 (6) TMI 821X X X X Extracts X X X X X X X X Extracts X X X X ..... er the name and Style M/s English Boot House , dealing with foot wears and other allied product. While the father was entitled to a share of 40% of the profit and loss, the other sons were entitled to 30% each. 3. Misunderstandings arose as between the plaintiff on one hand and defendants 2 and 3 on the other. The plaintiff filed a suit in O.S.No.184 of 1999 praying for a direction to defendants to furnish true and proper accounts of the firm M/s English Boot House. The plaintiff alleged that the firm had two show room at Coonoor and two Reduction Sales Centres at Coimbatore. He was looking after the business at one of the show rooms at Coonoor. The second defendant was looking after the other show room at Coonoor and the third defendant was looking after the business at Coimbatore. The entire accounts of the business was looked after by defendants 2 and 3 and having regard to the relationship between the parties, the plaintiff had reposed utmost trust. But later, the plaintiff came to know that defendants 2 and 3 had started a new business of their own in the Head Office itself in the name and style Foot Fashion in a clandestine manner. He came across a printed cash bill dat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 to 3, the Proprietor of Foot Fashion as fourth defendant and one Ibrahim sait as Proprietor of Classic Shoes , praying for the following reliefs:- (i) directing the dissolution of the firm Messrs. English Boot House having its Office Premises at 6,17,18,18L and 18M at Mount Road, Coonoor West 7.12.1999 and also directing the defendants 1 to 3 to furnish true, proper and genuine accounts of the firm M/s. English Boot House; (ii) Directing the fourth defendant to furnish the entire accounts of Foot fashion Classic Shoes being fourth and fifth defendants respectively treating the same as part of first defendant firm's business by dissolving the same. (iii) directing the allotment of share of plaintiff namely 30% as set out in Partnership agreement with respect of immovable properties described hereunder and also out of the income derived by English Boot House Foot fashion Classic Shoes after meeting true liabilities if any: (iv) by appointing Commissioner for division of immovable properties set out hereunder and allotment of 3/10th share to the plaintiff by metes and bounds. 6. The plaintiff contented in addition to the allegations already raised in O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... earned counsel. The first suit was not maintainable and hit by Section 69 of the Partnership Act and hence there was no need for the petitioner to seek for a direction to refer the matter to the Arbitrator. Even so, they have raised the issue in their written statement. The impleadment of other parties to the second suit cannot absolve the plaintiff the obligation to go before the Arbitrator. In the present case, having filed an earlier suit with only defendants 2 and 3 as parties, the present suit has been filed designedly to avoid going before the Arbitrator. Even otherwise, the fifth defendant ought to be treated as an assignee who would be bound by the terms of the agreement, vide, the preamble of the agreement. The Court was entitled to consider the conduct of the plaintiff which was noting but abuse of process of Court. Learned counsel also referred to the various features in the 1996 Act in comparison to the 1940 Act and contends that the Parliament had envisaged strict implementation of the Arbitration clause. The discretion which was vested on the Courts had no other alternative and were bound to refer the dispute to the Arbitrator. Mere allegations of mismanagement were n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so include the right to decide all the incidental issues including whether or not the partnership should be dissolved or not and that it would not be proper to drive the parties to another litigation. 14. Reference is made for a judgment of Delhi High Court in Palanjal v. Rawalpindi Theatres , in support of his contention that an assignee of one of the Parties to the agreement would be stepping into the shoes of that party and hence the assignee could be made on a party to the arbitration proceedings. 15. Further reference is made to the judgment of the Andhra Pradesh High Court in Srivenkateswara Construction v. Union of India , The Division Bench of the Andhra Pradesh High Court held that by the plaintiff unnecessarily joining third parties to the suit, the plaintiff cannot be allowed to defeat the Arbitration Clause by such a device. 16. Reference is made to a judgment of a Division Bench of Calcutta High Court in W.B.C.A. Development Corpn. v. Sasanka Sekhar . Reliance is placed on the observation that a small portion of the relief claimed in the suit not being within the scope of the arbitration clause alone cannot be a ground for refusal to stay the suit under Sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion agreement cannot be subjected to compulsory arbitration. 21. In Narinder Singh Randhawa v. Hardial Singh Dhillon, it was held that whenever dissolution of partnership was sought for under Section 44(g) of the Partnership Act, then it would be a matter for the Court to decide whether it was just and equitable to dissolve the partnership or not and such matters cannot be left to be considered by the arbitrator pursuant to the arbitration clause. 22. In Ganesh Chandra v. Kamal Kumar, It was held that in a suit for dissolution of partnership on the ground of just and equitable grounds as provided under Section 44(f) and (g) of the Partnership Act, the dispute relating to the dissolution should be decided by the Court even though the parties had stipulated a clause for arbitration. 23. In Sewa Ram v. Raj Rani, a learned single Judge held that in a suit for dissolution of partnership and rendition of accounts, one of the substantial reliefs was with reference to the properties in dispute purchased by the partner in the name of his wife and the same having been purchased with the funds of the partnership, no reference could be made to the arbitrator calling upon him to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urt to continue the proceedings before it only on the mere existence of an arbitration clause. A combined reading of all the provisions of the 1996 Act as well as section 8 discloses that the time-tested reasons which were behind the several judgments of the various Courts as well as the English Courts holding that Civil Court can refuse to stay the suit and can proceed with the suit under certain circumstances continue to hold good even now. The short-comings and deficiencies of the enquiry before an arbitrator are well known. The nature of the enquiry before an arbitrator is summary and Rules of procedure and evidence are not binding. The Arbitrator need not be even a law-knowing person. That is the reason why over a century, Courts have repeatedly held that in cases where substantial questions of law arise for consideration or issues which require serious consideration of evidence relating to fraud and misrepresentation etc. are involved, such cases are best left to the civil court and that the Arbitrator will not be competent to go into the said issues. 29. I do not think that the present Act had done anything to remove the said inadequacies and deficiencies which are inhere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was further held that when dissolution was sought for under Section 44(g) then it would be a matter for the court to decide and such matters cannot be left to be decided by the Arbitrator. The Supreme Court had occasion to deal with the judgments of the Privy Council in V.H. Patel and Co. v. H.H. Patel cited above. On the facts of the case before them which arose under 1940 Act, the Supreme Court found that the Arbitration clause in that agreement included a right in the Arbitration to consider the issue of dissolution on just and equitable grounds also and as such the Arbitrator was not precluded from going into the said issue. The Supreme Court also made it clear that in such circumstances it is permissible for the court to refer to arbitration a dispute in relation to the dissolution. In other words, though the Supreme Court held that the Arbitrator can also go into the issue of dissolution, the discretion of the Court to refer or not to refer was also left intact. It is true in the present case, strictly speaking section 44 will not be applicable, the Partnership being terminable at will, I am only emphasising that the provisions of the arbitrations Act cannot be read in isol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the law of arbitration and had stood the test of time. In Amarchand Lalit Kumar v. Shree Ambica Jute Mills , the Supreme Court had enlisted the following five grounds for revoking the contract of arbitration: (i) Excess or refusal of jurisdiction by arbitrator, (ii) Misconduct of arbitrator, (iii) Disqualification of arbitrator, (iv) Charges of fraud. (v) Exceptional cases. 33. This process of enumeration of the said grounds is bound to continue in accordance with the changing times. The usage of the word Shall cannot result in completely throwing over-board the rationale behind the enumeration of the said grounds. The manner in which Arbitration proceedings have been and are being conducted in this country had been the subject matter of expression of distress by the Supreme Court, on several occasions. 34. In Guru Foundation Rattan and Sons , the Supreme Court observed as Interminable, time consuming, complex and expensive court procedures impelled jurists to search for an alternative forum, less formal, more effective and speedy for resolution of disputes avoiding procedural claptrap and this led them to Arbitration Act, 1940 (Act for Short). Howev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... interest. It is settled proposition of law that even where Civil Courts jurisdiction is expressly barred by Statute, the Supreme Court had evolved several exceptions and had stated that exclusion of jurisdiction is not to be readily and unconstitutionality assumed. The right of a citizen to invoke courts protection is an inherent one and no man can exclude himself from the protection of the Courts vide in AIR 1917 PC 116, Supra. 39. Considering the nature of the disputes in the present case, it is not necessary for me to proceed further in a comparative study of the jurisdiction and powers of the Civil Court under the old Act and the new Act. The following four circumstances in the present case, would be sufficient to hold that the ultimate conclusion of the Court below in refusing to refer the dispute to the Arbitrator is quite justified. (A) A reading of the arbitration clause itself would signify that it is not operative when once the agreement had been terminated and the Partnership had been dissolved. The arbitration clause is very clear in the said context. In the event of any difference of opinion or dispute between the parties to this agreement during the continua ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le. In the present case, the plaintiff has positively made such allegations in no uncertain terms. In Paragraph No.VI, allegations of clandestine operation of running the business under the name and style of Foot Fashion have been made. It is alleged that the plaintiff come to know of such action only on coming across the bill which has been issued by the defendants in the very same place where the Partnership business was carried on. In Paragraph No.VII to IX, the plaintiff alleges that in spite of demand he has not been allowed access to the accounts. In Paragraph No.X the plaintiff alleges collusion between the defendants and their action of covering up the business of Foot Fashion . In Paragraph No.XI, misappropriation of funds are alleged. In Paragraph No.XlI, diversion of funds of the partnership has been alleged. In Paragraph No.XIIl a further allegation of misappropriation is made and reference is also made to the Partnership agreement prohibiting commencement of similar business without consent of all the partners. In Paragraph No.XIV manipulation of records and in Paragraph No.XV allegations of hurried attempts to divert the funds are also made, thus seeking appointmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation be brought under the scope of the arbitration clause. Accounts of Foot Fashion and Classic Shoes are called in question and allotment of plaintiffs share which is allegedly due to him in those two establishments are also sought for. Neither the assets of Foot Fashion nor the asset of Classic Shoes can have any relevance to the arbitration clause and would be totally outside the scope of clause 15 of the agreement. The Arbitrator cannot adjudicate upon the rights of third parties over the assets of the said two establishments. The positive stand of the Revision Petitioners themselves is that plaintiff cannot claim to treat the income from the said two concerns as income from English Boot House and mat they have no connection with each other, vide the counter filed in I.A.No.1644 of 1999. A perusal of the counter would disclose that the various defences taken by the Revision Petitioners would be totally outside the scope of reference to the Arbitrator. The Arbitrator will have absolutely no jurisdiction to go into those issues and the liability of those two establishments to the plaintiff. 40. Therefore, in the result, I do not find any justifiable reason to interfer ..... X X X X Extracts X X X X X X X X Extracts X X X X
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