CWP No.19730 of 2012 (O&M) .***** IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH CWP No.19730 of 2012 (O&M) Date of decision:30.11.2012 M/s Shiva Transport Company ...Petitioner versus Food Corporation of India and others ...Respondents CORAM: Hon'ble Mr.Justice A.K.Sikri, Chief Justice Hon'ble Mr.Justice Rakesh Kumar Jain Present: Mr.Vivek Suri, Advocate, for the petitioner.
Mr.K.K.Gupta, Advocate, for the respondents.
***** Rakesh Kumar Jain, J.
Petitioner has prayed for issuance of a writ in the nature of mandamus directing the respondents to consider it for the tender floated on 03.08.2012 for Road Transport Contract from Gohana to Delhi FCI Godown and not to reject its technical bid on the ground that the firm of the petitioner, which is duly registered with the District Registrar of Firms and Societies, Sonepat, should be registered afresh.
The facts in brief are that the petitioner firm was comprising of two partneRs.namely, Sunil Khasa and Narender Singh.
It came into being on 16.06.2005 as partnership at Will in which it was provided that on the CWP No.19730 of 2012 (O&M) .***** death of any of the partneRs.the business shall not, ipso facto, stands dissolved but shall be continuing by the legal heirs or representatives of the deceased with the surviving party.
The firm was duly registered with the Registrar of FirMs.Haryana at Serial not SNP-45 of 2005.
It carried on the business of handling the transport of the respondents as well as for other State procuring agencies.
Narender Singh, one of the partners of the firm, died on 07.04.2010 and after his death, his legal heiRs.namely, his wife and mother, who are Class-I heiRs.joined the business and a fresh partnership deed was executed on 08.04.2010.
The Registrar of Firms was accordingly informed and subsequently on 02.09.2011, the necessary amendment in Form-A was carried out on addition of Smt.
Savita and Smt.
Jogindri as partneRs.The respondents floated a tender on 03.08.2012 for Road Transport Contract from Gohana to Delhi FCI Godown.
The petitioner Firm applied for the tender which comprises of technical bid and price bid.
After qualifying the technical bid, the price bid is to be opened and in case its rates are lowest, then the contract is to be awarded.
The petitioner deposited earnest money of `9,60,000/- with the respondents for total estimated value of the contract of `4.80 Crores.
The petitioner submitted its technical bid as well as the price bid and was apprehensive that its technical bid may not be rejected on account of death of one of its partner.
At the time of notice of motion, it was ordered that the technical bid of the petitioner shall not be rejected.
In the written statement filed by the respondents, the stand has CWP No.19730 of 2012 (O&M) .***** been taken that in terms of Section 42(c) of the Partnership Act, 1932 (hereinafter referred to as the “Act”.).on the death of one of the two partneRs.the earlier partnership firm stands dissolved, therefore, the petitioner is required to seek new registration after induction of legal heirs of the deceased partner and in the absence of such a procedure having been undertaken, the petitioner is not eligible to be considered in response to the tender inquiry for appointment of Handling and Transport Contractor from Gohana to Delhi FCI godown as it is only a registered partnership firm or a sole proprietorship firm concern or a private limited company or a public limited company which is eligible for applying in response to the tender notice.
Learned counsel for the petitioner has argued that no doubt, subject to the contract, the partnership firm is dissolved on the death of one of the two partners in terms of Section 42(c) of the Act, but it is provided in the partnership deed that in case of death of one of the partneRs.his legal heirs would be inducted as partners in the partnership firm with the intention that it would not amount to dissolution.
Thus, Section 42(c) of the Act is not applicable insofar as the requirement of new registration is concerned.
In this regard, the judgment of the Supreme Court in the case of Sharad Vasant Kotak and others v.
Ramniklal Mohanlal Chawda and another, AIR 199.Supreme Court 877 has been relied upon.
On the other hand, learned counsel for the respondents has submitted that after the dissolution of the firm in terms of Section 42(c) of the Act where there are only two partneRs.the surviving partner do not CWP No.19730 of 2012 (O&M) .***** constitute the firm within the meaning of Section 16(1)(b) of the Income Tax Act.
In this regard, he has relied upon a decision of the Supreme Court in the case of ComMr.of Income-tax, Madhya Pradesh, Nagpur and Bhandara Nagpur (In both the Appeals).v.
Seth Govindram Sugar Mills (In both the Appeals).AIR 196.Supreme Court 24.
We have heard learned counsel for the parties and perused the record with their able assistance.
The controveRs.in this case is in a very narrow compass as we have to adjudicate as to whether in case of dissolution of a firm on account of death of one of the partneRs.the re-constituted partnership firm requires fresh registration or it requires only an intimation to be given to the Registrar of the Firms and in case of non-intimation, the firm is liable to be penalized.
In order to appreciate the arguments of both the counsel for the parties, some relevant provisions of the Act are required to be set out, which are as under:- “42.
Dissolution on the happening of certain contingencies.- Subject to contract between the partners a firm is dissolved,-- (a) if constituted for a fixed term, by the expiry of that term; (b) if constituted to carry out one or more adventures or undertakings, by the completion thereof; (c) by the death of a partner; and (d) by the adjudication of a partner as an insolvent.”
Effect of non-registration.- (1) No suit to enforce a right arising from a contract or conferred by this Act shall be instituted in any court by or on behalf of any person suing as a CWP No.19730 of 2012 (O&M) .***** partner in a firm against the firm or any person alleged to be or to have been a partner in the firm unless the firm is registered and the person suing is or has been shown in the Registrar of Firms as a partner in the firm.
(2) No suit to enforce a right arising from a contract shall be instituted in any Court by or on behalf of a firm against any third party unless the firm is registered and the persons suing are or have been shown in the Register of Firms as partners in the firm.
(3) The provisions of sub-sections (1) and (2) shall apply also to a claim of set-off or other proceeding to enforce a right arising from a contract, but shall not affect,- (a) the enforcement of any right to sue for the dissolution of a firm or for accounts of a dissolved firm, or any right or power to realize the property of a dissolved firm, or (b) the powers of an official assignee, receiver or Court under the Presidency-towns Insolvency Act, 1909 (3 of 1909) or the Provincial Insolvency Act, 1920 (5 of 1920) to realize the property of an insolvent partner.
(4) This section shall not apply,-- (a) to firms or to partners in firms which have no place of business in the territories to which this Act extends, or whose places of business in the said territories, are situated in areas to which, by notification under section 56, this Chapter does not apply, or (b) to any suit or claim of set-off not exceeding one hundred rupees in value which, in the Presidency- towns, is not of a kind specified in section 19 of the Presidency Small Cause Courts Act, 1882 (5 of 1882).or, outside the Presidency-towns, is not of a kind specified in the Second Schedule to the Provincial Small Cause Courts Act, 1887 (9 of CWP No.19730 of 2012 (O&M) .***** 1887).or to any proceeding in execution or other proceeding incidental to or arising from any such suit or claim.”
Penalty for contravention of section 60, 61, 62 or 63.-- If any statement, intimation or notice under section 60, 61, 62 or 63 in respect of any registered firm is not sent or given to the Registrar, within the period specified in that section, the Registrar may, after giving notice to the partners of the firm and after giving them a reasonable opportunity of being heard, refuse to make the suitable amendments in the records relating to the firm, until the partners of the firm pay such penalty, not exceeding ten rupees per day, as the Registrar may determine in respect of the period between the date of expiry of the period specified in sections 60, 61, 62 or as the case may be 63 and the date of making the amendments in the entries relating to the firm.”
According to Section 42(c) of the Act, a partnership firm would dissolve on the happening of certain contingencies which includes dissolution by death of a partner.
Section 69 talks of effect of non- registration where circumstances have been given in which a right cannot be enforced by way of suit in case the firm is not registered.
Section 69A provides for penalties if there is a contravention of Sections 60, 61, 62 or 63 of the Act in case of non-delivery of intimation in the office of Registrar of Firms within the specified period.
The respondents have refused to open the technical bid submitted by the petitioner on the ground that the firm stood dissolved on the death of one of its two partners and a fresh registration has not been obtained, reliance has been placed on ComMr.of Income Tax's case CWP No.19730 of 2012 (O&M) .***** (supra).In the said case, Nandlal and Bachhulal, both sons of Govindram, formed a partnership firm on 28.09.1943 in order to carry out the business of Sugar Mills.
Nandlal died leaving behind members of his branch of the joint family.
After the death of Nandlal, Bachhulal carried on the business of Sugar Mills and applied, after the death of Bachhulal, for registration on the basis of agreement of partnership executed prior to his death.
The Income Tax Officer refused to register the partnership on the ground that after the death of Nandlal, the partnership was dissolved and thereafter Bachhulal and the minors could be treated only as an association of persons.
On that footing, an order was passed by assessing the income of the business of the firm as that of an association of persons.
Against the said order, two appeals, one against the order refusing registration and other against the order of assessment, were filed before the Appellate Assistant Commissioner which were dismissed.
The appeals filed before the Income- tax Appellate Tribunal were also dismissed.
The assessee made two applications to the Tribunal for referring certain questions of law to the High Court, but they were also dismissed.
Thereafter, at the instance of the assessee, the High Court directed the Tribunal to submit the following two questions of law for its decision:- “(1) Whether on the facts and in the circumstances of the case, the status of the assessee, “Seth Govindram Sugar Mills, Mahidpur Road, Proprietor Nandlal Bachhulal Jaora”., is an Association of Persons or a firm within the meaning of Section 16(1)(b) of the Income-tax Act.
(2) Whether the order of the Appellate Tribunal is illegal on account of the Tribunal having committed an error of CWP No.19730 of 2012 (O&M) .***** record and having omitted to consider the relevant material in the case.”
The High Court held on the fiRs.question that in the assessment year 1949-50 the status of the assessee was that of a firm within the meaning of S.
16(1)(b) of the Income-tax Act and on the second question it held that the Tribunal misdirected itself in law in reaching the conclusion that the parties could not be regarded as partneRs.Thus, two appeals were preferred by the Income Tax department before the Supreme Court.
It has been categorically mentioned in para no.3 of the aforesaid judgment that “as the outset we must make it clear that the question of registration could not be agitated in these appeals, as that question was not referred to the High Court.
We shall, therefore, only consider the points raised by the questions referred to the High Court and held by the High Court against the appellant.
Indeed, the only effective question is whether during the assessment year 1950-51 the assessee was a firm or an association of persons”.It is needless to mention that the partnership deed was executed between Nandlal and Bachhulal on 28.09.1943.
Nandlal died on 09.12.1945 and for the assessment year 1950-51, the firm applied for registration on the basis of partnership deed dated 28.09.1943.
The question that has been decided by the Supreme Court is whether on the death of Nandlal, his heiRs.i.e., the members of his branch of the family, automatically became the partners of the said firm.
While deciding the said question, it was held that the partnership between Nandlal and Bachhulal came to an end on the death of Nandlal on 09.12.1945, but the question of law was decided in favour of the assessee and the appeals filed by the CWP No.19730 of 2012 (O&M) .***** Income Tax Department were dismissed.
This judgment relied upon by learned counsel for the respondents is of no help to it as the question of registration was neither raised not decided.
On the contrary, the judgment relied upon by learned counsel for the petitioner in Sharad Vasant Kotak and otheRs.(supra) is fully applicable.
In the said case, a partnership firm called M/s Paramount Builders came into being with 7 partners on 29.11.1979 and was registered on 15.12.1980 under Registration No.158675 with the Registrar of FirMs.On 06.05.1986, Shri Mohanlal Hinji Chawda, a partner of the firm, died and replaced by his widow Smt.
Jijiben Mohanlal Chawda.
Thereafter, another deed of partnership was executed consisting of the old six partners and Smt.
Jijiben Mohanlal Chawda but the induction of new partner was not brought to the notice of the Registrar of Firms by forwarding the required particulaRs.Still later on 03.11.1992, another partnership deed was brought into existence consisting of the same partners and in September, 1994, another partner Smt.
Kotak also passed away but the fact of her death was not intimated to the Registrar of FirMs.The fiRs.respondent in that case gave a notice of dissolution of the firm to the appellants and also filed a suit for dissolution of the partnership firm.
During the pendency of the suit, amendment was sought that subsequent changes or modifications in the partnership deed of M/S.Paramount Builders under the deed of partnership dated 20.10.1986 are merely in the nature of changes or modifications which do not affect registration of the said firm for entitling a partner to institute a suit for reliefs against the partners on dissolution of CWP No.19730 of 2012 (O&M) [ 10 ].***** firMs.The said amendment was contested on the ground that registration already given to the firm ceased to have validity and the partnership as at present must be deemed to be an unregistered one and, therefore, the suit was hit by S.
69(2A) in the Partnership Act.
The trial Judge accepted the objections and held that Section 69(2A) of the Act creates a bar on the threshold of the filing of the suit for the relief covered in the suit and the very suit filed by the plaintiff was incompetent and such application for amendment could not be permitted.
Aggrieved against the rejection of the amendment application, an appeal was preferred before the Division Bench of the High Court which was of the view that the registration of the firm continues to be in force notwithstanding any reconstitution of the firm and even when dissolution takes place, the registration of the firm continues.
Thus, the amendment was permitted which led to the filing of Special Leave Petition.
The Court was dealing with Section 69(2A) (Maharashtra Amendment) which prescribe that no suit to enforce any right for the dissolution of a firm or for accounts of a dissolved firm or any right or power to realize the property of a dissolved firm shall be instituted in any court by or on behalf of any person suing as a partner in a firm against the firm or any person alleged to be or to have been a partner in the firm, unless the firm is registered and the person suing is or has been shown in the Register of Firms as a partner in the firm.
It was found by the Supreme Court that the partnership was entered into on 29.11.1979 and was duly registered and certificate of registration was granted.
It was concluded that in case of reconstitution of firm, there is no necessity to get a fresh registration and if by virtue of non-compliance of certain mandatory CWP No.19730 of 2012 (O&M) [ 11 ].***** provisions in not informing the Registrar of firms about the change in the constitution of the firm, certain penalties provided in the Act alone are attracted which will not lead to the conclusion that the registration of the firm ceased.
This conclusion was drawn on a conjoint reading of Sections 58-63 and the forms prescribed thereunder.
The amendment was, thus, ultimately allowed.
In the case of Durga Dass Janak Raj v.
Preete Shah Sant Ram, AIR 195.(P&H) 530, the Division Bench of this Court was dealing with a case where dissolution of the firm had taken place on account of the death of one of the partners of the firm.
It was held that “while considering the provisions contained in Sections 58 to 63 it is noteworthy that they are permissive and enabling provisions.
Section 69(2) does create a bar to the institution of a suit by or on behalf of a firm against a third party, but the only conditions which are provided and which have to be fulfilled for institution and trial fo the suit are – (a) that the firm should be registered, and (b) the persons suing should be shown in the Register of Firms as partneRs.There is no provision in Section 69, or in Chapter VII dealing with registration of firms which makes fresh registration necessary in any of the contingencies provided for by Sections 61 to 63.
Hence, keeping in view the aforesaid discussion, we are of the considered opinion that even after the death of partner Narender Singh of the petitioner firm which was already registered and death of the deceased partner was intimated to the Registrar of Firms and immediately thereafter, the legal heirs of Narender Singh were inducted in the firm and a new CWP No.19730 of 2012 (O&M) [ 12 ].***** partnership deep was executed which was also brought to the notice of the Registrar of Firms who had recorded the same in Form-A prescribed under the Act, the old registration of the Firm continue and does not call for any fresh registration after the death of Narender Singh, as the decision of the Supreme Court in ComMr.of Income Tax's case (supra) is not at all applicable to the facts and circumstances of the present case rather the decision of the Supreme Court in Sharad Vasant Kotak and otheRs.case (supra) and decision of this Court in Durga Dass Janak Raj's case (supra) are applicable.
Accordingly, the writ petition is allowed and direction is hereby issued to the respondents to consider the petitioner firm for the tender floated on 03.08.2012 and not to reject its technical bid on the ground that the firm was not registered afresh after the death of Narender Singh as it has been reconstituted and the reconstitution was duly informed to the Registrar of FirMs.(A.K.Sikri) (Rakesh Kumar Jain) Chief Justice Judge 30.11.2012 vinod*