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Section 69(3) of Partnership Act doesn’t include Arbitration Proceedings: SC Judgment

Posted By / July 27, 2016 / Consumer Protection, Corporate, General Legal, General Legal, Legal Drafting, Property / 0 Comments

Supreme Court Judgment….A glance:-

Recently Supreme Court pronounced its judgment in the case of M/s. Umesh Goel Vs. Himachal Pradesh Cooperative Group Housing Society Limited. The judgment clearly held that under Section 69(3) of the Partnership Act, the phrase ‘other expression’ doesn’t include ‘Arbitral Proceedings’. Furthermore, the ban imposed under the said section will not apply to Arbitral proceedings and the Arbitration Award. According to the Division bench of the Apex Court, Sec.35 and Sec.36 of the Arbitration and Conciliation Act, 1996 is exclusively restricted to consider the Arbitration Award as a decree of a Court and the arbitration proceedings is not equivalent to the Court Proceedings.

Why the appeal was filed against the Delhi High Court Judgment?:-

The appeal was filed U/s 37 of the Act, 1996 at Delhi High Court by the Appellant, wherein, the court held that the award of the counter claim in Arbitral proceedings was reversed as it is not reasonable in consideration to the specific provision under Partnership Act, due to the Court’s understanding, that  Arbitral Proceedings is covered by the expression ‘other proceedings’ as under Section 69(3) of the Partnership Act. Consequently, the ban was imposed by the said section of Partnership Act on the appellant, which was also an unregistered firm at that point of time. The judgment of high court was challenged by the appellant before the honorable Supreme Court of India.

What is included in Sec.69 (3), Partnership Act?:-

According to Section 69(1), any person, being the partner of an unregistered firm is banned to file a suit in the court against the firm or any of its partners. Wherein, Section 69(2) allows the ban in same forms of court suits against any third party at the instance of such an unregistered firm. Section 69(3) states that provisions of Sec.69 (1) and Sec.69 (2) will apply to a claim of set off or other proceedings to enforce a right arising from a contract.

But, the High court interpreted the section differently, “in order to invoke sub-section (3) of Section 69 and for the 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 firm, that its / his endeavor 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 sub-section can operate to its full extent.”

Arbitration proceedings does not equate with Civil Court Proceedings…..How?:-

In consideration to the filed appeal suit with Supreme Court, the Apex court clearly said that an Award of Arbitration is a settled proposition and it must not be treated as a decree of court, especially for the purpose of execution. The honorable court also said 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 Section 35 and 36 it cannot be held that the entire Arbitral Proceedings is a Civil Court Proceedings for the applicability of Section 69(3) of the Partnership Act.”

With reference to the interpretation made by High Court under the Limitation Act while reading its Section 14, where under, Arbitral Proceedings on par with Civil Proceedings cannot be applied in this case.






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