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M/S. R.S. Leather Exports Vs. Central Bank of India and Another - Court Judgment

LegalCrystal Citation
CourtDRAT Madras
Decided On
Case NumberIN(SARFAESI)-645 of 2008
Judge
AppellantM/S. R.S. Leather Exports
RespondentCentral Bank of India and Another
Advocates:M/s. S.N. Amarnath and R. Dhananjayan, M/s. P.V. Ramachandran.
Excerpt:
.....the sa to set aside the possession notice and the sale notice issued by the bank. the respondent bank filed detailed counter affidavit resisting the application filed by the appellant and one of the preliminary objections raised by the respondent bank is with reference to the maintainability of the application on the ground that the appellant firm is not a registered one vide section-69(2) of the indian partnership act. 1932. hence ld. po heard both sides on the preliminary question whether the sa filed by the appellant is maintainable as it is not a registered firm and after hearing both sides came to the conclusion that the application filed by the appellant is not maintainable and therefore, dismissed the same. hence the appeal. 3. heard mr. s.n. amarnath, ld. counsel appearing for.....
Judgment:

1. This Appeal is filed challenging the Order passed by the DRT-I, Chennai, in SA No.344/2007 on 11.7.2008.

2. The brief facts leading to the filing of this Appeal are as follows :-

The Appellant firm availed financial assistance from the Respondent Bank on 4.3.2003 to the tune of Rs.15 lakhs and since the account became irregular, the Bank issued notice under Section-13(2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereinafter called as SARFAESI Act) on 8.6.2006, to which the Appellant sent objections by way of reply on 30.8.2006. Though the Appellant made an offer for One Time Settlement (OTS) at Rs.8 lakhs, the Bank declined to accept the same and issued Possession Notice on 14.8.2007. Further, the Bank had not sent any reply regarding the objections sent by the Appellant and since the property brought for sale by the Bank was not also mortgaged in favour of the Bank, the Appellant filed the SA to set aside the Possession Notice and the Sale Notice issued by the Bank. The Respondent Bank filed detailed Counter Affidavit resisting the Application filed by the Appellant and one of the preliminary objections raised by the Respondent Bank is with reference to the maintainability of the Application on the ground that the Appellant firm is not a registered one vide Section-69(2) of the Indian Partnership Act. 1932. Hence Ld. PO heard both sides on the preliminary question whether the SA filed by the Appellant is maintainable as it is not a registered firm and after hearing both sides came to the conclusion that the Application filed by the Appellant is not maintainable and therefore, dismissed the same. Hence the Appeal.

3. Heard Mr. S.N. Amarnath, Ld. Counsel appearing for the Appellant and Mr. P.V. Ramachandran, Ld. Counsel appearing for the Respondent Bank

4. The points for consideration are as follows :-

1) Whether the Application filed by the Appellant in SA No.344/2007 before the DRT is not maintainable for the reason that the Appellant firm is not a registered one as per Section-69(2) of the Partnership Act ?

2) Whether the impugned Order passed by the DRT has to be set aside as prayed for ?

The Points :

5. Admittedly the Appellant firm was not registered under the provisions of the Indian Partnership Act, 1932, and that the firm availed credit facilities from the Respondent Bank as claimed in the notice issued by the Bank under Section-13(2) of the SARFAESI Act on 8.6.2006, calling upon the Appellant to repay the amount within 60 days from the date of the notice. Similarly it is not in controversy that the objections raised by the Appellant in the reply notice dated 14.7.2006 and 30.8.2006, addressed to the Respondent bank were not considered and rejoinders were not issued by the Bank in accordance with law. Further the Bank proceeded to take possession of the Schedule property by issuing notice under Section-13(4) on 14.8.2007. Under such circumstances, the Appellant initiated the said proceedings before the DRT challenging the measures taken by the Bank.

6. Ld. Counsel for the Appellant has contended that the provision under Section-69(2) of the Partnership Act, does not prima facie bar initiation of proceedings by any firm which is not registered and he has strongly relied on the decision rendered by the Hon’ble Supreme Court in Firm Ashok Traders and Another Vs. Gurumukh Das Saluja and Others [2004 (2) CTC 208]. In answer to such an argument putforth on the Appellant’s side, Ld. Counsel for the Respondent Bank has strenuously contended that the Appellant firm must have been registered at the time of institution of the proceedings before the DRT and cited the decision U.P. State Sugar Corporation Ltd. Vs. Jain Construction Co. and Anr.[2005-I-L.W.481] rendered by the Hon’ble Supreme Court. A careful reading of both the decisions would indicate that the proceedings under Arbitration Act (1940), as well as under Arbitration and Conciliation Act (1996), came up for consideration before the Supreme Court. While considering such question, the Apex Court in 2005 (1) L.W. 481, laid the principle of law in paragraph-7 as follows :-

“7. It is true that the arbitral proceedings would not be maintainable at the instance of an unregistered firm having regard to the mandatory provisions contained in Section 69 of the Indian Partnership Act, 1932. It has been so held in [AIR 1964 SC 1882]. There cannot, however, be any doubt whatsoever that the firm must be registered at the time of institution of the suit and not later on.”

7. On the contrary, when the same question came up for consideration before the Apex Court, the dictum of law was laid down in 2004 (2) CTC 208 in Paragraph-12 as under :-

“12. In our opinion, which we would term as prima facie, the bar enacted by Section 69 of the Partnership Act does not affect the maintainability of an application under Section 9 of A and C Act.”

Therefore, the Order under challenge in the said Appeal was modified by the Hon’ble Supreme Court by holding that the Order of the High Court appointing a Receiver in the partnership business is maintainable, rest of the Order passed by the High Court is liable to be set aside and substituted by certain directions as enumerated in Paragraph-22 therein.

8. In view of the above decisions, it has to be considered whether the Application filed by the Appellant under Section-17(1) of the SARFAESI Act before the DRT is maintainable in view of the bar for instituting any proceedings by an unregistered partnership firm vide Section-69(2) of the Indian Partnership Act, 1932. Section-69 of the Partnership Act reads as follows :-

“69. Effect of non-registration. –

(1) 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.

(2) No suit to enforce a right arising from a contract shall be instituted in any court by or on behalf of a firm against any third party unless the firm is registered and the persons suing are or have been shown in the register of firms as partners in the firm.

(a) The provisions of sub-sections (1) and (2) shall apply also to a claim of set-off or other proceeding to enforce a right arising from a contract.

9. It is no doubt true that the dispute between the Appellant and the Respondent Bank arose on the basis of a contract whereby the Appellant availed credit facilities from the Respondent Bank and therefore, Ld. Counsel for the Respondent has contended that in view of the dictum of law laid down by the Hon’ble Supreme Court in [2002] 1 SCC 633 (Commissioner of Income Tax, Mumbai Vs. Anjum M.H. Ghaswala and Ors.), the proceedings initiated by the Appellant before the DRT has to be declared as not maintainable in law. The ratio laid down therein in Paragraph-27 reads as follows :-

“27. It is a normal rule of construction that when a statute vests certain power in an authority to be exercised in a particular manner then the said authority has to exercise it only in the manner provided in the statute itself.”

Similarly the Ld. Counsel for the Respondent has drawn the attention of this Tribunal to the rule of interpretation of a legislation as laid down in (2000) 6 SCC 545 as follows :-

“When the words of a legislation are clear, the court must give effect to them as they stand and cannot demur on the ground that the legislature must have intended otherwise.”

10. Further there is no controversy with reference to the proposition that as per Section-17 of the SARFAESI Act, the proceedings initiated thereunder is in the form of a Suit and therefore, Ld. Counsel for the Respondent Bank has urged that as per Section-69(2) of the Partnership Act, the word ‘Suit’ used therein, also includes the proceedings initiated under Section-17 of the SARFAESI Act. Further, he has also drawn a distinction between the Application filed under the provisions of Arbitrations Act, both old and new, and the proceedings initiated under Section-17 of the SARFAESI Act, and vehemently contended that the impugned Order passed by Ld. PO does not suffer from any illegality.

11. After careful consideration of the above factual aspects as well as the ratio of the decision cited above, this Tribunal comes to the irresistible conclusion that Section-69(2) of the Partnership Act clearly imposes a bar to initiate any proceedings to enforce the right under a contract entered into by the Appellant firm, which is not a registered one on the one hand, and the Respondent Bank on the other. It follows necessarily that the reasoning given by the Ld. PO in the impugned Order does not suffer from any illegality so as to call for interference with the same. Hence this Tribunal finds that the proceedings in SA-344/2007 initiated by the Appellant before the DRT is not maintainable and therefore, the impugned Order has to be affirmed. Thus these points are answered accordingly.

12. For the foregoing reasons, the proceedings in IN(SA)-645/2008 is dismissed with cost by confirming the impugned Order passed by the DRT-I, Chennai, in SA-344/2007 dated 11.7.2008. Cost Memo is directed to be filed within two weeks.


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