Madras High Court
M.A.Arivazhagan vs Ark Finance on 23 February, 2021
Author: T.Ravindran
Bench: T.Ravindran
S.A.No.1433 of 2008
IN THE HIGH COURT OF JUDICATURE AT MADRAS
RESERVED ON : 12.02.2021
PRONOUNCED ON : 23.02.2021
CORAM
THE HONOURABLE MR.JUSTICE T.RAVINDRAN
S.A.No.1433 of 2008
& M.P.No.1 of 2008
M.A.Arivazhagan ... Appellant
Vs.
ARK Finance,Partnership firm,
Rep.by its partner S.Paulraj,
No.9-A, G.S.T. Road,
Chengalpattu. ... Respondent
Prayer :- Second Appeal has been filed under Section 100 of CPC against the
Judgement and Decree dated 29.02.2008 passed in A.S.No.72 of 2006 on the
file of the Principal District Court, Kancheepuram, confirming the Judgment
and Decree dated 07.02.2006 passed in O.S.No.73 of 2000 on the file of the
Principal Subordinate Court, Chengalpattu.
For Appellant : Mr.S.Chandrabose
For Respondent : Mr.K.Hariharan
https://www.mhc.tn.gov.in/judis/
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S.A.No.1433 of 2008
JUDGMENT
Challenge in this second appeal is made to the Judgement and Decree dated 29.02.2008 passed in A.S.No.72 of 2006 on the file of the Principal District Court, Kancheepuram, confirming the Judgment and Decree dated 07.02.2006 passed in O.S.No.73 of 2000 on the file of the Principal Subordinate Court, Chengalpattu.
2.For the sake of convenience, the parties are referred to as per their rankings in the trial Court.
3.The defendant in O.S.No.73 of 2000 is the appellant in the second appeal.
4.Suit for recovery of money.
5.Briefly stated, the case of the plaintiff is that the plaintiff is a Partnership Firm consisting of partners viz., S.Paulraj and M.A.Arivazhaghan (defendant) and carrying on business in financing on interest, hire purchase, leasing, investments, acceptance of deposits and such other business, the https://www.mhc.tn.gov.in/judis/ 2/33 S.A.No.1433 of 2008 partners may agree and the abovesaid partnership, among the two partners was entered into on 23.12.1998. Earlier, the first partner's wife Dhanalakshmi ammal was a partner along with the second partner M.A.Arivazhaghan and the said partnership was entered into among them on 01.07.1994 and the same was registered. After the death of Dhanalakshmi ammal, the first partner viz., S.Paulraj was admitted into the Partnership Firm on 23.12.1998. The defendant borrowed a sum of Rs.2,00,000/- from the Partnership Firm on 22.05.1997 and a cheque was issued to the defendant by Dhanalakshmi ammal evidencing the transaction and the defendant received the cheque and secured the amount for the purpose of purchasing and reconstruction of the house property bearing D.No.75, Rajaji Street, Chengalpattu. Excepting the payment made by the defendant towards the loan borrowed by him as detailed in the memo of valuation, no other amount has been paid by the defendant and hence, a notice was sent to him on 14.08.1999 calling upon him to return the amount borrowed by him with interest from the plaintiff's Firm. Despite the receipt of the notice, the defendant neither responded to the same nor complied with the demand made by the plaintiff's Firm. As per the ledger maintained by the plaintiff, the defendant is liable to pay a sum of Rs.3,71,628/-. The defendant, after the purchase and reconstruction of the property as above stated with the aid of the https://www.mhc.tn.gov.in/judis/ 3/33 S.A.No.1433 of 2008 loan secured from the plaintiff, had transferred the property in the name of his daughter with a view to defeat the claim of the plaintiff. Hence, according to the plaintiff, it has been necessitated to institute the suit against the defendant for recovery of money due to it.
6.The defendant resisted the plaintiff's suit contending that the plaintiff's suit is not maintainable either in law or on facts and according to the defendant, he did not borrow any amount from the plaintiff and his father Arunagiri's money amounting to Rs.2,00,000/- was brought into the partnership accounts at the plaintiff's suggestion and fictitious deposits were created by the plaintiff, as if the third parties had deposited the money with the Partnership Firm and there was no borrowing by the defendant from the plaintiff and the allegation that the defendant borrowed a sum of Rs.2,00,000/- from the plaintiff and a cheque was issued to the defendant by the plaintiff towards the loan and the defendant, out of the loan received, purchased and reconstructed the property as detailed in the plaint are all false. The plaintiff has not been managing the partnership properly and not accounted for the income and expenditure. The defendant sent a suitable reply dated 14.10.2000 to the notice issued by the plaintiff setting forth the true facts. It is false to https://www.mhc.tn.gov.in/judis/ 4/33 S.A.No.1433 of 2008 state that the defendant settled the property in favour of his daughter with a view to defraud. plaintiff's claim. The plaintiff is not entitled to claim interest as prayed for and there is no cause of action for the suit and the suit is barred by limitation and the interest claimed is usurious and the suit is liable to be dismissed.
7.In support of the plaintiff's case, PWs1 & 2 were examined and Exs.A1 to A20 were marked. On the side of the defendant, DW1 was examined and no document has been marked. Exs.X1 to X5 were also marked.
8.On a consideration of the oral and documentary evidence and the submissions put forth by the respective parties, the trial Court was pleased to decree the suit for a sum of Rs.2,29,296/- with further interest on Rs.1,89,501/- at 18% per annum from 01.06.2000 till payment and accordingly, disposed of the suit. The first appeal preferred by the defendant was dismissed by the first appellate Court on an appreciation of the materials available on record and the submissions put forth by the respective parties and resultantly, confirmed the judgment and decree of the trial Court. Impugning the same, the present second appeal has been preferred by the defendant.
https://www.mhc.tn.gov.in/judis/ 5/33 S.A.No.1433 of 2008
9.At the time of admission of the second appeal, the following substantial questions of law were formulated for consideration:
" a.Whether the Courts below are justified in entertaining the suit filed by one Paulraj representing the 'ARK Finance' when he is not a registered partner as required u/s 69 of the Indian Partnership Act, 1932?
b.Whether the Courts below are correct in granting the decree in favour of a person who is not entitled to maintain the suit representing the firm as his name did not find place in the register of the District Registrar of firms in accordance with the Indian Partnership Act, 1932?"10.M.P.No.1 of 2008
Petition filed under Order 41 Rule 27 C.P.C. According to the petitioner/appellant, after the demise of Dhanalakshmi ammal, her husband viz., S.Paulraj was inducted as a partner and a fresh deed of partnership was entered on 23.12.1998 and the petitioner is the other partner, owing to misunderstanding in carrying out the business, hence, the false suit has been https://www.mhc.tn.gov.in/judis/ 6/33 S.A.No.1433 of 2008 laid by the plaintiff against the petitioner and after the induction of S.Paulraj as the partner of the Firm, the changes in the composition of the Firm were not intimated to the District Registrar of Firms and there was no renewal of the Firm's activities after 1996-1997 and the Form -A issued by the Registrar of Firms had been already handed over to his counsel, however, the same could not be filed before the Courts below as the same got misplaced and only after the dismissal of the first appeal, the same was traced and therefore, according to him, the certified copy of Form 'A' relating to the plaintiff's Firm is required to be marked as additional document and hence, the petition.
11.The respondent /plaintiff resisted the petition contending that the petition is not maintainable either in law or on facts and none of the provisions of Order 41 Rule 27 are satisfied by the petitioner/appellant for entertaining the additional evidence projected by him. The petitioner/appellant has also not taken any specific plea in the written statement that the suit is not maintainable on account of the non registration of the Firm as contemplated under Section 69 of the Indian Partnership Act, 1932 and therefore, the certified copy of Form 'A' put forth by the petitioner as additional evidence cannot be received at the second appeal stage and the document sought to be projected by the https://www.mhc.tn.gov.in/judis/ 7/33 S.A.No.1433 of 2008 petitioner/appellant by way of the additional evidence is only based on question of facts and by way of introducing the additional evidence, the petitioner/appellant is only endeavouring to project certain factual aspects without raising any point of law here or before the Courts below and as the suit has been laid by the plaintiff as the creditor against the defendant the debtor, hence, the partnership firm is not required to be registered and therefore, prayed that the petition for the reception of additional evidence is misconceived and liable to be dismissed.
12.The point that arises for consideration in the petition is, whether the same is entitled for acceptance.
13.Point in M.P.No.1 of 2008: Even as per the petitioner/appellant, the Form 'A' certificate projected by him by way of additional evidence was available during the course of trial. Despite the abovesaid position, the defendant had not endeavoured to marke the same before the Courts below. The contention of the defendant is that the same could not be produced before the Courts below as the said document had been lost. However, when pointing to the abovesaid contention, the defendant has not put forth the necessary pleas https://www.mhc.tn.gov.in/judis/ 8/33 S.A.No.1433 of 2008 as to when the said document had been lost, when it was retrieved and what circumstances, it was retrieved and from whom and by whom it was retrieved and therefore, when the abovesaid document is within the knowledge of the defendant, even during the course of trial, the abovesaid version of the defendant for not projecting the document before the Courts below is legally untenable and not established in such view of the matter, in my considered opinion, the reception of the abovesaid document as additional evidence in the second appeal stage cannot be countenanced. Further, for the disposal of the second appeal, in my considered opinion, the abovesaid document is not required, as such, as it is not the case of the plaintiff that the reconstituted partnership Firm based on Ex.A1 deed with the new members had been registered before the District Registrar of Firms in accordance with the Indian Partnership Act, 1932 and accordingly, the document sought to be projected by the petitioner/appellant as additional evidence in the second appeal stage cannot be permitted and resultantly, the petition is dismissed.
14.S.A.No.1433 of 2008: The plaintiff is ARK Finance, Partnership Firm represented by S.Paulraj, partner. Thus, it is noted that the plaintiff is a partnership Firm. From the pleas put forth in the plaint, it is seen that ARK https://www.mhc.tn.gov.in/judis/ 9/33 S.A.No.1433 of 2008 Finance, Partnership Firm was originally constituted by way of deed of partnership dated 01.07.1994 between P.Dhanalakshmi ammal and M.A.Arivazhaghan (the defendant) and the abovesaid partnership deed has been marked as Ex.A2. It is further seen that the abovesaid Firm had been registered and the Firm Registration Certificate No.27/94 has been marked as Ex.A3. On the demise of Dhanalakshmi ammal, it is found that as put forth in the plaint, her husband S.Paulraj was inducted into the abovesaid partnership Firm on 23.12.1998 and the deed of partnership entered into between S.Paulraj and M.A.Arivazhaghan dated 23.12.1998 has been marked as Ex.A1. Therefore, it is found that on the induction of S.Paulraj into the Firm, a fresh deed of partnership had been entered into on 23.12.1998 between S.Paulraj and M.A.Arivazhaghan, however, it is not the case of the plaintiff that the abovesaid reconstituted partnership Firm based on Ex.A1 deed had been duly registered before the appropriate authority. If it had been registered before the appropriate authority in the manner known to law, the plaintiff would have produced the reconstituted firm registration certificate based on the deed of partnership dated 23.12.1998. It is thus noted that the reconstituted plaintiff's Firm consisting of the partners S.Paulraj and M.A.Arivazhaghan had not been registered. Only the earlier partnership firm consisting of the partners https://www.mhc.tn.gov.in/judis/ 10/33 S.A.No.1433 of 2008 P.Dhanalakshmi Ammal and M.A.Arivazhaghan had been registered vide Ex.A3 registration certificate. Though it is noted that the plaintiff S.Paulraj had been inducted into the plaintiff's Firm prior to the institution of the suit, inasmuch as the reconstituted partnership Firm had not been registered, it is evident that the name of S.Paulraj does not find a place in the Register of the District Registrar of Firms in accordance with the Indian Partnership Act, 1932.
15.It is not in dispute that the plaintiff's Firm is carrying on business in financing on interest, hire purchase, leasing, investments, acceptance of deposits and such other business, the partners may agree. Thus, the main nature of the plaintiff's Firm is lending money on interest.
16.Briefly stated, the plaintiff has laid the suit against the defendant for recovery of money on the footing that a sum of Rs.2,00,000/- had been received by the defendant from the plaintiff's Firm on 22.05.1997 and the amount had been paid to the defendant by way of cheque bearing No.596479 and the defendant had failed to repay the amount borrowed from the plaintiff's Firm other than making certain payments and hence, according to the plaintiff, https://www.mhc.tn.gov.in/judis/ 11/33 S.A.No.1433 of 2008 as the defendant failed to pay the amount despite the issuance of the legal notice, it has been necessitated to levy the suit against the defendant for the recovery of money with interest.
17.Shorn of unnecessary details, the defence version is that the amount actually given to the defendant belonged to his father, which had been deposited by his father in the partnership Firm and the same had been received in the fictitious names of several persons and according to the defendant, he had not borrowed any money much less the sum of Rs.2,00,000/- from the plaintiff's Firm on 22.05.1997 as put forth by the plaintiff and therefore, not liable to pay the amount sought for by the plaintiff in the plaint and no creditor-debtor relationship exists between the plaintiff's firm and the defendant and therefore, sought for the dismissal of the plaintiff's suit.
18.On an appreciation of the materials available on record and the submissions put forth by the respective parties, it is found that the Courts below had granted the decree in favour of the plaintiff though not for the entire amount, but for the amount as determined by the Courts below with interest. Aggrieved over the same, the present second appeal has been laid. https://www.mhc.tn.gov.in/judis/ 12/33 S.A.No.1433 of 2008
19.In the second appeal, the defendant has taken two questions of law for dismissing the plaintiff's suit. According to the defendant, when S.Paulraj, who had been inducted into the partnership firm on 23.12.1998 by way of a deed of partnership dated 23.12.1998 and the reconstituted partnership firm has not been registered as required under Section 69 of the Indian Partnership Act, 1932, according to him, the suit laid by the plaintiff is not legally maintainable. Further, it is also put forth the case that as the name of S.Paulraj, who had been inducted as the partner of the plaintiff's firm on 23.12.1998, had not been disclosed in the Register maintained with the District Registrar of Firms in accordance with the provisions of the Indian Partnership Act, 1932, hence, the plaintiff's suit is not legally sustainable. Thus, according to the defendant, the plaintiff's suit is barred under Section 69 of the Indian Partnership Act, 1932.
20.No doubt, the abovesaid pleas put forth by the defendant in the second appeal had not been raised by him in the written statement. All that the defendant would put forth is that he had not borrowed any amount from the plaintiff's firm and therefore, not liable to pay the suit amount as claimed by the plaintiff. Now the question that has been projected in the second appeal is https://www.mhc.tn.gov.in/judis/ 13/33 S.A.No.1433 of 2008 maintainability of the plaintiff's suit for want of registration as contemplated under Section 69 of the Indian Partnership Act, 1932.
21.When as above pointed out, S.Paulraj, who had been inducted into the plaintiff's partnership firm only on 23.12.1998 by way of Ex.A1 deed and when it is seen that the reconstituted plaintiff's firm based on Ex.A1 deed has not been established to be a registered firm before the appropriate authority and more so, when on the date of the suit, S.Paulraj, who had been subsequently, inducted into the partnership firm, his name having not been disclosed or mentioned in the Register of District Registrar of Firms in accordance with the Indian Partnership Act, 1932 and when no material has been projected by the plaintiff pointing to the same as well as the plaintiff having also not pleaded that the reconstituted plaintiff's firm had been registered disclosing all the name of the partners mentioned in Ex.A1 deed, it is seen that the plaintiff's suit is not legally maintainable as contemplated under Section 69 of the Indian Partnership Act, 1932.
22.The contention has been raised by the plaintiff's counsel that the pleas now put forth by the defendant in the second appeal having not been raised by https://www.mhc.tn.gov.in/judis/ 14/33 S.A.No.1433 of 2008 the defendant in the written statement or before the Courts below, hence, according to him, such pleas should not be entertained. Per contra, according to the defendant's counsel, the point raised by him is purely a question of law and accordingly, contended that the question of law raised by him is germane and necessary for the disposal of the second appeal, particularly, to ascertain whether the plaintiff's suit is legally maintainable or not.
23.When in the absence of any material filed on the part of the plaintiff to evidence that S.Paulraj inducted as a partner by way of Ex.A1 deed had been shown as the partner as per the related entries in the Registrar of Firms and on the date of the suit, S.Paulraj was not shown as the partner in the Registrar of Firms and furthermore, when there is no material on the part of the plaintiff to evidence that the reconstituted partnership firm based on Ex.A1 deed had been registered before the Registrar of Firms, resultantly, it is seen that the suit laid by the plaintiff is not maintainable, in the light of the provisions of sub-section 2 of Section 69 of the Indian Partnership Act, 1932 and it is also noted that the subsequent registration after the institution of the suit also would not lend support to the plaintiff's case. The above position of law has been outlined by the apex Court in the decision reported in AIR 1989 Supreme Court 1769 https://www.mhc.tn.gov.in/judis/ 15/33 S.A.No.1433 of 2008 (M/s.Shreeram Finance Corporation V. Yasin Khan and others) and the same is extracted below:
"In the present case the suit filed by the appellants is clearly hit by the provisions of Sub.S(2) of S. 69 of the said Partnership Act, as on the date when the suit was filed, two of the partners shown as partners as per the relevant entries in the Registrar of Firms were not, in fact, partners, one new partner had come in and two minors had been admitted to the benefit of the partnership firm regarding which no notice was given to the Registrar of Firms Thus, the persons suing, namely, the current partners as on the date of the suit were not shown as partners in the Registrar of Firms. The result is that the suit was riot maintainable in view of the provisions of Sub.S. (2) of S. 69 of the said Partnership Act and the view taken by the Trial Court and confirmed by the High Court in this connection is correct although the plaint was amended on a later date that cannot save the suit. Reference has been made to some decisions in the judgment of the Trial Court; however, we do not find it necessary to refer to any of them as the position in law, in our opinion, is clear on a https://www.mhc.tn.gov.in/judis/ 16/33 S.A.No.1433 of 2008 plain reading of sub. S(2) of S. 69 of the said partnership Act."
24.On a consideration of the principles of law laid down by the apex Court, it is evident that the suit filed by the unregistered firm is not maintainable and the persons, who sue, viz., the current partners as on the date of the suit should also be established to be the partners of such a registered firm and in the absence of both, the suit is not maintainable as per sub-section 2 of Section 69 of the Partnership Firm Act, 1932.
25.As regards the plea raised by the plaintiff's counsel that the defendant has not raised the plea that the plaintiff's suit is not maintainable for want of registration in the written statement and no issue has also been formulated before the Courts below on that point and therefore, the abovesaid plea projected for the first time in the second appeal would be of no avail to the defendant, the abovesaid point has been considered by our High Court in the decision reported in 1999 (II) CTC 540 (M/s.K.R.M. Money Lenders rep.by its Power Agent Karuppiah Vs. Mr.A.Manoharan @ Doss) and after considering the decisions rendered our High Court 1989 (2) LW 418 (Savariraj Pillai T. V.M/s.R.S.S.Vastred & Co.,) and 1991 TLNJ 107 (Selvam https://www.mhc.tn.gov.in/judis/ 17/33 S.A.No.1433 of 2008 Estates V. Thangapandia Maharajan) proceeded to hold that the illegality in the institution of the suit goes to the root of the very institution and the plaint in such a case, is non est in law and the subsequent registration, if any, after the institution of the suit will not cure the defect of non registration before the date of the presentation of the suit and the defect pointed by the contesting defendant goes to the root of the matter and consequentially, the Court having no jurisdiction to proceed with trial of such a suit as the primordial condition precedent to the very institution of the suit had not been complied or fulfilled by the plaintiff.
26.The position of law with reference to the same, in the decision reported in 1989 (2) L.W 418 (Savariraj Pillai T. v. M/s.R.S.S. Vastred & Co.,) has been dealt with in the following manner:
Learned counsel Mr.E. Padmanabhan, would straight-away rely upon the decision in Loonkaran Sethia v. Ivan N. John, AIR 1977 SC.336: 1977 (1) SCR 853 in which dealing with the scope of S. 39 of the Act, it was held that it is mandatory in character that a partner of an erstwhile unregistered partnership firm cannot bring a suit to enforce a right arising out of a contract within the ambit of S. 69.
https://www.mhc.tn.gov.in/judis/ 18/33 S.A.No.1433 of 2008 In the matter of Abani Kantapal, a Division Bench in dealing with the scope of the section held that if a firm is not registered, excepting in a suit as contemplated under S. 69(1) of the Act, the Court will have no jurisdiction to entertain a suit in violation of S. 69(1). It further added:
... In other words, the plaint that has been filed by the plaintiff will be considered a void plaint, if it contravenes the provisions of sub-sec. (1)and (2) of S. 89 of the Partnership Act...
A Division Bench of the same Court in an earlier decision in Ram Kumar Sha Chandrai a firm v.
Dominion of India, held that if the name of one person who was partner on date of suit is not shown in the register then the suit as filed is not maintainable. A Division Bench in Bank of KoothattuKulam v. Thomas, AIR 1955 T.C.155, held:
It is necessary not only that the firm should be registered, but the person suing must be shown as a partner in the firm. And when it is found that on the date when the plaint is filed the https://www.mhc.tn.gov.in/judis/ 19/33 S.A.No.1433 of 2008 second part of this condition has not been carried out then S. 69(2) is not complied ... The registration after the institution of the suit cannot cure the defect of non registration before the date of suit.
A Division Bench of this court in Buhari Trading Co. v. Star Metal Co., in dealing with the dismissal of a suit which was sought to be withdrawn on the ground that the plaintiff therein was an unregistered firm, held that it would not be a bar to file a fresh suit, on the same cause of action after the firm gets registered, for doing that, no permission is needed. This decision also proceeds on the basis that the suit earlier filed is non est in the eye of law.
To counter the contentions of learned counsel Mr.E. Padmanabhan based on these decisions learned counsel Mr.T.R. Rajagopalan, would submit that it is only a formal defect in view of the provisions found in Order 23 Rule 1 (3) (b) C.P.C. and relied on Sri Saravana Chit Fund Co., v. Serudeen, which deals with failure to issue the statutory notice under Section 25 of the https://www.mhc.tn.gov.in/judis/ 20/33 S.A.No.1433 of 2008 Chit Funds Act, and on the suit being dismissed for want of notice, it was treated as a technical defect, and to prevent parties from suffering, permission was granted to withdraw the suit under Order. 23 Rule.1 (3) C.P.C. with liberty to file a fresh suit, so that there may not be miscarriage of justice. This decision of the learned Judge could not apply in relation to a suit covered by S. 69(2) of the Act, which had been held by the Supreme Court as mandatory. The concept of formal defect which could be available under Order 23 rule 1(3) C.P.C. would have no relevance when a mandatory requirement is not complied with, for the institution of a suit. A learned Judge in Atul v. Radkishore also took, the same view in respect of Order 23 rule 1 (d) C.P.C. to the effect that a formal defect is a defect of form which is prescribed by rules of procedure such as misjoinder of parties, causes of action, non payment of court fees etc., and in a case where plaintiff fails to incorporate a prayer for dissolution of partnership in a suit for accounts it would no doubt result in dismissal of suit, but it being a formal defect, plaintiff would be permitted to come again with a properly drafted https://www.mhc.tn.gov.in/judis/ 21/33 S.A.No.1433 of 2008 plaint. This is again a decision, which does not deal with non compliance of a mandatory requirement.
Kanniya v. Papayapa is a full Bench decision which dealt with the powers of an appellate court to allow a suit to be withdrawn with liberty to file a fresh suit, and hence, it has no application to the point in this revision. Therefore, those decisions do not in any manner enable the plaintiff to secure the withdrawal of the suit with permission to file a fresh suit.
Yet, learned counsel Mr.T.R. Rajagopalan, would submit that, when the suit had been filed by the firm, the fact that the firm being represented by a partner whose name was not registered with the Registrar of Firms, on the date of filing of the suit, would not make it a void suit, and that S. 69(2) would have no application. In the light of the decisions relied on by learned Counsel Mr.E. Padmanabhan and which had been referred to above, such a distinction would not be available to salvage a suit of this nature, which is hit by the mandatory requirements of S. 69(2) of the Act. In this context, Messrs.
https://www.mhc.tn.gov.in/judis/ 22/33 S.A.No.1433 of 2008 Shreeram Finance Corporation v. Yasin Khan, 1989 (2) LW 542 requires to be referred to. It was held therein that a suit hit by Section 69(2) is not maintainable, because it is a mandatory requirement."
27.The position of law with reference to the abovesaid point of law had been considered in the decision reported in 1991 TLNJ 107 (Selvam Estates v. Thangapandia Maharajan) as follows:
"Mr.T.V. Ramanujam, placed reliance on the judgment reported in Bank of Koothattukulam v. Thomas, AIR 1955 T.C.155, a Division Bench of Travancore Cochin High Court held as follows:
In Loon Karan v. Ivan E. John, AIR 1977 SC.336 : 1977 (1) SCR 853 the Supreme Court held as follows:
Section 69 of the Partnership Act is mandatory in character and its effect is to render a suit by a plaintiff in respect of a right vested in him or acquired by him under a contract which he entered into as a partner of an unregistered firm, whether existing or dissolved, void.
https://www.mhc.tn.gov.in/judis/ 23/33 S.A.No.1433 of 2008 In the matter of Abani Kanta Pai, AIR 1986 Cal. 143, a Division Bench of Calcutta High Court held as follows:
M/s. Shreeram Finance Corpn., v. Asin Khan, 1989 (2) LW 512, was relied on by the learned counsel for the defendants to say that the suit has been instituted against a person (1st defendant) who is not a partner. The firm registration certificate also does not show that name of the first defendant Thangapandian as a partner of the plaintiff firm. The Supreme Court in the above case held that the said suit is clearly hit by the provisions of sub sec (2) of Section 69 of the said Partnership Act, as on the date when the suit was filed, two of the partners shown as partners as per the relevant entries in the Registrar of Firms were not, in fact, partners, one new partner had come in and two minors had been admitted to the benefit of the partnership firm regarding which no notice was given to the Registrar of Firms. Thus, the current partners as on the date of suit were not shown as partners in the Registrar of Firms. Thus the Supreme Court dismissed the suit filed https://www.mhc.tn.gov.in/judis/ 24/33 S.A.No.1433 of 2008 by the Appellant on the question of maintainability in view of the provision of sub section (2) of section 69 of the Partnership Act by confirming the view taken by the trial court and the High Court. The Supreme Court further held that though the plaint was amended on a later date that cannot save the suit. The Bar under . S. 69 can only be with reference to the plaintiff and not with reference to the persons who are sued as defendants.
Another recent decision of our High Court was also relied by the learned counsel for the defendants which is reported in T. Savariraj Pillai v. M/s R.S.S. Vastrad & Co .AIR 1990 mad. 198, Sathiadev , J. held that requirements of Section 69 of the Partnership Act are mandatory and the suit filed by a party without complying with the requirements under Section 69 of the Partnership Act is fatal and hence, the suit filed is void. Hence permission to withdraw the suit with liberty to file a fresh suit cannot be granted.
It is very useful to refer a very recent judgment of our High Court by Srinivasan, J., reported in https://www.mhc.tn.gov.in/judis/ 25/33 S.A.No.1433 of 2008 A.P.S. Baharudeen v. Antony, 1991 TLNJ 27.
That is an appeal filed by plaintiffs in a representative capacity, who lost their case before both the courts below. They sought permission to withdraw the second appeal with liberty to file a fresh suit C.M.P. No. 1372 of 1990 was filed for the said relief in the second appeal. The said C.M.P. was resisted by the respondents in the appeal. Learned Judge in his detailed and well considered judgment held as follows:
The learned Judge was of the view that permission to withdraw a suit with liberty to file a suit can be granted if the suit has to fail by reason of formal defect or a ground analogous thereto. The learned Judge further held as follows:-
I have carefully considered the rival submission made by the learned counsel for the plaintiff and the learned counsel for the respective defendants. The above review of the case law on the subject shows that the views held by practically all the High Courts in India is that the registration of the firm is a condition https://www.mhc.tn.gov.in/judis/ 26/33 S.A.No.1433 of 2008 precedent to its right to institute a suit of the nature mentioned in Section (2) of the Partnership Act and that the registration after the institution of the suit cannot cure the defect of non registration before the date of the suit. It follows from this, that the plaintiff is not entitled to withdraw the present suit and file a fresh suit on the same cause of action. Since in my opinion, the defect pointed out by the defendants is not a formal defect but goes to the root of the matter Hence I have no jurisdiction to proceed with the trial with the condition precedent to the right to institute a suit has not been fulfilled in this case. Hence the question of withdrawing a void plaint does not arise since it is not a formal defect. If the plaint is treated as a void plaint, the question of granting permission does not arise at all."
28.Following the abovesaid decisions in the decision reported in 1999 (II) CTC 540 (M/s.K.R.M.Money Lenders rep by its Power Agent Karuppiah Vs. Mr.a.Manoharan @ Doss), the learned judge had enunciated the position of law as follows:
" Partnership Act, 1932, Section 69(2) -
https://www.mhc.tn.gov.in/judis/ 27/33 S.A.No.1433 of 2008 Suit instituted by partnership firm which was unregistered on date of institution of suit - Firm subsequently registered - Subsequent registration of firm does not cure defect of non-registration before presentation of suit - Non-registration of firm is illegality going to root of suit and plaint is itself non-est in law - Firm instituting suit should establish that firm is registered and disclose particulars of partners who constitute firm on date of institution of suit. -
Code of Civil Procedure, 1908, Order 7, Rule 1 - Plaint and pleadings - Defect in filing suit by unregistered firm goes to root of suit and Court is bound to consider same even if defendants had failed to raise such objection - Court has to reject plaint if barred by law - Suit by unregistered firm barred under Section 69(2) of Partnership Act - Suit to be rejected and plea of waiver of such objection by defendants is of no avail.
Practice and procedure - Suit by unregistered Firm decreed - One defendant alone filing appeal and raising objection regarding maintainability of suit by unregistered Firm - Plaint to be rejected and decree to be set aside -
https://www.mhc.tn.gov.in/judis/ 28/33 S.A.No.1433 of 2008 Plea that decree would be valid against other defendants who did not file appeal would be mockery of system as there would be two different decrees on same point or cause of actions."
29.It is thus seen that even if the defendant had not challenged the plaintiff's suit on the footing that the plaintiff's suit is not maintainable for want of registration of the plaintiff's firm, when the very institution of the suit by the unregistered plaintiff's firm is inherently defective, the very plaint being non est in the eyes of law and barred by Section 69(2) of the Indian Partnership Act, 1932 and there cannot be any amount of waiver on the part of the defendant by not raising the plea of maintainability of such a suit for want of registration and therefore, it is seen that merely because the defendant has not raised the pleas now taken by him in the second appeal before the Courts below is immaterial and in such view of the matter, considering the reasons aforestated, the plaintiff's suit has to be rejected and consequently, the judgments and decrees passed by the Courts below are also liable to be set aside.
https://www.mhc.tn.gov.in/judis/ 29/33 S.A.No.1433 of 2008
30.It is further seen that merely because the defendant has not raised such a plea in the written statement, it cannot be held that the defendant has failed or given up such a plea, particularly, when the very institution of the plaint by the unregistered firm is void and non est in the eyes of law and in such view of the matter, the absence of the plea of the non maintainability of the suit for want of registration in the written statement, would not in any manner alter the position, particularly, the position of law being that an unregistered of the firm aid is an illegality going into the root of the matter and the plaint itself is non est in law.
31.The plaintiff's counsel during the course of argument would contend that even otherwise, the plaintiff's firm is entitled to maintain the suit as provided under Section 69(3) of the Indian Partnership Act, 1932. However, in my considered opinion, the plaintiff having not laid the suit for 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 and on the other hand, it having laid the suit only for the recovery of money said to have been advanced to the defendant and though the defendant is also one of the partners of the plaintiff's firm, considering the pleas put forth in the https://www.mhc.tn.gov.in/judis/ 30/33 S.A.No.1433 of 2008 plaint, it is found that the dispute between the plaintiff and the defendant is not a dispute between the partners in their capacity as the partners and when the case of the plaintiff is that money was given to the defendant in the capacity of borrower and not in the capacity of partner and when the defendant has taken the plea that there was no borrowing of money by him form the firm, all put together, it is found that Section 69(3) of the Indian Partnership Act, 1932 would have no applicability to the case at hand.
32.In the light of the abovesaid position, the plaintiff's reconstituted firm on the date of the suit having not been established to be a registered one as required under law and also the names of the partners having been failed to be mentioned in the Register of the District Registrar firms in accordance with the Indian Partnership Act, 1932, in such view of the matter, for the aforesaid reasons, the substantial questions of law formulated in the second appeal are accordingly answered against the plaintiff and in favour of the defendant.
33.For the reasons aforestated, the Judgement and Decree dated 29.02.2008 passed in A.S.No.72 of 2006 on the file of the Principal District Court, Kancheepuram, confirming the Judgment and Decree dated 07.02.2006 https://www.mhc.tn.gov.in/judis/ 31/33 S.A.No.1433 of 2008 passed in O.S.No.73 of 2000 on the file of the Principal Subordinate Court, Chengalpattu, are set aside and consequently, the suit laid by the plaintiff in O.S.No.73 of 2000 is dismissed. Accordingly, the second appeal is allowed. No costs. M.P.No.1 of 2008 is dismissed and consequently, connected miscellaneous petition, if any, is closed.
Index : Yes/No
Internet : Yes/No
sms 23.02.2021
To:
1.The Principal District Court,
Kancheepuram.
2.The Principal Subordinate Judge, Chengalpattu.
3.The Section Officer, V.R.Section, High Court, Madras. https://www.mhc.tn.gov.in/judis/ 32/33 S.A.No.1433 of 2008 T.RAVINDRAN,J.
sms Pre-delivery Judgement made in S.A.No.1433 of 2008 & M.P.No.1 of 2008 23.02.2021 https://www.mhc.tn.gov.in/judis/ 33/33