KAMAL PUSHP ENTERPRISES versus D.R. CONSTRUCTION COMPANY

Citation: [2000] SUPP. 2 S.C.R. 20 · Decided: 28-07-2000 · Supreme Court of India · Bench: M. JAGANNADHA RAO · Disposal: Dismissed

Judgment (excerpt)

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KAMAL PUSHP ENTERPRISES. 
v. 
D.R. CONSTRUCTION COMPANY 
JULY 28, 2000 
[M. JAGANNADHA RAO AND DORAISWAMY RAJU, JJ.] 
Partnership Act, 1932 : 
Section 69-Unregisteredfirm-Prohibition against-Scope and extent 
of prohibition. 
Agreement between appellant and respondent-Respondent an unregis-
tered firm-Dispute between appellant and respondent-Reference to Arbitra-
tor at the instance of appellant-Award in favour of respondent-Proceedings 
for making the award rule of Court-Objection by appellant that respondent 
cannot defend proceedings in view of the bar contained under Section 69-
Held not maintainable-Prohibition contained in Section 69 is in respect of 
instituting a proceeding to enforce a right arising under a contract-It had no 
application before an Arbitrator-Award was not vitiated on account of prohi-
bition contained in Section 69-Post award proceedings are not suit or other 
proceedings to enforce any right arising under a contract. 
Arbitration Act, 1940 : Sections 8(2) and 14(2). 
Arbitration-Bar contained in Section 69 of Partnership Act-Applica-
bility to arbitration proceedings-Held not applicable. 
Gas Authority of India Ltd. entered into a contract with the appel-
lant to execute certain works. The appellant in tum had entered into a 
separate contract with the respondent, which is an unregistered firm, for 
carrying out the work, the execution of which was undertaken by the 
appellant under its contract with the Gas Authority of India Ltd. Disputes 
having arisen between the appellant and the respondent, a Reference was 
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made to the Arbitrator at the instance of the appellant. The Arbitrator 
passed an award in favour of the respondent. However, during the pro-
ceedings regarding making the award rule of court, the appellant raised 
an objection that the res1,>0ndent, being an unregistered firm, could not 
defend the arbitration proceedings in view of the bar contained in Section 
69 of the Partnership Act. On this issue the Trial Court decided against 
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K. P. ENTERPRISES v. D.R. CONSTRUCTION CO. 
21 
the appellant. The revision preferred by the appellant was rejected by a 
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single judge of the High Court holding that the provisions of Section 69 of 
the Partnership Act do not stand in the way of an unregistered firm 
defending proceedings against it and it precludes only the initiation of any 
proceedings by such a firm. 
In appeal to this Court it was contended on behalf of the appellant 
that the bar imposed under Section 69(3) is attracted to the case on hand 
and that inasmuch as the same prohibits the enforcement of any right 
arising from a contract by an unregistered firm, the objection can be taken 
at any stage i.e. even post award proceedings instituted to enforce the 
award. 
Dismissing the appeal, the Court 
HELD : 1. There is no infirmity or error whatsoever in the decision 
of the courts below to call for interference in this appeal. [i6-H; 27-A] 
2. The prohibition contained in Section 69 of the Partnership Act, 
1932 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 
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the Arbitrator was at the instance of the appellant itself. H the said bar 
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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 Arbitrator's power, authority and 
competency itself, undermining thereby the legal efficacy of the very award, 
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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 either 
rightly or legitimately said to be vitiated on account of the prohibition 
contained in Section 69 of the Partnership Act since the same has no 
application to proceedings before an Arbitrator. At the stage of enforce-
ment of the award by passing a decree in terms thereof what is enforced is 
the award itself which crystalise 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. [26~A-E] 
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