K.L. Verma And Anr. vs Shri V.K. Sharma And Anr.
2003 Latest Caselaw 1289 Del

JUDGMENT

S.K. Mahajan, J.

1. ADMIT.

2. Matter being short, the same has been heard with the consent of the parties and disposed of by this order.

3. This appeal is directed against the order of the learned Trial Court whereby the review application of the respondent was allowed and the judgment dated 20.12.1994 allowing the application of the respondent under Section 20 of the Arbitration Act and directing the appointment of an Arbitrator was set aside. A few facts relevant for deciding this appeal are :-

4. The appellant and the respondent were partners. There having arisen certain disputes between the parties, appellant filed a suit for dissolution and rendition of accounts of the partnership. On being served with summons in the suit, the respondent filed an application under Section 34 of the Arbitration Act stating inter alia that as the matter in dispute between the parties was covered by an Arbitration Agreement, the suit cannot proceed and was liable to be stayed. The Court allowed this application and stayed the proceedings in the matter. After the proceedings were stayed, the appellant filed application under Section 20 of the Arbitration Act for filing the Arbitration Agreement in Court and for reference of disputes to the Arbitrator. In the written statement besides other objections one of the objections taken by the respondent was that as the partnership was not registered under the provisions of the Partnership Act, the suit was not maintainable and was barred under Section 69 of the said Act. No issue was framed by the Trial Court on the question as to whether the suit was not maintainable in view of the provisions of Section 69 of the Indian Partnership Act and the Court by order dated 20.12.1994, allowed the application under Section 20 of the Arbitration Act directing the original agreement to be filed in Court and appointed an Arbitrator to enter into the reference and decide the disputes between the parties. After the passing of the judgment, the respondent filed an application under Section 114 of the CPC read with Sections 151 and 152 of the CPC for review of the order on the ground that the Court had not considered the objections raised by the respondent that the suit was barred by the provisions of Section 69 of the Partnership Act. By the impugned judgment, the Trial Court allowed that application and reviewed the order and set aside its earlier judgment dated 20.12.1994 and the application for appointment of Arbitrator was dismissed. Aggrieved by this order, the appellant has filed the present appeal.

5. It is contended by learned counsel for the appellant that the provisions of Section 69(3) of the Partnership Act will not bar an application under Section 20 of the Arbitration Act for reference of disputes, which includes dissolution and rendition of accounts, to an arbitrator. It is also contended that the respondent having already taken a stand in the suit filed by the plaintiff/ appellant for dissolution and rendition of accounts that the matter was covered by the arbitration, the respondent could not turn around and say that the application under Section 20 could not be allowed or that the matter could be referred to the Arbitrator. It is submitted that if the stand taken by the respondent is accepted the appellant will be left with no remedy to enforce his claim for dissolution of partnership and rendition of accounts. He has also relied upon a judgment of the Supreme Court in Smt. Prem Lata & Anr. Versus M/s Ishra Dass Chaman Lal & Ors. 1995 1 AD (SC) 247 to contend that Section 69 of the Partnership act does not prohibit the filing of the application under Section 69 of the Act.

6. I fully agree with the submissions made by learned counsel for the appellant. Under Section 69 (1) no suit to enforce a right arising from a contract shall be instituted in any Court by or on behalf of a firm against any third party unless the firm is registered and the person suing is or has been shown in the Register of Firms as a partner in the firm. Under sub-section (3) of Section 69, the provisions of sub-sections (1) and (2) shall also apply to a claim of set-off or other proceedings to enforce a right arising from a contract, but shall not affect the enforcement of any right to sue for the dissolution of a firm or for accounts of a dissolved firm, or any right or power to release the property of a dissolved firm. A bare reading of Clause 2(a) of Section 69(3) shows that a suit to enforce a right to sue for dissolution and rendition of accounts is not barred by provisions of Section 69 of the Partnership Act and even if the firm is not registered and the person suing has not been registered as a partner of the firm, the partner can still enforce his right to enforce dissolution of firm and rendition of accounts irrespective of the bar of registration under Section 69 (1) of the Act. Moreover the respondent having already taken a stand in the suit filed by the plaintiff/ appellant for dissolution and rendition of accounts that the suit could not proceed because of arbitration agreement between the parties and on such plea the suit having been stayed by the Court, the respondent cannot now turn around and take a plea that even the application under Section 20 of the Arbitration Act will not be maintainable. If the contention of learned counsel for the respondent is accepted, the appellant will be left without a remedy as he can neither file a suit nor can get the matter referred to arbitrator. It can never be the intention of the legislature and a party cannot be left without a remedy for redressal of his grievance.

7. In this view of the matter, in my opinion, the appellant was entitled to get the matter referred to arbitrator on his application under Section 20 of the Arbitration Act. In Smt. Prem Lata and another Versus M/s Ishar Dass Chaman Lal and Others (supra) also it was held by the Supreme Court that non-registration of the firm was no embargo for filing a suit under Section 20 of the Act. It was held that the alternative resolution forum agreed by the parties by reference of disputes to an arbitrator was a mode of enforcing the rights given under Clause (a) of sub-section (3) of the Section 69 of the Partnership Act and the enforcement includes a right for reference to an arbitrator in terms of agreement of partnership by and between the parties. Thus, there is no embargo for filing the suit under section 20 of the Act.

8. In view of the aforesaid clear observations of the Supreme Court, the Trial Court has clearly erred in allowing the application of the respondent for review of the judgment dated 20.12.1994 and the impugned order cannot be sustained. I, accordingly, allow this appeal, set aside the impugned order dated 10.4.1997 and direct the arbitrator to be appointed in terms of the order dated 20.12.1994. The appellant will be entitled to cost of this appeal assessed at Rs. 2000/-.