Jagdish Chandra Gupta v. Kajaria Traders (India) Ltd.AIR 1964 SC 1882

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M. HIDAYATULLAH, J. – By a letter dated July 30, 1955, M/s. Kajaria Traders (India)
Ltd. and M/s. Foreign Import and Export Association (sole proprietary firm owned by the
appellant Jagdish C. Gupta) entered into a partnership to export between January and June
1956, 10,000 tons of manganese ore to Phillips Brothers (India) Ltd., New York. Each partner
was to supply a certain quantity of manganese ore. We are not concerned with the terms of the
agreement but with one of its clauses which provided:
“That in case of dispute the matter will be referred for arbitration in accordance with the
Indian Arbitration Act.”
The company alleged that Jagdish C. Gupta failed to carry out his part of the partnership
agreement. After some correspondence, the company wrote to Jagdish C. Gupta on February
28, 1959 that they had appointed Mr R.J. Kolah (Advocate O.S.) as their arbitrator and asked
Jagdish Chander Gupta either to agree to Mr Kolah’s appointment as sole arbitrator or to
appoint his own arbitrator. Jagdish Chander Gupta afterconsideration and on March 17, 1959
the company informed Jagdish Chander Gupta that as he had failed to appoint an arbitrator
within 15 clear days they were appointing Mr Kolah as sole arbitrator. Jagdish C. Gupta
disputed this and the company filed on March 28, 1959 an application under Section 8(2) of
the Indian Arbitration Act, 1940 for the appointment of Mr Kolah or any other person as
arbitrator.

2. Jagdish Chander Gupta appeared and objected inter alia to the institution of the
   petition. Two grounds were urged (i) that Section 8(2) of the Indian Arbitration Act was not
   applicable as it was not expressly provided in the arbitration clause quoted above that the
   arbitrators were to be by consent of the parties and (ii) that Section 69(3) of the Indian
   Partnership Act, 1932 afforded a bar to the petition because the partnership was not
   registered. The petition was referred by the Chief Justice to a Divisional Bench consisting of
   Mr Justice Mudholkar (as he then was) and Mr Justice Naik. The two learned Judges agreed
   that in the circumstances of the case an application under Section 8 of the Indian Arbitration
   Act was competent and that the court had power to appoint an arbitrator. They disagreed on
   the second point. Mr Justice Mudholkar was of the opinion that Section 69(3) of the Indian
   Partnership Act barred the application while Mr Justice Naik held otherwise. The case was
   then referred to Mr Justice K.T. Desai (as he then was) and he agreed with Mr Justice Naik
   with the result that the application was held to be competent.
3. In this appeal it was not contended that the conclusions of the learned Judges in regard
   to Section 8(2) were erroneous. The decision was challenged only on the ground that Section
   69(3) was wrongly interpreted and the bar afforded by it was wrongly disallowed.
   The section, speaking generally, bars certain suits and proceedings as a consequence of
   non-registration of firms. Sub-section (1) prohibits the institution of a suit between partners
   inter se or between partners and the firm for the purpose of enforcing a right arising from a

contract or conferred by the Partnership Act unless the firm is registered and the person suing
is or has been shown in the Register of Firms as a partner in the firm. Sub-section (2)
similarly prohibits a suit by or on behalf of the firm against a third party for the purpose of
enforcing rights arising from a contract unless the firm is registered and the person suing is or
has been shown in the Register of Firms as a partner in the firm. In the third sub-section a
claim of set-off which is in the nature of a counter claim is also similarly barred. Then that
sub-section bars “other proceeding”. The only doubt that has arisen in this case is regarding
the meaning to be given to the expression “other proceeding”. One way to look at the matter
is to give these words their full and natural meaning and the other way is to cut down that
meaning in the light of the words that precede them. The next question is whether the
application under Section 8(2) of the Arbitration Act can be regarded as a proceeding “to
enforce a right arising from a contract”, and therefore, within the bar of Section 69 of the
Indian Partnership Act.

4. Mr Justice Mudholkar in reaching his conclusion did not interpret the expression “other
   proceeding” ejusdem generis with the words “a claim of set-off”. He held further that the
   application was to enforce a right arising from the contract of the parties. Mr Justice Naik
   pointed out that the words used were not “any proceeding” nor “any other proceedings” but
   “other proceeding” and that as these words were juxtaposed with “a claim of set off” they
   indicated a proceeding of the nature of a claim in defence. On the second point Mr Justice
   Naik held that this was not a proceeding to enforce a right arising from a contract but was a
   claim for damages and such a claim could be entertained because it was based on something
   which was independent of the contract to supply ore. He held that the right which was being
   enforced was a right arising from the Arbitration Act and not from the contract of the parties.
   Mr Justice K.T. Desai agreed with most of these conclusions and suggested that the words
   preceeding “other proceeding”, namely, “a claim of set-off” had “demonstrative and limiting
   effect”. He seems to have ascertained the meaning of the expression “other proceeding” by
   reference to the meaning of the words “a claim of set-off”, which he considered were
   associated with it.
5. The first question to decide is whether the present proceeding is one to enforce a right
   arising from the contract of the parties. The proceeding under the eighth section of the
   Arbitration Act has its genesis in the arbitration clause, because without an agreement to refer
   the matter to arbitration that section cannot possibly be invoked. Since the arbitration clause is
   a part of the agreement constituting the partnership it is obvious that the proceeding which is
   before the Court is to enforce a right, which arises from a contract. Whether we view the
   contract between the parties as a whole or view only the clause about arbitration, it is
   impossible to think that the right to proceed to arbitration is not one of the rights which are
   founded on the agreement of the parties. The words of Section 69(3), “a right arising from a
   contract” are in either sense sufficient to cover the present matter.
6. It remains, however, to consider whether by reason of the fact that the words “other
   proceeding” stand opposed to the words “a claim of set-off” any limitation in their meaning
   was contemplated. It is on this aspect of the case that the learned Judges have seriously
   differed. When in a statute particular classes are mentioned by name and then are followed by
   general words, the general words are sometimes construed ejusdem generis i.e. limited to the

same category or genus comprehended by the particular words but it is not necessary that this
rule must always apply. The nature of the special words and the general words must be
considered before the rule is applied. In Allen v. Emersons [(1944) IKB 362]. Asquith, J.,
gave interesting examples of particular words followed by general words where the principle
of ejusdem generis might or might not apply. We think that the following illustration will
clear any difficulty. In the expression “books, pamphlets, newspapers and other documents”
private letters may not be held included if “other documents” be interpreted ejusdem generis
with what goes before. But in a provision which reads “newspapers or other document likely
to convey secrets to the enemy”, the words “other document” would include document of any
kind and would not take their colour from “newspapers”. It follows, therefore, that
interpretation ejusdem generis or noscitur a sociis need not always be made when words
showing particular classes are followed by general words. Before the general words can be so
interpreted there must be a genus constituted or a category disclosed with reference to which
the general words can and are intended to be restricted. Here the expression “claim of set-off”
does not disclose a category or a genus. Set-offs are of two kinds — legal and equitable —
and both are already comprehended and it is difficult to think of any right “arising from a
contract” which is of the same nature as a claim of set-off and can be raised by a defendant in
a suit. Mr B.C. Misra, whom we invited to give us examples, admitted frankly that it was
impossible for him to think of any proceeding of the nature of a claim of set-off other than a
claim of set-off which could be raised in a suit such as is described in the second sub-section.
In respect of the first sub-section he could give only two examples. They are (i) a claim by a
pledger of goods-with an unregistered firm whose good are attached and who has to make an
objection under Order 21 Rule 58 of the Code of Civil Procedure and (ii) proving a debt
before a liquidator. The latter is not raised as a defence and cannot belong to the same genus
as a “claim of set-off”. The former can be made to fit but by a stretch of some considerable
imagination. It is difficult for us to accept that the legislature was thinking of such far-fetched
things when it spoke of “other proceeding” ejusdem generis with a claim of set-off.

7. Mr Justice Naik asked the question that if all proceedings were to be excluded why was
   it not considered sufficient to speak of proceedings along with suits in sub-sections (1) and (2)
   instead of framing a separate sub-section about proceedings and coupling “other proceeding”
   with “a claim of set-off”? The question is a proper one to ask but the search for the answer in
   the scheme of the section itself gives the clue. The section thinks in terms of (a) suits and (b)
   claims of set-off which are in a sense of the nature of suits and (c) of other proceedings. The
   section first provides for exclusion of suits in sub-sections (1) and (2). Then it says that the
   same ban applies to a claim of set-off and other proceeding to enforce a right arising from a
   contract. Next it excludes the ban in respect of the right to sue (a) for the dissolution of a firm,
   (b) for accounts of a dissolved firm and (c) for the realisation of the property of a dissolved
   firm. The emphasis in each case is on dissolution of the firm. Then follows a general
   exclusion of the section. The fourth sub-section says that the section as a whole, is not to
   apply to firms or to partners and firms which have no place of business in the territories of
   India or whose places of business are situated in the territories of India but in areas to which
   Chapter VII is not to apply and to suits or claims of set-off not exceeding Rs 100 in value.
   Here there is no insistence on the dissolution of the firm. It is significant that in the latter part
   of clause (b) of that section the words are “or to any proceeding in execution or other

proceeding incidental to or arising from any such suit or claim” and this clearly shows that the
word “proceeding” is not limited to a proceeding in the nature of a suit or a claim of set-off.
Sub-section (4) combines suits and a claim of set-off and then speaks of “any proceeding in
execution” and “other proceeding incidental to or arising from any such suit or claim” as
being outside the ban of the main section. It would hardly have been necessary to be so
explicit if the words “other proceeding” in the main section had a meaning as restricted as is
suggested by the respondent. It is possible that the draftsman wishing to make exceptions of
different kinds in respect of suits, claims of set-off and other proceedings grouped suits in
sub-sections (1) and (2), set-off and other proceedings in sub-section (3) made some special
exceptions in respect of them in sub-section (3) in respect of dissolved firms and then viewed
them all together in sub-section (4) providing for a complete exclusion of the section in
respect of suits of particular classes. For convenience of drafting this scheme was probably
followed and nothing can be spelled out from the manner in which the section is sub-divided.

9. In our judgment, the words “other proceeding” in sub-section (3) must receive their full
   meaning untrammelled by the words “a claim of set-off”. The latter words neither intend nor
   can be construed to cut down the generality of the words “other proceeding”. The sub-section
   provides for the application of the provisions of sub-sections (1) and (2) to claims of set-off
   and also to other proceedings of any kind which can properly be said to be for enforcement of
   any right arising from contract except those expressly mentioned as exceptions in sub-section
   (3) and sub-section (4).
10. The appeal is, therefore, allowed.