Karnataka High Court
Smt Sandhya Anthraper Kurishingal vs Manju Kathuria on 8 November, 2013
Equivalent citations: AIR 2014 KARNATAKA 21, 2014 (1) AIR KANT HCR 254, (2014) 1 ICC 1028, (2014) 1 KCCR 347
Bench: K.Bhakthavatsala, B.S.Indrakala
RFA No.1468/2006
1
®
IN THE HIGH COURT OF KARNATAKA AT BANGALORE
DATED THIS THE 8TH DAY OF NOVEMBER 2013
PRESENT
THE HON'BLE Dr. JUSTICE K.BHAKTHAVATSALA
AND
THE HON'BLE Mrs. JUSTICE B.S.INDRAKALA
R.F.A.NO.1468/2006 (DEC)
BETWEEN
1. Smt.Sandhya Anthraper
Kurishingal,
W/o Tarun Kurishingal,
Aged about 29 years,
Residing at
No.CA-132, Riviera Retreat
Thevara Waterfront,
Kochi-682 013,
Rep. by GPA Holder
Smt.Cecilia Anthraper.
2. Mr.Vinod Vijayakumar,
S/o.Dr.V.Vijayakumar,
Aged about 28 years,
Residing at
No.4, Langford Gardens,
Bangalore-560 025,
Rep. by GPA Holder
Dr.V.Vijayakumar. ...APPELLANTS
(By Sri.Udaya Holla, senior counsel
for M/s.Holla & Holla, Advs.)
RFA No.1468/2006
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AND:
1. Manju Kathuria,
W/o.Virendra Kathuria,
Aged about 52 years,
Residing at Sompur Gate,
Sarjapur Road,
Bangalore-562 125.
2. M/s.Fortune Projects,
A partnership firm,
Having its principal
Place of business at
No.98/1, 1st Floor,
1st Block, Koramangala,
Sarjapura Main Road,
Bangalore-560 034.
3. M.Shivananda,
Major,
S/o.unknown partner,
M/s.Fortune Projects,
No.98/1, 1st Floor,
1st Block, Koramangala,
Sarjapura Main Road,
Bangalore-560 034.
4. D.V.Bhuvanesh,
Major,
S/o.unknown partner,
M/s.Fortune Projects,
No.98/1, 1st Floor,
1st Block, Koramangala,
Sarjapura Main Road,
Bangalore-560 034.
RFA No.1468/2006
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5. Sri.Farooq,
Major,
S/o.unknown partner,
M/s.Fortune Projects,
No.98/1, 1st Floor,
1st Block, Koramangala,
Sarjapura Main Road,
Bangalore-560 034. ...RESPONDENTS
(By M/s.Kamal & Bhanu, Advs. for R-2 to 5,
Sri.Ravi V.Hosmani, Adv. for proposed impleading
Respondents, 9 9-A, 13, 16, 18-A, 20 and 26 in
I.A.I/2006,
Smt.Lata Sawant, for
M/s.Fortune Law Firm, Advs. for proposed
Impleading respondents 1, 3, 3A, 4, 5, 5A, 6, 6A,
7, 7A, 8, 11, 12, 12A, 14, 15, 17, 18, 19, 21, 22
23, 23A, 24, 24A and 27 in I.A.I/06)
- -- -
This RFA is filed u/s.96 of CPC against the Judgment
& Decree dt.19.4.2006 passed in O.S.No.1071/2003 on the
file of the I Addl. Civil Judge (Sr. Dn.), Bangalore Rural Dist.,
Bangalore, dismissing the suit for declaration and
injunction.
This Appeal being heard and reserved, coming on for
pronouncement of Judgment, this day, Dr.Bhakthavatsala,
J, delivered the following:-
JUDGMENT
A short question that arises for our consideration in this appeal is -
RFA No.1468/20064
"Whether the dismissal of the suit in O.S.No.1071/2003 on the file of I Addl. Senior Civil Judge, Bangalore Rural District, Bangalore, as not maintainable under Section 69(2) of the Partnership Act, 1932 (in short, "the Act") calls for interference of this Court ?"
2. Our answer to the above point is in the affirmative for the following reasons:
Appellants who are plaintiffs/partners of an unregistered firm of M/s.Windsor Wings Developers, filed a suit against the defendants in O.S.No.1071/2003 on the file of Senior Civil Judge, Bangalore Rural District, Bangalore, for the relief of declaration that the registered Sale deed dated 26.04.2003 executed by defendant No.1 is invalid, illegal and not binding on the plaintiffs, cancellation of the sale deed and for permanent injunction restraining the defendants 2 to 5 from selling, leasing, mortgaging or otherwise alienating and interfering with their peaceful possession of the suit schedule property. It is the case of the RFA No.1468/2006 5 plaintiffs that the suit schedule property was purchased in the name of the Firm and RTC entries stands in the name of the Firm. In the year 2003, due to growth of I.T corridor in the area, market value of the suit property was `30,00,000/-. The plaintiffs, in the month of March 2003, brought up the subject of selling the suit schedule property to the 1st defendant. But, the 1st defendant objected for sale. Again, when the plaintiffs raised the subject in the month of November, 2003, the 1st defendant avoided the discussion and the plaintiffs suspected the conduct of the 1st defendant and they made enquiries about the suit schedule property in the Office of the Sub-Registrar and discovered that the 1st defendant, who had no authority to sell the immovable property belonging to the Firm, without their consent had executed a sale deed dated 26.4.2003 on behalf of the Firm, in favour of the 2nd defendant for a consideration of `16,66,620/- though the property was worth more than `30,00,000/-. It is contended that the sale deed is invalid, void, fraudulent and the same is executed clandestinely with an intention of cheating the plaintiffs. In para-14 of the RFA No.1468/2006 6 plaint, it is pleaded that defendants 2 to 5 are trying to dispossess the plaintiffs and also trying to alienate the suit schedule property and therefore filed the Suit for the relief, as prayed for.
3. For the purpose of convenience 'the appellants' and 'the respondents' are hereinafter referred to as 'the plaintiffs' and 'the defendants' as arrayed in the Suit.
4. The defendants entered appearance and filed their written statement.
5. The defendants have taken up the contention that the Suit is barred under Section 69(2) of the Partnership Act.
6. The trial Court framed as many as eight issues and the issue No.5 is on the point-
"Whether the plaintiffs prove that the suit of the plaintiffs is not maintainable in view of Section 69(2) of the Partnership Act ?"RFA No.1468/2006
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The above-said issue No.5 was treated as preliminary issue. The trial Court, after hearing on the preliminary issue, answered the same in the affirmative in favour of the defendants and dismissed the Suit as not maintainable under Section 69(2) of the Act. This is impugned in this Appeal.
7. Sri.Udaya Holla, learned senior counsel appearing for the plaintiffs along with the Counsel on record submitted that the Court below erred in dismissing the suit as not maintainable under sub-section (2) of Section 69 of the Act. He further submitted that the appellants are neither enforcing any contract nor the contract of partnership and therefore the Suit is maintainable and Section 69 of the Act does not bar the suit. He has cited the following decisions:
i) 2003 (3) SCC 229 (N.KHADERVALI SAHEB (DEAD) BY L.Rs AND ANOTHER vs. N.GUDU SAHIB (DEAD) AND OTHERS) on the point that partnership is not an independent legal entity and the Firm name is only RFA No.1468/2006 8 compendious name given to partnership and the partners are the real owners of its assets;
ii) 2009(5) SCC 608 (V.SUBRAMANIAM vs. RAJESH
RAGHUVANDRA RAO) on the point that the
partnership is a compendium of its partners, the Partners of the firm are co-owners of the property of the firm. Absence of registration does not mean that the partners of the firm are deprived of rights in the said firm or its members and hence, cannot file a suit for its assets or dissolution or for realization of the property in the firm;
iii) 2007(15) SCC 58 (PURUSHOTTAM AND ANOTHER vs. SHIVRAJ FINE ARTS LITHO WORKS AND OTHERS) on the point that concept of partnership is to embark upon a joint venture and for that purpose, to prove capital money or even property included as immovable property and interest in properties to their share in the joint venture of the business of the partnership;
8. On the other hand, learned counsel for defendants 2 to 5 submits that as the plaintiffs' partnership firm is RFA No.1468/2006 9 unregistered, the Suit is not maintainable under sub- section (2) of Section 69 of the Act. He has contended that according to sub-section (1) of Section 69, no suit to enforce a right arising from a contract or conferred by the 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 Registrar of firms as a partner in the firm.
9. According to the Partnership Deed dated 29.12.1995, the defendant No.1 is the partner No.1 and the plaintiffs 1 and 2 are the partner Nos. 2 and 3, respectively, of the Firm called M/s. Windsor Wings Developers. The main business of the firm is to deal in real estate, buy, sell, acquire immovable property, develop property, construct building, sell viable sites, commercial, residential or industrial or any other business as may be decided upon by the partners from time to time. All the partners are working partners.
RFA No.1468/200610
10. According to Clause 25 of the Partnership deed, no partners of the firm shall, without the consent in writing of the other partners, be entitled to deal with the items mentioned in sub-Clauses-(a) to (h). Sub-clause (d) of Clause 25 of the Partnership deed says that no partners of the firm, shall, without consent in writing of the other partner, is entitled to transfer immovable property belonging to the firm. Therefore, it is contended by the learned counsel for the defendant Nos. 2 to 5 that the plaintiffs are enforcing their right under sub-clause (d) of Clause 25 under the partnership deed by filing the Suit and therefore, suit is not maintainable even under sub-section (1) of Section 69 of the Act. His further contention is that as per sub-Section (2) of Section 69, the plaintiffs/partners are not entitled to enforce their right in respect of the suit schedule property belonging to the un-registered Firm against the defendants 2 to 5. He has cited the following decisions:
i) AIR 1978 DELHI 255 (M/S.SHANKAR HOUSING CORPORATION vs. SMT.MOHAN DEVI AND OTHERS); RFA No.1468/2006 11
ii) AIR 1977 SC 336 (LOONKARAN SETHIA ETC., vs. MR.IVAN E.JOHN AND OTHERS);
iii) AIR 1992 DELHI 92 (KAVITHA TREHAN AND OTHERS vs. BALSARA HYGIENE PRODUCTS LTD.);
iv) AIR 1989 SC 1769 (M/S.SHREERAM FINANCE CORPORATION vs. YASIN KHAN AND OTHERS);
v) 1985(1) WLN 791 (RAJASTHAN HIGH COURT
SOHANLAL BASANT KUMAR vs. UMRAOMAL
CHOPRA).
11. It is useful to excerpt Section 69 of the Indian Partnership Act, 1932, for immediate reference, which reads as under:
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.RFA No.1468/2006 12
(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 persons using 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 affect,-
(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 of a dissolved firm, or
(b) the powers of an official assignee, receiver or Court under the Presidency-towns Insolvency Act, 1909 (3 of 1909) or the Provincial Insolvency Act, 1920 (5 of 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 RFA No.1468/2006 13 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
(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 Cause Courts Act, 1882 (5 of 1882), or, outside the Presidency-towns, is not of a kind specified in the Second Schedule to the Provincial Small Cause Courts Act, 1887 (9 of 1887), or to any proceeding in execution or other proceeding incidental to or arising from any such suit or claim.
12. The sum and substance of sub-section (1) of Section 69 of the Act is that no suit to enforce a right arising from a contract or conferred by this Act shall be instituted in any Court and the 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 RFA No.1468/2006 14 and the person suing is or has been shown in the Register of Firms as a partner in the firm.
13. The defendants have not pleaded that the suit is barred under sub-section (1) of Section 69, but in this Appeal, it is contended that the suit is not maintainable both under sub-sections (1) and (2) of Section 69 of the Act.
14. The plaintiffs who are partners of unregistered firm are neither enforcing their right arising from a contract nor the right conferred by the Act. But, the learned counsel for respondents/defendants is that the plaintiffs are enforcing their right under the contract of partnership deed dated 29.12.1995 and specifically Clause 25(d) which says that no partner of the firm shall, without the consent in writing of the other partners, be entitled to transfer immovable property belonging to the Firm, but the defendant No.1, as a partner of the partnership firm, has sold the suit land in favour of defendants 2 to 5. Though it is stated in sub- clause (d) of clause 25 of the partnership deed that no RFA No.1468/2006 15 partner of the firm shall without the consent in writing of the other partner, be entitled to transfer immovable property belonging to the firm, the appellants/plaintiffs seek to enforce their right conferred upon them under the Transfer of Property Act. It is well settled principle that a 'partnership firm' has 'no separate legal entity'. It is always understood that "firm" means 'partners', 'partners' means collectively a 'firm'. Thus the property belonging to a partnership firm is the property of the partners of the firm. In view of the above, under the Transfer of Property Act, each of the partner is entitled to claim his right to the immovable property of the firm, as co-owner. Under such circumstances, the contention of the learned counsel for Respondents 2 to 5 that the suit filed by the plaintiffs enforcing their right under the contract of partnership deed, holds no water.
15. Now, we refer to sub-section (2) of Section 69. According to that 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 RFA No.1468/2006 16 and the persons suing are or have been shown in the Register of Firms as the partners in the firm. In the instant case, there is no contract between the plaintiffs on one side and defendants 2 to 5 on the other and thus, there is no question of plaintiffs enforcing a right arising from a contract and thus the Suit is not hit under sub-Section (2) of Section 69 of the Act.
16. As per Section 69(1) of the Act, an unregistered partnership firm or partners are disabled from enforcing a right arising from a contract or the right conferred by the Partnership Act, 1932, but the provision does not take away the right of the partners of an unregistered firm to enforce their right under other enactments. According to Article 300-A of the Constitution of India, no person shall be deprived of his property save by authority of law.
17. It is pertinent to mention that 8 guntas of land in Survey No.24/1, 2 acres 30 guntas of land in Survey No.24/4 and 1 acre 12 guntas of land in Survey No.29, all situated at Goppasandra village, Sarjapur Hobli, Anekal RFA No.1468/2006 17 Taluk, i.e., in all 4 acres 10 guntas of land bounded on the East by land of Lakshmaiah Reddy, west by land of Narayana Reddy, north by land of Chikkapullappa, south by land of Rajappa, is the property of the partnership firm, was purchased under three registered Sale deeds dated 20.01.1996 by the partnership firm, viz., M/s.Windsor Wings Developers, out of the funds of the firm. Thus, the property becomes the property of the partners and they are co-owners. Apart from that the sale of the property entire property measuring 4 acres 10 guntas of land by defendant No.1 in favour of the defendant No.2, cannot be said to be a business transaction as the business of the firm is to acquire immovable property, develop property, construct buildings, sell viable sites, commercial, residential or industrial or any other business as may be mutually decided upon by the partners from time to time. In other words, land measuring in all 4 acres 10 guntas was purchased by the Firm with an intention to develop and make sites and sell it. Therefore, the plaintiffs are entitled for the relief sought for. Defendant No.1 has RFA No.1468/2006 18 committed breach of trust, which is an offence under the Indian Penal Code. It is useful to refer to some of the decisions on the point.
i) In the decision reported in AIR 1982 DELHI 482 (M/s.VIRENDRA DRESSES vs. M/s.VIRENDRA GARMENTS), the Delhi High Court has held that an unregistered partnership firm is entitled to file a suit for permanent injunction for passing off and remission of accounts against the defendant and enforce the right under the Trade and Merchandise Marks Act, 1958;
ii) In AIR 2006 BOMBAY 76 (CHANDRAIYYA MUTWAYYA IRABOLTI vs. SIDRAM GANPAT INGLE), the Bombay High Court has held that a suit for recovery of damages for a misconduct committed by another partner of the partnership firm and taking away certain articles lying therein and another wrongful act attributed is surrounding a godown and collecting money from the owner; is maintainable; RFA No.1468/2006 19
iii) In the decision reported in AIR 1975 KERALA 144 (KERALA ARECANUT STORES vs. RAMKISHORE SONS AND ANOTHER), the Division Bench of the Kerala High Court has held that a suit by partner of an unregistered firm for recovery of money under Negotiable Instrument Act on account of dishonour of a cheque endorsed in favour of a firm, is not barred.
iv) In the decision reported in AIR 1990 PATNA 95 (PADAM SINGH JAIN vs. CHANDRA BROTHERS AND OTHERS), the Patna High Court has held that eviction suit under Bihar Buildings, Lease, Rent and Eviction (Control) Act, 1983, by an unregistered firm is not for enforcement of agreement and the right to sue for eviction is a statutory right and therefore, Section 69(2) of Partnership Act, does not apply to eviction suit.
18. As per the above decisions, the plaintiffs are enforcing their right as co-owners of the suit property conferred under the Transfer of Property Act and the Partnership Act does not bar the partners of an RFA No.1468/2006 20 unregistered firm from enforcing their right conferred under the other enactments. In other words, at the cost of repetition, it must be mentioned that what is prohibited under Section 69 of the Act is enforcement of contract of partnership, provisions of the Partnership Act, 1932 and enforcement of right arising from a contract (between the firm and third party) and not the rights conferred under the other enactments. Therefore, we are of the opinion that the trial Court erred in dismissing the suit as barred by sub-section (2) of Section 69 of the Partnership Act, 1932. The decisions relied upon by the learned Counsel for the respondents/defendants are of no avail to the case of the defendants. For the reasons stated above, we answer point for consideration in the affirmative in favour of the appellants/plaintiffs and against the respondents/ defendants.
19. In the result, we pass the following Order:
Appeal is allowed. The impugned Order dated 19.04.2006 made in O.S.No.1071/2003 on the file of Senior RFA No.1468/2006 21 Civil Judge, Bangalore Rural District, Bangalore, is set aside and the suit is remitted to the trial Court for disposal, in accordance with law.
Registry is directed to refund the entire Court Fee paid on the memorandum of appeal.
Sd/-
JUDGE Sd/-
JUDGE Bnv Bjs