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V.J. Masarwala Vs. P. Sheth and Co. - Court Judgment

LegalCrystal Citation
SubjectContract
CourtGujarat High Court
Decided On
Judge
Reported in(1981)22GLR689
AppellantV.J. Masarwala
RespondentP. Sheth and Co.
Cases ReferredShivagouda Ravji Patil and Ors. v. Chandrakant Neelkant SaJalge and Ors.
Excerpt:
.....are or have been shown in the register of firms' mean that all the partners of the firm must be shown as partners in the register of firms and if any one of them is not shown as such partner of the firm, the provision of section 69(2) of the act will apply and the suit will be barred and will not be maintainable because the persons suing in the name of the firm are not shown in the register of firms as partners of the firm. 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 87-b of the code of civil procedure, a suit, though in form against a firm, was held to be in reality a suit against each partner. the bar equally applies to suits by the firm, as well as suit on behalf of the..........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 or firms as partners in the firm. it is well settled law that the words 'persons suing are or have been shown in the register of firms' mean that all the partners of the firm must be shown as partners in the register of firms and if any one of them is not shown as such partner of the firm, the provision of section 69(2) of the act will apply and the suit will be barred and will not be maintainable because the persons suing in the name of the firm are not shown in the register of firms as partners of the firm.5. there is a decision of a division bench of our high court in the bharat suryodaya mill's co. ltd. v......
Judgment:

B.J. Divan, C.J.

1. The petitioner before me is the original defendant and the opponent is the original plaintiff. The plaintiff is a partnership firm and it is contended that it has been registered under the provisions of the Indian Partnership Act, 1932 (herein after referred to as the Act). The plaintiff firm filed Summary Suit No. 4508 of 1974 against the defendant in the Court of Small Causes at Ahmedabad for the recovery of Rs. 2048/ 80 with interest and notice charges against the defendant and the question arises as to whether the requirements of Section 69(2) of the Partnership Act were complied within the facts and circumstances of this case. It has been set out in the plaint that the cause of action arose to the plaintiff firm on April 8, 1972. The partnership deed was entered in to prior to 1971 and two persons-Umesh Prahladbhai Sheth and Mehul Prahladbhai Sheth were joined as minors who were admitted to the benefits of the partnership. Out of these two minors, Umesh attained majority on June 10, 1971 and Mehul attained majority on September 14, 1973. The suit came to be filed on October 7, 1974. It is common ground that the names of Umesh and Mehul were not shown in the entry in the register of firms and their names were not added after they respectively attained majority. The provisions of the Act have to be looked at in order to arrive at the conclusion, on this question.

2. Section 30 of the Act deals with the minors admitted to the benefits of partnership. Under Sub-section (5) of Section 30 it is provided, that at any time within six monthe of his attaining majority or of his obtaining knowledge that he had been admitted to the benefits of partnership, whichever date is later, such person may give public notice that he has elected to become or that he has elected not to become a partner in the firm and such notice shall determine his position as regards the firm. Under proviso to Sub-section (5) of Section 30 if he fails to give such notice, he shall become a partner in the firm on the expiry of the said period of six months.

3. Section 63 of the Act deals with recording of changes in and dissolution of a firm. Sub-section (2) of Section 63 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 then 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) of Section 63 and the notice has to be filed along with the statement relating to the firm filed under Section 59 of the Act.

4. Section 69 of the Act deals with the effect of non-registration. Sub-section (2) of this section 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 or Firms as partners in the firm. It is well settled law that the words 'persons suing are or have been shown in the Register of Firms' mean that all the partners of the firm must be shown as partners in the Register of Firms and if any one of them is not shown as such partner of the firm, the provision of Section 69(2) of the Act will apply and the suit will be barred and will not be maintainable because the persons suing in the name of the firm are not shown in the Register of Firms as partners of the firm.

5. There is a decision of a Division Bench of our High Court in the Bharat Suryodaya Mill's Co. Ltd. v. Mohatta Bros. 10 G.L.R. 457 and in that decision it has been held by the Division Bench consisting of J.B. Mehta and B.G. Thakor, JJ., that suits by or against a firm under Order 30 of the Civil Procedure Code are in reality suits by partners or against the partners 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 87-B of the Code of Civil Procedure, a suit, though in form against a firm, was held to be in reality a suit against each partner. Such a suit by a firm must be treated 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 Indian Partnership Act was attracted or not. 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 tooting alone, the statutory bar to such a suit has to be considered. It was further held that Section 69(2) of the Indian Partnership Act bars a suit against a third party if it is for enforcing a right ariring from a contract. The bar equally applies to suits by the firm, as well as suit on behalf of the firm. Before such a suit can be filed to enforce a contractual right by the firm or on behalf of the firm two requirements must be fulfilled, namely, (1) that the firm must be a registered firm and (2) the persons suing are of 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 fatal bar to the entire suit and it would be wholly incompetent in a Court of law. A plain literal reading of Section 69(2) shows that both these conditions are cumulative conditions as they have been joined by the conjunction 'and' and not by disjunctive 'or'. 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 partners in the firm while dealing with the third party.

6. It may be pointed out that against this decision of the Division Bench, an appeal was preferred to the Supreme Court of India and the decision of the Supreme Court is reported in Mohatla Brothers v. the Bharat Suryodaya Mills Co. Ltd. Ahmedabad 0044/1976 : [1976]3SCR1022 . The Supreme Court reversed the decision of the Division Bench of the Gujarat High Court on appreciation of facts of that particular case and Khanna, J. speaking for the Supreme Court pointed out in paragraph 20 at page 1710 of the Report that in view of the conclusion of the Supreme Court it was not necessary to go into the legal question as to what should be the proper construction of Section 69(2) of the Indian Partnership Act. Thus, the Supreme Court has not specifically or in terms differed from the view taken by this High Court in the case of Bharat Survodaya Mills Co. Ltd. 10 G.L.R. 457 (Supra) so far as the construction of Section 69(2) is concerned and since that decision is a decision by a Division Bench of this High Court it is binding on me. I will, therefore, proceed on the basis of the interpretation of Section 69(2) by the Division Bench of this Court.

7. In the instant case, on June 10, 1971 Umesh attained majority and it is common ground that he had not exercised his option specifically to become a partner or not to become a partner in the firm and hence by virtue of the proviso to Sub-section (5) of Section 30 of the Act Umesh must be deemed to have become a partner on Decembsr 10, 1971. So far Mehul was concerned, he attained majority on September 14, 1973 and therefore, he must be deemed to have become a partner under the proviso to Sub-section (5) of Section 30 of the Act, on March 14, 1974. It is common ground before me that neither Umesh nor Mahul was shown as partner so far as Register of Firms was concerned, though, in fact, after December 10, 1971 Umesh was a partner in the firm and after March 14, 1974 Mehul was a partner in the firm. The two requirements set out in the decision in the Bharat Suryodaya Mills' case (supra) are, that the firm must be a registered firm and secondly all the persons suing are or have been shown in the Register of Firms as partners of the Firm when the cause of action arose. It may also be pointed out in this connection that under Sub-section (7) of Section 30 of the Act when a minor who has attained majority becomes a partner, his rights and liabilities as a minor continue upto date on which he becomes a partner, but he also becomes personally liable to third parties for all acts of the firm done since he was admitted to the benefits of partnership and his share in the property and profits of the firm shall be the share to which he was entitled as a minor. Thus, Sub-section (7) of Section 30 of the Act indicates that both in the case of Umesh and Mehul since they became partners by virtue of proviso to Sub-section (5) of Section 30 of the Act their rights and liabilities would relate back to the date when they were admitted to the benefits of partnership, but the point still remains that if according to the plaint the cause of action arose on April 8, 1972 and since the suit was on a contract, the name of Umesh at least should have been shown as a partner of the firm by the requisite entry in the Register of Firms. By April 8, 1972 Umesh had already become a partner the date being December 10, 1971 and since the name of Umesh was not shown in the Register of Firms with the names of all the other persons who were partners in the firm at the time when cause of action arose, the bar of Section 69(2) would come into operation.

8. Mr. Desai, learned Advocate for the respondent Firm drew my attention to the decision of the Supreme Court in Shivagouda Ravji Patil and Ors. v. Chandrakant Neelkant SaJalge and Ors. : [1964]8SCR233 . In that case the Supreme Court was not directly concerned with the interpretation of Section 69(2) of the Act and the question which was before the Supreme Court was whether a minor who was admitted to the benefits of partnership and who attained majority after the partnership was dissolved, could be said to be insolvant and could be adjudicated insolvant for acts of insolvency committed by major partners. Subba Rao, J. (as he then was) speaking for the Supreme Court observed that since the partnership firm was no longer in existence on the date on which the minor attained majority there was no firm in existence of which the minor who had attained majority, could have become a partner. The provisions of different sub-sections of Section 30 have been considered by the Supreme Court in para 5 at page 214 of the report, but that discussion is not of much help to me in deciding the provision of Section 69 (2) and hence, I do not refer in details to the ratio of the decision Shivagouda's case (supra).

9. The result, therefore, is that-it must be held that the provisions of Section 69(2) of the Act have not been satisfied in this case since all the persons who were partners at the time when the cause of action arose, have not been shown in the Register of Firms so far as this particular firm was concerned. It must therefore, be held that the suit was not maintainable since it was based on a contract and since the partnership firm, which was one of the contracting parties, was suing on the basis of that contract.

10. This Civil Revision Application is, therefore, allowed. The order passed by the learned Judge, Small Causes Court, Ahmedabad - the Court of the first instance - and the order passed by the Appellate Bench of Small Causes Court at Ahmedabad, in New Trial Application No. 8 of 1978 are set aside. As the suit was not maintainable, the suit must be dismissed with costs in the Court of the first instance. There will be no order as to costs of this Civil Revision Application.

11. Rule is allowed accordingly.


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