1. Dispute between contractor and unregistered sub-contractor — Arbitration award in favor of unregistered firm — Objection to enforcement under Section 69, Partnership Act. (Para 2 )
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2000 Supreme(SC) 1204
2000(6) Supreme 259
SUPREME COURT OF INDIA
(From Madhya Pradesh High Court)
M. Jagannadha Rao & Doraiswamy Raju, JJ.
Kamal Pushp Enterprises -Appellant
versus
D.R. Construction Company -Respondent
Civil Appeal No. 2235 of 1998
Decided on 28-7-2000
Counsel for the Parties :
For the Appellant : Sanjay Parikh and Suresh Sahni, Advocates.
For the Respondent : Vimal Dave, Shailendra Narain Singh, Advocates.
Important Points
IMPORTANT POINTS
1. Section 69 of the Partnership Act has no application to proceedings before an Arbitrator.
2. Post award proceedings cannot be considered by any means, to be a suit or other proceedings to enforce any rights arising under a contract so as to attract Section 69 of the Partnership Act.
1. Section 69 of the Partnership Act has no application to proceedings before an Arbitrator.
2. Post award proceedings cannot be considered by any means, to be a suit or other proceedings to enforce any rights arising under a contract so as to attract Section 69 of the Partnership Act.
Subject
Arbitration Law - Enforceability of Awards
Act Referred
Headnote
Partnership Act, 1932-Section 69-Arbitration Act, 1940-Section 14(2)-Unregistered firm-Prohibition to enforcement of rights arising from a contract-Prohibition contained in Section 69 has no application to proceedings before an arbitrator-Post award proceedings cannot be considered by any means to be a suit or other proceedings to enforce any rights arising under a contract-Respondent unregistered firm-Arbitration of dispute arising out of contract-Award filed suo moto in Court by arbitrator-Appellant raising objection contending that in view of Section 69 proceedings were barred since respondent was unregistered firm-Untenable especially when at all stages respondent was only on the defence.
It is not the case of the appellant before us that there was no arbitration clause in writing or that the dispute is not arbitrable but yet the Arbitrator has undertaken it for decision. As rightly pointed out for the respondent the very reference came to be made at the instance of the appellant and what is really objected to in the form of a preliminary issue is only the infirmity based upon Section 69 of the Partnership Act, 1932. The prohibition contained in Section 69 is in respect of instituting a proceeding to enforce a right arising from a contract in any Court by an unregistered firm, and it had no application to the proceedings before an Arbitrator and that too when the reference to the Arbitrator was at the instance of the appellant itself. If the said bar engrafted in Section 69 is absolute in its terms and is destructive of any and every right arising under the contract itself and not confined merely to enforcement of a right arising from a contract by an unregistered firm by instituting a suit or other proceedings in Court only, it would become a jurisdictional issue in respect of the Arbitrator s power, authority and competency itself, undermining thereby the legal efficacy of the very award, and consequently furnish a ground by itself to challenge the award when it is sought to be made a rule of Court. The case before us cannot be said to be one such and the learned counsel for the appellant though was fully conscious of this fact, yet tried to assert that it is open to the appellant to take up the objection based upon Section 69 of the Partnership Act, at any stage - even during the post award proceedings to enforce the award passed. The Award in this case cannot either rightly or legitimately said to be vitiated on account of the prohibition contained in Section 69 of the Partnership Act, 1932 since the same has no application to proceedings before an Arbitrator. At the stage of enforcement of the award by passing a decree in terms thereof what is enforced is the award itself which crystallise the rights of parties under the Indian Contract Act and the general law to be paid for the work executed and not any right arising only from the objectionable contract. Consequently, the post award proceedings cannot be considered by any means, to be a suit or other proceedings to enforce any rights arising under a contract. All the more so when, as in this case, at all stages the respondent was only on the defence and has not itself instituted any proceedings to enforce any rights of the nature prohibited under Section 69 of the Partnership Act, before any Court as such. We see no infirmity or error whatsoever in the decision of the courts below to call for our interference in this appeal. (Paras 8 and 9)
Legal Category Hierarchy
Table of Contents
2. Whether Section 69, Partnership Act bars an unregistered firm from benefiting from an arbitration award in proceedings initiated by the opposing party. (Para 5 )
3. Section 69 prohibits instituting proceedings to enforce contractual rights but does not bar defending proceedings or the enforcement of an arbitration award. (Para 8 , 9 )
4. The bar under Section 69, Partnership Act does not apply to arbitration proceedings or the subsequent enforcement of an award. (Para 9 )
5. Appeal dismissed; the preliminary issue decided by the trial court and High Court was upheld. (Para 9 , 10 )
6. Does Section 69 of the Partnership Act bar an unregistered firm from defending a proceeding?
No. The prohibition in Section 69 applies to the institution of a suit or other proceeding to enforce a right arising from a contract; it does not preclude an unregistered firm from defending itself or obtaining relief as a defendant. (Para 5 , 9 )
7. Does the bar under Section 69 apply to proceedings before an arbitrator?
No. The prohibition contained in Section 69 is in respect of instituting a proceeding in any Court and has no application to proceedings before an Arbitrator. (Para 9 )
8. Is the enforcement of an arbitration award considered a proceeding to enforce a right arising from a contract under Section 69?
No. Post-award proceedings enforce the award itself, which crystallizes the rights of parties under the Indian Contract Act and general law, rather than enforcing a right arising solely from the unregistered partnership contract. (Para 9 )
JUDGMENT
Raju, J.-The above appeal has been filed against the order of a learned Single Judge of the Madhya Pradesh High Court dated 13.10.95 in C.R. No. 561 of 1994, since reported in AIR 1996 M.P. 139, rejecting the Revision Petition filed by the appellant holding that the provisions of Section 69 of the Partnership Act do not stand in the way of an unregistered firm defending a proceedings against it and it precludes only the initiation of any proceeding by such a firm.
2. The Gas Authority of India Ltd., at Vijaypur, entered into a contract with the appellant to execute certain works and the appellant in its turn had entered into a separate contract with the respondent, indisputably an unregistered firm for carrying out the work, the execution of which was undertaken by the appellant under its contract with GAIL . Disputes arose between the appellant and the respondent. Thereupon, the appellant appears to have, invoking Section 8(2) of the Arbitration Act, 1940, served a notice on the respondent seeking for consent for the appointment of an Arbitrator, in terms of the arbitration clause, out of five proposed Arbitrators and the respondent gave its consent for the appointment of a named Advocate, as the Arbitrator. The Arbitrator entered into the reference and the appellant filed its claim and the respondent apart from opposing the claim of the appellant stated its own claim. The Arbitrator passed an Award in favour of the respondent and suo moto filed the award before the trial Court under Section 14(2) of the Arbitration Act. When the Court issued notice to both the appellant and the respondent, it is at this stage the appellant filed various objections, one of which was based upon Section 69 of the Partnership Act, and the trial Court appears to have framed a preliminary issue of law under Order 14 Rule 2, CPC, for decision as follows :
"Whether the proceedings regarding making the award rule of Court are maintainable as the non-applicant firm is not a registered partnership firm under Section 69 of the Partnership Act?"
3. The learned Trial Judge decided the preliminary issue against the appellant. Thereupon, the appellant moved the High Court by way of a revision unsuccessfully and has come before this Court with this appeal.
4. The learned counsel for the appellant, initially, attempted an argument about the propriety and illegality involved in the Arbitrator suo moto filing the award before the Civil Court for passing a decree but when objected to by the respondent that the revision before the High Court against which the present appeal has been filed arose out of the only preliminary issue decided by the trial Court on the applicability or otherwise of Section 69 of the Partnership Act to the case on hand, the arguments were confined to the question of disability, if any, of the respondent, being an unregistered firm, for getting any decree on the award of the Arbitrator, in the proceedings initiated by the Arbitrator.
5. Mr. Sanjay Parikh, learned counsel for the appellant, contended that the courts below ought to have sustained the objection of the appellant based upon Section 69 of the Partnership Act holding the proceedings to be barred on account of the respondent being an unregistered firm. According to the learned counsel the proceedings arising out of an award are certainly proceedings arising out of the agreement between parties and would fall under the category of "other proceedings" envisaged in Section 69 of the Partnership Act. Strong reliance was placed in this regard upon the decision of this Court reported in Jagdish Chandra Gupta v. Kajaria Traders (India) Ltd.1, Raptakos Brett & Co. Ltd. v. Ganesh Property2 and Haldiram Bhujiawala & Anr. v. Anand Kumar Deepak Kumar & Anr.3 in addition to placing reliance upon some other decisions of the High Courts, to substantiate his claim. It is unnecessary to refer to the decisions of the various High Courts in the light of the decisions of this Court. Per contra, Mr
