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P.M.S.M. Mohammed Abdul Samad and ors. Vs. P.M.S.C. Madarsa Rowther and ors. - Court Judgment

LegalCrystal Citation
SubjectCommercial
CourtChennai High Court
Decided On
Case NumberSecond Appeal No. 32 of 1957
Judge
Reported inAIR1959Mad440
ActsPartnership Act, 1932 - Sections 69, 69(1), 69(2) and 69(3)
AppellantP.M.S.M. Mohammed Abdul Samad and ors.
RespondentP.M.S.C. Madarsa Rowther and ors.
Appellant AdvocateD. Ramaswami Iyengar and ;V. Venkataraman, Advs.
Respondent AdvocateK. Raman, Adv.
DispositionAppeal allowed
Cases ReferredSheo Dutt v. Pushiram
Excerpt:
.....if his name appears in register as partner unless firm was registered - suit for accounts of a dissolved firm was within exception under section 69 (3) - present suit was to enforce right over property realised from third parties for benefit of all former partners of a dissolved firm - held, partners of non-registered firm have right to institute suit to realise property of dissolved firm. - - 1.the plaintiffs whose suit failed in the courts below prefer this second appeal. subsequently, businessmen in the position of the plaintiffs and defendants complained to the government challenging the legality of the government's order levying a surcharge. in so far as that decision may be held to be authority for the position that a suit like the present should be regarded as a suit to..........registered and the person suing was or had been shown in the register of firms as a partner in the firm. 'firm' is thus defined in section 4 :'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', 'that definition makes it clear that the expression 'firm' cannot be applied to a partnership except where it is continuing to carry on business. wherethe partnership has been dissolved, it is referred toin the act as a dissolved firm, and not simply as a firm. neither section 69(1) nor section 69(2) can apply to a suit instituted by a person who claims to have been a partner in a dissolved firm or to a suit instituted by or on behalf of a dissolved.....
Judgment:

Subrahmanyam, J.

1.The plaintiffs whose suit failed in the courts below prefer this second appeal. The plaintiffs and the defendants were doing business in partnership from 7-2-1944 to 21-1-1949. The main business transacted by the partnership was procurement and distribution of paddy under the Control Orders which were in force during the major part of that period. The partnership was dissolved in 1949 and accounts of the dissolved partnership were taken. The plaintiffs received theirshare of the capital and profits and retired from the partnership. The defendants are continuing the business. The firm was never registered.

2. During the period of the partnership, the Government directed the firm to pay a sum of Rs. S323-6-8 as surcharge on the stocks of paddy held by the partnership. The money was paid. Subsequently, businessmen in the position of the plaintiffs and defendants complained to the Government challenging the legality of the Government's order levying a surcharge. As a result of further consideration, the Government directed a refund of a portion of the surcharge which had been collected from merchants of that class.

In pursuance of that direction, the defendants were paid Rs. 1820-12-0 on 23-10-1951. That was nearly three years after the dissolution of the partnership. The plaintiffs instituted the suit which has given rise to the second appeal claiming that, since their share of the profits of the partnership was a half, they were entitled to a half of the sum of Rs. 1820-12-0. They prayed for a decree for the sum. Both the lower courts have held that, since the firm was not registered, the plaintiffs' suit was not maintainable Under Section 69 of the Partnership Act (Central Act 9 of 1932).

3. The plaintiffs' advocates appear to have conceded in the lower courts that the suit was within the prohibition enacted in Section 69(1) and to have contended that the suit was saved by the exception enacted in Section 69(3). The lower courts have held that the suit is not within the exception enacted in Section 69(3)(a).

4. The first point for determination in the second appeal is whether the suit is within the prohibition enacted in Section 69(1) of the Partnership Act. Section 69(1) is in these terms ;

'No suit to enforce a right arising from a contract or conferred by this Act shall be instituted in any court by or on behalf of any person suing as a partner in a firm against the firm or any person alleged to be or to have been a partner in the firm unless the firm is registered and the person suing is or has been shown in the Register of Firms as a partner in the firm.'

It may be useful to read also Section 69(2) which is in these terms :

'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.'

The object of Section 69(2) is to compel a firm which is a going concern to get itself registered it has to institute a suit or make claims in courts of law. Section 69(1) refers to a suit instituted in any court by or On behalf of any person suing as a partner in a firm. If such a person instituted a suit against the firm or any person alleged to be or to have been a partner in the firm, the suit would be dismissed unless the firm had been registered and the person suing was or had been shown in the Register of Firms as a partner in the firm. 'Firm' is thus defined in Section 4 :

'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', '

That definition makes it clear that the expression 'firm' cannot be applied to a partnership except where it is continuing to carry on business. Wherethe partnership has been dissolved, it is referred toin the Act as a dissolved firm, and not simply as a firm. Neither Section 69(1) nor Section 69(2) can apply to a suit instituted by a person who claims to have been a partner in a dissolved firm or to a suit instituted by or on behalf of a dissolved firm. Such suits lie outside the purpose of the sub-sections.

Their purpose is to compel registration of the firms that seek relief in courts. A dissolved firm cannot be registered. Hence a suit by or on behalf of a dissolved firm or by a partner of a dissolved firm cannot possibly be nit by the prohibition en-acted in those sub-sections. If a person who is a partner in a firm sues the firm for some particular relief or sues an individual partner of the firm or a former partner of the firm, the suit cannot be maintained unless the firm is registered. That is because the firm Is in being and may be registered.

If a person, who claims that he is a partner in ft firm and whose claim is disputed, sues the firm or a partner or a former partner of the firm, such a suit, again, is within the prohibition enacted in Section 69(1). ' That is because the suit is instituted by the plaintiff in his capacity as partner and since the firm is in being and is capable of being registered, it is opposed to the policy of the Act, subject to the exceptions enacted in Section 69(3) to allow the institution of a suit by a person who claims to be a partner unless the firm is registered and his name appears, or appeared, in the Register as a partner.

But unless there is a firm -- that is to say, a partnership that is continuing to do business --and the suit instituted by the plaintiff involves a basic claim on his part to be recognised as a continuing partner of the firm, the suit would not be hit by the prohibition enacted in Section 69(1) of the Act. In this case, it is admitted by both parties that the firm was dissolved in 1949. The plaintiffs were partners in the dissolved firm.

They sue the defendants who were the other partners of the dissolved firm. The suit and the defence pressed alike on the basis that the relationship pf partnership has ceased to subsist and that the firm is no longer in existence. To such a suit, Section 69(1) can have no application. I hold that the institution of the suit is not barred by Section 69(1) of the Partnership Act.

5. In the lower courts the contention that was urged was that the claim made by the plaintiff was to enforce his right and power to realise the property of the dissolved firm. The lower courts overruled that contention, They were right in doing so.

6. The surcharge refundable to the firm has been realised on behalf of the firm. The plaintiffs are seeking now not to realise the property of the dissolved firm but to realise from some of the partners of the former firm the plaintiffs' share of the money that has been realised. The plaintiffs cannot therefore be said to be enforcing or exercising any right or power to realise the property of the dissolved firm. The lower courts rightly held that the suit is not within the terms of the exception enacted in Section 69(31(a) of the Act.

7. In support of the proposition that the suit is within the exception enacted in Section 69(3)(a), the appellants' learned counsel relies on Sheo Dutt v. Pushiram, AIR 1947 All 229. In that case, the plaintiff and the defendant were members of a firm which had been dissolved. The plaintiff claimed that the defendant had overdrawn money from the partnership assets and was further liable, to bearhis share of the loss incurred by the partnership, The suit which gave rise to the appeal in the High Court was to recover the money overdrawn and the share of the other partner's loss.

Such a suit should be regarded as a soft for taking accounts of the dissolved partnership. It was in fact expressly found that the accounts of the partnership had never been settled between the parties and that, though the plaintiffs claimed specific sums of money, the relief which should have been claimed and which the court should grant was the relief of accounts. A suit for accounts of a dissolved firm is expressly within the elception enacted in Section 69(3)(a). That suit, regarded as a suit for accounts of a dissolved firm, was within that exception.

But the learned Judges also held that the suit might be regarded as a suit to enforce a right to realise the property of a dissolved firm. Such a view can, in my opinion, be taken only in a case where property is sought to be realised from third parties for the benefit of all the former partners of the firm. In so far as that decision may be held to be authority for the position that a suit like the present should be regarded as a suit to enforce or exercise the right or power to realise the property of a dissolved firm, I should, with great respect, hesitate to adopt it.

8. The second appeal is allowed and the judgments and decrees of the courts below are set aside.

9. Two questions arising on the pleadings remain yet to be determined. The first is whether, under the terms of the dissolution of the partnership the plaintiffs are disentitled to claim any share in the money that has been paid by the Government to the defendants. The second is whether, if the plaintiffs are entitled to claim a share, the-defendants are entitled to set off in respect of the sums mentioned in the written statement.

10. The District Munsif will restore the suitto its original number on his file and will disposeof it afresh in accordance with his findings on thetwo points mentioned above. Both parties will befree to adduce fresh evidence. The evidence already on record will be treated as evidence available at the fresh trial. The Court fee paid on theMemoranda of appeal in the lower court and inthis court will be refunded. The rest of the costsin all courts will abide and be provided for in therevised decree to be passed by the learned DistrictMunsif.


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