2001 (11) TMI 932 - HC - Companies Law

Summary

Issues Involved:
1. Validity of arbitration reference and award due to non-registration of the firm under the Indian Partnership Act, 1932.
2. Eligibility of a non-member as an arbitrator under the Stock Exchange bye-laws.
3. Timeliness of the claim referred to arbitration.

Issue-wise Detailed Analysis:

1. Validity of Arbitration Reference and Award Due to Non-Registration of the Firm:
The primary contention was that the respondent, being an unregistered firm under the Indian Partnership Act, 1932, could not make any claim in the arbitration proceedings. The appellant argued that under Section 69 of the Indian Partnership Act, the non-registration of a firm is fatal to the validity of the reference and the award. Section 69(1) and (2) prohibit the institution of suits or proceedings in any court by or on behalf of an unregistered firm. Section 69(3) extends this prohibition to claims of set-off or other proceedings to enforce a right arising from a contract. The appellant relied on several Supreme Court and High Court decisions to support this argument.

However, the court concluded that the term "proceeding" in Section 69(3) refers to something in the nature of a suit, i.e., a proceeding initiated in a court. The court held that the bar under Section 69 does not extend to arbitration proceedings conducted without the intervention of the court. This interpretation was supported by judgments from the Calcutta High Court and the Allahabad High Court, which clarified that Section 69's prohibition applies only to court proceedings and not to private arbitration.

2. Eligibility of a Non-Member as an Arbitrator:
The appellant contended that one of the arbitrators, Mr. Justice D.B. Deshpande (Retd.), was not a member of the Stock Exchange, and thus his appointment violated the relevant bye-laws of the Stock Exchange. The court rejected this argument, noting that the bye-laws were amended in 1993 to allow non-members to be appointed as arbitrators. Therefore, the appointment of Mr. Justice D.B. Deshpande was valid under the amended bye-laws.

3. Timeliness of the Claim Referred to Arbitration:
The appellant also argued that the claim referred to arbitration was barred by time. However, the court did not find merit in this contention. The learned Single Judge had already rejected this argument, and the court upheld that decision, thereby affirming the validity of the arbitration award.

Conclusion:
The court dismissed the appeal with costs, upholding the arbitration award. The key points were that the bar under Section 69 of the Indian Partnership Act does not apply to arbitration proceedings without court intervention, the appointment of a non-member as an arbitrator was valid under the amended bye-laws, and the claim was not barred by time.