Baldey Jagidishwarayya and Others vs Kotagiri Tejalingam and Others

S. Ali Khan, J.—This is a civil miscellaneous appeal filed against the order of the Sadar-Adalat, Sacunderabad, dated 20th March 1950 by which upon a question of law put by the arbitrator, the Court held that, having regard to the terms of reference, the arbitrator was competent to decide the differences between the plaintiff Kotagiri Tejalingam and the defendants Dagoy Vitoba and the rest. The facts alleged are that Tejalingam applied to the Court on 9th shehrewar 1350 P (9th July 1917) that the agreement of reference to arbitrator dated 7th February 1026 may be filed in Court. The Court after notice to show cause, filed the said agreement and made an order of reference to the arbitrator, Mr. N.B. Ohenoi, who acted as arbitrator for sometime and then on his declining to continue further, appointed Mr. Purushotham as arbitrator with the consent of the parties. It was Mr. Purushotham who mooted the question to the Court. He stated that the agreement of reference was between three partners on one side and two on the other; that two partners of the first group having died, defendants 2 to 6 have been brought on record as their legal representatives; and that he, as arbitrator, is being requested to decide disputes inter se between the partners of the first group also; that the question therefore is whether he has jurisdiction to do that under he terms of his reference. The Court below hold by the order under appeal that he had the jurisdiction. The arguments before us also centred round this question. The learned advocate for the appellants has made two points, viz. that (1) reference to arbitration was between two groups only and therefore under the terms of reference disputes inter se between members of one group only are outside the ambit of reference; and secondly that (2) this question mooted to the Court itself was contrary to the provisions of Section 550, Hyderabad Civil P.C. corresponding to Para,. 11, Schedule 2, Indian Civil P.C. To this the learned advocate for the respondent has replied that quite clearly disputes inter se were also contemplated by the terms of reference to arbitration and that the question put by the arbitrator was perfectly valid in law. We have thus to decide these two questions. We will begin with the interpretation of the terms of reference.

The agreement, of reference after reciting in the preamble that ''disputes'' and differences having arisen between (1) Soma Veeranna, (2) Baldey Ramanna, and (3) Kotagiri Tejalingam of the one part and (4) Dagey Vittoba and (5) Dagey Ambaji of the other part in reference to the firm of Soma Rajiah Baldey Ramanna states that

with a view to avoid litigation the parties to this reference have now agreed that all the said disputes and differences shall be referred to the sole arbitration of Mr. N.B. Chenoi etc.;

a little further on the powers of the arbitrator and the points of disputes are described in Para. 3 as follows:

The Arbitrator shall have full power to determine (a) what were the shares of the several partners during the lifetime of the deceased Venkatram; (b) whether Vittoba and Ambaji were partners in the said firm after Venkatram''s death and if so when they cased to be such and what wore their rights after Venkatram''s death; (c) to adjudicate up m all matters of account upon which the parties may be at variance; (d) to adjust accounts finally between the parties and to direct payment of such moneys as may be found due to or by the said Dagey Vittoba and Ambaji by or to the other parties hereto; (f) to decide by whom and in what proportion, the costs of this reference shall be borne; (g) pending final adjustment to direct payment by one party to the other of such sum as may be just and (h) generally to decide every matter and contention connected with the claim of the said Dagoy Vittoba and Ambaji against the other parties hereto in reference to the said firm and to make every order in reference to the said claim which it would be competent to a Court of law to decide and make in a suit for conforming the said claim.

A careful perusal of the above term* of reference will show that in its very first serial (a) it is provided that the shares of several partners are to be determined; it is not provided in (a) that the shares of the two groups only are to be determined. No doubt the determination of these shares of the individual partners is qualified by the period of "the lifetime of the deceased Venkatram, but quite clearly this qualification does not alter the fact of determination of shares of all the partners severally and individually. Then serial (a) provides that the arbitrator shall adjudicate upon all matters of account upon which the parties are at variance. The word ''parties* here may possibly refer to the two groups; bat to hold that we must, after construing the document as a whole, find that this word ''parties'' is used in it in this significance of groups only. If, however, we find that it is used as meaning partners also, it is clear that we cannot construe this word as meaning groups only but will have to interpret it as meaning partners also. Now clearly the word ''parties'' in serial (d) signifies partners and not groups. This will be evident if we peruse this serial (d). It runs like this that the arbitrator will

adjust accounts Anally between the parties and direct payment of such monies as may be found due to or by the said Dagoy vittoba and Ambaji by or to the other parties hereto.

Now if the intention was that parties should mean the contracting parties or groups then the underlined (here italicised) phrase ''to the other parties should have been by or to the other party hereto''. This serial (d) clearly meant that after final adjustment of account Vittoba and Ambaji should give or got whatever is due to or by the other partners; had it meant the other group the wording must have been ''by or to the other party''. Hence the conclusion cannot be avoided that the intention was to cover all the partners. This inference is further supported by the use of the same words "other parties" in serial (h). There again had "the intention been the ''other group'' or the other contracting party, there was no occasion to use the word ''parties''. This serial (h) is a general clause and empowers the arbitrator to decide every matter and contention connected with the claim of Vittoba and Ambaji against other parties. The use of those words in this context clearly shows that emphasis was laid on individual partners and claims of Vittoba and Ambaji against them severally was also included. Moreover, taking serials (a), (c), (d) and (h) together we see by the words ''several'', ''all'' and ''finally'' in them also indicate that not only the shares of several partners are to be determined but that all matters of account between parties should be adjudicated upon and finally adjusted. No doubt, disputes had arisen between two groups: but as both of them were members of a firm, the settlement of their disputes would in the nature of things require a demarcation of the shares of the individual partners. Unless that was to be done, the paints of differences between the groups could not be clear or relieved in bro.\\d outlines. Hence, we think, the wording of the operative portion of the agreement comprising the above serials (a) to (h) clearly brings out this intention by pointedly referring to other partners in the use of word ''parties'' where the word ''other party'' would have been more appropriate had the intention been otherwise and limited to the differences of the two groups merely. Moreover, we cannot assume that it was intended by the contracting parties that the agreement of reference should be in disregard of the law of partnership and rules of procedure. It is the duty of the Court also to interpret any agreement in consonance with law and procedure. Hence if we hold that the agreement was confined to disputes between the groups merely, then the award between the two groups will operate as res judicata between partners also. They will be bound by the award, even though they had no opportunity of getting their claims heard and decided by the arbitrator. This has bean decided in many cases: reference may be given to T.S. Subba Rao Vs. Appadurai Aiyar and Others, ; Hira Nand v. Dula Ram AIR 1933 Lah. 1022. These cases have also held that there cannot be piece meal settlements of some of the matters of partnerships, that in partnerships accounts can be taken only once, and there cannot in partnership be one dispute at one time between ''groups and then later on Anr. dispute between the members of that group (vide also Rattanchand Kumaji v. Amichand AIR 1934 Mad. 665. Moreover, it can hardly be gainsaid that disputes even between groups can be settled best if whatever all the parties have to say even inter se is said to the arbitrator; and that even one of members of a group has said something in favour of his group at one time and now goes back upon it, that volte de face should also be before the arbitrator for a proper appreciation and a just decision of the case. It is hardly necessary to emphasise that if a partner who is a member of a group within the partnership is not allowed to state his claim, how can he get from the partnership whatever is due to the group or to himself as an individual partner or to the other partners individually. Again, if the arbitrator is to be confined to the settlement of the claims of the groups merely his award will operate upon groups only and this will be against the law of partnership. For as laid down in Hiralal v. Dula Bam AIR 1933 Lah 1022, partners are liable only in proportion to their shares and not in proportion of their group; and that no decree can be passed against a group, for, once it is against a group every individual member of the group will become liable irrespective of the shares inter se that again being against the well-known principles of law of partnership. It is also to be noted that the agreement of reference was signed by all the partners and the dissolution of the partnership was in contemplation. It is hard to imagine that in this context a determination of the shares of groups alone was in contemplation. On these grounds we are of opinion that having regard to the principle of the law of partnership, the arbitrator in giving the award will have to give the award is favour of or against individual partners and not in favour of or against groups A partnership is not a corporation or a legal entity. Too word itself implied all partners individually and collectively. There cannot be groups in partnerships, Kanhaya Lal v. (Firm) Devi Dayal Brij Lal AIR 1936 Lab. 514. Hence after careful consideration, we find against the appellant on the first print argued, viz., that on a perusal of the agreement of reference, it is dear that disputes inter se the members of group ''were also included in it.

There remains the second point made by the learned advocate for the appellant viz., that under the very wording of Section 650, Hyderabad Civil P.C., (Para 11, Sch. 2), the arbitrator could only hive submitted an award whether on the whole of the matter in dispute or on part of it, and that here he was only asked a question and therefore should be ruled out of Court. I am afraid I do not regard this as a very weighty objection. It has been held in Innumerable cases here and in England that question of law can be submitted by as arbitrator to the Court and decided by it. The expression ''award'' or part of it means the final opinion of the arbitrator on the whole case or on a severable part of it. If this section permits the arbitrator to refer a question of law to the Court at the late stage, when he had given his award on the whole of the matter in dispute or on pact of them, it cannot be deemed to have prohibited the submissions of difficult points of law for decision of Court at a previous stage. Really Para. 11 of Sch. 2, Indian Civil P.C., or Section 550, Hyderabad Civil P.C. applies only when the jurisdiction of the arbitrator is not in dispute or doubt; when it is in doubt or dispute the arbitrator is fully competent and indeed it is h s duty to refer the matter to the Court. Ratna Mudaliar and Another Vs. C. Vijiaranga Mudaliar, Champsey Bhara and Co. v. Jivraj Balloo Spending and Wearing Co. Ltd. AIR 1923 P.C. 63 at p. 69 and Kanhia Lal v. Narain Singh AIR (2) 1915 Lab. 253 will show that when there is A dispute between the parties to arbitration regarding the Jurisdiction of the arbitrator the ultimate authority to decide the question is the Court a ad there is nothing wrong in the Court coming to the help of the arbitrator with its advice and directions when he come to the Court in a difficulty. On these grounds we are satisfied that this appeal cannot be allowed.

Appeal dismissed with costs.

Naik, C.J.

I agree.