Badri Dass v. P. K. Ramakrishnan — 1965 DIGILAW 161 (ALL)

JUDGMENT D.S. Mathur, J. - This is a revision under Section 115, Civil Procedure Code by Badri Das against the judgment of the Additional Civil Judge of Meerut, partly allowing and partly dismissing his appeal arising out of an order of the Munsif of Ghaziabad, dismissing his objection to the award and thereby refusing to set aside the award made by Mohan Singh, opposite party No. 2. 2. The material facts of the case are that Badri Das, applicant, and P. K. Ramkrishnan, opposite party No. 1, were partners of an unregistered firm. They entered into an arbitration agreement whereby two matters were referred to the arbitration of the sole Arbitrator, Mohan Singh, opposite party No. 2, who is the partner and proprietor of Sri Guru Nanak Engineering Company, Ghaziabad. The matters referred to arbitration were: (1) Dispute regarding continuance or otherwise of the partnership and, (2) Finalisation of accounts. The Arbitrator conducted the arbitration proceeding and within the prescribed period made an award and gave notice thereof to the parties. Thereafter P. K. Ramakrishan, opposite party No. 1, made an application under Section 14(2) of the Indian Arbitration Act for the filing of the award and the Munsif of Ghaziabad directed the Arbitrator to file the award with depositions and documents which may have been taken and proved before him. The Arbitrator filed the award and on notice being given to the parties of the filing of the award Badri Das, applicant, alone filed an objection with the prayer that the award be set aside. The Munsif dismissed the objection and refused to set aside the award. At the same time he ordered that the award shall be made a rule of the court and a decree passed in terms of the award which shall form part of the decree. 3. The Additional Civil Judge in appeal held that the application under Section 14(2) of the Indian Arbitration Act was maintainable and that the award could be taken notice of. He was further of the opinion that a part of the award was beyond the matters referred to the Arbitrator and hence was without jurisdiction. As the invalid part of the award was severable, the Additional Civil Judge confirmed the valid part of the award and set aside the invalid part thereof. He was further of the opinion that a part of the award was beyond the matters referred to the Arbitrator and hence was without jurisdiction. As the invalid part of the award was severable, the Additional Civil Judge confirmed the valid part of the award and set aside the invalid part thereof. The valid part of the award was made a rule of the court and the decree was to be passed in accordance therewith. Badri Das is now challenging the orders of the subordinate courts in this revision. 4. Two points have been urged before me; firstly, that Section 69(3) of the Indian Partnership Act was a bar to the maintainability of the application under Section 14(2) of the Indian Arbitration Act with the result that the award could not be made a rule of the court. The second point raised is that the award could not be accepted in part and should have been set aside as a whole. The material part of Section 69 of the Indian Partnership Act runs as below : "(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 .......any person alleged to be or to have been a partner in the firm unless the firm is registered and the person suing as or has been shown in the Register of Firms as a partner 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, . . . . . . ." 5. There existed some conflict on the meaning of the expression "other proceeding" used in sub-Sec. (3) oil Section 69 of the Indian Partnership Act, but the controversy has been set at rest by the decision of the Supreme Court in Jagdish Chandra Gupta v. Kajaria Traders (India) Ltd., 1964 A.L.J. 971. Restricted, meaning cannot now be assigned to this term and "other proceeding" shall mean any proceeding not necessarily, of the nature of the claim of set-off. The proceeding under the Indian Arbitration Act shall thus be governed by this sub-Section. Restricted, meaning cannot now be assigned to this term and "other proceeding" shall mean any proceeding not necessarily, of the nature of the claim of set-off. The proceeding under the Indian Arbitration Act shall thus be governed by this sub-Section. The point for consideration, therefore, is whether a proceeding based on an application under Section 14(2) of the Indian Arbitration Act is a proceeding "to enforce a right arising from a contract. 6. At this place it may be observed that a provision restricting the jurisdiction. of the court or affecting the maintainability of a suit or proceeding shall have to be strictly construed and unless all the ingredients of the enactment are fulfilled, it cannot be held that the suit or proceeding is not maintainable. Consequently, in the case of an unregistered firm only such suit or proceeding cannot be taken cognizance of by the courts, of law which meant to enforce a right arising from a contract. If such a suit or proceeding is not to enforce a right arising from a contract but is to enforce any other right the suit can be entertained, irrespective of whether the firm is registered or unregistered. 7. The above Supreme Court case, Jagdish Chandra Gupta v. Kajaria Traders (India) Ltd., arose out of a proceeding under Section 8 of the Indian Arbitration Act for the appointment of sole-Arbitrator. The parties had entered into a partnership agreement which contained an arbitration clause. The arbitration clause is : "That in case of dispute the matter will be referred for arbitration in accordance with the Indian Arbitration Act." 8. The sole Arbitrator or Arbitrators were not named in the agreement and, apparently, the parties did not by their mutral consent appoint any arbitrator. This necessitated the making of an application under Section 8 of the Indian Arbitration Act for the appointment of a sole arbitrator. The application appears to have been made before the Bombay High Court in exercise of its original civil jurisdiction. It came up for hearing before Madholkar and Naik, JJ. and on difference of opinion between them the matter was referred to K. T. Desai, J. Desai and Naik, JJ. were of opinion that the application under Section 8 was to enforce a statutory right and, consequently, Section 69 (3) of the Indian Partnership Act was no bar to the maintainability of the application. and on difference of opinion between them the matter was referred to K. T. Desai, J. Desai and Naik, JJ. were of opinion that the application under Section 8 was to enforce a statutory right and, consequently, Section 69 (3) of the Indian Partnership Act was no bar to the maintainability of the application. Madholkar, J., took a different view. The Supreme Court have upheld the view of Madholkar, J. 9. To take advantage of the Supreme Court decision it was contended before me that for the application of the bar imposed by Section 69 of the Indian Partnership Act one must look into the nature of the right sought to be enforced and not which document is sought to be filed or to be enforced. It is said that the application under Section 8 of the Indian Arbitration Act is for appointment of an arbitrator or Umpire and not for the enforcement of the arbitration agreement and as an application under Section 8 is hit by Section 69 (3) of the Indian Partnership Act it must be held that the courts should look into the past history and the nature of the conflict in understanding the right which was, in fact, sought to be enforced. This contention can be accepted to a certain extent but cannot be stretched to an inordinate limit. When a party desires the appointment of an Arbitrator or Umpire, what he has in mind is that the Arbitration agreement be enforced. The object is not a far-fetched one but is direct in the sense that he wants the Arbitrator to be appointed so that arbitration proceeding may be commenced forthwith. In other words, when the appointment of an Arbitrator is sought for, the underlying object is to enforce the arbitration agreement, i.e. to enforce a right arising -from an arbitration agreement, which is contract within the meaning of Section 69 of the Indian Partnership Act. As the application is in substance and for all practical purposes to enforce a right arising from the contract such an application shall be hit by Section 69 (3) of the Indian Partnership Act, if the firm of whose partner the applicant is, is unregistered. 10. The same cannot be said with regard to an award. As the application is in substance and for all practical purposes to enforce a right arising from the contract such an application shall be hit by Section 69 (3) of the Indian Partnership Act, if the firm of whose partner the applicant is, is unregistered. 10. The same cannot be said with regard to an award. A consideration of Sections 14 to 17 and -30 of the Indian Arbitration Act shall make it clear that ordinarily, if not invariably, the courts of law do not go behind the award. After the filing of the award under Section 14(2), parties have an opportunity to file an objection and after hearing the parties the court can modify the award under Section 15 or remit it under Section 16. Thee award is set aside under Section 30 and if not set aside, a decree is eventually passed under Section 17 of the Indian Arbitration Act. While modifying or remitting the award, the court takes into consideration the award and not the proceedings of the Arbitrator nor the arbitration agreement. It is true that an arbitration agreement can also be challenged by making an application under Section 33 of the Indian Arbitration Act. Such an objection can be contained in the objection to the award. But an objection to the arbitration agreement shall be maintainable only if it is not valid. Such an objection can not be entertained if it is enforceable. There was never any dispute as to the genuineness and validity of the arbitration agreement between the present applicant and opposite party No. 1. Dispute centres round the enforcement of a right tinder the award through farfetchedly under the arbitration agreement also. A contract is valid even though not enforceable and, consequently, on an objection being made the arbitration agreement could not be declared invalid and hence the award could not be set aside on the ground that the arbitration agreement was not enforceable. This shall also make it clear that while entertaining an objection to the award, courts do not enforce a right under the arbitration agreement, nor can the objection as to the validity of the award be said to be for enforcement of a right under the arbitration agreement. 11. In this view of the matter, after the making of the award, the courts enforce a right under the award and not a right under the arbitration agreement. 11. In this view of the matter, after the making of the award, the courts enforce a right under the award and not a right under the arbitration agreement. By no stretch of imagination can it be said that the award of the Arbitrator is akin. to a contract between the parties. The Arbitrator can make an award when there exist disputes between the parties and the parties in dispute can never come to an agreement and an award can never be deemed to be a contract. 12. Before commenting upon the important decisions which have been brought to my notice, it must be observed that the Supreme Court has not overruled the two cases arising out of an award which were brought to their notice. These cases were distinguished on the ground that they dealt with awards. Hafiz Qamar Din v. Nur Din, A.I.R. 1936 Lahore 136, pertains to different facts and the view expressed in Babu Lal Dltandhania v. Messrs Gautam and Co., AIR 1950 Calcutta 391 is clearly in consonance with what has been expressed above. 13. As already mentioned above, K. T. Desai and Naik, JJ., had in Kajaria Traders (India) Ltd. v. M/s Foreign Import and Export Association, A.I.R. 1961 Bombay 65 regarded the application under Section 8 of the Indian Arbitration Act to enforce a statutory right and not a right arising from a contract. This view is no longer a good law having been overruled by' the Supreme Court, but still it is necessary to indicate what can be deemed to be a statutory right and not a right arising out of a contract. Where a party commits an unlawful act, it is open to the aggrieved party to take civil or criminal action, or both. The taking if criminal action cannot be deemed to be in enforcement of a right under a contract even though the complainant may have in mind that as a result of criminal prosecution the offender may make good the loss suffered by him. The making of a criminal complaint is in the exercise of a right given under the law, and it cannot be deemed to be in. enforcement of a right arising from a contract. The making of a criminal complaint is in the exercise of a right given under the law, and it cannot be deemed to be in. enforcement of a right arising from a contract. Consequently, a partner of an unregistered firm itself can take criminal action even though the firm is not registered and a civil suit shall be barred by Section 69 of the Indian Partnership Act, unless prior to the institution of the suit the firm is registered and the person suing is shown in the Register of Firms as partners in the firm. 14. The same can be said with regard to insolvency matters. Whenever a creditor makes an objection for adjudication of a debtor as insolvent he may have in mind to recover his debt. But before the stage of adjudication no question of the recovery of the debt arises. It would be necessary for the creditor to make a claim after the order of adjudication has been passed. If the claim is not made, it cannot be recovered in the insolvency proceeding. Insolvency proceeding is meant to exercise the statutory right on finding that the debtor is in insolvent circumstances and it is necessary that his assets be administered in insolvency and distributed for the benefit of the creditors as a body. In other words, an insolvency petition by a partner of an unregistered firm, or an unregistered firm itself, shall be maintainable (also see Kottamasu v. Chakka Arijanadu, AIR 1939 Madras 145) though the claim of the petitioner may not later be entertained unless the firm is got registered before the making of the claim. 15. It was contended before me that only recoverable debts can be taken into consideration at the time of adjudication of a person as an insolvent and it is for this reason that time barred debts are overlooked. It is, therefore, contended that even unenforceable debts cannot be taken into consideration and hence an insolvency petition by a partner of an unregistered firm or by unregistered firm shall not be maintainable. Difference between a time-barred debt and a debt not enforceable by virtue of the provisions of Section 69 of the Indian Partnership Act is that a time-barred debt is unenforceable for ever while the bar imposed by Section 69 ceases to exist on the firm being registered. 16. Difference between a time-barred debt and a debt not enforceable by virtue of the provisions of Section 69 of the Indian Partnership Act is that a time-barred debt is unenforceable for ever while the bar imposed by Section 69 ceases to exist on the firm being registered. 16. The learned advocate for the applicant had also placed reliance upon the decision of this Court in Abdul Jabbar v. Audhesh Singh Rain Agyan, Singh, AIR 1954 Allahabad 310. That was a case where the creditors had filed a written statement under Section 9 of the U. P. Encumbered Estates Act and as the firm was unregistered, the claim was not, entertained on the ground that it was hit by the provisions of Section 69 of the Indian Partnership Act. A perusal of the U. P. Encumbered Estates Act makes it clear that though proceedings are started on an application made by the landlord under Section 4 of that Act a claim made by a creditor is a distinct claim which is heard and decided in the same manner as a suit and thereafter a decree is passed. For all practical purposes the proceeding arising out of a claim of a creditor is a distinct one and is akin to a suit for the recovery of the debt. That proceeding becomes a proceeding to enforce a right arising from a contract and is naturally hit by Section 69(3) of the Indian Partner ship Act. This view cannot, how. ever, be adopted in a case meant to enforce a right not arising from a contract, i.e. If arising from an award of the Arbitrator. 17. To sum up, the proceeding based on an application under Section 14(2) of the Indian Arbitration Act is not a proceeding to enforce a right arising from a contract, i.e. an arbitration agreement. It is a proceeding to enforce a right arising from an award made by the Arbitrator on his own, not necessarily with the consent of the parties. As the award is not and cannot be placed in the category of a contract, Section 69 of the Indian Partnership Act shall be no bar to the maintainability of a proceeding to enforce a right arising therefrom. The subordinate courts . As the award is not and cannot be placed in the category of a contract, Section 69 of the Indian Partnership Act shall be no bar to the maintainability of a proceeding to enforce a right arising therefrom. The subordinate courts . have thus taken a correct view that the application under Section 14(2) of the Indian Arbitration Act was maintainable and was not hit by,the provisions of Section 69 of the Indian Partnership Act. 18. On the second point raised by the learned advocate for the applicant it can simply be observed that the jurisdiction of the revisional court is limited by the provisions of Section 115, Civil Procedure Code It cannot set aside the decision of the subordinate court simply because sitting as an appellate court it would have taken a different view. Howsoever wrong or illegal the decision of the subordinate court may be, it cannot be set aside in revision unless there is some error in the exercise of jurisdiction or the subordinate court committed breach of the provisions of law or committed a procedural irregularity. The Munsif had the jurisdiction to entertain the application under Section 14(2) of the Arbitration Act and the Additional Civil Judge had the jurisdiction to hear the appeal preferred by Badri Dass against the Munsif's order refusing to set aside the award. None of them committed any illegality or irregularity in the exercise of jurisdiction. Further, the view taken by the Additional Civil Judge, cannot be said to be improper and hence the order of the Additional Civil Judge cannot be challenged in revision. 19. The revision is hereby dismissed with costs. Stay corder is vacated.