Term “Other proceedings” under S. 69(3) of the Partnership Act, 1932 does not include Arbitral Proceedings

Supreme Court_set back

Supreme Court: Dealing with the question relating to interpretation of Section 69(3) of the Partnership Act, 1932 with reference to its applicability to Arbitral proceedings, the bench of Fakkir Mohamed Ibrahim Kalifulla and C. Nagappan, JJ held that the Arbitral Proceedings do not come under the expression “other proceedings” of Section 69(3) of the Partnership Act and hence, the ban imposed under the said Section 69 can have no application to Arbitral proceedings as well as the Arbitration Award.

Interpreting S. 69 of the Partnership Act, the Court held 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 sub-sections (1) and (2) of Section 69 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.

Rejecting the contention that an Arbitral proceeding can be equated to a Civil Court Proceeding, the Court took notice of the Sections 35 and 36 of the Arbitration and Conciliation Act, 1996 and held that Section 36 of the 1996 Act 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 Sections 35 and 36 of the 1996 Act it cannot be held that the entire Arbitral proceeding is a Civil Court proceedings for the purpose of applicability of Section 69(3) of the Partnership Act. [Umesh Goel v. Himachal Pradesh Cooperative Group Housing Society Ltd., 2016 SCC OnLine SC 624, decided on 29.06.2016]

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