Firm registered pendente lite
pallawi
(Querist) 20 January 2012
This query is : Resolved
Cant find a good solution to the problem that should the plaint be rejected or the suit be allowed if an unregistered firm filed the suit but before any order could be passed it got registered. THERE ARE 2 conflicting judgments on the point (both by Andhra H.C.:Annopoorna Fertilisers vs. Arunodaya AIR 1994 AP 157 AND Atmuri Mahalaxmi AIR1990 AP288.) Is there any SC authority on the matter. This Law student will be highly obliged by your able guidance. )
Raj Kumar Makkad
(Expert) 20 January 2012
1. Jagat Mittar Saigal v.Kailash Chander Saigal, AIR 1983 Del 134,136
2. Loonkaram Sethia v Mr.Ivan E.John and Ors, AIR 1977 SC 336,347;
3. Bharat Sarvodaya Mills Co. Ltd v. M/s Mohatta Brothers, AIR (1969) Guj 178
4. AIR 1964 SC 1882
prabhakar singh
(Expert) 20 January 2012
The bare provisions themselves are very clearly laid down in section 69 of the partnership Act.
The firm must be registered before the institution of the suit which in your case is not hence the suit has to be sought for withdrawal with liberty to file a fresh suit which could be filed subject to law of limitation.
If no withdrawal is sought ,the Court can reject it under order VII rule 11(d).
However if the relief claimed in the suit is based not on the basis of some contract between plaintiff and defendant but on the basis of some provisions of law,the suit would not be hit by section 69 under consideration.
prabhakar singh
(Expert) 20 January 2012
In a case M/S. Raptakos Brett & Co. Ltd. vs Ganesh Property on 8 September, 1998
Equivalent citations: 1998 VIIAD SC 37, AIR 1998 SC 3085,the Apex court observed that
" So far as the applicability of the bar of Section 69INDIAN PARTERNERSHIP ACT, 1932^ Sub-section (2) of the Partnership Act is concerned, it is true that it is a penal provision which deprives the plaintiff of its right to get its case examined on merits by the court and simultaneously deprives the court of its jurisdiction to adjudicate on the merits of the controversy between the parties. It will, therefore, have to be strictly construed. It is also true that once on such construction of this provision the bar Under Section 69(2) of the Act gets attracted, then the logical corollary will be that the said provision being mandatory in nature would make the suit incompetent on the very threshold."
Point No. 2.
The second point framed in this case was "(ii) If the suit was so barred, whether subsequent registration of the plaintiffs firm under the Partnership Act could revive the suit or to make it competent at least from the date on which such registration pending the suit was obtained by the respondent firm"
The argument canvassed was as follows but the court left it to decide as relief was possible on point no 1 view.
"Point No. 2. :
28. In the light of our conclusion on Point No. 1, the alternative contention as to the effect of subsequent registration of the partnership on the suit would pale into insignificance and would become of academic interest. It is, therefore not necessary for us to closely examine this alternative contention. However, as both the learned senior counsel have pressed in service their respective contentions on this point for our consideration we may briefly refer to these contentions without expressing any final opinion thereon one way or the other.
29. Shri Nariman, learned senior counsel for the appellant submitted that the suit filed was barred from inception Under Section 69 Sub-section (2) of the Partnership Act-I it was a still born one and therefore, there was no question of reviving it on account of subsequent registration of the plaintiff partnership firm. In support of this contention he invited our attention to the decisions of various High Courts such as Jammu Cold Storage and General Mills Ltd. v. Khairati Lal and Sons, AIR (1960) Jammu & Kashmir page 101, Danmal Parshotam Dass (Firm) v. Babu Ram-Chhote Lai (Firm), , Dwijendra Nath Singh and Anr. v. Govinda and Anr.,
and also to two decisions of this Court in the cases of The Commissioner of Income Tax, Andhra Pradesh, Hyderabad v. Jayalakshmi Rice and Oil Mills Contractor Co., , and in Shreeram Finance Corporation v. Yasin Khan and Ors., and in the case of Sunderlal and Sons v. Yagendra Nath Singh and Anr., . He submitted that almost all the High Courts were unanimous in their decisions that if the suit filed by an unregistered firm is incompetent from the inception as per Section 69 Sub-section (2) subsequent registration of the plaintiff firm will be of no avail.
30. On the other hand, learned senior counsel for the respondent Dr. Singhvi submitted that so far as the High Courts decisions are concerned, the Nagpur High Court in Jakiuddin Badruddin and Ors. v. Vithoba Jagannath Gadali and Anr., AIR (1939) Nagpur 301 and Lahore High Court in Nazir Ahmad and Ors. v. Peoples Bank of Northern India Ltd., (in liquidation) through Official Liquidator and Ors., AIR 29 (1942) Lahore 289 had taken a contrary view. However, Shri Nariman for the appellant joined issue on this point and submitted that the aforesaid decision of the Nagpur High Court was not accepted by a latter decision of the same High Court in Abdul Karim v. Ramdas Narayandas Shop, ILR (1951) Nagpur page 31 and the aforesaid Lahore decision was expressly dissented to by two later decisions of the Punjab High Court in Des Raj Prem Chand and Anr. (Firm) v. Hira Lal Kali Ram and Anr. (Firm), and in Puran Mai Ganga Ram (Firm) v. The Central Bank of India Ltd., .
31. So far as this Court's decisions on this point were concerned Dr. Singhvi appearing for respondent submitted that in The Commissioner of Income Tax, Andhra Pradesh, Hyderabad v. Jayalakshmi Rice and Oil Mills Contractor Co., (supra) this court was not directly concerned with the question which is posed for our consideration. In the said decision the effect of registration of the firm in the subsequent assessment year as per Section 58 of the Partnership Act on the status of the erstwhile unregistered firm for the earlier assessment year fell for consideration of this court. It is of course true that Grover, J., speaking for this court in the said decision observed in passing that "even Under Section 69 of the Partnership Act which deals with the effect of non-registration it has been consistently held that the registration of a firm subsequent to the filing of the suit did not cure the defect" and that the observations of the Allahabad High Court in Danmal Parshotamdas (Firm) v. Babu Ram-Chhotelal (Firm), (supra) were mentioned with approval. Dr. Singhvi submitted that these observations were clearly obiter. In any case the High Court's decision on the point even if approved in general should not be treated to be a precedent while considering the scope and ambit of Section 69 Sub-section (2) of the Partnership Act and the effect of subsequent registration of an unregistered firm on the suit filed earlier when it was not so registered. For supporting this contention reliance was placed on a decision of this Court in Smt. Saiyada Mossarrat v. Hindustan Steel Ltd., Bhilai Steel Plant, Bhilai (M.P.) and Ors., paragraphs 4 and 5, The Mumbai Kamgar Sabha, Bombay v. Abdulbhai Faizullabhai and Ors., and Sreenivasa General Traders and Ors. v. State of Andhra Pradesh and Ors., . Relying on these decisions it was submitted that the observations of this court in (supra) which were
purely obiter should not be treated to be of any binding effect for deciding the present controversy. So far as the two member Bench decision of this Court in (supra) is concerned, it was submitted by Dr. Singhvi for the respondent that the said decision was directly concerned with second part of Section 69(2) of the Partnership Act and it held that subsequent amendment of the plaint filed by a firm whose reconstitution was not got registered under the Act earlier was of no avail and suit could not be saved. The said decision had no concern with the first part of Section 69(2). Even otherwise it had not taken into consideration various salient features of such litigations. According to Dr. Singhvi the salient features which were required to be considered were as under :
(i) Subsequent registration of the firm would serve the purpose of the Section namely, to enable only registered firms to file such suits;
(ii) Even if subsequently registered the firm would get the suit revived from the date of such registration sufficient penalty would get imposed on the plaintiff firm as it would loose more than three years mesne profits from the date of registration and other financial benefits prior to such a reviving as such subsequent register would have no retrospective effect.
(iii) the overriding need for such a liberal view would be to avoid Unnecessary multiplicity of proceedings based on mere technicalities.
In this connection it was submitted that even though the suit is found to be barred under Order 69 Rule (2) of the Partnership Act and, therefore, the plaint gets rejected under Order 7 Rule 11(d), as per Order 7 Rule 13 fresh suit can always be filed on the same cause of Action leaving aside the further question whether the said defective suit could be permitted to be withdrawn by the plaintiff under Order 23 Rule 1 Sub-rule (3) of the CPC and even in such a contingency the benefit of Section 14 of the Limitation Act would be available for filing a fresh suit. If that happens all that a subsequently registered plaintiff partnership firm could do is to immediately file a second suit on the ground that it is now already registered and that could only result in giving a fresh number to the suit which would further delay the proceedings before the court as it would be a freshly filed suit having a new number referable to the year of its filing. Thus ad-judicatory process would be further delayed. That such a situation in the present days when the court dockets are heavily loaded and arrears are mounting should be avoided and such a technical contention which does not advance the case of justice should be rejected. That the courts always lean in favour of curing such technical obstacles which have no bearing on the merits of the controversy between the parties. In this connection Dr. Singhvi pressed in service to two decisions of this Court. In Bansidhar Sankarlal v. Md. Ibrahim & Am., , Shah, J., speaking for the two Judge Bench held in paragraph 8 of the report that even if a suit or proceeding is instituted by a liquidator without obtaining leave of the company court as per the provisions of Section 171 of the Companies Act, 1913, which even barred the commencement of such proceedings against a company without the leave of the Court, once the leave is granted subsequently, the proceedings would be treated as not barred on the date granting of leave. That the aforesaid observations of this Court relied on by Dr. Singhvi are quite relevant and apposite for deciding the present controversy as such an approach would avoid placing reliance on pure technicalities and would further the ends of justice by enabling the court to adjudicate the matter on merits between the parties and unnecessary proliferation of- litigation will get avoided. In this connection Dr. Singhvi also invited our attention to another decision of this Court in Everest Coal Company Pvt. Ltd. v. State of Bihar and Ors., , wherein Krishna Iyer, J, speaking for a two Judge Bench of this Court considered the effect of filing of a suit by a receiver appointed under Order 40 Rule 1 of the CPC without obtaining prior leave of the Court. It was held in the said decision that if such a suit was filed by a receiver and if subsequently leave was obtained it would validate the suit. Krishna Iyer, J., noted that filing of the suit without leave of the Court would amount to contempt of the court and still subsequently obtained leave would cure the defect and remove the sin. In paragraph 11 of the Report it was observed that :
"Once amends are made by later leave being obtained, the gravamen is gone and the suit can proceed. The pity is that sometimes even such points are expanded into important questions calculated to protract Indian litigation already suffering from unhealthy longevity."
Placing reliance on these decisions of this Court, it was submitted by Dr. Singhvi that the decision of this Court in
(supra) requires to be reconsidered.
32. We, prima facie, find substance in what is contended by Dr. Singhvi for the respondent. It is obvious that even if the suit is filed by an unregistered partnership firm, against a third party and is treated to be incompetent as per Section 69 Sub-section (2) of the Partnership Act, if pending the suit before a decree is obtained the plaintiff puts its house in order and gets itself registered the defect in the earlier filing which even though may result in treating the original suit as still born, would no longer survive if the suit is treated to be deemed to be instituted on the date on which registration is obtained. If such an approach is adopted, no real harm would be caused to either side. As rightly submitted by Dr. Singhvi that, Order 7 Rule 13 of the CPC would permit the filing of a fresh suit on the same cause of Action and if the earlier suit is permitted to be continued it would continue in the old number and the parties to the litigation would be able to get their claim adjudicated on merits earlier while on the other hand if such subsequent registration is not held to be of any avail, all that would happen is that a fresh suit can be filed immediately after such registration and then it will bear a new number of a subsequent year. That would further delay the adjudicatory process of the court as such a new suit would take years before it gets ready for trial and the parties will be further deprived of an opportunity to get their disputes adjudicated on merits at the earliest and the arrears of cases pending in the court would go on mounting. It is axiomatic to say that as a result of protracted litigation spread over tiers and tiers of court proceedings in hierarchy, the ultimate result before the highest court would leave both the parties completely frustrated and financially drained off. To borrow the analogy in an English poem with caption "death the leveller", with appropriate modification, the situation emerging in such cases can be visualised as under : "upon final court's purple alter see how victor victim bleed". All these considerations in an appropriate case may require a re-look at the decision of the two member Bench of this Court in
(supra). However, as we have noted earlier, on the facts of the present case, it is not necessary for us to express any final opinion on this question or to direct reference to a larger Bench for reconsidering the aforesaid decision. With these observations we bring down the curtains on this controversy. Point No. 2, therefore, is answered by observing that it is not necessary on the facts of the present case in the light of our decision on the first point to decide this point one way or the other. Point No. 2 is, therefore, left undecided as not surviving for consideration."
R.Ramachandran
(Expert) 20 January 2012
Dear Pallawi,
The decision contained in AIR 1994 AP 157 states the correct legal position.
I FIND THAT NONE OF THE 4 DECISIONS CITED BY MR. MAKKAD HAS ANY RELEVANCE WHATSOEVER TO THE QUESTION POSED BY YOU.
Devajyoti Barman
(Expert) 20 January 2012
Ok, even the decision cited by Mr Singh is a good one.
pallawi
(Querist) 21 January 2012
Thanks to all the learned and helpful people here. Prabhakar sir the exerpts cited by you helped me resolve my doubts. Once again thanks to all of you.
M V Gupta
(Expert) 21 January 2012
Thanks to Shri Prabhakarji for reproducing extensively the relevant excerpts from the Judgement. Though I have not faced any such situation it is relevant to note the cases sited by him, which I have done. Thanks to the querist also for raising the issue.
