Himachal Pradesh High Court
Satish Sharma vs Hem Chand Sharma & Anr on 29 December, 2015
Author: Rajiv Sharma
Bench: Rajiv Sharma
IN THE HIGH COURT OF HIMACHAL PRADESH, SHIMLA.
RFA No. 10 of 2005
with
.
C.O. No. 124 of 2005.
Reserved on: 22.12.2015.
Decided on: 29.12.2015.
Satish Sharma ......Appellant.
Versus
Hem Chand Sharma & anr. .......Respondents.
of
Coram
The Hon'ble Mr. Justice Rajiv Sharma, Judge.
Whether approved for reporting? Yes.
For the respondents:
rt
For the appellant(s): Mr. Karan Singh Kanwar, Advocate.
Mr. K.D.Sood, Sr. Advocate with Ms. Mahika Verma, Advocate.
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Justice Rajiv Sharma, J.
This regular first appeal is directed against the judgment of the learned Addl. District Judge, (P.O., Fast Track Court), Solan, H.P. dated 3.12.2004 in Civil Suit No. 7 FT/1 of 2004/99.
2. "Key facts" necessary for the adjudication of this regular first appeal are that the appellant-plaintiff (hereinafter referred to as the plaintiff) filed a suit for recovery of Rs. 4,64,875/- against the respondents-defendants (hereinafter referred to as the defendants). According to the averments made in the plaint, defendant No. 1 entered into partnership with the plaintiff for carrying on a business of supplying vehicles on hire basis to N.J.P.C. One Anoop Sharma, son of defendant No. 1, was also joined as a partner.
Partnership in the name and style of M/S Cane Craft Cottage Industries came into existence. The plaintiff and defendant No. 1 had their share of profit and loss to the extent of 40% each and share of Anoop Sharma was 20%. The ::: Downloaded on - 15/04/2017 19:36:57 :::HCHP 2 partnership came into existence on 31.8.1996. For the purpose of supplying the vehicles on hire to N.J.P.C., funds were required to purchase vehicles.
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Negotiations with M/S Anagram Finance Limited Company took place. A sum of Rs. 6,72,500/- was required to be deposited with M/S Anagram Finance Limited Company for getting the vehicles financed. The plaintiff made a total payment of Rs. 2,95,000/- to defendant No. 1 who was entrusted with job of raising finances and to deal with the N.J.P.C. The of payments were acknowledged by defendant No. 1 vide receipt dated 25.9.1996, however, defendant No. 1 failed to contribute his share of the rt marginal money. Another sum of Rs. 65,000/- was required to be deposited with N.J.P.C. as earnest money. Defendant No. 1 failed to deposit earnest money with N.J.P.C. Since the vehicles could not be arranged, the N.J.P.C., terminated the contract vide letter dated 31.1.1997.
2. The suit was contested by defendant No. 1. Preliminary objection was taken that the suit was not maintainable. According to him, the share contributed to the partnership firm could not be claimed by way of suit for recovery. The provisions of Indian Partnership Act, 1932 were to be followed.
He has denied that any earnest money was required to be deposited with N.J.P.C., though it was admitted that the partnership in the name and style of Cane Craft Cottage Industry came into existence. Defendant No. 1 also denied that the plaintiff paid a sum of Rs. 60,000/-, 70,000/-, 1,00,000/-
and Rs. 65,000/- to him. He denied the acknowledgment of receipt.
3. Defendant No. 2 also filed the written statement. She took a specific preliminary objection that the share contributed to partnership firm ::: Downloaded on - 15/04/2017 19:36:57 :::HCHP 3 by one partner could not be claimed by way of suit for recovery. The plaintiff, in any case, if has contributed any amount to the partnership firm, he could .
file suit for rendition of account only.
4. The replication was filed and issues were framed by the learned trial Court on 11.7.2002. The suit was dismissed by the learned trial Court on 3.12.2004. Hence, this regular first appeal.
5. I have heard learned Advocates for the parties and gone through of the judgment and records of the case carefully.
6. The partnership firm came into existence, as per the pleadings of rt the parties, on the basis of letter dated 31.8.1996, issued by the N.J.P.C. The partnership deed is Ext. PW-2/Z-3. It is deemed to have come into force on 2.9.1996. It was not registered.
7. PW-1 Ranjit Singh has produced the record of case registered under Section 420/406 IPC. PW-2 Bisheshwar Sharma has proved receipt dated 25.9.1996. The certified copy of report is Ext. PW-2/Z-4. PW-3 Jaideep Krishan has proved cheque dated 7.6.1996. The photo-copy of the draft which was issued in favour of defendant No. 1 is Ext. PW-3/B. PW-4 Goverdhan Singh has proved Exts. PW-4/A to PW-4/H and Ext. PW-4/J to PW-4/R. PW-5 Madan Lal has proved Ext. PW-5/A. PW-6 D.N.Parihar has proved copy of FDR Ext. PW-6/A to PW-6/C. PW-7 Om Parkash Gandhi was also from PNB. He deposed that DD No. 508256, UCO Bank was presented before the Branch for collection in the account of Hem Chand Sharma. PW-8 Satish Sharma, (wrongly mentioned as PW-9) plaintiff has led his evidence by filing affidavit vide Ext. PW-9/A. In his affidavit, he has specifically stated ::: Downloaded on - 15/04/2017 19:36:57 :::HCHP 4 that the partnership was oral. He has paid a sum of Rs. 2,95,000/- to defendant No. 1. In his cross-examination, he also admitted categorically .
that at the time of drafting of the plaint, he has told his Lawyer that the partnership firm was oral. He has admitted that Ambassador car was supplied to N.J.P.C., though volunteered that it was on rent. The Ambassador car remained with N.J.P.C. for 2-3 months.
8. DW-2 Dharmender Kumar deposed that the partnership firm had of opened its account on 17.11.1995. The cheque-book was also issued.
Defendant No. 1 has led evidence by filing DX-1.
rt It is admitted that the partnership was entered into and the partnership deed was prepared on 2.9.1996. He denied the execution of receipt Ext. PW-2/B. He also denied the receipt of other amounts. The Ambassador car was supplied and the plaintiff has raised claim vide Ext. PW-4/G. The Car was furnished vide Ext.
PW-4/H. In his examination-in-chief, he deposed that he has sought compulsory retirement in the year 1993. He did not know how the receipt was prepared.
9. The plaintiff has duly proved that he has paid Rs. 2,95,000/- to defendant No. 1 vide receipt Ext. PW-2/B. His signatures were sent for comparison and as per the report of the handwriting expert Ext. PW-2/Z-4, the signatures were of defendant No. 1. However, the fact of the matter is that as per the evidence led by the parties, the partnership was oral. It was not registered. The defendants have taken a specific ground that suit in the present form was not maintainable.
::: Downloaded on - 15/04/2017 19:36:57 :::HCHP 510. Section 69(2) of the Indian Partnership Act, 1932, reads as follows:
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"69. Effect of non-registration.-(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 shown in the Register of Firms as partners in the firm."
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11. Thus, in view of the specific bar under sub-section (2) of Section 69 of the Partnership Act, the suit by a non-registered firm could not be filed for the recovery of amount arising on the basis of contract between the rt parties.
12. Mr. Karan Singh Kanwar, Advocate, has vehemently argued that the partnership came into existence but no business was done. However, according to his own statement, Ambassador car remained with N.J.P.C. for 2-3 months. He himself has produced Ext. PW-4/G, whereby he has claimed amount to supply the vehicle to N.J.P.C., to be paid to him.
13. In the case of Popsingh Mahadeo Prasad vrs. Dipchand Ray and another, reported in AIR 1960 Orissa 123, the Division Bench of the Orissa High Court has held that where there is no specific plea under sub-
section (2) of S. 69 taken in the written statement but the necessary facts for the application of that section have been brought to the notice of the Court, it cannot be a party to the perpetration of an illegality. The suit being by an unregistered firm must be held to be barred under sub-section (2) of S. 69. It has been held as follows:
::: Downloaded on - 15/04/2017 19:36:57 :::HCHP 6"7. An identical question came up for decisions before a Division Bench of this Court in the unreported case of the Balasore Textile Distributors Association v. Indian Union, First Appeal No. 20 of 1951: (AIR 1960 Orissa 119). In that case no specific plea under Sub-section (2) of Section .
69of the Indian Partnership Act was taken in the written statement, but there was necessary evidence for the application of that Section to be found on the record. Thus the Division Bench to which I was a party, took the view that when the necessary facts for the application of that Section have been brought to the notice of the Court, it cannot be a party to the perpetration of an illegality.
While arriving at this conclusion, we relied upon a decision of the Judicial Committee in the case of Surajmal v. Triton Insurance Co., AIR of 1925 P. C. 83. The decision in the aforesaid Privy Council case was subsequently followed by the Nagpur High Court in the case of Mohanlal Jagannath v. Kashiram Gokul, AIR 1950 Nag 71. A passage from the judgment of Lindley, LJ. in the case of Soott v. Brown, Doering McNab and Co., (1892) 2 QB 724 (728) is worth quoting :
rt"It matters not whether the defendant has pleaded the illegality or whether he has not. If the evidence adduced by the plaintiff proves the illegality, the Court ought not to assist him."
To the similar effect was a decision by the Calcutta High Court in the case of Gopinath Motilal v. Ram-das, AIR 1936 Cal 133. Mr. Dasgupta, however, contended that that decision of the Division Bench is not a correct decision. I cannot accept this contention. The above decision of a Division Bench of this Court is doubtless binding upon this Bench. Accordingly, there does not appear to be any merit in this contention of Mr. Dasgupta and the suit being by an unregistered firm must be held to be barred under Sub-section (2) of Section 69 of the Indian Partnership Act."
14. The learned Single Judge of the Calcutta High Court in the case of Sunderlal and Sons vrs. Yagendra Nath Singh and another, reported in AIR 1976 Cal. 471, has held that in view of the language of Section 69, a plaint filed by an un-registered firm would not be a plaint at all and all proceedings thereunder will be proceedings without jurisdiction. It has been held as follows:
"4. In this case the decree has been passed. If the decree is a nullity then of course this point can be taken. But the question is whether a decree passed without this point having been taken is nullity or not. In view of ::: Downloaded on - 15/04/2017 19:36:57 :::HCHP 7 the language of the section, in my opinion, a plaint filed by an unregistered firm would not be a plaint at all. If that be so, all proceedings thereunder will be proceedings without jurisdiction. Support for this proposition can be had from the observations of the .
Division Bench of Madras High Court in the case of K.K.A. Ponnuchami Gounder v. Mathnsami Goundar. AIR 1942 Mad 252. Similar view was taken in the case of A. T. Ponnappa Chcttiar v. Podappa Chettiar, AIR 1945 Mad 146, Shriram Sardarmal Didwani v. Gourishankar, , Firm Laduram Sagarrnal v. Jamuna Prosad Chaudhuri, AIR 1939 Pat 239 and Dwijendra Nath Singh v. Govinda Chandra, . This contention, in my opinion, can also be taken at this stage. Reliance in this connection may be placed on the observations of the Judicial Committee in the case of Surajmall Nagoremull v. Triton Insurance Co. Ltd., 52 Ind App 126 -
of (AIR 1925 PC 83) and in the case of Gopinath Motilal v. Ramdas, AIR 1936 Cal 133. In the aforesaid view of the matter I am of the opinion that the firm not being registered the decree was a nullity and as such cannot be executed.
6. rtI am therefore, of the opinion that where execution is in respect of a claim arising out of a suit based on a contract, the prohibition indicated by Section 69 would apply. Furthermore, the fact that in Sub-clause (b) of Sub-section (4) of Section 69 of the Act proceedings in execution or other proceedings incidental to the execution of certain specified suit as indicated in that sub-clause have been excluded and no other proceeding of execution has been excluded, in my opinion, is clearly indicative of the fact that the proceedings in execution which are to enforce rights arising from contracts would be covered by Section 69 of the Indian Partnership Act. In that view of the matter I am unable to accept the contention that execution proceedings are not covered by the prohibition of Section 69 of the Indian Partnership Act. Counsel for the decree-holder contended, further, that prohibition was against the institution of the suit and the prohibition was not against the consideration of the suit by the court. In aid of this submission he relied on the observations of the Patna High Court in the case of Kuldip Thakur v. Sheomangal Prasad Thakur, and also on the Bench decision of the Madras High Court in the case of Jalal Mohammad v. Kakka Mohammad, . In the view I have taken of the nature of prohibition, with great respect, I am unable to accept this conclusion of the aforesaid two decisions. Jurisdiction as observed by Lord Reid in, the case ofAnisminic Ltd. v. Foreign Compensation Commission, (1969) 2 AC 147, at p. 171 of the report is the entitlement of the tribunal to enter upon the inquiry in question. That entitlement in my opinion can only arise from a competent plaint instituted by a plaintiff. If the plaint was incompetent, there was no plaint. There was no suit. Ex facie and without any dispute there was no valid suit. A decree based on such a patent and indisputable error would be an error of jurisdiction and decree passed on such error would be nullity. If, however, the error depends upon adjudication of disputes, either of fact or law different considerations would apply. After all as the Supreme Court has observed that the question whether there was an error within ::: Downloaded on - 15/04/2017 19:36:57 :::HCHP 8 the jurisdiction or an error of jurisdiction depends upon the nature of the error. In view of the express provision and public policy indicated in Section 69 of the Partnership Act in my opinion entertaining a suit in derogation of that mandatory provision would defeat the purpose of the .
statute and such an error would amount to an error of jurisdiction and a decree passed on such an error would be a nullity. In the aforesaid view of the matter, in my opinion, on this ground also this decree cannot be executed. In the premises, this application must fail. However, in view of the thoroughness with which this application was argued I direct that the parties should pay and bear their own costs. Interim order, if any, is vacated. Certified for counsel."
15. Their lordships of the Hon'ble Supreme Court in the case of of Haldiram Bhujiawala and another vrs. Anand Kumar Deepak Kumar and another, reported in (2000) 3 SCC 250, have held while interpreting rt Section 69(2) of the Indian Partnership Act, 1932, that the purpose behind Section 69(2) was to impose a disability on the unregistered firm or its partners to enforce rights arising out of contracts entered into by the plaintiff firm with the third-party defendants in the course of the firm's business transactions. It has been held as follows:
"21. The above Report and provisions of the English Acts, in our view, make it clear that the purpose behind Section 69(2) was to impose a disability on the unregistered firm or its partners to enforce rights arising out of contracts entered into by the plaintiff firm with third party
- defendant in the course of the firm's business transactions.
22. In Raptokas Brett and Co., [1998] 7 SCC 184 it was clarified that the contractual rights which are sought to be enforced by plaintiff firm and which are barred under section 69(2) are "rights arising out of the contract" and that it must be a contract entered into by the firm with the third party defendants. Majmudar, J. stated (at p.191) as follows :
"A mere look at the aforesaid provision shows that the suit filed by an unregistered firm against a third party for enforcement of any right arising from a contract with such a third party would be barred........"::: Downloaded on - 15/04/2017 19:36:57 :::HCHP 9
From the above passage it is firstly clear that contract must be a contract by the plaintiff firm not with anybody else but with the third party defendant.
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23. The further and additional but equally important aspect which has to be made clear is that - the contract by the unregistered firm referred to in section 69(2) must not only be one entered into by the firm with the third party - defendant but must also be one entered into by the plaintiff firm in the course of the business dealing of the plaintiffs firm with such third party- defendant."
16. In the case of The Andhra Pradesh Co-operative Wool of Spinning Mills Limited and another vrs. G. Mahanadi and Company Wool Merchants and others, reported in AIR 2003 A.P. 418, the Division Bench of the Andhra Pradesh High Court has held that the burden to plead rt and prove that the plaintiff is registered firm and therefore, is entitled to maintain suit against the third party, is always on the firm in view of the legislative mandate under Section 69(2) of the Partnership Act.
17. The Division Bench of the Bombay High Court in the case of M/S Balaji Constructions Co., Mumbai and ors. vrs. Mrs. Lira Siraj Shaikh & ors., reported in AIR 2006 Bombay 106, has held that the firm not registered on the date of filing of suit and persons suing as partners now shown in register of firms, suit by such a firm is hit by Section 69(2) of the Partnership Act. It has been held as follows:
"10. Insofar as we are concerned, the Judgment of the Supreme Court in the case of M/S. Shreeram Finance Corporation (supra):
(AIR 1989 SC 1769) holds the field and binds us. In view of the decision in that case, the first Plaintiff-firm being not registered on the date of the filing of the suit, it has to be held and rightly so held by the trial Court that it was liable to be dismissed in view of Section 69(2) of the Indian Partnership Act, 1932."
18. The learned Single Judge of the Calcutta High Court in the case of Sri Velji Narayan Patel vrs. Sri Jayanti Lal Patel, reported in AIR ::: Downloaded on - 15/04/2017 19:36:57 :::HCHP 10 2009 Calcutta 164, has held that registration of firm is pre-requisite for entertainability of suit by Civil Court. The presentation of plaint by partners .
against an unregistered firm cannot be said to be a plaint worth the name. It has been held as follows:
"[9] Sub-section (1) of Section 69 disentitles a partner or a person on behalf of a partner to sue as a partner against the firm of a person allegedly to be a partner unless the firm is registered with the registrar of firms. Sub-section (2) similarly disentitles the firm to institute a suit against a third party unless the firm is of registered. The common feature between Sub-section (1) and Sub-section (2) is that such suit must relate to enforcement of right arising out of a contract of conferred by the Act. If a suit by a partner against a partner or firm does not relate to enforcement of a right arising out of a contract then there is no legal rt prohibition because the spirit of Section 69 either of Sub-section (1) or of Sub-section (2) is that such suit must be related to enforcement of the right arising from a contract. Having gone through the plaint of the suit it clearly appears that the plaintiff instituted the suit as a partner for enforcement of his right arising out of the contract. The entire narrative of the plaint is for declaration that the plaintiff is the owner of 50 per cent of the share of the partnership business and for declaration that he is entitled to enjoy 50 per cent of the said business under the name and style of M/s. Bhagat & Company, for production of books of accounts, statement of accounts, balance-sheet and other documents and for declaration that the defendant is liable to disburse and pay plaintiffs share of profit in the business.
Plaintiff does not sue in his individual capacity. The prayers in the plaint are basically for enforcement of his right as embodied in the partnership deed which was executed by and between the parties on 15th of April, 2000. In such circumstances, the provision of Sub-section (1) of Section 69 appears to have hit the plaint. Order 7, Rule 11(d) contains "where the suit appears from the statement in the plaint to be barred by any law". It is not the case in the plaint that the firm was registered with the Registrar of Firms.
[10] Presentation of the plaint by a partner against an unregistered firm cannot be said to be a plaint worth the name. In the decision in Sunderlal , AIR1976Cal471 (supra) this Court held as follows:
Jurisdiction as observed by Lord Reid in the case of Anisminic Ltd. v. Foreign Compensation Commission, 1969 2 AC 147 of the report is the entitlement of the tribunal to enter upon the inquiry ::: Downloaded on - 15/04/2017 19:36:57 :::HCHP 11 in question. That entitlement in my opinion can only arise from a competent plaint instituted by a plaintiff. If the plaint was incompetent, there was no plaint. There was no suit. Ex facie and without any dispute there was no valid suit. A decree based on .
such a patent and indisputable error would be an error of jurisdiction and decree passed on such error would be nullity. If, however, the error depends upon adjudication of disputes, either of fact or law different considerations would apply. After all as the Supreme Court has observed that the question whether there was an error within the jurisdiction or an error of jurisdiction depends upon the nature of the error. In view of the express provision and public policy indicated in Section 69 of the Partnership Act in my opinion entertaining a suit in derogation of of that mandatory provision would defeat the purpose of the statute and such an error would amount to an error of jurisdiction and a decree passed on such an error would be a nullity. [13] This being the legal position it has to be held that the, suit at the threshold is not maintainable and the provision of Order 7, rt Rule 11(d) of the CPC is applicable."
19. Thus, it can safely be concluded that after the registration of firm, there were business transactions. The learned Addl. District Judge, (P.O., Fast Track Court), Solan, H.P., has rightly come to the conclusion that the suit was not maintainable in view of Section 69(2) of the Indian Partnership Act, 1932.
C.O. No. 124 of 2005.
20. It is duly proved on the basis of record, oral as well as documentary, that the plaintiff has paid sum of Rs. 2,95,000/- to defendant No.1. The findings recorded by the learned Addl. District Judge (FTC), Solan are based on the correct appreciation of evidence adduced by the parties. The suit was within limitation and it was not bad for non-joinder of necessary parties. The plaintiff has duly proved receipt Ext. PW-2/B. The learned Addl.
::: Downloaded on - 15/04/2017 19:36:57 :::HCHP 12District Judge (FTC), Solan, has correctly appreciated the oral as well as documentary evidence available on record.
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21. Accordingly, the appeal as well as the Cross-objections are dismissed.
December 29, 2015, ( Rajiv Sharma ),
(karan) Judge.
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