Skip to content


Khatuna and anr. Vs. Ramsewak Kashinath, a Partnership Firm and anr. - Court Judgment

LegalCrystal Citation
SubjectCivil
CourtOrissa High Court
Decided On
Case NumberCivil Revn. No. 48 of 1982
Judge
Reported inAIR1986Ori1
ActsCode of Civil Procedure (CPC) , 1908 - Order 23, Rule 1 and 1(3); Partnership Act, 1932 - Sections 69 and 69(2)
AppellantKhatuna and anr.
RespondentRamsewak Kashinath, a Partnership Firm and anr.
Appellant AdvocateA.K. Padhi, ;P.K. Ray, ;S.K. Padhi and ;S.S. Das, Advs.
Respondent AdvocateR.C. Misra, ;S.C. Samant Ray and ;P.N. Mishra, Advs.
DispositionRevision allowed
Cases Referred(Smt. Savitri Devi v. Hira Lal) Rule Section Pathak
Excerpt:
.....of the principle laid down in the aforesaid decisions, law is well settled that the expression 'formal defect' occurring in order 23, rule 1(3)(a), c. in the premises of the principle enunciated in the aforesaid decisions it appears that law is well settled that a firm not registered under section 59 suffers from the legal disability of enforcing a right arising from a contract by instituting a suit against a third party by operation of section 69(2) of the act. c, it is thus clear from the pronouncements made in a large number of decision of different high courts that law is well settled that the non-joinder of necessary parties to a suit is not formal defect within the meaning of order 23, rule 1 c. if his order impugned in this case is allowed to remain, it shall occasion failure..........padhi, learned counsel appearing for the petitioners urged that on the date of institution of the suit opposite party no. 1, a partnership firm, was not registered under section 59 and so that suit could not be instituted by the firm against the petitioners as required in section 69(2) of the indian partnership act (referred to as the 'act'). further, necessary parties to the suit were not impleaded. the defects in the suit at the time of its institution as referred to above were not formal defects. therefore, the trial court committed a serious error of law in permitting withdrawal of the suit under order 23, rule 1(3), c.p.c. mr. r. c. misra, appearing for the opposite parties on the other hand contended that non-registration of opposite party no. 1 firm under section 59 of the act.....
Judgment:
ORDER

K.P. Mohapatra, J.

1. This revision is directed against the order passed by the learned Subordinate Judge. Rourkela permitting the plaintiffs to withdraw Title Suit No. 12 of 1979 with liberty to institute a fresh suit on the same cause of action.

2. It is necessary to narrate the essential facts in order to appreciate the contentions raised by the rival parties. The dispute between them centered around valuable land measuring Ac. Order 18 in Rourkela town which admittedly belonged to the petitioners (Defendants). The opposite parties (plaintiffs) instituted the suit and averred in the plaint that in or about the year 1955, the petitioners leased out the suit land in their favour on annual rent of Rs. 1800/-which they required for the purpose of installation of a petrol delivery station, depot, office and godown. After obtaining the lease and on receiving assurance from the petitioners that the lease was on permanent basis and they shall not be evicted in future, the opposite parties spent a huge amount by constructing buildings for installing the petrol delivery station. They commenced their business in right earnest and continued the same till the year 1979 when petitioner No. 2 being a rich and influential man of the locality attempted in various ways to evict them by force. They asserted that having remained in possession of thesuit land for over 12 years they acquired a valid lease hold title and are unevictable. Accordingly, in the suit, they sought for the relief of confirmation of their possession, and for permanent and mandatory injunction against the petitioners. In their written statement, the petitioners denied that they had granted permanent lease of the suit land in favour of the opposite parties in the year 1955. They asserted that in or about the year 1955 they permitted opposite party No. 2, a family friend, to install a petrol delivery station on the suit land as a licensee on condition that he shall vacate the same on demand. Later, opposite party No. 2 without their consent, transferred the suit land in favour of opposite party No. 1. It has not been known to them that opposite party No. 2 was carrying on business in petrol on the suit land in partnership with opposite party No. 1. Therefore, the opposite parties did not acquire valid title as permanent lessees in respect of the suit land and were not entitled to the reliefs claimed. On the other hand, the petitioners made a counter claim on the strength of their own title and sought for declaration that the opposite parties were not lessees but, opposite, party No. 2 was only a licensee, for recovery of possession after their eviction and for damages at the rate of Rs. 1500/- per month.

3. During the pendency of the suit, petitioner No. 2, on 18-8-1979 made a petition to the Court to direct opposite party No. 1 to disclose the names and addresses of persons who constituted the firm. Opposite party No. 1 on 6-9-1979 disclosed the names and addresses of the partners of the firm, such as, Abdul Gafur. Mahavir Prasad Agarwala and Smt. Shiv Kumari Devi. Thereafter the opposite parties on 28-10-1981 made a petition to the trial Court under Order 23, Rule 1. C.P.C. for leave to withdraw the suit and institute a fresh suit on the same cause of action. The grounds set forth in the petition were as follows :--

a) Opposite party No. 1 is a partnership firm which was registered under Section 59 of the Indian Partnership Act on 21-8-1979 after the suit was instituted on 22-6-1979. Because the partnership firm was not registered on the date of institution of the suit it was likely to fail.

b) The legal heirs of late Rama Chandra Agarwala and late Ramasewak Pandey who took the suit land on rent and started business in the name and style of 'M/s. Ramsewak Kasmath' in partnership are necessary parties to the suit and in their absence the same was likely to fail.

According to them, the aforesaid defects in the constitution of the suit were formal in nature and so they should be permitted to withdraw the same with liberty to institute a fresh suit on the same cause of action as contemplated in Order 23, Rule 1(3), C.P.C. In a counter, the petitioners opposed the petition on various grounds the details of which are unnecessary to repeat. Suffice it to mention that according to them, the grounds stated in the withdrawal petition were not at all adequate so as to permit withdrawal of the suit with liberty to institute a fresh suit on the same cause of action to their utter prejudice. The learned Subordinate Judge in the impugned order found as follows -

'Keeping the above legal principles in view it is to be determined if the plaintiff can be allowed to withdraw the suit with liberty to file a fresh suit for want of any formal defect or other sufficient grounds. No doubt, the plaintiff No. 1 is a partnership firm and it has not been registered at the time of institution of the suit but it has been registered after the institution of the suit. So, the suit is bound to fail for non-registration of the firm under Section 69 of the Indian Partnership Act It does not affect the merits of the suit and does not go to the root of the plaintiffs claim. So, it is a formal defect and it comes within the expression 'other sufficient grounds' so as to attract the provision of Order 23, Rule 1. C.P.C. Hence, on a consideration of the materials on record, I am inclined to hold that it is necessary for the ends of justice that the plaintiff should be allowed to withdraw the suit with opportunity to file a fresh suit, but the plaintiff must pay the defendant's cost to the defendants or deposit the same in the Court before the institution of the fresh suit. It is also made clear that the defendant's counter-claim will proceed in the suit as a suit and the defendants cannot be thereby prejudiced.'

Accordingly, he allowed the opposite parties to withdraw the suit with liberty to institute a fresh suit on the same cause of action. The petitioners are aggrieved with this order

4. Mrs. A. K. Padhi, learned counsel appearing for the petitioners urged that on the date of institution of the suit opposite party No. 1, a partnership firm, was not registered under Section 59 and so that suit could not be instituted by the firm against the petitioners as required in Section 69(2) of the Indian Partnership Act (referred to as the 'Act'). Further, necessary parties to the suit were not impleaded. The defects in the suit at the time of its institution as referred to above were not formal defects. Therefore, the trial Court committed a serious error of law in permitting withdrawal of the suit under Order 23, Rule 1(3), C.P.C. Mr. R. C. Misra, appearing for the opposite parties on the other hand contended that non-registration of opposite party No. 1 firm under Section 59 of the Act and non-joinder of necessary parties were defects of technical and formal nature and so the trial Court did not commit any error of law or jurisdiction by directing withdrawal of the suit with liberty to institute a fresh suit in respect of the same subject matter. The contentions raised required careful examination.

5. At the outset it would be useful to delineate the principles with regard to withdrawal of a suit according to the provisions of Order 23, Rule 1, C.P.C. A Full Bench of Bombay High Court in a decision reported in AIR 1940 Bom 121 (Ramrao Bhagwantrao Inamdar v. Babu Appanna Samage) laid down that the expression 'formal defect' occurring in Rule 1 of Order 23, C.P.C must be given a wide and liberal meaning and must be deemed to connote every kind of defect which does not affect the merit of the case, whether that defect is fatal to the suit or not In (1966) 32 Cut LT 864 (Dwaraka Agarwalla v. Mst Sashi Prabha Gountiani), Misra, J. (as he then was) relying upon a decision of the Privy Council reported in 13 MIA 160 (Watson v. Collector of Rajashahye) held that the expression 'formal defect' does not cover any defect pertaining to the merits of the case. The defect affecting the root of the plaintiffs case is not a formal defect. In a case reported in (1976) 42 Cut LT 339 (Harikrishna Agarwalla v. State of Orissa), S. K. Ray, A.C.J. (as he then was) held that the expression 'formal defect', even given a wide and liberal meaning, can connote only every kind of defect which does not affect the merits of the case. In view of the principle laid down in the aforesaid decisions, law is well settled that the expression 'formal defect' occurring in Order 23, Rule 1(3)(a), C.P.C. even if given a wide and liberal meaning must be deemed to connote every kind of defect which does not affect the merits of the case or does not strike at the root of the plaintiff's case.

6. On the petition of the petitioner No. 2, the opposite parties disclosed the names of the partners constituting the partnership firm 'opposite party No. 1'. They were, Abdul Gafur, Mahavir Prasad Agarwalla and Smt. Shiv Kumari Devi. Patently on 22-6-1979 when the suit was instituted, the firm was not registered under Section 59 of the Act. On the other hand, from the certified copy of the entries made in the Register of Firms which is in the trial Court record, it appears that the firm with the aforesaid partners was registered on 21-8-1979. This fact has been specifically stated by the opposite parties in the petition under Order 23, Rule 1 C.P.C. It is for consideration, whether, non-registration of the firm is a formal defect or a defect affecting the merits of the case.

7. Section 69(2) of the Act lays down as follows : --

'(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.

8. Leach, C. J. speaking for the Division Bench interpreted Section 69(2) of the Act in a case reported in AIR 1942 Mad 252 (K. K. A. Ponnuchami Gounder v. Mathusami) and held that a suit is instituted when the plaint is filed in a Court of competent jurisdiction. Section 69 says that a suit by a firm shall not be instituted until the firm has been registered. The registration of the firm is a condition precedent to the right to institute the suit and the Court has no jurisdiction to proceed with the trial when the condition precedent has not been fulfilled. Registration after the filing of the suit cannot cure the defect. It is apt to quote the following from the judgment :--

'The Allahabad High Court in 58 All. 495, the Patna High Court in 18 Pat. 114, the Lahore High Court in 17 Lah 275 and AIR 1938 Lah 767 have all held that subsequent registration of the firm will not allow the suit to proceed. All these cases except the second Lahore case were decided by Division Benches. The great weight of authority is in favour of the opinion that registration will not put the suit on a proper basis and that the Court's duty is to dismiss it. We consider that the majority opinion is correct.'

9. A Full Bench of the Jammu and Kashmir High Court in a case reported in AIR I960 J and K 101 (Jammu Cold Storage and General Mills Ltd. v. Khairati Lal and Sons) held that the provisions of Section 69(2) are mandatory and the registration of the firm is a condition precedent to the right to institute the suit and if on the date of the institution of the suit the firm is not registered, the suit cannot proceed. In AIR 1977 SC 336 (Loonkaran Sethia v. Ivan E. John) interpreting the provisions of Section 69 of the Act, Jaswant Singh, J. speaking for the Court made the following pronouncement : --

'A bare glance at the section is enough to show that it is mandatory in character and its effect is to render a suit by a plaintiff in respect of a right vested in him or acquired by him under a contract which he entered into as a partner of an unregistered firm, whether existing or dissolved, void. In other words, a partner of an 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.'

10. A similar interpretation of Section 69(2) of the Act was handed down by a Division Bench of Delhi High Court in a case reported in AIR 1978 Delhi 255 (Shankar Housing Corporation v. Smt. Mohan Devi). A Single Bench decision reported in AIR 1968 Andh Pra 378 (Sri Baba Commercial Syndicate v. Channamasetti Dasu) was cited by Shri Misra in which it was held that the firmly settled view of law is that the decision of a suit under Section 69 of the Act is not one on merits and no such decision can operate as res judicata. What must necessarily follow is that a fresh suit can be brought after the registration of a firm or after the name of the partners have been brought on the Register of Firms or after the firm is dissolved by the partners of a firm or any one authorised on behalf of the partners or the sole surviving partner. The learned Single Judge was obviously considering the question of res judicata and not a petition for withdrawal of the suit with liberty to institute a fresh suit in respect of the same subject matter. Nevertheless in the same judgment interpreting Section 69(2) of the Act he held that on account of non-registration, a firm cannot maintain a suit against a third party. Therefore, the decision is distinguishable. In the premises of the principle enunciated in the aforesaid decisions it appears that law is well settled that a firm not registered under Section 59 suffers from the legal disability of enforcing a right arising from a contract by instituting a suit against a third party by operation of Section 69(2) of the Act. Non-registration of the firm, therefore, is not a formal defect, but a defect affecting the merits of the suit, in other words, the every root of plaintiff's suit. In the instant case, indisputedly opposite party No. 1-firm was not registered under Section 59 of the date the suit was instituted and so by operation of Section 69(2) of the Act, the suit was initially not maintainable. The conclusion, therefore, is inescapable that such a defect in the suit of the opposite parties was not a formal defect. The first contention of Mrs. Padhi is therefore upheld.

11. The second contention of Mrs. Padhi, learned counsel for the petitioners relates to non-joinder of necessary parties which according to her was not a formal defect. In the petition under Order 23, Rule 1, C.P.C. it was stated that the legal heirs and representatives of late Rama Chandra Agarwalla and late Rama Sewak Pandey Kasinath which took the suit land on rent and started petrol business were not made parties to the suit According to Mr. Misra, appearing for the opposite parties, nonjoinder of necessary parties was a formal defect. As early as 1934 a Division Bench of the Calcutta High Court in a case reported in AIR 1934 Cal 59 (Haridas Sadhu Khan v. Giridhari Sadhu Khan) considering a petition under Order 23, Rule 1 C.P.C. held that the defects that certain necessary parties were not impleaded and certain debuttar properties were not included in the claim, were not formal defects. A similar view was also expressed in AIR 1941 Oudh 417 (Ram Padarath Misir v. Data Din Misir). In AIR 1943 All 67 (Muktanath Tiwari v. Vidyashanker Dube), it was held that the merits of the case are affected where the plaintiff's say that it would be necessary to have a stranger to the suit in the array of parties in order to obtain a correct adjudication of the controversy between the parties. Hence, the defect that certain necessary parties were not impleaded is not a formal defect within Order 23, Rule 1, C.P.C. In AIR 1950 Bom 378 (Asian Assurance Co. Ltd. v. Madholal Sindhu) Chagla, C. J. speaking for the Division Bench held that a defect of non-joinder of some of the parties to the suit is not a formal defect contemplated in Order 23, Rule 1, C.P.C. In another case reported in AIR 1956 Bom 632 (Tarachand Bapuchand v. Gaibihaji Ahamed Bagwan) Gajendragadkar, J. (as he then was) held that non-joinder of parties does not constitute a formal defect within the meaning of Order 23, Rule 1 C.P.C. B. K. Patra, J. in a case reported in AIR 1973 Orissa 37 (Trinath Parida v. Sobha Bholaini) relied upon the decisions of the Bombay High Court in the cases of Asian Assurance Co. Ltd. and Tarachand Bapuchand (supra) and held that non-joinder of a necessary party is not a formal defect within the meaning of Order 23, Rule 1 C.P.C. It is a defect which affects the root of the plaintiff's case and cannot be said to be a mere formal defect. In AIR 1977 Him Pra 91 (Smt. Savitri Devi v. Hira Lal) Rule Section Pathak, C. J. (As he then was) referred to the Bombay case of Tarachand Bapuchand and the Oudh decision of Ram Padarath Misir (AIR 1941 Oudh 417) (supra) and held that the omission to implead a necessary party cannot be described as formal defect. It is a material defect and so cannot be the basis for an order under Order 23, Rule 1(2) C.P.C, It is thus clear from the pronouncements made in a large number of decision of different High Courts that law is well settled that the non-joinder of necessary parties to a suit is not formal defect within the meaning of Order 23, Rule 1 C.P.C., but the defect strikes at the root of the suit, because, an effective and necessary parties to the suit as rightly pointed out in (1966) 32 Cut LT 864 (supra). The second contention of Mrs. Padhi must also be upheld.

12. In the ultimate analysis, the defects stated in the petition of the opposite parties and discussed above were not formal defects within the meaning of Order 23, Rule 1(3)(a) C.P.C. Therefore, the learned Subordinate Judge committed an error of law and jurisdiction in permitting the opposite parties to withdraw Title Suit No. 12 of 1979 with liberty to institute a fresh suit in respect of the same subject matter. If his order impugned in this case is allowed to remain, it shall occasion failure of justice. So, in exercise of powers conferred under Section 115, C.P.C. the impugned order must have to be vacated.

13. In the result, the Civil Revision is allowed and the impugned order passed by the learned Subordinate Judge is set aside. The petition under Order 23, Rule 1 CP.C. stands rejected. The parties should appear before the learned Subordinate Judge, Rourkela on 1-2-1985 to receive directions. Advocate's fee is assessed at Rs. 100/-.


Save Judgments// Add Notes // Store Search Result sets // Organizer Client Files //