Case: Jagdish Chander Gupta Vs. Kajaria Traders (India) Ltd

The facts are simple. By a letter dated July 30, 1955, Messrs. Kajaria Traders (India) Ltd., who is the respondent here and Messrs. Foreign Import and Export Association (sole proprietary firm owned by the appellant Jagdish C. Gupta) entered into a partnership to export between January and June 1956, 10,000 tons of manganese ore to Phillips Brothers (India) Ltd., New York, Each partner was to supply a certain quantity of manganese ore. We are not concerned with the terms of the agreement but with one of its clauses whichin case of dispute the matter will be referred for arbitration in accordance with the Indian Arbitrationcompany alleged that Jagdish Chander Gupta failed to carry out his part of the partnership agreement. After some correspondence, the company wrote to Jagdish Chander Gupta on February 28, 1959 that they had appointed Mr. R. J. Kolah (Advocate O. S.) as their arbitrator and asked Jagdish Chander Gupta either to agree to Mr. Kolahs appointment as sole arbitrator or to appoint his own arbitrator. Jagdish Chander Gupta put off consideration and on March 17, 1959 the company informed Jagdish Chander Gupta that as he had failed to appoint an arbitrator within 15 clear days they were appointing Mr. Kolah as sole arbitrator. Jagdish Chander Gupta disputed this and the company filed on March 28, 1959 an application under S. 8 (2) of the Indian Arbitration Act, 1940 for the appointment of Mr. Kolah or any other person as arbitrator.2. Jagdish Chander Gupta appeared and objected inter alia to the institution of the petition. Two grounds were urged (i) that S. 8(2) of the Indian Arbitration Act was not applicable as it was not expressly provided in the arbitration clause quoted above that the arbitrators were to be by consent of the parties and (ii) that S. 69 (3) of the Indian Partnership Act, 1932 afford a bar to the petition because the partnership was not registered. The petition was referred by the Chief Justice to a Divisional Bench consisting of Mr. Justice Mudholkar (as he then was) and Mr. Justice Naik. The two learned Judges agreed that in the circumstances of the case an application under S. 8 of the Indian Arbitration Act was competent and that the court had power to appoint an arbitrator. They disagreed on the second point. Mr. Justice Mudholkar was of the opinion that S. 69(3) of the Indian Partnership Act barred the application while Mr. Justice Naik held otherwise. The case was then referred to Mr. Justice K. T. Desai (as he then was) and the agreed with Mr. Justice Naik with the result that the application was held to be competent.

Court's reasoning:
7. Mr. Justice Naik asked the question that if all proceedings were to be excluded why was it not considered sufficient to speak of proceeding along with suits in sub-ss. (1) and (2) instead of framing a separate sub-section about proceedings and coupling other proceeding with a claim of set-off? The question is a proper one to ask but the search for the answer in the scheme of the section itself gives the clue. The section thinks in terms of (a) suits and (b) claims of set-off which are in a sense of the nature of suits and (c) of other proceedings. The section first provides for exclusion of suits in sub-ss. (1) and (2). Then it says that the same ban applies to a claim of set-off and other proceeding to enforce a right arising from a contract. Next it excludes the ban in respect of the right to sue (a) for the dissolution of a firm, (b) for accounts of a dissolved firm and (c) for the realisation of the property of a dissolved firm. The emphasis in each case is on dissolution of the firm. Then follows a general exclusion of the section. The fourth sub-section says that the section as a whole, is not to apply to firms or to partners and firms which have no place of business in the territories of India or whose places of business are situated in the territories of India but in areas to which Chapter VII is not to apply and to suits or claims of set off not exceeding Rs. 100/- in value. Here there is no insistence on the dissolution of the firm. It is significant that in the latter part of clause (b) of that section the words are "or to any proceeding in execution or other proceeding incidental to or arising from any such suit or claim and this clearly shows that the word "proceeding is not limited to a proceeding in the nature of a suit or a claim of set-off. Sub-section (4) combines suits and a claim of set-off and then speaks of "any proceeding in execution and "other proceeding incidental to or arising from any such suit or claim as being outside the ban of the main section. It would hardly have been necessary to be so explicit if the words other proceeding in the main section had a meaning as restricted as is suggested by the respondent. It is possible that the draftsman wishing to make exceptions of different kinds in respect of suits, claims of set-off and other proceedings grouped suits in sub-secs. (1) and (2), set-off and other proceeding in sub-sec. (3) made some special exceptions in respect of them in sub-s. (3) in respect of dissolved firms and then viewed them all together in sub-s. (4) providing for a complete exclusion of the section in respect of suits of particular classes. For convenience of drafting this scheme was probably followed and nothing can be spelled out from the manner in which the section is sub-divided.8. Some cases noticed by the High Court were cited to us but none of them appears to be really in point.point.9. In our judgment, the words other proceeding in sub-s. (3) must receive their full meaning untrammeled by the words a claim of set-off. The latter words neither intend nor can be construed to cut down the generality of the words other proceeding. The sub-section provides for the application of the provisions of sub-secs. (1) and (2) to claims of setoff and also to other proceedings of any kind which can properly be said to be for enforcement of any right arising from contract except those expressly mentioned as exceptions in sub-sec. (3) and sub-sec. (4).way to look at the matter is to give these words their full and natural meaning and the other way is to cut down that meaning in the light of the words that precedeproceeding under the eighth section of the Arbitration Act has its genesis in the arbitration clause, because without an agreement to refer the matter to arbitration that section cannot possibly be invoked. Since the arbitration clause is a part of the agreement constituting the partnership it is obvious that the proceeding which is before the court is to enforce a right, which arises from a contract. Whether we view the contract between the parties as a whole or view only the clause about arbitration, it is impossible to think that the right to proceed to arbitration is not one of the rights which are founded on the agreement of the parties. The words of S. 69(3), "a right arising from a contractare in either sense sufficient to cover the presentfollows, therefore, that interpretation ejusdem generis or noscitur a sociis need not always be made when words showing particular classes are followed by general words. Before the general words can be so interpreted there must be a genus constituted or a category disclosed with reference to which the general words can and are intended to be restricted. Here the expression "claim ofdoes not disclose a category or a genus.are of two kindslegal and equitableand both are already comprehended and it is difficult to think of any right "arising from a contract which is of the same nature as a claim ofand can be raised by a defendant in a suit. Mr. B. C. Misra, whom we invited to give us examples, admitted frankly that it was impossible for him to think of any proceeding of the nature of a claim ofother than a claim ofwhich could be raised in a suit such as it described in the secondIn respect of the firsthe could give only two examples. They are (i) a claim by a pledge of goods with an unregistered firm whose goods are attached and who lias to make an objection under O. 21 R. 58 of the Code of Civil Procedure and (ii) proving a debt before a liquidator. The latter is not raised as a defence and cannot belong to the same genus as a "claim of set off. The former can be made to fit but by a stretch of some considerable imagination. It is difficult for us to accept that the Legislature was thinking of such farfetched things when it spoke of "other proceeding ejusdem generis with a claim of