IMPORTANT POINT
An arbitration clause in a partnership deed of an unregistered partnership can be enforced for purpose of securing a dissolution and accounts of the firm or for enforcing any right or power for obtaining property of dissolved firm.

JUDGMENT

Mrs. Sujata V. Manohar, J.-Leave granted.

2. The appellant and respondents 1 to 5 were partners in an unregistered partnership firm by the name of M/s. Lakshmi Narain & Sons which was constituted under a deed of partnership dated 4/6.11.1967. The first respondent brought Title Suit No. 71 of 1991 against the appellant and respondents 2 to 5 for dissolution of the partnership firm and for accounts in the Court of the Sub-Judge, Ranchi. As the deed of partnership contained an arbitration clause, the appellant made an application before the Sub-Judge under Section 34 of the Arbitration Act for stay of the Title Suit No. 71 of 1991. This application was granted. In appeal before the High Court being Misc. Appeal No. 13 of 1992, the High Court has ultimately by its order dated 16.12.1992 upheld the order of the Sub-Judge granting a stay under Section 34 of the Arbitration Act.

3. The appellant filed Misc. Case No. 11 of 1992 before the Sub-Judge, Ranchi under Section 8 of the Arbitration Act for appointment of an arbitrator. The first respondent raised a preliminary objection contending that the partnership firm was unregistered, and by reason of Section 69 of the Indian Partnership Act, a petition under Section 8 of the Arbitration Act was not maintainable. The Sub-Judge, however, held that the petition was maintainable. In Civil Revision No. 190 of 1993 which was filed by the first respondent against this order, the High Court, by its order dated 6.8.1993, has allowed the revision and held that by reason of Section 69 of the Indian Partnership Act, a petition under Section 8 of the Arbitration Act is not maintainable.

4. The present appeal is from the order of the High Court dated 6.8.1993. The relevant provisions of Section 69 of the Indian Partnership Act are as follows:

"69. Effect of non-registration.-

(1) No suit to enforce a right arising from a contract or conferred by this Act shall be instituted in any Court by or on behalf of any person suing as a partner in a firm against the firm or any person alleged to be or to have been a partner in the firm 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.

(2) No suit to enforce a right arising from a contract shall be instituted in any Court by or on behalf of a firm against any third party unless the firm is registered and the persons suing are or have been shown in the Register of Firms as partners in the firm.

(3) The provisions of sub-section (1) and (2) shall apply also to a claim of set-off or other proceeding to enforce a right arising from a contract, but shall not affect -

(a) the enforcement of any right to sue for the dissolution of a firm or for accounts of a dissolved firm, or any right or power to realise the property of a dissolved firm, or

(b) the powers of an official assignee, receiver or Court under the Presidency-towns Insolvency Act, 1909, or the Provincial Insolvency Act, 1920, to realise the property of an insolvent partner."

5. Under Section 69(1), a suit, inter alia, to enforce a right arising from a contract cannot be filed by a person suing as a partner in a firm against the other partners of the firm unless the firm is registered. Under sub-section (3) any other proceeding to enforce a right arising from a contract by a person suing as a partner against the other partners of an unregistered firm is also barred. Since the right to resort to arbitration flows from the contract between the parties contained in the partnership deed, a suit or any other proceeding by a partner to enforce this term in the contract against the other partners would, therefore, normally be barred under the first part of sub-section (3) of Section 69. (Vide Jagdish Chandra Gupta v. Kajaria Traders (India) Ltd.1.) Sub-section (3), in its later part, however, carves out certain exceptions to the bar contained in sub-sections (1), (2) and the first part of sub-section (3).