Allahabad High Court
M/S. Agarwal Stone Mill vs U.P. State Electricity Board And Others on 1 February, 1993
Equivalent citations: AIR1993ALL286, AIR 1993 ALLAHABAD 286, 1993 ALL. L. J. 1145, 1993 (1) ALL CJ 361, 1993 (2) ALL WC 895
ORDER
1. These are two writ petitions one is filed by M/s. Agarwal Stone Mills and the other is filed by M/s. Krishna Kumar Vishambhar. Both these writ petitions contain identical preliminary question for determination as to whether the firm can maintain a writ petition. For the purposes of determination of the limitation controversy, it is not necessary to dilate on the facts of these cases.
2. In both these writ petitions, the petitioners have not disclosed their status as to whether they are corporate or juristic person or having other personality so to entitle them to maintain these writ petitions under Art 226 of the Constitution.
3. Heard learned counsel for the petitioners, Sri Satya Prakash in writ petition Krishna Kumar Vishmbhar v. State of U.P. and others and Sri Wajahat Husain Khan in the writ petition M/s. Agarwal Stone Mills.
4. Learned counsel for the petitioners though fairly stated that the petitioners are the firm but they have failed to disclose as to whether the firms are registered or unregistered.
5. It is a settled position of law that only a natural, person juristic legal or corporate can approach this Court under Art. 226 of the Constitution of India. However learned counsel for the petitioners tried to impress upon the Court that the petitioners are also persons and as such are entitled to maintain the petition in the name of the firm. The submission is sans any substance.
6. The Indian Partnership Act 1932 which essentially is a branch of law of contract whereunder the partnership is defined as a relationship between the persons inter se, who have agreed to share the profits of the business carried on by all or any of them acting for all. The person who have entered into the partnership with one another are called individually as partner and collectively as a firm. In the name under which their business is carried on is called 'the firm name'. The relationship of partnership arises from the contract and not from the status either statutory or otherwise. The contract entered into between the partners, if provided, for determination of their partnership, in that event it is called as partnership at will. The mutual rights and duties of the partners are also settled under the contract and the partners for the purposes of business are agent of the firm. There can be two nature of partnership, one registered and other unregistered. The position may be akin to the friendly socitieties as existed in England. The friendly society may be registered or unregistered. While the permitted purposes of registered friendly society are defined by the statute. There is no legal definition of an unregistered friendly society, so is the position under the Indian Partnership Act 1932. For an unregistered partnership firm no purpose is defined by the statute and there is no legal definition of unregistered partnership firm whereas the purpose of a registered partnership firm is defined by the statute.
7. The firm is not a corporation either sole or aggregate and is not vested by the policy, of law with a capacity of acting in several respects as an individual.
8. In the case of Board of Trustees, Ayurvedic and Unani Tibia College, Delhi v. State of Delhi 1962, (1) Supply SCR 156 : (AIR 1962 SC 458), the Supreme Court had occasion to answer the question whether the Board of Trustees, which was originally registered under the Societies Registration Act, 1860 and a new Board of trustees which was incorporated by an Act of the legislature called the Tibbia College Act, 1952 by which the old Board was dissolved and a new Board constituted were corporations. The Court held that the old Board was not but the hew Board was pesing the question what is a corporation, the Court answered it with the statements contained in Halsbury's Laws of England.
9. In Halsbury's Laws of England, 4th Edition, Volume 9, Paragraph 1201, it is said:--
"A corporation may be defined as a body of persons (in the case of a corporation aggregate) or an office (in the case of a corporation sale) which is recognized by the law as having a personality which is distinct from the separate personalities of the members of the body or the personality of the individual holder for the time being of the office in question."
A corporation aggregate has been defined" in paragraph 120 as, "A corporation of individuals united into one body under a special denomination having perpetual succession under an artificial form, and vested by the policy of the law the capacity of acting in several respects as an individual, particularly of taking and granting property, of contracting obligations and of suing and being sued, of enjoying privileges and immunities in common and of exercising a variety of political rights, more or less extensive, according to the design of its institutition, or the powers conferred upon it, either at the time of its creation or at any subsequent period of its existence."
10. The firm does not satisfy the requirement of a corporation, in the case (supra), the Supreme Court held as:--
"a corporation aggregate has therefore, only one capacity, namely its corporate capacity. A corporation or a non-trading corporation. The usual examples of a trading corporation are (1) charter companies, (2) companies incorporated by special acts of Parliament, (3) companies registered under the Companies Act, etc. Non-trading corporations illustrated by (1) municipal corporations, (2) district boards, (3) benevolent institution (4) universities etc. An essential element in the legal conception of a corporation is that its identity is continuous, that is, that the original member or members and his or their successors are one. In law the individual corporates, or members, of which it is composed are something wholly different from the corporation itself, for a corporation is a legal person just as much as an individual. Thus, it has been held that a name is essential to a corporation that a corporation aggregate can, as a general rule, only act or express its will by deed under its common seal, that at the present day in England a corporation is created by one or other of two methods, namely, by Royal Charter of incorporation from the Crown or by the authority of Parliament that is to say, by or by virtue of statute. There is authority of long standing for saying that the assence of a corporation consists in (1) lawful authority of incorporation, (2) the persons to be incorporated (3) a name by which the persons are incorporated, (4) a place, and (5) words sufficient in law to show incorporation. No particular words are necessary for the creation of a corporation; any expression showing an intention to incorporate will be sufficient."
11. The Court also stated as:--
"The Court then noticed the various provisions of the Societies Registration Act, 1860 which according to them contained no sufficient words to indicate an intention to incorporate but on the contrary contained provisions showing that there was an absence of such intention. Therefore, they observed. "We have, therefore, come to the conclusion that the provisions aforesaid do not establish the main essential characteristic of a corporation aggregate, namely that an intention to incorporate the society."
12. In the controversy as involved in the present writ petitions, it is relevant to extract paragraph 11, from the case of Supreme Court, Deputy Commissioner of Sales Tax (Law) Board of Revenue (Taxes) v. M/s. K. Kalukuty reported in AIR 1985 SC 1143 : (1985 Tax LR 2921), which directly dilate the controversy involved in the present writ petitions. The Supreme Court held that at page 1147 (of AIR):--
"It is permissible to say that a partnership agreement creates and defines the relation of partnership and therefore identifies the firm. If that conclusion be right, it is only a further step to hold that each partnership agreement may constitute a distinct and separate firms. That is not to say that a firm is a corporate entity or enjoys a juristic personality in that sense. The firm name is only a collective name, for the individual partners. But each partnership is a distinct relationship. The partners may be different and yet the nature of the business may be the same, the business may be different and yet the partners may be the same. An agreement between the partners to carry on a business and share its profits may be followed by a separate agreement between the same partners to carry on another business and share the profits therein. The intention may be to constitute two separate partnership and therefore two distinct firms. Or to extend merely a partnership, originally constituted to carry on one business, to the carrying on of another business. It will all depend on the intention of the partners. The intention of the partners will have to be decided with reference to the terms of the agreement and all the surrounding circumstances including evidence as to the interlacing or interlocking of management, finance and other incidents of the respective businesses."
13. In Dulichand Laxminarayan v. Commissioner of Income-tax, Nagpur, AIR 1956 SC 354, the Supreme Court has said that for the purposes of registration under Indian Partnership Act there is no impediment in the way of all the members of ail the constituent firms and the Karta of the Hindu undivided family and the individual entering into an agreement in order to be entitled to the benefit of registration, it will have to be shown that the shares of all individual partners are specified in the deed, and that all the partners have personally signed the application for registration as required by Section 26A of the Act read with Rule 2.
14. In that case, the deed specifies that each of the five constituent parties is entitled to an equal, i.e. 1/5th share but it does not specify the individual shares of each of the partners of each of the three smaller constituent firms. Further all the members of these three firms have not signed the application or registration personally. It is said that each of the three persons who executed the deed for the three smaller firms must be regarded as having the authority of their co-partners in their respective firms to sign the application for registration just as they had their authority to execute the deed itself for them. Even if they had such authority as to which there is no evidence at all on the record, the section and Rule 2 require that each partner (not being minor) must sign personally. That admittedly has not been done, and, therefore, the application was not in proper form.
15. In the case referred to below also the firm was not considered as a person to be represented by individual by any of the partners.
"In re, Jai Dayal Madan Gopal, AIR 1933 All 77 (E) Sulaiman C. J. followed the Calcutta decisions and was not prepared to dissent from the view that the word "person" in Section 239 Indian Contract Act, 1872 should not be interpreted so as to include a firm. The learned Chief Justice, however, expressed the view that it was difficult to say that there was anything in Section 239 itself which made the application to that section of the definition of "person" as given in General Clauses Act in any way repugnant. The learned Chief Justice however, does not a appear to have considered whether there was anything repugnant in the subject of partnership law, as it prevails in this country which operates to exclude the application of that definition to the word "person" occurring in Section 239 of the Indian Contract Act. In our opinion, the word "persons" in Section 4 of Indian Partnership Act, which has replaced Section 239 of the Indian Contract Act, contemplates only natural or artificial, i.e., legal persons and for the reasons stated above, a firm is not a "person" and as such is not entitled to enter into a partnership with another firm or Hindu undivided family or individual."
16. A 'firm' is not a legal entity but is only a collective or compendious name for all the partners. So, if a suit to enforce a right arising from a contract is to be instituted by a firm against a third party, the firm would be the plaintiff. If the suit is to be instituted on behalf of a firm, the partners or partners, who want or want to institute the suit on behalf of the (i.e. for the benefit of) the firm would be the plaintiff. But, in both the cases the suit would in effect be or on behalf of all the partners of the firm.
17. Under Section 2(23) of the Indian Income-tax Act the expression 'firm' 'partner' and 'partnership' arc defined. A close and careful reading of the provision of the Partnership Act indicates that 'Partnership' or 'firm' as such is not a separate independent entity or person in law but is merely an association or combination of persons agreeing to carry on business in partnership with a motive to share the profits and some persons-acting and conducting for and on behalf of the others. It is also well settled that a firm as such is not entitled to enter into a partnership with another firm or individual and it has no legal personality apart from the partners. In other words, a firm under the partnership law, be it English or Indian, is only a collective name for individuals carrying on business in partnership though the mercantile usage recognised the firm as a separate; distinct person. But under the Act, Section 4 charges the total income of the previous year of every person to income-tax at the rate or rates specified in the Finance Act applicable to the assessment year in question. The term 'person' is defined under Section 2(32) of the Act, which includes:--
(i) an individual,
(ii) a Hindu undivided family,
(iii) a company,
(iv) a firm,
(v) an association of persons or a body of individuals, whether incorporated or not,
(vi) a local authority, and
(vii) every artificial juridical person not falling within any of the proceedings sub-clauses.
18. Hence, a firm under the Act is unlike under the Partnership 'Act, a separate and distinct legal entity chargeable to income-tax and therefore, it is a taxable unit. It has a separate personality and existence of its own dehors the partners. As observed by the Supreme Court in Commissioner of Income-tax v. A.W. Filgi & Co. (1953) 24 ITR 405 : (AIR 1953 SC 455) at page 456 (of AIR):
"A firm can be charged as a distinct assessable entity as distinct from its partners Who can also be assessed individually."
19. Section 69 of the Indian Partnership Act which deals with the effect of nonregistration of a firm qua the civil suit is extracted as below:--
"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."
20. Thus a partner cannot maintain the writ petition in firm's name even if the firm is a registered one under Section 59 of the Partnership Act. Even an individual partner is affected personally, but all the affected partners of the firm are supposed to join for maintaining the petition under Art. 226 of the Constitution.
21-22. The following cases may not go unnoticed in the context of the controversy.
In C.I.T. V. R.M. Chidambaram Pillai, (1977) SCC Tax 188: (AIR 1977 SC 489) the view taken was that a firm is not a legal person even though it has some attributes of personality. Partnership is a curtain relation between persons, the product of agreement of share the profits of a business. 'Firm' is a collective noun a compendious expression to designate an entity, not a person.
Likewise, in Munshi Ram v. Municipal Committee (1979) 3 SCC 83 : (AIR 1979 SC 1250), the Court took the view that a firm of the partnership is not a legal entity separate and distinct from partners and is only compendious description of individuals who compose the firm.
23. In view of the above, the petitions as drawn, are incompetent having been filed in the name of firm which is neither natural nor juristic person.
24. Though, the petitions, for the reasons stated heretofore, are held to be incompetent, as they stand, but the interest of justice demands that an opportunity be provided to learned counsel for the petitioners to rectify the defects regarding maintainability in the name of firm. The learned counsel for the petitioners, accordingly, if they choose to do so, may amend their respective petitions, within three days.
25. Order accordingly.