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Ratan Lal Sharma v. Purshottam Harit .
Factual and Procedural Background
The appellant and the respondent formed a partnership in December 1962 to run “New Bengal Engineering Works,” which owned both movable and immovable assets. Within six months the partners fell out and, on 22 August 1963, executed a written agreement referring “the disputes of our concern” to two arbitrators. The arbitrators delivered their award on 20 September 1963 and lodged it in the High Court on 9 November 1963.
On 10 September 1964 the respondent applied to the High Court to question the validity of the arbitration agreement and to set aside the award. A learned Single Judge dismissed that application on 27 May 1966 as time-barred but declined the appellant’s request to pronounce judgment on the basis of the award. The appellant’s intra-court appeal against this refusal was dismissed as unmaintainable by a Division Bench. He therefore filed (i) the present civil appeal against the Single Judge’s refusal, and (ii) a special-leave petition challenging the Division Bench’s order.
Legal Issues Presented
- Whether the arbitral award, which allots immovable property worth more than ₹100 exclusively to the appellant, requires registration under Section 17 of the Registration Act, 1908.
- Whether, after dismissing the respondent’s time-barred application to set aside the award, the High Court was nonetheless bound by Section 17 of the Arbitration Act, 1940 to pronounce judgment in terms of the unregistered award.
- Incidental to the above, whether the award constitutes an assignment of the respondent’s share in the partnership—regarded in law as movable property—thereby obviating the need for registration.
Arguments of the Parties
Appellant's Arguments
- The award is not void for uncertainty.
- The award merely assigns the respondent’s share in the partnership—a movable interest—and therefore is exempt from registration.
- Once the respondent’s application to set aside the award was dismissed, Section 17 of the Arbitration Act compelled the Court to pronounce judgment in accordance with the award.
The opinion does not set out the respondent’s specific counter-arguments.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Ajudhia Pershad Ram Pershad v. Sham Sunder, AIR 1947 Lah 13 | A partner’s share in partnership assets is movable property; its assignment does not require registration. | Relied upon to explain when registration is unnecessary, but distinguished because the present award went beyond mere assignment of a partner’s share. |
| Addanki Narayanappa v. Bhaskara Krishtappa, (1966) 3 SCR 400 | Same principle regarding the nature of a partner’s share and its assignability. | Cited to outline the legal concept of a partner’s share; used in assessing whether the award effected such an assignment. |
| CIT v. Juggilal Kamalapat, (1967) 1 SCR 784 | Further affirmation that a partner’s share is movable property. | Reinforced the discussion on registration exemptions; again found inapplicable because the award conferred absolute title to specific immovable property. |
| Satish Kumar v. Surinder Kumar, (1969) 2 SCR 244 | An award dealing with rights in immovable property worth more than ₹100 requires registration; unregistered awards are inadmissible. | Formed the core basis for holding that the unregistered award could not be looked into for passing judgment. |
Court's Reasoning and Analysis
The Court confined its analysis to the questions of registration and enforceability, finding it unnecessary to address the plea of uncertainty. It observed:
- The award does not merely transfer the respondent’s abstract share in the partnership. Clause (1) “exclusively allotted” the factory and all assets to the appellant and declared him “absolutely entitled” to them in exchange for monetary consideration specified in clauses (4) and (7). This language creates new proprietary rights in specific immovable property.
- Because the property involved is valued above ₹100, Section 17 of the Registration Act mandates registration. The parties conceded the value threshold.
- The award was in fact unregistered. Under Satish Kumar v. Surinder Kumar, an unregistered award affecting immovable property is inadmissible in evidence. Consequently, the High Court was legally precluded from examining the award.
- Section 17 of the Arbitration Act, which empowers a court to pronounce judgment on an award, presupposes that the award is admissible. Where the award is legally excluded from consideration, the statutory obligation to pronounce judgment does not arise.
- The award’s clauses were “an inseparable tangle”; selective enforcement of only the movable-property portions was impossible because the consideration for allotting the immovable assets permeated the entire document.
Holding and Implications
Holding: Both the civil appeal and the special-leave petition are dismissed. The Court affirms that the arbitral award required registration and, being unregistered, could not be made the basis of a judgment.
Implications: The dismissal leaves the parties without an enforceable award and saddles the appellant with costs. The decision applies established principles on registration of awards dealing with immovable property; it does not create new precedent but reinforces existing law that unregistered awards affecting such property are inadmissible.
S.N Dwivedi, J.— Before us there is this associate litigation the civil appeal and the special leave petition for admission. Its history runs thus: There is the New Bengal Engineering Works. It has a factory and various movable and immovable properties. It is a running business. The business was set up by the appellant and the respondent as partners in December 1962. As usual with many partnerships, the partners did not march in step for long. Within six months they fell out. On August 22, 1963, they could, however, agree to refer their disputes to the arbitration of two persons, Sri R.N Sharma, and Sri C.M Sharma. The agreement is in writing. It referred “the disputes of our concern” and gave “the arbitrators full authority to decide our dispute”. The arbitrators gave their award on September 20, 1963. They filed the award in the High Court on November 9, 1963. On September 10, 1964 the respondent filed an application for determining the validity of the agreement and for setting aside the award. On May 27, 1966 a learned Single Judge of the High Court dismissed the application as time-barred. But he declined the request of the appellant to proceed to pronounce judgment according to the award. From this part of the order the appellant filed an appeal, but the appeal was dismissed as unmaintainable by a Division Bench. The appellant has now preferred the present appeal against the decisions of the Single Judge declining to pronounce judgment in accordance with the award. He has also filed the special leave petition against the judgment of the Division Bench.
2. We shall first take up the civil appeal. The special leave petition will become infructuous or anaemic after our decision for or against the appellant. The learned Single Judge refused to pronounce judgment in accordance with the award because (1) according to him the award was void for uncertainty and (2) the award, which created rights in favour of the appellant over immovable property worth over Rs 100, required registration and was unregistered. Counsel for the appellant has advanced three arguments: (1) the award is not void for uncertainty; (2) the award seeks to assign the respondent's share in the partnership to the appellant and so does not require registration; and (3) under Section 17 of the Arbitration Act, the Court was bound to pronounce judgment in accordance with the award after it had dismissed the respondent's application for setting it aside.
3. It is not necessary to express any opinion on the first argument as we are of opinion that the award requires registration and, not being registered, is inadmissible in evidence for the purpose of pronouncing judgment in accordance with it. So we pass on to the remaining two arguments of the appellant.
4. It is well settled now that the share of a partner in the assets of the partnership which has also immovable properties is movable property and the assignment of the share does not require registration under Section 17, Registration Act. (See Ajudhia Pershad Ram Pershad v. Sham Sunder AIR 1947 Lah 13, ILR 1947 Lah 417 Addanki Narayanappa v. Bhaskara Krishtappa (1966) 3 SCR 400, AIR 1966 SC 1300, (1966) 2 SCJ 490 and CIT v. Juggilal Kamalapat (1967) 1 SCR 784, AIR 1967 SC 401, (1967) 63 ITR 292. But the award with which we are concerned does not seek to assign the share of the respondent to the appellant either in express words or by necessary implication. We set out the relevant portion of the award:
“(We) make our award as follows:
(1) The factory and all assets and properties of New Bengal Engineering Works are exclusively allotted to Dr Ratan Lal Sharma, who is absolutely entitled to the same. He will pay all liabilities of the factory.
(2) Dr Rajan Lal Sharma shall have no claim for the receipts signed by Sri Purshottam Harit.
(3) Payment of all cheques issued by Dr Ratan Lal Sharma on behalf of Modern Processors to Shri Purshottam Harit shall be treated invalid.
(4) Dr Ratan Lal Sharma shall pay Rs 17,000 (Rupees seventeen thousand only) to Shri Purshottam Harit.
(5) Shri Purshottam Harit shall render all assistance to Dr Ratan Lal Sharma for realising all the dues of the said firm, as and when necessary and for transfer of tenancy right of the Factory in favour of Dr Ratan Lal Sharma.
(6) All papers and documents in respect of the said business shall be made over to Dr Ratan Lal Sharma.
(7) The following sums when realised shall be divided equally between Dr Ratan Lal Sharma and Shri Purshottam Harit.
Name of Debtors Amount in Rs 1. Associated Engineering Corpn. . . . . 284.17 2. Link Machinery, Ltd. . . . . 1079.28 3. Clendent Products . . . . 47.25 4. Minerva Engineering Works . . . . 514.18 Total . . 1924.88
N.B (8) The factory should not be run by Dr Ratan Lal Sharma until and unless the payment of the award is not made to Shri Purshottam Harit”
5. The word “not” is slip here. The parties conceded before the learned Single Judge that the award deals with immovable property worth above Rs 100. So if it is found by us that the award purports to create rights in the appellant over immovable property, it would require registration under Section 17, Registration Act. (See Satish Kumar v. Surinder Kumar). (1969) 2 SCR 244, AIR 1970 SC 833, (1970) 1 SCJ 522 On the dissolution of the partnership or with the retirement of a partner from the partnership the share of the partner in the partnership assets is equal to the value of his share in the net partnership assets after deduction of all liabilities and prior charges. Even during the subsistence of the partnership, he may assign his share to another partner. In that event the assignee partner would get only the right to receive the share of profits of the assignor. [See Narayanappa case at p. 407].
6. Now the award does not transfer the share of the respondent, interpreted in the aforesaid sense, to the appellant in express words. Nor such is the necessary intendment of the award. It expressly makes an exclusive allotment of the partnership assets including the factory and liabilities to the appellant. It goes further and makes him “absolutely entitled to the same”, in consideration of a sum of Rs 17,000 [see clause (4)] plus half of the amount of Rs 1924.88 p to the respondent and the appellant's renouncement of the right to share in the amounts already received by the respondent. So in express words it purports to create rights in immovable property worth above Rs 100 in favour of the appellant. It would accordingly require registration under Section 17 Registration Act. As it is unregistered, the Court could not look into it. If the Court could not, as we hold, look into it, the Court could not pronounce judgment in accordance with it. Section 17 of the Arbitration Act presupposes an award which can be validly looked into by the Court. The appellant cannot successfully invoke Section 17.
7. The award is an inseparable tangle of several clauses and cannot be enforced as to the part not dealing with immovable property. As already stated, various other relevant clauses constitute consideration for clause (1), that is, for the creation of absolute rights in the factory and other properties in favour of the appellant. This is perfectly clear from the note of the arbitrators appended to the award as clause (8). The appellant is not given a right to run the factory unless he has paid the awarded consideration to the respondent.
8. For the reasons already discussed, we agree with the learned Single Judge that the award requires registration and not being registered, no judgment could be pronounced upon it. In the view that we have taken, the special leave petition cannot be admitted.
9. The appeal as well as the special leave petition are accordingly dismissed. The respondent shall get his costs in the appeal.
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