B.A. Khan, J.
1. Petitioners' applications under Sections 11 and 9 of the Arbitration & Conciliation Act, 1996 have been dismissed for being barred by Section 69 of the Indian Partnership Act by impugned order dated 2.9.2002 passed in Suit No. 65/2002 giving rise to this petition.
2. Petitioners had filed these applications before learned Additional District Judge for appointment of arbitrator under Section 11 and for appointment of receiver under Section 9 of the Act as a temporary interim measure. Their case was that private respondents 2 to 6 had inducted them in partnership vide Partnership Deed dated 30.9.2000 pursuant whereto they had contributed their share capital but these respondents had then in breach of the terms of Partnership prevented them from having any excess to books/registers of partnership firm, had issued cheques without obtaining their signatures, had failed to maintain any statement of accounts and had deprived them from the profits and so on. The disputes had thus arisen and a notice was served on them invoking the arbitration clause in the Partnership Deed and informing them that they had appointed one Mr.S.Bahl, Chartered Accountant as their arbitrator. They were also required to appoint an arbitrator to adjudicate upon the disputes/differences that had arisen within 30 days of the receipt of the notice but they had failed.
3. Petitioners accordingly prayed in their application under Section 11 as under:-
'a) The court be pleased to appoint Sh.S.Bahl as sole arbitrator;
b) Refer the disputes and differences to the sole arbitrator;
c) Appoint a receiver to look after the partnership firm including the records of partnership firm.'
4. In their application under Section 9 of the Arbitration Act, petitioners asked for a restraint order against respondents No. 2 to 6 from issuing any cheque on behalf of the firm which exceeds Rs. 10,000/- and from entering into the office of partnership firm and for appointment of receiver for taking the records of firm into custody and for looking after it.
5. Respondent Nos.2 to 6 filed their reply explaining that partnership business ran into losses of which petitioners were informed and in response to which they had shown their disinterest in continuing with the partnership. They had terminated the partnership putting an end to their rights as partners. It was also claimed by them that the accounts were also settled and excess payment made to them and that there was no occasion for appointment of a receiver nor had any disputes arisen between them which were referable to any arbitration.
6. No objection was taken by these respondents against the maintainability of the two applications. All the same, the following issue was framed by the learned Additional District Judge on 8.7.2002 in these applications:-
'Whether the petition is maintainable in view of bar created by Section 69(1) of the Indian Partnership Act.'
7. The impugned order records that no arguments were advanced by the petitioners to justify the maintainability of their applications. The case of the respondents on the other hand was that since the partnership firm was an unregistered one, the petition filed by petitioners was not maintainable under Section 69(1) and even under the exceptions provided under sub clause (3) of this Section. Reliance in this regard was placed on the judgment of this Court in M/s.Paras Ram Darshan Lal v. Union of India : AIR1979Delhi135 , Om Prakash v. Usha Rani : 96(2002)DLT35 and Mohd.Monirul Hasan v. Mohd.Iftikar Ahmed AIR 2000 Guw 108.
8. Learned Additional District Judge decided this preliminary issue upholding the respondents' plea and dismissing petitioners' applications by holding:-
'The case of petitioners is squarely covered by the judgments (Supra) as already observed by me. The petitioners have proceeded to file the present petition on the basis of continuing partnership which admittedly is unregistered.
Therefore, petition under Section 11 of Arbitration & Conciliation Act, 1996 whether treated as a suit or proceeding is barred and not maintainable under Section 69 of Partnership Act and the case of the petitioners cannot be said to be covered under exception as provided under Section 69(3) of the Partnership Act. The issue is accordingly decided in favor of respondents and against the petitioners.'
9. Petitioners' case is that learned Additional District Judge had gone wrong in framing the preliminary issue and applying the judgments relied upon by him to their applications and had exceeded his jurisdiction and also failed to appreciate that he was acting as a nominee of the Chief Justice under Section 11 of the Arbitration Act to discharge his administrative function for appointment of an arbitrator and once their applications complied with the requirements of law for such appointment, he could not have dismissed the two applications. He had also overlooked that provisions of the Arbitration Act which permitted least judicial intervention in matters involving settlement of disputes which fall within the domain of arbitrator and had also misappreciated and misapplied the provisions of Section 69 of the Partnership Act. He had also wrong reliance on a judgment of a Guwahati High Court in Mohd.Monirul Hasan (supra) in which a partner of an unregistered firm had filed a suit for rendition of accounts as there existed no arbitration agreement between the parties. He had also failed to appreciate that once respondents had taken the stand that partnership firm was dissolved and the accounts settled, the dispute between the parties had turned into a dispute related to dissolution of partnership and settlement of accounts attracting the exceptions provided under Section 69(3), even if it was assumed that this provision had any application in the matter.
10. The respondents' stand on the other hand, is that petitioners' applications filed as partners of the unregistered firm were not maintainable being barred by Section 69(1) of the Partnership Act and were also not covered by the exceptions provided under sub Section (3)(a) of this Section. Reliance in support is placed on a Supreme Court judgment in Prabhu Shanker Jaiswal v. Sheo Narain Jaiswal, : (1996)11SCC225 and the judgment of this Court in M/s.Paras Ram Darshan Lal v. Union of India : AIR1979Delhi135 and Om Prakash v. Usha Rani : 96(2002)DLT35 .
11. The relevant provisions of the two enactments-Arbitration Act and the Partnership Act would have to be extracted and these read as under:-
Arbitration Act Section 5:-
Notwithstanding anything contained in any other law for the time being in force, in matters governed by this Part, no judicial authority shall intervene except where so provided in this Part.
Section 11:- Appointment of Arbitrators
1).........
2).........
3).........
4) If the appointment procedure in sub-section (3) applies and
(a) a party fails to appoint an arbitrator within thirty days from the receipt of a request to do so from the other party; or
(b) the two appointed arbitrators fail to agree on the third arbitrator within thirty days from the date of their appointment, the appointment shall be made, upon a request of a party, by the Chief Justice or any person or institution designated by him.
5) Failing any agreement referred to in sub-section (2), in an arbitration with a sole arbitrator, if the parties fail to agree on the arbitrator within thirty days from the receipt of a request by one party from the other party to so agree the appointment shall be made, upon request of a party, by the Chief Justice or any person or institution designated by him.
6) Where, under an appointment procedure agreed upon by the parties, -
(a) a party fails to act as required under that procedure; or
(b) the parties, or the two appointed arbitrators, fail to reach an agreement expected of them under that procedure; or
(c) a person, including an institution, fails to perform any function entrusted to him or it under that procedure.
A party may request the Chief Justice or any person or institution designated by him to take the necessary measure, unless the agreement on the appointment procedure provides other means for securing the appointment.
7) A decision on a matter entrusted by sub-section (4) or sub-section (5) or sub-section (6) to the Chief Justice or the person or institution designated by him is final.
Partnership Act Section 69:-
Effect of non-registration
(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 persons 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 Registrar of Firms as a partner in the firm.
(2) The provisions of sub-section (1) and (2) shall apply also to a claim of set-off or other proceeding to enforce a right arising from a contract, but shall not affect -(a) the enforcement of any right to sue for the dissolution of a firm or for accounts of a dissolved firm, or any right or power to realize the property of a dissolved firm.'
Coming to the provisions of Arbitration Act first, it would be seen that Section 5 bars a judicial intervention except where it is permitted under the Act. This Section mandates that no judicial authority shall intervene except to the extent as is provided under the Act. Similarly, Section 8 requires such Authority to refer an action arising out of an arbitration agreement to arbitration. The object of minimising the judicial intervention in the arbitration matters is to achieve the speedy resolution of disputes by the arbitral Tribunal. It is in this perspective that provisions of Section 11 and the nature of proceedings would have to be examined and appreciated.
12. Section 11 deals with the appointment of arbitrators. It empowers the Chief Justice or any person or institution designated by him to appoint the arbitrator/s where a party fails to so appoint within 30 days from the request by the other party. Either party can apply for such appointment on satisfying the following requirements:-
'a) that there exists an arbitration agreement between the parties;
b) that such agreement provides for the reference to be made to an arbitrator to be appointed with the consent of the parties;
c) that disputes have arisen between the parties to which the agreement applies;
d) that parties had failed to concur on the appointment of the arbitrator and the concerned party had failed to appoint him despite 30 days notice served on such party.'
13. Section 69(1) of the Partnership Act, on the other hand, bars a partner of the unregistered firm to institute a suit to enforce a right arising out of a contract falling within its parameters. Sub Section (3) of this Section extends this bar to a claim of set off and also to other proceedings of any kind which are for enforcement of any right arising from a contract except those expressly excluded by exceptions provided in sub Clauses (a) and (b) of sub Section (3) and sub Section (4). Clause (a) of sub Section (3) which is relevant for our purpose provides that this bar shall not effect the enforcement of any right to sue for the dissolution of a firm or for accounts of a dissolved firm or any right or power to realize the property of an undissolved firm. In other words, if a partner of an unregistered firm files any proceedings for enforcement of any right to sue for dissolution of the firm or for the accounts of the dissolved firm, bar imposed by Section 69(1) would not apply.
14. The crucial question that arises for determination in the present case is whether petitioners applications under Section 11 (for appointment of an arbitrator) and under Section 9 (for interim measures) of the Arbitration Act are a suit or 'any other proceeding' within the meaning of Section 69(3) and thus barred under these provisions or whether these could be saved under the exception provided under sub Section (3)(a) of this Section.
15. An application under Section 11 of the Arbitration Act for appointment of an arbitrator to arbitrate the disputes between the parties can by no stretch of imagination be said to be a suit in any sense of the word because this neither involves any adjudication or determination of the rights and claims of the parties nor does it lead to any decision on these. It is a mere request to the Chief Justice or his designated Authority to appoint an arbitrator and to refer dispute/s to him and where the Chief Justice or the designated Authority feels satisfied that the arbitration agreement exists and disputes have arisen between parties and that they have failed to appoint the arbitrator, the appointment and reference of disputes to the arbitrator follows as a matter of course. The Chief Justice or the designated Authority does not sit as a Civil Court to decide this application in accordance with provisions of Civil Procedure Code. The order passed on this is, thereforee, administrative in nature and not adjudicatory.
16. A suit in contradistinction is a proceeding instituted in a civil court of original jurisdiction and it commences by a presentation of plaint. It is governed and regulated by provisions of the Civil Procedure Code and it decides the rights and claims of the parties under these provisions.
17. Law Lexicon defines it as any proceeding in a court of justice where a right is litigated between the parties and where a plaintiff files it to recover his right or claim. A suit may as well be a proceeding but all proceedings are not a suit. For example a land acquisition proceeding, an application under Section 20 of Old Arbitration Act or under Section 31 of State Financial Corporation Act are not a suit.
18. None of the attributes of a suit are, thereforee, either present or even discernible in an application under Section 11 of the Arbitration Act which neither commences with a plaint nor involves any adjudication or decision of any right or claim of the parties nor is it governed by any provision of the Civil Procedure Code.
19. The Supreme Court dealing with the nature of proceedings under Section 11 had this to say in Konkan Railway v. Rani Constructions Ltd : [2002]1SCR728 :-
'There is nothing in Section 11 that requires the party other than the party making the request to be noticed. It does not contemplate a response from that other party. It does not contemplate a decision by the Chief Justice or his designate on any controversy that the other party may raise, even in regard to its failure to appoint an arbitrator within the period of thirty days. That the Chief Justice or his designate has to make the nomination of an arbitrator only if the period of thirty days is over does not lead to the conclusion that the decision to nominate is adjudicatory.'
20. If application under Section 11 of the Arbitration Act is not a suit, it can't naturally be barred under Section 69(1) because this provision only bars a suit instituted by a partner of an unregistered firm to enforce a right arising from a contract.
21. But the matter does not rest at that because sub Section (3) of Section 69 of the Partnership Act extends this bar to some other areas also including a claim of set-off or any other proceedings to enforce a right arising from a contract. What, thereforee, remains to be seen is whether petitioners applications would fall within the expression 'other proceedings to enforce a right arising from a contract' occurring in this clause.
22. The word 'proceeding' is a general one and includes proceedings of any kind. It is not limited to proceedings in a court of law/judicial proceedings only. This word in Section 69(3) should, thereforee, be taken in the liberal sense and if the proceedings are directed to enforce as right arising out of the contract, these would be barred under Section 69(3) of Partnership Act. This bar would not, however, apply to the proceedings initiated by a partner of unregistered firm for enforcement of a right related to dissolution of the firm or settlement of its accounts.
23. An application under Section 20 of Old Arbitration Act for reference of disputes to Arbitrator has been held to be a proceeding within the meaning of Section 69(3) to enforce the right of seeking arbitration - a right arising out of the contract by several judgments of various High Courts. It is also settled that the expression 'for enforcement of any right to sue for the dissolution of the firm or for accounts of a dissolved firm', is to be used in the widest sense. Under the Old Arbitration Act an application under Section 20 for reference of disputes to the Arbitrator has also been held to be for the enforcement of a right to sue for dissolution or settlement of accounts. To sum up the bar imposed by Section 69(1) against institution of suit by a partner of an unregistered firm extends to proceedings other than the suits also so long as such proceedings seek to enforce a right arising from the contract and where an application or petition by an unregistered firm initiates a proceeding of legal nature for enforcement of a right arising out of a contract, it would be barred unless it is covered by the exceptions under clauses (a) and (b) of sub Section (3). The bar would not apply under Section 69(3)(a) if the proceeding is for dissolution of partnership and settlement of accounts.
24. The Supreme Court had the occasion to deal with this expression 'Proceedings to enforce a right arising from contract' and also the exceptions to this in Prabhu Shanker Jaiswal's case and this is how it interpreted the provisions of Section 69(3)(a):-
'Under Section 69(1) of the Partnership Act, a suit, inter alia, to enforce a right arising from a contract cannot be filled by a person suing as a partner in a firm against the other partners of the firm unless the firm is registered.
Under Sub-Section (3) any other proceedings to enforce a right arising from a contract by a person suing as a partner against the other partners of an unregistered firm is also barred.
Since the right to resort to arbitration flows from the contract between the parties contained in the partnership deed, a suit or any other proceeding by a partner to enforce this term in the contract against the other partners would, thereforee, normally be barred under the first para of sub-Section (3) of Section 69.
However, under sub-section (3) (a) this bar will not affect the enforcement of any right to sue for the dissolution of a firm or for accounts of a dissolved firm or any right or power to realise the property of a dissolved firm. thereforee, although the partnership firm may be unregistered, one partner can sue other partners for dissolution of the firm and for accounts.
The words 'to sue' used in sub -section (3) (a) cannot be construed narrowly to refer only to suits for dissolution of partnership and accounts. The exception contained in sub-section (3) (a) applies not merely to sub-sections (1) and (2) but also the first part of sub-section (3) which deals with proceedings other than suits.
Therefore, in order that sub-section (3) (a) would apply to all these provisions, the words 'to sue' in sub-section (3) (a) must be understood as applying to any proceedings for dissolution of partnership or for accounts of a dissolved firm or to realise the property of a dissolved firm. This proceeding may be either by way of a suit or it can even be a proceeding under the Arbitration Act to secure these rights through arbitration. Hence where arbitration is sought under the arbitration clause in a partnership deed of an unregistered firm for the purpose of dissolution and accounts of the partnership firm, the partners can maintain all applications/petitions under the Arbitration Act for the purpose of enforcing their right to secure dissolution and accounts of the partnership firm through arbitration. In the present case the suit for dissolution and accounts of the partnership firm has been stayed under Section 34 of the Arbitration Act at the instance of Respondent No. 1. The petition of the appellant, thereforee, under Section 8 of the Arbitration Act is maintainable.'
25. The legal position enunciated by this judgment and which, thereforee, becomes binding is that if a proceeding seeks to enforce the right to resort to arbitration between the parties, a suit or any other proceeding by a partner of an unregistered firm would be barred under sub Sections (1) and (3) of Section 69. However, this bar would not apply if such suit or proceeding enforces any right to sue for the dissolution of a firm or for accounts of a dissolved firm or any right or power to realize the property of a dissolved firm.
26. The rationale and object behind the exceptions carved out under sub-Sections (3) and (4) of Section 69 seems to be that partnership having been dissolved or having come to terminus, the rights of the parties are to be worked out in terms of the contract of the partnership entered by them and the rights engrafted therein and so long as the parties seek enforcement of those rights including the right to dissolution of the partnership, they can do so on the strength of the exception provided under sub Clause (3) (a) even though the partnership firm was an unregistered firm (See H.B. Vittala Kamath v. M/s.Krishna Motor Service, Shimoga : AIR1994Kant181 ; Ram Kumar Agarwal v. Ram Kishan Tayal Fouji : AIR1991MP188 and Jagat Mittar Saigal v. Kailash Chander Saigal).
27. We, accordingly, hold that an application filed under Section 11 of the Arbitration Act filed by a partner of an unregistered firm is not a suit within the meaning of that word and thus not barred under Section 69(1). This as also the application under Section 9 would, however, fall within the expression 'other proceedings' contained in Section 69(3) and would be barred unless covered by the exceptions under Section 69(3)(a)&(b). These applications are also to be taken as initiating proceedings and suing for enforcement of a right to sue related to dissolution of the firm or for that settlement of accounts depending upon the nature of their task and context.
28. The question that arises in this conspectus now is whether petitioners' applications under Sections 11 and 9 of the Arbitration Act filed as partners of unregistered partnership would be barred under Section 69(3) of Arbitration Act.
29. It is undisputed that petitioners' are the partners of an unregistered firm. Their applications under Sections 11 and 9 of the Arbitrations are initiating proceedings as contemplated by Section 69(3) for enforcement of right of arbitration - a right arising under the partnership contract. These would, thereforee, be straightaway barred and not maintainable unless saved by the exception contained in Clause(a) of sub-section 3 i.e. unless these applications can be held to be for enforcement of a right to sue related to dissolution of the firm and settlement of accounts.
30. Petitioners' case in their applications is that they are the partners of the firm and have contributed to its share capital but respondents were running its affairs in breach of the terms of partnership deed by not maintaining the accounts and by issuing cheques without their signatures etc. The stand of respondents, on the contrary, is that these petitioners had ended the partnership and that accounts were also settled with them and so was the due amount paid to them. The rival claims, thereforee, undoubtedly give rise to a dispute related to dissolution of partnership and settlement of accounts. Once petitioners' assert that partnership was continuing and respondents maintain that it had ended, a dispute arises surrounding the dissolution of partnership. Similarly when petitioners' claim that respondents had not maintained the accounts and respondents assert that these were settled, it can't be said that the dispute is not on settlement of accounts.
31. We, thereforee, feel no difficulty in holding that as petitioners applications eventually seek enforcement of a right to sue related to dissolution of the firm and settlement of accounts these are saved by the exception under Section 69(3)(a) and are maintainable. This petition is resultantly allowed and the impugned order dated 2.9.2002 passed in Suit No. 65/2002 set aside. Petitioners' applications shall revive and be considered afresh and decided under law.
32. Parties to appear before the ADJ on 8.11.2004.