Sqn. Ldr. (R.) KHURRAM ZAMAN vs Mrs. AFIA ZAFAR and others

' IJAZ-UL-HASSAN KHAN, J.----This appeal, with leave of the Court, has been filed by Khurram Zaman, appellant, to call into question the legality of the order dated 24-9-2007 passed by learned Single Judge of the Lahore High Court, Rawalpindi Bench, Rawalpindi, dismissing Civil Revision No,378 of 2007 preferred by appellant affirming concurrent findings of fact recorded by the Courts below i,e, Civil Judge and Addl. District Judge, Rawalpindi.

2. Facts of the case need not be reiterated as the same have been mentioned in the leave granting order. Suffice it to state that appellant and respondents, on the basis of an unregistered partnership deed dated 20-12-2005, established a firm. The agreement contained certain terms and conditions including Arbitration clause. It appears that certain disputes arose between the parties which necessitated appellant to file suit for dissolution of the partnership and rendition of accounts etc. During the proceedings, respondents moved an application under, section 34 of the Arbitration Act, 1940, for stay of the proceedings. The application was allowed by learned Civil Judge, Rawalpindi vide order dated 11-7-2007, which was maintained in appeal by learned Addl.

District Judge, Rawalpindi, through judgment dated 24-7-2007. The civil revision filed by appellant did not succeed. It was dismissed by the learned High Court through the order impugned herein.

3. Leave was granted by this Court to examine in detail interpretation of section 69(3) of the Partnership Act, 1932.

4. Appearing on behalf of appellant, Khawaja Muhammad Farooq, Advocate, contended with vehemence that !Earned High Court has not correctly interpreted the provisions of section 69 of the Partnership Act, 1932, and allowed application for stay of proceedings for reasons not sustainable in law. Learned counsel reiterated that subsections (1) and (2) of section 69 of Partnership Act refer to suits to enforced a right arising from a contract, the provisions of subsection (3) extends the provisions of subsections (1) and (2) to claim of set off or other proceedings to enforce a right from a contract. The use of disjunctive 'or' indicates that there are two alternatives. Therefore, other proceedings occurring in subsection (3) cannot be interpreted as ejusdem generis with set off. A set off is a defence and it seldom arises out of a contract. Learned counsel submitted that an application for resort to arbitration in a suit against an unregistered firm was held to be barred under section 69(3) of Partnership Act by a Division Bench of Allahabad High Court in a case reported as Syed Wahid Hussain v. Maharajkumar Mahmud Hasan Khan and others (AIR 1961 Allahabad 409). A similar view was expressed in another case reported as Messrs Para Ram Darshan Lal v. Union of India and another (AIR 1979 Delhi 135). He contended that learned High Court has not considered in its true perspective the judgment reported as All Muhammad v. Mirza Muhammad Hussain Beg (PLD 1968 Lah. 712) which is a larger Bench judgment and has preferred to follow a single Bench judgment reported as Syed Naushab All v. Lt. Col. Mehmood Khan Durrani (PLD 1972 Lah.

76.6). To supplement the submissions reliance was placed on follow reported cases:--

(i) Syed Wahid Hussain v. Maharajkumar Mahmud Hasan Khan and others AIR 1961 Allahabad 409.

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

(ii) Messrs Para Ram Darshan Lal v. Union of India and another AIR 1979 Delhi 135.

(iv) Usman v. Haji Omer and others PLD 1966 SC 328.

(vi) Ali Muhammad v. Mirza Muhammad Hussain Beg PLD 1968 Lahore 712.

(iv) Syed Naushab All v. Lt. Col. Mehmood Khan Durrani PLD 1972 Lahore 766.

5. Aforesaid contentions of learned appellant's counsel were opposed on the ground that the proceedings have been stayed in view of clause 15 of the agreement under reference which stipulates that, if a dispute arises between the parties, it shall be resolved through arbitration and respondents invoked the provisions of section 34 of the Act, which the trial Court rightly granted.

Provisions of section 69(3) of Partnership Act, 1932 were stated to have been interpreted correctly.

To augment the submission, reliance was placed on the case of Pakistan International Airlines Corporation v. Messrs Pak Saaf Dry Cleaners (PLD 1981 SC 53).

6. Having heard the arguments advanced by both sides in the light of the material on file, we find that the parties to the lis established an unregistered firm through partnership deed dated 20-12- 2005. Clause 15 of the said agreement provides mechanism for the partners of the firm to resolve their dispute with respect to the business of the firm through an arbitrator to be mutually appointed by all the partners. Before filing written statement in the suit filed by appellant, respondents moved an application under section 34 of the Arbitration Act, 1940, which was allowed by the Civil Judge, Rawalpindi, seized of the matter. An appeal was preferred thereagainst, which did not succeed. The same was dismissed by Additional District Judge, Rawalpindi. The civil revision preferred by appellant also met the same fate. Having considered the matter from angles, we are of the view that the civil revision preferred by appellant has been dismissed through a detailed and well reasoned order, which is not open to legitimate exception. There is no illegality or irregularity in the impugned order as well as in the concurrent findings of fact recorded by the two Courts below.

Needless to emphasize that where a party to an arbitration agreement starts legal proceedings with respect to the subject matter of such agreement, the other party has a right to get such proceedings stayed so as to enable arbitration to proceed in terms of the agreement. The case- law cited by learned counsel for the appellant is distinguishable and proceed on different facts. It does not advance appellant's cause.

7. As a result, the appeal, having been found, without substance fails, which is hereby dismissed with no order as to costs.