# MIS UMESH GOEL v. HIMACHAL PRADESH COOPERATIVE GROUP HOUSING SOCIETY LTD

- **Citation:** [2016] 6 S.C.R. 703
- **Court:** Supreme Court of India
- **Decided:** 2016
- **Case number:** Civil Appeal No.79f6 of2009
- **Bench:** Fakkir Mohamed Ibrahim Kalifulla, C. Nagappan
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/mis-umesh-goel-v-himachal-pradesh-cooperative-group-housing-society-ltd-31548
- **Pages:** 25

## Headnote

Partnership Act, 1932 - s.69(3) - Scope and ambit of -
Whether the ban imposed u!s.69 against an unregistered firm can
operate in the matter of arbitral proceedings by interpreting that
the expression "other proceedings" in sub-section (3) of s.69 will
include arbitral proceedings by equating the arbitral proceeding
to a suit filed in a Court - Held: The ban imposed u!s.69 can have.
no application to arbitral proceedings or arbitration award - Such
proceeding will not come under the expression "other proceedings"
in sub-section (3) of s.69 - Expressions couched in sub-section (3)
cannot have independent existence - The "other proceedings"
should be intrinsically connected with the "suit"which are banned
under sub-sections (1) and (2) of s.69 - The provisions of subsections (1) and (2) have been impliedly incorporated in sub-section
(3) -
The arbitral proceedings cannot be treated as civil
proceedings/suit for the purpose of s.69(3) by takii1g a cue from
Limitation Act, Arbitration and Conciliation Act or Interest Act -
Arbitration and Conciliation Act, 1996 - ss. 35 and 36 - Limitation
Act, 1963 - s.14 - Interest Act, 1978 - s. 2(a).
Interpretation of Statutes - A statutory provision has to be
interpreted from the words that are expressly used - Court should
not add or substitute any word to it.
Words and Phrases - 'Court' - Meaning of
Allowing the appeal, the Court
HELD: 1.1 While under sub-section (1) of s. 69 of
Partnership Act, the ban imposed operates against the firm itself
or any of its partners, under sub-section (2) the ban operate against
any third party. The provisions of sub-sections (1) and (2) have
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[2016) 6 S.C.R.
been impliedly incorporated in sub-section (3) of of s.69. When
the opening set of expression in sub-section (3) states that the
provisions of sub-sections (1) and (2) shall apply, the entirety of
sub-sections (1) and (2) 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-sec.tion (3). [Paras 10 and
UJ [713-A-B; 714-A]
1.2 Having regard to the manner in which the expressions
are couched in sub-section (3), a claim of set off or other
proceedings c.annot 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. [Para 20] (717-A-B]
1.3 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. In the event, the above
ingredients set out under sub-sections (1), (2) and (3) being
fulfilled then and then alone the ban prescribed against an
unregistered firm under Section 69(1), (2) and (3) would operate
and not otherwise. [Paras 13 and 14) (714-F-H)
,
1.4 When under sub-section (3) which also relates to a ban
F. 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 sub-clauses (a) and (b) of
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sub-section (3) are read, 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 sam

## Text

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[2016] 6 S.C.R. 703
MIS UMESH GOEL
v.
HIMACHAL PRADESH COOPERATIVE GROUP HOUSING
SOCIETY LTD.
(Civil Appeal No.79f6 of2009)
JUNE-29, 2016
[FAKKIR MOHAMED IBRAHIM KALIFULLA AND C.
NAGAPPAN, JJ.]
Partnership Act, 1932 - s.69(3) - Scope and ambit of -
Whether the ban imposed u!s.69 against an unregistered firm can
operate in the matter of arbitral proceedings by interpreting that
the expression "other proceedings" in sub-section (3) of s.69 will
include arbitral proceedings by equating the arbitral proceeding
to a suit filed in a Court - Held: The ban imposed u!s.69 can have.
no application to arbitral proceedings or arbitration award - Such
proceeding will not come under the expression "other proceedings"
in sub-section (3) of s.69 - Expressions couched in sub-section (3)
cannot have independent existence - The "other proceedings"
should be intrinsically connected with the "suit"which are banned
under sub-sections (1) and (2) of s.69 - The provisions of subsections (1) and (2) have been impliedly incorporated in sub-section
(3) -
The arbitral proceedings cannot be treated as civil
proceedings/suit for the purpose of s.69(3) by takii1g a cue from
Limitation Act, Arbitration and Conciliation Act or Interest Act -
Arbitration and Conciliation Act, 1996 - ss. 35 and 36 - Limitation
Act, 1963 - s.14 - Interest Act, 1978 - s. 2(a).
Interpretation of Statutes - A statutory provision has to be
interpreted from the words that are expressly used - Court should
not add or substitute any word to it.
Words and Phrases - 'Court' - Meaning of
Allowing the appeal, the Court
HELD: 1.1 While under sub-section (1) of s. 69 of
Partnership Act, the ban imposed operates against the firm itself
or any of its partners, under sub-section (2) the ban operate against
any third party. The provisions of sub-sections (1) and (2) have
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been impliedly incorporated in sub-section (3) of of s.69. When
the opening set of expression in sub-section (3) states that the
provisions of sub-sections (1) and (2) shall apply, the entirety of
sub-sections (1) and (2) 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-sec.tion (3). [Paras 10 and
UJ [713-A-B; 714-A]
1.2 Having regard to the manner in which the expressions
are couched in sub-section (3), a claim of set off or other
proceedings c.annot 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. [Para 20] (717-A-B]
1.3 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. In the event, the above
ingredients set out under sub-sections (1), (2) and (3) being
fulfilled then and then alone the ban prescribed against an
unregistered firm under Section 69(1), (2) and (3) would operate
and not otherwise. [Paras 13 and 14) (714-F-H)
,
1.4 When under sub-section (3) which also relates to a ban
F. 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 sub-clauses (a) and (b) of
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sub-section (3) are read, 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).
M/S UMESH GOEL v. HIMACHAL PRADESH COOPERATIVE
GROUP HOUSING SOCIETY LTD.
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. [Para 15) [715-B-E]
·1.5 Sub-clause (b) of sub-section (4) also 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 ca1.1 be categorized
as 'other proceedings'. [Para 16) [715-G-H)
. .
Kamal Pushp Enterprises v. D.R. Construction Co.
(2000) 6 SCC 659:2000 (2) Suppl. SCR 20 - relied
on.
Jagdish Chander Gupta.. v. Kajaria Traders (India) Ltd
1964 (8) SCR 50 - distinguished.
2. 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 not defined,- the definition in the
Contract Act, 1872 can be applied. In. the Contract Act also there
is no specific definition set out for the expression "Court".
However, a definition of the "Court" is found in Section 2(l)(e)
of the Arbitration and Conciliation Act, 1996. 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, 21; 34, 36, 37, 39, 42, 43,
47, 48, 49, 50, 56, 58 and 59. [Paras 21 and 26) (717-C; 720-F-G)
3. A reading of Section 69 as a whole does not permit of
any interpretation that would cover Arbitral proceedings, de llors,
filing of a 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
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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 present case. [Para 32) [724-F-H)
Mis. Consolidated Engg. Enterprises v. Principal Secy.
Irrigation Dept!. and Ors. 2008 (6) SCALE 748;
P. Sarathy v. State Bank of India (2000) 5 SCC 355:
2000
(1) Suppl. SCR 402 - held inapplicable.
4. It will not be appropriate to import the definition clause
under Section 2(a) of the Interest Act 'Court' whereby 'Court'
has been defined to include a Tribunal and an Arbitrator to the
Partnership Act in order to apply Section 69(3) of the Partnership
Act. (Para 331 (725-Dl
·
5. By re'ferring to Sections 35 and 36 of the 1996 Act, 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. Section 36 only creates a statutory fiction which is
limited for the purpose of enforcement oft he 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. (Para 34)
[725-G-H; 726-A-B)
State of W.B. v. Sadan K.Bormal and Am: (2004) 6 SCC
59; Paramjeet Singh Patheja v. /CDS Ltd. (2006) 13
SCC 322: 2006 (8) Suppl. SCR 178 - relied on.
The Bharat 4ank, Ltd., Delhi v. The Employees of the
Bharat Bank Ltd., Delhi and the Bharat Bank Employees'
Union, Delhi AIR 1950 SC 188: 1950 SCR 459;Firm
Ashok Traders and Anr. v. Gurumukh Das Saluja and
M/S UMESH GOEL v. HIMACHAL PRADESH COOPERATIVE
GROUP HOUSING SOCIETY LTD.
Ors. (2004) 3 SCC 155: 2004 (1) SCR 404; Panchu
Gopal Bose v. Board of Trustees for Port of Calcutta
(1993) 4 SCC 338: 1993 (3) SCR 361; Sumtibai and
Ors. v. Paras Finance Co. Regd. Partnership Firm,
Beawer (Raj.) Through Mankanwar (Smt.) Wlo
Parasmal Chordia (Dead) and Ors. (2007) 10 SCC 82:
2007 (10) SCR 543; Raj Kumar Khurana v. State of
(NCT of Delhi) and Anr. (2009) 6 SCC 72: 2009 (7)
SCR 434; Mis. Indian Oil Cmporation Limited Rep. by
Its Chief LPG Manager (Engg.) S. Chandran v. Mis.
Devi Constructions, Engineering Contractors & Anr.
2009 (2) Law Weekly 849; Delhi Development
Authority v. Kochhar Construction Work and Anr.
(1998) 8 sec 559 - referred to.
Case Law Reference
1964 (8) SCR 50
distinguished
Para 7
2000 (2) Suppl. SCR 20
relied on
Para7
1950 SCR 459
referred to
Para7
2004 (1) SCR 404
referred to
Para 7
2007 (10) SCR 543
referred to
Para7
1993 (3) SCR 361
referred to
Para7
2008 (6) SCALE 748
held inapplicable
Para7
(2004) 6 sec 59
relied on
Para7
I
2009 (7) SCR 434
referred to
Para 7
2009 (2) Law Weekly 849
referred to
Para 7
(1998) 8 sec 559
referred to
Para 7
2000 (1) Suppl. SCR 402
held inapplicable
Para7
2006 (8) Suppl. SCR 178
relied on
Para35
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 7916
of2009.
From the Judgment and Order dated 20.1 I .2007 of the High Court
of Delhi at New Delhi in FAO (OS) No. 376 of2005.
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Dhruv Mehta, Sr. Adv., Vikas Sharma, Ms. Devyani Sharma, (For
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Amber Qamaruddin, Advs. for the Appellant.
Amrender Saran, Sr.Adv., PuneetTaneja,Adv. for the Respondent.
The Judgment of the Court was delivered by
FAKKIR MOHAMED IBRAHIM KALIFULLA, J. I. An
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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 toArbitral proceedings.
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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 etc. The agreement for the
construction of I 02 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
MIS UMESH GOEL v. HIMACHALPRADESH COOPERATIVE GROUP
HOUSING SOCIETY LTD.[F AKKIR MOHAMED IBRAHIM KALIFULLA, f.]
the respondent, though, the appellant earlier moved the High Court by
way of an Arbitration Application No.145 of2003 on 09.07.2003 under·
Section I 1(5)ofthe 1996Actforappointmentofan 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 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 of2005, 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
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isolation. The learned Senior Counsel further contended that going by
the plain reading of the Statute and ifthe golden 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 o.flaw.
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 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.
M/S UMESH GOEL v. HIMACHAL PRADESH COOPERATIVE GROUP
711
HOUSING SOCIETY L TD.[FAKKIR MOHAMED IBRAHIM KALIFULLA, J.]
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.) WI
o Parasmal Chordia (Dead) and Ors.- (2007) I 0 SCC 82, Panchu
A
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Go pal Bose v. Board of Trustees for Port of Calcutta - ( 1993) 4
SCC 338, Mis. Consolidated Engg. Enterprises v. Principal Secy. . C
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 sec 355.
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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
F
submissions of Mr. Dhruv Mehta, learned Senior Counsel for the appellant
merit acceptance.
9. To appreciate the respective submissions and in support ofour
conclusion, at the very outset Section 69 requires to be noted, which
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"69. Effect of non-registration.-( 1) No suit to enforce a right
arising from a contract or conferred by this Act sh al I 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
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[2016) 6 S.C.R.
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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
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have been shown in the register of firms as partners in the firm.
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(3) The provisions of sub-sections (I) 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 forthe dissolution ofa
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 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 (5of1882), 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
MIS UMESH GOEL v. HIMACHAL PRADESH COOPERATIVE GROUP
HOUSING SOCIETY L TD.[FAKKIRMOHAMED IBRAHIM KALIFULLA, J.]
been impliedly incorporated in sub-section (3). When the opening set of
expression in sub-section (3) states that the provisions of sub-sections
(I) 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 (l)and (2) alone should be held to be incorporated forthe
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 (I) 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 (I) and
(2). When we read sub-section (1) of Section 69 the said sub-section
primarily imposes a ban on any person as a partner ofa 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 ofan 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 (I) 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 matteroffiling 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 (I)
and (2) therefore shows that while under sub-section (I) 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
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firm itself or by anyone representing as partners of such an unregistered
finn. While under sub-section (I) the ban imposed would operate against
the finn 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
includeArbitral 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 ofarbitral proceedings. If sub-sections (I) 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 (I) 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 (I)
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 forthe 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 finn, that its I 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 subsection can operate to its full extent.
13. As far as the construction of the said sub-section (3) ofS~ction
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
(I), (2) and (3) being fulfilled then and then alone the ban prescribed
against an unregistered firm under Section 69(1), (2) and (3) would
operate and not otherwise.
MIS UMESH GOEL v. HIMACHAL PRADESH COOPERATIVE GROUP
71 5
HOUSING SOCIETY LTD.[F AKKIR MOHAMED IBRAHIM KALIFULLA, J.]
15. Keeping the above outcome of the legal position that can be
derived from a reading of sub-sections (I), (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 ofa 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
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(3). The specific exclusions contained in clauses (a) and (b) of subsection (3) therefore makes the position clear to the effect that even · E
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.
16. When we read sub-section (4), the ban imposed under subsections (I), (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. I 00 in value under those specific statute referred to in the said subclause can also be launched without any ban being operated as provided
under sub-sections (I), (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'.
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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
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 ofattack. The learned Single Judge of the High
Court also found no merit in the said contention and upheld the a~ard 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
MIS UM ESH GOEL v. HIMACHAL PRADESH COOPERATIVE GROUP
HOUSING SOCIETY LTD.(FAKKIRMOHAMED IBRAHIM KALIFULLA, J.]
barred by virtue of the provision set out in sub-sections (I) 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 ofa 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 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 forthe expression "Court". However, we find a definition
of the "Court" in Section 2(l)(e) of the 1996Act, which reads as under:
"2. Definitions.-(!) In this Part, unless the context otherwise
requires,-
·''
(a)
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(b)
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(c)
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(d)
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(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, havingjurisdiction to decide
the questions forming the subject-matter of the arbitration if the
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same had been the subject-matter of a suit, but does not include
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any civil court ofa 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
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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.
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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: ·
"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 (I) 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 (I) 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 ofbusiness in the territories oflndia 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. I 00 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
MIS UMESH GOEL v. HIMACHAL PRADESH COOPERATIVE GROUP
HOUSING SOCIETY L TD.[FAKKJR MOHAMED IBRAHIM KALIFULLA, J.)
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 subsections (I) 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. Jn 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) 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 subsection (4)."
(Underlining is ours)
24.