Reportable IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NO.7[SECTION][SECTION] OF [SECTION]0[SECTION] M/s Umesh Goel Appellant VERSUS Himachal Pradesh Cooperative Group Housing Society Ltd. Respondent J U D G M E N T [ENTITY], J.
An interesting but very important legal question arises for consideration in this appeal relating to interpretation of [SECTION] of the [ACT] with reference to its applicability to Arbitral proceedings.
The facts are not in controversy which can be briefly stated as under:
The respondent which is a Cooperative Group Housing Society invited tenders for construction of 102 dwelling units with basement at Plot No. [SECTION] Sector 5, Dwarka New Delhi. The tenders were invited in May [SECTION][SECTION]8. The appellant, an unregistered partnership firm submitted its bid in response to the said tender on 06.05.[SECTION][SECTION]8. The appellant was the successful bidder and the contract was awarded to the appellant at an estimated cost of Rs.[SECTION].80 crores. The appellant was issued a letter of intent. On 0[SECTION].08.[SECTION][SECTION]8 the appellant submitted its first bill for the construction of the compound wall etc. The agreement for the construction of 102 dwelling units with basement was entered into between the appellant and the respondent on
02.02.[SECTION][SECTION][SECTION]. It is stated that there was some delay in getting the plan sanctioned, which according to the appellant, he was not responsible for the delay. A dispute arose as between the appellant and the respondent which necessitated the appellant to move the High Court of Delhi by way of an application under [SECTION] of the Arbitration and Conciliation Act [SECTION][SECTION]6 (for short [SECTION][SECTION]6 Act) to restrain the respondent from dispossessing the appellant from the worksite till the work executed by the appellant is measured by the Commissioner to be appointed by the Court. It was filed on 22.05.[SECTION]05. A Commissioner was also appointed by the High Court. The appellant filed another application under [SECTION] of the [SECTION][SECTION]6 Act to restrain the respondent from operating its bank accounts and from dispossessing the appellant on [SECTION].01.[SECTION]03.
With reference to the dispute which arose as between the appellant and the respondent an arbitrator/an advocate by name Smt. [ENTITY] was appointed by the respondent to adjudicate the dispute between them. As the appointment came to be made on [SECTION].03.[SECTION]03 by the respondent, though, the appellant earlier moved the High Court by way of an Arbitration Application No.[SECTION]5 of [SECTION]03 on 0[SECTION].07.[SECTION]03 under [SECTION] of the [SECTION][SECTION]6 Act for appointment of an independent arbitrator, the same was subsequently withdrawn. The appellant participated in the arbitration proceedings before the arbitrator appointed by the respondent. Claims and counter claims were made by the appellant as well as the respondent before the arbitrator. The arbitrator passed the award on 05.05.[SECTION]05 wherein the claim of the appellant was allowed to the extent of Rs. 1,[SECTION],[SECTION],886.08 along with interest at the rate of [SECTION]% from 01.06.[SECTION]02 till the date of the award and further interest from the date of award till its payment at the rate of [SECTION]% per annum. While resisting the claim of the appellant, the respondent did not specifically raise any plea under [SECTION] of the [ACT].
The respondent challenged the award dated 05.05.[SECTION]05 under [SECTION] of the [SECTION][SECTION]6 Act before the Delhi High Court which was registered as A.A. No.[SECTION]8 of [SECTION]05. The said application was filed on 02.08.[SECTION]05. The respondents application was dismissed by the learned Single Judge by an order dated 01.0[SECTION].[SECTION]05. The respondent filed Review Application No.26 of [SECTION]05 which was also dismissed by the learned Single Judge by an order dated 03.10.[SECTION]05. As against the orders dated 01.0[SECTION].[SECTION]05 and 03.10.[SECTION]05, the respondent preferred appeals in FAO (OS) No.[SECTION]6 of [SECTION]05 on [SECTION].11.[SECTION]05. Pending disposal of the appeals, an interim order was passed on [SECTION].07.[SECTION]06 directing the respondent to deposit [SECTION]% of the decretal amount within six weeks and by subsequent order dated [SECTION].08.[SECTION]06 the time was extended by another four weeks. By the impugned order dated [SECTION].11.[SECTION]07 the Division Bench having allowed the FAO(OS) No.[SECTION]6 of [SECTION]05, the appellant is before us.
We heard Mr. [ENTITY], learned Senior Counsel for the appellant and Mr.[ENTITY], learned Senior Counsel for the respondent. Mr. [ENTITY], learned Senior Counsel in his submissions after drawing our attention to [SECTION] and in particular [SECTION] of the [ACT] contended that when sub sections (1) and (2) are read in to [SECTION], the expression other proceedings mentioned in the said sub section (3) should be with reference to other proceedings connected with a suit in a Court and cannot be read in isolation. The learned Senior Counsel contented that if it is read in that sense the expression other proceedings in sub section (3) can have no relevance nor referable to Arbitral proceedings in isolation. The learned Senior Counsel further contended that going by the plain reading of the Statute and if the golden rule of construction is applied, an arbitrator by himself is not a court for the purpose of [SECTION] of the Statute. The learned Senior Counsel then submitted that there is a vast difference between an arbitrator and the Court, that though an arbitrator may exercise judicial powers, he does not derive such powers from the State but by the agreement of the parties under a contract and, therefore, he cannot be held to be a Court for the purpose of [SECTION] of the [ACT]. While referring to [SECTION] of the [SECTION][SECTION]6 Act, the learned Senior Counsel submitted that it is only a statutory fiction by which for the purpose of enforcement, the award is deemed to be a decree and it cannot be enlarged to an extent to mean that by virtue of the said award to be deemed as a decree, the arbitrator can be held to be a Court. Lastly, it was contended by him that in order to invoke [SECTION], three mandatory conditions are required to be fulfilled, namely, that (a) there should be a suit and the other proceedings should be intrinsically connected to the suit, (b) such suit should have been laid to enforce a right arising from the contract and (c) such a suit should have been filed in a Court of law.
As against the above submissions Mr. [ENTITY], learned Senior Counsel for the respondent submitted that the expression other proceedings will include arbitral proceedings and that the foundation for it must only be based on a right in a contract. In support of the said submission, learned senior counsel contended that this Court has held while interpreting [SECTION] of the [ACT] that arbitral proceedings are to be treated on par with civil proceedings. The learned Senior Counsel also submitted that under [SECTION] of the [ACT], arbitral proceedings have been equated to regular suits and, therefore, the expression other proceedings in [SECTION] of the [ACT] should be held to include an Arbitral Proceeding on par with a suit. The learned counsel, therefore, contented that the arbitrator should be held to be a Court and the proceedings pending before it are to be treated as a suit and consequently other proceedings. By referring to [SECTION] and [SECTION] of the [SECTION][SECTION]6 Act where an award of the arbitrator has been equated to a decree of the Court and applicability of [ACT] for the purpose of execution has been prescribed, the learned Senior Counsel contended that the arbitral proceedings should be held to be civil proceedings before a Court.
Mr. [ENTITY], learned Senior Counsel for the appellant relied upon the decisions reported in [ENTITY] Gupta v. Kajaria Traders (India) Ltd. [SECTION]64 (8) SCR [SECTION], [ENTITY] Enterprises v. D.R. Construction Co. ([SECTION]00) 6 SCC 6[SECTION], The [PRECEDENT] and the Bharat Bank Employees Union, Delhi - AIR [SECTION][SECTION] SC [SECTION]8, Firm Ashok Traders and another v. Gurumukh Das Saluja and others ([SECTION]04) 3 SCC [SECTION]5, [PRECEDENT] Partnership Firm, Beawer (Raj.) Through Mankanwar (Smt.) W/o Parasmal Chordia (Dead) and Ors.- ([SECTION]07) 10 SCC 82, [ENTITY] v. Board of Trustees for Port of Calcutta - ([SECTION][SECTION]3) 4 SCC 3[SECTION], M/s. Consolidated Engg. Enterprises v. Principal Secy. Irrigation Deptt. and Ors. [SECTION]08 (6) SCALE 7[SECTION], State of W.B. v. [ENTITY] and Anr. - ([SECTION]04) 6 SCC [SECTION], Raj Kumar Khurana v. State of (NCT of Delhi) and Anr. - ([SECTION]0[SECTION]) 6 SCC 72 and M/s. Indian Oil Corporation Limited Rep. by Its Chief LPG Manager (Engg.) S. Chandran v. M/s. Devi Constructions, Engineering Contractors & another [SECTION]0[SECTION] (2) Law Weekly 8[SECTION]. Mr. [ENTITY], learned Senior Counsel for the respondent relied upon the decisions reported in Firm Ashok Traders (supra), Delhi Development Authority v. Kochhar Construction Work and Anr. ([SECTION][SECTION]8) 8 SCC 5[SECTION], [ENTITY] (supra) and [ENTITY] v. State Bank of India - ([SECTION]00) 5 SCC 355.
Having heard learned counsel for the appellant as well the respondent and having bestowed our serious consideration to the respective submissions, the various decisions relied upon and the provisions contained in the [ACT], the [ACT], [ACT] and [ACT], we are of the view that the submissions of Mr. [ENTITY], learned Senior Counsel for the appellant merit acceptance.
To appreciate the respective submissions and in support of our conclusion, at the very outset [SECTION] requires to be noted, which reads as under:
6[SECTION]. 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 person 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 register of firms as a partner in the firm.
(2) No suit to enforce a right arising from a contract shall be instituted in any court by or on behalf of a firm against any third party unless the firm is registered and the persons suing are or have been shown in the register of firms as partners in the firm.
(3) The provisions of sub-sections (1) and (2) shall apply also to a claim of set-off or other proceedings to enforce a right arising from a contract, but 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 a dissolved firm, or the powers of an official assignee, receiver or court under the Presidency-
towns Insolvency Act, [SECTION]0[SECTION] (3 of [SECTION]0[SECTION]) or the Provincial Insolvency Act, [SECTION][SECTION] (5 of [SECTION][SECTION]) to realize the property of an insolvent partner.
(4) This section shall not apply-
(a) to firms or to partners in firms which have no place of business in the territories to which this Act extends, or whose places of business in the said territories, are situated in areas to which, by notification under [SECTION], this Chapter does not apply, or
(b) to any suit or claim of set-off not exceeding one hundred rupees in value which, in the Presidency-towns, is not of a kind specified in [SECTION] of the Presidency Small Cause Courts Act, [SECTION]82 (5 of [SECTION]82), or, outside the Presidency-towns, is not of a kind specified in [SECTION] to the Provincial Small Cause Courts Act, [SECTION]87 ([SECTION] of [SECTION]87), or to any proceeding in execution or other proceeding incidental to or arising from any such suit or claim. Though, some of the decisions which were cited before us dealt with [SECTION] of the [ACT], in the instance we wish to analyze the said sub-section along with the other components of the said [SECTION]. When we read [SECTION] carefully, we find that as rightly contended by Mr. [ENTITY], learned Senior Counsel for the appellant, the provisions of sub-sections (1) and (2) have been impliedly incorporated in sub-section (3). When the opening set of expression in sub-section (3) states that the provisions of sub-sections (1) and (2) shall apply, there is no difficulty in accepting the said submission of learned Senior Counsel for the appellant that the entirety of the said two sub-sections should be held to be bodily lifted and incorporated in sub-section (3). It is difficult to state that any one part of sub-sections (1) and (2) alone should be held to be incorporated for the purpose of sub-section (3). Therefore, we are convinced that when we read sub-section (3) it is imperative that all the ingredients contained in sub-sections (1) and (2) should be read into sub-section (3) and thereafter apply the said sub- section when such application is called for in any matter.
Once we steer clear of the said position it will be necessary to note what are the specific ingredients contained in sub-sections (1) and (2). When we read [SECTION] the said sub-section primarily imposes a ban on any person as a partner of a firm from filing any suit to enforce a right arising from a contract or a right conferred under the [ACT] in any Court by or on behalf of an unregistered firm or a person suing as a partner of a firm against the said firm or against any person alleged to be or to have been a partner in that firm. To put it in nut-shell the ban imposed under [SECTION] is on any person in his capacity as the Partner of an unregistered firm against the said firm or any of its partners, in the matter of filing a suit to enforce a right arising from a contract or conferred by the provisions of the [ACT]. In effect, the ban is in respect of filing a suit against that unregistered firm itself or any of its partners by way of a suit under a contract or under the [ACT]. Under sub-section (2) the very same ban is imposed on an unregistered firm or on its behalf by any of its partners against any third party by way of a suit to enforce a right arising from a contract in any Court. A close reading of sub-Sections (1) and (2) therefore shows that while under sub-section (1) the ban is as against filing a suit in a Court by any person as a partner of an unregistered firm against the firm itself or any of its partner, under sub- section (2) such a ban in the same form of a suit in the Court will also operate against any third party at the instance of such an unregistered firm. The common feature in both the sub-sections are filing of a suit, in a Court for the enforcement of a right arising from a contract or conferred by the [ACT] either on behalf of an unregistered firm or by the firm itself or by anyone representing as partners of such an unregistered firm. While under sub-section (1) the ban imposed would operate against the firm itself or any of its partners, under sub-section (2) the ban would operate against any third party.
The question for our consideration is by virtue of sub-section (3) whether the expression other proceedings contained therein will include Arbitral proceedings and can be equated to a suit filed in a Court and thereby the ban imposed against an unregistered firm can operate in the matter of arbitral proceedings. If sub-sections (1) and (2) are virtually lifted whole hog and incorporated in sub-section (3), it must be stated that it is not the mere ban that is imposed in sub-sections (1) and (2) that alone is contemplated for the application of sub-section (3). In other words, when the whole of the ingredients contained in sub-sections (1) and (2) are wholly incorporated in sub-section (3), the resultant position would be that the ban can operate in respect of an unregistered firm even relating to a set off or other proceedings only when such claim of set off or other proceedings are intrinsically connected with the suit that is pending in a Court. To put it differently, in order to invoke [SECTION] and for the ban to operate either the firm should be an unregistered one or the person who wants to sue should be a partner of an unregistered firm, that its / his endeavour should be to file a suit in a Court, in which event even if it pertains to a claim of set off or in respect of other proceedings connected with any right arising from a contract or conferred by the [ACT] which is sought to be enforced through a Court by way of a suit then and then alone the said sub-section can operate to its full extent.
As far as the construction of the said [SECTION] is concerned, we are able to discern the above legal position without any scope of ambiguity. To be more precise, the condition precedent for the operation of ban under sub-section (3) is that the launching of a suit in a Court of law should be present and it should be by an unregistered firm or by a person claiming to be partner of an unregistered firm either to a claim for set off in the said suit or any other proceedings intrinsically connected with the said suit.
In the event of the above ingredients set out under sub-sections (1), (2) and (3) being fulfilled then and then alone the ban prescribed against an unregistered firm under [SECTION] would operate and not otherwise.
Keeping the above outcome of the legal position that can be derived from a reading of [SECTION] in mind we can draw further conclusions by making specific reference to sub-clauses (a) and (b) of sub-section (3) as well as the exceptions set out in sub-clauses (a) and
(b) of sub-section (4) as well. When under sub-section (3) which also relates to a ban concerning other proceedings, the law makers wanted to specifically exclude from such ban such of those proceedings which also likely to arise in a suit, but yet the imposition of ban of an unregistered firm need not be imposed. Keeping the said intent of the law makers in mind, when we read sub-clauses (a) and (b) of sub-section (3), it can be understood that even though such other proceedings may be for the enforcement of any right to sue but yet if it is 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, the same can be worked out by way of a suit in a Court or by way of other proceedings in that suit and the same will not be affected by the ban imposed under sub-section (3). Similarly, any steps initiated at the instance of an official assignee, a receiver or Court under the Presidency-Towns Insolvency Act of [SECTION]0[SECTION] (3 of [SECTION]0[SECTION]) or the Provincial Insolvency Act of [SECTION][SECTION] (5 of [SECTION][SECTION]) to realize the property of an insolvent partner in a pending suit of a Court also stand excluded from the ban imposed under sub-section (3). The specific exclusions contained in clauses (a) and (b) of sub-section (3) therefore makes the position clear to the effect that even though such proceedings may fall under the expression other proceedings and may be intrinsically connected with a suit in a Court, yet the ban would not operate against such proceedings.
When we read sub-section (4), the ban imposed under sub-sections (1), (2) and (3) will have no application to any of those proceedings set out in sub- clauses (a) and (b) of the said sub-section (4). A specific reference to sub-clause (b) of sub-section (4) disclose that in the last part of the said sub-clause it is specifically provided that other proceedings incidental to or arising from any suit or claim of set off not exceeding Rs.100 in value under those specific statute referred to in the said sub- clause can also be launched without any ban being operated as provided under sub-sections (1), (2) and (3). The said part of sub-clause (b) of sub- section (4) thus gives a vivid picture as to the position that the other proceeding specified in the said sub-section can only relate to a pending suit in a Court and not to any other different proceeding which can be categorized as other proceedings.
We are thus able to arrive at a definite conclusion as to the scope and ambit of [SECTION] in particular about [SECTION]. Having thus analyzed the provision in such minute details and its implication, we can now apply the said provision to the case on hand and find out whether [SECTION] is attracted to the Arbitral Proceedings and the ultimate award passed therein by construing the same as falling under the expression other proceedings.
In the case on hand, the contract between the parties contained an Arbitration Clause. The respondent invoked the said clause and an Arbitrator came to be appointed. After the respondent filed its statement of claim, the appellant filed its reply and also its counter claim dated [SECTION].08.[SECTION]03. Before the Arbitrator, in the course of oral arguments, a faint attempt was made contending that, the appellant-firm being an unregistered one, by virtue of [SECTION] of the [ACT], the proceedings insofar as the counter claim was concerned, the same was not maintainable and should be rejected. The Arbitrator took the correct view that [SECTION] has no application to the proceedings of the Arbitrator and held that the objection of the respondent was not sustainable. The Arbitrator allowed the counter claim to the extent of Rs.1,[SECTION],[SECTION],886/- (Rupees One crore thirty six lacs twenty four thousand eight hundred eighty six only). When the award of the Arbitrator was challenged by the respondent under [SECTION] of the Act, the very same objection was raised as a ground of attack. The learned Single Judge of the High Court also found no merit in the said contention and upheld the award of counter claim.
By the impugned judgment, the Division Bench in the appeal filed under [SECTION] of the Act took a contrary view and held that the counter claim in an Arbitral Proceedings is covered by the expression other proceedings contained in [SECTION] of the [ACT] and the appellant being an unregistered firm at the relevant point of time was hit by the embargo contained therein and consequently the award of counter claim in the award as confirmed by the learned Judge was reversed as not justiciable by virtue of [SECTION] of the [ACT].
Based on the close analysis of [SECTION] in its different parts, we are able to discern and hold that in order to attract the said Section, first and foremost the pending proceeding must be a suit instituted in a Court and in that suit a claim of set off or other proceedings will also be barred by virtue of the provision set out in [SECTION] as specifically stipulated in sub-section (3) of the said Section. Having regard to the manner in which the expressions are couched in sub-section (3), a claim of set off or other proceedings cannot have independent existence. In other words, the foundation for the application of the said sub-section should be the initiation of a suit in which a claim of set off or other proceedings which intrinsically connected with the suit arise and not otherwise.
Under the [ACT], the expression Court is not defined. In [SECTION] of the said Act though it is stated that the expressions used but not defined, the definition in the [ACT], [SECTION]72 can be applied, in the [ACT] also there is no specific definition set out for the expression Court. However, we find a definition of the Court in [SECTION] of the [SECTION][SECTION]6 Act, which reads as under:
2. Definitions.-(1) In this Part, unless the context otherwise requires,-
(a) xxx xxx xxx
(b) xxx xxx xxx
(c) xxx xxx xxx
(d) xxx xxx xxx
(e) Court means the principal Civil Court of original jurisdiction in a district, and includes the High Court in exercise of its ordinary original civil jurisdiction, having jurisdiction to decide the questions forming the subject-matter of the arbitration if the same had been the subject-matter of a suit, but does not include any civil court of a grade inferior to such principal Civil Court, or any Court of Small Causes; Mr. [ENTITY], learned Senior Counsel for the respondent in his submissions contended that under [SECTION] of the [SECTION][SECTION]6 Act since it has been provided that the award of an Arbitrator can be enforced under the [ACT] in the same manner as if it were a decree of the Court, it should be held that the role played by the Arbitrator should also be deemed to be that of a Court and on that footing hold that Arbitral Proceedings are also akin to Court proceedings before the Court by equating the Arbitral Tribunal as a Court.
Having thus noted the facts involved in the case on hand and before dealing with the contentions of Mr. [ENTITY], learned Senior Counsel for the respondent on the interpretation of [SECTION], we wish to note the earliest decision on this very question dealt with in [ENTITY] case (supra). Justice [ENTITY], speaking for the Bench has made a critical analysis of this very provision, namely, [SECTION] and has stated as under in paragraphs 7 and [SECTION]:
7. Mr. Justice [ENTITY] asked the question that if all proceedings were to be excluded why was it not considered sufficient to speak of proceedings along with suits in sub-Sections (1) and (2) instead of framing a separate sub- section about proceedings and coupling other proceeding with a claim of set-off? The question is a proper one to ask but the search for the answer in the scheme of the section itself gives the clue. The section things in terms of (a) suits and (b) claims of set-off which are in a sense of the nature of suits and (c) suits and other proceedings. The section first provides for exclusion of suits in sub-sections (1) and (2). Then it says that the same ban applies to a claim of set-off and other proceeding to enforce a right arising from a contract. Next it excludes the ban in respect of the right to sue (a) for the dissolution of a firm, (b) for accounts of a dissolved firm and (c) for the realization of the property of a dissolved firm. The emphasis in each case is on dissolution of the firm. Then follows a general exclusion of the section. The fourth sub-section says that the section as a whole, is not to apply to firms or to partners and firms which have no place of business in the territories of India or whose places of business are situated in the territories of India but in areas to which [SECTION] is not to apply and to suits or claims of set- off not exceeding Rs.100 in value. Here there is no insistence on the dissolution of the firm. It is significant that in the latter part of clause (b) of that section the words are or to any proceeding in execution or other proceeding incidental to or arising from any such suit or claim and this clearly shows that the word proceeding is not limited to a proceeding in the nature of a suit or a claim of set-off. Sub-section (4) combines suits and a claim of set-off and then speaks of any proceeding in execution and other proceeding incidental to or arising from any such suit or claim as being outside the ban of the main section. It would hardly have been necessary to be so explicit if the words other proceeding in the main section had a meaning as restricted as is suggested by the respondent. It is possible that the draftsman wishing to make exceptions of different kinds in respect of suits, claims of set-off and other proceedings grouped suits in sub-sections (1) and (2), set-off and other proceedings in sub-section (3) made some special exceptions in respect of them in sub-section (3) in respect of dissolved firms and then viewed them all together in sub-section (4) providing for a complete exclusion of the section in respect of suits of particular classes. For convenience of drafting this scheme was probably followed and nothing can be spelled out from the manner in which the section is sub-divided.
[SECTION]. In our judgment, the words other proceeding in sub-section (3) must receive their full meaning untrammeled by the words a claim of set-off.
The latter words neither intend nor can be construed to cut down the generality of the words other proceeding. The sub-section provides for the application of the provisions of sub-sections (1) and (2) to claims of set-off and also to other proceedings of any kind which can properly be said to be for enforcement of any right arising from contract except those expressly mentioned as exceptions in sub-section (3) and sub-section (4). (Underlining is ours) In the first blush, when we read paragraph 7, one is likely to gain an impression as though the expression other proceedings is disjunctive of a suit as specifically prescribed in [SECTION]. But on a deeper scrutiny of the judgment, we find that in the light of the special features involved in the said case, it was laid down that other proceedings would be referable to Arbitration as well. We will right now note and state as to those intricate factors which weighed with the learned Judges to state the law in such terms. First and foremost, it will have to be noted that in the said case, the Arbitral proceedings arose under the Indian [ACT] of [SECTION][SECTION] and in particular in relation to a proceeding which emanated under [SECTION] of the said Act. Under [SECTION] of the [SECTION][SECTION] Act, the power of Court to appoint Arbitrator or umpire is specified. [SECTION] details the situations under which the said power of appointment of Arbitrator or umpire can be made. Under [SECTION], the expression Court is defined to mean a Civil Court having jurisdiction to decide the questions framing the subject matter of a suit excluding a Small Causes Court. Under the said definition, an exception is carved out even for a Small Causes Court to fall under the definition of Court when the said Court is called upon to exercise its jurisdiction in situations, which are set out in [SECTION] of the Act.
The definition of Court under [SECTION] read along with [SECTION] and [SECTION] of the [SECTION][SECTION] Act, therefore, indicates that the proceedings initiated under the said Sections are virtually in the nature of a suit in a Civil Court having jurisdiction, though such proceedings are relating to initiation as well as superintendence of Arbitration proceedings such as appointment of an Arbitrator or umpire or inaction or neglect on the part of Arbitrator or umpire or the incapacity of the Arbitrator or umpire, death of an Arbitrator or umpire or even in situations where the agreement has not provided for or not intended to supply the vacancy or the parties or the Arbitrator fail to supply the vacancy or the parties or the Arbitrator who are required to appoint an umpire and they fail to carry out their obligation. Under [SECTION] of the [SECTION][SECTION] Act even in the absence of an agreement providing for Arbitration, by consent of all parties to any suit can seek for a reference to Arbitration before the judgment is pronounced. Equally a reference to [SECTION], [SECTION], [SECTION], [SECTION], [SECTION], [SECTION], [SECTION], [SECTION], [SECTION], [SECTION], [SECTION], [SECTION], [SECTION], [SECTION], [SECTION], [SECTION], [SECTION], [SECTION], [SECTION], [SECTION], [SECTION], [SECTION], [SECTION], [SECTION], [SECTION], [SECTION], [SECTION] and [SECTION] of [SECTION][SECTION] Act disclose that the whole scheme of the Act in effect invested the Civil Court and under certain specified situations even with the Small Causes Court to exercise all the powers that a Civil Court having jurisdiction in a civil suit mutatis mutandis in relation to an Arbitration apply, unlike the Arbitration and Conciliation Act of [SECTION][SECTION]6 (hereinafter called the [SECTION][SECTION]6 Act).
The scope and ambit of the power and jurisdiction of Court defined under [SECTION] of the [SECTION][SECTION]6 Act is circumscribed to certain specified extent as set out in [SECTION], [SECTION], [SECTION], [SECTION], [SECTION], [SECTION], [SECTION], [SECTION], [SECTION], [SECTION], [SECTION], [SECTION], [SECTION], [SECTION], [SECTION], [SECTION] and [SECTION]. A comparative consideration of the [SECTION][SECTION] Act and [SECTION][SECTION]6 Act disclose the extent of control and operation of a Court under the former Act was far more intensive and elaborate than the latter Act. The more significant distinction as between the [SECTION][SECTION] Act and the [SECTION][SECTION]6 Act is clear to the position that the former Act does not merely stop with the initiation and enforcement of an Arbitration and its award, but effectively provides for intervention at every stage of the Arbitral proceedings upto its final consideration and enforcement as if it were a regular civil suit, whereas under the [SECTION][SECTION]6 Act, the scope of intervention is not that of a Civil Court as it could do in the matter of a suit. Such clear distinction could be discerned from the reading of the various provisions of both the Acts. Therefore, in the light of such distinctive features that prevail in respect of an Arbitral proceeding which emanated under the [SECTION][SECTION] Act, this Court held in [ENTITY] case (supra) to the effect that an Arbitral proceedings governed by [SECTION][SECTION] Act would squarely fall under the category of other proceedings as specified in [SECTION] of the [ACT]. To be more precise, in [ENTITY] case (supra), in as much the initiation of the proceedings were under [SECTION] of the [SECTION][SECTION] Act before a Civil Court having jurisdiction to decide the question forming the subject matter of suit and the respondent therein being an unregistered Partnership Firm, the ingredients set out in [SECTION] of the [ACT] applied in all force and consequently held that the prohibition set out in the said Section squarely applied.
We only wish to add that though in the said decision, this Court did not specifically mention as to the requirement of pendency of a proceeding in the nature of a suit in a Civil Court as the basic ingredient to be satisfied as stipulated in [SECTION] in order to extend the specific prohibition even to other proceedings under sub- section (3), this Court was fully aware of the fulfillment of those mandatory requirement having regard to the nature of proceedings that existed under the provisions of the [SECTION][SECTION] Act. Therefore, our conclusion based on the interpretation of [SECTION] on the whole as set out in paragraphs [SECTION] to [SECTION] are fully supported by the above decision. We have therefore no hesitation to hold that the ratio laid down in [ENTITY] case (supra) does not in anyway conflict with the view which we have taken herein, having regard to the advent of the [SECTION][SECTION]6 Act, under which the nature of Arbitration Proceedings underwent a sea change as compared to the [SECTION][SECTION] Act, what is stated in [ENTITY] case (supra) can have application in the special facts of that case and that it can have no application to a proceedings which emanated under the [SECTION][SECTION]6 Act, for which the interpretation to be placed on [SECTION] will have to be made independently with specific reference to the provisions of the [SECTION][SECTION]6 Act, where the role of the Court is limited as noted earlier to the extent as specified in [SECTION], [SECTION] etc. Having thus noted the distinctive features in [ENTITY] case (supra), we wish to refer to the subsequent decision of this Court reported in [ENTITY] Enterprises (supra). The judgment and the ratio in [ENTITY] (supra) was sought to be applied in all force in [ENTITY] Enterprises (supra), but having noted the distinctive feature of [ENTITY] (supra), this Court has explained the said judgment and held that it will have no application to a post Award situation. Some of the relevant portions of the judgment in [ENTITY] Enterprises (supra) can be quoted to appreciate the ultimate conclusion which fully supports our view. The question posed for consideration has been noted as under:
5. Mr. [ENTITY], learned counsel for the appellant, contended that the Courts below ought to have sustained the objection of the appellant based upon [SECTION] of the [ACT] holding the proceedings to be barred on account of the respondent being an unregistered firm. Strong reliance was placed in this regard upon the decision of this Court reported in [ENTITY] Gupta Vs. Kajaria Traders (India) ltd. [AIR [SECTION]64 SC [SECTION]82]; in addition to placing reliance upon some other decisions of the High Courts, to substantiate his claim.
6. This Court ultimately construed the words other proceedings in sub-
section (3) of [SECTION] giving them their full meaning untrammelled by the words a claim of set off, and held that the generality of the words other proceedings are not to be cut down by the latter words. The said case, being one concerning an application before Court under [SECTION] of the [ACT], [SECTION][SECTION] in the light of the arbitration agreement, this Court finally held that since the arbitration clause formed part of the agreement constituting the partnership the proceeding under [SECTION] was in fact to enforce a right which arose from a contract/agreement of parties.
[SECTION]. The prohibition contained in [SECTION] 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 the Arbitrator was at the instance of the appellant itself. If the said bar engrafted in [SECTION] 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 Arbitrators power, authority and competency itself, undermining thereby the legal efficacy of the very award, 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] of the partnership Act, [SECTION][SECTION] since the same has no application to proceedings before an Arbitrator. At the stage of enforcement of the award by passing a decree in terms thereof what is enforced is the award itself which crystallise the rights of parties under the [ACT] and the general law to be paid for the work executed and not any right arising only from the objectionable contract Consequently, the post award proceedings cannot be considered by any means, to be a suit or other proceedings to enforce any rights arising under a contract. All the more so when, as in this case, at all stages the respondent was only on the defence and has not itself instituted any proceedings to enforce any rights of the nature prohibited under [SECTION] of the [ACT], before any Court as such. (Emphasis added) The above passages extracted from the case of [ENTITY] Enterprises (supra), apart from explaining the principles laid down in [ENTITY] case (supra), has thus held in categorical terms as to how [SECTION] prohibition will have no application to the post award proceedings as they do not fall under the expression other proceedings of the said section. This Court thus having already understood and explained [ENTITY] case (supra) and reiterated the legal position on the application of [SECTION] to the post award proceedings, which fully supports our conclusion in the case on hand, we need not dilate much on this issue.
Having reached the above definite conclusion on the application of [SECTION] to the post award proceedings, when we consider the submissions of Mr. [ENTITY], learned senior counsel for the respondent, the learned counsel, in the first place, contended that for the application of [SECTION] of the [ACT] to Arbitral proceedings, the foundation must be only based on a right in a contract. As far as the said contention is concerned, the same has already been dealt with by this Court in [ENTITY] Enterprises (supra) wherein it is held as under:
The Award in this case cannot either rightly or legitimately said to be vitiated on account of the prohibition contained in [SECTION] of the partnership Act, [SECTION][SECTION] since the same has no application to proceedings before an Arbitrator. At the stage of enforcement of the award by passing a decree in terms thereof what is enforced is the award itself which crystallise the rights of parties under the [ACT] and the general law to be paid for the work executed and not any right arising only from the objectionable contract (Emphasis added) Therefore, the said contention of the learned senior counsel for the respondent has no force.
The learned senior counsel then contended that while interpreting [SECTION] of the [ACT], it was held that Arbitration Proceedings are to be treated on par with civil proceedings. Though, in the first blush, the submission looks more attractive, on a deeper scrutiny it must be held that it is always well settled that a judgment can be a binding precedent on a question of law, which was canvassed before it and decided. Keeping the said principle in mind when we consider the said submission, we have clearly held as to how a reading of [SECTION] as a whole does not permit of any interpretation that would cover Arbitral proceedings, de hors, filing of a suit in a Court and that too in respect of a right under a contract governed by the provisions of the [ACT], especially after the coming into force of the [SECTION][SECTION]6 Act and the proceedings governed by the special features contained in the said Act. Therefore, any interpretation made under the [ACT] while construing [SECTION] to treat Arbitral proceedings on par with civil proceedings cannot be applied to the case on hand. Further, the decision of this Court in [ENTITY] having considered the application to [SECTION] itself to Arbitral Proceedings and held that the same will not apply to a Post Award Proceedings, we do not find any merit in the said submission. Therefore, we are not able to apply the principles laid down in the decision reported in M/s. Consolidated Engg. Enterprises (supra) and [ENTITY] (supra) relied upon by the learned senior counsel for the respondent.
The next submission of Mr. [ENTITY], learned Senior Counsel was again by relying upon [SECTION] of the [ACT]. Under the said definition section, Court has been defined to include a Tribunal and an Arbitrator. The learned senior counsel, therefore, contended that Arbitral Proceedings should be equated to a Court and consequently make [SECTION], applicable to it as falling under the expression other proceedings. If such a specific provision has been incorporated in the [ACT], there can be no difficulty in accepting the argument of the learned senior counsel for the respondent. In the absence of such a specific provision, it will not be appropriate to import the definition clause under [SECTION] of the [ACT] to the [ACT] in order to apply [SECTION] of the [ACT]. Therefore, we do not find any scope to countenance such a submission of the learned senior counsel for the respondent.
Lastly, it was contended by Mr. [ENTITY], learned Senior Counsel that under [SECTION] of the [SECTION][SECTION]6 Act, an Award of the Arbitrator has been equated to decree of the Court for the purpose of execution. Under [SECTION] of the [SECTION][SECTION]6 Act, an Arbitral Award will be final and binding on the parties and persons claiming under them subject to the other provisions prescribed in the said part of the Act. Under [SECTION] it is provided that where the time for making an application to set aside the arbitral award under [SECTION] expired, or such application having been made and referred, the award can be enforced under the [ACT] in the same manner as if it were a decree of the Court. When we consider the submission of the learned senior counsel for the respondent, at the very outset, it must be held that by referring to [SECTION] and [SECTION], it is difficult to draw an inference that based on the deeming provision specifically meant for the enforcement and execution of an Award, the Arbitral Proceedings can be equated to a Civil Court proceedings. As rightly contended by Mr. [ENTITY], learned senior counsel for the appellant, [SECTION] only creates a statutory fiction which is limited for the purpose of enforcement of the Award. The deeming fiction is specifically restricted to treat the Award as a decree of a Court, exclusively for the purpose of execution, though as a matter of fact, it is only an Award of Arbitral proceeding. It is a settled proposition, that a statutory provision will have to be construed from the words that are expressly used and it is not for the Court to add or substitute any word to it. Therefore, going by [SECTION] and [SECTION] it cannot be held that the entire Arbitral proceeding is a Civil Court proceedings for the purpose of applicability of [SECTION] of the [ACT]. In this context, we draw support from the decision of this Court reported in [ENTITY] (supra), paragraph [SECTION] is relevant for our purpose which reads as under:
[SECTION]. So far as interpretation of a provision creating a legal fiction is concerned, it is trite that the Court must ascertain the purpose for which the fiction is created and having done so must assume all those facts and consequences which are incidental or inevitable corollaries to the giving effect to the fiction. In construing a fiction it must not be extended beyond the purpose for which it is created or beyond the language of the Section by which it is created. It cannot be extended by importing another fiction. These principles are well settled and it is not necessary for us to refer to the authorities on this subject. The principle has been succinctly stated by Lord [ENTITY] in East End Dwelling Co. Ltd. V. Finsbury Borough Council, ([SECTION]51) 2 ALL ER [SECTION]7, when he observed :-
"If you are bidden to treat an imaginary state of affairs as real, you must surely, unless prohibited from doing so, also imagine as real the consequence and incidents which, if the putative state of affairs had in fact existed, must inevitably have flowed from or accompanied it-. The statute says that you must imagine a certain state of affairs; it does not say that having done so, you must cause or permit your imagination to boggle when it comes to the inevitable corollaries of that state of affairs". We also draw support from the decision of this Court reported in Paramjeet Singh Patheja Vs. ICDS Ltd. - ([SECTION]06) 13 SCC [SECTION]2, paragraph [SECTION] is relevant, which reads as under:
[SECTION]. The words as if demonstrate that award and decree or order are two different things. The legal fiction created is for the limited purpose of enforcement as a decree. The fiction is not intended to make it a decree for all purposes under all statutes, whether State or Central. Though the learned senior counsel for the appellant and the respondent referred to certain other decisions in support of their respective submissions, as we are fortified by our conclusion, based on the interpretation of [SECTION] of the [ACT] vis vis the [SECTION][SECTION]6 Act and the [SECTION][SECTION] Act as well as supported by the decision in [ENTITY] (supra) and [ENTITY] Enterprises (supra), we do not find any necessity to refer to those decisions in detail. Having regard to our conclusion that Arbitral Proceedings will not come under the expression other proceedings of [SECTION] of the [ACT], the ban imposed under the said [SECTION] can have no application to Arbitral proceedings as well as the Arbitration Award. Therefore, the appeal stands allowed, the impugned judgment of the Division Bench is set aside and the judgment of the learned Single Judge stands restored. No costs.
J. [[ENTITY]] J. [[ENTITY]] New Delhi;
June [SECTION], [SECTION][SECTION].