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PETITIONER: KAMAL PUSHP ENTERPRISES

       Vs.

RESPONDENT: D.R. CONSTRUCTION COMPANY

DATE OF JUDGMENT:       28/07/2000

BENCH: M. Jagannadha Rao, J. & Doraiswamy Raju, J.

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.

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?

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.

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

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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.    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 Vs.  Kajaria Traders (India)  ltd.   [AIR 1964 SC 1882];  Raptakos Brett &  Co.   Ltd. Vs.  Ganesh Property [(1998) 7 SCC 184] and Haldiram Bhujiawala & Anr.  Vs.  Anand Kumar Deepak Kumar & Anr.  [(2000) 3 SCC 250] 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.  Vimal Dave, while adopting  the  reasoning of the courts below, contended that  the provisions of Section 69 of the Partnership Act are no impediment to  the respondent getting relief as a defendant in the hands  of the  Arbitrator in a proceeding initiated by the appellant itself and  as long as the respondent was only a respondent and had  not initiated  or  commenced any proceedings of its own, there is  no merit  in  the preliminary objection raised, which, according  to the learned counsel, has been rightly overruled.

The  question  as  to the scope and ambit of Section 69  (3)  was considered  by  this  Court in the decision reported  in  Jagdish Chandra  Gupta (supra).  An application filed under Section  8(2) of  the Arbitration Act for the appointment of a named person  or anyone  else  to  go into the disputes between  the  parties  was objected  to, among other things on the ground that Section 69(3) of  the Partnership Act afford a bar to the petition because  the partnership was not registered.  As against the conclusion of the High  Court that the application was maintainable, an appeal  was filed  in this Court.  In construing the words, ‘‘a claim of  set off  or  other  proceeding  to enforce a  right  arising  from  a contract  .., it was held that the section thinks in terms of (a)  suits and (b) claims of set off which are in a sense of  the nature  of suits and (c) other proceedings and while the  section first  provides for exclusion of suits in sub-sections (1) &  (2) of  Section 69 the same ban is also applied to a claim of set off and  other  proceedings  to  enforce any  right  arising  from  a contract.   This  Court  ultimately construed the  words  ‘‘other proceedings  in sub-section (3) of Section 69 giving them their full  meaning  untrammelled by the words ‘‘a claim of set  off, and  held that the generality of the words ‘‘other  proceedings are not to be cut down by the latter words.  The said case, being one  concerning an application before Court under Section 8(2) of the  Arbitration  Act,  1940  in the  light  of  the  arbitration agreement,  this  Court finally held that since  the  arbitration clause  formed part of the agreement constituting the partnership the  proceeding under Section 8(2) was in fact to enforce a right which arose from a contract/agreement of parties.

The above referred to decision was adverted to and the principles

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therein  were also applied in the subsequent decision reported in Raptakos Brett & Co.  Ltd.  (supra) and on the facts of that case that  the  cause of action for the suit was not the agreement  of tenancy  which  lapsed by efflux of time but really  one  arising under  the  General Law and Transfer of Property Act it was  held that  the bar of suit or other proceedings based upon the lack of registration  of  the  firm does not apply to the case.   In  yet another  decision  of this Court reported in Haldiram  Bhujiawala (supra)  rendered  by a Bench to which one of us (M.   Jagannadha Rao,  J.) was a party, following the earlier decision reported in 1998  (7) SCC 184 (supra) it was held that the bar under  Section 69  (2)  was  not  attracted  to that case  since  the  suit  for permanent  injunction  to restrain the defendants from using  the plaintiffs  trade mark/name was based upon the statutory  rights under  the  Trademarks Act and on common law principles  of  tort applicable  to passing off actions and not under the unregistered partnership agreement.

The persistent plea made on behalf of the appellant before us is that the bar imposed under Section 69(3) is attracted to the case on  hand and that inasmuch as the same prohibits the  enforcement of any right arising from a contract by an unregistered firm, the objection  can  be  taken  at any stage  i.e.,  even  post  award proceedings  instituted  to  enforce the award.   Inspiration  is drawn  for this claim from the decision of a learned Single Judge of  the  Madras High Court reported in J.  Belli Gowder vs  Joghi Gowder  and another [AIR 1951 Mad.683].  That was a case  wherein an  award came to be passed by an Arbitrator on an oral reference or  submission  made.   Unlike  the law in  force  prior  to  the Arbitration  Act,  1940, the said Act in Section 2(a) defined  an arbitration agreement to be one made in writing to submit present or  future differences to arbitration and, therefore, it was held that after the coming into force of the Act an award passed on an oral submission or reference can neither be filed and made a rule of  Court under the Act nor enforced apart from the provisions of the  Act.  This decision which is based on the principle that the Arbitrator  is a creature of the contract between the parties and a  reference  to  the  Arbitrator could be only by  means  of  an agreement  in writing only indicates that such infirmity goes  to the root of the very jurisdiction of the Arbitrator to enter into the  reference and decide by passing an award and in our view the same can be of no assistance to the case of the appellant.  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 Arbitrators  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

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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.  It is useful in this connection to refer to  the  decision  of  this Court in Satish  Kumar  &  others  vs Surinder  Kumar  & others [AIR 1970 SC 833], wherein it has  been stated  in  unmistakable terms that an Award is not a mere  waste paper  but  does create rights and has some legal effect  besides being  final  and binding on the parties.  It has also been  held that  the  award is, in fact, a final adjudication of a Court  of the  parties  own  choice and until  impeached  upon  sufficient grounds  in an appropriate proceedings, an award which is on  the face  of  it  regular,  is  conclusive upon  the  merits  of  the controversy  submitted  for arbitration.  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.  The appeal fails and shall stand dismissed.

We  make it clear that we have decided only the point relating to the  preliminary  issue raised and decided by the trial judge  as well  as  by the High Court, and all or any other objections  and contentions  may be raised and pursued by the respective  parties in  the proceedings pending before the Trial Court.  The  parties will bear their respective costs.