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

Section 69 is the whole point of the registration chapter. Registration is not compulsory; the sanction for not registering is the disability in s. 69. Sub-sections (1) and (2) bar suits. Sub-section (3) extends the bar to a claim of set-off, or other proceeding to enforce a right arising from a contract.

Everything turns on those two words, other proceeding. Read naturally they cover any proceeding of any kind. Read ejusdem generis with the words that precede them, they would be confined to proceedings of the nature of a claim of set-off — that is, to defensive claims. On the narrow reading an unregistered firm could go to arbitration, apply to have an arbitrator appointed, and get an award, all outside s. 69.

Jagdish Chandra Gupta takes the wide reading, and its reasoning on when ejusdem generis applies is a set piece of statutory interpretation worth reproducing in an answer.

By a letter dated 30 July 1955, M/s Kajaria Traders (India) Ltd and M/s Foreign Import and Export Association — a sole proprietary firm owned by the appellant, Jagdish Chandra Gupta — entered into a partnership to export, between January and June 1956, 10,000 tons of manganese ore to a buyer in New York. Each partner was to supply a certain quantity of the ore. The agreement contained a clause providing that in case of dispute the matter will be referred for arbitration in accordance with the Indian Arbitration Act.

The company alleged that Jagdish Chandra Gupta had failed to carry out his part of the agreement. After correspondence, the company wrote on 28 February 1959 that it had appointed an advocate as its arbitrator, and asked him either to agree to that person acting as sole arbitrator or to appoint his own. On 17 March 1959 the company informed him that, as he had failed to appoint an arbitrator within fifteen clear days, it was appointing its nominee as sole arbitrator. He disputed this, and on 28 March 1959 the company applied under s. 8(2) of the Indian Arbitration Act 1940 for the appointment of an arbitrator.

Gupta objected on two grounds: that s. 8(2) was inapplicable because the arbitration clause did not expressly provide that the arbitrators were to be appointed by consent of the parties; and that s. 69(3) of the Partnership Act barred the petition because the partnership was not registered.

A Divisional Bench held the application under s. 8 competent, but divided on s. 69(3): one judge held that it barred the application, the other that it did not. On a reference, a third judge agreed with the latter, so the application was held competent. On appeal to the Supreme Court, only the s. 69(3) point was pressed.

1. Is an application under the arbitration legislation to appoint an arbitrator, made under a clause in a partnership agreement, a proceeding to enforce a right arising from a contract?
2. Are the words other proceeding in s. 69(3) to be read ejusdem generis with a claim of set-off, so as to be limited to proceedings of a defensive character?

The appeal was allowed. The bar of s. 69(3) applied.

First: it was a proceeding to enforce a right arising from a contract

A proceeding under s. 8 of the Arbitration Act has its genesis in the arbitration clause, because without an agreement to refer the matter to arbitration the section cannot possibly be invoked. Since the arbitration clause is part of the agreement constituting the partnership, it is obvious that the proceeding is one to enforce a right which arises from a contract. Whether one views the contract as a whole or only the arbitration clause, it is impossible to think that the right to proceed to arbitration is not one of the rights founded on the agreement of the parties. In either sense the words of s. 69(3), a right arising from a contract, are sufficient to cover the matter.

Second: ejusdem generis does not apply here

The Court set out the principle carefully. When in a statute particular classes are mentioned by name and then followed by general words, the general words are sometimes construed ejusdem generis, that is, limited to the same category or genus as the particular words. But it is not necessary that this rule must always apply. The nature of the special words and of the general words must be considered before the rule is applied.

The Court's own illustration is the clearest statement of the point available, and is worth reproducing. In the expression books, pamphlets, newspapers and other documents, private letters may not be held included if other documents is read ejusdem generis with what goes before. But in a provision reading newspapers or other document likely to convey secrets to the enemy, the words other document would include a document of any kind and would not take their colour from newspapers.

It follows 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 be 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; 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. Counsel invited to give examples could suggest, for sub-section (1), only two — an objection under Order 21 Rule 58 of the Code of Civil Procedure by a pledgee of goods of an unregistered firm whose goods are attached, and proving a debt before a liquidator. The second is not raised as a defence and cannot belong to the same genus as a claim of set-off; the first could be made to fit only by a stretch of considerable imagination. It is difficult to accept that the legislature was thinking of such far-fetched things when it spoke of other proceeding.

Third: the scheme of the section confirms the wide reading

The Court answered the drafting objection — why, if all proceedings were to be excluded, was it not enough to speak of proceedings alongside suits in sub-sections (1) and (2)? The scheme of s. 69 supplies the clue. The section thinks in terms of suits, of claims of set-off, which are in a sense of the nature of suits, and of other proceedings. It excludes suits in sub-sections (1) and (2); it then applies the same ban to a claim of set-off and other proceeding to enforce a right arising from a contract; then it lifts the ban for suits for the dissolution of a firm, for accounts of a dissolved firm and for realisation of the property of a dissolved firm — the emphasis in each case is on dissolution of the firm; and then sub-section (4) excludes the section altogether for firms with no place of business in the territories, for exempted areas, and for small-cause suits and set-offs not exceeding one hundred rupees.

The decisive textual pointer is in the latter part of sub-section (4), which speaks of any proceeding in execution or other proceeding incidental to or arising from any such suit or claim. That shows plainly that the word proceeding is not limited to a proceeding in the nature of a suit or a claim of set-off. It would hardly have been necessary to be so explicit if the words other proceeding in the main section had the restricted meaning contended for. The sub-division of the section is a matter of drafting convenience, and nothing can be spelled out of it.

The conclusion

The words other proceeding in sub-section (3) must receive their full meaning, untrammelled by the words a claim of set-off. Those latter words neither intend nor can be construed to cut down the generality of other proceeding. Sub-section (3) applies 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 the enforcement of any right arising from contract, except those expressly excepted in sub-sections (3) and (4).

The expression other proceeding in s. 69(3) bears its full and natural meaning and is not restricted ejusdem generis by the preceding words a claim of set-off, because those words disclose no genus. Any proceeding of any kind to enforce a right arising from a contract is barred where the firm is unregistered, subject only to the exceptions expressly stated in sub-sections (3) and (4). An application to appoint an arbitrator under a clause in the partnership agreement enforces a right arising from a contract and is therefore barred.

Haldiram Bhujiawala v. Anand Kumar Deepak Kumar (2000) approaches s. 69 from the other side: it is not enough that the proceeding be a proceeding, it must also be to enforce a right arising from a contract. A suit based on infringement of a statutory trade mark right and on the common law of passing off is not, and so escapes.

M/s Umesh Goel v. Himachal Pradesh Cooperative Housing Society Ltd (2016) deals with arbitral proceedings themselves, as distinct from an application to a court under the arbitration legislation, and holds that they do not fall within the expression other proceedings in s. 69(3), so that the ban applies neither to the arbitral proceedings nor to the award.

Put the three together and the exam answer writes itself: Jagdish Chandra Gupta on the width of other proceeding; Haldiram on the requirement that the right arise from a contract; Umesh Goel on where arbitral proceedings sit.