SANGANER DAL AND FLOUR MILL versus F.C.I. AND. ORS.

Citation: [1991] SUPP. 1 S.C.R. 542 · Decided: 22-10-1991 · Supreme Court of India · Bench: K. RAMASWAMY, YOGESHWAR DAYAL · Disposal: Dismissed
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Judgment (excerpt)

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SANGANER DAL AND FLOUR MILL 
v. 
F.C.I. AND. ORS. 
OCTOBER 22, 19<Jl 
[K. RAMASWAMY AND YOGESHWAR DAYAL, JJ.] 
Indian Partnership Act, 1932--Section 19(2)(a)-Application o~ 
Contract by one partner-No objection by others--Arbitratio11 clause of the 
contract bi11ding on the jinn 011d reference of dispute for arbitration u/s.20, 
Arbitration Act, 194(}-{'roper. 
The appellant-a partnership firm consisted of nine partners. One 
Satya Narain was one of the partners. He submitted a tender to the 
respondents on July 25, 1973 on behalf of the firm offering to sppply 1000 
quintals of Gram Dal at the rate of Rs.185/· per bag. Tender was accepted 
by the respondents. The appellant coinmitted breach of the contract and 
as a result, the respondents. filed an ~pplication under sec. 20 of the 
Arbitration Act, 1940 before the District Court for making reference for 
arbitration in terms of the contract. 
The application was allowed and the dispute was referred for 
arbitration. 
Against the order of the Addi. District Judge, an appeal wa~ filed 
before the High Court and the High Court confirmed the order ·or the 
Additional District Judge. 
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This appeal by special leave under Art. 136 of the ConstitUtion is 
against the order of the High Court. The appellant contended . that by . 
operation of Sec.19(2)(a) of the Partnership Act, 1932, there was no implied 
authority given to one of the partners to refer the dispute re~ting to the 
business of the farm for arbitration and therefore the reference made by the 
court, pursuant tO a contract entered into by one of its partner, Satya Narain 
G on behalf of the firm, was without jurisdiction and that the original contract 
did not contain arbitration clause. In a separate letter with a rubber stamp 
(facsimile) of the firm, one of the partners agreed for reference to arbitration 
and therefore the reference did not bind the other partners. 
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Dismissing the appeal, this Court, 
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FLOUR MILL v. F. C. 1' 
543 
HELD: 1. The operation of Secs. 18 & 19(1) is subject to the_ A 
exceptions engrafted in sub-sec. (2) of Sec. 19. Sec. 19(2)(a) provides that 
in the absence of any usage or custom of trade to the contrary, the implied 
authority of a partner does not empower him to submit a dispute relating 
to the business of the firm to arbitration. [545B-C] 
2. None of the partners laave entered into the witness box to deny the B 
validity of the contract nor raised any objection that they had not 
authorised the partner (Satya Narain) to enter into the contract nor that 
they were bound by any acts done by him. When the partner signed the 
tender, at that time no other partners raised objection regarding the 
signing of the tender by the partner on behalf of the firm. In view of these C 
facts it is clear that they ratified the contract. [544 E-FJ 
3. The firm had entered into a binding contract with the corporation 
and contract contained the arbitration clause which binds the partners. 
(544 GJ 
4. The contract engrafts an arbitration clause and in terms thereof 
the dispute .is to be referred to the arbitration. Therefore, the reference 
made by the Addi. District Judge under Sec. 20 of the Arbitration Act is 
within the jurisdiction and in terms of the contract. [545 DJ 
Gopal Das v. Baij Nath & Ors., AIR 1926 Allahabad 238; Finn Rad-
hakishan Chwmila/ v. Finn Ashamal Ishardas, AIR 1926 L~hore 92; 
Rajendra Prasad v. Pannalal Champa/a/ & Ors, AIR 1932 Calcutta 343; 
Mansabdar Khan v. M.T. Allah Devi & Ors., AIR 1934 Lahore 485; Sohan-
ial v. Finn Madhoram Banwarilal, AIR 1952 Punjab 240; and Mis. Alazap-
pa Cotton Mills v. lndo Bunna Trading Corporation, AIR 1976 Madras 79, 
referred to. 
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1677 of 
1984. 
From the Judgment and Order dated 7.7.1983 of the Rajasthan High 
Court in S.B. Civil Misc. Appeal No. 6 of 1983. 
S.K. Jain, Mrs. Pratibha Jain and Sudhanshu Afreya for the Appel-
lant. 
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C.K. Sucharita, Y. Prabhakara Rao (N.P.) and Ganpathi Iyer Gopalkrish-
nan for the Respondents. 
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SUPREME COURT REPORTS 
(1991) SUPP. 1 S.CR. 
The following Order of the Court was delivered: 
This appeal by special leave under Art. 136. of the Constitution is 
against the order of the High Court of Rajasthan dated July 7, 1983. The 
appellant a partnership firm consists of nine partners of which Satya 
Narain is one of the partners. On July 25, 1973 Satya Narain submitted a 
B tender to
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