LexM/S. KRISHNA MOTOR SERVICE BY ITS PARTNERS versus H.B. VITTALA KAMATH
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MIS. KRISHNA MOTOR SERVICE BY ITS PARTNERS
v.
H.B. VITTALA KAMATH
APRIL 19, 1996
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[K. RAMASWAMY AND G.B. PATTANAIK, JJ.]
Arbitration Act, 1940.
S.W-Partnership finn--{fnregistered--Dissolution-Applicatio11 for
C reference by one of the pa1tners-Whether entitled to-Held : Yes-Items
under reference-Entitled to goodwill upto the date of dissolution but not
thereafter-Ce1tain items mising out of contract would not come under any
exceptions engrafted under S.69(3) of Partnership Act.
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Pa1tnership Act, 1932 :
S.69--Non-registration of pmtnershiJr-Whcther a partner of such
pmtnm-hip entitled to make an app/icatio11 for reference under S.20 of the
Arbitration Act-Held: Yes.
Prem Lata v. Ishar Dass Chaman Lal, [1995) 2 SCC 145, relied on.
Jagdish Chander Gupta v. Kajaria Traders (India) Ltd., (1964) 8 SCR
50 and Mahender v. Gum Dayal, AIR (1951) Patna 196, referred to •
CIVIL APPELLATE JURISDICTION : Civil Appeal Nos. 7784-85
of 1996.
From the Judgment and Order dated 25.3.94 of the Karnataka High
Court in C.P. No. 96 of 1994.
S.S. Javali and P.R. Ramcsesh for the Appellants.
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Mrs. Anjani Aiyagari for the Respondent.
The following Order of the Court was delivered :
Leave granted.
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We have heard learned counsel on both sides.
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KRISHNA MOTOR SERVICE v. H.B. VITT ALA KAMA1H
595
These appeals by special leave arise from the order of a Division A
Bench of the Karnataka High Court made in M.F.A. No. 324/86 on 3.1.1994
and in Civil Petition No. 96/94 on 25.3.1994. It is not necessary to narrate
in extenso the constitution, existence and continuance of the partnership
firm prior to July 1, 1973. Suffice it to state that the respondent, who was
working in the partnership firm as a Supervisor on salary basis, was taken
as a partner on July 1, 1973, resulting a new partnership and it was agreed
that he would be entitled to 10% of the profit and loss without contribution
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of any capital in the partnership. When disputes had arisen between the
appellants and the respondent, the appellants - four partners - had a notice
issued on 10.5.1984 dissolving the partnership. The respondent by his reply
dated 17.5.1984 had agreed for dissolution. Subsequently, he filed an C
application under Section 20 of the Arbitration Act, 1940 (for short, the
'Act) on 8.6.1984, in the court of the Civil Judge at Shimoga for reference
to the arbitrator in terms of the agreement. The Trial Court rejected three
out of 4 claims made by him and referred claim No. 1 to the arbitration.
The High Court on further cC:nsideration, in appeal, added two more items D
to the reference. Thus, these appeals by special leave.
Shri Javali, learned senior counsel for the appellants, contended that
since admittedly the partnership firm was not registered as required under
Section 69 of the Partnership Act, 1932, the respondent was not entitled
to the reference under Section. 20. of the Act to an arbitration. He also E
contended that even assuming that the Court has such power of making
reference, it would be only within the parameters of the provisions in
sub-section (3) of Section 69 of the Partnership Act and no other claim is
referable for arbitration. He placed strong reliance on Jagdish Chander
Gupta v. Kajaria Traders (India) Ltd., [1964) 8 SCR 50, in particular the F
last paragraph thereof, overruling the Judgment of the Patna High Court
in Mahender v. Guru Dayal, AIR (1951) Patna 196. The respondent resisted
the contention and relied on Prem Lata v. Ishar Dass Chaman Lal, [1995)
2 sec 145.
The question, therefore, is: whether the respondent is entitled to a G
reference under Section 20 of the Act? Admittedly, the partnership firm
was not registered as required under Section 69(1) of the Partnership Act.
The partnership deed does contain a clause for reference to arbitrate the
disputes that should arise under the contract. The qnestion, therefore, is:
whether the excepttons to sub-section (3) of Section 69 would apply to the H
596
SUPREME COURT REPORTS [1996) SUPP. 1 S.C.R.
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facts of the case? Sub-section (3) of section 69 envisages as under :
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"69. (3) The provisions of sub-sections (1) and (2) shall apply also
to a claim of set-off or other proceeding to enforce a right arising
from a contract, but shall not affect -
(a) the enforcement of any right to sue for the dissolution of a
firm or for accounts or a dissolved firm, or any right or power to
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