GANESH CHANDRA DEY Vs. KAMAL KUMAR AGARWALLA
HIGH COURT OF CALCUTTA
GANESH CHANDRA DEY
KAMAL KUMAR AGARWALLA
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S.A.Masud, J. -
(1.) THIS is an application under Section 34 of the Indian Arbitration Act, 1940 for stay of a suit filed by the respondent Kamal Kumar Agarwal. The petitioners, Ganesh Chandra Dey and Ghanashyam Das and the respondent are the partners of a firm known as "ESBI CYCLE INDUSTRIES" at No. 7, Ganesh Chandra Avenue. Calcutta, under a deed of partnership dated November 2G, 1963. It provides that the capital of the partnership firm shall be as follows:
It is further provided that in addition to the above capital contribution Shri Kamal Kumar Agarwal shall arrange for further capital required for the business of the firm which shall bear an interest @ 9% per annum. But under the said agreement the profits and losses of the firm are to be determined equally among them that is to say each of the partners will have 1/3rd share in the profits and losses. Sometime in June 1969 disputes and differences arose between the petitioners on the one hand and the respondent on the other as set out in paragraph 9 of the petition. By a letter dated July 22, 1969. the respondent is alleged to have caused First National City Bank, Brabourne Road Branch, Calcutta to stop all payments of the current account in the name of the said partnership firm. The respondent thereafter by his letter dated August 12, 1969 but despatched on August 18, 1969 sent a notice of dissolution of partnership which was received by the petitioners on or about August 22, 1969. By a letter dated September 5, 1969 Ganshyamdas requested the respondent for referring their disputes to arbitration in terms of clause 14 of the agreement. The other petitioner Ganesh Chandra Dey also intimated the respondent by a letter dated September 29, 1969 that the pending disputes should be referred to the arbitration and in fact nominated Shri Narayan Chandra Banerjee of No. 2 Ganesh Chandra Avenue, as arbitrator on his behalf. It is alleged that the respondent with his father and uncle started negotiation for settlement of the disputes between the parties through the intervention of a common friend Shri Vinod Shankar Tiwari. On October 3, 1969 the respondent instituted a suit in this Court for a declaration that the said partnership between the parties stood dissolved on August 18. 1969, for accounts, appointment of a Receiver and injunction. The petitioners came to know oC this fact from the notice of motion which was taken by the respondent for appointment of a Receiver in the said suit on or about October 6, 1969. In fact a Receiver has already been appointed by T. K. Basu, J. over the partnership business. Thereafter the present application has been made by the petitioners on November 27, 1969.
(2.) THE learned counsel for the petitioners bas drawn my attention to clause 14 of the agreement which reads as follows:-- "That in case of any dispute and difference arising amongst tbe parties either in the interpretation of this business or in any matter touching the rights and liabilities of the partners either continuing all the terms or after it has ceased functioning in any other matter relating to in the partnership such dispute shall be referred to the arbitration of as many arbitrators as there may be parties in difference and the Award of the said arbitrators or Umpire selected by the arbitrators shall be binding on all the parties equally." He has submitted that the disputes between the partners should be referred to the arbitration of three arbitrators being the nominees of three partners and the pending suit should be stayed inasmuch as the suit was instituted in respect of the rights and liabilities of the parties in the partnership business.
Mr. Pyne on behalf of the respondent has, however, urged that the arbitration clause is vague and unworkable and tbe declaration for the dissolution of the partnership which he has prayed for in the suit cannot be a subject-matter which could be decided by the arbitrators under the arbitration clause. It may be stated here that I suggested the counsel for both the parties that as the notice of dissolution of partnership has admittedly been made it is better that the petitioners on the one hand and the respondent on the other shall each nominate one arbitrator and the arbitrators should decide all the disputes between the parties including the determination of the assets and liabilities of the partnership firm. Mr. Pyne has not only agreed to my suggestion but also requested the court to appoint an arbitrator if the petitioners are not agreeable to the said suggestions. The matter has been adjourned to consider tbe said suggestions but the learned counsel for the petitioners have stated, on instruction from his clients, that under the arbitration clause there must be three arbitrators to be nominated by the three partners. Under the circumstances Mr. Pyne has requested the court to proceed with the application. I agree with the contention of Mr. Pyne that the arbitration clause is not happily expressed. The words, "the interpretation of this business" and "in any matter touching the rights and liabilities of the partners either continuing of the terms or after It has ceased functioning in any other matter relating to in the partnership" are vague and give rise to more than one meaning. Firstly, dispute regarding the interpretation of the partnership business does not carry any sense. Secondly, disputes and difference in respect of matters after the partnership business bas ceased to function in any other matter relating to the partnership may be understood in two ways. It may be said that the business has ceased to function but the partnership agreement has not been terminated or it may also be construed that disputes even after tbe dissolution of the partnership would also be determined by the arbitration clause. There is no doubt that the parties intended to have their disputes and differences in respect of the partnership business to be decided in a private forum, i.e., before the arbitrators but, in the present case, apart from the original disputes between the parties the respondent has served a notice of dissolution of partnership which has been duly received by the petitioners. It has, therefore, been legitimately argued that the termination of the agreement or the dissolution of the partnership business cannot be determined by the arbitrators specially in view of the fact that the petitioners are not accepting dissolution. Thus there is force in the contention of Mr. Pyne that the arbitration clause does not make it clear whether the dissolution of the partnership itself can be decided by the arbitrators. This confusion may give rise to a situation which may delay the determination of the disputes between the parties. If the arbitration is allowed to continue and the award is made the parties against whom the award would be made might challenge the said award on the ground that the arbitrator had no jurisdiction to decide the validity of the notice of dissolution of the partnership.
(3.) THERE is another reason why I am of the opinion that the arbitration clause as agreed upon by the parties would be unworkable inasmuch as there is a bona fide apprehension of the respondent in not getting a fair award after the two petitioners are allowed to nominate two arbitrators and the respondent to nominate one Arbitrator. THERE is no doubt that the parties agreed to such clause and it is the duty of the court to see that three arbitrators should decide the disputes as agreed upon by the respondent. But in the facts of this case the relationship between the parties is very strained and it is alleged that the respondent is not being allowed by the petitioner to take part in the business although his share of the capital is very much in excess of the joint contribution of the petitioners. I therefore, hold that this is a fit and proper case where I should exercise my discretion in not staying the suit under Section 34 of the Act.;
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