1. This matter has been placed on board for speaking to the minutes of a decree under the following circumstances.
2. The plaintiffs sued as a firm. Defendants. Nos. 1 and 2 had given instructions on behalf of defendant No. 3 for raising a certain loan and the claim in suit arose out of such instructions.
When the suit reached hearing before me on 25-11-1952, defendant No. 2 appeared in person and admitted the claim. He stated that he had paid Rs. 44,000 already and had agreed to compromise the rest of the claim for Rs. 20,000 payable in. four instalments in terms signed by him and the-plaintiffs. The consent terms were put in and have been marked Ex. A. No decree was, however, passed on that day against defendant No. 2 because defendant No. 1 contested the suit, and I thought it advisable that a decree should be passed when the whole suit had been disposed of.
Thereafter the suit was contested by the other defendants and adjourned from time to time. In the course of the evidence it transpired that the plaintiffs were not a registered firm, and thereupon, an issue was raised and tried as to whether the plaintiffs were a duly registered firm at the date-of the suit. On 13-1-1953, I held that the plaintiffs were not a duly registered firm, and I therefore' dismissed the suit with costs.
When this order was passed by me on 13-1-1953, my attention was not drawn to the consent terms, as between the plaintiffs and defendant No. 2 which, had been recorded on 25-11-1952, nor was any application made for a decree In terms of the consent.
3. Mr. Laud for the plaintiffs now applies for a decree against defendant No. 2 in terms of consent between the plaintiffs and defendant No. 2 which already have been recorded. The question is whether, having regard to the fact that the Court has now held that the plaintiffs are not a duly registered firm, I can proceed to pass a consent decree.
4. Now, Section 69, Partnership Act provides that an unregistered firm shall not be entitled to institute any suit to enforce a right arising from a contract. Therefore, the effect of the section is that a suit by an unregistered firm is at its inception bad. The provisions of Section 69 are mandatory and unlike their counterpart in England there is no power in the High Court to grant to the defaulting partnership any relief against the disability imposed by the section.
Section 69 does not confer any right on the defendant which he can at his option waive. It debars an unregistered firm from filing a suit, and the moment the Court is satisfied that the-plaintiffs are an unregistered firm, the Court must treat the suit as if it had not been filed and proceed to dismiss it.
It is true that the section does not in any manner affect the validity of a contract between the firm and any third party and that the disability imposed by the section is one which is capable of being got over by the plaintiffs registering their firm before filing a suit. But that does not affect the true position as it emerges from the provisions of Section 69, viz. that until the firm is registered, no suit by the firm is competent in respect of any right arising to the firm out of any contract of the firm with third parties. In my opinion, therefore, the consent of the defendant cannot make a suit which is initially bad, good; nor can it enable a Court to pronounce a decree in favour of an unregistered firm when the Court has found that the plaintiffs were an unregistered I firm.
5. There is a decision of McNair J. reported in-- 'Gopinath Motilal v. Ramdas : AIR1936Cal133 , where the learned Judge was dealing with the question as to whether a defendant who had not pleaded that the suit was not maintainable by reason of Section 69 of the Partnership Act was entitled to raise such an issue at the hearing. The learned Judge held that he was, and in doing so the learned Judge relied upon the observations of Lord Sumner in -- 'Surajmul Nagoremull v. Triton Insurance Co. , where their Lordships of the Privy Council had to deal with a case of an unstamped document, and Lord Sumner observed at p. 84:
'The suggestion may be at once dismissed that it is too late now to raise the section as an answer to the claim. No Court can enforce as valid that which competent enactments have declared shall not be valid, nor is obedience to such an enactment a thing from which a Court can be dispensed by the consent of parties, or by a failure to plead or to argue the point at the outset.'
The learned Judge also referred to the case of -- 'Nixon v. The Albion Marine Insurance Co.', (1867) 2 Ex 338 (C). In that case the question was whether the plaintiffs were entitled to recover from, the defendants a sum due on an alleged contract of insurance. No covering note or memorandum of insurance was stamped as required by law nor was there a policy stamped in accordance with the law. For the purposes of the case, however, the parties agreed that a valid policy should be deemed to have been executed hi the defendants' ordinary form. The Court ordered the case to be struck out on the ground that they could not hear it without sanctioning what amounted to an evasion of the stamp laws.
Kelly C. B. observed at p. 339 :
'If we were to hear this case, we should be assisting the parties to evade the statutes requiring a policy and covering note to be stamped. Whatever course the plaintiffs and defendants might have chosen to take in pleading, we cannot sanction an evasion of the stamp laws, when it comes under our notice. The case must be struck out.'
McNair J. at p. 135 of the report -- : AIR1936Cal133 , observes that the reasoning and the decision of these two cases appeared to him to be entirely applicable to the argument which had then been raised with regard to the provisions of the Partnership Act. With respect to the learned Judge, there is a great deal of difference between an unstamped document which is required by law to be stamped and which defect cannot be cured by any act of parties and failure to register a firm which can be cured by the partners of the firm getting the firm registered. The analogy between' the two cases therefore does not appear to me to be complete.
Nonetheless, the provisions of Section 69, Partner-ship Act are in themselves, in my opinion, sufficient for the purpose of deciding that once the Court has found that the plaintiffs' firm is an unregistered firm, as the plaintiffs have no right in law to institute a suit as a firm, the Court can pass no order in the suit as such except of course an order of dismissal. No act of the defendant can make a suit good which is at its inception bad and therefore no question of the defendant waiving any right arises in such a case.
in my opinion, therefore, having already found that the plaintiffs are not a registered firm, I cannot proceed to pass a decree in terms of the consent between the plaintiffs and defendant No. 2. It may well be that this agreement will confer upon the plaintiffs rights which they can enforce in appropriate proceedings.
6. I, therefore, dismiss the suit as against defendant No. 2. I make no order as to costs as defendant No. 2 had consented to a decree and has now profited by the statutory provisions of Section 69, Partnership Act.
7. Suit dismissed.