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PETITIONER: PRABHU SHANKAR JAISWAL

       Vs.

RESPONDENT: SRI SHEO NARAIN JAISWAL & ORS

DATE OF JUDGMENT:       29/10/1996

BENCH: A.M. AHMADI, SUJATA V. MANOHAR

ACT:

HEADNOTE:

JUDGMENT: presents:                  Hon’ble the chief Justice                  Hon’ble Mrs.Justice Sujata V.Manohar      Vikas  Singh,   Adv,  for  L.R.  Singh,  Adv.  for  the appellant      V.A.Mohta. Sr.Adv., A.K. Choudhary., Advs. for Manoj Prasad, Adv. with him for the Respondents.                       J U D G M E N T      The following Judgement of the court was delivered:      Mrs. Sujata V.Manohar.J.      Leave granted.      The appellant  and respondents  1 to 5 were partners in an unregistered partnership firm by the name of M/S. Lakshmi Narain  a  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 respondent 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 off  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. 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.19O  of  1993  which  was  filed  by  the  first respondent against  his 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.

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    The present  appeal is form the order of the High court dated 5.8.1993. 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-sections      (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 Isolvency Act,      1909, or  the Provincial Insolvency      Act, 1909,  to realise the property      of an, insolvent partner.      Under Section  69(1), a  suit, inter  alia  to  enforce 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 firms registered. Under sub-section (3) any other  proceeding to  enforce a  right a  arising from a contract by  a person  suing as  a partner against the other parnters 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. [AIR 1964 SC 1882 infra]). 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).      Under sub-section  (3)(a) this  bar will not affect 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. Therefore,   although    the   partnership   firm   may   be unregistered,  one   partner  can  sue  other  partners  for

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dissolution of the firm and for accounts. The words "to sue" used in  sub-section (3)(a)  cannot be construed narrowly to refer only  to suits  for  dissolution  of  partnership  and accounts. The  exception contained  in   sub-section  (3)(a) applies not  merely to  sub-sections (1) and (2) but also to the  first   part  of   sub-section  (3)  which  deals  with proceedings other  than suits. Therefore, in order that sub- section (3)(a)  would apply   to  all these  provisions, the words "to sue" section (3)(a) must be understood as applying to any  proceedings for  dissolution of  partnership or  for accounts of a dissolved firm or to realise the property OF a dissolved firm.  This proceeding  may be  either by way of a suit or  it can  even be  a proceeding under the Arbitration Act to  secure these  rights through arbitration. [Vide Prem Lata (Smt)]  & Anr.  v. M/s Ishar Dass Chaman & Ors. (1995 2 SCC 145),  a judgment  to which  one of  us  was  a  party.] Therefore, an arbitration clause in a partnership deed of an unregistered partnership  can be enforced for the purpose of securing, inter  alia, a  dissolution and  accounts  of  the partnership  or   for  enforcing  any  right  or  power  for obtaining the property of a dissolved firm.      Our attention  was drawn to the case of Jagdish Chandra Gupta v.  Kajaria Traders  (India) LTD  (AIR SC  1882) where this Court has held that the word "proceedings’ in the first part of  sub-section (3) must be widely construed to include proceedings in  arbitration. The  exception carved out under sub-section (3)(a)  would edually apply to such proceedings. The dispute,  however, in that case between the partners did not relate  to dissolution  or accounts  of the  partnership firm. Hence  a resort  to the  exception  under  sub-section (3)(a) was  not required.  In fact,  this aspect was neither argued nor  considered by  this Court  in  that  case.  This question directly  arose in  Prem Lata’s case  (supra). This Court has  held that  a  suit  under    Section  20  of  the Arbitration Act was maintainable under  the exception carved out in  sub-section (33(a)  of   Section 69  of  the  Indian Partnership Act.  Hence where   arbitration  is sought under the  arbitration  clause  in  a    partnership  deed  of  an unregistered firm  for the   of  dissolution and accounts of the  partnership    Firm,  the  partners  can  maintain  all applications/petitions under  the Arbitration  Act  for  the purpose of  enforcing their  right to secure dissolution and accounts of  the partnership  firm through  aribitration. In fact, in  the present  case the  suit  for  dissolution  and accounts of  the partnership  firm  has  been  stayed  under Section 34  of  the  Arbitration  Act  at  the  instance  of respondent No.1.  The petition  of the appellant, therefore, under Section  8 of  the  Arbitration Act is maintainable in the present case.      The Judgment and order of the High Court dated 6.8.1993 is set aside. The appeal is allowed with cost.