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BOMBAY HIGH COURT
N.D. Vyas, Sujata V. Manohar, JJ.
CHANDULAL HATHIBHAI SHAH - APPELLANT
v.
CHAMPAKLAL AMBALAL PARIKH - RESPONDENT
Appeal No. 296 of 1989 in Arbitration Petition No. 1455 of 1981,
Decided on: June 25, 1993
PARTNERSHIP - UNREGISTERED FIRM - ARBITRATION - ENFORCEMENT OF ARBITRATION CLAUSE - BAR UNDER SECTION 69 OF THE PARTNERSHIP ACT, 1932 - PETITION UNDER SECTION 20 OF THE ARBITRATION ACT - MAINTAINABILITY.
Fact of the Case:
An unregistered partnership firm entered into a Deed of Partnership containing an arbitration clause. Disputes arose between the partners, and the respondent filed a petition under Section 20 of the Arbitration Act seeking to enforce the arbitration clause and refer the disputes to arbitration.
Finding of the Court:
The court held that a petition under Section 20 of the Arbitration Act is a proceeding to enforce a right arising from a contract between the partners of an unregistered firm and is, therefore, barred by Section 69 of the Partnership Act, 1932.
Issues: Whether a petition under Section 20 of the Arbitration Act is a proceeding to enforce a right arising from a contract between the partners of an unregistered firm.
Ratio Decidendi: The court relied on the Supreme Court decision in Jagdish Chandra v. Kajaria Traders (Ind.) Ltd., which held that a proceeding under Section 8(2) of the Arbitration Act, which is similar to a proceeding under Section 20, is barred by Section 69(3) of the Partnership Act. The court also referred to the Allahabad High Court decision in Iqbal Singh v. Ram Narain, which held that a proceeding under Section 20 of the Arbitration Act is a proceeding to enforce a right arising from a contract and is, therefore, barred by Section 69(3) of the Partnership Act.
Final Decision: The court allowed the appeal, set aside the judgment of the single judge, and dismissed the petition under Section 20 of the Arbitration Act.
Sujata Manohar, J. - The appellant and the respondent entered into a Deed of Partnership dated 1.1.1979 under which they agreed to carry on business in yarn and as commission agents in partnership in the firm name and style of M/s. C. H. Shah & Co. The partnership, however, is not registered. A recital in the Partnership Deed states that the respondent was tenant of business premises situate at Room No. 29, 152/2 Narayan Dhuru Street, Bombay-400003. Clause 5 of the Partnership Deed provides that the partnership business as to be conducted in the said premises. Clause 29 of the partnership deed provides that any dispute or question which may arise in connection with the business of the said partnership or any matter connected with it shall, unless decided by mutual agreement by the parties, be referred to arbitration of arbitrators, one to be appointed by each party to the dispute.
2. Since about July, 1981 there were disputes between the parties. According to the respondent, from 20th July, 1981 onwards the appellant prevented the respondent from entering the said premises. The respondent thereupon gave a notice of dissolution on 1.1.1981. The respondent thereafter filed in this court Arbitration Petition No. 1455 of 1981 under Section 20 of the Arbitration Act praying: (a) that the arbitration agreement contained in the Deed of Partnership dated 1st January, 1979 be ordered to be filed in this court and (b) that this court be pleased to make an order of reference to the arbitrator to be appointed by the parties failing which to the arbitrator to be appointed by this court and costs of the petition. This petition has been allowed by a learned single Judge of this court by his judgment and order dated 2nd February, 1988. The appellant has filed the present appeal from the above judgment.
3. As the partnership deed of 1.1.1979 is not registered, it is contended by the appellant that in view of Section 69 of the Partnership Act, 1932 a suit petition of the respondent under Section 20 of the Arbitration Act is barred. Section 69 of the Partnership Act deals with the effect on non-registration of a partnership.
"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) .........................................
(3) The provisions of sub-sections (1) and (2) shall apply also to a claim of set-off or other proceedings 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 ........." Under Section 69(1), therefore, no suit can be filed by one partner of a firm against another partner to enforce a right 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. The same bar is extended by Section 69(3) to other proceedings to enforce a right arising from a contract. Therefore even if we do not consider a petition under Section 20 of the Arbitration Act as a suit, a petition under Section 20 of the Arbitration Act would be covered by Section 69(1) read with Section 69(3). This is, provided it is considered as a proceeding to enforce a right arising from a contract.
4. The question is whether a petition under Section 20 of the Arbitration Act is a proceeding to enforce a right arising from a contract as between the two partners of an admittedly unregistered firm. The arbitration clause is a part of the contract between the partners embodied in the partnership deed. A petition under Section 20 of the Arbitratio
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