Page 1 Reportable

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO.7916 OF 2009

M/s Umesh Goel …Appellant

VERSUS

Himachal Pradesh Cooperative Group Housing

Society Ltd. …Respondent

J U D G M E N T

Fakkir Mohamed Ibrahim Kalifulla, J.

1.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.

2.The facts are not in controversy which can be briefly stated as under:

The respondent which is 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 submitted its bid in response to

the said tender on 06.05.1998. The appellant was the successful bidder and

the contract was awarded to the appellant at an estimated cost of Rs.9.80

crores. The appellant was issued a letter of intent. On 09.08.1998 the

appellant submitted its first bill for the construction of the compound wall

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Page 2 etc. The agreement for the construction of 102 dwelling units with basement

was entered into between the appellant and the respondent on 02.02.1999.

It is stated that there was some delay in getting the plan sanctioned, which

according to the appellant, he was not responsible for the delay. 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 (for short “1996 Act”)

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. It was filed on 22.05.2005. A

Commissioner was also 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 on 29.01.2003.

3.With reference to the dispute which arose as between the appellant

and the respondent an arbitrator/an advocate by name Smt. Sangeeta

Tomar was appointed by the respondent to adjudicate the dispute between

them. As the appointment came to be made on 17.03.2003 by the

respondent, though, the appellant earlier moved the High Court by way of

an Arbitration Application No.145 of 2003 on 09.07.2003 under Section

11(5) of the 1996 Act for appointment of an independent arbitrator, the

same was subsequently withdrawn. The appellant participated in the

arbitration proceedings before the arbitrator appointed by the respondent.

Claims and counter claims were made by the appellant as well as the

respondent before the arbitrator. 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. While resisting the claim of the

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Page 3 appellant, the respondent did not specifically raise any plea under Section

69 of the Partnership Act.

4.The respondent challenged the award dated 05.05.2005 under Section

34 of the 1996 Act before the Delhi High Court which was registered as A.A.

No.188 of 2005. The said application was filed on 02.08.2005. The

respondent’s application was dismissed by the learned Single Judge by an

order dated 01.09.2005. The respondent filed Review Application No.26 of

2005 which was also dismissed by the learned Single Judge by an order

dated 03.10.2005. As against the orders dated 01.09.2005 and 03.10.2005,

the respondent preferred appeals in FAO (OS) No.376 of 2005 on

14.11.2005. Pending disposal of the appeals, an interim order was passed

on 21.07.2006 directing the respondent to deposit 50% of the decretal

amount within six weeks and by subsequent order dated 18. 08.2006 the

time was extended by another four weeks. By the impugned order dated

20.11.2007 the Division Bench having allowed the FAO(OS) No.376 of 2005,

the appellant is before us.

5.We heard Mr. Dhruv Mehta, learned Senior Counsel for the appellant

and Mr.Amarendra Saran, learned Senior Counsel for the respondent. Mr.

Dhruv Mehta, learned Senior Counsel in his submissions after drawing our

attention to Section 69 and in particular Section 69(3) of the Partnership

Act contended that when sub sections (1) and (2) are read in to sub section

(3) of Section 69, the expression “other proceedings” mentioned in the said

sub section (3) should be with reference to other proceedings connected

with a suit in a Court and cannot be read in isolation. The learned Senior

Counsel contented that if it is read in that sense the expression “other

proceedings” in sub section (3) can have no relevance nor referable to

Arbitral proceedings in isolation. The learned Senior Counsel further

contended that going by the plain reading of the Statute and if the golden

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Page 4 rule of construction is applied, an arbitrator by himself is not a court for the

purpose of Section 69 of the Statute. The learned Senior Counsel then

submitted that there is a vast difference between an arbitrator and the

Court, that though an arbitrator may exercise judicial powers, he does not

derive such powers from the State but by the agreement of the parties

under a contract and, therefore, he cannot be held to be a Court for the

purpose of Section 69 of the Partnership Act. While referring to Section 36

of the 1996 Act, the learned Senior Counsel submitted that it is only a

statutory fiction by which for the purpose of enforcement, the award is

deemed to be a decree and it cannot be enlarged to an extent to mean that

by virtue of the said award to be deemed as a decree, the arbitrator can be

held to be a Court. Lastly, it was contended by him that in order to invoke

Section 69(3), three mandatory conditions are required to be fulfilled,

namely, that (a) there should be a suit and the other proceedings should be

intrinsically connected to the suit, (b) such suit should have been laid to

enforce a right arising from the contract and (c) such a suit should have

been filed in a Court of law.

6.As against the above submissions Mr. Saran, learned Senior Counsel

for the respondent submitted that the expression “other proceedings” will

include arbitral proceedings and that the foundation for it must only be

based on a right in a contract. In support of the said submission, learned

senior counsel contended that this Court has held while interpreting

Section 14 of the Limitation Act that arbitral proceedings are to be treated

on par with civil proceedings. The learned Senior Counsel also submitted

that under Section 2(a) of the Interest Act, arbitral proceedings have been

equated to regular suits and, therefore, the expression “other proceedings”

in Section 69(3) of the Partnership Act should be held to include an Arbitral

Proceeding on par with a suit. The learned counsel, therefore, contented

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Page 5 that the arbitrator should be held to be a Court and the proceedings

pending before it are to be treated as a suit and consequently other

proceedings. By referring to Sections 35 and 36 of the 1996 Act where an

award of the arbitrator has been equated to a decree of the Court and

applicability of Civil Procedure Code for the purpose of execution has been

prescribed, the learned Senior Counsel contended that the arbitral

proceedings should be held to be civil proceedings before a Court.

7.Mr. Dhruv Mehta, learned Senior Counsel for the appellant relied

upon the decisions reported in Jagdish Chander Gupta v. Kajaria Traders

(India) Ltd. 1964 (8) SCR 50, Kamal Pushp Enterprises v. D.R.

Construction Co. (2000) 6 SCC 659, The Bharat Bank, Ltd., Delhi v. The

Employees of the Bharat Bank Ltd., Delhi and the Bharat Bank

Employees’ Union, Delhi - AIR 1950 SC 188, Firm Ashok Traders and

another v. Gurumukh Das Saluja and others – (2004) 3 SCC 155,

Sumtibai and Ors. v. Paras Finance Co. Regd. Partnership Firm, Beawer

(Raj.) Through Mankanwar (Smt.) W/o Parasmal Chordia (Dead) and

Ors.- (2007) 10 SCC 82, Panchu Gopal Bose v. Board of Trustees for Port

of Calcutta - (1993) 4 SCC 338, M/s. Consolidated Engg. Enterprises v.

Principal Secy. Irrigation Deptt. and Ors. – 2008 (6) SCALE 748, State of

W.B. v. Sadan K. Bormal and Anr. - (2004) 6 SCC 59, Raj Kumar Khurana

v. State of (NCT of Delhi) and Anr. - (2009) 6 SCC 72 and M/s. Indian Oil

Corporation Limited Rep. by Its Chief LPG Manager (Engg.) S.

Chandran v. M/s. Devi Constructions, Engineering Contractors &

another – 2009 (2) Law Weekly 849. Mr. Saran, learned Senior Counsel for

the respondent relied upon the decisions reported in Firm Ashok Traders

(supra), Delhi Development Authority v. Kochhar Construction Work

and Anr. (1998) 8 SCC 559, Panchu Gopal Bose (supra) and P. Sarathy v.

State Bank of India - (2000) 5 SCC 355.

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Page 6 8.Having heard learned counsel for the appellant as well the respondent

and having bestowed our serious consideration to the respective

submissions, the various decisions relied upon and the provisions

contained in the Partnership Act, the Interest Act, Civil Procedure Code and

Arbitration Act, we are of the view that the submissions of Mr. Dhruv

Mehta, learned Senior Counsel for the appellant merit acceptance.

9.To appreciate the respective submissions and in support of our

conclusion, at the very outset Section 69 requires to be noted, which reads

as under:

“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 proceedings to enforce a right arising from

a contract, but shall not effect –

(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 realize the property of a dissolved firm, or

(b)the powers of an official assignee, receiver or court under

the Presidency-towns Insolvency Act, 1909 (3 of 1909) or

the Provincial Insolvency Act, 1920 (5 of 1920) to realize

the property of an insolvent partner.

(4) This section shall not apply-

(a) to firms or to partners in firms which have no place of

business in the territories to which this Act extends, or

whose places of business in the said territories, are situated

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Page 7 in areas to which, by notification under section 56, this

Chapter does not apply, or

(b) to any suit or claim of set-off not exceeding one hundred

rupees in value which, in the Presidency-towns, is not of a

kind specified in section 19 of the Presidency Small Cause

Courts Act, 1882 (5 of 1882), or, outside the

Presidency-towns, is not of a kind specified in Schedule II to

the Provincial Small Cause Courts Act, 1887 (9 of 1887), or

to any proceeding in execution or other proceeding

incidental to or arising from any such suit or claim.”

10.Though, some of the decisions which were cited before us dealt with

Section 69(3) of the Partnership Act, in the instance we wish to analyze the

said sub-section along with the other components of the said Section 69.

When we read sub-section (3) of Section 69 carefully, we find that as rightly

contended by Mr. Dhruv Mehta, learned Senior Counsel for the appellant,

the provisions of sub-sections (1) and (2) have been impliedly incorporated

in sub-section (3). When the opening set of expression in sub-section (3)

states that the provisions of sub-sections (1) and (2) shall apply, there is no

difficulty in accepting the said submission of learned Senior Counsel for the

appellant that the entirety of the said two sub-sections should be held to be

bodily lifted and incorporated in sub-section (3). It is difficult to state that

any one part of sub-sections (1) and (2) alone should be held to be

incorporated for the purpose of sub-section (3). Therefore, we are convinced

that when we read sub-section (3) it is imperative that all the ingredients

contained in sub-sections (1) and (2) should be read into sub-section (3)

and thereafter apply the said sub-section when such application is called

for in any matter.

11.Once we steer clear of the said position it will be necessary to note

what are the specific ingredients contained in sub-sections (1) and (2).

When we read sub-section (1) of Section 69 the said sub-section primarily

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Page 8 imposes a ban on any person as a partner of a firm from filing any suit to

enforce a right arising from a contract or a right conferred under the

Partnership Act in any Court by or on behalf of an unregistered firm or a

person suing as a partner of a firm against the said firm or against any

person alleged to be or to have been a partner in that firm. To put it in

nut-shell the ban imposed under sub-section (1) of Section 69 is on any

person in his capacity as the Partner of an unregistered firm against the

said firm or any of its partners, in the matter of filing a suit to enforce a

right arising from a contract or conferred by the provisions of the

Partnership Act. In effect, the ban is in respect of filing a suit against that

unregistered firm itself or any of its partners by way of a suit under a

contract or under the Partnership Act. Under sub-section (2) the very same

ban is imposed on an unregistered firm or on its behalf by any of its

partners against any third party by way of a suit to enforce a right arising

from a contract in any Court. A close reading of sub-Sections (1) and (2)

therefore shows that while under sub-section (1) the ban is as against filing

a suit in a Court by any person as a partner of an unregistered firm against

the firm itself or any of its partner, under sub-section (2) such a ban in the

same form of a suit in the Court will also operate against any third party at

the instance of such an unregistered firm. The common feature in both the

sub-sections are filing of a suit, in a Court for the enforcement of a right

arising from a contract or conferred by the Partnership Act either on behalf

of an unregistered firm or by the firm itself or by anyone representing as

partners of such an unregistered firm. While under sub-section (1) the ban

imposed would operate against the firm itself or any of its partners, under

sub-section (2) the ban would operate against any third party.

12.The question for our consideration is by virtue of sub-section (3)

whether the expression “other proceedings” contained therein will include

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Page 9 Arbitral proceedings and can be equated to a suit filed in a Court and

thereby the ban imposed against an unregistered firm can operate in the

matter of arbitral proceedings. If sub-sections (1) and (2) are virtually lifted

whole hog and incorporated in sub-section (3), it must be stated that it is

not the mere ban that is imposed in sub-sections (1) and (2) that alone is

contemplated for the application of sub-section (3). In other words, when

the whole of the ingredients contained in sub-sections (1) and (2) are wholly

incorporated in sub-section (3), the resultant position would be that the ban

can operate in respect of an unregistered firm even relating to a set off or

other proceedings only when such claim of set off or other proceedings are

intrinsically connected with the suit that is pending in a Court. To put it

differently, in order to invoke sub-section (3) of Section 69 and for the ban

to operate either the firm should be an unregistered one or the person who

wants to sue should be a partner of an unregistered firm, that its / his

endeavour should be to file a suit in a Court, in which event even if it

pertains to a claim of set off or in respect of ‘other proceedings’ connected

with any right arising from a contract or conferred by the Partnership Act

which is sought to be enforced through a Court by way of a suit then and

then alone the said sub-section can operate to its full extent.

13.As far as the construction of the said sub-section (3) of Section 69 is

concerned, we are able to discern the above legal position without any scope

of ambiguity. To be more precise, the condition precedent for the operation

of ban under sub-section (3) is that the launching of a suit in a Court of law

should be present and it should be by an unregistered firm or by a person

claiming to be partner of an unregistered firm either to a claim for set off in

the said suit or any other proceedings intrinsically connected with the said

suit.

14.In the event of the above ingredients set out under sub-sections (1), (2)

and (3) being fulfilled then and then alone the ban prescribed against an

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Page 10 unregistered firm under Section 69(1), (2) and (3) would operate and not

otherwise.

15.Keeping the above outcome of the legal position that can be derived

from a reading of sub-sections (1), (2) and (3) of Section 69 in mind we can

draw further conclusions by making specific reference to sub-clauses (a)

and (b) of sub-section (3) as well as the exceptions set out in sub-clauses (a)

and (b) of sub-section (4) as well. When under sub-section (3) which also

relates to a ban concerning ‘other proceedings’, the law makers wanted to

specifically exclude from such ban such of those proceedings which also

likely to arise in a suit, but yet the imposition of ban of an unregistered firm

need not be imposed. Keeping the said intent of the law makers in mind ,

when we read sub-clauses (a) and (b) of sub-section (3) , it can be

understood that even though such other proceedings may be for the

enforcement of any right to sue but yet if it is for the dissolution of a firm or

for accounts of a dissolved firm or any right or power to realize the property

of a dissolved firm, the same can be worked out by way of a suit in a Court

or by way of other proceedings in that suit and the same will not be affected

by the ban imposed under sub-section (3). Similarly, any steps initiated at

the instance of an official assignee, a receiver or Court under the

Presidency-Towns Insolvency Act of 1909 (3 of 1909) or the Provincial

Insolvency Act of 1920 (5 of 1920) to realize the property of an insolvent

partner in a pending suit of a Court also stand excluded from the ban

imposed under sub-section (3). The specific exclusions contained in clauses

(a) and (b) of sub-section (3) therefore makes the position clear to the effect

that 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.

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Page 11 16.When we read sub-section (4), the ban imposed under sub-sections

(1), (2) and (3) will have no application to any of those proceedings set out in

sub-clauses (a) and (b) of the said sub-section (4). A specific reference to

sub-clause (b) of sub-section (4) disclose that in the last part of the said

sub-clause it is specifically provided that other proceedings incidental to or

arising from any suit or claim of set off not exceeding Rs.100 in value under

those specific statute referred to in the said sub-clause can also be

launched without any ban being operated as provided under sub-sections

(1), (2) and (3). The said part of sub-clause (b) of sub-section (4) thus gives a

vivid picture as to the position that the ‘other proceeding’ specified in the

said sub-section can only relate to a pending suit in a Court and not to any

other different proceeding which can be categorized as ‘other proceedings’.

17.We are thus able to arrive at a definite conclusion as to the scope and

ambit of Section 69 in particular about Section 69(3). Having thus analyzed

the provision in such minute details and its implication, we can now apply

the said provision to the case on hand and find out whether Section 69(3) is

attracted to the Arbitral Proceedings and the ultimate award passed therein

by construing the same as falling under the expression “other proceedings”.

18.In the case on hand, the contract between the parties contained an

Arbitration Clause. The respondent invoked the said clause and an

Arbitrator came to be appointed. After the respondent filed its statement of

claim, the appellant filed its reply and also its counter claim dated

30.08.2003. Before the Arbitrator, in the course of oral arguments, a faint

attempt was made contending that, the appellant-firm being an

unregistered one, by virtue of Section 69 of the Partnership Act, the

proceedings insofar as the counter claim was concerned, the same was not

maintainable and should be rejected. The Arbitrator took the correct view

that Section 69 has no application to the proceedings of the Arbitrator and

held that the objection of the respondent was not sustainable. The

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Page 12 Arbitrator allowed the counter claim to the extent of Rs.1,36,24,886/-

(Rupees One crore thirty six lacs twenty four thousand eight hundred eighty

six only). When the award of the Arbitrator was challenged by the

respondent under Section 34 of the Act, the very same objection was raised

as a ground of attack. The learned Single Judge of the High Court also

found no merit in the said contention and upheld the award of counter

claim.

19.By the impugned judgment, the Division Bench in the appeal filed

under Section 37 of the Act took a contrary view and held that the counter

claim in an Arbitral Proceedings is covered by the expression “other

proceedings” contained in Section 69(3) of the Partnership Act and the

appellant being an unregistered firm at the relevant point of time was hit by

the embargo contained therein and consequently the award of counter claim

in the award as confirmed by the learned Judge was reversed as not

justiciable by virtue of Section 69 of the Partnership Act.

20.Based on the close analysis of Section 69 in its different parts, we are

able to discern and hold that in order to attract the said Section, first and

foremost the pending proceeding must be a suit instituted in a Court and in

that suit a claim of set off or other proceedings will also be barred by virtue

of the provision set out in sub-sections (1) and (2) of Section 69 as

specifically stipulated in sub-section (3) of the said Section. Having regard

to the manner in which the expressions are couched in sub-section (3), a

claim of set off or other proceedings cannot have independent existence. In

other words, the foundation for the application of the said sub-section

should be the initiation of a suit in which a claim of set off or other

proceedings which intrinsically connected with the suit arise and not

otherwise.

21.Under the Partnership Act, the expression “Court” is not defined. In

Section 2(e) of the said Act though it is stated that the expressions used but

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Page 13 not defined, the definition in the Indian Contract Act, 1872 can be applied,

in the Contract Act also there is no specific definition set out for the

expression “Court”. However, we find a definition of the “Court” in Section

2(1)(e) of the 1996 Act, which reads as under:

“2. Definitions.-(1) In this Part, unless the context otherwise

requires,-

(a)xxxxxxxxx

(b)xxxxxxxxx

(c)xxxxxxxxx

(d)xxxxxxxxx

(e)“Court” means the principal Civil Court of original

jurisdiction in a district, and includes the High Court in

exercise of its ordinary original civil jurisdiction, having

jurisdiction to decide the questions forming the subject-matter

of the arbitration if the same had been the subject-matter of a

suit, but does not include any civil court of a grade inferior to

such principal Civil Court, or any Court of Small Causes;”

22.Mr. Amrender Saran, learned Senior Counsel for the respondent in his

submissions contended that under Section 36 of the 1996 Act since it has

been provided that the award of an Arbitrator can be enforced under the

Code of Civil Procedure in the same manner as if it were a decree of the

Court, it should be held that the role played by the Arbitrator should also

be deemed to be that of a Court and on that footing hold that Arbitral

Proceedings are also akin to Court proceedings before the Court by equating

the Arbitral Tribunal as a Court.

23.Having thus noted the facts involved in the case on hand and before

dealing with the contentions of Mr. Saran, learned Senior Counsel for the

respondent on the interpretation of Section 69(3), we wish to note the

earliest decision on this very question dealt with in Jagdish Chander case

(supra). Justice Hidayatullah, speaking for the Bench has made a critical

analysis of this very provision, namely, Section 69(3) and has stated as

under in paragraphs 7 and 9:

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Page 14 “7. Mr. Justice Naik asked the question that if all proceedings were to

be excluded why was it not considered sufficient to speak of

proceedings along with suits in sub-Sections (1) and (2) instead of

framing a separate sub-section about proceedings and coupling “other

proceeding” with “a claim of set-off? The question is a proper one to

ask but the search for the answer in the scheme of the section itself

gives the clue. The section things in terms of (a) suits and (b) claims of

set-off which are in a sense of the nature of suits and (c) suits and

other proceedings. The section first provides for exclusion of suits in

sub-sections (1) and (2). Then it says that the same ban applies to a

claim of set-off and other proceeding to enforce a right arising from a

contract. Next it excludes the ban in respect of the right to sue (a) for

the dissolution of a firm, (b) for accounts of a dissolved firm and (c) for

the realization of the property of a dissolved firm. The emphasis in

each case is on dissolution of the firm. Then follows a general

exclusion of the section. The fourth sub-section says that the section

as a whole, is not to apply to firms or to partners and firms which have

no place of business in the territories of India or whose places of

business are situated in the territories of India but in areas to which

Chapter VII is not to apply and to suits or claims of set-off not

exceeding Rs.100 in value. Here there is no insistence on the

dissolution of the firm. It is significant that in the latter part of clause

(b) of that section the words are “or to any proceeding in execution or

other proceeding incidental to or arising from any such suit or claim”

and this clearly shows that the word “proceeding” is not limited to a

proceeding in the nature of a suit or a claim of set-off. Sub-section (4)

combines suits and a claim of set-off and then speaks of “any

proceeding in execution” and “other proceeding incidental to or arising

from any such suit or claim” as being outside the ban of the main

section. It would hardly have been necessary to be so explicit if the

words “other proceeding” in the main section had a meaning as

restricted as is suggested by the respondent. It is possible that the

draftsman wishing to make exceptions of different kinds in respect of

suits, claims of set-off and other proceedings grouped suits in

sub-sections (1) and (2), set-off and other proceedings in sub-section (3)

made some special exceptions in respect of them in sub-section (3) in

respect of dissolved firms and then viewed them all together in

sub-section (4) providing for a complete exclusion of the section in

respect of suits of particular classes. For convenience of drafting this

scheme was probably followed and nothing can be spelled out from the

manner in which the section is sub-divided.

9. In our judgment, the words “other proceeding” in sub-section (3)

must receive their full meaning untrammeled by the words “a claim of

set-off”. The latter words neither intend nor can be construed to cut

down the generality of the words “other proceeding”. The sub-section

provides for the application of the provisions of sub-sections (1) and (2)

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Page 15 to claims of set-off and also to other proceedings of any kind which can

properly be said to be for enforcement of any right arising from contract

except those expressly mentioned as exceptions in sub-section (3) and

sub-section (4).”

(Underlining is ours)

24.In the first blush, when we read paragraph 7, one is likely to gain an

impression as though the expression ‘other proceedings’ is disjunctive of a

suit as specifically prescribed in sub-sections (1) and (2) of Section 69. But

on a deeper scrutiny of the judgment, we find that in the light of the special

features involved in the said case, it was laid down that ‘other proceedings’

would be referable to Arbitration as well. We will right now note and state as

to those intricate factors which weighed with the learned Judges to state the

law in such terms. First and foremost, it will have to be noted that in the

said case, the Arbitral proceedings arose under the Indian Arbitration Act of

1940 and in particular in relation to a proceeding which emanated under

Section 8 of the said Act. Under Section 8 of the 1940 Act, the power of

Court to appoint Arbitrator or umpire is specified. Sub-sections (1)(a) to (c)

and (2) of Section 8 details the situations under which the said power of

appointment of Arbitrator or umpire can be made. Under Section 2(c), the

expression ‘Court’ is defined to mean a Civil Court having jurisdiction to

decide the questions framing the subject matter of a suit excluding a Small

Causes Court. Under the said definition, an exception is carved out even for

a Small Causes Court to fall under the definition of Court when the said

Court is called upon to exercise its jurisdiction in situations, which are set

out in Section 21 of the Act.

25.The definition of ‘Court’ under Section 2(c) read along with Sections 8

and 21 of the 1940 Act, therefore, indicates that the proceedings initiated

under the said Sections are virtually in the nature of a suit in a Civil Court

having jurisdiction, though such proceedings are relating to initiation as

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Page 16 well as superintendence of Arbitration proceedings such as appointment of

an Arbitrator or umpire or inaction or neglect on the part of Arbitrator or

umpire or the incapacity of the Arbitrator or umpire, death of an Arbitrator

or umpire or even in situations where the agreement has not provided for or

not intended to supply the vacancy or the parties or the Arbitrator fail to

supply the vacancy or the parties or the Arbitrator who are required to

appoint an umpire and they fail to carry out their obligation. Under Section

21 of the 1940 Act even in the absence of an agreement providing for

Arbitration, by consent of all parties to any suit can seek for a reference to

Arbitration before the judgment is pronounced. Equally a reference to

Sections 11, 12, 14, 15, 16, 17, 18, 19, 20, 21, 23, 24, 25, 28, 29, 30, 31,

32, 33, 34, 36, 37, 38, 39, 40, 41, 43 and 47 of 1940 Act disclose that the

whole scheme of the Act in effect invested the Civil Court and under certain

specified situations even with the Small Causes Court to exercise all the

powers that a Civil Court having jurisdiction in a civil suit mutatis mutandis

in relation to an Arbitration apply, unlike the Arbitration and Conciliation

Act of 1996 (hereinafter called the “1996 Act”).

26.The scope and ambit of the power and jurisdiction of ‘Court’ defined

under Section 2(e) of the 1996 Act is circumscribed to certain specified

extent as set out in Sections 8, 9, 14, 27, 34, 36, 37, 39, 42, 43, 47, 48, 49,

50, 56, 58 and 59. A comparative consideration of the 1940 Act and 1996

Act disclose the extent of control and operation of a Court under the former

Act was far more intensive and elaborate than the latter Act. The more

significant distinction as between the 1940 Act and the 1996 Act is clear to

the position that the former Act does not merely stop with the initiation and

enforcement of an Arbitration and its award, but effectively provides for

intervention at every stage of the Arbitral proceedings upto its final

consideration and enforcement as if it were a regular civil suit, whereas

under the 1996 Act, the scope of intervention is not that of a Civil Court as

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Page 17 it could do in the matter of a suit. Such clear distinction could be discerned

from the reading of the various provisions of both the Acts. Therefore, in the

light of such distinctive features that prevail in respect of an Arbitral

proceeding which emanated under the 1940 Act, this Court held in Jagdish

Chander case (supra) to the effect that an Arbitral proceedings governed by

1940 Act would squarely fall under the category of ‘other proceedings’ as

specified in Section 69(3) of the Partnership Act. To be more precise, in

Jagdish Chander case (supra), in as much the initiation of the proceedings

were under Section 8 of the 1940 Act before a Civil Court having

jurisdiction to decide the question forming the subject matter of suit and

the respondent therein being an unregistered Partnership Firm, the

ingredients set out in Section 69(1) to (3) of the Partnership Act applied in

all force and consequently held that the prohibition set out in the said

Section squarely applied.

27.We only wish to add that though in the said decision, this Court did

not specifically mention as to the requirement of pendency of a proceeding

in the nature of a suit in a Civil Court as the basic ingredient to be satisfied

as stipulated in sub-sections (1) & (2) of Section 69 in order to extend the

specific prohibition even to ‘other proceedings’ under sub-section (3), this

Court was fully aware of the fulfillment of those mandatory requirement

having regard to the nature of proceedings that existed under the provisions

of the 1940 Act. Therefore, our conclusion based on the interpretation of

Section 69 on the whole as set out in paragraphs 12 to 17 are fully

supported by the above decision. We have therefore no hesitation to hold

that the ratio laid down in Jagdish Chander case (supra) does not in

anyway conflict with the view which we have taken herein, having regard to

the advent of the 1996 Act, under which the nature of Arbitration

Proceedings underwent a sea change as compared to the 1940 Act, what is

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Page 18 stated in Jagdish Chander case (supra) can have application in the special

facts of that case and that it can have no application to a proceedings which

emanated under the 1996 Act, for which the interpretation to be placed on

Section 69(3) will have to be made independently with specific reference to

the provisions of the 1996 Act, where the role of the Court is limited as

noted earlier to the extent as specified in Sections 8, 9 etc.

28.Having thus noted the distinctive features in Jagdish Chander case

(supra), we wish to refer to the subsequent decision of this Court reported

in Kamal Pushp Enterprises (supra) . The judgment and the ratio in

Jagdish Chander (supra) was sought to be applied in all force in Kamal

Pushp Enterprises (supra), but having noted the distinctive feature of

Jagdish Chander (supra), this Court has explained the said judgment and

held that it will have no application to a post Award situation. Some of the

relevant portions of the judgment in Kamal Pushp Enterprises (supra) can

be quoted to appreciate the ultimate conclusion which fully supports our

view. The question posed for consideration has been noted as under:

“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……. Strong reliance was placed in this regard

upon the decision of this Court reported in Jagdish Chander Gupta

Vs. Kajaria Traders (India) ltd. [AIR 1964 SC 1882]; ….. in addition

to placing reliance upon some other decisions of the High Courts, to

substantiate his claim….”

6. …..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

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Page 19 in fact to enforce a right which arose from a contract/agreement of

parties.”

9. 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 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…….”

(Emphasis added)

29.The above passages extracted from the case of Kamal Pushp

Enterprises (supra), apart from explaining the principles laid down in

Jagdish Chander case (supra), has thus held in categorical terms as to

how Section 69 prohibition will have no application to the post award

proceedings as they do not fall under the expression ‘other proceedings’ of

the said section. This Court thus having already understood and explained

Jagdish Chander case (supra) and reiterated the legal position on the

application of Section 69(3) to the post award proceedings, which fully

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Page 20 supports our conclusion in the case on hand, we need not dilate much on

this issue.

30.Having reached the above definite conclusion on the application of

Section 69(3) to the post award proceedings, when we consider the

submissions of Mr. Amrender Saran, learned senior counsel for the

respondent, the learned counsel, in the first place, contended that for the

application of Section 69(3) of the Partnership Act to Arbitral proceedings,

the foundation must be only based on a right in a contract. As far as the

said contention is concerned, the same has already been dealt with by this

Court in Kamal Pushp Enterprises (supra) wherein it is held as under:

“…..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.…….’ (Emphasis added)

31.Therefore, the said contention of the learned senior counsel for the

respondent has no force.

32.The learned senior counsel then contended that while interpreting

Section 14 of the Limitation Act, it was held that Arbitration Proceedings are

to be treated on par with civil proceedings. Though, in the first blush, the

submission looks more attractive, on a deeper scrutiny it must be held that

it is always well settled that a judgment can be a binding precedent on a

question of law, which was canvassed before it and decided. Keeping the

said principle in mind when we consider the said submission, we have

clearly held as to how a reading of Section 69 as a whole does not permit of

any interpretation that would cover Arbitral proceedings, de hors, filing of a

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Page 21 suit in a Court and that too in respect of a right under a contract governed

by the provisions of the Indian Partnership Act, especially after the coming

into force of the 1996 Act and the proceedings governed by the special

features contained in the said Act. Therefore, any interpretation made

under the Limitation Act while construing Section 14 to treat Arbitral

proceedings on par with civil proceedings cannot be applied to the case on

hand. Further, the decision of this Court in Kamal Pushp having

considered the application to Section 69(3) itself to Arbitral Proceedings and

held that the same will not apply to a Post Award Proceedings, we do not

find any merit in the said submission. Therefore, we are not able to apply

the principles laid down in the decision reported in M/s. Consolidated

Engg. Enterprises (supra) and P. Sarathy (supra) relied upon by the

learned senior counsel for the respondent.

33.The next submission of Mr. Saran, learned Senior Counsel was again

by relying upon Section 2(a) of the Interest Act. Under the said definition

section, ‘Court’ has been defined to include a Tribunal and an Arbitrator.

The learned senior counsel, therefore, contended that Arbitral Proceedings

should be equated to a Court and consequently make Section 69(3),

applicable to it as falling under the expression ‘other proceedings’. If such a

specific provision has been incorporated in the Partnership Act, there can

be no difficulty in accepting the argument of the learned senior counsel for

the respondent. In the absence of such a specific provision, it will not be

appropriate to import the definition clause under Section 2(a) of the Interest

Act to the Partnership Act in order to apply Section 69(3) of the Partnership

Act. Therefore, we do not find any scope to countenance such a submission

of the learned senior counsel for the respondent.

34.Lastly, it was contended by Mr. Saran, learned Senior Counsel that

under Section 36 of the 1996 Act, an Award of the Arbitrator has been

equated to decree of the Court for the purpose of execution. Under Section

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Page 22 35 of the 1996 Act, an Arbitral Award will be final and binding on the

parties and persons claiming under them subject to the other provisions

prescribed in the said part of the Act. Under Section 36 it is provided that

where the time for making an application to set aside the arbitral award

under Section 34 expired, or such application having been made and

referred, the award can be enforced under the Code of Civil Procedure in the

same manner as if it were a decree of the Court. When we consider the

submission of the learned senior counsel for the respondent, at the very

outset, it must be held that by referring to Sections 35 and 36, it is difficult

to draw an inference that based on the deeming provision specifically meant

for the enforcement and execution of an Award, the Arbitral Proceedings

can be equated to a Civil Court proceedings. As rightly contended by Mr.

Dhruv Mehta, learned senior counsel for the appellant, Section 36 only

creates a statutory fiction which is limited for the purpose of enforcement of

the Award. The deeming fiction is specifically restricted to treat the Award

as a decree of a Court, exclusively for the purpose of execution, though as a

matter of fact, it is only an Award of Arbitral proceeding. It is a settled

proposition, that a statutory provision will have to be construed from the

words that are expressly used and it is not for the Court to add or

substitute any word to it. Therefore, going by Sections 35 and 36 it cannot

be held that the entire Arbitral proceeding is a Civil Court proceedings for

the purpose of applicability of Section 69(3) of the Partnership Act. In this

context, we draw support from the decision of this Court reported in Sadan

K. Bormal (supra), paragraph 25 is relevant for our purpose which reads as

under:

“25. So far as interpretation of a provision creating a legal

fiction is concerned, it is trite that the Court must ascertain the

purpose for which the fiction is created and having done so

must assume all those facts and consequences which are

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Page 23 incidental or inevitable corollaries to the giving effect to the

fiction. In construing a fiction it must not be extended beyond

the purpose for which it is created or beyond the language of

the Section by which it is created. It cannot be extended by

importing another fiction. These principles are well settled and

it is not necessary for us to refer to the authorities on this

subject. The principle has been succinctly stated by Lord

Asquith in East End Dwelling Co. Ltd. V. Finsbury Borough

Council, (1951) 2 ALL ER 587, when he observed :-

"If you are bidden to treat an imaginary state of affairs as

real, you must surely, unless prohibited from doing so, also

imagine as real the consequence and incidents which, if

the putative state of affairs had in fact existed, must

inevitably have flowed from or accompanied it-. The statute

says that you must imagine a certain state of affairs; it

does not say that having done so, you must cause or

permit your imagination to boggle when it comes to the

inevitable corollaries of that state of affairs".”

35.We also draw support from the decision of this Court reported in

Paramjeet Singh Patheja Vs. ICDS Ltd. - (2006) 13 SCC 322, paragraph

42 is relevant, which reads as under:

“42. The words “as if” demonstrate that award and decree

or order are two different things. The legal fiction created is

for the limited purpose of enforcement as a decree. The

fiction is not intended to make it a decree for all purposes

under all statutes, whether State or Central.”

36.Though the learned senior counsel for the appellant and the

respondent referred to certain other decisions in support of their respective

submissions, as we are fortified by our conclusion, based on the

interpretation of Section 69 of the Partnership Act vis-à-vis the 1996 Act

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Page 24 and the 1940 Act as well as supported by the decision in Jagdish Chander

(supra) and Kamal Pushp Enterprises (supra) , we do not find any

necessity to refer to those decisions in detail. Having regard to our

conclusion that Arbitral Proceedings will not come under the expression

“other proceedings” of Section 69(3) of the Partnership Act, the ban imposed

under the said Section 69 can have no application to Arbitral proceedings

as well as the Arbitration Award. Therefore, the appeal stands allowed, the

impugned judgment of the Division Bench is set aside and the judgment of

the learned Single Judge stands restored. No costs.

….………………………………………...J.

[Fakkir Mohamed Ibrahim Kalifulla]

….………………………………………...J.

[C. Nagappan]

New Delhi;

June 29, 2016.

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