Bombay High Court
Shavak Burjorji Patell vs Jamshid Kersi Dalal And Others on 11 July, 2011
Author: A.S.Oka
Bench: A.S.Oka
1 AO.1028.05.doc
ndm
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
CIVIL APPELLATE JURISDICTION
APPEAL FROM ORDER NO. 1028 OF 2005
Shavak Burjorji Patell,
Since deceased, through
His Heirs and Legal Representatives
1A. Farsheed Burjor Patell and others. ... Appellants
Versus
Jamshid Kersi Dalal and others. ... Respondents
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Mr. G.S.Godbole for the Appellants.
Mr. Vineet Naik a/w Ms. Deepa Ahuja for Respondent No.1.
Mr. M.R.Deshpande for Respondent Nos.3-A to 3-C.
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CORAM : A.S.OKA, J.
th
DATE ON WHICH SUBMISSIONS ARE HEARD : 15 April, 2011.
th
DATE ON WHICH JUDGMENT IS PRONOUNCED : 11 July 2011
JUDGMENT :
1 By this appeal from order, the Appellants have taken an ::: Downloaded on - 09/06/2013 17:28:35 ::: 2 AO.1028.05.doc exception to the judgment and decree passed by the District Court in an appeal by which an order of remand has been passed. This is an Appeal against an order of remand. In the case of Narayanan versus Kumaran [(2004)4 SCC 26], the Apex Court held that an Appeal under clause (u) of Rule 1 of Order XLI of the Code of Civil Procedure, 1908 can be entertained only on the ground available under Section 100 of the said Code. Accordingly, by order dated 16 th March, 2007, this Court has framed the substantial questions of law.
2 The present appeal has been preferred by the original Defendant Nos.1, 3, 4 and 10. The Respondent No.1 is the original plaintiff and the other Respondents are the other Defendants. On th 15 March, 1982, a deed of partnership was executed by and between the Defendant No.1 and one Mr.Framroze Burjorji Patell for carrying on the business in partnership under the name and style as M/s.Dorabjee and Company. The said Mr.Framroze Burjorji Patell st withdrew himself from the partnership. On 1 April, 1984, a deed of ::: Downloaded on - 09/06/2013 17:28:35 ::: 3 AO.1028.05.doc partnership was executed between the Plaintiff and the Defendant No.1. for the running the business in partnership under the name and style as M/s.Dorabjee and Company in partnership at 1B, th Moledina Road, Pune 1. This partnership is not registered. On 19 August, 1988, the Plaintiff issued notice to the Defendant No1. By the said notice, the Plaintiff called upon the Defendant no.1 not to ig th circumvent his rights. In the reply dated 9 September 1988 issued to the said notice by the Defendant No.1, it was pointed out that the st partnership of M/s.Dorabjee and Company formed on 1 April, 1984 has been dissolved. In the year, 1991, the Plaintiff filed the present suit. The substantive relief claimed is of directing the Defendant No. 1 to render the truthful accounts of the firm M/s.Dorabjee and st Company in pursuance of the deed of partnership dated 1 April, th 1988 till about two days after 9 September, 1988 and for a declaration that the said partnership may kindly be declared as dissolved. The Plaintiff claimed 50% share in the partnership.
Another prayer was made for permanent injunction restraining the ::: Downloaded on - 09/06/2013 17:28:35 ::: 4 AO.1028.05.doc Defendant No.1 from appropriating the assets and amounts of the said partnership.
3 In the said suit, the Plaintiff filed an application praying for interim relief of temporary injunction and appointment of Court Receiver. The Defendant No.1 filed an application at Exhibit - 51 praying for framing preliminary issue of the maintainability of the suit in view of bar created by Sub-Section (2-A) of Section 69 of the Indian Partnership Act, 1932 (hereinafter referred to as "the said Act") inasmuch as the said partnership firm was admittedly unregistered. The Defendant No.1 as well as the Defendant Nos.3 to 6 filed a detailed written statement raising the said contention.
Accordingly, a preliminary issue regarding maintainability of the suit rd was framed by the trial Court. By the judgment and order dated 23 April, 1999, the said suit was dismissed on the ground that it was not maintainable in view of the bar created by Section 69 (2-A) of the said Act as amended by the Maharashtra Act No.29 of 1984. An ::: Downloaded on - 09/06/2013 17:28:35 ::: 5 AO.1028.05.doc appeal was preferred by the Plaintiff against the dismissal of the suit. In the appeal, various amendments were permitted to be made to the plaint. The Plaintiff also made an application at Exhibit - 73 seeking amendment of the plaint by adding paragraph Nos.2A and 13-1-A. By the amendment, the Plaintiff wanted to incorporate an allegation that after the execution of the deed of partnership dated st 1 April, 1984, an application for registration of the partnership was made to the Registrar of the Firms and even requisite registration th fees were paid on 20 December, 1985. A prayer was sought to be added seeking mandatory injunction against the heirs of the Defendant No.1 to duly sign and submit requisite application forms and documents in the office of Registrar of the Partnership Firms, th Pune for registering the said partnership. By order dated 5 April, 2003, the said application was dismissed.
nd 4 On 22 January, 2004, the District Court allowed the said appeal on the ground that the Plaintiff was not given an ::: Downloaded on - 09/06/2013 17:28:35 ::: 6 AO.1028.05.doc opportunity to lead evidence on the preliminary issue and to prove documents in support of the claim. Therefore, an order of remand was passed for giving an opportunity to both the parties to adduce evidence on the preliminary issue of maintainability of the suit. After the remand, an application was made by the Plaintiff for amendment of the plaint. By the said application, the Plaintiff sought to incorporate additional paragraphs for raising a contention that after st the execution of the deed of partnership dated 1 April, 1984, application for registration was filed and the registration fees was th paid on 20 December, 1985. However, the Registrar of Firms by th letter dated 26 July, 1988 declined to register the firm on the ground that the said firm was already registered and therefore, the same could not be registered on second occasion by showing different address. It was sought to be alleged that there was withdrawal of the papers of registration by the Defendant No.4.
The said application for amendment was rejected by the order dated nd 22 April, 2004. After the remand, it appears that the Plaintiff did ::: Downloaded on - 09/06/2013 17:28:35 ::: 7 AO.1028.05.doc not adduce any evidence and in fact a purshis was filed by the Plaintiff and his advocate recording that the Plaintiff was not th desirous of leading any evidence. By order dated 5 July, 2004, the learned trial Judge dismissed the suit on the ground that the same was not maintainable on account of want of registration of firm. An appeal was preferred by the Plaintiff against the order of dismissal.
ig th By the impugned judgment and order dated 19 July, 2005, the learned trial District Judge held that the plaint was based on two causes of action, one arising on the basis of the partnership deed and the other arising out of Specific Relief Act, 1963 (hereinafter referred to as "the Act of 1963") and therefore, the suit could not have been decided on preliminary issue. The learned Judge held that the preliminary issue of maintainability was a mixed question of law and facts and therefore, such issue could not have been framed and decided as a preliminary issue. Therefore, by the impugned judgment and order, the learned Additional District Judge passed an order of remand and directed the trial Court to hear and decide the ::: Downloaded on - 09/06/2013 17:28:35 ::: 8 AO.1028.05.doc issue of maintainability of the suit along with other issues in the suit.
Against the aforesaid judgment and order, the present appeal has been preferred by the Defendant nos.1, 3, 4 and 10.
5 The learned counsel appearing for the Appellants submitted that the order of the trial Court of framing preliminary issue had attained finality and hence, the same could not have been reopened. He submitted that merely because relief of declaration or injunction was sought, the suit was not based on a cause of action under the provisions of the said Act of 1963. He submitted that the entire cause of action was based on the status claimed the Plaintiff as a partner of a dissolved firm. The reliefs claimed the suit were based on jural relationship created by the said partnership.
6 The learned counsel appearing for the Appellant invited the attention of the Court to the amendments made by the st Maharashtra Act 29 of 1984, which came into force on 1 January, ::: Downloaded on - 09/06/2013 17:28:35 ::: 9 AO.1028.05.doc 1985. He pointed out that before the said amendment, there was an exception to the bar of suits under Sub-Sections 1 and 2 in the form of sub-Section (3) (a) of Section 69 of the said Act, which permitted a partner of an unregistered firm to sue for dissolution of the firm or for accounts of the firm or for realizing the property of dissolved firm.
He pointed out that by the said amendment, sub-Section (2-A) of the said Act was brought on the statute book, which prevented a partner of an unregistered partnership firm from filing a suit for dissolution of the firm or for accounts of a dissolved firm or for realizing property of the dissolved firm. He pointed out that clause
(a) of Sub-Section 3 was substituted by the said amendment. He pointed out a decision of the Apex Court in the case of V.Subramaniam Vs. Rajesh Raghuvandra Rao ([2009] 5 SUPREME COURT CASES 608). He pointed out that by the said decision, it was held that Sub-Section (2-A) which was added with st effect from 1 January, 1985 was unconstitutional and the same was struck down. He submitted that by the said decision, the substituted ::: Downloaded on - 09/06/2013 17:28:35 ::: 10 AO.1028.05.doc Sub-Section (3) (a) was not touched by the Apex Court and what was held to be unconstitutional was only sub-Section (2-A) of Section 69. Thus, by virtue of substitution of the original proviso to sub-Section (3) (a), the suit was not maintainable.
7 The learned counsel appearing for Respondent No.1 -
Plaintiff has made detailed submissions. He relied upon the statements of objects and reasons of the Maharashtra Act 29 of 1984. He pointed out that the Apex Court in the case of V.Subramaniam (supra) has held that the provision of sub-Section (2-A) of Section 69 of the said Act virtually deprives a partner of an unregistered firm from recovering his share in the property of the firm or from seeking dissolution of the firm. He submitted that once sub-Section (2-A) being a stringent provision having being struck down, the exception thereto carved out in the substituted sub-
Section (3) (a) does not and cannot enure to the benefit of Section (2-A). He submitted that mere failure of the Apex ::: Downloaded on - 09/06/2013 17:28:35 ::: 11 AO.1028.05.doc Court to declare substituted sub-Section (3) (a) as ultra-vires cannot be interpreted to mean that the said exception survives on the statute book. He submitted that such interpretation will lead to an absurdity and the very reason for striking down the Sub-Section (2-A) will be nullified. He placed reliance on the decision of the Apex Court in the case of Modern Dental Collage and Research Centre and others Vs. State of Madhya Pradesh and others [(2009) 7 Supreme Court Cases 751]. He submitted that if the literal interpretation makes a statute unconstitutional being contrary to the laid down law, reading down the statute to sustain its validity is permissible. The learned counsel lastly submitted that the substituted sub-Section (3) (a) of Section 69 of the said Act will have to be read down in the light of the declaration of sub-Section (2-A) st of Section 69 of the said Act as amended with effect from 1 January, 1985 as unconstitutional. He, therefore, submitted that the suit was very much maintainable.
::: Downloaded on - 09/06/2013 17:28:35 :::12 AO.1028.05.doc 8 I have given careful consideration to the submissions. It th must be noted here that on 6 April, 1999, the learned trial Judge framed a preliminary issue of maintainability of the suit due to absence of the registration of the firm. The trial Court dismissed the suit as not maintainable. The Plaintiff preferred Civil Appeal No.440 of 1999 before the District Court against the decree of dismissal.
Perusal of the judgment and order in Civil Appeal No.440 of 1999 shows that the order of remand was passed therein on the ground that the Plaintiff was not given an opportunity to adduce evidence.
nd As stated earlier, on 22 January, 2004, an order of remand was passed in the said Civil Appeal No.440 of 1999. The District Court directed the trial Court to give an opportunity to both the parties to adduce evidence on the preliminary issue and to decide the preliminary issue afresh. After the said order, on application made by the Plaintiff, a witness summons was issued to the Registrar of th Firms to produce documents. On 19 June, 2004, the Plaintiff filed a purshis recording that he does not desire to lead oral evidence on ::: Downloaded on - 09/06/2013 17:28:35 ::: 13 AO.1028.05.doc the preliminary issue. Thereafter, the learned trial Judge proceeded to decide the preliminary issue of jurisdiction. The learned Judge made a reference to the applications for amendment filed by the Plaintiff, which were rejected. The learned Judge held that as no documentary evidence was produced to show that the firm was ever registered under the said Act, bar under Sub-Section (2-A) of Section 69 of the said Act was applicable. Therefore, the trial Court dismissed the suit which was challenged by the Plaintiff in the District Court by filing Civil Appeal No.599 of 2004 in which the impugned order has been passed. A reference will have to be made to the impugned judgment and order passed by the District Court.
Even the District Court recorded a finding that the partnership firm M/s.Dorabjee and Company constituted by a deed of partnership st dated 1 April, 1984 was not registered under the provisions of the said Act. The District Court made a reference to various prayers made in the suit. The District Court held that the first prayer namely the prayer for accounts and dissolution may be barred by Section 69 ::: Downloaded on - 09/06/2013 17:28:35 ::: 14 AO.1028.05.doc (2) of the said Act, but the other prayers were under the said Act of 1963 and therefore, it cannot be said that the said prayers were not maintainable. The learned Judge held that the cause of action was a composite cause of action arising out of the said Act as well as the said Act of 1963. Therefore, the learned Judge held that framing of such issue as a preliminary issue was not proper. It will be necessary to make a reference to what is held in paragraph No. 14 of the impugned judgment:
"14. Admittedly, the issue regarding maintainability is a mixed question of Law and facts and therefore, it cannot be decided as preliminary issue as held in our own Bombay High Court. Therefore, framing such issue as a preliminary issue and deciding the same, is not proper. There are various aspects in this issue, keeping the firm unregistered deliberately is one aspect and remaining firm unregistered due to some mischievous act of the person, is another thing. Both contingencies cannot be equally considered."
Therefore, without recording any finding on the preliminary issue, the suit was remanded with a direction to decide the issue of maintainability of the suit along with the other issues.
::: Downloaded on - 09/06/2013 17:28:35 :::15 AO.1028.05.doc th 9 As pointed out earlier, by the order dated 6 April, 1999, the issue of maintainability was framed by the trial Court as a preliminary issue, which was based on the legal effect of absence of registration of the firm. The said preliminary issue was decided by the trial Court against the Plaintiff. An appeal was preferred by the Plaintiff against the said judgment and order. A copy of the memorandum of the said appeal being Civil Appeal No.440 of 1999 has been annexed to the present appeal. There is no contention raised in the grounds of appeal that the order framing preliminary issue is illegal. In fact, there is no challenge to the said order in the entire memorandum of appeal. It will be also necessary to make a nd reference to the final order passed in the earlier appeal on 22 January, 2004. The order of remand was passed only on the ground that the Plaintiff was not given an opportunity to adduce evidence in support of the preliminary issue. The trial Court was directed to give an opportunity to both the parties to adduce ::: Downloaded on - 09/06/2013 17:28:35 ::: 16 AO.1028.05.doc evidence on the preliminary issue and thereafter, the trial Court was directed to decide the preliminary issue on merits. The trial Court decided the preliminary issue against which an appeal was preferred before the District Court in which impugned order has been passed. The order of the trial Court framing preliminary issue passed during the pendency of the suit was not disturbed in the earlier Civil Appeal No.440 of 1999 and was in fact affirmed by directing the trial Court to decide the preliminary issue afresh. The order passed in the Civil Appeal No.440 of 1999 attained finality and was binding on the District Court in the subsequent appeal arising of the same suit. . Therefore, the finding of the District Court in the impugned judgment and order that there was no warrant for framing preliminary issue is completely erroneous. It was the duty of the District Court to consider the finding recorded by the trial Court on the preliminary issue and to decide the preliminary issue on merits.
Instead of deciding the issue, the learned Judge has directed that the issue of maintainability cannot be heard as a preliminary issue ::: Downloaded on - 09/06/2013 17:28:35 ::: 17 AO.1028.05.doc and the same has been ordered to be decided with other issues.
The said approach is completely erroneous.
10 In such a situation, in normal course, the parties would have been again relegated to the Appellate Court with a direction to decide the Appeal on merits. However, before this Court, both the learned counsel have made submissions on merits on the preliminary issue. The preliminary issue has been framed way-back in the year 1999 in a suit filed in the year 1991. The trail Court has decided the issue on two occasions. Therefore, it will be unjust to pass an order of remand directing the District Court to decide the appeal again. Moreover, the issue is required to be decided on admitted facts. This Court has already framed questions of law on merits of the issue of jurisdiction. The questions (b) to (d) framed th under the order dated 16 March 2007 read thus:
"(b) Whether the learned Judge ought to have seen that it is an admitted position that the firm in respect of which the Respondent No.1 had filed the suit was not registered and hence provisions of section 69(2) of the ::: Downloaded on - 09/06/2013 17:28:35 ::: 18 AO.1028.05.doc Indian Partnership Act, 1932 were clearly attracted and the entire suit which was for enforcement of alleged right emanating from the said partnership, was clearly barred ?
(c) Whether the learned Judge has overlooked that the 2nd and 3rd reliefs as prayed in the suit viz. the relief of declaration of dissolution of the firm and for injunction were also directly flowing from the status claimed by the Respondent no.1 of being a partner of an unregistered firm ?
(d) Whether it was absolutely improper and impermissible for the learned Judge of the Appellate Court to pass an order of remand inasmuch as despite of opportunity granted by earlier order, the first Respondent did not lead any evidence ?"
Therefore, I proceed to decide the issue of maintainability of the suit on merits.
11 For that purpose, it will be necessary to make a reference to the relevant averments and prayers in the plaint. The averments made in the plaint show that the suit relates to partnership firm M/s.Dorabjee and Company was brought into st existence on the basis of the deed of partnership dated 1 April, 1984. In paragraph No.7 of the plaint, the Plaintiff has stated thus:
::: Downloaded on - 09/06/2013 17:28:35 :::19 AO.1028.05.doc "7) .... As the defendant no.1 has asserted by the notice dated 9-9-1988, received after by the plaintiff and stated that the partnership stand dissolved, plaintiff herewith submits that the plaintiff is entitled to his share in the profit and the assets of the partnership for the said purpose, accounts of the partnership business and property, are required to be settled and the share of the plaintiff of 50% in the profits of the partnership is required to be availed to the plaintiff."
In paragraph No.8, the Plaintiff has stated thus :
"8) .... This plaintiff further submits that the partnership firm between the plaintiff and the defendant no.1 constituted under the name and style, M/s. Dorabjee and Company is not having any term of capital and in the circumstances, by the notice of the defendant no.1 dated 9-9-1988, the defendant no.1 having asserted his intention to dissolve the partnership firm, the partnership stand dissolved on the notice dated 9-9-1988 being received by the plaintiff nearly a couple of days after the same, and the plaintiff, therefore, is entitled to the truthful account of all the assets and profits of the business as the same are held by the defendant no.1. It is herewith further submitted by the plaintiff that since after the notice dated 9-9-1988 all the defendants connived together and did not allow the plaintiff to participate in the business of the firm, nor they allowed the plaintiff any settlement of the account and in the circumstances, the plaintiff has no other option, but to file the present suit."
(Emphasis added) ::: Downloaded on - 09/06/2013 17:28:35 ::: 20 AO.1028.05.doc In paragraph No.9 of the plaint, the Plaintiff stated thus:
"9) The plaintiff further submits that the plaintiff is entitled to the huge amounts of profits and the share as per the terms of the Deed of the Partnership against the defendant no.1, while the same can be asserted only on settling of the accounts as all the accounts and the documents of partnership, are all held by the defendant no.1 in connivance with the other defendants. Presently, the plaintiff asserts that the plaintiff may be allowed to value the suit to the extent of Rs.25,700 for the purpose of jurisdiction and the Court Fees and the plaintiff herewith crave the leave of the Hon'ble Court to pay the Court fee on the amount and the claim that would be found due by the Hon'ble Court against the defendant no.1 on settling the accounts."
12 A cause of action is nothing but a bundle of facts, which entitles a Plaintiff to file a suit. Perusal of the plaint and especially the aforesaid paragraphs show that the cause of action is the purported dissolution of the firm made by the Defendant No.1 by th notice dated 9 September, 1988. As a result of the dissolution, the Plaintiff has contended that he is entitled the truthful accounts of all the assets and profits of the business of the firm. The prayers made in the suit read thus:
::: Downloaded on - 09/06/2013 17:28:35 :::21 AO.1028.05.doc "(A) The defendant no.1 be ordered to render the truthful accounts of the firm M/s. Dorabjee and Company of 1B, Moledina Road, Pune - 1 between the plaintiff and defendant no.1 in pursuance of the Deed of Partnership dated 1-4-1988 till about 2 days after 9-9-1988, and the said partnership between the plaintiff and the defendant no. 1 may kindly be declared as dissolved after the notice of the defendant no. 1 dated 9-9-1988 and the plaintiff may be decreed his 50% share.
(B) The defendant no. 1 & other defendants may be restrained by permanent injunction for causing any inter meddling with and any user of the partnership and any appropriation of the assets and amounts of the said partnership and the defendants may be further restrained from asserting any kind of a deal between the defendants inter se against the interest of the plaintiff and the defendants nos. 2 to 4 be further restrained from themselves holding out for transacting in any way with regard to any assets of the business of the partnership of the plaintiff and the defendant no.
1 ;
(C) In view of the malafide intention of the defendants, to deny the claim of the plaintiff and misappropriate the firms assets, it is necessary to appoint a Receiver to hold all the said accounts and assets from the defendants."
13 The Appellate Court has held that there is a joint cause of action under the said Act and under the said Act of 1963. On plain reading of the plaint, the cause of action pleaded is the ::: Downloaded on - 09/06/2013 17:28:35 ::: 22 AO.1028.05.doc dissolution of the firm made by the Defendant No.1. There is nothing like a separate cause of action under the said Act of 1963.
Prayer clauses (B) and (C) are merely consequential prayers and the said prayers are sought on the basis of the same cause of action namely the dissolution of the firm by the Defendant No.1.
Therefore, the reasoning adopted by the District Court on this aspect is completely erroneous.
14 Now, the only point survives for consideration is whether bar created under Section 69 of the said Act will apply to the suit.
The Appellants in their application made before the Trial Court for raising preliminary issue had relied upon only the Sub-Section (2-A) of Section 69. The said contention was accepted by the Trial Court and the suit was dismissed. Now, in the case of V.Subramanium (supra) the Apex Court has held Sub-Section (2-A) of Section 69 inserted by the Maharashtra Act 29 of 1984 to be unconstitutional. It cannot be disputed that prior to the amendment, the present suit ::: Downloaded on - 09/06/2013 17:28:35 ::: 23 AO.1028.05.doc was maintainable.
15 Section 69 of the said Act before the amendment made by the Maharashtra Act 29 of 1984, reads thus:
"69. Effect of non-registration. - (1) No suit to enforce a right arising from a contract or conferred by this Act shall be instituted in any Court by or on behalf of any person suing as a partner in a firm against the firm or any person alleged to be or to have been a partner in the firm unless the firm is registered and the person suing is or has been shown in the Register of Firms as a partner in the firm. (2) No suit to enforce a right arising from a contract shall be instituted in any Court by or on behalf of a firm against any third party unless the firm is registered and the person suing are or have been shown in the Register of Firms as partners in the firm.
(3) The provisions of sub-sections (1) and (2) shall apply also to a claim of set-off or other proceeding to enforce a right arising from a contract, but shall not effect,-
(a) the enforcement of any right to sue for the dissolution of a firm or for accounts of a dissolved firm, or any right or power to realise the property or a dissolved firm, or
(b) the powers of an official assignee, receiver or Court under the Presidency-towns Insolvency Act, 1909, or the Provincial Insolvency Act, 1920, to realise the property of an insolvent partner.
(4) This section shall not apply,-
(a) to firms or to partners in firms which have no place of business in the territories to which this Act extends, or whose places of business in the said territories, are situated in areas to which, by notification under section 56, this Chapter does not apply, or ::: Downloaded on - 09/06/2013 17:28:35 ::: 24 AO.1028.05.doc
(b) to any suit or claim of set-off not exceeding one hundred rupees in value which, in the Presidency-towns, is not of a kind specified in section 19 of the Presidency Small Causes Court Act, 1882, or outside the Presidency-towns, is not of a kind specified in the Second Schedule to the Provincial Small Cause Courts Act, 1887, or to any proceeding in execution or other proceeding incidental to or arising from any such suit or claim.
16 The amendment made by the Act No. 29 of 1984 to the Section 69 of the said Act in its application to the State of Maharashtra is as under:-
(a) to sub-S (1), the following proviso shall be added, namely:-
"Provided that the requirement of registration of firm under this sub-section shall not apply to the suits or proceedings instituted by the heirs or legal representatives of the deceased partner of a firm for accounts of the firm or to realise the property of the firm";
(b) after sub-S. (2), the following sub-section shall be inserted, namely:-
"(2-A) No suit to enforce any right for the dissolution of a firm or for accounts of a dissolved firm or any right or power to realise the property of a dissolved firm shall be instituted in any Court by or on behalf of any person suing as a partner in a firm against the firm or any person alleged to be or to have been a partner in the firm, unless the firm is registered and the person suing is or has been showing in the Registrar of Firms as a partner in the firm:
Provided that the requirement of registration of firm under this sub-section shall not apply to the suits or proceedings ::: Downloaded on - 09/06/2013 17:28:35 ::: 25 AO.1028.05.doc instituted by the heirs or legal representatives of the deceased partner of a firm for accounts of a dissolved firm or to realise the property of a dissolved firm";
(c) in sub-S (3),-
(i) for the words, brackets and figures "sub-sections (1) and (2)", the words, brackets, figures and letter "sub- sections (1), (2) and (2-A)" shall be substituted;
(ii) for Cl. (a), the following clause shall be substituted, namely:-
"(a) the firms constituted for a duration upto six months or with a capital upto two thousand rupees; or".-
Maharashtra Act 29 of 1984, S. 13 (w.e.f. 1-1-1985) The sub-section 1 of Section 69 of the said Act except the proviso is the same before and after the amendment. Before the amendment, by virtue of the exception carved out by clause (a) of sub-section 3, a partner of an unregistered firm was entitled to maintain a suit for dissolution of a firm or for accounts of dissolved firm, or for realization of a property of a dissolved firm. By virtue of Sub-Section (2-A) added by the Act No.29 of 1984, a suit by a partner of an unregistered firm for the aforesaid reliefs was expressly barred. The exception carved out by clause (a) of sub-section 3 was done away with by substitution of the clause (a). An exception was carved out by proviso added to both Sub-Sections 1 and (2-A) by which legal ::: Downloaded on - 09/06/2013 17:28:35 ::: 26 AO.1028.05.doc representatives of the deceased partner of an unregistered firm are entitled to file a suit for accounts of a firm or for realization of the property of the firm. By substituted clause (a) of sub-section 3, an exception was carved out to Sub-Sections (1), (2) and (2-A) only in respect of the firms constituted for a duration upto six months or with capital upto two thousand rupees.
17 In the case of V.Subramanium (supra), The Apex Court declared sub-Section (2-A) of Section 69 as unconstitutional. The Apex Court held thus:
"23. The primary object of registration of a firm is protection of third parties who were subjected to hardship and difficulties in the matter of proving as to who were the partners. Under the earlier law, a third party obtaining a decree was often put to expenses and delay in proving that a particular person was a partner of that firm. The registration of a firm provides protection to the third parties against false denials of partnership and the evasion of liability. Once a firm is registered under the Act the statements recorded in the register regarding the constitution of the firm are conclusive proof of the fact contained therein as against the partner. A partner whose name appears on the register cannot deny that he is a partner except under the circumstances provided. Even then registration of ::: Downloaded on - 09/06/2013 17:28:35 ::: 27 AO.1028.05.doc a partnership firm is not made compulsory under the Act. A partnership firm can come into existence and function without being registered.
24. However, the Maharashtra Amendment effects such stringent disabilities on a firm as in our opinion are crippling in nature. It lays down that an unregistered firm cannot enforce its claims against third parties. Similarly, a partner who is not registered is unable to enforce his claims against third parties or against his fellow partners. An exception to this disability was a suit for dissolution of a firm or a suit for accounts of a dissolved firm or a suit for recovery of property of a dissolved firm. Thus a partnership firm can come into existence, function as long as there is no problem, and disappear from existence without being registered. This is changed by the 1984 Amendment extending the bar of the proceedings to a suit for dissolution or recovery of property as well.
25. The effect of the 1984 Amendment is that a partnership firm is allowed to come into existence and function without registration but it cannot go out of existence (with certain exceptions). This can result into a situation where in case of disputes amongst the partners the relationship of partnership cannot be put to an end by approaching a court of law. A dishonest partner, if in control of the business, or if simply stronger, can successfully deprive the other partner of his dues from the partnership. It could result in extreme hardship and injustice. Might would be right. An aggrieved partner is left without any remedy whatsoever. He can neither file a suit to compel the mischievous partner to cooperate for registration, as such a suit is not maintainable, nor can he resort to arbitration if any, because the arbitration proceedings ::: Downloaded on - 09/06/2013 17:28:35 ::: 28 AO.1028.05.doc would be hit by Section 69(1) of the Act [Jagdish Chandra Gupta v. Kajaria Traders (India) Ltd.11].
26. In our opinion the restrictions placed by sub-section (2- A) of Section 69 introduced by the Maharashtra Amendment Act, for the reasons given above, are arbitrary and of excessive nature and go beyond what is in the public interest. Hence the restrictions cannot be regarded as reasonable."
(Emphasis added) The Apex Court in paragraph 29 held thus:
"29. The High Court was of the view that the object of the Maharashtra Amendment was to induce partners to register and it was intended to protect third-party members of the public. We cannot see how sub-section (2-A) of Section 69 in any way protects the third-party members of the public. It makes it virtually impossible for partners in an unregistered firm to dissolve the firm or recover their share in the property of the firm. Hence it is totally arbitrary."
(Emphasis added) Thus the said provision is held arbitrary as it prevents a partner of an unregistered firm from filing a suit for accounts, for recovery of property of his firm, for recovery of his share etc. ::: Downloaded on - 09/06/2013 17:28:35 ::: 29 AO.1028.05.doc 18 The submission of the learned counsel for the Appellants is that under the unamended clause (a) of Sub-Section 3, a partner of unregistered firm was entitled to file a suit for dissolution of firm, for accounts and for recovery of property, but the same has been substituted by the amendment. He pointed out that though the Apex Court has struck down Sub-section (2-A), the substituted clause (a) of Sub-Section 3 has not been struck down.
His submission is that the original clause (a) of Sub-Section 3 which carved out an exception to unamended Sub-Section (1) permitted a partner of unregistered firm to file a suit for dissolution of firm and accounts does not exist on the statute book in view Act No.29 of 1984. Therefore, in view of bar created by Sub-Section (1), the suit is not maintainable. If this argument is accepted, the observation of the Apex Court in the case of V.Subramanium(supra) that "It makes it virtually impossible for partners in an unregistered firm to dissolve the firm or recover their share in the property ::: Downloaded on - 09/06/2013 17:28:35 ::: 30 AO.1028.05.doc of the firm. Hence it is totally arbitrary." will apply even to Sub-
Section (1) and hence it will render the said provision unconstitutional. In the case of M. Rathinaswami Vs. State of Tamil Nadu, [(2009) 5 SCC 625], the Apex Court held thus:
"28. It is well settled that to save a statutory provision from the vice of unconstitutionality sometimes a restricted or extended interpretation of the statute has to be given.
This is because it is a well-settled principle of interpretation that the Court should make every effort to save a statute from becoming unconstitutional. If on giving one interpretation the statute becomes unconstitutional and on another interpretation it will be constitutional, then the Court should prefer the latter on the ground that the legislature is presumed not to have intended to have exceeded its jurisdiction.
29. Sometimes to uphold the constitutional validity the statutory provision has to be read down. Thus, in 5 Umayal Achi v. Lakshmi Achi , the Federal Court was considering the validity of the Hindu Women's Right to Property Act, 1937. In order to uphold the constitutional validity of the Act, the Federal Court held the Act intra vires by construing the word "property" as meaning "property other than agricultural land". This restricted interpretation of the word "property" had to be given otherwise the Act would have become unconstitutional."
(Emphasis added) ::: Downloaded on - 09/06/2013 17:28:35 ::: 31 AO.1028.05.doc 19 Thus, it is not possible to accept the submission of the learned counsel appearing for the Appellants which will render even the sub-Section (1) of Section 69 unconstitutional. Hence, after the sub-Section (2-A) of Section 69 is held to be unconstitutional, a suit by a partner of unregistered firm for dissolution for accounts and for realisation of his share is maintainable. Accordingly, the present suit is maintainable. In any event, the Appellants in their application for framing a preliminary issue had relied upon only the Sub-
Section (2-A) of Section 69 which is now held to be unconstitutional.
Prior to the amendment, it cannot be disputed that the present suit was maintainable.
20 Hence, I pass the following order:
i. That part of the impugned and order which directs that the issue of maintainability cannot be decided as a preliminary issue is set aside ;::: Downloaded on - 09/06/2013 17:28:35 :::
32 AO.1028.05.doc ii. The preliminary issue is answered by holding that the suit is maintainable ;
iii. The suit shall be decided expeditiously ;
iv. All contentions of the parties on merits of the suit are kept open ; and v. The Appeal is partly allowed on above terms with no order as to costs.
vi. On the request made by the learned counsel appearing for the Appellants Shri. Patel, the interim order in Appeal will continue for a period of six weeks from today.
[ A.S.OKA, J ] ::: Downloaded on - 09/06/2013 17:28:35 :::