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Chhote Lal Vs. U.P. State Electricity Board - Court Judgment

LegalCrystal Citation
SubjectCommercial
CourtAllahabad High Court
Decided On
Case NumberF.A.F.O. No. 476 ot 1979
Judge
Reported inAIR1990All27
Acts Indian Partnership Act, 1932 - Sections 56, 69, 69(1), (2), (3) and (4); Arbitration Act, 1940 - Sections 8(2), 20 and 34; Presidency-towns Insolvency Act, 1909; Provincial Insolvency Act, 1920; Presidency Small Cause Courts Act, 1882 - Sections 19; Provincial Small Cause Courts Act, 1887
AppellantChhote Lal
RespondentU.P. State Electricity Board
Appellant Advocate Sankatha Rai, Adv.
Respondent Advocate Standing Counsel
Excerpt:
.....part payment - proceedings under arbitration initiated - unregistered partnership firm had no right to enforce its rights arising out of a contract - such a suit is barred. - cantonments act[c.a. no. 41/2006]. section 346 & cantonment fund (servants rules, 1937, rules 13, 14 & 15: [h.l. gokhale, ag. cj, p.v. hardas, naresh h. patil, r.m. borde & r.m. savant, jj] jurisdiction of school tribunal constituted under maharashtra employees of private schools (conditions of service) regulations act, (3 of 1978) held, school run by the cantonment board is a primary school and it is not a school recognised by any such board comparable to the divisional board or the state board. the school tribunal constituted under section 8 of the maharashtra act cannot entertain appeals filed under..........69 of the indian partnership act is in these terms:'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 suits 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.....
Judgment:
ORDER

N.N. Mitral, J.

This is an appeal against an order rejecting the application under S. 20 of the Arbitration Act, 1940 on the ground that the alleged dispute was not covered by the Arbitration clause and that the appellant was not competent to maintain the proceeding.

2. In order to have a clear picture of the situation it is necessary to have a few background facts. The appellant along with one Ashok Kumar was carrying on partnership business in the name of M/s. Supreme Traders. On 17-2-1974 the said partnership entered into a building contract with the respondent. However, it is alleged that Ashok Kumar transferred his share in the partnership to the plaintiff Chhote Lal. A suit was filed by him against Ashok Kumar seeking declaration of his rights and on 3-11-1986, the Civil Court declared that the appellant was the sole proprietor of the firm Supreme Traders. Subsequent to it, the present proceedings under Section 20 of the Arbitration Act were initiated for referring the dispute to arbitration. The basis of the application was that although the plaintiff had executed the work of the value of Rs. 1,69,092-62 he was only paid a sum of Rs. 1,46,000/- and thus a sum of Rs. 23,092-62 remained unpaid. It is this amount along with security amount of Rs. 16,000/- and some other claims which the appellant claimed from the defendant for which he wanted the dispute to be referred to arbitration.

3. The claim was contested by the respondent and was mainly pleaded that the partnership firm which had entered into the building contract being unregistered, the plaintiff was not entitled to claim any amount as the suit was barred under Section 69(2) of the Indian Partnership Act. It was also contended that the dispute sought to be referred to arbitration was not covered by the arbitration clause.

4. The learned Court below came to the conclusion that the dispute was not covered by the arbitration clause and that the plaintiff was not entitled to maintain the suit. Aggrieved the appellant has come up before this Court.

5. In spite of the list being revised, the learned counsel for the respondent was not present so as to place his view point ah the question how the dispute was not covered by the arbitration clause. However, it is not necessary to enter into that controversy as the appeal is bound to fail even if we were toassume that the dispute was covered by the arbitration clause.

6. It is not disputed that a proceeding under Section 20 of the Arbitration Act is in the nature of a suit and would be covered by Section 69. Section 69 of the Indian Partnership Act is in these terms:

'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 suits 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 proceeding to enforce a right arising from a contract but shall not affect-

(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 realise 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 realise 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 or 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 PresidencySmall Cause Courts Act, 1882 (15 of 1882), or, outside the Presidency-towns, is not of a kind specified in the Second Schedule to the Provincial Small Cause Courts Act, 1887 (9 of 1887), or to any proceeding in execution or other proceeding in execution or other proceeding incidental to or arising from any such suit or claim.'

7. The section, speaking generally, bars certain suits and proceedings as a consequence of non-registration of firm. Sub-section (1) prohibits the institution of a suit between partners inter se or between partners and the firm for the purpose of enforcing a right arising from a contract or conferred by Partnership Act, 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.

8. Sub-section (2) prohibits a suit by or on behalf of the firm against a third party for the purpose of enforcing right arising from a contract 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.

9. According to sub-section (3), the above two sub-sections will apply also in the case of a claim of set off which is in the nature of a counter-claim and to other proceedings to enforce a right arising from a contract. But there are two exceptions to this i.e. when the suit is for dissolution of firm or for accounts of the dissolved firm or to realise its property and also to a case for realisation of property of an insolvent partner by the official receiver or Court under the Presidency-towns and Provincial Insolvency Act. Sub-section (4) provides for exception in certain class of cases with which we are not concerned in this appeal.

10. As the facts narrated earlier would indicate, the present case does not fall in any of the exceptions to sub-section (3). The claim put-forth by the plaintiff has its roots in the contract which the partnership had entered into with the defendant in 1974. It is not denied that the firm was not a registered one and, therefore, there was no question of either Chhote Lal or Ashok Kumar being shown in the Register of Firms as partners. Therefore,the only controversy is as to whether it is a matter in which the plaintiff was seeking to enforce a right arising from a contract. The whole basis of his claim is the contract which the partnership had entered into with the defendant on 17-2-1974 and what the plaintiff is seeking is its enforcement by reference to arbitration. Such a suit obviously would be hit by Section 69(2) of the Partnership Act. There are number of cases of this Court on this point and it is not necessary to refer to all of them. We may, however, refer to the case of Smt. Rampa Devi v. Bishambhar Nath Puri, AIR 1976 All 19. In that case also, a Division Bench of this Court was confronted with a case where an unregistered firm was seeking to enforce an arbitration clause contained in a contract under Section 20 of the Arbitration Act. In that case, the plaintiff had first initiated proceedings under Section 20 but had failed as the partnership was not registered. Subsequently when the plaintiff filed a suit for the recovery of the amount, the plea was raised by the defendant by moving an application under Section 34 of the Arbitration Act. The plaintiff's contention was that the proceedings in the suit could not be stayed. This plea was repelled holding that the dismissal of the earlier proceedings did not mean that the parties could not refer the dispute to arbitration even when intervention of the Court was not required. In terms of the agreement, the parties have the right to appoint an arbitrator and refer the dispute to him and this could be done without seeking any help from the Court. From what has been held in this case, it is clear that the parties cannot seek to enforce a right arising out of the terms of the contract even to enforce arbitration through the intervention of the Court if the firm was unregistered.

11. A similar view was taken by another Division Bench of this Court in Iqbal Singh v. Ram Narain, AIR 1977 All 352. It was held in that case that when an application under Section 20 of the Arbitration Act by a party to an agreement for unregistered partnership business was for the enforcement of the right of getting the dispute settled by arbitration, the same would not be maintainable in view of Section 69(3) of the Partnership Act. In J.C.Gupta v. Kajaria Traders (India) Ltd., AIR 1964 SC 1882, Hidayatullah, J. as he then was, speaking for the Court said as under :--

'Where a partner of an unregistered partnership applies under S. 8(2) of the Arbitration Act to enforce a right arising from a contract between partners, the proceedings arc barred by S. 69(3) of the Partnership Acts.'

12. From what we have said above, it is clear that a partner in an unregistered partnership cannot enforce any right if the same arises out of a contract entered into by the partnership or by partners thereof. In the present case, since the building contract had been executed by the unregistered partnership and what the plaintiff was seeking to enforce was right arising under that contract, the same could not be done by means of a suit as such a suit was barred under S. 69(2) and (3), of the Partnership Act.

13. In view of the above, it is not necessary for us to enter into other question as to whether the dispute sought to be referred to arbitration was covered by the arbitration clause in the agreement.

14. In the result, the appeal fails and is accordingly dismissed. However, there will be no order as to costs.

15. Appeal dismissed.


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