Partnership; Umesh Goel Vs. Himachal Pradesh Cooperative Group Housing Society Ltd. [Supreme Court of India, 29-06-2016]

Indian Partnership Act – Section 69(3) – Interpretation of – Unregistered partnership firm – Applicability to Arbitral proceedings – Held, 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.


IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

[Fakkir Mohamed Ibrahim Kalifulla] [C. Nagappan] JJ.

June 29, 2016

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 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 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 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 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