Delhi High Court - Orders
Tierra Height Developers vs Vidya Prakash Mehra on 25 May, 2022
Author: Neena Bansal Krishna
Bench: Neena Bansal Krishna
$~22
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ CS(OS) 2085/2011
TIERRA HEIGHT DEVELOPERS ..... Plaintiff
Through: Mr. Sanjay Agnihotri, Advocate.
versus
VIDYA PRAKASH MEHRA ..... Defendant
Through: Mr. Manish Verma & Mr. Sonu
Singh, Advocates for D-2.
Mr. Jitender Verma, Advocate for LR
No. 3 of defendant-Ravinder Kumar
Mehra.
CORAM:
HON'BLE MS. JUSTICE NEENA BANSAL KRISHNA
ORDER
% 25.05.2022
1. This suit has been filed by the plaintiff seeking suit for specific performance, mandatory injunction, perpetual injunction and damages. A preliminary objection has been taken on behalf of the defendant about the maintainability of the suit by the plaintiff under Section 69 of the Partnership Act, 1932 (hereinafter referred to as the „Act, 1932‟) as it is not a registered partnership firm.
2. The factual matrix in brief is that the plaintiff firm, which is registered with the Sub-Registrar, had entered into an Agreement to Sell dated 03rd June, 2010 in respect of property bearing No. G-32, Residential Scheme, Masjid Moth, New Delhi (hereinafter referred to as „suit property‟) for total sale consideration of Rs. 9,50,00,000/-. According to the terms of Signature Not Verified Signed By:NIRMLA CS(OS) 2085/2011 Page 1 of 6 TIWARI Signing Date:07.06.2022 17:11:25 Agreement to Sell dated 03rd June, 2010, a sum of Rs. 75,00,000/- was paid to the defendant as earnest money in the year 2010 through various cheques as per the terms of the Agreement to Sell. The sale was to be completed within sixty days. It was the responsibility of the defendant to get the completion of mutation/freehold of the suit property done and the plaintiff undertook to facilitate the defendant to get the freehold in the name of the first party. Both parties made sincere efforts for getting the property freehold after signing of the Agreement to Sell. When the deal did not materialize, the plaintiff filed the present suit.
3. A preliminary objection has been taken by the defendant about the maintainability of the present suit in view of the bar under Section 69 of the Act, 1932.
4. Learned counsel for the plaintiff has argued that not in every suit can the plea of Section 69 of the Act, 1932 in regard to non-registration of a partnership firm, be agitated. Reliance has been placed on the decision of Madras High Curt in N. A. Munavar Hussain Sahib & Ors. vs. E. R. Narayanan & Ors. AIR 1984 Madras 47, wherein it was observed that a firm is registered or not is a question of fact and unless this fact is enquired into and decided the restriction regarding the filing of suit under Section 69 of the Act, 1932 cannot be invoked by any of the parties to the suit. Furthermore, such a plea cannot be allowed to be used when it has not been pleaded in the written statement.
5. A reference has also been made to Jalal Mohammad Ibrahim vs. Kakka Mohammaed Ghouse Sahib AIR 1972 Madras 86, where the question arose whether the defence regarding the non-registration and invalidity of a decree passed in the suit relating to the unregistered firm can be permitted to Signature Not Verified Signed By:NIRMLA CS(OS) 2085/2011 Page 2 of 6 TIWARI Signing Date:07.06.2022 17:11:25 be raised in a separate decree. The Division Bench held that the defence of non-registration of a firm is a plea that has to be raised in the suit and if it has not been raised, it cannot be agitated for the first time in the appeal and more so, it cannot be permitted to be raised by way of a separate suit. The omission on the part of the appellant to raise a specific plea in regard to the non-registration of the firm cannot be agitated in the appeal.
6. Learned counsel on behalf of the plaintiff has also relied upon the decision of this Court in M/s Vesco Product Company vs. Sh. Rajinder Nath Pathak in RSA No. 182/2002 and CM No. 497/2002 decided on 08 th December, 2010, wherein it was observed that the bar to Section 69(2) of the Act, 1932 arises when the contract entered into by the partnership is "in the course of business transaction" by the firm with its customers/defendants.
7. Learned counsel for the plaintiff has, therefore, argued that since the plea of non-registration of the firm of the plaintiff thereby attracting the bar under Section 69 (2) of the Act, 1932 has not been taken in the written statement, the defendant cannot be permitted to raise this plea at this stage.
8. Learned counsel on behalf of the defendant has submitted that though a specific plea of non-registration of the plaintiff-firm has not been taken in the written statement, but the suit is still at the stage of recording of evidence and the trial is yet to be concluded. The objection in regard to the non-registration of firm can be validly taken at this stage. Learned counsel for the respondent has further submitted that the judgements relied upon by the plaintiff are not applicable in this case inasmuch as the plea is being raised during the trial and not at the stage of appeal. It is further submitted that bar to Section 69(2) of the Act, 1932 applies to any transaction undertaken by an unregistered partnership firm with the third party and the Signature Not Verified Signed By:NIRMLA CS(OS) 2085/2011 Page 3 of 6 TIWARI Signing Date:07.06.2022 17:11:25 present suit is barred under Section 69(2) of the Act, 1932.
9. Submissions heard.
10. The plaintiff has asserted in Paragraph-1 of its plaint that it is a registered partnership firm and has placed the copy of the Partnership Deed on record. During the course of arguments, it was fairly conceded that the plaintiff firm is not registered with the Registrar of Firms but is registered with the Sub-Divisional Magistrate. Admittedly, the plaintiff is not a registered partnership firm under the Act, 1932. The question arises is thus whether the plaintiff is barred to institute the present suit on account of being an unregistered firm.
11. In order to appreciate the rival contentions of the parties, it would be pertinent to extract the provision of Section 69(2) of the Act, 1932, which read as under:
"Section 69(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 suing are or have been shows in the Registrar of Firms as partners in the firm."
12. From a bare perusal of the Section 69(2) of the Act, 1932, it emerges that it is not attracted to any and every contract, which the firm enters into with the third party. The Hon‟ble Supreme Court in M/s Raptakos Brett & Co. Ltd. vs. Ganesh Property AIR 1988 SC 3085 has held that Section 69(2) of the Act, 1932 does not bar the enforcement of a statutory right or a common law right by way of a suit, by an unregistered firm. In that case, it was held that the right to evict a tenant upon the expiry of the lease is not a right arising from a contract but is a common law right under the Transfer of Signature Not Verified Signed By:NIRMLA CS(OS) 2085/2011 Page 4 of 6 TIWARI Signing Date:07.06.2022 17:11:25 Property Act, 1882 and such a suit shall not be barred even in the absence of registration of the plaintiff-firm.
13. The Hon‟ble Supreme Court explained this aspect in the case of M/s Halidram Bhujiawala and Anr. vs. M/s Anand Kumar Deepak Kumar & Anr. AIR 2000 SC 1267 and has observed that there is considerable ambiguity in Section 69(2) of the Act, 1932 as to what is meant by the words "arising out of a contract", inasmuch as the provision does not say whether the contract in Section 69(2) of the Act, 1932 is one entered into by the firm with the defendant or with somebody else, who is not a defendant (that is a third party), nor as to whether it is a contract entered into with the defendant in business or unconnected with business. A reference was made to the report of Special Committee, which preceded the Act, 1932 for construing Section 69(2) of the Act 1932, wherein it was observed that a contract by an unregistered firm referred to in Section 69(2) of the Act, 1932 must not only be entered into by the firm with a third party but must also be entered "in the course of business dealings" with the third party. It was thus concluded that when the Legislature uses the words "arising out of a contract" in Section 69(2) of the Act, 1932, it is referring to a contract entered into during a course of business transaction by the plaintiff with the customer/defendant. The idea is to protect those in commerce, who deal with such partnership firm in business. The third parties, who deal with the partners, ought to be able to know the names of the partners of the firm before they deal with them in business. Section 69(2) of the Act, 1932 is not attracted to any and every contact as a source of title to an asset owned by a firm. The Act, 1932, in fact, has not prescribed that the transactions of contracts entered into by a firm with a third party are bad in law, if firm is an unregistered Signature Not Verified Signed By:NIRMLA CS(OS) 2085/2011 Page 5 of 6 TIWARI Signing Date:07.06.2022 17:11:25 firm.
14. This judgement was followed by this court in the decision of the decision of M/s Vesco Product Company vs. Sh. Rajinder Nath Pathak in RSA No. 182/2002 and CM No. 497/2002 decided on 08 th December, 2010, wherein it was observed that the bar to Section 69(2) of the Act, 1932 arises when the contract entered into by the partnership is "in the course of business transaction" by the firm with its customers/defendants. Section 69(2) of the Act, 1932 is not attracted to any and every contract as to the source of title to an asset owned by the firm. The Act, 1932 has not prescribed that the transactions of contracts entered into by a firm with a third party is bad in law, merely because the firm is an unregistered firm.
15. The present suit has been filed by the plaintiff seeking a specific performance of the Agreement to Sell dated 03rd June, 2010 entered into with the defendant in respect of property bearing No. G-32, Residential Scheme, Masjid Moth, New Delhi. There is no averment in the plaint that the suit transaction was entered into by the plaintiff during the course of business transaction. Likewise, the defendant has not taken any such plea in his written statement so much so, that plea of bar of Section 69(2) of the Act, 1932 has also not been pleaded. Whether the bar of Section 69(2) of the Act, 1932 would be attracted is a mixed fact of law, which can be determined only after considering the evidence of both the parties as held by the Madras High Court in N. A. Munavar Hussain Sahib & Ors. (supra) and Jalal Mohammad Ibrahim (supra).
16. In the present case, merely because a suit has been filed by the plaintiff, which is an unregistered firm, for specific performance of an Agreement to Sell dated 03rd June, 2010 ipso facto does not attract the bar of Signature Not Verified Signed By:NIRMLA CS(OS) 2085/2011 Page 6 of 6 TIWARI Signing Date:07.06.2022 17:11:25 Section 69(2) of the Act, 1932 in the light of there being no specific averment made either by the plaintiff or the defendant that this contract was entered into by the parties "during the course of business transaction."
17. The plea of non-maintainability under Section 69(2) of the Act, 1932 as raised by the defendant is, therefore, not tenable at this stage in the absence of requisite pleadings.
18. List before the Joint Registrar for plaintiff‟s evidence on 18th July, 2022.
NEENA BANSAL KRISHNA, J MAY 25, 2022 S.Sharma Signature Not Verified Signed By:NIRMLA CS(OS) 2085/2011 Page 7 of 6 TIWARI Signing Date:07.06.2022 17:11:25