{"id":245734,"date":"2008-01-04T00:00:00","date_gmt":"2008-01-03T18:30:00","guid":{"rendered":"https:\/\/www.legalindia.com\/judgments\/atul-singh-ors-vs-sunil-kumar-singh-ors-on-4-january-2008"},"modified":"2018-12-30T15:38:19","modified_gmt":"2018-12-30T10:08:19","slug":"atul-singh-ors-vs-sunil-kumar-singh-ors-on-4-january-2008","status":"publish","type":"post","link":"https:\/\/www.legalindia.com\/judgments\/atul-singh-ors-vs-sunil-kumar-singh-ors-on-4-january-2008","title":{"rendered":"Atul Singh & Ors vs Sunil Kumar Singh & Ors on 4 January, 2008"},"content":{"rendered":"
Supreme Court of India<\/div>\n
Atul Singh & Ors vs Sunil Kumar Singh & Ors on 4 January, 2008<\/div>\n
Author: G P Mathur<\/div>\n
Bench: G.P. Mathur, Aftab Alam<\/div>\n
           CASE NO.:\nAppeal (civil)  10 of 2008\n\nPETITIONER:\nAtul Singh & Ors.\n\nRESPONDENT:\nSunil Kumar Singh & Ors.\n\nDATE OF JUDGMENT: 04\/01\/2008\n\nBENCH:\nG.P. Mathur & Aftab Alam\n\nJUDGMENT:\n<\/pre>\n
J U D G M E N T<\/p>\n
Arising out of Special Leave Petition (Civil) No.24729 of 2005)<\/p>\n
G. P. MATHUR, J.\n<\/p>\n
1.\tLeave granted.\n<\/p>\n
2.\tThis appeal, by special leave, has been preferred against the
\njudgment and order dated 4.8.2005 of Patna High Court, by which the
\nCivil Revision Petition preferred by Sunil Kumar Singh (defendant
\nNo.3 in the suit) was allowed and the order passed by the trial Court
\non 17.3.2005 rejecting his prayer for referring the dispute for
\narbitration under Section 8 of the Arbitration and Conciliation Act,
\n1996 (hereinafter referred to as the 1996 Act) was set aside.\n<\/p>\n
3.\tIn order to understand the controversy raised, it is necessary to
\nmention the basic facts of the case.  The appellants herein filed Title
\nSuit No.296 of 1998 in the Court of Sub-Judge-I, Patna, against Sunil
\nKumar Singh (defendant no.3) and 5 others for a declaration that the
\nreconstituted partnership deed dated 17.2.1992 (effective from
\n1.4.1992) is illegal, void and without jurisdiction and was also without
\nany intention or desire of Shri Rajendra Prasad Singh (who died after
\n17.2.1992) to retire from the partnership. A declaration was also
\nsought that the plaintiffs being heirs of late Shri Rajendra Prasad
\nSingh will be deemed to be continuing as partners to the extent of his
\nshare.   It was further prayed that a decree for rendition of accounts of
\nthe firm from 1.4.1992 upto date may be passed and the defendants
\nmay be directed to pay to the plaintiffs their share of the profits of the
\npartnership as well as interest and principal amount of unsecured loan
\nadvanced by the firm. A further relief for grant of an ad-interim
\ninjunction restraining the respondents from mismanaging and
\nmisappropriating the funds of the firm was also sought, besides
\nappointment of a Receiver during the pendency of the suit to manage
\nthe firm.\n<\/p>\n
4.\tThe case of the plaintiffs, as set out in plaint, in brief, is as
\nunder. A partnership firm in the name and style of M\/s Veena
\nTheatres Pvt. Ltd. was formed by a deed of partnership on 25.12.1959
\nand the business of the firm was to book pictures with film
\ndistributors at various places and to get them screened or exhibited in
\nthe picture hall owned by M\/s Veena Theatres Pvt. Ltd.   The capital
\nin the firm was invested by the members of the family of Shri
\nShatrughan Prasad Singh. Shri Rajendra Prasad Singh also
\nsubsequently became a partner of the firm by making investments and
\na deed of partnership was executed on 20.12.1972.  The partnership
\nwas reconstituted on 21.5.1976, in which the share of Shri Rajendra
\nPrasad Singh was 21% and on the death of Brij Mohan Prasad Singh,
\nhis widow Smt. Sona Devi was inducted as a partner and a fresh deed
\nwas executed on 13.1.1989 in which Shri Rajendra Prasad Singh
\ncontinued to be a partner having 21% share.  Shri Rajendra Prasad
\nSingh died on 5.9.1992 leaving behind plaintiff nos.2, 3, 5 and 7, who
\nare his grandsons, as his heirs. The wife and two sons of Shri
\nRajendra Prasad Singh had predeceased him. The case of the plaintiffs
\nfurther is that the defendants fraudulently executed another
\npartnership deed on 17.2.1992, in which Shri Rajendra Prasad Singh
\nwas not shown as one of the partners, though he had neither given any
\nconsent nor had expressed his desire for retiring from the partnership.
\nThe plaintiffs made a request to the defendants to give the accounts of
\nthe partnership firm and give them their share of profits, but the
\ndefendants refused to do so on the ground that they or their
\npredecessor-in-interest viz. Shri Rajendra Prasad Singh were not
\npartners in the partnership deed which was executed on 17.2.1992.
\nThe suit was accordingly filed on 1.8.1998 for the reliefs mentioned
\nabove.\n<\/p>\n
5.\tThe suit proceeded ex-parte against all the defendants except
\nBirendra Kumar Singh (defendant no.2), who appeared before the trial
\nCourt and moved an application for giving time to file written
\nstatement.  He also moved an application for rejecting the plaint under
\nOrder VII Rule 11 CPC on 18.9.1998, which was rejected on
\n16.1.2002.   A review petition seeking review of the aforesaid order
\nwas filed but the same was dismissed on 29.4.2004.  He, thereafter,
\nmoved an application on 3.8.2004 for referring the dispute for
\narbitration, but subsequently his counsel conceded that the said
\napplication was not maintainable.\n<\/p>\n
6.\tSunil Kumar Singh (defendant no.3), who is son of Birendra
\nKumar Singh (defendant no.2) did not put in appearance despite
\nservice of summons and the trial Court vide order dated 28.6.1999
\ndirected to proceed ex-parte against him.   After more than 5 years
\ndefendant no.3 moved two applications on 14.10.2004 for setting
\naside the order dated 28.6.1999 by which the Court had directed to
\nproceed ex-parte against him and also sought time to file written
\nstatement. On the concession made by the plaintiffs, the order to
\nproceed ex-parte against defendant no.3 was set aside on 3.11.2004.
\nThe defendant no.3 thereafter moved an application on 25.11.2004
\nunder Section 34 of the Arbitration Act, 1940 praying that in view of
\nthe arbitration clause in the agreement dated 13.1.1989, the
\nproceedings in the suit may be stayed and the matter may be referred
\nto arbitration.  The plaintiffs filed an objection to the application on
\n1.12.2004.  On 16.12.2004, defendant no.3 filed a supplementary
\npetition in support of his earlier petition dated 25.11.2004 reiterating
\nthe prayer for referring the dispute to arbitration. Subsequently, on
\n28.2.2005, defendant no.3 moved a petition purporting to be
\nsupplementary petition to the petitions dated 25.11.2004 and
\n16.12.2004, wherein it was averred that as the suit is of the year 1998,
\nto avoid any chances of confusion, his earlier petitions may be treated
\nto have been filed under Section 8 of the Arbitration and Conciliation
\nAct, 1996.  This petition was opposed by the plaintiff appellants.  The
\ntrial Court dismissed the petition by the order dated 17.3.2005 mainly
\non the ground that as Shri Rajendra Prasad Singh (predecessor-in-
\ninterest of the plaintiffs) was not a party to the partnership deed which
\nwas executed on 17.2.1992, and as the main relief sought in the suit
\nwas that the said partnership deed dated 17.2.1992 was illegal and
\nvoid, which question could only be decided by the civil Court, the
\ndispute could not be referred to arbitration. The defendant no.3
\nchallenged the aforesaid order by filing a Civil Revision Petition
\nwhich was allowed by the High Court by the impugned order dated
\n4.8.2005.  The operative portion of the order passed by the High Court
\nonly says that the Court below has committed error in passing the
\nimpugned order.   Accordingly, the impugned order is set aside and
\nthis civil revision is allowed.   No specific order making reference to
\narbitration was passed.\n<\/p>\n
7.\tShri Ranjit Kumar, learned senior counsel for the appellants,
\nhas submitted that the main relief claimed in the suit is that a
\ndeclaration be made that the reconstituted partnership deed dated
\n17.2.1992 was illegal, void and without jurisdiction as there was no
\nintention or desire on the part of Shri Rajendra Prasad Singh to retire
\nfrom the partnership and that the plaintiffs being heirs of Shri
\nRajendra Prasad Singh, shall be deemed to be continuing as partners
\nto the extent of his share.   The other relief regarding rendering of
\naccounts of all transactions from 1.4.1992 onwards was dependent
\nupon the first relief inasmuch as Shri Rajendra Prasad Singh or the
\nplaintiffs were admittedly not shown as partners of the firm in the
\ndeed dated 17.2.1992 and unless the said document was declared as
\nvoid, they could not claim any rights on the basis of earlier deed dated
\n13.1.1989.  Learned counsel has submitted that Shri Rajendra Prasad
\nSingh or the plaintiffs being not parties to the deed dated 17.2.1992,
\nSection 8 of the 1996 Act can have no application to the facts and
\ncircumstances of the case and the High Court committed manifest
\nerror of law in setting aside the order of the trial Court and allowing
\nthe revision petition filed by defendant no.3.  Learned counsel has
\nalso submitted that having regard to the facts of the case, the relief of
\ndeclaration that the partnership deed is illegal or void or the relief of
\ncancellation thereof can only be granted by the Civil Court and not by
\nan arbitrator.   In support of his submission Shri Ranjit Kumar has
\nplaced reliance on the following observations made in Khardah
\nCompany Ltd. v. Raymon & Company (India) Pvt. Ltd., AIR<\/a> 1962 SC
\n1810 :\n<\/p>\n
     It cannot be disputed that the expression arising
\nout of or concerning or in connection with or in
\nconsequence of or relating to this contract occurring
\nin an arbitration clause in an agreement to purchase
\ngoods are of sufficient amplitude to take in a dispute as to
\nthe validity of the agreement.  But the arbitration clause
\ncannot be enforced when the agreement of which it forms
\nan integral part is held to be illegal.  On principle it must
\nbe held that when an agreement is invalid every part of it
\nincluding the clause as to arbitration contained therein
\nmust also be invalid.  (1942) AC 356 and AIR 1959 SC
\n1362 and ILR (1948) 2 Cal 171 and AIR 1954 Mad
\n528(531), Rel. on; AIR 1952 SC 119, Ref. (Para 4).\n<\/p>\n
     Accordingly, a dispute that the contract of which
\nthe arbitration clause forms an integral part is illegal and
\nvoid is not one which the arbitrators are competent to
\ndecide under the arbitration clause although it is of
\nsufficient amplitude to take in a dispute as to the validity
\nof the agreement and in consequence a party to the
\ncontract is entitled to maintain an application under S. 33
\nfor a declaration that the contract is illegal and that in
\nconsequence the proceedings taken thereunder before the
\narbitrators and the award in which they resulted were all
\nvoid : AIR 1959 SC 1357, Rel. on.  (para 13)<\/p>\n
\tLearned counsel has also submitted that the suit was filed on
\n1.8.1998 and defendant no.2 having failed in his attempt to get the
\nmatter referred to arbitration, his son Sunil Kumar Singh (defendant
\nno.3) who was set ex-parte on 28.6.1999 moved the application for
\nstaying the suit under Section 34 of Arbitration Act, 1940 on
\n5.11.2004 and then moved the application giving rise to the order
\nunder challenge on 28.2.2005 and such an application having been
\nmoved after an inordinate delay, it was wholly improper on the part of
\nthe High Court to have accepted his prayer.   It has been further urged
\nthat there was non-compliance of Sub-section (2) of Section 8 of the
\n1996 Act as the application moved by defendant no.3 was not
\naccompanied by the original arbitration agreement or a duly certified
\ncopy thereof and, therefore, the same ought to have been rejected.
\nShri S.B. Sanyal, learned senior counsel for the respondent, has
\nsubmitted that the plaintiffs in fact are claiming rendition of accounts
\nand their share in the partnership business for which they are basing
\ntheir claim on the partnership deed dated 13.1.1989 to which Shri
\nRajendra Prasad Singh was a party and the said deed contains an
\narbitration clause.  In such circumstances, the High Court rightly
\nreferred the dispute for arbitration and the contention raised by
\nlearned counsel for the plaintiffs has no substance.\n<\/p>\n
8.\tIn order to appreciate the contention raised by learned counsel
\nfor the parties, it will be convenient to set out Sections 7 and 8 of the
\n1996 Act :\n<\/p>\n
7. Arbitration agreement. – (1) In this Part, ‘arbitration
\nagreement’ means an agreement by the parties to submit
\nto arbitration all or certain disputes which have arisen or
\nwhich may arise between them in respect of a defined
\nlegal relationship, whether contractual or not.\n<\/p>\n
     (2) An arbitration agreement may be in the form of
\nan arbitration clause in a contract or in the form of a
\nseparate agreement.\n<\/p>\n
     (3) An arbitration agreement shall be in writing.
\n     (4) An arbitration agreement is in writing if it is
\ncontained in-\n<\/p>\n
(a) a document signed by the parties;\n<\/p>\n
(b) an exchange of letters, telex, telegrams or other
\nmeans of telecommunication which provide a
\nrecord of the agreement; or\n<\/p>\n
(c) an exchange of statements of claim and defence
\nin which the existence of the agreement is
\nalleged by one party and not denied by the
\nother.\n<\/p>\n
     (5) The reference in a contract to a document
\ncontaining an arbitration clause constitutes an arbitration
\nagreement if the contract is in writing and the reference is
\nsuch as to make that arbitration clause part of the
\ncontract.\n<\/p>\n
8.    Power to refer parties to arbitration where there
\nis an arbitration agreement. – (1) A judicial authority
\nbefore which an action is brought in a matter which is the
\nsubject of an arbitration agreement shall, if a party so
\napplies not later than when submitting his first statement
\non the substance of the dispute, refer the parties to
\narbitration.\n<\/p>\n
     (2) The application referred to in subsection (1)
\nshall not be entertained unless it is accompanied by the
\noriginal arbitration agreement or a duly certified copy
\nthereof.\n<\/p>\n
     (3) Notwithstanding that an application has been
\nmade under sub- section (1) and that the issue is pending
\nbefore the judicial authority, an arbitration may be
\ncommenced or continued and an arbitral award made.\n<\/p>\n
\tSub-section (1) of Section 8 of the 1996 Act says that a judicial
\nauthority before which an action is brought in a matter which is the
\nsubject of an arbitration agreement shall, if a party so applies not later
\nthan when submitting his first statement on the substance of the
\ndispute, refer the parties to arbitration.  Therefore, for application of
\nSection 8, it is absolutely essential that there should be an arbitration
\nagreement between the parties.   It is an admitted fact that neither Shri
\nRajendra Prasad Singh nor the plaintiffs are parties to the partnership
\ndeed dated 17.2.1992.  There is no document as defined in Section 7
\nof 1996 Act which may contain the signature of either Shri Rajendra
\nPrasad Singh or the plaintiffs.  Similarly, there is no document as
\ncontemplated by clauses (b) or (c) of Sub-section (4) of Section 7 of
\n1996 Act from which it may be spelled out that either Rajendra Prasad
\nSingh or the plaintiffs were parties to clause relating to arbitration
\ncontained in the partnership deed dated 17.2.1992. It is also an
\nadmitted fact that Shri Rajendra Prasad Singh was alive when the said
\npartnership deed dated 17.2.1992 was executed.  Therefore, on the
\nface of it Section 8 of 1996 Act would not apply to any dispute
\nconcerning the said partnership deed dated 17.2.1992 and the matter
\ncannot be referred to arbitration.\n<\/p>\n
9.\tThe first relief claimed by the plaintiffs in the suit is a decree
\nfor declaration that the reconstituted partnership deed dated 17.2.1992
\nwas illegal and void and there was no intention or desire of Shri
\nRajendra Prasad Singh to retire from the partnership and further that
\nthe plaintiffs being heirs of Shri Rajendra Prasad Singh will be
\ndeemed to be continuing as partners to the extent of his share.   It is
\ntrue that the plaintiffs have also sought rendition of accounts and their
\nshare of profits from the partnership as well as interest over the
\nunsecured loan and the principal amount of unsecured loan on
\nrendition of accounts.  For getting this relief, the plaintiffs
\nundoubtedly rely upon the partnership deed dated 13.1.1989.
\nHowever, this deed of 1989 could be relied upon and form the basis of
\nthe claim of the plaintiffs only if the partnership deed dated 17.2.1992
\nwas declared as void.   If the deed dated 17.2.1992 was not declared
\nas void and remained valid and operative, the plaintiffs could not fall
\nback upon the earlier partnership deed dated 13.1.1989 to claim
\nrendition of accounts and their share of profits.   Therefore, in order to
\nget their share of profits from the partnership business, it was
\nabsolutely essential for the plaintiff appellants to have the partnership
\ndeed dated 17.2.1992 declared as illegal, void and inoperative.  The
\nrelief for such a declaration could only be granted by the civil Court
\nand not by an arbitrator as they or Shri Rajendra Prasad Singh through
\nwhom the plaintiffs derive title, are not party to the said deed.   The
\ntrial Court had, therefore, rightly held that the matter could not be
\nreferred to arbitration and the view to the contrary taken by the High
\nCourt is clearly illegal.\n<\/p>\n
10.\tSub-section (2) of Section 8 of the 1996 Act says that the
\napplication referred to in sub-section (1) shall not be entertained
\nunless it is accompanied by the original arbitration agreement or a
\nduly certified copy thereof.    As already stated in the earlier part of
\nthe judgment, defendant no.3 had moved an application on 25.11.2004
\nunder Section 34 of the Arbitration Act, 1940 for staying the
\nproceedings of the title suit and for referring the matter to arbitration.
\nHe filed a supplementary petition to the aforesaid application on
\n16.12.2004. Herein also reference was made to Section 34 of
\nArbitration Act, 1940. Thereafter, he filed an application on 28.2.2005
\npraying that as the Arbitration Act, 1940 had been repealed and the
\nsuit is of 1998, to avoid any confusion, his earlier petitions may be
\ntreated to have been filed under Section 8 of the Arbitration Act,
\n1996.  None of these petitions were accompanied by the original
\narbitration agreement dated 17.2.1992 or a duly certified copy thereof.
\nIn fact, there is no requirement of filing the original arbitration
\nagreement or a duly certified copy thereof under Section 34 of
\nArbitration Act, 1940 and as such there was no occasion for defendant
\nno.3 to file the aforesaid document.   The third petition filed on
\n28.2.2005 contained the following prayer :\n<\/p>\n
\tIt is, therefore, prayed that your honour may
\ngraciously be pleased to treat the petitions dated
\n25.11.04, 16.12.04 and the present petition as supplement
\nand part of each other for deciding the prayer with regard
\nto stay of the proceedings of the aforesaid suit and\/or to
\nrefer to arbitration in view of the arbitration agreement
\ncovering the subject matter of this suit.<\/p>\n
\tThere is no whisper in the petition dated 28.2.2005 that the
\noriginal arbitration agreement or a duly certified copy thereof is being
\nfiled along with the application.   Therefore, there was a clear non-
\ncompliance of sub-section (2) of Section 8 of 1996 Act which is a
\nmandatory provision and the dispute could not have been referred to
\narbitration.   Learned counsel for the respondent has submitted that a
\ncopy of the partnership deed was on the record of the case.   However,
\nin order to satisfy the requirement of sub-section (2) of Section 8 of
\nthe Act, defendant no.3 should have filed the original arbitration
\nagreement or a duly certified copy thereof along with the petition filed
\nby him on 28.2.2005, which he did not do.   Therefore, no order for
\nreferring the dispute to arbitration could have been passed in the suit.\n<\/p>\n
11.\tIn view of the discussions made above, the appeal is allowed
\nwith costs and the impugned order dated 4.8.2005 passed by the High
\nCourt in Civil Revision No.1010 of 2005 is set aside.<\/p>\n","protected":false},"excerpt":{"rendered":"
Supreme Court of India Atul Singh & Ors vs Sunil Kumar Singh & Ors on 4 January, 2008 Author: G P Mathur Bench: G.P. Mathur, Aftab Alam CASE NO.: Appeal (civil) 10 of 2008 PETITIONER: Atul Singh & Ors. RESPONDENT: Sunil Kumar Singh & Ors. DATE OF JUDGMENT: 04\/01\/2008 BENCH: G.P. Mathur & Aftab Alam […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_lmt_disableupdate":"","_lmt_disable":"","_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[30],"tags":[],"class_list":["post-245734","post","type-post","status-publish","format-standard","hentry","category-supreme-court-of-india"],"yoast_head":"\nAtul Singh & Ors vs Sunil Kumar Singh & Ors on 4 January, 2008 - Free Judgements of Supreme Court & High Court | Legal India<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.legalindia.com\/judgments\/atul-singh-ors-vs-sunil-kumar-singh-ors-on-4-january-2008\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Atul Singh & Ors vs Sunil Kumar Singh & Ors on 4 January, 2008 - 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