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Gandhi Company Vs. Krishna Glass Pvt. Ltd. - Court Judgment

LegalCrystal Citation
SubjectContract
CourtMumbai High Court
Decided On
Case Number Suit No. 17 of 1973 (Bom. Original side)
Judge
Reported in(1983)85BOMLR179; 1983MhLJ1036
AppellantGandhi Company
RespondentKrishna Glass Pvt. Ltd.
Excerpt:
.....out of contract--plaint signed by person mho on date of suit not shown as partner in register affirms--suit whether hit by section 69(2)--subsequent entry of that person as partner of firm in register of firms whether saves dismissal of suit.;the two conditions proscribed by section 69(2) are clearly cumulative and both the conditions would be required to be satisfied before a suit can be properly instituted. further the requirement of section 69 is a mandatory one and it is obligatory on the court to dismiss a plaint filed without compliance with both the requirements. it is not open to the defendants to waive these requirements. where en the date on which a suit is filed in the firm name to enforce a right of the firm arising from a contract with the plaint signed by a person who on..........of the preliminary issues.2. the suit is filed by gandhi company, described as a partnership firm registered under the indian partnership act and carrying on business at 90/92, kazi syed street, bombay-400 003 br, in para one of the plaint it is, inter alia, stated that the plaintiffs are a partnership firm registered under the indian partnership act. it is stated further that they, inter alia, carry on business of supply of silica, sand, dolomite limestone and other minerals.3. in para. 7 of the plaint it is stated that there was a talk between one rasikbhai gandhi, described as a partner of the plaintiffs, and one shri dhirubhai boda, who was connected with the defendants company. it is rasiklal narottamdas gandhi who has signed the plaint on behalf of the plaintiffs firm and.....
Judgment:

S.K. Desai, J.

1. The suit to-day has been placed on board for determination of the preliminary issues.

2. The suit is filed by Gandhi Company, described as a partnership firm registered under the Indian Partnership Act and carrying on business at 90/92, Kazi Syed Street, Bombay-400 003 BR, In para one of the plaint it is, inter alia, stated that the plaintiffs are a partnership firm registered under the Indian Partnership Act. It is stated further that they, inter alia, carry on business of supply of silica, sand, dolomite limestone and other minerals.

3. In para. 7 of the plaint it is stated that there was a talk between one Rasikbhai Gandhi, described as a partner of the plaintiffs, and one Shri Dhirubhai Boda, who was connected with the defendants company. It is Rasiklal Narottamdas Gandhi who has signed the plaint on behalf of the plaintiffs firm and also verified the same. In the verification clause the contents of para. 7 of the plaint have been declared as true to the knowledge of the said Rasiklal Narottamdas Gandhi.

4. The plaint in the suit was lodged on December 11, 1972 although the order directing it to be taken on file was passed subsequently on January 10, 1973.

5. The defendants filed their written statement on August 19, 1974 and in the same, as initially filed, the defendants have pleaded to para 1 of the plaint in the following words:

With reference to para. 1 of the plaint the defendants are not aware of and do not admit that the plaintiffs are a registered partnership firm or carry on business of supply of silica or dolomite limestone or other minerals as alleged or at all.

6. I may state that this is the normal plea taken since the fact of registration would be one within the special knowledge of the plaintiff and further, since the certified copy of the extract from the Register of Firms is not to be found in the list of documents annexed to the plaint on which the plaintiffs state they will be relying. Thus, there was no occasion for the defendants to take inspection although they could have tried to seek inspection of the original register from the Registrar of Firms.

7. It may now be mentioned that when the suit reached hearing and after the pleadings were read a xerox copy of the extract from the register of firms of which a certified copy has been put in and marked Exhibit 'A' before me subsequently, was seen by defendants' Counsel, It was on that occasion that it was submitted that the suit as filed suffered from non-compliance with the mandatory requirements of Section 69 of the Indian Partnership Act and was liable to be dismissed. On March 15, 1983 the issues were settled and issue as to non-registration of the firm and the issue that the said Rasiklal Narottamdas Gandhi was not shown as a partner, were directed to be tried as preliminary issues.

8. The following issues would be the proper preliminary issues. They are based on two parts of Section 69 of the Indian Partnership Act as would be apparent:

Issue No. 1 : Whether the plaintiffs firm was properly registered as required by Section 69 of the Indian Partnership Act'?

Issue No. 2 : Whether the said Rasiklal Narottamdas Gandhi was shown as a partner in the register of firms on the date of the filing of the suit?

Issue No. 3 : If answer to either of the aforesaid issues is in the negative, whether the sail is liable to be dismissed ?

9. On March 21, 1983 the suit was fixed for trial of preliminary issues and on that day Mr. Munshi on behalf of the plaintiffs made a submission that the defendants must be deemed to have waived the point in view of the plea taken in para 8 of the written statement which plea has been earlier extracted.

10. As far as this High Court is concerned, it has been held in Govindmal Gianchand v. Kunj Biharilal (1953) 56 Bom. L.R. 348, that the requirements prescribed by Section 69 of the Indian Partnership Act cannot be waived by the defendants. Tendolkar J. has observed in his aforesaid judgment that the provisions of Section 69 are mandatory and there is no power in the High Court to grant to the defaulting plaintiff any relief against the disability imposed by the section. It has been further observed that the section does not confer a right on the defendant which he can waive. It has been categorically stated that no act of the defendant can make a suit good which is at its inception bad and, therefore, no question of any waiver on the part of the defendants would seem to arise.

11. However, since I was of opinion that a fairly substantial claim in equity may fail for non-compliance with technical requirements, I directed Mr. Chinai who was then appearing on behalf of the defendants to apply for amendment of the written statement which he did by submitting an oral draft amendment in Court. The matter was, however, kept back till to-day when an engrossed draft is available and the written statement has been directed to be amended as per the draft. These facts have been recorded in my order dated March 21, 1983.

12. By the amendment permitted to be carried out the following paragraph has been added to the written statement as para 14A:

14.A. The Defendants say and submit that the plaintiff firm of which one Rasiklal N. Gandhi is a partner is not registered in accordance with the previsions of Section 69 of the Indian Partnership Act, 1932. This fact came to light only at the time of hearing of the suit in February/ March, 1983, when a zerox copy of the certificate of registration was produced for the first time. In the circumstances the suit is liable to be dismissed on this ground alone. It is denied that the plaintiffs arc a registered partnership firm.

13. We now come to the crucial issue whether there has been any non-compliance with the provisions contained in Section 69 of the Indian Partnership Act. Sub-sections (1) and (2) of Section 69 are material for our purposes and they may now be extracted. They read as under:

69. (1) No suit to enforce a right arising from a contract or conferred by this Act shall he 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.

(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.

Let us now try to apply these provisions to the facts of the instant case.

14. The certified copy of the extract from the Register of Firms issued on December 11, 1973 has been tendered in the suit and marked Exhibit 'A'. This shows that the firm started on October 29, 1962 with five partners although it was got registered on September 11, 1964 only. There were in addition three minors admitted to the benefits of the partnership but their date of admission to the benefits of the partnership is indicated as October 29, 1962 and the entries give the respective dates on which the minors would attain majority. It may be mentioned in passing that within six months of the said dates the minor would have to make the election as provided by the proviso to Sub-section (5) of Section 30 of the Indian Partnership Act. The entry in respect of Bharatkumar Dhirajlal Gandhi is a little odd. It would appear that the person typing the extract has not copied out the necessary dates. He would also seem to be a minor admitted to the benefits of the partnership, although it is not possible to make a categorical statement.

15. Thereafter on December 10, 1973 an entry is made in the register of firms which shows that two partners viz. Rasiklal Narottamdas Gandhi and Kiritkumar Maneckchand Gandhi joined the partnership firm and became partners thereof on April 8, 1966.

16. Exhibit 'A' read together with the plaint establishes the following position:

(i) The suit is based on a contract viz. an express agreement arrived at in 1969 or 1970;

(ii) At the time of accrual of the cause of action the firm consisted of seven partners plus such of the minors who had either elected to be partners or not exercised their option within a period of six months;

(iii) On the date of filing of the suit which suit was filed on behalf of the firm by the said Rasiklal N. Gandhi who also verified the plaint., the said Rasiklal N. Gandhi was not shown in the Register of Firms as a partner of the plaintiffs firm ;

(iv) One year after the filing of the suit the necessary entry showing the said Rasiklal N. Gandhi as a partner has been made in the Register of Firms.

17. It is not necessary to mention that the disability imposed by Section 69 of the Indian Partnership Act would come into play only if the suit is one to enforce a right arising from a contract and not otherwise. This aspect does not arise for consideration in the present case as the suit is admittedly based on an oral contract.

18. We have before us a suit filed in the firm name with the plaint being signed by the said Rasiklal N. Gandhi who was, on the date of the institution of the suit, not shown in the Register of Firms as a partner. The short question then which is required to be answered is whether the suit is hit by the mandatory requirements of Section 69?

19. As far as registration of the firm is concerned, it has been held by a division bench of the Bombay High Court in Prithvisingh Devisingh v. Haji Hasanalli Vazirkhan : AIR1951Bom6 , that unless a partnership firm is registered, the institution of a suit by it is barred, and that initial defect cannot be cured by any subsequent registration of the partnership firm. The question is whether there is a defect by non-showing of the said Rasiklal N. Gandhi as a partner on the date of the institution of the suit and if it is held that there is a defect, then whether the defect can be cured by & subsequent entry made showing his name as a partner but with effect from a date anterior to the accrual of the cause of action.

20. It would appear that there is a divergence of views in the several High Courts on the proper construction of Section 69, particularly Sub-section (2) thereof, and certain courts have construed the word 'and' as 'or' whereas other Courts have postulated that there are two requirements and not one. Mr. Munshi has submitted that the word 'and' is required to be construed in the disjunctive sense and read as 'or'. If his submission were to be accepted, then it is clear that the firm is registered although there has been change in the composition which is not noted, and the section would not come in the way of the plaintiffs as the first requirement would appear to have been satisfied.

21. Mr. Munshi, in this connection, referred me to a decision of the Patna High Court in J. Purshuttam Das and Co. v. R.R. Brothers : AIR1973Pat300 , which has followed with approval an earlier decision of the Andhra Pradesh High Court in M.J. Velu Mudaliar v. Sri Venkateswara Finance Corporation : AIR1971AP63 Both these Courts have expressly dissented from the contrary decisions of the Calcutta and the Punjab High Court in Hansraj v. G.N. Champalal 66 C W.N. 262, and Firm Buta Mai Dev Raj v. Chanan Mai A.I.R [1964] P & H 270 respectively.

22. In Hansraj v. G.N. Champalal (supra), a single Judge of the Calcutta High Court rejected the construction canvassed for by Mr. Munshi before me and the relevant observations are to be found at page 268 of the report. The said Calcutta case was followed with approval by a division bench of the Punjab High Court in Firm Buta Mal Dev Raj v. Chanan Mai (supra). The decision of the Patna High Court was cited before the division bench of the Punjab High Court which, however, preferred to follow its own earlier view and the view of the Calcutta High Court. The head note of the Punjab case extracts the ratio of the decision and it may now be set out:

In order to institute a suit a partnership firm must not only be a registered firm but also all the persons who are partners in the firm at the time of the institution of the suit must be, or have been, shown as such in the Register. The expression 'the persons suing' in Section 69(2) must mean the partners in the firm. The use of the plural 'persons' is obviously deliberate, since -while a singular may also mean the plural, the plural can never mean, singular. When a suit is instituted in the name of a firm the suit is on behalf of all the partners, and not only such of them as are shown, in the Register as such, and all the partners must be 'the persons suing' contemplated in Section 69(2). Thus, where a certain person who had been a partner from the beginning of the constitution of the plaintiff partnership and was still a partner at the time of the institution of the suit but had never been shown as such along with two other partners iii the Register, the suit by such a firm is incompetent.

23. Finally, we have a very elaborate judgment of the Gujarat High Court dealing with the question in an exhaustive manner. The said judgment is Bharat Sarvodaya Mills Co. Ltd., Ahmedabad v. Mohatta Brothers a Firm : AIR1969Guj178 ,. It has been held by the Gujarat High Court that Section 69(2) imposes two mandatory requirements and that unless both the conditions are fulfilled, there would be a fatal bar to the entire suit and it would be wholly incompetent in a Court of Law. In the view of the Gujarat High Court, both the conditions were cumulative conditions. The Gujarat High Court, however, held that no separate registration was necessary where there was a reconstitution of a continuing firm. However, in its view the second condition must also be complied with by showing that not only the firm was registered but also that all the partners at the date of the accrual of the cause of action are or have been shown in the Register of Firms as partners. Obviously, they must be shown as partners on the date on which the suit is filed and not at a later date. .Even if the Gujarat view is correct, then the suit filed by the firm of Gandhi Company by the hand of its partner Rasiklal N. Gandhi must fail as the said Rasiklal N. Gandhi was not shown as a partner in the Register of Firms on the date when the suit was instituted.

24. It may be mentioned that after the Gujarat High Court gave its decision in Mohatta Brothers' matter (supra) dismissing the suit, the said decision came to be considered by the Supreme Court in Mohatta Brothers v. The Bharat Sarvodaya Mills Co, Ltd. : [1976]3SCR1022 On a review of the factual evidence the Supreme Court held that one Satyavati Mohatta had not become a partner of the plaintiff firm which factual conclusion got over the defects indicated by the Gujarat High Court and which had compelled it to allow the appeal and dismiss the suit. On this footing, the matter was remanded back to the Gujarat High Court and the Supreme Court found it unnecessary to go into the legal discussion which had been embarked on by the division bench of the Gujarat High Court.

25. Mr. Chinai drew my attention to two decisions of the Supreme Court in which the provisions of Section 69 are adverted to. The first of these two decisions is Commissioner of Income Tax, Andhra Pradesh, Hyderabad v. Jyalakshmi Rice and Oil Mills Contractor Co. : [1971]79ITR549(SC) . In para 4 the Supreme Court has reiterated the Bombay view expressed by the division bench in 52 Bom. L.R. 862 that registration of a firm subsequent to the filing of the suit would not cure the defect contemplated by Section 69. It has been observed further that the registration of a firm takes place only when the necessary entry is made in the Register of Firms and not on an earlier date such as the date of the application.

26. In Loonkaran Sethia v. Ivan E. John : [1977]1SCR853 , the Supreme Court had occasion to consider the provisions of Section 69. The view of the Supreme Court is to be found in paras, 20 and 21 of the judgment delivered by Jaswant Singh J. speaking for the Bench.

27. It will have to be conceded, however, that the above two Supreme Court judgments do not directly deal with the point under consideration.

28. Mr. Chinai also drew my attention to an unreported decision of a division bench of the Bombay High Court (to which decision I was a party) given in Jhaverbai Hirachand v. Ahmedally (1982) Original side Appeal No. 338 of 1981 in Notice of Motion No. 466 of 1981 in Suit No. 594 of 1981 decided by Desai and Rele JJ. on April 12, 1982 (Unrep.), decided in April 1982, In the said decision the Supreme Court decision in Loonkaran Seihia's case (supra) has been cited by Rele JJ. in para 13 of the judgment and followed, though admittedly the point under consideration was different .from the one arising before me.

29. In my opinion, the correct view is the one taken initially by the Calcutta High Court and lastly declared by the division bench of the Gujarat High Court.

30. The two conditions prescribed by Section 69(2) are clearly cumulative and both the conditions would be required to be satisfied before a suit can be properly instituted. In my opinion further the requirement of Section 69 is a mandatory one and it is obligatory on the Court to dismiss a plaint filed without compliance with both the requirements. It is not open to the defendants to waive these requirements. In any case, no such waiver can be said to have taken place in the instant case by reason of the pleadings contained in para 8 of the written statement.

31. In the present case it is established on the material on record that on the date of accrual of the cause of action the firm of Gandhi Company had a partner by name Rasiklal N. Gandhi. It is this Rasiklal N. Gandhi who has signed the plaint on behalf of the plaintiffs firm and has verified the same. On the date on which the plaint was lodged, his name was not shown in the Register of Firms as a partner of the plaintiffs firm. As explained by the Punjab and the Gujarat High Courts the suit filed on behalf of Gandhi Co. is a suit filed on behalf of all the partners who were the partners of the said firm on the date of the filing of the suit and the suit must fail unless the names of all these partners have been shown on the said date in the Register of Firms. As the name of the said Rasiklal N. Gandhi had not been shown in the Register of Firms on the date of the filing of the suit the present suit must also suffer the same fate. That subsequently an entry is made and his name entered and shown in the Register of Firms would not help the plaintiffs. We are concerned with the position as it existed on December 11, 1972, and on that position the plaintiffs are required to be non-suited.

32. I may add that Mr. Munshi had made certain submissions based on Section 45 of the Contract Act. In my opinion, this is a suit in the firm name and we are not concerned with whether separate partners could have sued in their individual names or not. However, that such a suit could not be entertained has been held in our decision given in Appeal No. 338 of 1981 (supra).

33. Thus, in the result, I am required to reject all the submissions made by Mr. Munshi. In my opinion, there has been failure on part of the plaintiffs to comply with the mandatory requirements of Section 69(1) and the result of that failure must be a dismissal of the suit. Accordingly, the suit will stand dismissed.

34. Mr. Chinai applies for costs. Bearing in mind the rather peculiar circumstances of the case and the prima facie impression I have formed of there being some definite impression given to the plaintiffs that they would be paid the amount claimed, I think this is a fit case in which parties should be ordered to bear their own costs. There will be an order accordingly.


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