Bangalore District Court
M/S.Buzzotel Services vs Aiosell Technologies Private Ltd on 27 July, 2020
IN THE COURT OF XVIII ADDL.CITY CIVIL JUDGE, AT
BENGALURU CITY, [CCH.NO.10]
Dated this day the 27th July 2020
PRESENT
Sri. SADANANDA NAGAPPA NAIK, B.A.L., LL.B.
XVIII Addl.City Civil Judge.
O.S.No.7661/2019
Plaintiff M/s.Buzzotel Services,
(Presently in dissolution)
Reptd. By its partner
Satvik Upadhyaya
Having its office at
No.14, Sarjapur Main Road,
Kaikondanahalli village
(Next to Total Mall)
Bengaluru - 560 035.
(By Sri.P.N., Advocate)
/VS/
Defendants: 1. AIOSELL Technologies Private Ltd.,
A Company incorporated under
The Companies Act, 2013,
having its regd. Office at:
No.14, Kaikondanahalli village
Sarjapur Main Road,
(Next to Total Mall)
Bengaluru - 560 035.
2. Siddharth Goenka,
Director,
AIOSELL Technologies Private Ltd.,
No.14, Kaikondanahalli village
Sarjapur Main Road,
2 O.S.No.7661/2019
(Next to Total Mall)
Bengaluru - 560 035.
Also residing at:
No.B 303, Block,
Prestige St.John Wood,
Bangalore 560 029
(By Sri.K.N.N., Advocate)
Applicants : AIOSELL Technologies Private Ltd.,
and another
Vs.
Opponent: M/s.Buzzotel Services
ORDERS ON I.A.NO.4 FILED UNDER ORDER 7 RULE 11 OF
CPC r/w Sec.53 of INDIAN PARTNERSHIP ACT, 1932
Defendants have filed this application praying to reject
the plaint on the ground that it is barred by law and
consequently dismiss the above suit.
2. The above application is enclosed with the affidavit
of defendant No.2 wherein it is contended that he is the
director of 1st defendant. He and one Mr.Satvik Upadhyaya
were two partners of the plaintiff and by virtue of notice
dtd.21.6.2019 he dissolved the plaintiff firm as the duration of
the partnership firm was 'At Will'. The rights of the erstwhile
partners of the dissolved firm may be enforced only by the
erstwhile partners or their representatives against the other
3 O.S.No.7661/2019
partners or their representatives. The present suit is not filed
by a partners, but by the dissolved firm which is not provided
for under any law. Further in the event of partnership firm
being dissolved, it requires all the erstwhile partners of the
firm shall join in suing against any 3 rd parties. 1St defendant
being a 3rd party, cannot be sued either in the name of
dissolved firm or by only one of the partners of the erstwhile
firm. Since he had not joined together in filing the suit,
Mr.Satvik Upadhyaya alone cannot maintain the suit. The
suit is filed to harass the defendants which is frivolous and
vexatious. There is interse dispute between 2 nd defendant
and other partner Mr.Satvik Upadhyaya and Arbitration
Complaint No.Com.AA.74/2019 is pending before Commercial
Court, Bangalore. Hence, prayed to reject the plaint as
prayed.
3. The above application is opposed on behalf of
plaintiff wherein it is contended that the application is barred
by law and the present suit is in relation to its proprietary
software source code and server environment. There is no bar
under the Act that prohibits a partnership firm in dissolution
from maintaining legal proceedings to protect or realise its
property. Further contended that while considering the
application under order 7 rule 11, courts shall examine the
plaint averments and documents annexed thereto which
clearly made out the cause of action to the suit. Plaintiff's
affairs are yet to be wound up, there is no bar in law
4 O.S.No.7661/2019
preventing them to approach the court to realise its property.
Defendants have mischievously attempted to characterise the
suit as an interse partnership dispute. Hence, prayed to
dismiss the application.
4. Heard the learned counsels for the plaintiff and
defendants. The counsel for the defendants/applicants have
relied on the below referred decisions:
1. AIR 1970 RAJ 86 - Firm Alwar Iron Syndicate Vs.
Union of India.
2. AIR 1975 ORISSA 84 - Afsar Hussain and others
Vs. Trilokchand Premchand
3. AIR 1963 MP 37 - Firm Gopal Company Limited,
Bhopal and another Vs. Firm Hazarilal Company,
Bhopal.
Percontra the counsel for the plaintiff/ respondent has
relied on the decision reported in 2015 SCC OnLine Cal. 1192
- HiTech Systems & Services Ltd., Vs. Suprabhat Ray & Ors. I
have also considered the case law cited by the learned
counsels for the plaintiff and defendants with utmost
reverence. The following points that would arise for my
consideration:
1. Whether the defendant No.1 & 2 have
made out grounds to reject the plaint as
prayed in I.A.4?
2. What order?
5. My answer to the above points are as under:
Point No.1: In the affirmative
Point No.2: As per final order,
for the following:
5 O.S.No.7661/2019
REASONS
6. Point No.1: Before adverting to the other factual
aspects of this Application, let me analyze few aspects with
regard to the Order VII Rule 11 and related provisions. Order 7
rule 11 empowers the court to reject the plaint, in case, the
plaint does not disclose a cause of action, where the relief
claimed is undervalued, and inspite of the time given by the
court to correct the valuation within time, the plaintiff fails to
do so and where the relief claimed is properly valued by the
court, but the court fee actually paid is insufficient and the
deficiency is not made good in time inspite of time granted by
the court or where the suit is barred by law, if the plaint is not
filed in duplicate and where the provision of order 7 rule 9 is
not complied. While deciding application under order 7 rule 11
it is not necessary to call for the written statement. It may be
decided merely by going through the averments made in the
plaint.
7. With regard to partnership, it is said that a
Partnership is like a marriage, and that extends to its ending
too. It's easier to get into a partnership than it is to get out of
it because legal entanglements continue after a person is no
longer a partner or the firm is dissolved. A partnership is
formed by a mutual agreement between the parties. It may be
written, oral, express or implied. Though writing is not
prescribed by the Partnership Act, if the partners desire the
firm to be assessed for the purpose of income tax, it is
6 O.S.No.7661/2019
necessary to be in writing. There should be atleast 2 persons
to constitute a Partnership. The partnership cannot have more
than 10 partners for banking business and 20 members for
other businesses. The firm is a compendium of partners, it is
not a legal person or a separate legal entity having any
independent or distinct existence. Once the firm is registered,
as per the law prevailing in Karnataka, the Registrar issues an
Acknowledgment of registration of firm in Form C as per Rule
10 of Karnataka Partnership (Registration of Firms) Rules,
1954. Thereafter, whenever changes occurs in the registered
firm as to any incoming, continuing, or outgoing partner or
when the registered firm is dissolved, any person who was a
partner immediately before the dissolution may give notice to
the Registrar of such change or dissolution as per Section 63
of the partnership Act. Chapter 6 of the Partnership Act
provides for various modes of dissolution of partnership Firm.
Once the firm is dissolved, the firm will remain in force for the
purpose of winding up proceeding only. Art.5 of the
Limitation Act provides for 3 years limitation on suit for an
account and for the profits of a dissolved partnership and the
time from which period begins to run is from the date of
dissolution.
8. Keeping in view of the above said principles in mind,
let me analyse the present application filed under order 7 rule
11 CPC for rejection of plaint.
7 O.S.No.7661/2019
9. In the present case, it is not disputed that the
partnership firm is dissolved. The lonely question that arise for
consideration is whether the Dissolved firm represented by
dissolved firm's Partner can file a suit against its other
partner.
Admittedly, the present application is filed by the
defendants under order 7 Rule 11 for rejection of plaint. The
counsel for defendant no.1 and 2 /Applicant in his argument
has contended that in the cause title of the plaint, the plaintiff
has mentioned that the firm is presently is in dissolution.
Also contended that as per the partnership deed dated
24.05.2016, the Satvik Upadhyaya (Representative of dissolved
firm) is the 1st Partner and 2nd Defendant is the 2nd Partner.
However, the same has been dissolved by virtue of notice
issued by Siddarth Goenka/Defendant No. 2 dated 21.6.2019
to Satvik Upadhyaya. When the firm is dissolved, the suit by
dissolved firm is not maintainable under law. It is also as
contended by Defendants/Applicants that partners of a
dissolved firm are bound by Arbitration Clause as contained
in the Partnership Deed. Pursuant to the same, the Plaintiff
filed an Application in Arbitration Comp.No.COM.AA.74/2019
in his individual capacity before the City Civil Court (CCH84)
under Sec.9 Arbitration and Conciliation Act, the Court has
already granted a Temporary Injunction against the Defendant
no.2. The present suit is also for the similar relief of
injunction. The plaintiff has already got the remedy what he
wanted to get in this suit. It was also argued that the
8 O.S.No.7661/2019
Dissolved partnership is only between the partners. 1 st
Defendant is a new company and not a party to partnership
deed and also read copiously from the provisions of Section
43, 45, 46, 47 Partnership Act to contend that the present suit
is not maintainable and as per Section 45 of partnership Act,
only partnership firm is liable and not the partner. It was also
contended that the 1st Defendant company was formed only
after dissolution. When there is suit filed by the firm, the same
has to be in accordance with Order 30 Rule 1 of CPC 1908.
The counsel has also contended that Plaintiff in his plaint has
mentioned that the cause of action arose on 24.6.2019 and
other subsequent dates. Even if the cause of action as
mentioned in the plaint is taken as true, plaintiff and the
defendants are not partners at the time of accruing cause of
action. Hence, the suit is barred by law. The Counsel also
contended that the Defendant No.1/AIOSELL Technologies
Private Limited is established on 24.6.2019 which is later
established after dissolution of a firm on 21.6.2019. The
counsel for the Defendants has also argued that the present
suit is filed in the partnership capacity and not in the
individual capacity. As the present suit in the name of firm,
the same is not maintainable.
10. Percontra, learned counsel for the
Plaintiff/Opponent has contended that the Dissolution and
winding up are different and read copiously from Section 47
Partnership Act to contend that even after dissolution of Firm,
9 O.S.No.7661/2019
the authority of each partner will bind the firm and contended
that the partnership still exists. It is also contended that as
per Sec.16 Partnership Act if a partner has carried on any
business of the same nature and competing with that of firm,
he shall account for and pay to the firm all profits made by
him in that business. In this case also, the Defendant no.2
has formed a defendant No.1 company and carrying the same
business as of the Plaintiff by using the firm's property. It was
also contended by the Plaintiff/opponent that as per Section
53 of the Partnership Act, even after dissolution of firm a
partner can still restrain any other partner from carrying on
the similar business. It was also argued that Order 30 Rule 1
CPC 1908 is not substantive act with regard to partnership
and it will not create a substantive right. Substantive
provisions of partnership are contained only in Partnership
Act. Civil Procedure Code provides for only how to present a
plaint in the name of the firm and contended that order 30
rule 1 CPC is not applicable to the present suit. The Plaintiff
has also contended that the Defendant No.2/Applicant in his
email dated 15.10.2018 addressed to the plaintiff Satvik
Upadhyaya has admitted that the Software is the collective
property of Buzzotel Services and the same is not owned by
any individual. Hence, prayed to dismiss the application.
11. In order to decide the present application, reference has
been made to the following provisions of Partnership Act,
Provisions of Civil Procedure Code and the case laws:
10 O.S.No.7661/2019
Sec. 4. Definition of "partnership", "partner", "firm" and "firm
name".--''Partnership" is the relation between persons who
have agreed to share the profits of a business carried on by all
or any of them acting for all. Persons who have entered into
partnership with one another are called individually "partners"
and collectively a "firm", and the name under which their
business is carried on is called the "firm name".
Sec. 7.Partnership at will.--Where no provision is
made by contract between the partners for the
duration of their partnership, or for the
determination of their partnership, the partnership
is 'partnership at will'.
Sec.43. Dissolution by notice of partnership at will.
--
(1) Where the partnership is at will, the firm may be
dissolved by any partner giving notice in writing to
all the other partners of his intention to dissolve
the firm.
(2) The firm is dissolved as from the date mentioned
in the notice as the date of dissolution or, if no date
is so mentioned, as from the date of the
communication of the notice.
Sec.45. Liability for acts of partners done after dissolution.--
(1) Notwithstanding the dissolution of a firm, the
partners continue to be liable as such to third
parties for any act done by any of them which would
have been an act of the firm if done before the
dissolution, until public notice is given of the
dissolution:
11 O.S.No.7661/2019
Provided that the estate of a partner who dies, or
who is adjudicated an insolvent, or of a partner
who, not having been known to the person dealing
with the firm to be a partner, retires from the firm,
is not liable under this section for acts done after
the date on which he ceases to be a partner.
(2) Notices under subsection (1) may be given by
any partner.
Sec.46. Right of partners to have business wound
up after dissolution.--
On the dissolution of a firm every partner or his
representative is entitled, as against all the other
partners or their representatives, to have the
property of the firm applied in payment of the debts
and liabilities of the firm, and to have the surplus
distributed among the partners or their
representatives according to their rights.
Sec.47. Continuing authority of partners for
purposes of winding up.--
After the dissolution of a firm the authority of each
partner to bind the firm, and the other mutual
rights and obligations of the partners continue
notwithstanding the dissolution, so far as may
be necessary to wind up the affair of the firm
and to complete transactions begun but
unfinished at the time of the dissolution, but
not otherwise: Provided that the firm is in no case
bound by the acts of a partner who has been
adjudicated insolvent; but this proviso does not
affect the liability of any person who has after the
adjudication represented himself or knowingly
permitted himself to be represented as a partner of
the insolvent.
12 O.S.No.7661/2019
Sec.53. Right to restrain from use of firm name or
firm property.--
After a firm is dissolved, every partner or his
representative may, in the absence of a contract
between the partners to the contrary, restrain any
other partner or his representative from carrying on
a similar business in the firm name or from using
any of the property of the firm for his own benefit,
until the affairs of the firm have been completely
wound up:
Provided that where any partner or his
representative has bought the goodwill of the firm,
nothing in this section shall affect his right to use
the firm name.
Order XXX of Civil Procedure Code (CPC) - Suits by or
against firms and persons carrying on business in names
other than their own
Rule 1. Suing of partners in name of firm.
(1) Any two or more persons claiming or being liable
as partners and carrying on business, in India may
sue or be sued in the name of the firm (if any) of
which such persons were partners at the time of the
accruing of the cause of action, and any party to a
suit may in such case apply to the Court for a
statement of the names and addresses of the
persons who were, at the time of the accruing of the
cause of action, partners in such firm, to be
furnished and verified in such manner as the Court
may direct.
(2) Where persons sue or are sued partners in the
name of their firm under subrule (1), it shall, in the
case of any pleading or other document required by
or under this Code to be signed, verified or certified
by the plaintiff or the defendant, suffice such
13 O.S.No.7661/2019
pleading or other document is signed, verified or
certified by any one of such persons.
Rule 9. Suits between copartners.
This Order shall apply to suits between a firm and
one or more of the partners therein and to suits
between firms having one or more partners, in
common; but not execution shall be issued in such
suits except by leave of the Court, and, on an
application for leave to issue such execution, all
such accounts and inquiries may be directed to be
taken and made and directions given as may be
just.
Rule 15 of Order XX of Code of Civil Procedure 1908
"Decree in suit for dissolution of partnership"
Where a suit is for the dissolution of a partnership,
or the taking of partnership accounts, the Court,
before passing a final decree, may pass a
preliminary decree declaring the proportionate
shares of the parties, fixing the day on which the
partnership shall stand dissolved or be deemed to
have been dissolved, and directing such accounts to
be taken, and other acts to be done, as it thinks fit.
12. In CIT Vs.. Seth Govindram Sugar Mills [1965] 57
ITR 510, The Supreme Court observed (at page 515) :
"The fundamental principle of partnership,
therefore, is that the relation of partnership arises
out of contract and not out of status.... Section
42 can be interpreted without doing violence either
to the language used or to the said basic
principle. Section 42(c) of the Partnership Act can
appropriately be applied to a partnership where
there are more than two partners. If one of them
dies, the firm is dissolved ; but if there is a contract
to the contrary, the surviving partners will continue
the firm. On the other hand, if one of the two
14 O.S.No.7661/2019
partners of a firm dies, the firm automatically
comes to an end and, thereafter, there is no
partnership for a third party to be introduced
therein and, therefore, there is no scope for
applying Clause (c) of Section 42 to such a
situation. It may be that pursuant to the wishes or
the directions of the deceased partner the surviving
partner may enter into a new partnership with the
heir of the deceased partner, but that would
constitute a new partnership. In this light Section
31 of the Indian Partnership Act falls in line
with Section 42 thereof.
In Dahi Laxmi Dal Factory Vs. ITO [1976] 103 ITR 517
(All) [FB], The High Court in this connection observed (at page
525):
"Now, in the present case, the old firm was
constituted by two partners. One of them died and
there was no stipulation in the partnership deed
that the firm shall not stand dissolved on the death
of a partner. Indeed, even if there had been such a
stipulation the firm could not have been saved from
dissolution because after the death of Jethalal only
one partner was left and one man cannot constitute
a firm. "
In Chunilal Bhagavan Das Gandhi Vs. Ahamad Rowter
AIR 1960 Kerala 156(DB) Where a partnership is formed
consisting of two partners only, then on the retirement of one
of the partner, the remaining partner alone cannot to
constitute a partnership and it ceases to exist. If a suit is
instituted on behalf of the partnership which has no existence
the suit is liable to be dismissed.
15 O.S.No.7661/2019
In Bengal Hemp Supply Co. Vs. Radha Kishan Sheo Datt
Rai reported in AIR 1969 ALL 129
A registered firm having two partners entered
into contract with third party in 1950 for supply of
Hemp Rope Cuttings. In 1951, one of the partner
died and his son was taken as partner in the firm.
Thereafter, a firm filed a suit against 3rd party for
damages for breach of contract. It was held that suit
filed by the firm is not maintainable since the
deceased partner's son was not a partner at the
time of contract and the firm is also stood dissolved
on the death of one of the partner.
In Vazir Bhai Sultan Bhai Tamboli Vs. Gadmal Nathmal
Marwadi reported in AIR 1940 BOM 263 It was held that
when a partnership at Will is formed, apart from the
circumstance in which the court may dissolve it, it can come
to an end by notice of a dissolution or abandonment by one of
the partner of the partnership.
In Chaturbhuj Durgadas Factory Vs. Damodhar
Jamnadas Zawar AIR 1960 BOM 424 - It was held that on the
dissolution of the firm, it leads to dissolution of partnership as
between the partners. But the partnership subsists only for
the purpose of winding up of its business and adjusting the
rights of the partners interse.
16 O.S.No.7661/2019
In Sohanlal Vs.Ameenchand and Sons reported in AIR
1973 SC 2572 Hon'ble Supreme Court has held that in a firm
consisting of 3 partners, when one partner sends a notice of
dissolution of partnership, the other partners cannot prevent
him from using the trademark.
In the recent decision of Hon'ble Supreme Court in
Dahiben Vs. Arvindbhai Kalyanji Bhanusali through Lrs., and
others reported in 2020 SCC OnLine SC 562 (Civil Appeal
No.9519/2019 dtd.9.7.2020) the Hon'ble Supreme Court has
summarised the concept of rejection of plaint as follows:
12.1 The remedy under Order VII Rule 11 is an
independent and special remedy, wherein the Court
is empowered to summarily dismiss a suit at the
threshold, without proceeding to record evidence,
and conducting a trial, on the basis of the evidence
adduced, if it is satisfied that the action should be
terminated on any of the grounds contained in this
provision.
The underlying object of Order VII Rule 11 (a) is that
if in a suit, no cause of action is disclosed, or the suit
is barred by limitation under Rule 11 (d), the Court
would not permit the plaintiff to unnecessarily
protract the proceedings in the suit. In such a case, it
would be necessary to put an end to the sham
litigation, so that further judicial time is not wasted.
17 O.S.No.7661/2019
12.2 The power conferred on the court to terminate a
civil action is, however, a drastic one, and the
conditions enumerated in Order VII Rule 11 are
required to be strictly adhered to.
12.3 Under Order VII Rule 11, a duty is cast on the
Court to determine whether the plaint discloses a
cause of action by scrutinizing the averments in the
plaint, read in conjunction with the documents relied
upon, or whether the suit is barred by any law.
12.7 The test for exercising the power under Order
VII Rule 11 is that if the averments made in the
plaint are taken in entirety, in conjunction with the
documents relied upon, would the same result in a
decree being passed. This test was laid down in
Liverpool & London S.P. & I Assn. Ltd. v. M.V.Sea
Success I & Anr.,2004(9) SCC 512 which reads as :
"139. Whether a plaint discloses a cause of action or
not is essentially a question of fact. But whether it
does or does not must be found out from reading the
plaint itself. For the said purpose, the averments
made in the plaint in their entirety must be held to be
correct. The test is as to whether if the averments
made in the plaint are taken to be correct in their
entirety, a decree would be passed."
18 O.S.No.7661/2019
12.8 If on a meaningful reading of the plaint, it is
found that the suit is manifestly vexatious and
without any merit, and does not disclose a right to
sue, the court would be justified in exercising the
power under Order VII Rule 11 CPC.
12.9 The power under Order VII Rule 11 CPC may be
exercised by the Court at any stage of the suit, either
before registering the plaint, or after issuing
summons to the defendant, or before conclusion of
the trial.
12.10 The provision of Order VII Rule 11 is
mandatory in nature. It states that the plaint "shall"
be rejected if any of the grounds specified in clause
(a) to (e) are made out. If the Court finds that the
plaint does not disclose a cause of action, or that the
suit is barred by any law, the Court has no option,
but to reject the plaint.
In Azhar Hussain v. Rajiv Gandhi 1986(supp) SCC 315
held as follows:
19 O.S.No.7661/2019
"12. ...The whole purpose of conferment of such
power is to ensure that a litigation which is
meaningless, and bound to prove abortive should
not be permitted to occupy the time of the Court,
and exercise the mind of the respondent. The sword
of Damocles need not be kept hanging over his head
unnecessarily without point or purpose. Even if an
ordinary civil litigation, the Court readily exercises
the power to reject a plaint, if it does not disclose
any cause of action."
In T. Arivandandam Vs. T.V. Satyapal & Anr. Reported in
1977(4) SCC 467 Hon'ble Supreme Court has held that while
considering an application under Order VII Rule 11 CPC what
is required to be decided is whether the plaint discloses a real
cause of action, or something purely illusory, in the following
words :
"5. ...The learned Munsiff must remember that if on
a meaningful - not formal - reading of the plaint it
is manifestly vexatious, and meritless, in the sense
of not disclosing a clear right to sue, he should
exercise his power under O. VII, R. 11, C.P.C. taking
care to see that the ground mentioned therein is
fulfilled. And, if clever drafting has created the
illusion of a cause of action, nip it in the bud at the
first hearing ..."
In I.T.C. Ltd. v. Debt Recovery Appellate Tribunal,
reported in 1998(2) SCC 170 Hon'ble Supreme Court has held
that law cannot permit clever drafting which creates illusions
of a cause of action. What is required is that a clear right must
be made out in the plaint.
20 O.S.No.7661/2019
In Deorah And Co. vs Commissioner Of IncomeTax
reported in 1993 200 ITR 467 Gauhati In the present case,
one of the two partners constituting the firm retired and
subsequently the surviving partner and a new partner
continued the business under a new deed. It is clear that the
partnership ceased to exist on the retirement of one of the two
partners. That was the logical consequence of retirement of
one of the only two partners. There is nothing in the scheme
of Section 187 of the Act indicating a legislative intention to
totally ignore fundamental principles underlying a partnership
as laid down in the Partnership Act and creating a situation
where the firm would be deemed to have survived with only
one partner surviving.
In Motilal Chimanram vs Sarupchand Prithiraj
reported in (1936) 38 BOMLR 1058 held that though the
dissolution of a firm causes a dissolution of the partnership
between the partners, the partnership still subsists, but
merely for the purpose of winding up its business and
adjusting the rights of the partners inter se, and for this
purpose the authority of the partners to bind the firm, and all
their other mutual rights and obligations, continue
notwithstanding the dissolution. The power of each partner,
however, extends only so far as it is necessary to wind up the
affairs of the firm and to complete transactions already begun.
21 O.S.No.7661/2019
In Svapn Constructions Vs. ICPL Employees Cooperative
Group Housing Society Ltd. & Ors. Reported in 127 (2006)
DLT 80/2006 III AD (DELHI) 212. In this case the respondents
had raised objections that the petition was filed by M/s. Svapn
construction, which was a sole proprietorship concern, which
was not a legal entity and consequently, the petition was not
maintainable. The petition was filed in the name of a
proprietorship concern which is neither a registered company
nor a joint family nor a partnership firm. Accordingly, the
application under Order 7 Rule 11 and Order 30 Rule 10 read
with Section 151 of the Code of Civil Procedure, 1908 for
dismissal of the suit is hereby allowed.
In Seth Loonkaran Sethiya And Others v. Mr Ivan E.
John And Others reported in AIR 1977 SC 336 / (1977) 1
SCC 379 / 1977 1 SCR 853 it was observed as follows:
In other words, a partner of a erstwhile unregistered
partnership firm cannot bring a suit to enforce a
right arising out of a contract falling within the
ambit of Section 69 of the Partnership Act.
Exception:
(3) The provisions of Subsections (1) and (2) shall
apply also to a claim of setoff or other proceeding to
enforce a right arising from a contract, but shall not
effect
(a) the enforcement of any right to sue for
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..
22 O.S.No.7661/2019
In Nathi Devi v. Radha Devi Gupta reported in AIR 2005
SC 648, the Apex Court held that, The interpretation function
of the Court is to discover the true legislative intent, it is trite
that in interpreting a statute the Court must, if the words are
clear, plain, unambiguous and reasonably susceptible to only
one meaning, give to the words that meaning, irrespective of
the consequences. Those words must be expounded in their
natural and ordinary sense. When a language is plain and
unambiguous and admits of only one meaning no question of
construction of statute arises, for the Act speaks for itself.
Courts are not concerned with the policy involved or that the
results are injurious or otherwise, which may follow from
giving effect to the language used. If the words used are
capable of one construction only then it would not be open to
the Courts to adopt any other hypothetical construction on the
ground that such construction is more consistent with the
alleged object and policy of the Act. In considering whether
there is ambiguity, the Court must look at the statute as a
whole and consider the appropriateness of the meaning in a
particular context avoiding absurdity and inconsistencies or
unreasonableness which may render the statute
unconstitutional.
In the words of Tindal, C.J., in Sussex Peerage case
[(1844) 11 Cl & F 85], wherein, he said thus, If the words of
the statute are in themselves precise and unambiguous, then
no more can be necessary than to expound those words in
23 O.S.No.7661/2019
their natural and ordinary sense. The words themselves so
alone in such cases best declare the intent of the lawgiver.
In Ram Rattan v. Parma Nand reported in AIR 1946 PC
51, the Hon'ble Mr.S.R.Das, held as follows:
The cardinal rule of construction of statutes is to
read the statutes literally, that is, by giving to the
words their ordinary, natural and grammatical
meaning. If, however, such a reading leads to
absurdity and the words are susceptible of another
meaning, the Court may adopt the same. But if no
such alternative construction is possible, the Court
must adopt the ordinary rule of literal
interpretation. In the present case, the literal
construction leads to no apparent absurdity and
therefore, there can be no compelling reason for
departing from that golden rule of construction.
13. It is a well settled law of interpretation that when
the words of the statute are clear, plain or unambiguous, ie.,
they are reasonably susceptible to only one meaning, the
Courts are bound to give effect to that meaning irrespective of
consequences. Reference can be made to the decision of the
Apex Court in Nelson Motis v. Union of India reported in AIR
1992 SC 1981.
14. It is a settled principle of law that when the
application for rejection of plaint is filed, the court has to
consider the application first before proceeding with the suit
and it is only the plaint averments and the documents that
has to be looked into.
24 O.S.No.7661/2019
15. On the perusal of the plaint averments, the cause
title of the plaint discloses that the suit is filed in the name of
a Firm and not in the individual capacity. Also in Para 13 of
the plaint, it has been mentioned that the "Defendant No.2
proceeded to issue a notice of dissolution of the plaintiff dated
21 June 2019 (Notice of Dissolution). As a result, the Firm Stood
dissolved with effect from 21st June 2019". It is also mentioned
in Para 23 of the plaint that the cause of action arose on 24 th
June 2019 when the defendant No.1 company was
incorporated by defendant no.2 on 25th June 2019 and other
subsequent dates.
16. On perusal of the documents it shows that the
Plaintiff is a registered firm as per document no.1 dated
17.6.2016. As per document no.6, partnership deed, Satvik
Updayaya Representative of Plaintiff and Defendant No.2 are
the partners. Duration of the Partnership is Partnership at
Will as per Clause 1 of the Partnership Deed dated 24.5.2016.
It also contains an arbitration clause in clause 18. Clause 20
specifies that partners may agree that on the dissolution any
one of the partners may take the entire business of the firm
with all its assets and liabilities as going concern and the
account of other partners shall be settled as per mutual
agreement. Document 11 is the Notice of dissolution by the
Defendant No.2 dated 21.6.2019 which has been issued to
Mr.Satvik Upadhyaya. First defendant company is
incorporated on 24th June 2019, vide document No.3.
25 O.S.No.7661/2019
17. On perusal of Section 43(2) of the Partnership Act,
it states that the firm is dissolved as from the date mentioned
in the notice as the date of dissolution or, if no date is so
mentioned, as from the date of the communication of the
notice.
On perusal of the provision Section 45 of the Partnership
Act, it states that even after dissolution of the firm, the
partners are liable to the 3rd parties till the public notice is
given of the dissolution. Since the present suit is not by the 3 rd
parties against the dissolved firm or against the partners of
dissolved firm, the Section 45 provision has no application to
the present case.
On perusal of Section 46 of the Act, it states that after
dissolution of a firm "every partner or his representative" has
right to business to wound up for the purpose of applying the
property of the firm in payment of the debts and liabilities of
the firm and to distribute the surplus among the partners. As
it can be perused, the legislation has employed the words
"every partner or his representative" and not the words of
"dissolved firm or their representative".
On perusal of the provision of Section 47, it states that it
is the authority of each partners which will bind the firm for
the purpose of winding up of the firm and to complete the
transaction begun but unfinished at the time of dissolution,
but not otherwise. Since, this suit is involved for Permanent
Injunction and not for the purpose of winding up of the firm or
26 O.S.No.7661/2019
for accounts and as the plaintiff has also not shown in the
plaint that any transactions begun but unfinished nor the suit
is for winding up, the present suit does not fall within the
purview of Sec.47.
18. The counsel for the plaintiff/ opponent has heavily
relied on the provision of Sec.53 of the Partnership Act on the
substantive right of a partner of dissolved firm.
On perusal of Section 53, the provision states that after
the firm is dissolved, every partner or his representative may
restrain any other partner or his representative from carrying
on a similar business in the firm name or from using any of
the property of the firm for his own benefit, until the affairs of
the firm have been completely wound up. On meticulous
perusal of the provision, it shows that the Legislation has
employed the words of "every partner or his representative"
and not the words "dissolved firm" or "its representative".
Therefore the plaintiff cannot resort to remedy under this
provision as it is exclusively meant for the partners of a firm
and not for the firm after dissolution.
19. According to Black's Law Dictionary 8th Edn. at page
506 a Dissolution means "the act of bringing to an end".
Though the dissolution of the Partnership and Firm are
different, on perusal of the Sections 7, 43 & 45, these
provisions show that the legislation has employed the words of
"Firm" with reference to the dissolution and not the word of
27 O.S.No.7661/2019
"partnership". When the firm itself is dissolved, the question of
existence of firm does not arise at all and even if it exists, it is
only for the purpose of winding up as provided under Sections
45 & 46 of the Partnership Act. Even the heading of the
Chapter 6 of Partnership Act containing Sections 39 to 55
refers it to as dissolution of firm and not the partnership.
20. As it can be perused, the present suit is not for
winding up or for the dissolution of a firm or for an accounts
of a dissolved firm, but it is for restraining the other partner as
provided under Section 53. As discussed supra, it is the
partners of a dissolved firm who can restrain the other partner
of the same dissolved firm and not the dissolved firm itself
which can sue against the other partners.
21. As already stated, a careful reading of section 53
states that it is "every partner" and not the firm or firm
represented by a partner.
Moreover, once the firm is dissolved, the firm exists only
for the purpose of winding up or adjustment of accounts as
provided under Sections 45 & 46 of Partnership Act. Since the
present suit is not for winding up or for accounts or by a
dissolved firm's partner against a dissolution of another
partner for injunction or as under Order 30 of CPC which
provides for two or more persons who are either liable to be
partners or are partners to sue or be sued in the name of the
firm of which such persons were partners at the time of the
28 O.S.No.7661/2019
occurring of cause of action, I am of the opinion that the
present suit is not maintainable for want of cause of action by
the plaintiff and no cause of action has accrued to the Plaintiff
dissolved firm. Hence, I answer the above point in the
affirmative.
22. Point No.2: In the result I pass the following:
ORDER
I.A.No.4 filed under Order 7 Rule 11
of CPC r/w Sec.53 of Indian Partnership Act, 1932 by the defendant No.2 is hereby allowed. Consequently, plaint is hereby rejected.
[Dictated to the Judgment Writer directly on computer, computerised, and print out taken by him, corrected and then pronounced by me in open court, this day the 27th July, 2020].
(SADANANANDA NAGAPPA NAIK) XVIII ADDL. CITY CIVIL AND SESSIONS JUDGE, BENGALURU