Case Note & Summary
The case involves a civil revision application filed by the applicant (original defendant) under Section 115 of the Code of Civil Procedure, 1908, challenging an order dated 21st August 2018 passed by the learned Ad-hoc Judge, City Civil Court, Borivali, Dindoshi, Mumbai, in S.C. Suit No.3220 of 2013. The impugned order granted liberty to the respondents (original plaintiffs) to withdraw the suit and file arbitration proceedings. The applicant contended that the respondents, being an unregistered partnership firm, were barred by Section 69 of the Partnership Act, 1932 from enforcing any right arising from a contract, including the arbitration agreement. The respondents argued that the arbitration agreement is a separate contract and not hit by Section 69. The court analyzed the provisions of Section 69 of the Partnership Act and Section 8 of the Arbitration and Conciliation Act, 1996. It held that Section 69 does not bar an unregistered firm from enforcing an arbitration agreement, as the arbitration agreement is independent of the main contract. The court also noted that the trial court could have directly referred the parties to arbitration under Section 8 of the Arbitration Act, but the order granting liberty to withdraw the suit was not illegal or improper. The court dismissed the civil revision application, upholding the trial court's order.
Headnote
A) Civil Procedure - Withdrawal of Suit with Liberty to File Arbitration - Section 115 CPC, Order 23 Rule 1 CPC - The applicant (original defendant) challenged the order granting liberty to the respondents (original plaintiffs) to withdraw the suit and file arbitration proceedings. The court held that the trial court had jurisdiction to grant such liberty and that the arbitration agreement is not rendered unenforceable merely because the plaintiff firm is unregistered under the Partnership Act, 1932. (Paras 1-10)
B) Partnership Act - Unregistered Firm - Enforceability of Arbitration Agreement - Section 69 Partnership Act, 1932 - The court held that Section 69 of the Partnership Act does not bar the enforcement of an arbitration agreement by an unregistered firm. The arbitration agreement is a separate contract and can be enforced independently. (Paras 11-15)
C) Arbitration - Reference to Arbitration - Section 8 Arbitration and Conciliation Act, 1996 - The court observed that the trial court could have referred the parties to arbitration under Section 8 of the Arbitration Act instead of granting liberty to withdraw the suit. However, the order granting liberty was not interfered with as it was within the court's discretion. (Paras 16-20)
Issue of Consideration
Whether the trial court erred in granting liberty to the respondents (original plaintiffs) to file arbitration proceedings after withdrawal of the suit, and whether such withdrawal is barred under Section 69 of the Partnership Act, 1932.
Final Decision
The court dismissed the civil revision application, upholding the trial court's order granting liberty to the respondents to withdraw the suit and file arbitration proceedings.
Law Points
- Section 115 CPC
- Section 69 Partnership Act 1932
- Section 8 Arbitration Act 1996
- Order 23 Rule 1 CPC
- Withdrawal of suit with liberty to file arbitration
- Unregistered partnership firm
- Enforceability of arbitration agreement
Case Details
2018 LawText (BOM) (10) 69
Civil Revision Application (Stamp) No.26883 of 2018
Mr.S.M. Gorwadkar, Senior Counsel i/b Mr.Khan Altaf for the Applicant; Mr.A.Y. Sakhare, Senior Counsel with Mr.Pankaj Dwivedi, Mr.Rohan Hirpury and Mr.Diwakar Dwivedi for the Respondents
Mohd.Rafique Mohd. Hussain Tinwala
M/s.S.S. Enterprises & Ors.
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Nature of Litigation
Civil revision application challenging an order granting liberty to withdraw a suit and file arbitration proceedings.
Remedy Sought
The applicant (original defendant) sought to set aside the order dated 21st August 2018 granting liberty to the respondents (original plaintiffs) to withdraw the suit and file arbitration proceedings.
Filing Reason
The applicant contended that the respondents, being an unregistered partnership firm, were barred by Section 69 of the Partnership Act, 1932 from enforcing any right arising from a contract, including the arbitration agreement.
Previous Decisions
The trial court had passed the impugned order below Exhibit 25 in S.C. Suit No.3220 of 2013.
Issues
Whether the trial court erred in granting liberty to the respondents to file arbitration proceedings after withdrawal of the suit?
Whether the arbitration agreement is enforceable by an unregistered partnership firm under Section 69 of the Partnership Act, 1932?
Submissions/Arguments
The applicant argued that the respondents, being an unregistered partnership firm, cannot enforce any right arising from a contract, including the arbitration agreement, under Section 69 of the Partnership Act, 1932.
The respondents argued that the arbitration agreement is a separate contract and is not hit by Section 69 of the Partnership Act, 1932, and that the trial court had correctly granted liberty to withdraw the suit.
Ratio Decidendi
Section 69 of the Partnership Act, 1932 does not bar an unregistered partnership firm from enforcing an arbitration agreement, as the arbitration agreement is a separate contract independent of the main contract. The trial court had jurisdiction to grant liberty to withdraw the suit with liberty to file arbitration proceedings.
Judgment Excerpts
By this civil revision application filed under section 115 of the Code of Civil Procedure, 1908 (for short “CPC”), the applicant (original defendant) has impugned the order dated 21st August, 2018 passed by the learned Ad-hoc Judge, City Civil Court, Borivali, Dindoshi, Mumbai below Exhibit 25 in S.C. suit No.3220 of 2013 granting liberty to the respondents (original plaintiffs) to file the arbitration proceedings after withdrawal of the said suit.
The court held that Section 69 of the Partnership Act does not bar the enforcement of an arbitration agreement by an unregistered firm.
Procedural History
The respondents (original plaintiffs) filed S.C. Suit No.3220 of 2013 in the City Civil Court, Borivali, Dindoshi, Mumbai. The applicant (original defendant) filed an application below Exhibit 25. The trial court passed an order on 21st August 2018 granting liberty to the respondents to withdraw the suit and file arbitration proceedings. The applicant challenged this order by filing Civil Revision Application (Stamp) No.26883 of 2018 in the High Court of Judicature at Bombay. The matter was heard finally at the admission stage by consent of parties.
Acts & Sections
- Code of Civil Procedure, 1908: 115
- Partnership Act, 1932: 69
- Arbitration and Conciliation Act, 1996: 8
