1. These two cross appeals raise an interesting question as to the interpretation of the two mandatory conditions laid down in Section 69(2) of the Indian Partnership Act, 1932, hereinafter referred to as 'the Act,' in the context of a reconstituted firm by addition of a new partner and when the cause of action had accrued after such reconstitution. First Appeal No. 769/1960 is filed by the original defendant company while First Appeal No. 1029/60 is filed by the original plaintiff-firm.
2. The short facts which have given rise to these two appeals are as under:--
The plaintiff-firm is a partnership firm having firm's name Messrs. Mohatta Brothers which carried on the business of managing agency of the defendant-company, namely Bharat Survodaya Mills Company limited, hereinafter referred to as the 'company'. The plaintiff-firm carried on the said business of the managing agency upto 4th September 1950. Shri Chaturbhujdas had given a scheme of management. Ex. 168, on behalf of Messrs. Chaturbhujdas Kharawala Mohatta and Company hereinafter referred to as 'the new managing agents', on 31st July 1950. On 1st August 1950 a notice was issued by the secretary for sanctioning the said scheme in the company's general meeting to be held on 4th September 1950. The company by the resolution of the general meeting of its shareholders approved the said scheme on 4th September 1950. Under the said scheme the partners of the plaintiff-firm who worked as the 'old managing agents,' had their resignation accepted by the company and the new managing agents were appointed with effect from 4th September 1950 as the company's secretaries, treasurers and agents in place of the plaintiff-firm. The material terms of the said scheme, Ex. 168 are as under :-- Under Clause 5 before the scheme was sanctioned by the company the existing directors had to submit to the company and get the balance-sheet and the profit and loss accounts for the period ending 1949 passed by the company, and they had also to give a pro forma balance-sheet upto 31st July 1950 duly audited by the company's auditors. It was mentioned that the said scheme was givenunder the belief that the machinery as per the list supplied by the old managing agents was existing at that time, and also under the belief that the company had no liability or debt whatever beyond the amount of Rs. 4,77,850/- due upto date to the old managing agents and their friends and relatives and of which a list was given. The next Clause 6 provided that whatever amount was lying with the company to the credit of the old managing agents and their friends and relatives as on 30th July 1950 and which according to the say of the old managing agents was about Rs. 4,77,850/- was to be kept at the credit of the old managing agents viz. the plaintiff-firm and no interest was to be paid thereon from 1st August 1950, and that no interest was to be taken on the said amounts for a period of five years from the date of the commencement of the business of the company in pursuance of the sanction of the scheme, Ex. 168, and that the said deposits were not to be withdrawn for a period of 10 years but they were to be kept in the Company bearing interest at 6% subject to the company's option of returning the amount earlier if it so desired. The next Clause 7 which is material provided that the company owed to the Punjab National Bank a sum of Rs. 3,46,466-11-6 and there was an outstanding demand with the company in respect of the payment of bonus to the employees for the year 1949. It was the say of the old managing agents that both these liabilities of the company may be discharged from the amount realised by sale of the stores etc. the goods, lying with the company of which a list had been given to the new managing agents by the old managing agents as also from excess profit tax deposits and income-tax advance payment amounts. If in so paying the amount (to?) the bank and in discharging the liability of bonus, this liability could not be fully discharged and the company would have to bear any liability in that connection, the same liability was undertaken to be discharged by the old managing agents. It was thereafter provided in the said clause that if after fulfilling all the liabilities as mentioned in that clause, there was any surplus, the same should be treated as assets of the company, and half of the said amount shall be given over towards repayment of the aforesaid amount lying with the company to the credit of the old managing agents, their friends and relations, provided however that if after payment of the dues to the bank from the sale proceeds of the stores etc. there was no sufficient surplus and the bonus amount was to be paid from receipt of excess profit tax deposits and the income-tax advance payments, the same shall be first paidby the old managing agents. Clause 13 provided that till the scheme was sanctioned, liability towards municipal tax, income-tax, sales tax, rent or other liability whatever which might be existing or which might accrue thereafter would be discharged by the old managing agents and if the company had to pay the same, the same amount would be repaid by the old managing agents.
3. It was the plaintiff's case that the liability of the Punjab National Bank was fully discharged and as no bonus was held to be payable by the Industrial Court for the year 1949 to the employees and as there was surplus left after discharging the liability of the Punjab National Bank, from earmarked assets consisting of excess profit tax deposits, income-tax advance amount and the amounts realised from the sale of the stores etc. it was entitled by reason of Clause 7 to a repayment of half the surplus towards the deposit amounts which were credited in pursuance to the scheme, Ex. 168, to the plaintiff's account. The plaintiff, therefore, claimed a decree against the defendant-company for accounts of the surplus and for a decree for the amount due as per the said terms after taking accounts with 9% interest under the same scheme and under general law. The plaintiff-firm also claimed that it was entitled to a deduction while taking accounts for the various expenses which it had incurred on behalf of the defendant-company for realisation of those three earmarked assets by keeping staff, by fighting litigation and which were inextricably connected with those three earmarked assets. A suit was filed on 16th December 1954 in the firm name of 'Messrs Mohatta Brothers', carrying on business at Shri Phirojshah Mehta Road, Fort, Bombay, and the plaint was signed and verified by one partner Shri Shiv Ratan G. Mohatta. The defendant company in its written statement at Ex. 12 contended that the plaintiff-firm could not maintain this suit as the constitution of the old firm of Mohatta Brothers, Ahmedabad, which acted as the managing agents of the company had been changed on or about 4th October 1949 and from that date the said firm of Mohatta Brothers, which acted as managing agents of the company consisted of six persons including No. 6 Satyavatidevi Mohatta. The said newly constituted firm of Messrs Mohatta Brothers having not been registered and as the cause of action had accrued in favour of that firm the present suit was not maintainable. The defendant also contended that the suit was bad for non-joinder of the necessary parties, namely, the relations and friends of M/s. Mohatta Brothers to whom the alleged deposits belonged. It was also contended that the suit was barred by limitation and also, was in any event premature. The defendant also denied theliability to pay any amount to the plaintiff or that the aforesaid deductions claimed by the plaintiff-firm could be legally claimed. On the other hand, the defendant company claimed deductions of various items mentioned in para 13 of the written statement as those liabilities had not been discharged by the old managing agents. It was the case of the defendant that on a true and proper interpretation of the scheme, Ex. 168, these were conditions precedent and unless the plaintiff-firm discharged all its liabilities which had accrued due, it could not make any such claim for accounts as provided in Clause 7 of the scheme. In fact, the accountability was disputed. The trial Court held that the plaintiff firm was entitled to file a suit. The trial Court came to the conclusion that the new partnership deed, Ex. 116 by which Satyavatidevi Mohatta was added as a partner was not acted upon and, therefore, there was no bar to the present suit under Section 69(2) of the Act. The trial Court also held that there was no bar of non-joinder or limitation and such a suit for accounts could be filed as it was for unascertained amount which could only be determined after taking accounts of the earmarked assets and liabilities mentioned in Clause 7 of Ex. 168. The trial Court also held that the suit was not premature as the liability had accrued. The trial Court also held that the plaintiff firm was not entitled to the deductions claimed under Section 70 of the Contract Act as it was bound to spend such amounts even in its own interests. As regards the deductions claimed by the defendant-company, the trial Court held that it was entitled to deduct the amounts shown in Sub-clause (5) of para 13 of the written statement as these amounts were wrongly withdrawn by the plaintiff-firm. Even though it had been agreed that no amount would be withdrawn from the aforesaid deposited amount, the trial court found that the amount of Rs. 13,059-11-0 was wrongly withdrawn from the total actual deposit o Rs. 4,57,723-13-9, on the basis of the surplus arrived, it decreed the plaintiff's suit against the defendant for a sum of Rs. 77, 286-0-2 with future interest at 6% from 1st January 1956. The defendant company has, therefore, filed First Appeal No. 769/1960 against the said decree, while the plaintiff-firm has filed cross-appeal No. 1029/60 for the amounts disallowed and has restricted the plaintiff's claim only to the amount of Rs. 51764-6-6 as mentioned in the explanatory statement annexed to the memo of appeal. As both these appeals arise out of the same order and raise common questions of law and facts, they are disposed of by this common order.
4. Mr. Gandhi had raised the following points in his appeal :--
(1) The plaintiff-firm was not entitled to file a suit as the plaintiff firm was differently constituted from the firm of Mchatta Brothers as on 31-7-50, and in any event, as the minor Shashikumar had become major in 1953 and had become a partner of the plaintiff-firm Mohatta Brothers, Ahmedabad, and as even the name of Satyavatidevi who was the partner suing did not appear in the entry in the register of firms the present suit was barred under Section 69(2) of the Act.
(2) That the friends and relations of Mohatta Brothers having not been joined, the suit was bad for non-joinder of necessary parties.
(3) That there was no privity of contract between the plaintiff-firm and the defendant-company and therefore, for enforcing a contract with the new managing agents, who were not even parties to the present suit, no such suit was maintainable against the company.
(4) That the suit for accounts was not legally competent,
(5) That the plaintiff was not entitled to claim any surplus under Clause 7 of the scheme as it had committed a breach of the essential terms of the scheme and had not discharged various liabilities which it should have first discharged before making this claim.
(6) That the defendant company was entitled to get credit for the various amounts mentioned in para 13 if any account was to be made up while the plaintiff-firm was not entitled to any credit as claimed towards the various expenses.
(7) That there was no surplus whatsoever from which such decree could be passed in favour of the plaintiff.
5. Mr. Nanavati in the other appeal had claimed the amounts disallowed as per the explanatory statement in his appeal.
6. Before going into the merits of these cross appeals, the first point which we should consider at the very outset and which goes to the root would be as regards the bar of Section 69(2) to the present suit by the plaintiff-firm on the ground that the two mandatory conditions in Section 69(2) of the Act were not fulfilled. Before considering Section 69(2), it would be proper at the outset to consider the meaning of the term 'firm' and the nature of a suit by a firm, or in the name of a firm. Section 4 of the Act defines, partnership. It is the relation between persons who have agreed to share the profits of a business carried on by all or any of them acting for all. Persons who have entered into partnership with one another are called individually 'partners' and collectively 'a firm', and the name under which their business is carried on is called the 'firm name'. Thus a firm has not a legal entity, and it is collective term for the partners who have entered into a partnership with one another. Order 30 of the Code of Civil Procedure, 1908, hereinafter referred to as 'the Code' deals with suits by or against firms and persons carrying on business in names other than their own. Order 30, Rule 1(1) provides that any two or more persons claiming or being liable as partners and carrying on business in India may sue or be sued in the name of the firm, if any, of which such persons were partners at the time of the accruing of the cause of action, and any party to a suit may in such case apply to the Court for a statement of the names and addresses of the persons who were, at the time of the accruing of the cause of action, partners in such firm, to be furnished and verified in such manner as the Court may direct. Under Order 30, Rule 1(2) where persons sue or are sued as partners in the name of their firm under Sub-rule (1) it shall, in the case of any pleading or other document required by or under this Code to be signed, verified or certified by the plaintiff or the defendant, be sufficient if such pleading or other document is signed, verified or certified by any one of such persons. The expression 'such persons' will mean persons who were partners at the time of accruing of the cause of action. Order 30, Rule 2(1) provides that where a suit is instituted by partners in the name of their firm, the plaintiffs or their pleader shall, on demand in writing by or on behalf of any defendant, forthwith declare in writing the names and places of residence of all the persons constituting the firm on whose behalf the suit is instituted. Rule 2 Sub-rule (2) provides that where the plaintiffs or their pleader fail to comply with any demand made under Sub-rule (1), all proceedings in the suit may, upon an application for that purpose, be stayed upon such terms as the Court may direct. Sub-rule (3) then provides that where the names of the partners are declared in the manner referred to in Sub-rule (1), the suit shall proceed in the same manner, and the same consequences in all respects shall follow, as if they had been named as plaintiffs in the plaint, provided that all the proceedings shall nevertheless continue in the name of the firm. From these provisions of Order 30, it is clear that it enables the suit to be brought by the partners or against the partners in the name of their firm. A suit brought in the firm name is really one by persons who were partners at the time of accrual of the cause of action. The procedure for a suit in the name of the firm is that in the cause title as per the draft in Appendix 4 'A B, a firm carrying on business in partnership at --' shall be mentioned and the plaint shall be signed and verified by any one of such persons who was a partner at the time of the accruing of the cause of action. The other partners need not at all be mentioned. Sub-rule 2(2) requires a disclosure on demand of partners' names and places of residence in such suits instituted by partners in the name of the firm and the suit has to be stayed until its demand is complied with by disclosing all the persons constituting the firm and on whose behalf the suit is instituted by such partners in the name of the firm. Once information is disclosed a suit proceeds in the same manner and with same consequences in all respects as if all those partners constituting the firm on whose behalf the suit is instituted were named plaintiffs in the plaint. This is only an enabling provision and the partners can always individually file a suit. If, however, they resort to this alternative procedure under Order 30, the suit proceeds all throughout in the name of the firm. But still it remains for all purposes, and all consequences follow, as if the suit was instituted by all the named plaintiffs. That is why Rule 1 and Rule 2 in terms mention the suit in the name of the firm as a suit by the partners in the name of the firm. Therefore, even though the cause title mentions the firm A. B. suing and even though name of the firm is used for bringing a suit, what is styled as a suit by the firm is really a suit instituted by all the partners who constitute the firm, at the time of the cause of action and on whose behalf the suit is instituted and whose names have to be furnished on demand and who are thereafter treated as named plaintiffs. In Purushottam & Co. v. Manilal & Sons, : 1SCR982 their Lordships of the Supreme Court considered the definition of the term 'firm' in Section 4 of the Act, and observed that it was clear from the provisions of the Act that the word 'firm' or the 'firm name' was merely a compendious description of all the partners collectively. It followed, therefore, that where a suit was filed in the name of a firm it was still a suit by all the partners of the firm unless it was proved that all the partners had not authorised the suit. A firm is not a legal entity in the sense of a company and when a suit is filed in the name of the firm it is in reality a suit by all the partners of the firm. At p. 329 also their Lordships observed that the provisions of Rule 2 show that although the suit was filed in the name of the firm a disclosure had to be made, on demand in writing or on behalf of any defendant, of names and places of residence of all the persons constituting the firm, on whose behalf the suit was instituted. The provisions of Rule 2 would indicate that although the suit was filed in the name of the firm it was nonetheless a suit by all the partners of the firm because if a disclosure of the names of the partners was asked for by any defendant, on such disclosure, the suit must proceed as if the partners had been named as plaintiffs in the suit, even though the proceedings would nevertheless be continued in the name of the firm. It was, therefore, clear that the provisions of Order 30. Rules 1 and 2 were enabling provisions to permit several persons who were doing business as partners to sue or be sued in the name of the firm. Their Lordships observed that Rule 2 would not have been in the form it was if the suit instituted in the name of the firm was not regarded as, in fact a suit by the partners of the firm. Their Lordships again considered the question in Mandalse Devi v. M. Ramnarain Private Ltd. : 3SCR421 . Their Lordships observed that for the sake of convenience Order 30 of the Code permits a firm to sue or be sued in the firm name 'as if it were a corporate body'. Their Lordships, however, observed that the legal fiction must not be carried too far. For some purposes the law has extended a limited personality to a firm--See Bhagwati Morarji Gokuldas v. Alembic Works Co. Ltd., -- but the firm is not a legal entity. See : 1SCR982 Lindley on Partnership, 12th Edition pp. 27-28. The persons who are individually called partners are collectively called a firm, and the name under which their business is carried on is called the firm name. See Section 4 of the Indian Partnership Act, 1932. Order 30, Rule 1 of the Code enables two or more persons claiming or being liable as partners and carrying on business in India to sue or be sued in the name of the firm of which they were partners at the time of the accrual of the cause of action. Rule 1 shows that individual partners sue or are sued in their collective firm name. Rule 2 provides that on disclosure of the names of partners of the plaintiff firm, the suit proceeds as if they are named as plaintiffs in the plaint. Rule 6 provides that the persons sued in the firm name must appear individually in their own names. A suit by or in the name of a firm is thus really a suit by or in the name of all its partners. See Rodriquez v. Speyer Brothers 1919 AC 59 and : 1SCR982 . So also a suit against the firm is really a suit against all the partners of the firm. Their Lordships quoted a passage of Lindley L. J. in Western National Bank of City of New York V. Perez, Trisanna and Co., 1891-1 QB 304 at p. 314 as under :--
'When a firm's name is used, it is only a convenient method of denoting those persons who compose the firm at the time, when that name is used, and a plaintiff who sues partners in the name of their firm in truth sues them individually, just as much as if he had set out all their names.'
The decree passed in the suit, though in form against the firm, is in effect a decree against all the partners. After laying down this legal position, their Lordships applied that ratio to the facts of that case. In that case the firm of Jagatsons International Corporation was sued. As the suit was brought against that firm, their Lordships held that the Maharaja of Sirmur and all other partners were sued as if the plaint had set out their names, and the decree passed in the suit was in reality a decree against all the partners of the firm including the Maharaja of Sirmur. Now, the Maharaja of Sirmur was the Ruler of a former Indian State and Section 86 read with Section 87B of the Code barred the institution of a suit against him except with the consent of the Central Government. No such consent was given to the institution of the suit against the Maharaja of Sirmur. In the absence of the requisite consent of the Central Government, a suit which was in reality though not in form against the Maharaja of Sirmur, was barred by Section 86 and Section 87B. See Gaekwad Baroda State Railway v. Hafiz Habib-ul-Haq, . Consequently, the suit so far as it was one against the Maharaja of Sirmur was incompetent and the decree against the firm in so far as it was a decree against him was a nullity. From this subsequent decision by their Lordships of the Supreme Court it appears to be a settled position that such suits by or against a firm under Order 30 are in reality suits by partners or against the partners at the 'time when the cause of action accrued. There is no question of a deemed fiction, but in reality the suit is by all the partners or against all the partners, even though firm name is used as a convenient method for denoting those persons who compose the firm at the time when the cause of action accrued. In such cases even though the plaint in the cause title mentions name of the firm as the plaintiff, the suit is really by all the partners individually, just as much as if they had all of them set out their names in the plaint. Even when considering the bar, which would be attracted to such a suit by reason of an independent statutory provision like Section 86, read with Section 87B of the Code, their Lordships held that a suit, though in form against a firm was in reality a suit against each partner, including the Ruler of Sirmur, a former Indian State, and therefore, it was held to be incompetent. On a parity of reasoning, we must treat such a suit by a firm as really a suit by the partners at the time of the accrual of the cause of action, in order to consider whether the bar of Section 69(2) of the Act was attracted or not. We do not agree with Mr. Nanavati in his contention that Order 30 Rule 2(3) provides only a fiction and that fiction must be limited only in so far as it enables a suit being brought in the name of the firm. We cannot allow our imagination to be boggled down while considering the consequences, when the question of the bar to such a suit is to be considered, whether by resorting to Section 86 read with Section 87B or under any other statutory provision. Whatever be the formalities, suit or its cause title, we must treat it in reality as a suit by the partners. The fiction only permits a convenient procedure to be adopted but for all intents and purposes the suit remains a suit by all the partners or against all the partners and on that footing alone the bar to such a suit has to be considered.
7. Now we would turn to Section 69(2) of the Act which is the relevant section to be interpreted by us. Section 69(2) runs as under :--
'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.'
Section 69(2), therefore, bars a suit against a third party if it is for enforcing a right arising from a contract. The bar equally applies both to suits by the firm as well as suits on behalf of the firm. Two mandatory requirements which must be fulfilled before such a suit can be filed to enforce a contractual right by the firm or on behalf of the firm are: (1) that the firm must be a registered firm and (2) that the persons suing are or have been shown in the Register of firms as partners of the firm. As the section creates a bar to the suit, the requisite conditions will have to be treated as mandatory conditions. Unless these two conditions are fulfilled there would be a fatal bar to the entire suit and it would be wholly incompetent in a Court of law. A plain literal reading of the section shows that both these conditions are cumulative conditions as they have been joined by the conjunction 'and' and not by the disjunctive 'or'. We would consider in a moment the contention of Mr. Nanavati that the second condition is inapplicable by its nature to a suit by a firm. Prima facie, on a plain literal reading of Section 69(2), both these mandatory conditions must be held to be cumulative conditions and both of them must be complied with to show that a suit to enforce a contractual right by or on behalf of a firm is maintainable against a third party. These two conditions are enacted for protecting a third party who enters into a contract with the firm. If the firm is registered and the partners acting for the firm have their names shown in the Register of firms; as partners in the firm the third party would have a complete protection when he enters into such a contract. Looking to the purpose underlying Section 69(2), it is obvious that both these conditions must be cumulative conditions. If only a firm was registered and thereafter it was reconstituted by introduction of new partners unless the second condition is fulfilled, the third party would not have adequate protection as it could not check up whether they were partners of the registered firm when such persons purport to act as a partner in the firm while dealing with the third party. Section 69(2) creates a bar not only in cases where the suit is by the firm but also when the suit is on behalf of the firm. The suit by the firm can be filed, as we lave already discussed under Order 30, Rule 1, by bringing it in the name of the firm mentioning the firm in the cause title and the plaint being verified by one of the partners at the time of accrual of the cause of action. The suit on behalf of the firm can be filed equally by all the partners who are compromises and all of whom are under Section 45 of the Indian Contract Act, 1872, joined together in enforcing the promise against a third party promisor. The suit by a firm as we have already discussed, is only a procedural provision for the purposes of the firm of the suit but in reality even a suit by the firm is a suit by all the individual partners at the time of accrual of the cause of action. Therefore, there would be no rhyme or reason for the Legislature to provide two different conditions when the suit is by a firm or when the suit is by individual partners merely, because for the sake of convenience in filing a suit a different procedure was laid down in Order 30 to enable a firm to bring a suit in the Firm name. Therefore, on a plain literal construction we must hold that in both the cases where the suit is by a firm or on behalf of the firm both of these mandatory conditions must be cumulative conditions.
8. As regards the first condition it has to be shown that the firm is registered. A controversy has arisen as to what is the import of the term 'firm' in the context of the first condition, Mr. Trivedi and Mr. Gandhi argued that the term 'firm' must have through (out?) the Act the same meaning as laid down in Section 4 i. e. as a collective term to denote partners who have entered into the partnership with one another. It is, therefore, argued on their behalf that once there is a reconstitution of a firm there is emergence of a new firm within the meaning of Section 4. It must get different registration and without getting another registration the first requirement of Section 69(2) cannot be fulfilled. Mr. Nanavati on the other hand pointed out a number of sections in the Act to show that the expression 'firm' has been loosely used. Section 31(1) provides that subject to contract between the partners and to the provisions of Section 30, no person shall be introduced as a partner into a firm without the consent of all the existing partners. Section 31(2) provides that subject to the provisions of Section 30, a person who is introduced as a partner into a firm does not thereby become liable for any act of the firm done before he became a partner. This section clearly contemplates that a person is introduced into a firm and even after his introduction, the firm continues. Section 32 speaks of retirement of a partner and under Section 32(3) notwithstanding the retirement of a partner from a firm, he and the partners continue to be liable to third parties for any act done by any of them which would have been an act of the firm if done before the retirement, until public notice is given of the retirement. Then even after the retirement the firm may continue. Section 34 deals with insolvency of a partner. Section 39 deals with the rights of outgoing partners to carry on competing business with that of the firm. In the next Chapter relating to dissolution of a firm, Section 39 speaks of dissolution of a partnership between all the partners of a firm which under Section 40 may be with the consent of all the partners or in accordance with the contract between the partners. There may be a compulsory dissolution of a firm under Section 41 or on the happening of certain contingencies as under Section 42 or a dissolution by notice of partnership at will under Section 43 or under Section 44 by Court. The dissolved firm is wound up. In Chapter VII of Registration of Firms, under Section 58 an application for registration has to be made to the Registrar of Firms with the prescribed particulars signed by all the partners or their agents and duly verified. Under Section 59 the Registrar registers the firm in the Register of Firms. Sections 60, 61 and 62 deal with, recording of alteration in firm name and principal place of business, closing and opening of branches and noting of changes in names and addresses of partners. Section 63 which is material for our purposes, provides in Clause (1) that when a change occurs in the constitution of a registered firm any Incoming, continuing or outgoing partner, and when a registered firm is dissolved any person who was a partner immediately before the dissolution, or the agent of any such partner or person specially authorised in this behalf, may give notice to the Registrar of such change or dissolution, specifying the date thereof, and the Registrar shall make a record of the notice in the entry relating to the firm in the Register of Firms, and shall file the notice along with the statement relating to the firm filed under Section 59. Section 69(2) provides that when a minor who has been admitted to the benefits of partnership in a firm attains majority and elects to become or not to become a partner, and the firm is that a registered firm, he, or his agent specially authorised in this behalf, may give notice to the Registrar that he has or has not become a partner, and the Registrar shall deal with the notice in the manner provided in Sub-section (1). This Section 63 leaves no doubt whatever that even when there is a change in the constitution of a registered firm by reason of incoming, or outgoing partner or where there is dissolution of the firm, or when the minor admitted to the benefits of the partnership becomes a major and elects or refuses to continue as a partner what is necessary for the Registrar to do is to note the change in the constitution or about the fact of dissolution of the firm. It is thus obvious that in the context in which the registration of the firm is contemplated in Chapter VII, the registered firm may continue its existence notwithstanding any reconstitution of the partnership firm and even when dissolution has taken place provided the registered firm continues in existence. In that view of the matter so far as Section 69(2) is concerned, the first condition would only mean that the continuing firm must be a registered firm and it does not require a fresh registration each time that a re-constitution or dissolution of the continuing firm takes place. The firm retains its identity for the purposes of registration and what is required under Section 63 is notifying the changes in the constitution of the firm or as regards its dissolution, There would, however, be no fresh entry of registration so long as the same registered firm continues in existence. Therefore, we accept the first contention of Mr. Nanavati that even when a firm is reconstituted by introduction of a new partner it would remain the same registered firm and there would be no necessity of a fresh registration if the continuing firm was a registered firm which was registered with the Registrar of Firms by the order under Section 59 of the Act.
9. As regards the second condition the controversy centres round the ex-pression 'the persons suing', as the second condition requires that the persons suing are or have been shown in the Register of -Firms as partners in the firm. Mr. Nanavati argues that this second condition in the context of a suit by a firm would be wholly inapplicable or in any event, there would be a sufficient compliance with this condition if the partners signing or verifying the plaint under Order 30, Rule 1(2) were shown in the Register of Firms as a partner. We must keep in mind that Section 69(2) is not an enabling provision but clearly a disabling provision. It does not by itself create a Arm as a specific legal entity nor does It enable the firm to file a suit as a distinct legal entity as in case of a limited company. The provision creates a bar to a suit and in that context it uses the expression 'suit by or on behalf of a firm'. Therefore, for the purpose of finding out the true import of the expression 'suit by a firm' we get no guidance from the Act except to a limited extent as is provided by Section 4. Section 4 in terms states that the expression, 'firm' is only a collective term for the partners and it does not create any distinct legal entity. The meaning of the expression, 'suit by a firm' will have to be therefore found1 from the provisions of Order 30 which enable such a suit to be filed under the Code, That expression has been interpreted by their Lordships of the Supreme Court to mean that even though in form the suit is by a firm and in the name of the firm, in reality it is a suit by all the partners constituting a firm at the time of accrual of the cause of action. Therefore the persons suing would obviously be all the partners who constitute the firm at the time of the accrual of the cause of action. There is no question of a fiction here because it is in form a suit by a firm but in substance a suit only by the partners. In view of this settled legal position as regards the import of the expression 'suit by or on behalf of a firm' under Order 30, it would not be open to Mr. Nanavati to make any distinction between the suit by a firm or on behalf of a firm on the ground that in the former case the suit being by a firm there would be no question of a person suing at all. According to the settled legal position, if when the suit is filed by a firm It is in reality a suit by all the partners constituting a firm at the time of the accrual of the cause of action and they being the plaintiffs or the persons suing, the names of all these partners who constitute the firm at the time of the cause of action must be shown to be or to have been entered in the Register of firms as partners in the firm.
10. Mr. Nanavati, however, argued that for the first condition we have already given a wider meaning to the term'firm' in the context of Section 69(2) by treating the firm as a continuing firm irrespective of the changes in its constitution. If, therefore, a firm has a continued existence it must be treated as a separate legal entity. In that context Mr. Nanavati argued that in the same Section 69(2) when the Legislature uses the expression 'suit by a firm' in contradistinction with the words 'persons suing', we should hold that the second condition could not apply when the suit is by the firm which is at least for the purposes of Section 69 a distinct legal entity and which continues its existence even after the change in the constitution of the firm or even after its dissolution. There would be some scope for this argument if this section was an enabling section. As we have already stated that the section is a disabling section, it does not permit a suit but it bars a suit. Therefore, the expression 'suit by or on behalf of a firm' only gives the description of the nature of the suit and it does not enable a firm to sue. The suit by a firm could only be brought by recourse to the procedural provision of Order 30 alone and in view of the settled position of law, we cannot interpret 'suit by a firm' as in any way different from the suit by the partnersthemselves. The construction suggested by Mr. Nanavati proceeds on the assumption that the firm is a legal entity which it is not. It also proceeds on the assumption that only by a fiction the partners are considered as the plaintiffs. Even though their Lordships have held that in reality it is so and to such an extent that even when a bar to such a suit is to be considered this fiction must be treated as a reality. Mr. Nanavati also argued that this interpretation could result in great hardship which could not be intended by the Legislature. Mr. Nanavati, therefore, argued that when the section is capable of two constructions we should adopt that construction which would avoid all such results. In fact, there is no ambiguity whatever in the expression used by the Legislature. There is no scope for two interpretations even as the expression used by the Legislature is 'persons suing' and even when a suit is brought by a firm undoubtedly all the partners are the persons suing. What Mr. Nanavati wants us is to rewrite the section by modifying Its language by holding that the second condition is by its very nature inapplicable to a case where the suit is filed in the name of a firm under Order 30. It is against all settled canons of construction to rewrite or modify the plain terms of the statute when no ambiguity is disclosed and when two constructions are not possible. If the Legislature wanted to exclude the second condition it would have suitably redrafted Section 69(2).
11. Mr. Nanavati finally argued that by its inherent nature this second condition could not apply in case of a suit by a firm. When in the first condition we have held that in cases of reconstitution of a firm, a registered firm continues we can always envisage cases (where?) both the conditions may be fulfilled in case of a suit by a firm. If the partnership is reconstituted by reason of retirement, death or by outgoing of any partner after it has been registered, under the names of all the original partners such a firm would not only fulfil the first condition but equally the second. In case of a suit by such a firm the partners who constitute the firm at the time of accrual of the cause of action were the original partners before its reconstitution and as their names were shown in the Register of Firms as partners in the firm, both the conditions would be obviously fulfilled. It is in these cases where the firm gets reconstituted by introduction of a new! partner or partners, and the cause of action accrued to such a reconstituted partnership that a difficulty might arise if the reconstitution is not notified to the Registrar of Firms. In that case, as all the partners suing in the name of the firm would not be shown in the Register of Firms, the second condition would not be fulfilled and the bar in Section 69(2) would be attracted. That itself makes it clear that there is nothing inherent in the nature of the second condition which makes it inapplicable in the context of a continuing registered firm which brings a suit in the firm name and which fulfils first condition. It can fulfil the second condition provided the partners at the time of accrual of cause of action get their names shown in the Register of Firms as partners before the institution of the suit. Therefore, there is no absurdity or any redundancy if we were to hold that the second condition is a mandatory condition even when the suit is brought by the firm in the firm name under Order 30. In fact, to give any other construction as suggested by Mr. Nanavati would make this second condition redundant and would seek to modify the language by ignoring the conjunction 'and' which the Legislature has advisedly used. Even if we look to the object underlying this salutary provision, which is for protecting the innocent third party, it would hardly make any difference whether the suit is brought in a convenient form of a suit in the firm name or by partners. If the bar applies in one case there would be no reason why the bar should not apply in the other case. We must keep in mind the fact that the Legislature envisages a complete bar if the firm is not registered and if the partners at the time of cause of action are or have not been shown in the Register of Firms because such a suit iscompletely barred irrespective of the fact whether the suit is filed in the firm name or by individual partners. Section 69(3)(a) makes it clear that it is only after getting the firm dissolved that a suit can be filed in such cases by partners for realising the property of a dissolved firm from a third party. That exception is provided by the Legislature itself. But unless the case is brought in that exception in Section 69(3)fa) the bar would be applied both as regards the suit in the name of the firm as well as the suit by individual partners.
12. We would consider the relevant authorities which have been cited before us in this connection. In Pratapchand Ramchand & Co. v. Jehangirji Bomanji Chinoy, 42 Bom LR 497 = (AIR 1940 Bom 257) Blackwell J. had to consider this question in the context of a reconstituted firm which was reconstituted by two of the original partners Chhogamal Dhanji and Chunilal Idanji after the death of the third partner Pratapchand. Blackwell J. proceeded on the footing that the suit firm was in fact dissolved on the death of the partner Pratapchand. At p. 500 (of Bom LR) = (at p. 258 of AIR) Blackwell J. observed that the Act did contemplate notwithstanding dissolution by death that so far as registration was concerned the firm was to be deemed still to be registered, and it empowered any person who was a partner immediately before the dissolution to give notice of the change and required the Registrar to record that notice in the entry relating to the registration of the firm and to file it along with the original statement which had been filed. As regards the second condition Blackwell J. observed at p. 500 (of Bom LR)=(at p. 258 of AIR) that at the time of the institution of the suit the firm was registered and it consisted of two original partners whose names were shown on the register at the date of the institution of the suit. The fact that the firm was registered at the date of the institution of the suit and that the names of the persons suing, the firm being a compendious name for the persons suing, were shown in the register at the date of the institution of the suit appeared to be a compliance with Section 69(2) of the Act. Further proceeding Blackwell J. observed that it would seem that the Legislature introduced the words with which that Sub-section concluded viz. 'and the persons suing are or have been shown in the Register of firms as partners in the firm' advisedly. If additional partners had come into the firm as partners since the date of registration, and their names had not been entered on the register in accordance with notice of a change in the constitution of the firmgiven to Registrar it might well be that the firm as then constituted could not sue, because although it was a registered firm some of the persons then suing would not be shown in the Register of Firms as partners in the firm at the date of the suit. In Kesrimal v. Dalichand, , Modi J. had to deal with the later category of case envisaged by Blackwell J. In that case one Premchand of the plaintiffs firm having died his son Pukhraj came into partnership and he was one of the two persons who brought the suit, although his name admittedly was never got registered in the Register of Firms at any time until such a suit was brought. Following the aforesaid view of Blackwell J. it was held that such a suit must be dismissed. At page 142 Modi J. summarised the legal position by holding that before a partner could maintain a suit to enforce a right arising from a contract against any third party two conditions must be fulfilled, viz., first, that the firm should be registered and where a partner thereof happened to have died, a fresh or de novo registration of the firm need not be insisted upon as a matter of law and the firm could still be considered to be a registered one; and the second requirement was that the person or persons on whose behalf the suit was or had to be brought must have been shown in the Register of Firms as partners therein at the time of the institution of the suit, and that if both these conditions are not fulfilled, such a suit must be held to be bad and unmaintainable and would have to be dismissed. In Dr. V. S. Bahal v. S. L. Kapur & Co. , the Division Bench consisting of Bhandari C. J. and Falshaw, J. also took the same view of Section 69(2) of the Act. In that case also two questions had arisen; (1) as to whether on retirement of one partner in 1942 the first firm S. L. Kapur & Co. was dissolved necessitating a fresh registration of the reconstituted firm, and (2) whether a suit could be filed on behalf of the firm in view of the fact that a third partner had subsequently been added whose name was only communicated to the Registrar during the pendency of the suit and did not appear in the register of firms at the date of the institution of the suit,At page 26 the Division Bench held that 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 of Firms. That certainly appeared to be the plain meaning of the words in Section 69(2), 'unless the firm is registered and the persons suing are or have been shown in the Register of Firms as partners in thefirm'. It is difficult to imagine what other meaning the words 'persons suing' are capable of bearing in this context. There is no doubt that in a sense the firm itself is a person but in their Lordships' view there could be no doubt that the words 'persons suing' here meant persons in the sense of individuals, and that the only individuals referred to must be partners in the firm. The Division Bench disagreed with the view taken in Sardar Singar Singh v. Sikri Brothers, AIR 1944 Oudh 37. This decision, therefore, has taken the same view. We would, however, only clarify that the expression 'persons suing' in the context of a suit by a firm would not mean partners at the date of the suit, but only partners at the time of the accrual of the cause of action. With that modification, we are in complete agreement with the said ratio. We also find that the same view, of the two conditions being mandatory in the case where suit is filed in the name of the firm, had been taken by the Division Bench, consisting of Govinda Pillai and Vithayathil JJ., in Bank of Koothatukulam v. Thomas, AIR 1955 TC 155; and by Bose J. in SohanTal Pachisia & Co. v. Bilasroy : AIR1954Cal179 , where an earlier unreported decision was referred to; and by Deo J. in Kapurchand Bhagaji v. Lax-manTrimbak AIR 1952 Nag 57. Mr. Nana-vati on the other hand had drawn our attention to the three other decisions which appeared to take the contrary view that in case of a suit by a firm it would be sufficient if the first condition alone is complied with as to the firm being registered. In Ram Kumar v. Dominion of India, AIR 1952 All 695, the Division Bench, consisting of Wall Ullah and P.L. Bhargava JJ., has held that the firm being in fact the plaintiff and it being registered under the Partnership Act, the provisions of Section 69(2) were complied with and hence the plaint would not be rejected for want of a copy of the registered firm showing the son Ramkumar as its partner. It appears that the learned Judge has even referred to Order 30, Rule 1 and has held that a suit instituted in the name of the firm under Order 30, Rule 1 is really a suit by partners of the firm collectively. The suit being by the firm, the addition of the words 'through so and so' was redundant and of no consequence. Even the plaint was verified by Ramkumar. The learned Judge, however, in terms held that the suit may be by the firm and the firm having been registered the provisions of Section 69(2) were fully complied with and it was wholly unnecessary for the trial Court to consider whether Ramkumar was or was not a partner in the firm. The learned Judge followed the decision In AIR 1944 Oudh 37, where also the DivisionBench had held that the real plaintiff in the case being a firm of Sikri Brothers, the mention of the name of one partner Hagpal through whom the suit was brought did not make him the plaintiff and that such a defect, if any, was one of form and not of substance. Both these decisions, therefore, proceed on the assumption that the second condition could not apply in case of a firm and also on the footing that in case of a suit by the firm in the name of the firm, the firm is the real plaintiff. That view is obviously inconsistent with the settled legal position which we have referred to of the suit by a firm which is only in form in the name of the firm or by the firm but in substance and in reality by partners themselves. Mr. Nanavati finally relied upon the decision in Chiman Lal v. Firm New India Traders : AIR1962Pat25 by the Division Bench consisting of Kanhaiya Singh and Ramratna Singh, JJ. At p. 27 the Division Bench observed that Section 69(2) must be read with Order 30, Rule 1 of the Code. In their Lordships' view these provisions read together apparently mean that when a suit is instituted in the name of a registered firm, only those persons who were registered as partners of the firm would get the benefit of a decree in favour of the firm or should be liable for a decree against the firm; subject to these conditions, the suit was however maintainable and for purposes of this suit only two partners who are registered in the registration certificate will be deemed to be partners with the plaintiff firm. The via media found out by the Division Bench in that case is wholly inconsistent with the settled legal position that a suit under Order 30, Rule 1 by or against a firm would be really by all the partners in the firm and the decree in such a suit would be in favour of or against all the partners who constitute the firm at the time of the accrual of the cause of action. These three decisions, therefore, could not be considered as good law in view of the aforesaid settled position in so far as they proceed on the footing which is inconsistent with the settled legal position and we respectfully disagree with the said three decisions. In the result, our conclusion as regards both these conditions is that no separate registration is necessary where there is reconstitution of a continuing firm, but the second condition must also be complied with by showing that not only the continuing firm is a registered firm but 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. If these two conditions are not fulfilled, the suit in the name of the firm under Order 30 would be clearly barred by virtue of Section 69(2) of the Act.
13. We will now apply the ratio of this decision to the facts of the present case.
14-15. There are two partnership deeds of the firm of Mohatta Brothers on record at Ex. 115, dated 19th May. 1949, and at Ex. 116, dated 14th October 1949. Under the first partnership deed, Ex. 115, the plaintiff firm consisted of five adult partners and the minor Shashikumar Mohatta was admitted only to the benefits of the partnership.
(After discussing documentary evidence, his Lordship proceeded.)
Even the mention of the share as having accrued to the minor through Bai Satyavati is consistent with the fact that it was Satyavati alone who was the sixth partner of the managing agency firm after its reconstitution by Ex. 116 oh 24th October 1949, Therefore, there is no substance in the contention of Mr. Nanavati that the said partnership deed, Ex. 116, was not acted upon and the finding of the trial Court on this question must be reversed.
16. Mr. Gandhi has put up an alternative case and urged that besides Satyavati, even the minor must be recognised as having become a partner from 1953. For this purpose Mr. Gandhi relies on the fact that the losses have been given to the minor at least from 1953 as per the account books and the assessment orders. When the grandfather Shivratan Mohatta was examined, no such question as to the minor's age was asked to him. If the defendant company wanted to establish that the minor had attained majority and after six months had become the partner of the plaintiff-firm, it should have asked the witness Shivratan, Ex. 110, in that connection. Mr, Gandhi relied upon the statement in the evidence of witness Damani to the effect that the age of Shashikumar at the time of deposition was about 23-24 years on 26th March 1959 when Damani was examined. This is a rough estimate by Damani and it cannot be taken as correct age of the minor. In fact the other witness Motilal, Ex. 341. who has been asked in this connection has stated that the age of the minor on the date of his deposition on 28th July 1959 was only 20 years. Therefore, on the whole there is no evidence as regards the minor's age and the whole argument of Mr. Gandhi is based on mere conjectures. Mr. Gandhi wanted to lead additional evidence in this appeal on the question of minor's age, but no ground whatever was made out for admission of any additional evidence at this stage and the said application is rejected by us. We have admitted additional evidence only by consent of the parties as regards PI and PII by the plaintiff-firm to explain the accountsshowing sales of stores and other articles which items were mentioned in the trial Court's judgment. These accounts were duly proved. We have already allowed additional evidence by the consent of the parties as regards the disclosure of the names of the partners of the plaintiff-firm under Order 30, Rule 2 by D I and D II. In that view of the matter, we only hold that the deed Ex. 116 was duly acted upon and the plaintiff-firm at the time of the accrual of the cause of action consisted of six partners, including Satyavati whose name admittedly is not shown in the register of firms.
17. Mr. Nanavati next argued that the plaintiff-firm having duly disclosed five names of the adult partners and the sixth minor as having been admitted only to the benefits of the partnership in the reply Exts. D l and D 2 on 8th August 1956 as required under Order 30, Rule 2, these were the only persons suing within the meaning of Section 69(2) of the Act. This contention of Mr. Nanavati cannot be accepted. It cannot be expected that the plaintiff firm could omit to mention all the relevant partners at the time When cause of action had accrued The Legislature has provided a statutory bar under Section 69(2), both in cases where the suit is filed in firm name or where the individual partners bring a suit and the names of all the partners at the time of accrual of the cause of action must be disclosed. Even if such names are not disclosed, the persons suing are all the partners at the date of the accrual of the cause of action and if the name of any such partner is not in the register of firms, the second mandatory condition in Section 69(2) would not be fulfilled. Mr. Trivedi is right in pointing out that in cases of co-promisees Section 45 of the Indian Contract Act would require that the promise in their favour can be enforced jointly by all of them. Mr. Nanavati has no doubt argued that Order 30 creates an exception to Section 45 of the Indian Contract Act. We, however, cannot accept this contention of Mr. Nanavati. The said exception in Order 30 is a limited exception as mentioned in Order 30, Rule 4, which runs as under :--
'(1) Notwithstanding anything contained in Section 45 of the Indian Contract Act, 1872, where two or more persons may sue or be sued in the name of a firm under the foregoing provisions and any of such persons dies whether before the institution or during the pendency of any suit, it shall not be necessary to join the legal representative of the deceased as a party to the suit'.
This non obstante clause applies only when the partners sue in the firm name or are sued in the firm name and any of such persons dies, whether before or during the pendency of a suit. In such a case it is not necessary to join the legal representatives of the deceased partner. The very restriction of this exception in Rule 4 only to the case where the partner dies makes it amply clear that otherwise the provisions of Section 45 of the Indian Contract Act would normally prevail and any suit without joining all the partners or by the compendious use of the firm name without disclosing all the partners would obviously fail In fact in case of a death of a partner the number would be reduced and the second mandatory condition in Section 69(2) would be fulfilled by the registered firm if the name of the deceased partner was already shown. We have already distinguished these cases from the cases where new partner is added in which case alone the registered firm which fulfilled the first condition would not be able to fulfil the second mandatory condition in Section 69(2) of the Act. The provision of Order 30, Rule 4, therefore, would furnish an additional ground in support of our view that where firm sues all the partners in whose favour the cause of action had accrued are suing and that is why there is no bar of Section 45 of the Indian Contract Act and there would be equally no bar of Section 69(2) of the Act, where names of all those partners of the reconstituted firm are shown in the register of firms. In the present case however, the name of the sixth partner Bat Satyavati is not shown in the entry Ex. 178 with the Registrar of Firms and therefore, this defect of non-compliance of the second condition of Section 69(2) is fatal to the plaintiffs suit.
18. In view of this legal position which we have discussed, the second mandatory condition under Section 69(2) is not fulfilled in the present case that the name of Satyavati who was a partner of the reconstituted firm and in whose favour the cause of action had accrued is not shown in the register of firms. This defect would be as fatal as the first defect of want of registration of the firm itself and in both the cases we would have no option but to dismiss the suit. In that view of the matter it would be wholly unnecessary to go into any of the other contentions which have been raised in these two appeals and to record any finding on the issues relating to the merits of the case or as regards the other appeal of the plaintiff as well. Howsoever, much we may regret to dismiss the plaintiff's suit which apparently is well founded by upholding the technical objection of the defendant company, we are bound to dismiss this suit as in law a non-compliance of this second mandatory condition is also equally fatal as the non-compliance of the first condition. At the same time, however, in the circumstances of the case while dismissing the plaintiffs suit we would order that both the parties shall bear their own costs all throughout.
19. In the result we allow First Appeal No. 769 of 1960 by the defendant company by reversing the finding and the decree of the trial Court which proceeded on the basis that there was no bar under Section 69(2) and we accordingly dismiss the plaintiff's suit. We also dismiss First Appeal No. 1029 of 1960 filed by the plaintiff firm for the same reasons.
20. Mr. Nanavati orally applied for certificate for fitness for appeal to the Supreme Court. We are satisfied that the requirements of Articles 133(1)(a) and 133(1)(c) are fulfilled in the present case and we grant certificate for appeal to the Supreme Court under the said two provisions.
21. In the end we would acknowledgethe great assistance we have receivedfrom the advocates on both the sides, including Mr, B. S. Trivedi whose researchhad brought out all the relevant authorities on this vexed question before us.