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Puran Mal Ganga Ram, Firm Vs. the Central Bank of India Ltd. - Court Judgment

LegalCrystal Citation
SubjectCompany
CourtPunjab and Haryana High Court
Decided On
Case NumberFirst Appeal No. 121 of 1948
Judge
Reported inAIR1953P& H235
ActsPartnership Act, 1932 - Sections 4, 5 and 69; Code of Civil Procedure (CPC) , 1908 - Order 30, Rule 1; Companies Act, 1913 - Sections 171
AppellantPuran Mal Ganga Ram, Firm
RespondentThe Central Bank of India Ltd.
Appellant Advocate Faqir Chand Mital and; S.C. Mital, Advs.
Respondent Advocate Tek Chand and; H.L. Sibal, Advs.
DispositionAppeal dismissed
Cases ReferredGeneral v. Brown
Excerpt:
.....fail? the books of account, which would have been the best evidence in favour of the firm being a joint hindu family firm, were not produced on the ground that they had got lost during the disturbances. the weight of authority, and in fact all the reported cases on the point which deserve to be taken into consideration, are clearly to the effect that subsequent registration will not validate the suit. 'the words of clause 16 of this order are plain and imperative and it is essential that the provisions should be observed with complete strictness and where prosecutions have been initiated without the requisite sanction, they should be regarded as completely null and void, and if sanction is subsequently given, new proceedings should be commenced 'ab initio'.his lordship went on to say..........v. peoples bank of northern india, ltd.', air 1942 lah 289 (fb) (b), where it was held that a suit instituted against a company in liquidation without the leave of the court as required by section 171, companies act should not be dismissed if within the period of limitation leave of the court is obtained and is produced in court. but that was a case under section 171, companies act where the word 'institute' has not been used but the words used are 'shall be continued or commenced'. no doubt at page 295 ram lall j. relying on -- 'vardarajulu v. rajamanika', air 1937 mad 767 (c), and on -- 'radha charan v. matilal', 41 cal wn 534 (d), made certain observations which seem to show that in his view a suit filed by an unregistered partnership could be validated by a subsequent.....
Judgment:

Kapur, J.

1. This is a plaintiffs' appeal against the judgment and decree of Mr. Jagan Nath, Senior subordinate Judge, Hissar, dismissing the plaintiffs' suit.

2. The plaintiffs claiming to be a Joint Hindu family arm brought the suit, out of which this appeal has arisen, for recovery of Rs. 10,000/- on account of 'non-delivery or mis-appropriation' of pledged goods. The defence 'inter alia' was that the plaintiff-firm was not a joint faintly firm and no suit could be instituted because it was not a registered firm. The learned Judge raised two issues:

' 1. Is the plaintiff-firm a joint Hindu family business and does not require registration?

2. If not, should the suit fail?'

He held that it was not a Joint family firm and as it was admitted that it had not been registered under Section 69, Partnership Act it could not institute the suit and even' though the registration had been effected after the suit had been brought the defect of want of registration could not be rectified.

3. Counsel for the appellants has submitted in the first instance that the plaintiff-firm is a joint Hindu family firm and is not a contractual firm and, therefore, no registration was necessary.

4. There is a document, Ex. D-4, on the record, i.e., a letter signed by Mangal Chand and Chhabil Das addressed to the Agent of the Central Bank of India, Ltd., Hissar, dated 11-12-1945. In this it is stated:

'We, the undersigned, are the partners in the said firm.....The Bank may recover itsclaim from the estate of any or all of the partners of the firm.Whenever any change occurs in our partnership. ....We undertake to inform the Bank.....and our individual responsibility to theBank will continue until.....'

Mangal Chand plaintiff made a statement before Issues hi which he admitted that this document Ex. D-4, was signed by him and that their firm was not a registered firm and also that the firm had been started eight years ago. He made a supplementary statement In which he stated that the account-books were lost in the disturbances.

5. For the plaintiffs two persons were produced as witnesses. The first is Khushi Ram P. W. 1. He does not seem to be of much assistance to the plaintiffs as he does not say that the plaintiff-firm is a Joint Hindu family firm. All he says is that they, the brothers, are Joint. No stranger is a partner in it. And also that 'the firm was started seven or eight years ago'. This does not show that there is any Joint Hindu family firm. The other witness is P.W. 2 Tara Chand, who has stated that the plaintiff-firm is owned by Chhabil Das and Mangal Chand who are real brothers and are joint, that the firm is a joint Hindu family concern and no stranger is a partner in it. In cross-examination he said that Mangal Chand's sons were joint with him.

6. It is significant that neither of the partners appeared as a witness to support the case that they were members of a joint Hindu family and their firm was a joint Hindu family firm. The books of account, which would have been the best evidence in favour of the firm being a joint Hindu family firm, were not produced on the ground that they had got lost during the disturbances. There Is no explanation as to why the plaintiffs described themselves as partners of a firm when they were executing Ex. D-4. On this evidence I would hold that the plaintiffs have not proved that the firm is a joint Hindu family firm and is not a contractual firm. In this connection counsel for the appellants relied on a judgment in -- 'Debi Sahai v. Gillu Mall', AIR 1938 Lah 563 (A), but there the learned Judge remarked that there was evidence which showed that the firm was a joint Hindu family firm. It was not decided as a mere question of law but on the evidence in that case it was held that the firm was a Joint Hindu family firm.

7. It was then submitted by Mr. Faqir Chand Mittal that as the firm was registered on 7-6-1948, which was about two months after the institution of the suit, the suit should not have been dismissed, but it should have been taken to have been instituted as from the date of the registration and he relied on -- 'Nazir Ahmed v. Peoples Bank of Northern India, Ltd.', AIR 1942 Lah 289 (FB) (B), where it was held that a suit instituted against a company in liquidation without the leave of the Court as required by Section 171, Companies Act should not be dismissed if within the period of limitation leave of the Court is obtained and is produced in Court. But that was a case under Section 171, Companies Act where the word 'Institute' has not been used but the words used are 'shall be continued or commenced'. No doubt at page 295 Ram Lall J. relying on -- 'Vardarajulu v. Rajamanika', AIR 1937 Mad 767 (C), and on -- 'Radha Charan v. Matilal', 41 Cal WN 534 (D), made certain observations which seem to show that in his view a suit filed by an unregistered partnership could be validated by a subsequent registration of the firm. But as was held in a Division Bench judgment of this Court in -- 'Firm Des Raj Prem Chand v. Registered Firm Hira Lal Kali Ram', AIR 1952 Punj 415 (E), those observations must be considered as obiter as the statute was a different one where different words had been used and these observations had not the concurrence of the other two Judges. Beckett J. delivered a separate judgment and Tek Chand J. merely agreed in the answer proposed by his learned brethren. In -- 'Des Raj's case (E)', it had been observed by Falshaw J., with whom I agreed:

'The weight of authority, and in fact all the reported cases on the point which deserve to be taken into consideration, are clearly to the effect that subsequent registration will not validate the suit.'

In two judgments of the Federal Court, which no doubt were under different statutes but where the words used were the same, the view taken was that a subsequent sanction taken does not validate a prosecution which was instituted without such sanction. The first case is -- 'Hort Ram Singh v. Emperor', AIR 1939 FC 43 (F), which was a case under Section 270(1), Government of India Act of 1935. The words of the statute were:

'270 (1) No proceeding civil or criminal shall be instituted against any person.....'

Referring to these words Sulalman J. said at p. 52:

'The prohibition is against the institution itself and its applicability must therefore be judged in the first instance at the earliest stage of institution.'

In a later judgment of the Federal Court in --'Basdo Aggarwalla v. Emperor', AIR 1945 PC 16 (G), under the Drugs Control Order, in Clause 16, it was provided:

'No prosecution for any contravention of the provisions of this Order shall be instituted without the previous sanction of the Provincial Government.'

The appellant in that case was produced before the Chief Presidency Magistrate on 2-5-1944. Certain proceedings were taken and the case was adjourned to 16-5-1944 for evidence and order for bail was also made. The case was then adjourned to 24th May, on which date the sanction of the Provincial Government was filed and it was held: 'The words of Clause 16 of this Order are plain and imperative and it is essential that the provisions should be observed with complete strictness and where prosecutions have been initiated without the requisite sanction, they should be regarded as completely null and void, and if sanction is subsequently given, new proceedings should be commenced 'ab initio'.' His Lordship went on to say 'The prosecution in this case was clearly instituted without the previous sanction required by Clause 16.....the whole proceedings in this case are null and void.'

The words used in Section 92(2), Civil P. C. are similar and they are:

'No suit.....shall be instituted..... except in conformity with the provisions of that sub-section' and it has been held that the obtaining of a consent in writing of the Advocate-General is a condition precedent to a valid Institution of a suit under this section. Where no such consent has been obtained the suit must be dismissed and cannot be rectified by any subsequent amendment. In -- 'Gajanan Laxman v. Bhalchandra Keshav', AIR 1942 Bom 125 (2) (H), it was held: 'The consent of the Advocate-General was necessary to the institution of the suit and in the absence of such a consent the suit was not maintainable.'

In -- 'Abdul Behman v. Cassum Ebrahim', 36 Bom 168 (I), the plaintiffs as relators obtained the sanction of the Advocate-General under Section 92, Civil P. C. They filed a suit against three defendants in respect of certain charitable properties. When the suit was called on for hearing, two of the defendants were struck off and the plaintiffs asked for and obtained leave to add another person as defendant and they amended the plaint but no sanction of the Advocate-General was obtained previous to the amendment of the plaint. It was held that the plaintiffs were not entitled to bring the suit against the added defendant on the ground that no sanction of the Advocate-General was obtained previous to his being made a defendant in the suit and previous to the amendment of the plaint. In -- 'Attorney-General v. Fellow', (1820) 1 Jac & W 254 (J), the Lord Chancellor said that an amendment could not be permitted without the sanction of the Attorney General. In -- 'Sayad Hussain v. Collector of Kalra', 21 Bom 257 (K), a simitar view was taken by a Division Bench of the Bombay High Court. The Allahabad High Court in -- 'Gopal Dei v. Kanno Del', 26 All 162 (L), held that the consent as provided in Section 92, Civil P. C., is a condition precedent to the Institution of the suit and if no valid consent is given before the suit is instituted the mistake cannot subsequently be rectified, unless by means of withdrawal of the suit with permission to institute a fresh suit.

8. I, therefore, hold that as there was no registration of the firm under Section 69, Partner- ship Act before the suit was instituted. Subsequent registration will not rectify that mistake. I would, therefore, dismiss this appeal with costs.

Harnam Singh, J.

9. In order to appreciate the points that arise for decision in Regular First Appeal No. 121 of 1948, the facts of the case may be set out in some detail.

10. On 6-4-1948, Messrs. Puran Mal-Ganga Ram instituted Civil Suit No. 43 of 1948 against the Central Bank of India, Limited, for the recovery of goods pledged or in the alternative for the recovery or Rs. 10,000/- on account of nondelivery of the goods pledged and misappropriation.

11. On 6-5-1948, the defendant-bank filed written statement. In para. No. 1 (a) of that statement it was pleaded that the defendant-firm, being unregistered, Civil Suit No. 43 of 1948 was liable to dismissal.

12. On the pleadings of the parties the Court of first instance fixed the following Issues: ' 1. Is the plaintiff firm a Joint Hindu family business and does not require registration? 2. If not, should the suit fail?

13. On 7-6-1948, the Registrar of Firms, East Punjab, acknowledged the receipt of statement prescribed by Section 58(1), Partnership Act, 1932. In that letter the Registrar mentioned that the statement had been filed and the name of the firm Puran Mal-Ganga Ram, Tehsil Bhiwani, District Hissar, had been entered in the register of firms.

14. Finding that the plaintiff-firm was not a Joint Hindu family business, the Court of first instance has dismissed the suit, leaving the parties to bear their own costs.

15. From the decree passed by the Court of first instance on 14.-7-1948, the plaintiff-firm appeals under Section 96, Civil P. C.

16. In arguments counsel for the appellant maintains that the plaintiff-arm being a joint Hindu family firm, no registration of the firm was necessary and that in any case the suit should have been deemed to have been instituted on 7-6-1948, when the plaintiff-firm was registered under Section 59, Partnership Act, 1932, hereinafter referred to as the Act.

17. On 11-12-1945, Mangal Chand and Chhabil Das wrote letter Ex. D-4, to the defendant-bank. That letter

'As the firm of Puran Mal-Ganga Ram have dealings with Bank, we beg to inform you that we the undersigned are the partners In the said firm. We are Jointly and severally responsible to the Bank for the liabilities of the firm to the Bank. The Bank may recover its claim from the estate of any or all of the partners of the firm.

Whenever any change occurs in our partnership or agency, we undertake to inform the Bank of the same In writing and our individual responsibility to the Bank will continue until we receive from the Bank an acknowledgement of that letter and until all our liabilities to the Bank are discharged.

Yours faithfully,

Sd/-

Mangal Chand

Sd/-

Chhabil Das.'

From the letter. Ex. D-4, it is plain that the plaintiff-firm was a partnership within Section 4 of the Act.

18. Section 5 of the Act provides that the relation of partnership arises from contract and not from status, and, in particular the members of a Hindu undivided family carrying on a family business as such are not partners in such business. Letter, Ex. D-4, shows that there was a contractual partnership between Mangal Chand and Chhabil Das.

19. Khushi Ram stated that the firm belonged to Chhabil Das and Mangal Das who were real brothers and that no stranger was a partner in the plaintiff-firm. In reply to Court question Khushi Ram has stated that the plaintiff-firm was started by the two brothers seven or eight years ago. Clearly, the evidence given by Khushi Ram P. W. 1 shows that the business carried on by Mangal Das and Chhabil Das was not a family business within Section 5 of the Act.

20. Tara Chand P. W. 2 gave evidence that the paintiff-firm belonged to Chhabil Das and Mangal Das who are real brothers and are joint. He then gave evidence that the plaintiff-firm was a Joint Hindu family concern which had been in existence for seven or eight years prior to 1948 adding that no stranger was partner in the firm. Gopi Bam, father of Chhabil Das and Mangal Das, carried on business at Calcutta before he died.

21. In the Court of first instance the plaintiff-firm did not produce their account-books and neither Chhabil Das nor Mangal Das gave evidence in the case.

22. In my judgment the evidence given by Khushi Ram and Tara Chand is not sufficient to rebut the evidence furnished by the letter, Ex. D-4. That being so, I confirm the decision given by the Court of first instance that the plaintiff-firm was a partnership firm.

23. Section 69(2) of the Act provides that 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.

24. In construing Section 69 of the Act in some cases Courts have been of the opinion that suit by an unregistered firm can be validated by the subsequent registration of the firm. In other cases the view has been taken that a subsequent registration of the firm cannot cure the defect which existed at the time of the Institution of the suit. In my opinion, a suit by an unregistered firm cannot be validated by the subsequent registration of the firm.

25. Now, first of all I come to that conclusion upon the language of the section. Clearly, Section 69 of the Act is framed in the way in which sections are framed when it is intended that some preliminary steps should be taken before a suit is maintainable at all. The prohibition contained in Section 69 of the Act is against the institution of the suit itself and its applicability must, therefore, be judged In the first instance at the earliest stage of the institution. In this connection -- 'AIR 1939 FC 43 (P)' and -- 'AIR 1945 PC 16 (G), may be seen.

26. In -- 'AIR 1939 PC FC 43 (P)', Section 270(1), Government of India Act, 1935, came up for construction before their Lordships of the Federal Court. Section 270, Government of India Act directed that no proceedings, civil or criminal, 'shall be instituted' against any person in respect of any act done or purporting to be done in the execution of his duty as a servant of the Crown in India or Burma before the relevant date, except with the consent, In the case of a person who was employed in connection with the affairs of the Government of India or the affairs of Burma, of the Governor-General in his discretion and in the case of a person employed in connection with the affairs of a province of the Governor of that province in his discretion. In construing that section Sulaiman J. said:

'Section 270(1) directs that no proceedings, civil or criminal, shall be instituted, etc., etc. The prohibition is against the institution itself and its applicability must, therefore, be judged in the first instance at the earliest stage of the institution.'

27. In -- 'AIR 1945 FC 16 (G)', Clause 16, Drugs Control Order, 1943 came up for construction before the Court. Clause 16 of the Order provides that no prosecution for any contravention of the provisions of the Order shall be instituted without the previous sanction of the Provincial Government. In construing Clause 16 of the Order the Court found:

'In our judgment the words of Clause 16 of this Order are plain and imperative, and it is essential that the provisions should be observed with complete strictness and where prosecution have been initiated without the requisite sanction, that they should be regarded as 'completely null and void' and if sanction is subsequently given, new proceedings should be commenced ab initio.'

28. From the law stated in -- 'AIR 1939 FC 43 (F)' and -- AIR 1945 FC 16 (G)', It is plain that the prohibition contained in Section 69 of the Act Is to the institution of the suit itself and that subsequent registration of the firm cannot validate the Institution of the suit which is null and void.

29. Basing himself upon -- 'AIR 1942 Lah 289 (FB) (B)', counsel urges that the subsequent registration of the firm validates the institution of the suit.

30. In -- 'AIR 1942 Lah 289 (FB) (B)', the point arose for decision was under Section 171, Companies Act. Section 171, Companies Act reads:

'When a winding up order has been made or a provisional liquidator has been appointed, no suit or other legal proceedings 'shall be proceeded with' or commenced against the company except by leave of the Court, and subject to such terms as the Court may impose.'

31. In deciding the point that arose in -- 'AIR 1942 Lah 289 (FB) (B)', Ram Lal and Beckett JJ. point out that Section 171, Indian Companies Act corresponded to Section 177, English Act which was in identical terms except that in the Indian Act the word 'suit' has been substituted for the word 'action' in the English Act. That being so, Ram Lal and Beckett JJ. thought that the word 'commenced' occurring in Section 171, Indian Companies Act should be assigned the same meaning which was assigned to the word 'commenced' appearing in Section 177, English Act. Relying upon the English decisions under Section 177. English Act Ram Lal and Beckett JJ. found that the grant of leave by the liquidation Court was not to be regarded as a condition precedent to the institution of the suit.

32. In England the law is that the first compulsory process to bring the parties into Court must be considered to be the commencement of the suit. In -- 'Attorney-General v. Brown', (1801) 145 E R 1129 CM) Macdonald Chief Baron delivering the opinion of the Court said:

'That it has been the regular and constant practice for more than a century to consider the 'capias' as the commencement of the proceedings; nor is there much danger in that practice to the defendant, for the Court can always call for the process and see whether It was actually issued in time. We cannot, therefore, break in upon a practice so long established; but if the defendant questions it, he must do so by an application to the Court, and not by a motion for a new trial.'

Order 2, Rule 1 of the Supreme Court Rules, 1883, provides 'inter alia' that even action in the High Court shall be commenced by a writ or summons. The procedure contemplated by Rule 1 of Order 2 of the Rules of the Supreme Court, 1883, corresponds to the procedure provided by Section 27, Civil P. C. Section 26 of the Code enacts that suit shall be instituted by the presentation of the plaint whereas Section 27 of the Code provides that where a suit has been duly Instituted, a summons shall be issued to the defendant to appear and answer the case. Plainly, the prohibition contained in Section 69 of the Act is to the presentation of the plaint, whereas the prohibition contained in Section 171, Companies Act is to the issuance of the first compulsory process to bring the parties into Court.

33. Now, the suit out of which this appeal has arisen was instituted on 6-4-1945, whereas the plaintiff-firm was shown for the first time in the Register of Firms maintained under Section 59 of the Act on 7-6-1948. That being so, the institution of the suit should be regarded as completely 'null and void'. If the institution of the suit be a nullity, the subsequent registration of the plaintiff-firm could not validate what in law did not exist.

34. For the reasons given above, I would affirm the decree passed by the Court of first instance and dismiss the appeal with costs.


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