2016 Supreme(SC) 482

SUPREME COURT OF INDIA
Fakkir Mohamed Ibrahim Kalifulla, C. Nagappan, JJ.
M/s Umesh Goel – Appellant
Versus
Himachal Pradesh Cooperative Group Housing Society Ltd. – Respondent
Civil Appeal No. 7916 of 2009
Decided On : 29-06-2016

IMPORTANT POINTS
All ingredients of sub-sections (1) and (2) of section 69, Partnership Act should be read into sub-section (3) and thereafter apply the said sub-section.
Section 69(3) would come into play when a suit is launched by an unregistered partnership firm or a partner thereof either to a claim for set off in the said suit or any other proceedings intrinsically connected with the said suit.
Section 69 was applied in case of arbitration under Act, 1940 but would not apply to arbitration under Act 1996.
It cannot be held that the entire Arbitral proceeding is a Civil Court proceedings for the purpose of applicability of Section 69(3).

Headnote:(a) Indian Partnership Act, 1932 – Section 69 – Carefully read, it is found that provisions of sub-sections (1) and (2) have been impliedly incorporated in sub-section (3) – The two sub-sections should be held to be bodily lifted and incorporated in sub-section (3) – It is imperative that all ingredients of sub-sections (1) and (2) should be read into sub-section (3) and thereafter apply the said sub-section. (Para 10)

       (b) Indian Partnership Act, 1932 – Section 69(1), (2) and (3) – Sub-section (1) imposes a ban on a partner of an unregistered firm from filing any suit against the firm or any partner to enforce a right arising from a contract or a right conferred under the Partnership Act in any Court – Sub-section (2) imposes the same ban on the partners or the firm as against third party. (Para 11)

       © Indian Partnership Act, 1932 – Section 69(3) – Other proceedings – Section 69(3) would come into play when a suit is launched by an unregistered partnership firm or a partner thereof either to a claim for set off in the said suit or any other proceedings intrinsically connected with the said suit. (Para 13, 14)

       (d) Indian Partnership Act, 1932 – Section 69(3) and (4) – Proceedings specifically excluded in section 69(3)(a) and (b) – Even though such proceedings may fall under the expression “other proceedings” and may be intrinsically connected with a suit in a Court, yet the ban would not operate against such proceedings – ‘Other proceeding’ in sub-section (4) can only relate to a pending suit in a Court and not to any other different proceeding. (Para 15, 16)

       (e) Indian Partnership Act, 1932 – Section 69 – Respondent invoking arbitration clause and appointing arbitrator – Filing its claim – Appellant making appearance and filing counter claim – Respondent trying to invoke section 69 – Arbitrator rightly held that Section 69 has no application to the proceedings of arbitrator. (Para 18)

       (f) Indian Partnership Act, 1932 – Section 69 – Other proceedings – Arbitration – Extent of control and operation of a Court under Arbitration Act, 1940 was far more intensive and elaborate than Arbitration and Conciliation Act, 1996 – Section 69 therefore applied in case of arbitration under Act, 1940 but would not apply to arbitration under Act 1996 – Jagdish Chander will have no application to a post Award situation. (Para 26, 27, 28)

       (2000) 6 SCC 659 – Relied upon

       1964 (8) SCR 50; AIR 1950 SC 188; (2004) 3 SCC 155; (2007) 10 SCC 82; (1993) 4 SCC 338; (2009) 6 SCC 72; 2009 (2) Law Weekly 849; (1998) 8 SCC 559 – Referred

       (g) Indian Partnership Act, 1932 – Section 69 and section 43, Arbitration and Conciliation Act, 1996 – Enforcement of award – What is enforced is the award crystalising the rights of the parties under the Indian Contract Act and the general law to be paid for the work executed – No right arising only from the objectionable contract is enforced – Section 69 has no application. (Para 30)

       (h) Indian Partnership Act, 1932 – Section 69(3) r/w section 14, Limitation Act, 1963 – Section 14, Limitation Act may treat arbitral proceeding at par with a suit but when section 69(3) does not apply to post award proceedings, there is no question of treating arbitral proceeding at par with court proceeding. (Para 32)

       2008 (6) SCALE 748; (2000) 5 SCC 355 – Distinguished

       (i) Arbitration and Conciliation Act, 1996 – Section 35 and 36 – Section 35 makes the award binding on the parties – Section 36 only creates a statutory fiction limited for the purpose of enforcement of the Award – Therefore, it cannot be held that the entire Arbitral proceeding is a Civil Court proceedings for the purpose of applicability of Section 69(3). (Para 34)

       (2004) 6 SCC 59; (2006) 13 SCC 322 – Relied upon

       Facts of the case:

       An interesting but very important legal question arises for consideration in this appeal relating to interpretation of Section 69(3) of the Indian Partnership Act with reference to its applicability to Arbitral proceedings.

       The respondent, a Cooperative Group Housing Society, invited tenders for construction of 102 dwelling units with basement at Plot No. 21 Sector 5, Dwarka New Delhi. The tenders were invited in May 1998.

       The appellant, an unregistered partnership firm, was the successful bidder and the contract was awarded to the appellant at an estimated cost of Rs.9.80 crores.

       The appellant submitted its first bill for the construction of the compound wall etc.

       A dispute arose as between the appellant and the respondent which necessitated the appellant to move the High Court of Delhi by way of an application under Section 9 of the Arbitration and Conciliation Act 1996 to restrain the respondent from dispossessing the appellant from the worksite till the work executed by the appellant is measured by the Commissioner to be appointed by the Court.

       A Commissioner was appointed by the High Court. The appellant filed another application under Section 9 of the 1996 Act to restrain the respondent from operating its bank accounts and from dispossessing the appellant.

       An arbitrator/an advocate namely Smt. Sangeeta Tomar was appointed by the respondent.

       The appellant participated in the arbitration proceedings before the arbitrator appointed by the respondent. Claims and counter claims were made.

       The arbitrator passed the award on 05.05.2005 wherein the claim of the appellant was allowed to the extent of Rs. 1,36,24,886.08 along with interest at the rate of 12% from 01.06.2002 till the date of the award and further interest from the date of award till its payment at the rate of 18% per annum.

       The respondent challenged the award before the Delhi High Court which was dismissed by the Single Judge. The Review Application filed by the respondent was also dismissed. Respondent’s appeals thereagainst was allowed.

       Finding of the Court:

       Bar under section 69(3), Partnership Act does not apply to post award proceedings.

       Result: Appeal allowed.