Jagdish Chandra Gupta v. Kajaria Traders (India) Ltd., AIR 1964 SC 1882

Equivalent Citation

1964 AIR 1882, 1964 SCR (8) 50

Bench

HIDAYATULLAH, M.

WANCHOO, K.N.

GUPTA, K.C. DAS

AYYANGNAR, N. RAJAGOPALA

Decided on

29 APRIL, 1964

Relevant Act/ Section

S. 69 OF INDIAN PARTNERSHIP ACT, 1932 (9 OF 1932)

S. 8(2) OF ARBITRATION ACT, 1940 (ACT 10 OF 1940) 

Petitioner 

JAGDISH CHANDRA GUPTA

Respondent 

KAJARIA TRADERS (INDIA) LTD.

Facts 

On  30 July 1955, the respondent Messrs. Kajaria Traders (India) Ltd. and Messrs. Foreign Import and Export Association (exclusively owned by the appellant Jagdish C. Gupta) entered into a partnership to export between January and June 1956, 10,000 plenty of manganese ore to Phillips Brothers (India) Ltd., New York. Each partner was to provide a particular quantity of manganese ore. The agreement has arbitration clauses. The corporation claimed that Jagdish Chander Gupta did not carry out his part of the partnership agreement. The corporation wrote to Jagdish Chander Gupta on February 28, 1959, that they had appointed an arbitrator and asked Jagdish Chander Gupta either to confirm Mr. Kolah’s appointment as the only arbitrator or to appoint his arbitrator. Jagdish Chander Gupta postpones consideration and on St Patrick’s Day, 1959, the corporate informed Jagdish Chander Gupta that as he had not assigned an arbitrator within 15 days, they were appointing Mr. Kolah as the only arbitrator. Jagdish Chander Gupta discovered this. And on March 28, 1959, the company filed a plea under s. 8 (2) of the Indian Arbitration Act, 1940 for the nomination of Mr. Kolah or any other person as arbitrator. Jagdish Chander Gupta appeared and demurred the petition.

Issues before High Court

  1. Whether S. 8(2) of the Indian Arbitration Act was applicable in this agreement because it was not expressly provided in the Letter of Intent that the arbitrators were to be appointed by consent of the parties?
  2. Whether S. 69(3) of the Indian Partnership Act, 1932 petition can be filed because the partnership was not registered?

Judgment by High Court 

 Mr. Jagdish Gupta firstly argued that if the appointment is not made within 15 days of notice, on the application of the party who has given the notice, and following the principle of Audi Alteram Partem, the court may appoint an arbitrator. The Bombay High Court bench consists of Justice Mudholkar and Justice Naik, who agreed on the first contention constructed by Mr. Jagdish.

But the division bench contradicts the 2nd point. Justice Mudholkar believed that the application cannot be filed under s. 69(3) of the Indian Partnership Act, 1932, while Justice Naik has a different opinion. Then the case went to Justice KT Desai who agreed with Justice Naik’s view. And the court held that the application was held to be competent.

Contentions before Supreme Court

After the Bombay High Court Judgement, the appeal was filed in which it was contended that the High Court wrongly interpreted the grounds under S. 69(3) of the Indian Partnership Act, 1932.

Judgment by Supreme Court

The Supreme Court held that the words ‘other proceeding’ in S. 69(3) of the partnership act must receive their meaning and must be unaffected by words’ claim of set-off. Therefore, the appeal is allowed to rescind the decision of the Bombay High Court.

Conclusion 

The judgment answers the question of whether an unregistered firm can initiate arbitration proceedings negatively. Despite the arbitration clause, the arbitration proceedings were barred in this case. Hence, to function like a well-oiled machine, the firm must get registered.

The case analysis has been done by Megha Patel, a 2nd year Law Student at the Mody University of Science and Technology, Laxmangarh, Rajasthan.

The case analysis has been edited by Shubham Yadav, a 4th-year student at Banasthali Vidpyapith, Jaipur.

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