1964 (4) TMI 109 - SC - Companies Law

Supreme Court sets aside High Court decision, dismissing application under Indian Arbitration Act.

JAGDISH CHANDRA GUPTA Versus KAJARIA TRADERS INDIA LTD.

JAGDISH CHANDRA GUPTA Versus KAJARIA TRADERS INDIA LTD. - 1964 AIR 1882, 1964 SCR (8) 50 Issues Involved1. Applicability of Section 8(2) of the Indian Arbitration Act, 1940.2. Interpretation and applicability of Section 69(3) of the Indian Partnership Act, 1932.Detailed Analysis1. Applicability of Section 8(2) of the Indian Arbitration Act, 1940The High Court of Bombay had to determine whether an application under Section 8(2) of the Indian Arbitration Act was competent. The clause in the partnership agreement between the parties stated that disputes would be referred to arbitration as per the Indian Arbitration Act. When a dispute arose, the respondent appointed an arbitrator and asked the appellant to do the same. Upon the appellant's failure to appoint an arbitrator within the stipulated time, the respondent moved the court for the appointment of an arbitrator. The court held that the application under Section 8(2) was competent, affirming that the court had the power to appoint an arbitrator.2. Interpretation and Applicability of Section 69(3) of the Indian Partnership Act, 1932The primary contention in the appeal was whether Section 69(3) barred the application under Section 8(2) of the Arbitration Act due to the partnership's non-registration. Section 69(3) prohibits proceedings to enforce a right arising from a contract if the firm is not registered. The court had to interpret whether the term 'other proceeding' in Section 69(3) included an application under Section 8(2) of the Arbitration Act.The judges differed in their interpretation:- Mr. Justice Mudholkar: He opined that 'other proceeding' should be interpreted broadly and was not limited to proceedings ejusdem generis with a claim of set-off. He held that the application was to enforce a right arising from the contract.- Mr. Justice Naik: He argued that 'other proceeding' should be interpreted narrowly, limiting it to proceedings similar to a claim of set-off. He believed the application was for damages and not to enforce a contractual right, thus not barred by Section 69(3).- Mr. Justice K. T. Desai: He agreed with Mr. Justice Naik, suggesting that the words preceding 'other proceeding' had a limiting effect.The Supreme Court, however, concluded that the words 'other proceeding' in Section 69(3) must receive their full meaning, untrammeled by the words 'a claim of set-off.' The court held that the application under Section 8(2) of the Arbitration Act was indeed to enforce a right arising from the contract and thus fell within the bar of Section 69(3) due to the partnership's non-registration.ConclusionThe Supreme Court allowed the appeal, setting aside the High Court's decision. The application under Section 8(2) of the Arbitration Act was dismissed, as it was barred by Section 69(3) of the Indian Partnership Act due to the non-registration of the partnership. The appeal was allowed with costs throughout on the applicant in the High Court.