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Dispute of Unregistered Partnership Firm Can Be Referred To Arbitration, Bar U/S 69 Partnership Act Not Applicable: Calcutta High Court

Rahul Garg
3 Oct 2022 4:30 AM GMT
Dispute of Unregistered Partnership Firm Can Be Referred To Arbitration, Bar U/S 69 Partnership Act Not Applicable: Calcutta High Court
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The Calcutta High Court on Friday, while hearing an application filed under Section 11 of the Arbitration and Conciliation Act, 1996 ('Arbitration Act') for appointment of an arbitrator to resolve the dispute between the parties, held that the bars for instituting a suit or any other proceeding under Section 69 of the Indian Partnership Act, 1932 ('Partnership Act') shall not...

The Calcutta High Court on Friday, while hearing an application filed under Section 11 of the Arbitration and Conciliation Act, 1996 ('Arbitration Act') for appointment of an arbitrator to resolve the dispute between the parties, held that the bars for instituting a suit or any other proceeding under Section 69 of the Indian Partnership Act, 1932 ('Partnership Act') shall not be applicable to arbitral proceedings under Section 11 of the Arbitration Act.

The case of the applicants was that, although unregistered, a partnership deed was executed between the applicants and the respondents containing an Arbitration Clause mandating the referral of all disputes and questions to a person appointed unanimously to act as an arbitrator.

A dispute arose between the parties, subsequent to which, the applicants sent a notice to the respondents invoking the arbitration clause and proposing the name of an advocate as sole arbitrator to resolve the dispute. In their reply, however, respondents denied the appointment of an arbitrator alleging that the allegations raised by the applicants in their initial notice were false. Aggrieved in these circumstances, the applicants filed the application under Section 11 of the Arbitration Act for appointment of an arbitrator.

In the present application filed by the applicants, the respondents argued that since the partnership firm was 'unregistered,' the dispute could not be referred to an arbitrator in view of the application of and the bar created by Section 69 of the Partnership Act. Their case was that since sub-sections (1) and (2) read with sub-section (3) of Section 69 of the Partnership Act restrict the filing of suit by any person as a partner of an unregistered firm including by means of a claim under 'other proceedings,' the applicants could not seek appointment of an arbitrator, the partnership deed in their case being 'unregistered.'

Chief Justice Prakash Shrivastava relied on the Supreme Court decision in Umesh Goel v. Himachal Pradesh Cooperative Group Housing Society Limited, (2016) 11 SCC 313 and on the Madras High Court decision in M/s. Jayamurugan Granite Exports v. M/s. SQNY Granites, 2015 4 LW 385, both of which held that arbitral proceedings shall not come under the expression 'other proceedings' of Section 69(3) of the Partnership Act and that the ban imposed under Section 69 can have no application to arbitration proceedings as well as an arbitral award under Section 11 of the Arbitration Act.

Accordingly, the Calcutta High Court held that non-registration of the partnership firm would not attract the bar under Section 69 of the Partnership Act, so far as institution of proceedings under Section 11 of the Arbitration Act is concerned.

Case Title: Md. Wasim and Another v. M/S Bengal Refrigeration and Company and Others

Case No: A.P. No. 27 of 2022

Citation: 2022 LiveLaw (Cal) 316 

Coram: Chief Justice Prakash Shrivastava

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