Delhi District Court
Vinayak Plywoods vs Ads And Associates on 23 August, 2023
IN THE COURT OF MS VINEETA GOYAL,
DISTRICT JUDGE (COMMERCIAL-03),
PATIALA HOUSE COURTS, NEW DELHI
CS No. 858 of 2018
CNR No. DLND01-010018-2018
In the matter of:
1. M/s Vinayak Ploywoods,
A Partnership Firm,
2. Sh. Arun Chaturvedi
S/o Sh. N. L. Chaturvedi,
Add: Plot No. 477, Hanuman Mandir Road,
Chirag Delhi, New Delhi-110017
........ Plaintiffs
Versus
1. M/s ADS And Associates
A Proprietorship Firm
Through its owner Sh. Arun K. Das,
203, 2nd Floor, Gyandeep Complex,
Near Canara Bank, Munirka,
New Delhi-110067
2. Sh. Arun K. Das, Proprietor
H-3/41, 2nd Floor, Mahavir Enclave,
Bengali Market, Palam Dabri Road,
New Delhi
3. Sh. Vinod Gupta,
Partner of the plaintiff no. 1.
S/o Late Sh. M. P. Gupta,
70, 3rd Floor, Gali No. 4,
Ravi Nagar, New Delhi-18
...... Defendants
Date of institution of suit : 05.09.2018
Date of Judgment : 23.08.2023
CS No. 858/18 Vinayak Ploywoods & Ors Vs. ADS & Associates & Ors Page 1 of 26
Appearance: Sh. Yogesh Kumar Gupta & Sh. Harpreet
Singh, Ld. Counsels for the plaintiffs.
Sh. Pradeep Sharma, Ld. Counsel for
defendant no. 1 & 2.
JUDGMENT
1. The plaintiff has originally filed the present suit for recovery of Rs. 28,85,233.17 (Rupees Twenty Eight Lacs Eight Five Thousand Two Hundred Thirty Three and Seventeen Paise only) along with interest against the defendant which was subsequent amended and amended plaint was filed.
2. The plaintiff in the amended plaint claimed recovery of Rs. 25,47,998.17 (Rupees Twenty Five Lacs Forty Seven Thousand Nine Hundred Ninety Eight and Seventeen Paise only) along with interest alleging that plaintiff no.1 is the Partnership Firm, represented through its partners Sh. Arun Chaturvedi, plaintiff no. 2 and Sh. Vinod Gupta, defendant no.3. It is averred that the plaintiff no.1 had stopped its working of operations of selling and purchasing of goods and also surrendered its certificate to the registration of VAT on December, 2013 with concerned authorities. The plaintiff no.1 is not in operation.
2.1. It is further averred that plaintiff no.1 was in the business of selling and purchasing of plywoods, timber, laminates and adhesive goods. The defendant no.1 is in the business of selling, designing CS No. 858/18 Vinayak Ploywoods & Ors Vs. ADS & Associates & Ors Page 2 of 26 and decorating and manufacturing of furnitures. The defendant no.1 has VAT /CST /Sales Tax registration numbers at New Delhi and in the State of Uttar Pradesh and Punjab. The defendant no.2 is a sole proprietor of defendant no.1.
2.2. It is averred that defendant no.1 through defendant no.2 approached the plaintiff's office to supply plywoods, timber sawan goods and other goods. The plaintiff no.1 through its partner and defendant no.1 through its proprietor has finalized the rates of goods and also finalized the terms and conditions of payment and delivery of goods. The defendant nos. 1 and 2 had regularly placed various orders to the plaintiff no.1 to supply the goods and through various bills raised upon defendant no.1 and 2, the plaintiff no.1 had been supplying the various goods as per their invoices since December, 2011 till August, 2013 as per the instructions. The goods were duly delivered at their office and other places as per instructions. The defendant no.1 and 2 have confirmed the receipt of goods.
2.3. It is further averred that after the goods duly supplied to the defendant no.1 and 2, they had been regularly paying/making part payments towards the outstanding amount in their continuing account in the books of account of plaintiff no.1. As per books of account, there is an outstanding amount of Rs. 20,73,528.17 inclusive of VAT / CST & local carriage against the defendant nos.1 and 2. It is also averred that defendant nos. 1 and 2 have also CS No. 858/18 Vinayak Ploywoods & Ors Vs. ADS & Associates & Ors Page 3 of 26 issued various C forms and other forms under the VAT and sales tax for the purchase of goods under the said bills and had further availed advantages of same from the concerned authorities.
2.4. It is further averred that various requests and demands were raised by plaintiff no.1 and upon assurance and requests of defendant nos. 1 and 2 that they would clear the outstanding amount shortly, the plaintiffs accepted their request keeping in view that both plaintiffs and defendant no.1 and 2 were in the same business. But the defendant nos. 1 and 2 again and again made excuses to clear the outstanding amount on one pretext or the other. A legal notice dated 04.03.2015 was served upon them. The defendant nos. 1 and 2 have made a part payment of Rs. 2.0 lakhs to the plaintiffs towards outstanding amount of Rs. 20,73,528.17. The GST return of plaintiff no. 1 for a period of 01.07.2013 to 30.09.2013 is already submitted with concerned authority. Thereafter, on various requests and demands of the plaintiffs, the defendant nos. 1 and 2 issued two cheques bearing no. 000301 and 000302 of Rs. 2,50,000/- each, both dated 14.10.2015 and 15.10.2015, drawn on HDFC Bank as part payment of Rs. 5.0 lakh towards the outstanding amount of Rs. 18,73,528.73. Upon presentation, the said cheques got dishonoured and returned back to the plaintiffs with remarks 'insufficient funds' vide cheque return memos dated 15.10.2015 and 16.10.2015. The plaintiff no.1 served a legal notice under Section 138 of Negotiable Instruments Act, 1881 (in short 'N I Act') dated 06.11.2015 to defendant nos. 1 and CS No. 858/18 Vinayak Ploywoods & Ors Vs. ADS & Associates & Ors Page 4 of 26
2. The criminal cases vide CC No. 1683/2015 under Section 138 of NI Act in respect of said cheques has been filed against the defendant nos. 1 and 2 which is pending before the court of Ld. MM, Saket Courts, New Delhi. It is further alleged that the plaintiffs are entitled to recover outstanding amount of Rs. 18,73,528.73 as on 01.07.2015 and also entitled for interest @ 12% per annum till 30.06.2018 amounting to Rs. 6,74,470/- in total, a sum of Rs. 25,47,998.17 from defendants no.1 and 2 along with interest. Hence, this suit for recovery.
3. Pursuant to summons issued, joint written statement was filed by defendant nos. 1 and 2. The defendant no. 3, despite service, neither appeared nor filed written statement.
3.1 The defendant nos. 1 and 2 in their joint written statement inter alia raised various preliminary objections including that the suit is barred by the provisions of Section 69 (2) of the Indian Partnership Act, 1932 (in short 'the Act 1932) and that the suit is barred by limitation as well as bad for non-joinder of necessary parties.
3.2 In para-wise reply, the defendants denied the averments of the plaint and submitted that plaintiff no. 1 is no more existing as one of the partner, who is defendant no. 3 in the present case has deposed as a witness in complaint under Section 138 of N I Act proceedings on oath during cross examination, which took place CS No. 858/18 Vinayak Ploywoods & Ors Vs. ADS & Associates & Ors Page 5 of 26 on 23.05.2018 that "no formal dissolution of Partnership Deed was executed and it was only an oral understanding between me and Sh. Arun Kumar Chaturvedi." The present suit has been filed by the Partnership Firm through erstwhile partner against the defendant no. 3, who is also erstwhile partner of plaintiff no. 1. If at all, assuming that Partnership Firm is not dissolved then the present suit is not maintainable in its present form without seeking an appropriate remedy well available with the plaintiff no. 1 against defendant no. 3. It is further submitted that plaintiff has no locus to file present suit as plaintiffs themselves averred that plaintiff no. 1 is not in operation till December 2013, therefore, the suit of the plaintiff is not maintainable and the same is liable to be rejected.
3.3 It is further submitted that the claim of the plaintiffs is based upon certain bills, which are forged, fabricated and manipulated and have been filed only to create lawful liability against defendant nos. 1 and 2. The plaintiffs have not filed these bills in Criminal Complaint under Section 138 of N I Act and even have not relied upon these bills at pre-summoning stage. The plaintiff no. 2 during the proceedings of 138 N I Act case, moved an application for summoning defendant no. 3 and thereafter, defendant no. 3 appeared and during his cross examination dated 08.03.2018, he deposed that the document Ex. CW3/A (colly) (total 85 pages) were not in existence at the time of filing of complaint i.e. in the year 2015. The said admission clearly shows that the bills filed in CS No. 858/18 Vinayak Ploywoods & Ors Vs. ADS & Associates & Ors Page 6 of 26 the present suit were forged, fabricated and manipulated.
3.4 It is further submitted that as far as the supply of goods are concerned, it was mutually agreed between the parties that as and when goods were supplied, the answering defendant would make the payment, however, the defendant no. 2 on behalf of defendant no. 1 had issued two cheques towards the advance payment with assurance that when the goods will be delivered, the said cheques would be honored. It is the own case of the plaintiffs that they have already initiated proceedings under 138 of N I Act against defendants and during those proceedings, the witnesses of the plaintiffs admittedly stated on oath that the alleged bills filed in the present suit were not in existence, therefore, no question would arose for supply of alleged goods to the defendant nos. 1 & 2. Further, with respect to the statement of account filed by the plaintiffs, it is submitted that this document has no evidentiary as the said document is hand written in the bottom and the half of the contents were of computer generated, which is not admissible in evidence as per law.
3.5 With regard to the two cheques of Rs. 2,50,000/- each, both dated 14.10.2015 & 15.10.2015 respectively drawn on HDFC Bank Limited and part payment of Rs. 5,00,000/- towards the outstanding amount of Rs. 18,73,528.73, it is submitted that plaintiff no. 2 Sh. Arun Kumar Chaturvedi has deposed as CW-1 in proceedings under 138 N I Act, during cross examination on CS No. 858/18 Vinayak Ploywoods & Ors Vs. ADS & Associates & Ors Page 7 of 26 27.06.2017 stating that the cheques in question were given 8 months prior from the date when the cheques were deposited. Even also, during the said cross examination, the plaintiff no. 2 had stated on oath that he does not remember the exact date when the cheques were handed over to plaintiff no. 2. It is stated that both the cheques in question were given by defendant nos. 1 and 2 on the pretext that as and when the goods would be supplied, the same would be encashed. As a matter of fact, the alleged goods were never supplied by the plaintiffs which fact is also admitted during the cross examination of CW-3 namely Sh. Vinod Gupta/defendant no.3 on 08.03.2018. It is submitted that admittedly, it is the own case of the plaintiffs which they have alleged in the present suit as well as in the complaint that defendant no.2 has received the goods. Per contra, it is submitted that it was the own witness of plaintiffs, who had admitted that goods were left by the driver at the site meaning thereby there was no handing over the physical possession of the goods by the driver to any competent or any authorized person on behalf of defendant nos.1 and 2, therefore, no situation would arouse for alleged delivery of goods by the defendant no.1 and 2. It is further submitted that plaintiff no. 2 during cross examination in complaint proceedings has stated on oath that "I do not know why the amount of Rs. 2,00,000/- received from the accused have not been reflected in complaint Vol. My counsel knows about it". It is submitted by the defendant that it is own case of the plaintiff in complaint proceedings that there was an alleged amount of Rs. 20,73,528.17 but in the present suit, the plaintiff CS No. 858/18 Vinayak Ploywoods & Ors Vs. ADS & Associates & Ors Page 8 of 26 alleged to have claimed an amount of Rs. 18,73,528.17 against defendants, which clearly contradicts the alleged facts in the present suit as well as in the complaint under Section 138 of N I Act. It is further submitted that the plaintiffs are not entitled for the recovery of amount as claimed and on these grounds, a prayer was made that the suit of the plaintiffs deserves dismissal.
4. From the pleadings of the parties, following issues were framed by my Ld. Predecessor vide order dated 27.09.2022:-
1. Whether the plaintiff is entitled to recovery, if so, what amount? OPP.
2. Whether the plaintiff is entitled to interest, if so, at what rate and for which period? OPP.
3. Relief.
5. It is relevant to mention here that defendant nos. 1 and 2 moved an application under Order XIV Rule 5 r/w Section 151 of Code of Civil Procedure, 1908 for framing of additional issues. The then Ld. Presiding Officer framed following additional issues on 12.10.2022:-
i) Whether the provisions of Section 69 (3) (a) of the Partnership Act are applicable in the present case when the plaintiff's firm is not dissolved as per law? OPP.
ii) Whether the statutory liability in terms of provisions of Section 30 and 37 of Negotiable Instruments Act is applicable only to the extent of cheque amount in the present suit? OPP.
iii) Whether the suit of plaintiff no.1 (partnership firm) is maintainable being unregistered firm at the time of filing of present case and as such, its right to file the suit is hit by provisions of Section CS No. 858/18 Vinayak Ploywoods & Ors Vs. ADS & Associates & Ors Page 9 of 26 69 (1) and 69 (2) of Partnership Act? OPP.
iv) Whether the suit of the plaintiff is time barred against defendant no.1? OPD-1.
6. In order to establish its case, plaintiffs examined Sh. Arun Chaturvedi as PW-1 and Sh. Prem Singh, Ahlmad in the court of Ms. Abhilasha Singh, Ld. MM-03, South District, Saket, New Delhi as PW-2 and thereafter, closed its evidence. On the other hand, the defendant no.1 and 2 had examined Sh. Sanjay Kumar, Authorized representative/Attorney Holder as DW-1 and thereafter, closed its evidence.
7. I have heard arguments advanced by ld. Counsel for parties and gone through the record. My issue-wise findings are as under:-
Issue no. (i), (ii) and (iii)
8. Before adverting on issue nos. 1 & 2, these additional issues are taken up together being interconnected because the findings on these issues have in fact bearing on the other issues.
9. The plaintiffs to substantiate their case, examined Sh. Arun Chaturvedi, one of the partner of Firm (plaintiff no. 1) as PW1. He tendered his evidence by way of affidavit as PW1/A and deposed that the plaintiff no. 1 is a Partnership Firm and represented through its partner Sh. Arun Chaturvedi himself and Sh. Vinod Gupta, the defendant no. 3 in the instant suit. He deposed that the plaintiff no. 1 had stopped its working of operation of selling and CS No. 858/18 Vinayak Ploywoods & Ors Vs. ADS & Associates & Ors Page 10 of 26 purchasing of goods and also surrendered its certificate and registration of VAT on December 2013 with the concerned authorities. The plaintiff no. 1 is no more in the operation of business. However, the assets and liabilities of the Firm has been distributed between the partners orally and the outstanding of defendant nos. 1 & 2 comes in his favour. He relied upon Partnership Deed Mark PW1/A.
10. Ld. Counsel appearing on behalf of the plaintiffs contended that on the basis of oral arrangement between the partners of the Firm, all receivable / properties from defendant nos. 1 and 2 have come under the umbrella of plaintiff no. 2. Therefore, in accordance with provisions of Section 69 (3) (a) of the Act, 1932, the plaintiff no. 2 being individual, is entitled to recover the same and the suit filed by one of the partners, plaintiff no. 2 of dissolved Firm to recover the same being property of dissolved Firm is maintainable. He further contended that even otherwise, the instant suit is based on legal liability created by virtue of Section 30 & 37 of N I Act on the basis of dishonor of the cheques Ex. PW1/I & Ex. PW1/J. The defendant nos. 1 & 2 after receiving the goods, have made part payments in discharge of their liability through afore- stated cheques, which were got dishonored vide return memo Ex. PW1/K & Ex. PW1/L. In this regard, a complaint case no. 469383/16 is pending in the Court of Ld. MM-02, N I Act, South District, Saket. It is argued that plaintiffs are seeking enforcement of liabilities created under Section 30 & 37 of the N I Act and since CS No. 858/18 Vinayak Ploywoods & Ors Vs. ADS & Associates & Ors Page 11 of 26 the instant suit is not based on any contract between the parties, the bar under Section 69 (2) of the Act, 1932 would not apply. Reliance is placed upon judgments titled as Raptakos Brett & Co Ltd vs. Ganesh Property, 1998 Supp (1) SCR 485, Haldiram Bhujiawala & Anr Vs. Anand Kumar Deepak Kumar & Anr, (2000) 3 SCC 250, Hindustan Infrastructure Construction Corp. Ltd Vs. R. S. Woods Internationa & Ors, CRP No. 19/2018, decided on 13.12.2018 by High Court of Delhi and CRP No. 640/2015 of High Court of Kerala, 1997 (7) SCC 184 & 2000 (3) SCC 250.
11. Countering the above arguments, Ld. Counsel for the defendant nos. 1 & 2 argued that instant suit is hit by provisions of Section 69 (1) & (2) of the Act 1932. The plaintiff no. 1, being unregistered firm cannot file a suit based on alleged transaction / bills Ex. PW1/D (colly), Ex. PW1/E (colly) & Ex. PW1/F (colly) as raised by the plaintiffs against the defendant nos. 1 & 2 because the claim of the plaintiffs is not simply based on dishonored cheques. While not disputing that the plaintiffs have already filed a complaint under Section 138 of N I Act against defendant nos. 1 & 2 herein, which is pending, Ld. Counsel for the defendant nos. 1 & 2 drew attention of the Court to the cross examination of defendant no. 3 conducted in the said proceedings and argued that this witness admitted that no formal dissolution of Partnership Deed was executed and it was oral understanding between him and Sh. Arun Kumar Chaturvedi, plaintiff no. 2 herein. It is further submitted that Ld. Counsel appearing on behalf CS No. 858/18 Vinayak Ploywoods & Ors Vs. ADS & Associates & Ors Page 12 of 26 of plaintiffs on 25.05.2022 made statement & admitted that Partnership Firm had stopped working since December 2013 but it is still in existence. The case under Section 138 N I Act is pending against the defendants. Similarly, on 27.08.2022, the plaintiff no. 2 also made statement before the Court that plaintiff no. 1 is a Partnership Firm of which, he and Vinod Gupta are the partners. The Firm has not been yet dissolved, however, it has been continuing its operations since December 2013.
12. Referring to the above, Ld. Counsel for the defendant nos. 1 & 2 submitted that the plaintiff no. 1 is an unregistered Partnership Firm. Section 69 (3) (a) of the Act, 1932 can be resorted only if the Partnership firm has been dissolved. In the present case, there is nothing on record to show that Partnership Firm is dissolved as per law. Ld. Counsel for the defendant nos. 1 & 2 further urged that PW1 in Para 1 of evidence by way of affidavit Ex. PW1/A has testified that plaintiff no. 1 is no more in operation of business, however, the assets and liabilities of the Firm have been distributed between the parties orally and the outstanding of defendant nos. 1 & 2 came in favour of PW1. However, this witness during cross examination stated that his share with defendant no. 3 was divided as per Partnership Deed. Ld. Counsel submitted that from the averments of the plaint and evidence adduced by the plaintiffs, it is clearly evident that plaintiffs are taking contradictory stands. On one hand, the plaintiffs have taken a stand that plaintiff no. 1 was not dissolved and plaintiff no. 1 is no more in operation of business CS No. 858/18 Vinayak Ploywoods & Ors Vs. ADS & Associates & Ors Page 13 of 26 on the contrary, on the other hand, plaintiff no. 2 has claimed that he has right to recover the amount from defendant nos. 1 & 2 for the reasons that assets and liabilities of plaintiff no. 1 distributed and the outstanding of defendant nos. 1 & 2 came in his favour. It is well settled that unless the Firm is dissolved, during subsistence of Partnership, no partner can deal with any portion of property relating to the Firm nor any partner can assign his interest to any one. It can only be done after the dissolution of firm. Ld. Counsel for the defendant nos. 1 & 2 argued that plaintiff no. 2 has no locus to claim recovery against defendant nos. 1 & 2 without dissolution of the Firm, as per law. There is no NOC of defendant no. 3 on record to show that he had authorized plaintiff no. 2 to sue defendant nos. 1 & 2. It is argued that neither plaintiff no. 1 could have maintained the suit being unregistered Partnership Firm nor could plaintiff no. 2 sue on the ground of assets of the Firm, which included the debts due to defendant nos. 1 & 2. Further, as per Section 69 (2) (a) of the Act, 1932, it is quite evident that this section can be resorted to only if the firm has dissolved taking any other meaning out of the same would render Section 69 (1) & (2) of the Act, 1932 nugatory in as much as if an unregistered, undissolved Partnership Firm is allowed to take recourse to Section 69 (3) (a) of the Act, 1932 then the bar created by Section 69 (1) & (2) of the Act, 1932 would become meaningless. It is contended that by any stretch, the present suit cannot be treated as suit filed under Section 69 (3) (a) of the Act, 1932. Since, admittedly, the plaintiff no. 1 is unregistered Firm, therefore, the bar created by CS No. 858/18 Vinayak Ploywoods & Ors Vs. ADS & Associates & Ors Page 14 of 26 Section 69 (2) of the Act, 1932 comes into operation and the same debars the plaintiffs for filing case against any third party unless plaintiff no. 1 is registered. It is argued that assuming without admitting that the present suit has been filed on the basis of cheuqes issued by defendant nos. 1 & 2, even in that case, since all the partners have not been arrayed as plaintiffs and the suit cannot be decreed as the plaintiffs being non suited. It is argued that the present suit is not maintainable and it is barred for non compliance of provisions of Section 69 (2) of the Act, 1932. During the course of arguments Ld. Counsel for defendants relied upon judgment Tara Chand Vs. Hulkar Mal, AIR 1970 Del 1060 and M/s Sai Nath Enterprises Vs. North Delhi Manciple Corporation & Anr, pronounced on 23.12.2015.
13. On judicial scanning of evidence led by parties, at the out set, it is significant to mention here that the evidence led by the plaintiffs in the form of deposition of PW1 and the stand taken by the plaintiffs during the course of arguments is contrary to the pleadings, which cannot be led or taken, in the considered opinion, the very basis of the suit stands contradicted. Pertinently, it is to be mention here that plaintiffs in the amended plaint have simply averred that the plaintiff no. 1 is a Partnership Firm and represented through its partners Sh. Arun Chaturvedi, plaintiff no. 2 and Sh. Vinod Gupta, defendant no. 3 in the instant suit. The plaintiff no. 1 had stopped its working of operation of selling or purchasing of goods and surrendered its certificate / registration of VAT on CS No. 858/18 Vinayak Ploywoods & Ors Vs. ADS & Associates & Ors Page 15 of 26 December, 2013 with concerned authorities. The plaintiff no. 1 is no more in operation of business. However, a close scrutiny of averments of the plaint as a whole clearly show that the plaintiffs have alleged that they are entitled for recovery of amount of Rs. 18,73,528.17 from defendant nos. 1 & 2. Pertinently, in prayer clause also, plaintiffs have prayed for a decree of recovery of money in favour of the plaintiffs against the defendant nos. 1 & 2. This shows that the plaintiffs in the plaint have never taken this stand that the plaintiff no. 2 is entitled to recover the aforesaid amount including interest from defendant nos. 1 & 2 because the assess and liabilities of the Firm were distributed amongst partners. It is also relevant to note that the PW1 in its affidavits of evidence Ex. PW1/A had first time averred that assets and liabilities of the firm had been distributed between the partners orally and the outstanding of defendant nos. 1 & 2 came in his favour. At this juncture, it is also relevant to refer the cross-examination of defendant no. 3 dated 28.03.2018 in CC No. 469383/16 Ex. DW1/G, the relevant part is reproduced as under:
"It is correct that the complainant firm namely Vinayak Plywood stopped its working from December 2013. It is also correct that the status of Vinayak Plywoods was over after Dec 2013. Vol The sale and purchase of the said firm stopped.
Q. Whether the partnership firm namely Vinayak Plywoods got dissolved?
A. After Dec 2013, sale and purchases through Vinayak Playwoods got stopped. However, the transactions with regard to giving and taking money are still under operation.
Q. Is there any written contract between Sh. Arun Chaturvedi and you with regard to the fact stated above?CS No. 858/18 Vinayak Ploywoods & Ors Vs. ADS & Associates & Ors Page 16 of 26
A. There was no written agreement or contract entered between Sh. Arun Chaturvdi and me with regard to the fact stated above.
At this stage, witness is shown the document Ex. CW1/B. Q. In Para 1 of your affidavit Ex. CW1/B, you have stated that you are the partner of the firm namely M/s Vinayak Plywoods but as above, you stated that the firm has stopped its working since Dec 13. What have you to say? A. The firm is still in existence, therefore, my both statements are correct though the firm had stopped working since Dec 13.
XXX No Formal dissolution of partnership deed was executed and it was only an oral understanding between me and Mr. Arun Chaturvedi.
14. It transpires from the above that no formal dissolution of Partnership Deed was executed in accordance with law. Moreover, no date, month & year has been stated as to when the assets and liabilities had been distributed amongst partners. It is relevant to note that this fact got strengthened from the cross examination of PW1 because this witness upon questioning that can you explain what are your assets & liabilities, which were divided between you and Mr. Vinod, the witness responded I cannot tell verbally. The same has been done mutually. I do not remember the exact date & year. No written argument was executed between us. It is borne out from record that plaintiff on. 2 has not placed on record any NOC granted in its favour for recovery of any outstanding dues from defendant nos. 1 & 2 as claimed. Thus, in the absence of any cogent and convincing evidence led by the plaintiffs, it can be concluded that the plaintiffs have failed to establish on record that the plaintiff no. 1 (Partner Firm) is dissolved as per law. In these CS No. 858/18 Vinayak Ploywoods & Ors Vs. ADS & Associates & Ors Page 17 of 26 premises, the provisions of Section 69 (3) (a) of the Act, 1932 are not applicable in the present case. accordingly, issue no. 1 is decided in favour of plaintiffs.
15. Adverting to issue nos. ii & iii, in simple words, the nature of suit filed and the reliefs as claimed would decide as to whether or not bar under Section 69 (2) of the Act, 1932 would operate or not. If the relief claimed arises out of a contract entered into by the plaintiff no. 1 in the course of its business with defendant nos. 1 & 2, it would be barred but if the suit is for enforcement of statutory right or common law right, then the bar would not operate.
16. The instant suit for recovery of the amount, which has allegedly claimed by the plaintiffs remained unpaid by the defendant nos. 1 & 2, is based on invoices pertaining to the sales of goods. It is the case of the plaintiffs that the defendant nos. 1 & 2 had regularly placed various orders upon the plaintiff no. 1 for supply of goods and the plaintiff no. 1 supplied goods as per instruction of the defendants from December 2011 till August 2013. In support thereof, the plaintiffs have relied upon Statement of Accounts and copies of bills for supply of goods at the office of defendant nos. 1 & 2 situated at Noida Ex. PW1/D (colly), New Delhi Ex. PW1/E (colly) and Punjab Ex. PW1/F (colly). The plaintiffs have claimed that out of the original amount was Rs. 20,73,528.17, a sum of Rs. 2.0 lacs were paid by the defendant nos. 1 & 2, when legal notice was issued on 04.03.2015 and thereafter CS No. 858/18 Vinayak Ploywoods & Ors Vs. ADS & Associates & Ors Page 18 of 26 for the balance amount of Rs. 18,73,528.17, the defendant nos. 1 & 2 issued two cheques dated 14.10.2015 and 15.10.2015 of Rs. 2,50,000/- each Ex. PW1/I & Ex. PW1/J from HDFC Bank. These cheques when presented got dishonored for which relevant proceedings under Section 138 of N I Act was mounted in the Court of Ld. MM-02, South District, Saket being CC No. 163/2015 (New CC No. 469383/16). Based on these, proceedings under N I Act for amount of Rs. 5.0 lacs, the plaintiffs claimed that this claim of the plaintiff was statutory right and thus, bar under Section 69 (2) of the Act, 1932 would not operate. It can be culled out from the record that plaintiffs' claim is hinging upon various invoices issued by plaintiff no. 1 upon the defendant nos. 1 & 2. It is no more res integra that each sale invoice is a separate contract, which is independently enforceable. These sale invoices (contracts) issued by the plaintiff no. 1 to the defendant nos. 1 & 2 during its business dealing would show that condition as laid down in Section 69 (2) of the Act, 1932 are not fulfilled, which provides that no suit to enforce the right arising from a contract shall be instituted in any Court by or on behalf of a firm against third party unless the firm is registered and the persons suing are have been shown in the Register of Firms as partners in the firm.
17. The next question now arises as to whether the dishonor of cheques of Rs. 2.5 lacs each as stated above had created any statutory right and secondly, whether it would entitle the plaintiffs to claim the entire amount of Rs. 18,73,528.17 as statutory right. It CS No. 858/18 Vinayak Ploywoods & Ors Vs. ADS & Associates & Ors Page 19 of 26 has been argued by the plaintiffs that action under N I Act has created statutory right based on decisions of Hon'ble High Court of Delhi in Hindustan Infrastructure Construction Corporation Ltd Vs. R. S. Woods International, 2018 SCC OnLine Del 12960, which is based on Hon'ble Kerala High Court decision in Afsal Baker Vs. Maya Filters, 2016 SCC OnLine Ker 29914.
18. For dealing with the questions raised in this matter as additional issues, the relevant provisions contained in Section 69 of the Act, 1932 are extracted as follows:-
"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 suits 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 any the persons 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 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 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 CS No. 858/18 Vinayak Ploywoods & Ors Vs. ADS & Associates & Ors Page 20 of 26
(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, to outside the Presidency-towns, is not of a kind specified in the Second Schedule to the Provincial Small 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."
19. Hon'ble Supreme Court in the case of Raptakos Brett & Co. Ltd Vs. Ganesh Property: (1998) 7 SCC 184 laid down the fundamentals, which have further been explained and applied by Hon'ble Court in the cases of Halidram Bhujiawala & Anr vs. Anand Kumar Deepak Kumar And Anr (2000) 3 SCC 250 and Purshottam & Anr vs. Shivraj Fine Art Litho Works & Ors (2007) 15 SCC 58. The principles vividly exposited in the case of Haldiram Bhujiawala (supra) that to attract the bar of Section 69 (2) of the Act of 1932, the contract in question must be the one entered into by the firm with the third party defendant and must also be the one entered into by the plaintiff firm in the course of its business dealings; and that Section 69 (2) of the Act of 1932 is not a bar to a suit filed by an unregistered firm, if the same is for enforcement of a statutory right or a common law right.
20. However, the following paragraph appearing Hindustan Infrastructure Construction Corporation Limited (supra) which is extraction of Afsal Baker case (supra) is relevant.
21. The Hon'ble Kerala High Court in Afsal Baker (supra) CS No. 858/18 Vinayak Ploywoods & Ors Vs. ADS & Associates & Ors Page 21 of 26 observed as under: -
10. In the instant case, as noticed above, by virtue of Sections 30 and 37 of the Negotiable Instruments Act, on the dishonour of a cheque, the statute creates a liability on the drawer, apart from the general law of contracts. The right to sue on the contract is available and open to the party. However, apart from that, the statute creates a liability as against the drawer of the instrument. If the suit is on the original cause of action based on the original contract between the parties, there is no doubt, the suit would be hit by Section 69(2) of the Indian Partnership Act. But, in the instant case, what is sought to be enforced is the liability created under the Negotiable Instruments Act. It is not a case where suit is filed on the original cause of action by producing the cheques as a piece of evidence to prove the liability under the original contract.
Here, the suit itself is laid on the instrument. A reading of the plaint leaves no room for doubt regarding that. The bar under Section 69(2) of the Indian Partnership Act would apply only where the suit is sought to be laid on a contract and not in a case where statutory right/liability is sought to be enforced. In the instant case, the suit being purely based on the liability under Section 30 and 37 of the Negotiable Instruments Act, it is a suit based on statutory liability dehors the contract between the parties. The suit cannot be held to be barred under Section 69(2) of the Indian Partnership Act.
11. In the circumstances, I find no reason to differ from the conclusion arrived at by the court below to the effect that the suit is not barred under Section 69 (2) of the Act, 1932 and that it is maintainable."
22. The reading above makes it amply clear that when a suit is entirely based on dishonoured cheque and nothing else (original contract) in that event the bar of section 69 (2) of the Act, 1932 would not apply as what is being enforced is a statutory right and not a right emerging from contract. However, if the basis of the proceedings is original contract entered in the course of business the protection would not be available.
CS No. 858/18 Vinayak Ploywoods & Ors Vs. ADS & Associates & Ors Page 22 of 2623. In the present case, the entire case of recovery suit is based on invoices (contract) out of which only a part of Rs. Five Lacs (Rs. 2.5 lacs two times) can at best be based on the dishonoured cheques. Even for this to become the statutory right, the plaintiffs should have sued the defendant nos. 1 & 2 just based on the dishonoured cheques and nothing else only then the statutory right based on N I Act would have emerged. A plain reading of the present suit would show that it is a suit for recovery based on the invoices and not on cheques in question. The relevant paragraph nos. 14, 15 & 16 of the plaint are reproduced as under:
"14. That in any case, the plaintiffs are entitled to legally recoverable amount of Rs. 18,73,528.17 from the defendant nos. 1 & 2. As the said amount has been illegally retained by the defendant nos. 1 & 2. The defendant nos. 1 & 2 are also liable to pay interest to the plaintiffs. The defendant nos. 1 & 2 are intentionally and deliberately withholding the legal amounts of the plaintiff no. 1 and thus make them liable to pay interest @ 18% p.a. at the current prevailing rate. The defendant nos. 1 & 2 are liable to pay following amounts to the plaintiffs as under:-
Particulars Amounts (Rs.)
a) Outstanding of amounts
as on 01.07.2015 Rs. 18,73,528.17
b) Legally Recoverable Interest
@ 18% p. a. till 30.06.2018 Rs. 10,11,705.00
---------------------
Rs. 28,85,233.17
---------------------
15.That the goods were supplied to the defendant nos. 1 & 2 till August, 2013. The plaintiffs are also entitled to pen de lite and future interest at the rate of 18% per annum from the date of the filing of the present suit to the realisation of the said amount. The defendant no. 3 is the partner of the plaintiff no. 1 and the present suit is being filed against him as both the defendants are in collusion with each other.CS No. 858/18 Vinayak Ploywoods & Ors Vs. ADS & Associates & Ors Page 23 of 26
16. That the cause of action to file the present suit when the goods have been supplied to the defendant nos. 1 & 2. It arose again when the defendant nos. 1 & 2 had been making regular payments towards the outstanding. It arose again when the defendant nos. 1 & 2 had made a part payment of Rs. 2,00,000/- the total outstanding. It arose again when the defendant nos. 1 & 2 had issued two cheques bearing nos. 000301 and 000302 of Rs. 2,50,000/- each both dated 14.10.2015 and 15.10.2015 drawn on HDFC Bank Ltd. as part payments towards the total outstanding. It arose again when the said two cheques were got dishonoured and returned back to the plaintiffs with the remarks "INSUFFICIENT FUNDS" vide cheques return memos dated 15.10.2015 and 16.10.2015. The cause of action also arose on various dates whenever the amount was demanded by the plaintiffs but the defendant nos. 1 & 2 failed to pay the same."
24. As discussed above, in the present suit, the plaintiff no. 1 is an unregistered partnership firm and the relief sought by the plaintiffs is not based on the statutory liability of the defendants created under Section 30 and 37 of the NI Act, 1881, rather on the contractual liability of the defendant nos. 1 & 2 towards the plaintiffs. The protection based on Hindustan Infrastructure Construction Corpn. Ltd. v. R.S. Woods International Ltd. (supra), which is extraction of Afsal Baker case (supra) is that a suit purely based on the liability under Section 30 and 37 of the N I Act cannot be held to be barred under Section 69(2) of the Act, 1932. In the present case however, the cause of action of the plaintiffs, as discussed in preceding paragraphs, is not entirely based the dishonour of the said cheques, rather on the original contract between the parties. Ergo, the present suit becomes distinguishable from the above mentioned landmark cases.
CS No. 858/18 Vinayak Ploywoods & Ors Vs. ADS & Associates & Ors Page 24 of 2625. Considering the position of law outlined in the abovesaid decision, it is evident that plaintiff's suit is hit by Section 69 (2) of the Act, 1932. Non registration of plaintiff no. 1 is an illegality going to the root of the suit and thereby the plaint itself is non-est in law. In case of Delhi Development Authority Vs. Kochar Construction Works & Anr, (1998) 8 SCC 559, wherein, their Lordships were pleased to hold that if partnership firm is not registered as required under Section 69 (2) of the Act, 1932, the suit instituted by unregistered firm is void ab initio, it means that unregistered firm cannot legally enforce the right accrued to them during the process of law.
26. In view of the above discussion, it cannot be said that the plaintiff by way of present suit is seeking enforcement of the liability of the petitioners created under Section 30 and 37 of the Negotiable Instruments Act, 1881. Consequently, the bar of S. 69(2) of the Act, 1932 stands revived and the present suit becomes a nullity. Accordingly, issue nos. ii & iii are decided against the plaintiffs.
Additional issue no. iv:
27. As observed in deciding additional issue no. iii, the suit of the plaintiffs is barred for non compliance of the provisions of Section 69 (2) of the Act, 1932, once, the suit is barred, this issue is also decided against the plaintiffs.
CS No. 858/18 Vinayak Ploywoods & Ors Vs. ADS & Associates & Ors Page 25 of 26Issue nos. 1 & 2:
28. The onus to prove these issues were on the plaintiffs. Since, it is observed that suit is barred for non compliance of provisions of Section 69 (2) of the Act, 1932, which provides that no suit to enforce the right arising from a contract shall be instituted by or any on behalf of firm against any third party unless the firm is registered and the person showing are or have been shown in the Register of the Firm as Partners in the Firm, hence, these issues are also decided against the plaintiffs.
Relief:
29. In view of above findings, the present suit is hit by Section 69 (2) of the Indian Partnership Act, 1932, the present suit is accordingly dismissed with no orders as to costs. Decree sheet be prepared accordingly.
30. File be consigned to Record Room.
Pronounced in the open (VINEETA GOYAL)
Court on 23rd August 2023 District Judge (Commercial)-03
Patiala House Courts / New Delhi
CS No. 858/18 Vinayak Ploywoods & Ors Vs. ADS & Associates & Ors Page 26 of 26