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Arbitration Act, 1940-Sections 20 and 39(iv)-Arbitration and Conciliation Act, 1996-Sections 21 and 85(2)(a)-Application for appointment of arbitrator in terms of arbitration clause in case of dispute between parties-Trial Court holding that firm being unregistered as such application not maintainable even though applicant firm filed amendment application with regard to the same-High Court holding that since 1996 Act has come into force parties to relegate under the new Act-On appeal held : Since the arbitral proceedings commenced before coming into force of the 1996 Act, provisions of 1940 Act applicable and matter remitted to High Court-Furthermore firm must be registered at the time of the institution of the suit and not later-Also, the High Court is to consider the correctness of the order passed by trial court-Partnership Act, 1932- Section 69. Appellant-State Sugar Corporation and respondent-construction company entered into a contract. Dispute arose between the parties but the appellant did not appoint any arbitrator as per the arbitration clause in the contract. Respondent filed application under section 20 of the Arbitration Act, 1940. Civil Judge held it to be not maintainable as the respondent firm was not registered even though the respondent had admitted that it failed to make necessary averment in the plaint as regard registration of the firm inadvertently and had filed an application for amendment of the petition. Respondent then filed an appeal. High Court allowed the appeal directing that since the Arbitration and Conciliation Act, 1996 has come into force, parties are to relegate under the new Act Hence the present appeal. Appellant-State Sugar Corporation contended the application for appointment of an arbitrator was not maintainable under the 1940 Act and the 1996 Act as the respondent firm was not registered; and that in any event, the impugned judgment is unsustainable in law as the arbitral proceeding was initiated prior to coming into force of the 1996 Act. Respondent-firm contended that in a similar matter this Court directed the trial court to appoint an arbitrator in terms of arbitration clause of the contract between the parties, on remitting the matter, and as such there being a similar stipulation in the instant case, it must be acted upon. =Allowing the appeal, the Court HELD : 1.1. In the event it is found by the High Court that the Civil Judge was wrong in rejecting the application for amendment of the plaint and in fact the respondent-firm was registered under the Partnership Act, the question of throwing out the said suit on that ground would not arise. High Court would consider these questions. Further, 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 Partnership Act, 1932. The firm must be registered at the time of institution of the suit and not later. [830-F-G] Delhi Development Authority v. Kochhar Construction Work and Anr., [1998] 8 SCC 559, relied on. Jagdish Chandra Gupta v. Kajaria Traders (India) Ltd., AIR (1964) SC 1882 and Firm Ashok Traders and Anr. v. Gurumukh Das Saluja and Ors., [2004] 3 SCC 155, referred to. 1.2. Disputes and differences between the parties arose in the year 1991 and the respondent filed an application under Section 20 of the Arbitration Act, 1940 in the same year. It invoked the arbitration clause in the agreement. The arbitral proceeding was set in motion. In terms of Section 21 of the Arbitration and Conciliation Act, 1996 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. Therefore, in respect of the arbitral proceedings commenced before coming into force of the 1996 Act, the provisions of the 1940 Act would apply. Hence, the matter is remitted to High Court for afresh consideration. [831-A-B; 832-A-B] Milkfood Ltd. v. M/s. GMC Ice Cream (P) Ltd., JT (2004) 4 SC 393, relied on. CIVIL APPELLATE JURISDICTION : Civil Appeal No. 5479 of 2004. =2004 AIR 4335, 2004(3 )Suppl.SCR826 , 2004(7 )SCC332 , 2004(7 )SCALE307 , 2004(7 )JT61

CASE NO.:
Doon Valley, Dehradun, 1850s -

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Appeal (civil) 5479 of 2004

PETITIONER:
U.P. State Sugar Corporation Ltd. 

RESPONDENT:
Jain Construction Co. & Anr.

DATE OF JUDGMENT: 25/08/2004

BENCH:
N. Santosh Hegde & S.B. Sinha

JUDGMENT:
J U D G M E N T
(Arising out of SLP (C) No.4459 of 2004)

S.B. SINHA, J :

 Leave granted.

 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 
Partnership Act, 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 
Court. 

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 
into force;

(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 costs.

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