TaxTMI 
TaxTMI 
2016 (6) TMI 1488
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....t 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 a....
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....ctions (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 enforce....
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....ip Firm, Beawer (Raj.) Through Mankanwar (Smt.) W/o Parasmal Chordia (Dead) and Ors.- (2007) 10 SCC 82, Panchu Gopal Bose v. Board of Trustees for Port of Calcutta - (1993) 4 SCC 338, M/s. Consolidated Engg. Enterprises v. Principal Secy. 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 SCC 355. 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....
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.... 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 been impliedly incorporated in sub-section (3). When the opening set of expression in sub-section (3) states that the provisions of sub-sections (1) 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 (1) and (2) alone should be held to be incorporated for the 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 (1) 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 ....
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....erate in the matter of arbitral proceedings. If sub-sections (1) 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 (1) 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 (1) 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 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 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 Cour....
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....pecific 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. 16. When we read sub-section (4), the ban imposed under sub-sections (1), (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. 100 in value under those specific statute referred to in the said sub-clause can also be launched without any ban being operated as provided under sub-sections (1), (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 b....
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....der 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 barred by virtue of the provision set out in sub-sections (1) 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 of a 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 for the expression "Court". However, we find a definition of the "Court" in Section 2(1)(e) of the 1996 Act, which reads as under: "2. Definitions.-(1) In this Part, unless ....
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....des 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 of business in the territories of India 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. 100 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" ....
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....ection 8 details the situations under which the said power of appointment of Arbitrator or umpire can be made. Under Section 2(c), the expression 'Court' is defined to mean a Civil Court having jurisdiction to decide the questions framing the subject matter of a suit excluding a Small Causes Court. Under the said definition, an exception is carved out even for a Small Causes Court to fall under the definition of Court when the said Court is called upon to exercise its jurisdiction in situations, which are set out in Section 21 of the Act. 25. The definition of 'Court' under Section 2(c) read along with Sections 8 and 21 of the 1940 Act, therefore, indicates that the proceedings initiated under the said Sections are virtually in the nature of a suit in a Civil Court having jurisdiction, though such proceedings are relating to initiation as well as superintendence of Arbitration proceedings such as appointment of an Arbitrator or umpire or inaction or neglect on the part of Arbitrator or umpire or the incapacity of the Arbitrator or umpire, death of an Arbitrator or umpire or even in situations where the agreement has not provided for or not intended to supply the vacancy or the p....
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....e proceedings were under Section 8 of the 1940 Act before a Civil Court having jurisdiction to decide the question forming the subject matter of suit and the respondent therein being an unregistered Partnership Firm, the ingredients set out in Section 69(1) to (3) of the Partnership Act applied in all force and consequently held that the prohibition set out in the said Section squarely applied. 27. We only wish to add that though in the said decision, this Court did not specifically mention as to the requirement of pendency of a proceeding in the nature of a suit in a Civil Court as the basic ingredient to be satisfied as stipulated in sub-sections (1) & (2) of Section 69 in order to extend the specific prohibition even to 'other proceedings' under sub-section (3), this Court was fully aware of the fulfillment of those mandatory requirement having regard to the nature of proceedings that existed under the provisions of the 1940 Act. Therefore, our conclusion based on the interpretation of Section 69 on the whole as set out in paragraphs 12 to 17 are fully supported by the above decision. We have therefore no hesitation to hold that the ratio laid down in Jagdish Chander case (su....
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....ation agreement, this Court finally held that since the arbitration clause formed part of the agreement constituting the partnership the proceeding under Section 8(2) was in fact to enforce a right which arose from a contract/agreement of parties." 9. 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 Arbitrators 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 Award in this case cannot e....
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....ceedings 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........' (Emphasis added) 31. Therefore, the said contention of the learned senior counsel for the respondent has no force. 32. The learned senior counsel then contended that while interpreting Section 14 of the Limitation Act, it was held that Arbitration Proceedings are to be treated on par with civil proceedings. Though, in the first blush, the submission looks more attractive, on a deeper scrutiny it must be held that it is always well settled that a judgment can be a binding precedent on a question of law, which was canvassed before it and decided. Keeping the said principle in mind when we consider the said submission, we have clearly held as to how a reading of Section 69 as a whole does not permit of any interpretation that would cover Arbitral proceedings, de hors, filing of a suit in a Court and that too in respect of a right under....
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....d, the award can be enforced under the Code of Civil Procedure in the same manner as if it were a decree of the Court. When we consider the submission of the learned senior counsel for the respondent, at the very outset, it must be held that by referring to Sections 35 and 36, 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. As rightly contended by Mr. Dhruv Mehta, learned senior counsel for the appellant, Section 36 only creates a statutory fiction which is limited for the purpose of enforcement of the 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 purp....