M/S UMESH GOEL V HIMACHAL PRADESH COOPERATIVE HOUSING SOCIETY LTD. (2016) 11 SCC 313
FACTS
Cooperative Group Housing Society invited tenders for construction of 102 dwelling units with a basement in Dwarka, New Delhi.
Appellant, an unregistered partnership firm, submitted a bid on 06.05.1998 and won the contract at Rs.9.80 crores.
Agreement signed on 02.02.1999 after some delay in plan sanctioning, which appellant claims not to be responsible for.
Dispute arose, appellant moved High Court under Section 9 of Arbitration and Conciliation Act 1996 to restrain respondent from dispossessing.
Commissioner appointed to measure work executed by appellant.
Another application under Section 9 filed by appellant to restrain respondent from operating bank accounts and dispossessing appellant.
Respondent appointed arbitrator Smt. Sangeeta Tomar; appellant withdrew earlier application for independent arbitrator and arbitrator awarded appellant Rs. 1,36,24,886.08 with interest at 12% from 01.06.2002 till award date and further interest at 18%.
Respondent challenged the award under Section 34 of the 1996 Act before Delhi High Court.
The Single Judge dismissed the respondent's application and review application.
Respondent appealed in FAO (OS) No.376 of 2005 on 14.11.2005.
Pending disposal of appeals, interim order passed directing respondent to deposit 50% of decretal amount within specified time.
The Division Bench allowed FAO (OS) No.376 of 2005, leading to the current appeal.
ISSUE
Whether expression other proceedings contained in Section 69(3) of the Indian Partnership Act, 1932 will include Arbitral proceedings and can be equated to suit filed in Court and thereby ban imposed against unregistered firms can operate in matters of arbitral proceedings?
JUDGEMENT
The Court ruled that Arbitral Proceedings do not fall within the scope of the term "other proceedings" as stated in Section 69(3) of the Indian Partnership Act, 1932.
The prohibition outlined in Section 69 of the Indian Partnership Act, 1932 does not extend to Arbitral proceedings and the resulting Arbitration Award.
LEGAL ANALYSIS
The court emphasised that Section 69 of the Indian Partnership Act, 1932 imposes a ban on unregistered firms or individuals claiming to be partners of such firms from initiating legal proceedings in a court.
The ban extends to claims of set-off or other proceedings intrinsically linked to a pending suit.
The Court clarified that to trigger Sub-section (3) of Section 69, the key condition is the initiation of a suit in a court by an unregistered firm or a person claiming to be a partner of such a firm.
The prohibition does not extend to arbitration proceedings, and the Court rejected an argument challenging the maintainability of a counter claim of appellant in arbitration based on Section 69 of the Indian Partnership Act, 1932.
The Court underscored that the interpretation of Section 69 should not encompass arbitral proceedings, especially given the distinct features of the A&C Act which governs arbitration.