JUDGMENT
Madhava Reddy, J.
1. This appeal by the 3rd defendant in O. S. No. 155/79, on the file of the Principal Subordinate Judge, Guntur, is directed against the order dismissing I. A. No. 1017/79. That was a petition filed by the appellant herein under S. 34 of the Indian Arbitration Act to stay all further proceedings in O. S. No. 155/79 including the proceedings in all interlocutory applications pending disposal of that petition.
2. The 1st respondent herein instituted the suit O. S. No. 155/79 for dissolution of the partnership firm and for rendition of accounts. The appellant defendant No. 3 respondent No. 1 plaintiff, respondent No. 3 defendant No. 2,and the 4th defendant 4th respondent, are partners of the 2nd respondent 1st defendant firm. It is the case of the plaintiff that originally the 3rd defendant appellant established a propriety concern Messers. Srinivasa Agro Chemicals under the self employment scheme. After the construction of the building in part and erection of the machinery to some extent as he was not in a position to complete the same, he secured a loan from the Punjab National Bank, the 5th Respondent herein. But as he was not able to invest any further amounts the 3rd defendant wanted the plaintiff and the 4th defendant to invest further amounts. Accordingly, the plaintiff; 2nd defendant and 4th defendant were taken as partners and they constituted themselves into a partnership firm under the name and style of Srinivasa Agro Chemicals Limited. That firm was registered with the Registrar of Firms. A formal deed of partnership was executed on 1-4-1974. The shares of the partners in the said firm were as follows: –
Plaintiff - 40ps. 2nd defendant - 20ps. 3rd defendant - 20ps. 4th defendant - 20ps.
The 1st defendant firm was being managed by the 2nd defendant, who is the father of the 3rd defendant. It is the plaintiff’s case that he invested Rupees 1,01,000 while the 4th defendant invested Rs. 87,500. The 2nd defendant was appointed as a managing partner. It is alleged by the plaintiff that the 2nd and 3rd defendants having taken over complete control of the business have been appropriating huge amounts for them selves. On enquiry the plaintiff came to know that huge stocks of technical BHC, purchased for the purpose of converting them into dusting powers were sold away and the amounts were misappropriated by defendants 2 and 3 for their personal welfare. It is alleged that huge expenditure was booked by obtaining bogus vouchers. Defendants 2 and 3 are alleged to be guilty of misfeasance and malfeasance. In or about April, 1979, when the plaintiff and the 4th defendant required them to show the account books they refused. They referred the matter to the mediators K. Venkateswara Rao, Maddala Rama Rao and others which resulted only in the production of some of the books of 1978 and 1979 and by the 2nd defendant. The inspection of these account books confirmed their apprehension regarding falsification of accounts and mis appropriation of the amounts. When the 2nd defendant was required to explain the accounts he refused to comply. The plaintiff informed the 5th respondent Bank not tohonour the transactions of the 2nd defendant. The 2nd defendant is also alleged to have secreted one of the cars of the firm and trying to remove all the moveables of the firm with a view to misappropriate the same. According to the plaintiff, if the accounts are properly taken, he would be found entitled to receive Rs. 2,00,000 towards his share of the profits. Hence the suit for dissolution of partnership and accounts was laid on 4-7-1979.
3. The plaintiff took out an urgent motion even on that day for the appointment of a Commissioner. Even before the summons were taken Mr. G. S. Rama Rao, Advocate, filed Vakalat for the 2nd defendant on 4-7-1979 and appeared before the Court when the petition for appointment of the Commissioner came up for consideration. Mr. G. S. Rama Rao, counsel for the 2nd defendant, took time for filing counter and also offered to appear for the 3rd defendant appellant and the 4th defendant 4th respondent herein. The trial court passed orders appointing a Commissioner to take an inventory of the properties of the firm.
4.The plaintiff had also filed a separate application for the appointment of a receiver and yet another application for issuing an injunction restraining the defendants from disposing of the stocks. The Commissioner visited the factory and prepared inventory on 5-7-1979. At the time of the preparation of the inventory by the Commissioner, the 3rd defendant appellant was present. The Commissioner filed a report along with the inventory into Court on 9-7-1979. On the same day the 3rd defendant appellant filed I. A. No. 1017/79 requesting the Court to refer the matter to the Arbitrator and for stay of the suit and also stay of all further proceedings therein.
5. In that petition 3rd defendant pleaded that he having passed M. Sc. (Agriculture) obtained licence from the Industries Department under the scheme of self employment for the manufacture of insecticides and pesticides under the name and style of Messers. Srinivasa Agro Chemicals. He then approached the 5th respondent Bank for grant of credit facilities and it accordingly granted loan for the construction of the buildings and erection of the machinery. For the completion of the factory the 3rd defendant had to borrow Rs. 1,10,000/- and Rupees 67,500/- from the plaintiff and the 4th defendant. They in turn expressed their desire to join the venture and requested the 3rd defendant to take them as partners. The 3rd defendant’s father, who retired as Regional Manager, Bharat Pulverising Mills, also joined as a partner to look after the management of the business and thus the suit partnership came into being on 1-4-1974, and a partnership deed was executed with all the assets and liabilities of the erstwhile concern. The share of the respective partners as pleaded in the plaint is admitted. It was stated that the erection of the machinery was completed and the manufacturing process was commenced on 6th May, 1974, with the skill and effort of defendants 2 and 3. It is claimed that all the partners were apprised of the running of the firm in all its aspects and all the partners were approving the accounts from time to time. The tax returns also were being filed with the knowledge of the partners. It is alleged that with the ulterior motive of becoming the sole proprietors, the plaintiff and the 4th defendant began threatening the 2nd and 3rd defendants in the factory premises. The 3rd defendant avers that they had no objection to the other partners looking into the accounts and that they had no objection to the other partners looking into the accounts and that they gave the account books of 1977-78 and 1978-79 in May, 1979, to them for verification and return, but they failed to return the same. It is alleged that although there is a specific provision in the partnership deed for reference of any difference and disputes to Arbitration, with a view to put the defendants 2 and 3 to loss and force them to quit, the present suit O. S. NO. 155/79 was filed without any prior notice. The 3rd defendant pleads that the partnership deed specifically provides for arbitration and for the continuation of the partnership business pending the arbitration proceedings as such the proceedings in the suit should be stayed and the dispute be referred to arbitration. He also further avers that he was ready and willing to co operate in the reference of all differences to arbitration and for a final decision thereon. He pleads that if the matter is not referred to arbitration, the material on hand would deteriorate in quality and value, and the financial relations with the 5th respondent Bank will be strained and the allotment of chemicals now being made by the Government would be stopped and the business will be totally crippled. He therefore pleaded for stay of all further proceedings in the suit and in interlocutory petitions.
6. The petition was opposed inter alia pleading the same facts as were stated in the plaint. It was further averred that Mr. G. S. Rama Rao, Advocate who was no other than the Advocate appearing for the father of the 3rd defendant appellant, and he represented the 3rd defendant on 4 -7-1979 when the suit was instituted and the petitions for the appointment of the Commissioner, appointment of the Receiver and for issuing temporary injunction came up for consideration before the trial Court. Further, the presence of the 3rd defendant at the time of inventory taken by the Commissioner on 5-7-1979 constituted a step in the suit and therefore the petition for stay of the suit was not maintainable. It was also pleaded that the partnership was at will and that clause 14 did not prohibit the dissolution of the firm. On the other hand it contemplated dissolution of the firm at will and when once some of the partners determined to dissolve the firm, the question of arbitration did not arise. Further when the partner filed the suit for dissolution of the partnership firm, there cannot be any arbitration with respect to dissolution of the partnership firm, there cannot be any arbitration with respect to dissolution. In the light of the serious allegations of fraud and misappropriation against defendants 2 and 3, it is not desirable to invoke the provisions of the Arbitration Act. No justice could be done by resorting to the special procedure under the Arbitration Act, which, according to them would only involve the parties in the further litigation. In the interests of justice the suit should be proceeded with and the dispute be not referred to arbitration. They also pleaded that the plaintiff and the 4th defendant have invested major amounts and have undertaken the liability of the Bank. If the business is allowed to be continued by defendants 2 and 3. It would only provide them with a further opportunity to swindly the funds and expose the plaintiff and the 4th defendant to further loss and liability. They prayed for the dismissal of the petition.
7. The 4th respondent defendant supported the plaintiff and claimed to have invested Rs. 4,00,000.
8. The learned subordinate Judge on a consideration of the terms of the partnership deed held, that the partner ship is at will and any of the partners was at liberty to seek dissolution of the partnership firm and the dissolution took effect the moment it is declared so and in the instant case the dissolution of the partnership shall be deemed to have taken effect on the date when the suit was filed and appearance was entered on behalf of the defendants. The learned Subordinate Judge also held that the 3rd defendant took no step in the suit inasmuch as Mr. G. S. Rama Rao filed Vakalat for his father and took time for filing a counter and also because the 3rd defendant himself appeared before the Commissioner at the time of inventory. The learned Subordinate Judge also took note of the fact that the plaintiff and the 4th defendant although major shareholders were denied the opportunity of looking into the accounts. They would not be in a position to secure the reliefs before the Arbitrator. The learned Subordinate Judge also observed that the 3rd defendant appellant did not take any steps to refer the dispute to the Arbitration when the financing Bank gave notice to all the partners to settle their disputes. The learned Subordinate Judge concluded that the “above reasons compel me not to exercise the discretion given under Section 34 of the Arbitration act in favour of the petitioner” and accordingly dismissed the petition.
9. Section 34 of the Arbitration Act vests power in the Court to stay legal proceedings where there is an arbitration agreement. Any party to an arbitration agreement may avail himself of the right to obtain stay of legal proceedings, provided the requirements of that section are satisfied. He may, “at any time before filing a written statement or taking any other steps in the proceedings”, apply to the judicial authority before which proceedings are pending to stay the proceedings. The Court or such authority, may if satisfied that there is no sufficient reason why the matter should not be referred to in accordance with the arbitration agreement and finds that the applicant at the time when the proceedings were commenced and also still remains, ready and willing to do all things necessary to the proper conduct of the arbitration stay the proceedings. If the party to the application for stay under Section 34 before filing the written statement or taking any other steps in the proceedings, then he has no right to seek stay of proceedings. The application has to be made before any step is taken in the proceedings. That is a condition precedent to be satisfied for a condition precedent to be satisfied for the exercise of the right to apply for stay of proceedings. If that condition is not satisfied the Court or the judicial authority cannot stay the proceedings. Even if an application is made before the written statement is filed and any other step is taken in the proceedings the applicant has still to satisfy the Court that he was at the time when the proceedings were commenced and still remains ready and willing to do all things necessary to the proper conduct of the arbitration. Even then, the party is not entitled as of right to the stay of proceedings; the Court must be satisfied that there is no sufficient reason why the matter should not be referred in accordance with the arbitration agreement. Thus even where the requirements of Section 34 are satisfied, there is still a judicial discretion vested in the Court either to stay or not to stay the judicial proceedings. That discretion has to be exercised judicially having regard to the facts and circumstances of each case.
10. The Supreme Court in Anderson Wright Ltd. v. Moran and Co. laid down the conditions which should be fulfilled before stay is granted in the following words.
“Thus in order that a stay may be granted under this section, it is necessary that the following conditions should be fulfilled (1) The proceedings must have been commenced by a party to an arbitration agreement against any other party to the agreement:
(2) The legal proceedings which is sought to be stayed must be in respect of a matter agreed to be referred:
(3) The applicant for a stay must be a party to the legal proceedings and he must have taken no step in the proceedings after appearance. It is also necessary that he should satisfy the Court not only that he is but also was at the commencement of the proceedings ready and willing to do everything necessary for the proper conduct of the arbitration: and
(4) The Court must be satisfied that there is no sufficient reason why the matter should not be referred to an arbitration in accordance with the arbitration agreement”.
In the case as the Supreme Court was not satisfied as to whether the respondent therein was or was not a party to the arbitration agreement, remanded matter to the High Court.
11. The Supreme Court in a later decision is Printers (Mysore) Private Ltd. v. Pothan Joseph, . Laid down the principles, which should weigh with the Court in granting stay of judicial proceedings, emphasising that merely because the conditions specified under Section 34 are satisfied, it is not obligatory to order stay of proceedings and it may in its discretion “nevertheless refuse to grant stay if it is satisfied that there are sufficient reasons why the matter should not be referred in accordance with the arbitration agreement”.
The Supreme Court declared as follows: –
“Section 34 of the Act confers power on the Court to stay legal proceedings where there is an arbitration agreement subject to the conditions specified in the section. The conditions thus specified are satisfied in the present case, but the section clearly contemplates that, even though there is an arbitration agreement and the requisite conditions specified by it are satisfied, the Court may never the less refuse to grant stay if it is satisfied that there are sufficient reasons why the matter should not be referred in accordance with the arbitration agreement . In other words, the power to stay legal proceedings is discretionary, and so a party to an arbitration agreement against whom legal proceedings have been commenced cannot by relying on the arbitration agreement claim the stay of legal proceedings instituted in a court as a matter of right. It is, however, clear that the discretion vested in the Court must be properly and judicially exercised. Ordinarily, where a dispute between the parties has by agreement between them to be referred to the decision of a domestic tribunal the Court would direct the parties to go before the tribunal of their choice and stay the legal proceedings instituted before it by one of them. As in other matter so judicial discretion, so in the case of the discretion conferred on the Court by Section 34 it would be difficult, and it is indeed inexpedient, to lay down any inflexible rules which should govern the exercise of the said discretion. No test can indeed the laid down the automatic application of which will help the problem of the exercise of judicial discretion. As was observed by Bowen L. J. in Gardner v. Jay, 91885) 29 Ch D 50 at 58 that discretion, like other judicial discretion. Must be exercised according to common sense and according to justice”.
Keeping these principles in view we may now proceed to examine whether the appellant petitioner, who prayed for stay of the suit, had taken any steps in the proceedings so as to disentitle him to move the Court under Section 34. The suit was filed on 4-7-1979. On that day the 3rd defendant appellant’s father. Who was the 2nd defendant in the suit, appeared though his counsel Sri G. S. Rama Rao. Sri G. O. Rama Rao filed Vakalat only on behalf of the 2nd defendant and offered to appear for the 3rd and 4th defendants. At that stage notice of the suit was not issued to any of the parties. Along with the plaint three interlocutory applications, one for the appointment of the Commissioner, another for the appointment of a Receiver and third for the issue of temporary injunction were filed. The Court recorded on the docket as follows on 4-7-1979. “Sri G. S. Rama Rao filed Vakalat for Rs. 2 (defendant No2 in the suit i. e. the father of the 3rd defendant appellant) and undertakes to file Vakalat for others. For counter meanwhile the respondent is directed not to sell the stock, …………………………………. 9-7-1979”.
From the docket order it is clear that the 3rd defendant appellant did not appoint Sri G. S. Rama Rao as his Advocate. It is not shown that Sri. G. S. Rama Rao was specifically instructed by D-3 to take time for filing Vakalat and counter on his behalf. Except the docket order there is no evidence to show that Sri G. S. Rama Rao offered to file Vakalat for all the defendant respondents. The stand of all the defendants was not identical as is clear from the counter subsequently filed by the 4th defendant 4th respondent which shows that he is sailing with the plaintiff. Obviously Sri. G. S. Rama Rao could not have offered to file Vakalat on the instructions of both the 3rd defendant and the 4th defendant. Any offer by Sri G. S. Rama Rao, when he was not appointed under a Vakalat by the 3rd defendant appellant to represent him in the court on 4-7-1979 could not bind him. The matter was adjourned to 9-7-1979 for filling a counter. That does not necessarily in counsel Sri. G. S. Rama Rao the docket order “for counter” can only mean for counter of the 2nd respondent. The statement made by Sri G. S. Rama Rao in these circumstances could not be deemed to be a step taken by the 3rd defendant appellant in the proceedings or in the suit. In fact the 3rd defendant appellant never gave Vakalat to Sri G. S. Rama Rao even subsequently. He engaged Mr. Sitaramdas and filed I. A. No. 1017/79 for stay for further proceedings in the suit and invoked his right to have the matter referred to arbitration. The lower Court did not specifically find that 3rd defendant has taken any step in the proceedings so as to disentitle him to seek stay of proceedings in the suit. Though it began the discussion by referring to the arguments that the petitioner and his father took steps in the proceedings, it ultimately merely found that “the respondents are aware of the proceedings and if it is so, it cannot be said that the respondents have not made up their mind not to participate in the proceedings”. A party, by reason only of the fact that he became aware of a proceeding, cannot be deemed to have taken a step in the proceedings so as to disentitle him from seeking stay of proceedings under Section 34 of the Arbitration Act.
12.In State of U. P. v. Janaki Saran Kailash Chandra the Supreme Court laid down that:
“Taking other steps in the suit proceedings connotes the idea of doing something in aid of the progress of the suit or submitting to the jurisdiction of the court for the purpose of adjudication of the merits of the controversy in the suit.”
The appearance and offer of Sri G. S. Rama Rao on his own on 4-7-1979 to file Vakalat on behalf of others cannot bind the appellant so as to hold that he took any proceeding “in aid of the progress of the suit” or “for the purpose of adjudication of the merits of the controversy in the suit”.
13. Relying upon the decision of this Court in Bajaj International Pvt Ltd. v. Indian Tobacco Suppliers Pvt. Ltd. AI|R 1978 Andh Pra 80 it is contended that taking time for filing the written statement constitutes “taking step in the proceedings” and that the action of Sri G. S. Rama Rao in taking time for filing counter disentitled the appellant from filing a petition under Section 34. But that was a case in which several adjournments were taken for filing written statement and a petition for raising the attachment was also filed before an application for stay of further proceedings was made. The facts of that case are clearly distinguishable . The question here is not whether taking time for counter amounts to taking a step in the proceedings, but whether the act of Sri G. S. Rama Rao, who was not appointed as an Advocate on behalf of the 3rd defendant appellant amounts to a step taken by the appellant. An advocate may act for a party in a court of law only on the strength of a Vakalat signed by the party appointing him as his counsel. Order III, R. 4 (1) and (2) C. P. C. declares:
“No pleader shall act for any person in any Court, unless he has been appointed for the purpose by such person by a document in writing signed by such person or by his recognized agent or by some other person duly authorised by or under a power of attorney to make such appointment.
(2) Every such appointment shall for the purpose of sub-rule (1), be deemed to be in force until determined with the leave of the Court by a writing signed by the client or the pleader, as the case may be, and filed in Court or until the client or the pleader dies, or until all proceedings in the suit are ended so far as regards the client…..”
Admittedly no such authorisation was executed by the 3rd defendant-appellant in favour of Sri G. S. Rama Rao; much less was it filed into Court.
14. Reliance was placed by the learned counsel for the 1st respondent upon the Full Bench Decision of this court in Satyanarayana v. Venkata, AIR 1957 Andh Pra 172 to contend that even though Sri G. S. Rama Rao Advocate, may not have had a Vakalat executed in his favour by the appellant, still his act in representing to the Court that he would file Vakalat on behalf of the appellant amounted to a step by the appellant himself. The Full Bench was dealing with an execution petition filed by the Advocate in whose favour there was no Vakalat. The Full Bench held that:
“The presentation of an application for execution is an act required or authorised by law to be done by a party in person, by his recognised agent or by a pleader duly appointed by him in that behalf. Acting includes applying and a pleader who makes an application on behalf of the litigant acts for him and cannot do so unless he is duly authorised in that behalf. But the presentation of an application by a pleader to whom the authority in the prescribed manner under R. 4 of O. III Civil Procedure Code, was not given is only an irregularity which could be cured at a subsequent stage.”
The Full Bench held that the provisions of O. III, R. 4 were only directory and not mandatory. In that case the action of the Advocate was ratified by the party by executing a Vakalat at a subsequent stage. That is not the position here. On the contrary while there is nothing on record to show that the representation of Sri G. S. Rama Rao was authorised by the 3rd defendant-appellant, at the adjourned date of hearing, the 3rd defendant-appellant repudiated the representation made by Sri G.S. Rama Rao by appointing another Advocate Sri Sitaramadas and filing an application to stay the proceedings in the suit. The Full Bench decision referred to above therefore does not help the appellant 1st respondent’s contention in any way.
15. It was contended on behalf of the plaintiff-respondent that as the other defendants had not prayed for stay of the proceedings and had taken time for filing counter, the application for stay of the suit by the appellant also should be rejected. We are, however, unable to accept this contention. The right to seek stay of the judicial proceedings vests in a party by virtue of the fact that he is a party to the arbitration agreement and by virtue of Section 34 of the Arbitration Act. Merely because one of the parties to the Arbitration agreement does not seek to exercise the right vested in him under Section 34, the other party to the arbitration agreement cannot be deprived of that right. That right vests in each of the parties to the arbitration agreement and each party can invoke the jurisdiction of the Court to exercise its power under Section 34, to stay the proceeding. A Division Bench of the Allahabad High Court in R. B. Thakur v. Thakur Das, held:
“In our opinion it is not at all necessary for all the defendants to apply for stay or to show their willingness to submit disputes to arbitration, provided that all the defendants are bound by the submission clause.
It is sufficient if one of them does so and wishes to take advantage of the submission clause. It was so held in the leading case of willesford v. Watson, (1873) 8 Ch App 473: 42 LJ Ch 447)…..
Where therefore there are several defendants, any one of them can make the application to have the action stayed and it is not necessary that they should all join in making it.”
16. We are therefore clearly of the view that the appearance of Sri G. S. Rama Rao on 4-7-1979 and offering to file Vakalat for the appellant does not amount to the appellant taking a step in the proceeding so as to disentitle him from filing an application under Section 34 for stay of all further proceedings in the suit and in the interlocutory applications.
17. It was also contended on behalf of the plaintiff respondent and accepted by the learned Subordinate Judge that the presence of the appellant during the inventory made by the Commissioner appointed by the Court amounted to a step in the proceeding. It would be seen that the Court had not ordered the parties to be present at the taking of the inventory. The 3rd defendant was one of the partners and one of the active participants in the management of the partnership business. His presence at the factory premises was in the usual course of the management of the partnership business and not in pursuance of any proceedings taken or orders made by the Court. The Commissioner did not require the presence of the appellant at the time of inventory nor was it obligatory for the 3rd defendant-appellant to be present. Obviously because inventory of the property, in which he himself had a substantial interest, was being taken, the 3rd defendant-appellant was present. Any such presence cannot be deemed to be a step in the proceeding. Whether the 3rd defendant was present or not, under the authority of the Court, the Commissioner was competent to take an inventory of the property. His presence in the words of the Supreme Court did not amount to “something in aid of the progress of the suit.” The Commissioner appointed to take an inventory could not adjudicate any matter. Reliance is placed upon a decision of the Madras High Court in Bortes S. A. v. Astrouic Companai, . That was a case in which after an application for vacating the interim injunction was filed, the defendants applied for stay of proceedings and that was held to be a step taken in the proceedings. In that judgment reference was made to the following English case Ives and Barker v. Willians (1894-2 Ch 478: 63 LJ Ch 521), Ford’s Hotel Co. v. Bartlett, (1896 AC 1: 65 LJQB 166). County Theatres and Hotels Ltd. v. Knowles (1902-1 KB 480: 71 LJ KB 351) and Ochs v. Ochs Bros. ((1909) 2 Ch 121; 78 LJ Ch 555) etc. It is unnecessary for us to refer to these decisions for in all these cases it was found as a fact that the defendants appeared either by themselves or through their Advocates and either requested for time, or filed an application for vacating the interim orders. Even seeking time for counter in person or by a counsel duly appointed or filing a petition for vacating interim orders, after knowing what the suit is about, does amount to taking a step in the proceeding. But no such facts as would amount to taking a proceeding in the suit are established in the present case. As already discussed above, Sri G. S. Rama Rao was not authorised by the appellant to appear on his behalf and seek time and the presence of the appellant before the Commissioner at the time of the inventory was in the ordinary course of his business. Therefore, the appellant was not disentitled to apply for stay of proceedings under Section 34. This ground for the rejection of the appellants’ application for stay cannot therefore be sustained. That however does not conclude the matter.
18. The next question that falls for consideration is whether this Court should set aside the order and direct stay of proceedings in the suit and in all interlocutory applications merely because the appellant, who is a party to the arbitration agreement has applied to the Court for stay of proceedings before filing the written statement and before taking any step in the suit. As already discussed above that is only a condition precedent for applying for stay and not by itself sufficient to make it obligatory for the Court to order stay of proceeding. The Court is still to be satisfied that there is no sufficient reason why the matter should not be referred in accordance with the arbitration agreement and exercise its judicial discretion in the matter.
19. The learned Subordinate Judge has taken several factors into consideration for refusing stay of proceedings in the suit. They are: respondents 1 and 4 were denied the opportunity to look into the accounts when on suspicion that the appellant and his father were misappropriating large funds, they demanded an inspection of the account books. Plaintiff-respondents No. 1 and defendant-respondent No. 4 are the major share-holders. The 3rd defendant-appellant did not take any steps to get the dispute referred to the arbitrators even when the Financing Bank the 5th respondent called upon them by a notice to settle their differences, the partnership is one at will and any partner had the liberty to seek dissolution of the firm and such a dissolution had occurred when the suit was filed and the defendants entered appearance.
20. In the plaint it was asserted that the 2nd and 3rd defendants being in management of the firm were misappropriating large funds and that when he became suspicious of the management by the 2nd defendant, and made enquiries the plaintiff came to know that huge stocks and funds were misappropriated. He called upon defendants 2 and 3 to show him the accounts but they failed to respond. Even at the intervention of the mediators the account books of only 1978-79 were shown and the inspection of these books confirmed their fears. When an explanation was sought from defendants 2 and 3, they gave evasive replies and failed to render account. He also alleges the several bogus vouchers were prepared and expenditure boosted up. They also tried to remove all the moveables including the motor car. Of course the defendant-appellant has denied this allegation and stated that the account books of 1977-78 and 1978-79 were delivered and yet in May, 1979 defendant No. 4 “Chose to create hurdles in the business by issue of notice with false contents to 5th respondent to stop operation of accounts.”
21. From the above averments it is clear that there are serious differences between the partners and each alleges that the other is creating hurdles in the smooth running of the business. The financing Bank was given notice not to allow operation of the accounts of the Firm. Significantly, there is no assertion that all the books of accounts in the possession of defendants 2 and 3 were produced or even offered for the inspection of the plaintiff. There is no speedy machinery available to the arbitrators to enforce the production of the account books or for taking an inventory or appointing a receiver. There are certainly relevant factors which the court could legitimately keep in view in exercising the discretion vested in it under Sec. 34 of the Arbitration Act. The plaintiff-1st respondent had admittedly a 40% share and the respondent-defendant No. 4 has 20% share. They together have a larger interest than the 3rd defendant-appellant. The appellant’s father who has a 20% interest also has not prayed for the stay of the suit and reference to arbitration. Of course that does not preclude the appellant who is one of the partners from moving for stay in his own right. But the fact that 60% of the share-holders do not seek reference of the dispute to arbitrators is certainly a factor which the court could legitimately take into account in exercising its discretion in this regard. As rightly pointed out by the learned subordinate Judge the disputes had already arisen between the parties and were pending unresolved. In reply to the notice issued by the plaintiff and defendant No. 4 the financing Bank 5th respondent-defendant wrote to all the partners of the firm on 21-6-75, advising them to settle the disputes between themselves at the earliest and run the business. Pending such settlement the Bank stopped further withdrawals from the account of the firm with the Bank. Thus, it is clear that the misunderstanding which had developed into serious differences and disputes had gone to the notice of the third parties including the financing Bank and in spite of the advice of the financing Bank none of the parties including the 3rd defendant-appellant, who now seeks a stay of the suit and reference to arbitration did not take any steps to appoint an arbitrator or call upon his partners to refer the dispute to arbitration. All these are again relevant factors which have properly weighted with the lower court in exercising its discretion against the stay of suit and reference to arbitration.
22. No doubt the appellant contends that the plaintiff rushed to the court without even giving a notice and there was hardly any time for reference of the dispute to an arbitrator. While the notice was given by the Bank on 21-6-1979 the suit was filed on 4-7-1979. Thus there was at least about fifteen days time during which the appellant, if he was really anxious that these differences should be decided by way of arbitration and not through Court could have taken steps for reference of the dispute to the arbitrator. It may not be out of place to notice at this state that the plaintiff averred that the mediation attempted earlier proved infructuous. The 3rd defendant appellant did not state anything in his petition with reference to this averment. That the plaintiff and the 4th respondent invested nearly two lakhs of rupees, is not disputed by the appellant. Further the plaintiff has alleged fraud and misappropriation of funds against the appellant and the 2nd defendant-respondent. These allegations are no doubt denied by the appellant. But such allegations are better decided in an open court rather than by an arbitrator. The lower Court has taken all the relevant considerations into account in coming to the conclusion that the discretionary power vested in it under Section 34 should not be exercised in favour of the appellant. It has come to the conclusion that it was not a fit case to exercise discretion under Section 34 in favour of the petitioner-appellant. Sitting in appeal when we find that the trial court has exercised the discretion on a consideration of relevant factors, it would not be proper for us to interfere with that discretion. The Supreme Court in Printers (Mys)Private Ltd. v. P. Joseph held as follows:-
“The question as to whether legal proceedings should be stayed under Section 34 must always be decided by the court in a judicial manner having regard to the relevant facts and circumstances of each case.”
The Supreme Court also pointed out that such a discretion when exercised by the trial court the appellate court should be slow to interfere with the exercise of the said discretion.
“In dealing with matters raised before it at the appellate stage the appellate court would normally not be justified in interfering with the exercise of the discretion under appeal solely on the ground that if it had considered the matter at the trial stage it would have come to a contrary conclusion. If the discussion has been exercised by the trial court reasonably and in a judicial manner the fact that the appellate court would have taken a different view may not justify interference with the trial court’s exercise of discretion. As is often said it is ordinarily not open to the appellate court to substitute its own exercise of discretion for that of the trial Judge; but if it appears to the appellate court that in exercising its discretion the trial court has acted unreasonably or capriciously or has ignored relevant facts and has adopted an unjudicial approach then it would certainly be open to the appellate Court, and in many cases it may be its duty ……. To interfere with the trial court’s exercise of discretion …..” This principle was further reiterated by the Supreme Court in U. P. Co-operative Federation Ltd. v. Sunder Bros., Delhi, . On a consideration of all the relevant facts and circumstances of the case the Supreme Court observed in that case:-
“We are unable to hold that the trial court has acted unreasonably or capriciously or has ignored relevant facts and has adopted unjudicial approach so as to justify our interference in appeal.”
The Supreme Court further laid down in State of U. P. v. M/s Janki Saran Kailash Chandra as under:-
“The right to institute a suit in some Court is conferred, on a person having a grievance of a Civil nature, under the general law. It is a fundamental principle of law that where there is a right there is a remedy. Section 9 of the Civil P. C. confers this general right of suit on aggrieved person except where the cognizance of the suit is barred either expressly or impliedly. A party seeking to curtail this general right to suit has to discharge the onus of establishing his right to do so and the law curtailing such general right has to be strictly complied with.”
The Court further pointed out:
“The fact that the suit is for a very heavy amount by way of damages for breach of contract, it will, in our opinion, be more satisfactory on the whole to have the suit tried in a competent court of law in the normal course rather than by a lay arbitrator who is not bound either by the law of evidence or by the law of procedure. This course can certainly in no way be considered unjust or prejudicial to the appellant as to require interference by this Court.”
We cannot put it more emphatically in the present case especially having regard to the contention raised in the suit with reference to clause 14 and 17 of the partnership deed, on a consideration of which the court has expressed its opinion even at this stage that the partnership is at will and the institution of the suit for dissolution operated as a dissolution of the partnership on the date when the defendants entered their appearance. However we must say that whether the partnership is at will or not is a question to be decided in the main suit. The learned counsel appearing for both the parties sought to place different interpretations on the said clauses. Cls. 14 and 17 must be read together and so read the partnership could not be treated to be one at will. The plaintiff respondent asserted that each of the clauses must be so read as to give them their full effect and if so read the partnership was a partnership at will and any partner can dissolve the firm by giving a notice or instituting a suit. Clause 14 applies to a situation where none of the partners in spite of differences and disputes did not want to dissolve the firm but were anxious to continue the firm in which event they could refer the differences and disputes to the arbitrator and until the award was made the firm would continue undissolved. We do not think it necessary to finally dispose of this contention one way or the other, for, in our opinion the other circumstances referred to above, most of which were taken into account by the Court below were sufficient to justify the non-exercise of the discretion vested in the court under Sec. 34 to stay the proceedings. We would therefore leave open the question whether the partnership was one at will or one which could not be dissolved at the instance of one or more partners if the other partners were anxious to continue the firm and that the only course open to the partners not willing to continue as partners was to retire and settle their account as provided in clause 12, to be decided in the main suit. We are therefore not referring to the several decisions cited at the Bar by both the counsel in support of their respective contentions as to the nature of the partnership on an interpretation of the terms of the partnership deed.
23. In view of our foregoing discussion, the discretion exercised by the court below refusing to stay the suit and all proceedings in the suit and refusing reference to arbitration does not call for interference in appeal.
24. This appeal therefore fails and is accordingly dismissed but in the circumstances of the case without costs.
25. Appeal dismissed.