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

Citation: [1991] SUPP. 1 S.C.R. 542

Court: Supreme Court of India

Bench: K. RAMASWAMY, YOGESHWAR DAYAL

Case summary

The application was allowed and the dispute was referred for * arbitration. District Judge after considering the evidence and the objections allowed the application and referred the dispute for arbitration.

Judgment text

SANGANER DAL AND FLOUR MILL v. F. C. I. AND. ORS. . (. _ ~ OCTOBER 22, 19 inds all the partners. Sec. 18 of the Partnership Act postulates that "sub- __, jec;t to the provisions of the Act a partner is the agent of the firm for the purposes of the business of the firm". Sec. 19(1) adumbrates that "subject to the provisions of Sec. 22 the act of the partners which is done to carry on in the usual way the business of the kind carried on by the firm, binds the firm". Thus, Satya Narain has implied authority to enter into the contract with the corporation to supply the Dal of 1000 quintals at the contracted rate which is the usual course of the business of the appellant. Bu. t it is settled law that the operation of Secs. 18 & 19(1) is subject to the 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. Satya Narain has power to do business on behalf of the firm and in exercise thereof he entered into the contract with the corporation during the usual control of business to supply the Dal. Then crucial question is whether a valid contract which was not repudiated as per law, binds the other partners? Our answer is yes. It is not in dispute that 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 perfectly within the jurisdiction and in terms of the contract.

It is not the case of the partners that the firm is not carrying on the business of the supply of Dal and that Satya Narain, as found by the Trial Court, was authorised to do business on behalf of the firm. Under those circumstances, the reference is clearly valid. We do not find any illegality to interfere with the order of the High Court. In this view, the decisions in Gopal Das v. Baij Nath & Ors. , AIR .... ¥ 1926 Allahabad 238; Finn Radlzakisha11 Chun11i/a/ v. Finn Ashamal lshardas, AIR 1926 Lahore 91; Raje11dra Prasad v. Pa1111a/al Champa/al & Ors. , AIR 1932 Calcutta 343; Mansabdar Khan v. M. T. Allah Devi & Ors. , AIR 1934 Lahore 485; Solza11/al v. Finn Madlioram Brmwarilal, AIR 1952 Punjab 240; and Mis Alazappa Cotton Mills v. lndo Bzm11a Trading Corporation, AIR 1976 Madras 79; cited by learned counsel are of little assistance to the appellant. In Mis Alazappa Cotton Mills case the original contract does 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. On those facts it was held that the reference does not bind the other partners. The appeal is accordingly dismissed. Since we do not call upon the respondents to argue, there will be no order as to costs. V. P. R. Appeal dismissed.