KAMAL PUSHP ENTERPRISES v. D.R. CONSTRUCTION COMPANY

Citation: [2000] SUPP. 2 S.C.R. 20

Court: Supreme Court of India

Bench: M. JAGANNADHA RAO, DORAISWAMY RAJU

Judgment text

KAMAL PUSHP ENTERPRISES. v. D. R. CONSTRUCTION COMPANY JULY 28, 2000 [M. JAGANNADHA RAO AND DORAISWAMY RAJU, JJ. ] Partnership Act, 1932 : Section 69-Unregisteredfirm-Prohibition against-Scope and extent ofprohibition. Agreement between appellant and respondent-Respondent an unregisteredfirm-Dispute between appellant and respondent-Reference to Arbitrator at the instance ofappellant-Award in favour ofrespondent-Proceedings for making the award rule of Court-Objection by appellant that respondent cannot defend proceedings in view of the bar contained under Section 69- Held not maintainable-Prohibition contained in Section 69 is in respect of instituting a proceeding to enforce a right arising under a contract-It had no application before an Arbitrator-Award was not vitiated on account ofprohibition contained in Section 69-Post award proceedings are not suit or other proceedings to enforce any right arising under a contract. Arbitration Act, 1940 : Sections 8(2) and 14(2).

Arbitration-Bar contained in Section 69 ofPartnership Act-Applicability to arbitration proceedings-Held not applicable. Gas Authority of India Ltd. entered into a contract with the appellant to execute certain works. The appellant in tum had entered into a separate contract with the respondent, which is an unregistered firm, for carrying out the work, the execution of which was undertaken by the appellant under its contract with the Gas Authority of India Ltd. Disputes having arisen between the appellant and the respondent, a Reference was made to the Arbitrator at the instance of the appellant. The Arbitrator--passed an award in favour of the respondent. However, during the proceedings regarding making the award rule of court, the appellant raised an objection that the res1,>0ndent, being an unregistered firm, could not defend the arbitration proceedings in view of the bar contained in Section 69 of the Partnership Act. On this issue the Trial Court decided against ?. O K. P.

ENTERPRISES v. D. R. CONSTRUCTION CO. 21 the appellant. The revision preferred by the appellant was rejected by a single judge of the High Court holding that the provisions of Section 69 of the Partnership Act do not stand in the way of an unregistered firm defending proceedings against it and it precludes only the initiation of any proceedings by such a firm. r In appeal to this Court it was contended on behalf of the appellant that the bar imposed under Section 69(3) is attracted to the case on hand and that inasmuch as the same prohibits the enforcement of any right arising from a contract by an unregistered firm, the objection can be taken at any stage i. e. even post award proceedings instituted to enforce the award. Dismissing the appeal, the Court HELD : 1. There is no infirmity or error whatsoever in the decision of the courts below to call for interference in this appeal. [i6-H; 27-A] 2. The prohibition contained in Section 69 of the Partnership Act, ,.

1932 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. H the said bar engrafted in Section 69 is absolute in its terms and is destructive ofany 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 Arbitrator's power, authority and competency itself, undermining thereby the legal efficacy ofthe 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 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 crystalise 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. [26~A-E] 3. The post award proceedings cannot be considered by any means, to be a suit or other proceedings to enforce any rights arising un\ler 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 enf . : the appellant before us that there was no arbitration clause in writing or that the dispute is not arbitrable but yet the Arbitrator has undertaken it for decision.

As rightly pointed out for the respondent the very reference came to be made at the instance of the appellant and what is really objected to in the form of a preliminary issue is only the infirmity based upon Section 69 of the Partner- ship Act, 1932. 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 Arbitrator's 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 case before us cannot be said to be one such and the learned counsel for the appellant though was fully conscious of this fact, yet tried to assert that it is open to the appellant to take up the objection based upon Section 69 of the Partnership Act, at any stage even during the post award proceedings to enforce the award passed.

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. It is useful in this connection to refer to the decision of this Court in Satish Kumar & Others v. Surinder Kumar & Others, AIR (1970) SC 833, wherein it has been stated in unmistakable terms that an Award is not a mere waste paper but does create rights and has some legal effect besides being final and binding on the parties.

It has also been held that the award is, in fact, a final adjudication of a Court of the parties' own choice and until impeached upon sufficient grounds in an appropriate proceedings, an award which is on the face of it regular, is conclusive upon the merits of the controversy submitted for arbitration. 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. We see no infirmity or error whatsoever in the decision of the courts below to call for our interference in this appeal. The appeal fails and shall stand A dismissed.

We make it clear that we have decided only the point relating to the preliminary issue raised and decided by the trial judge as well as by the High Court, and all or any other objections and contentions may be raised and B pursued by the respective parties in the proceedings pending before the Trial Court. The parties will bear their respective costs. T. N. A. Appeal dismissed.