DELHI DEVELOPMENT AUTHORITY Vs. KOCHHAR CONSTRUCTION WORK

JUDGEMENT

(1.) Special leave granted.

(2.) This appeal raises a short question regarding the interpretation of sections 69 (2 and (3 of the Indian Partnership Act, 1932 read with Section 20 of the Arbitration Act, 1940. The factual matrix in which this question arises may be briefly stated as under: Respondent 1, an unregistered firm, filed proceedings under Section 20 of the Arbitration Act, 1940 in the High court of Delhi. The Delhi development Authority entered a counter and contested the proceedings on various grounds including the ground of limitation. The learned Single Judge allowed the suit and directed the appointment of an arbitrator. Against that order a first appeal was filed before a division bench of the High court by the respondent. That appeal was dismissed holding that the subsequent registration of the firm cured the initial defect since that was within the period of limitation. Hence this appeal by special leave.

(3.) Section 69 (1 provides that no suit to enforce a right arising from a contract 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. This Ss. begins with the words: "no suit. . shall be instituted in any court. . ", which prima facie bar the institution of the suit by a firm which is unregistered. Ss. (2 next provides that no suit 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. This Ss. also begins with the words: "no suit. . shall be instituted in any court. . ", which clearly bar the institution of a suit by a firm which is not registered. The provisions of Ss. (1 and (2 have been made applicable to other proceedings to enforce a right arising from a contract by virtue of Ss. (3 of Section 69. It would thus seem on a plain reading of Section 69 (2 that a suit instituted in any court by or on behalf of a firm against any third party shall not be valid unless the firm is registered and the persons suing are or have been shown in the Register of Firms as partners of the firm. Plainly, the institution of the suit itself is barred both by Ss. (1 and Ss. (2 of Section 69 of the Partnership Act. Section 20 of the Arbitration Act provides that where any persons have entered into an arbitration agreement before the institution of any suit with respect to the subject-matter of the agreement or any part of it, and where a difference has arisen to which the agreement applies, they or any of them, instead of proceeding under Chapase of Shreeram Finance Corpn. v. Yasin Khan (paras 5 and 6. The fact that it is an application to be registered and numbered as a suit would not make any difference for the obvious reason that though Ss. (1 and (2 of Section 69 of the Partnership Act refer to a suit, Ss. (3 thereof makes those Ss. applicable even "to other proceedings which would include an application registered and numbered as a suit under Section 20 of the Arbitration Act". [see Jagdish Chandra Gupta v. Kajaria Traders (India) Ltd. ]