State Sugar Corporation Ltd. Vs. Jain Construction Co. & Anr  Insc 494 (25
N. Santosh Hegde & S.B. Sinha (Arising out of SLP (C) No.4459 of 2004) S.B. SINHA, J :
This appeal is directed against the judgment and order dated 2.12.2003
passed by the High Court of Uttaranchal at Nainital in A.O.
No.313 of 2002 whereby and whereunder the appeal filed by the respondents
herein purported to be under Section 39(iv) of the Arbitration Act, 1940
(hereinafter referred to as 'the 1940 Act) was allowed, directing :
"Since, the Arbitration and
Conciliation Act, 1996 has come into force, therefore, appropriate remedy
to relegate is available to the parties to act in accordance with the
provisions of the new Act, if there is an arbitration clause in the agreement.
It is an open remedy to the party to move to approach to the Chief Justice or
His Nominated Judge in the arbitration under the New Act." The basic fact
of the mater is not in dispute. The parties hereto had entered into an
agreement on or about 11.4.1988 as regard certain civil works in an unit
belonging to the Appellant herein. Disputes and differences having arisen
between the parties, the respondent herein filed an application under Section
20 of the 1940 Act in the Court of the Civil Judge, Dehradun for appointment of
an arbitrator relying on or on the basis of a purported arbitration agreement
contained in clause 34 of the aforementioned contract.
The said suit was marked as O.S. No.290 of 1991. The respondent herein,
inter alia, pleaded :
"That as per clause no.34 of contract bond all disputes between the
parties arising under the contract, arbitrator is to be appointed by Managing
Director of the Defendant Corporation. The plaintiff has written so many
letters to the M.D. and Secretary of Corporation for appointment of Arbitrator
but they did not pay any attention and have not appointed any Arbitrator so
far, so the plaintiff is entitled to get the appointment of Arbitrator from the
Court." By reason of a judgment and order dated 1.5.1992, the learned
Civil Judge, Dehradun rejected the said petition, inter alia, on the ground
that the same was not maintainable in view of Section 69 of the Indian Partnership
Act, as the plaintiff-firm was not a registered one. The said finding was
arrived at despite the fact that the respondent herein had filed an application
for amendment of the said petition. As it appears from the judgment of the
learned Civil Judge, that the respondent herein had admitted that it failed to
make necessary averment in the plaint as regard registration of the firm
inadvertently and the application for amendment has been filed having regard to
the contentions raised by the Appellant herein in that behalf. The respondent
herein being aggrieved by the said judgment filed an appeal before the High
Court which was marked as A.O. No.313 of 2002. The said appeal was allowed in
the manner as stated hereinbefore.
Mr. Vinay Garg, learned counsel appearing on behalf of the appellant, would
submit that as the respondent-firm was not a registered one, the application
for appointment of an arbitrator both under the 1940 Act and the Arbitration
and Conciliation Act, 1996 (hereinafter referred to as 'the 1996 Act') was not
maintainable. Reliance, in this connection, has been placed on Firm Ashok
Traders and Another vs. Gurumukh Das Saluja and Others [(2004) 3 SCC 155]. It
was also contended that in any event, the impugned judgment is unsustainable in
law in view of the provisions contained in Section 85(2)(a) of the 1996 Act, as
the arbitral proceeding was initiated as far back as on 1.5.1991, i.e. prior to
coming into force of the 1996 Act.
The respondent appearing in person, inter alia, submitted that in a similar
matter being SLP (C) No.18995 of 1995 arising out of an order in Appeal No.493
of 1995 passed by the Allahabad High Court, this Court directed the Additional
Civil Judge, to whom the matter was remitted, to appoint an arbitrator in terms
of clause 34 of the contract between the parties and, thus, there is absolutely
no reason as to why clause 34 of the present agreement, which contains similar
stipulation, should not be acted upon. A written submission has also been filed
before us, inter alia, contending that the Appellant herein is guilty of
commission of breach of the said agreement dated 11.4.1988.
The question as to whether the respondent no.1-firm is registered or not is
essentially a question of fact. It is true that the arbitral proceedings would
not be maintainable at the instance of an unregistered firm having regard to
the mandatory provisions contained in Section 69 of the Indian Partnership Act,
1932. It has been so held in Jagdish Chandra Gupta vs.
Kajaria Traders (India) Ltd. [AIR 1964 SC 1882]. We may, however, notice
that this Court in Firm Ashoka Traders (supra) despite following Jagdish
Chandra Gupta held that Section 69 of the Indian Partnership
Act would have no bearing on the right of a party to an arbitration clause
under Section 9 of the 1996 Act. As correctness or otherwise of the said
decision is not in question before us, it is not necessary to say anything in
this behalf but suffice it to point out that in the event it is found by the
High Court that the learned Civil Judge was wrong in rejecting the application
for amendment of the plaint and in fact the respondent-firm was registered
under the Indian
the question of throwing out the said suit on that ground would not arise.
There cannot, however, be any doubt whatsoever that the firm must be registered
at the time of institution of the suit and not later on.
[See Delhi Development Authority vs. Kochhar Construction Work and Another (1998)
8 SCC 559].
The said questions, thus, would fall for consideration before the High
The only question which survives consideration is the applicability of the
1996 Act in the fact of the present case. Disputes and differences between the
parties arose in the year 1991. The respondent filed an application under
Section 20 of the 1940 Act on 1.5.1991. It invoked the arbitration agreement as
contained in clause 34 of the contract. The arbitral proceeding was, therefore,
set in motion. In terms of Section 21 of the 1996 Act, the arbitral proceedings
in respect of a particular dispute commences on a date on which the request for
that dispute to be referred to arbitration was received by the respondent.
Section 85 (2)(a) of the 1996 Act reads thus :
"85. Repeal and saving.-(1) The Arbitration (Protocol and Convention)
Act, 1937 (6 of 1937), the Arbitration Act, 1940 (10 of 1940) and the Foreign
Awards (Recognition and Enforcement) Act, 1961 (45 of 1961) are hereby repealed.
(2) Notwithstanding such repeal,- (a) the provisions of the said enactments
shall apply in relation to arbitral proceedings which commenced before this Act
came into force unless otherwise agreed by the parties but this Act shall apply
in relation to arbitral proceedings which commenced on or after this Act comes
(b) all rules made and notifications published, under the said enactments
shall, to the extent to which they are not repugnant to this Act, be deemed
respectively to have been made or issued under this Act." This Court in Milkfood
Ltd. vs. M/s GMC Ice Cream (P) Ltd. [JT 2004 (4) SC 393] , relying on or on the
basis of Shetty's Constructions Co.
Pvt. Ltd. vs. Konkan Railway Construction and Another [(1998) 5 SCC 599), Thyssen
Stahlunion GMBH vs. Steel Authority of India Ltd. [(1999) 9 SCC 334 = JT 1999
(8) SC 66], Fuerst Day Lawson Ltd. vs. Jindal Exports Ltd. [(2001) 6 SCC 356]
and State of West Bengal vs. Amritlal Chatterjee [(JT 2003 (Supp.1) SC 308],
held that in respect of the arbitral proceedings commenced before coming into
force the 1996 Act, the provisions of the 1940 Act shall apply.
In view of the aforementioned pronouncements of this Court, the impugned
judgment cannot be sustained. It is set aside accordingly. The matter is
remitted to the High Court for consideration of the merit of the matter afresh.
Keeping in view the fact that the matter is pending for a long time, we
would request the High Court to dispose of the matter as expeditiously as
possible, preferably within a period of eight weeks from the date of receipt of
a copy of this order.
The appeal is allowed with the aforementioned observations and directions.
In the facts and circumstances of the case, there shall be no order as to