caselaws
Supreme Court of India
Shiv Developers Thr. Sunilbhai … vs Aksharay Developers on 31 January, 2022Author: Dinesh Maheshwari
Bench: Dinesh Maheshwari, Vikram Nath
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 785 OF 2022
(ARISING OUT OF SLP (C) NO. 20262 OF 2018)
SHIV DEVELOPERS THROUGH ITS
PARTNER SUNILBHAI SOMABHAI AJMERI …. APPELLANT(S)
VERSUS
AKSHARAY DEVELOPERS & ORS. …. RESPONDENT(S)
JUDGMENT
DINESH MAHESHWARI, J.
The relevant factual matrix and background……………………………………………..2
The application seeking rejection of plaint: divergent views of the Trial Court
and the High Court…………………………………………………………………………………6
Rival Submissions……………………………………………………………………………….12
Section 69 of the Act of 1932 and the relevant principles…………………………..15
Application of the relevant principles to the subject suit…………………………….21
Conclusion………………………………………………………………………………………….23
Leave granted.
2. This appeal, by the plaintiff of a suit for declaration and injunction,
is directed against the judgment and order dated 15.02.2018, as passed
by the High Court of Gujarat1, in Civil Revision Application No. 241 of
Signature Not Verified
2017, whereby the High Court has allowed the revision application filed
Digitally signed by
Rajni Mukhi
Date: 2022.01.31
15:19:41 IST
Reason:
by the contesting defendants (respondent Nos. 1 to 3 herein) and has
1 For short, ‘the High Court’.
1
reversed the order dated 07.04.2017, as passed by the Court of 9 th
Additional Senior Civil Judge, Vadodara2 in Special Civil Suit No. 333 of
2015.
2.1. By the said order dated 07.04.2017, the Trial Court had rejected
the application moved by the contesting defendants under Order VII Rule
11(d), Order XXX Rules 1 and 2 and Section 151 of the Code of Civil
Procedure, 19083 read with Section 69 of the Indian Partnership Act,
19324 for rejection of plaint on the ground that the suit filed by and on
behalf of an unregistered partnership firm was barred by law. The Trial
Court essentially held that, on its subject-matter relating to the validity of
the sale deed in question, the bar of Section 69(2) was not operating
against this suit. However, the High Court has taken a contrary view of
the matter and has held that the plaintiff, being an unregistered firm,
would be barred to enforce a right arising out of the contract in terms of
Section 69(2) of the Act of 1932.
3. We may take note of the factual matrix and the background
aspects of the matter, so far relevant for the question calling for
determination in this matter, i.e., as to whether the subject suit, filed by an
unregistered partnership firm, is covered by the bar created by Section
69(2) of the Act of 1932?
The relevant factual matrix and background
2 For short, ‘the Trial Court’.
3 For short ‘the Code’.
4 For short, ‘the Act of 1932’.
2
4. For a proper comprehension of the subject-matter, worthwhile it
would be to take note of the status of respective parties before dilating on
the pleadings and submissions.
4.1. The appellant herein is an unregistered partnership firm by the
name “Shiv Developers”. It is stated that this firm is engaged in the
business of construction of buildings and is comprising of two equal
partners, namely, Mr. Sunilbhai Somabhai Ajmeri and Mr. Jignesh
Kanubhai Desai. The said Mr. Sunilbhai Somabhai Ajmeri is also referred
to as ‘the administrator’ of this firm and has filed the suit on behalf of the
firm.
4.2. In the suit so filed by the plaintiff-appellant, a partnership firm in the
name “Aksharay Developers” has been arrayed as defendant No. 1
(respondent No.1 herein) whereas the defendant Nos. 2 to 4 namely,
Dineshbhai Bhailal Bhai Patel, Arjunsinh Narayansinh Rajput, and
Ranjitsinh Narayansinh Rajput (respondent Nos.2 to 4 herein) have been
joined in their capacity as the partners of the defendant No. 1 firm. As
shall be noticed hereafter, the composition of this firm, in the name
“Aksharay Developers” with the said persons as partners, is itself a matter
of contention in the suit so filed by the plaintiff-appellant. The Municipal
Commissioner and the Town Development Officer of Vadodara Municipal
Corporation have also been joined as defendant Nos. 5 and 6 in the suit
but they are not the contesting parties in relation to the subject-matter of
this appeal.
3
5. Now, we may briefly refer to the relevant aspects of the case of
appellant, as emerging from the plaint averments.
5.1. The plaintiff-appellant has averred that on 26.11.2013, the
appellant and the respondent Nos. 2 and 3 purchased a property (open
land)5 bearing Tika No. 5/3, City Survey No. 104, 105, 132, 106/A in City
Survey Vibhag- B, situated on Kalal Pitha Road, Hujaratpaga, Sub-District
Vadodara, admeasuring 232.81 square metres, through a registered sale
deed. According to the appellant, its share in the suit property was 60%
and the respective shares of respondent Nos. 2 and 3 were 20% each.
5.2. It has further been averred that on 22.04.2014, a new partnership
by the firm name “Aksharay Developers” was formed with four partners,
namely, Sunilbhai Somabhai Ajmeri (also the partner and administrator of
the appellant firm) and the respondent Nos. 2, 3 and 4. According to the
plaint averments, the said partnership was formed exclusively for the
purpose of the project related with the suit property and the tenure of the
partnership was confined to the completion of the said project. A
Memorandum of Understanding6 was signed by the partners on the date
of incorporation of the firm, i.e., 22.04.2014; and it was agreed in the
MOU that from the income which may accrue from the project, a fixed
sum of Rs 1,00,00,000 (Rs. One Crore) would be paid to Sunilbhai
Somabhai Ajmeri along with 5-10% on the profit accruing upon the
completion of project. According to the appellant, the said MOU clearly
5 Hereinafter referred to as ‘the suit property’.
6 For short, ‘MOU’.
4
acknowledged the fact that all the parties to the MOU were the partners of
the firm “Aksharay Developers” and the MOU was being entered by virtue
of the same.
5.3. The grievance of the appellant has been stated in the manner that
in new turn of events, on 23.02.2015, the respondent Nos. 2 and 3
constituted another firm under the same name and style as “Aksharay
Developers” but without including Sunilbhai Somabhai Ajmeri and
respondent No. 4 as partners. This firm, as constituted on 23.02.2015, is
the respondent No. 1 herein and it is alleged that the same has been
constituted and got registered by the respondent Nos. 2 and 3
clandestinely and fraudulently. It is further alleged that on the very next
day of constituting the respondent No. 1 firm, i.e., on 24.02.2015, the
respondent Nos. 2 and 3 got executed a sale deed, whereby 60% share
of the appellant in the suit property was purchased by this firm Aksharay
Developers from Sunilbhai Somabhai Ajmeri, acting on behalf of the
appellant firm Shiv Developers. It has yet further been alleged that the
cheques issued in favour the appellants towards sale consideration were
dishonoured.
5.4. As per the appellant, Sunilbhai Somabhai Ajmeri (acting on behalf
of the appellant firm) was oblivious to the fact that on 23.02.2015, the
respondent Nos. 2 and 3 got registered a partnership firm under the name
“Aksharay Developers” without any mention of himself and the
respondent No. 4; and that Sunilbhai Somabhai Ajmeri was throughout
5
under the bona fide belief that the suit property of appellant firm was
being sold to that firm wherein he was also a partner as per the
partnership deed and MOU dated 22.04.2014.
5.5. With the aforesaid assertions, the appellant has alleged that the
respondent Nos. 2 and 3 have obtained the suit property through a well-
hatched conspiracy and without even discharging the sale consideration;
and as per the terms agreed upon in the sale deed dated 24.02.2015, if
the cheques issued towards sale consideration were not honoured, the
sale deed shall be deemed to be null and void. Accordingly, the appellant
has instituted the subject suit seeking perpetual injunction and declaration
of the sale deed dated 24.02.2015 as null and void.
The application seeking rejection of plaint: divergent views of
the Trial Court and the High Court
6. In the suit so filed by the appellant, the respondent Nos. 1 to 3
appeared in response to the summonses and moved an application for
rejection of plaint with reference to the provisions of the Act of 1932.
6.1. The contesting respondents submitted in the said application that
the plaintiff-appellant had neither produced any documentary evidence to
show that the suitor firm was a registered partnership firm nor any
averment was taken in that regard in the plaint. It was further submitted
that the sale deed in question (marked 4/4) was a registered document
and the same was executed by Sunilbhai Somabhai Ajmeri as
administrator-partner of the firm Shiv Developers. The respondents thus
6
contended that the suit for declaration against the registered sale
document, when the plaintiff had not shown to be a registered firm, was
barred by Section 69 of the Act of 1932. In other words, contention of the
respondents had been that as per the mandate of Section 69 of the Act of
1932, the plaintiff, being an unregistered partnership firm, was barred to
file a suit regarding the rights arising from any agreement/contract. It was
also submitted that as per Order XXX CPC, a suit could be filed on behalf
of the firm by any person who is a partner of the firm but the person filing
the plaint had not produced any evidence to show that he was a partner
in the said firm.
6.2. The application so moved for rejection of plaint was opposed by
the plaintiff-appellant with the submissions, inter alia, that Section 69 of
the Act of 1932 was not applicable in the case of fraud. It was further
submitted that the plaintiff has been a partner of the firm Aksharay
Developers and there was no evidence to show that the said partnership
firm Aksharay Developers had been dissolved. It was also submitted that
the subject-matter of the suit was to get the sale document quashed on
account of fraud and cheating; and the suit of this nature was not barred
by Section 69 of the Act of 1932. Thus, the primary contention on behalf
of the plaintiff-appellant had been that the bar of Section 69 of the Act of
1932 was not attracted because the subject suit was not for enforcement
of any right arising from the contract pertaining to the business of the firm
but was for enforcement of statutory rights of the plaintiff. It was also
7
submitted that there was no bar of Order XXX CPC to the present suit
inasmuch as there was no dispute by the defendants as regards the
partnership firm and they had also not prayed for declaring the names of
the partners. It has also been the contention on behalf of the plaintiff-
appellant that the necessary evidence was required to be led in relation to
the pleas sought to be raised by the defendants and, as such, the
application was not maintainable at the given stage.
7. In its order dated 07.04.2017, the Trial Court took note of the rival
submissions and examined the provisions contained in Section 69 of the
Act of 1932 as also the decisions cited on behalf of the parties. After
taking note of the principles of law enunciated by this Court and the
factual aspects of the case at hand, the Trial Court rejected the
contentions urged on behalf of the respondents, inter alia, for the reason
that it was not prima facie borne out that the sale document (marked 4/4)
was pertaining to an agreement/contract relating to the business of the
partnership by the name “Shiv Developers”. The Trial Court further
noticed the case of the plaintiff that the amount of sale consideration had
not been received and opined that the suit would not be barred by the
provisions of Section 69 of the Act of 1932 because of non-receipt of
amount of sale consideration by the partners of the firm which had sold
the property by a registered document and had the legal right of receiving
the amount of sale consideration. The Trial Court further observed that
dismissal of the suit was not envisaged by the provisions contained in
8
Order XXX CPC. Therefore, the application as moved by the respondents
was rejected by the Trial Court.
8. The contesting defendants (respondent Nos. 1 to 3 herein)
challenged the orders so passed by the Trial Court by way of a revision
application before the High Court. This revision application has been
allowed by the High Court by the impugned judgment and order dated
15.02.2018.
8.1. It was contended on behalf of the contesting
defendants/revisionists before the High Court that the appellant firm
being an unregistered partnership firm, the subject suit by this firm for
enforcement of a right arising out of the contract of sale was squarely
within the ambit of Section 69 of the Act of 1932 and the Trial Court had
erred in disallowing the application for rejection of the plaint while
proceeding contrary to the applicable provisions of law as also the settled
principles enunciated in the binding decisions.
8.2. Per contra, it was argued on behalf of the plaintiff-appellant that
specific fraud has been alleged in the present case; that Sunilbhai
Somabhai Ajmeri and the defendant Nos. 2 and 3 entered into the
contract in independent capacity, which later on, as a part of design of the
said defendants, was converted into a registered sale deed. It was
contended that the issues raised in the plaint need to be adjudicated after
trial and the plaint cannot be rejected under Order VII Rule 11(d) CPC.
9
9. Having taken note of rival submissions, the High Court
summarised the findings of the Trial Court, including its conclusion based
upon the sale document, that the transaction in question was an
independent one and the claim made in the suit was not arising out of any
business transaction of the firm or the contract relating to or arising out of
business transactions. The High Court also took note of the prayers in the
plaint for declaring the sale deed as being fraudulent, illegal and void and
the respondents having no right to float any scheme on the suit land.
9.1. The High Court thereafter referred to the submissions of the
respondents with reference to Order XXX Rules 1 and 2 CPC read with
Section 69 of the Act of 1932 and, before reproducing the said Section
69, recorded its endorsement of one of the relevant findings of the Trial
Court in the following terms: –
“23……On a bare reading of this provision it appears that the
learned trial judge has rightly observed that the transaction in
question is not arising out of the business of plaintiff firm nor claim
is generated from the plaintiff firm……”
9.2. Thereafter, The High Court, in the context of Section 69(2), held
that the transaction under challenge was a sale document dated
24.02.2015, entered into by the plaintiff, an unregistered firm, with the
respondents who were third-parties; and held that, by the effect of non-
registration of the firm, the suit appeared to be not maintainable. The said
findings read as follows: –
“ 24….The relevant provisions which is to be construed on the
case on hand is Sub Section 2 of Section 69 which indicates that
10
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. Here is the
case in which the transaction which is under challenge is a sale
dated 24.02.2015 is a document entered in to by the plaintiff firm
against the defendants who are third party and undisputedly the
plaintiff firm is an unregistered firm, and therefore, by effect of non-
registration, the suit appears to be not maintainable….”
9.3. The High Court, thereafter, referred to various decisions cited at
the Bar including that in the case of Purushottam and Anr. v. Shivraj
Fine Art Litho Works and Ors., as reported in (2007) 2 G.L.H. 406[=
(2007) 15 SCC 58] and in that regard, observed as under7 : –
“33. Another decision which has been pressed into service a
decision in the case of Purushottam (supra) and by referring to this
a contention is raised that the bar of Section 69(2) will not apply in
the background of this fact. However, again if the fact is to be
seen of that decision even the head note of the said decision itself
makes it clear that if the right sought to be enforced does not arise
from a contract to which unregistered firm is a party or is not
entered into in connection with the business of the unregistered
firm, the bar under Section 69(2) will not apply. As such, on the
contrary, this decision helps the petitioners to substantiate the
contention here as seen in the proceeding on hand that there is a
transaction entered into by and on behalf of plaintiff firm which is
undisputedly unregistered firm and the claim and relief sought is
arising out of that contract which has been entered into to which
plaintiff unregistered is a very much party.
Hence, this judgment, on the contrary will not come, in assistance
to the respondent as in that particular case, the contract was
neither entered into by unregistered firm nor it was entered into by
unregistered firm in the course of its business, and therefore, suit
was held to be maintainable.”
9.4. Ultimately, after an analysis of various decisions, the High Court
allowed the revision application and set aside the order dated 07.04.2017
of the Trial Court with the consequential effect of rejection of plaint in the
following words: –
7. We are not dilating on various other decisions referred by the High Court but have reproduced the aforementioned paragraph 33 for its implication, as shall
appear in the discussion hereafter later.
11
“36. The overall analysis of the aforesaid decisions which are
pressed into service and the undisputed background of the
circumstances of this case has clearly spelt-out that the suit
proceedings which are hit by Section 69(2) of the Act read with
Order 30 of the C.P.C., there is no reason why such non-
maintainable proceedings be allowed against the object of Order 7
Rule 11(d). Hence, by giving full effect to the statutory provisions,
the Court is of the considered opinion that serious error jurisdiction
is committed by the Court, and as such present Revision
Application deserves to be allowed, and the impugned order dated
07.04.2017 passed below Exh. 11 in Special Civil Suit No. 333 of
2015 by the learned 9th Additional Senior Civil Judge, Vadodara is
quashed and set aside with a consequential effect of rejection of
plaint. “
10. The aforesaid judgment and order dated 15.02.2018 as passed by
the High Court has been challenged in this appeal by the plaintiff-
appellant.
Rival Submissions
11. Learned counsel for the appellant has submitted that the High
Court has failed to appreciate that Section 69(2) of the Act of 1932 does
not bar all suits by an unregistered partnership firm against third parties.
In the factual matrix of the present case, suit is not hit by Section 69(2)
because the contract is not in the regular business dealings of the firm;
and the words “enforcing a right arising under the contract” used in
Section 69(2) of the Act of 1932 signify the rights arising out of contracts
in respect of the firm’s business transactions only. Learned counsel has
relied upon the decisions in Haldiram Bhujiawala and Anr. v. Anand
Kumar Deepak Kumar and Anr: (2000) 3 SCC 250 and Purushottam
(supra).
12
11.1. Learned counsel has supplemented his arguments with reference
to the concurrent findings of the Trial Court and the High Court on the fact
that the contract under consideration, on which the suit is premised, was
not in connection with the business of the unregistered firm. Therefore, as
per the law laid down by this Court, suit of the appellant is not barred
under the provisions of Section 69(2) of the Act of 1932. Learned counsel
has further argued that the High Court has committed an error in bringing
all suits by an unregistered firm against the third party within the ambit of
Section 69(2) of the Act of 1932.
11.2. In addition to the above, learned counsel has also emphasised
that Section 69(2) of the Act does not bar a suit by an unregistered
partnership firm for enforcement of a statutory right or a common law
right, as held by this Court in Haldiram Bhujiawala (supra). In this
regard, the learned counsel has also referred to the findings of the Trial
Court that since the contract of sale has been affected through a
registered sale document, non-payment of the consideration against the
said sale gives right to the appellant firm to enforce the terms of the sale
document; and such a right is acquired by law, under the Transfer of
Property Act, 1882.
12. Per contra, learned counsel appearing for the contesting
respondents has strenuously argued that the sale document dated
23.02.2015 was executed by the administrator-partner of the unregistered
firm and not in his individual capacity. Consequently, the sale document
13
was related to the business of the firm. Thus, the learned counsel has
supported the High Court’s conclusion that the suit was hit by the bar
under Section 69(2) of the Act of 1932.
12.1. Learned counsel for the contesting respondents has referred to
the cases of Umesh Goel v. Himachal Pradesh Co-operative Group
Housing Society Ltd: (2016) 11 SCC 313 and Farooq v. Sandhya
Anthraper Kurishingal and Ors.: (2018) 12 SCC 580, for the
submission that any suit filed by an unregistered partnership firm is hit by
Section 69 of the Act of 1932; and if the said suit is filed for enforcement
of rights arising out of a contract to which the said unregistered
partnership firm is a party, it would be rendered non-maintainable.
12.2. Thus, learned counsel for the contesting respondents would argue
that the High Court has rightly allowed the revision application and has
rightly rejected the plaint filed by the appellant firm.
13. Having given anxious consideration to the rival submissions and
having examined the record with reference to the law applicable, we are
clearly of the view that the impugned judgment and order dated
15.02.2018, as passed by the High Court, cannot be sustained and the
bar of Section 69(2) of the Act of 1932 is not attracted to the suit filed by
the appellant.
14
Section 69 of the Act of 1932 and the relevant principles
14. For dealing with the questions raised in this matter, we may take
note of the provisions contained in Section 69 of the Act of 1932 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 suits 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.
(3) 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, but shall not affect,—
(a) the enforcement of any right to sue for the dissolution of a firm
or for accounts of a dissolved firm, or any right or power to realise
the property of a dissolved firm, or
(b) the powers of an official assignee, receiver or Court under the
Presidency-towns Insolvency Act, 1909 (3 of 1909) or the
Provincial Insolvency Act, 1920 (5 of 1920) to realise the property
of an insolvent partner.
(4) This section shall not apply,—
(a) to firms or to partners in firms which have no place of business
in the territories to which this Act extends, or whose places of
business in the said territories are situated in areas to which, by
notification under Section 56, this Chapter does not apply, or
(b) to any suit or claim of set-off not exceeding one hundred
rupees in value which, in the Presidency-towns, is not of a kind
specified in Section 19 of the Presidency Small Cause Courts Act,
1882 (5 of 1882), or, to outside the Presidency-towns, is not of a
kind specified in the Second Schedule to the Provincial Small
Cause Courts Act, 1887 (9 of 1887), or to any proceeding in
execution or other proceeding incidental to or arising from any
such suit or claim.”
15. In our view, the questions arising in this matter could be directly
answered with reference to the principles enunciated by this Court in the
case of Raptakos Brett & Co. Ltd. v. Ganesh Property: (1998) 7 SCC
15
184, which have further been explained and applied by this Court in the
cases of Haldiram Bhujiawala and Purushottam (supra). We may take
note of the principles vividly exposited in the case of Haldiram
Bhujiawala (supra) that to attract the bar of Section 69(2) of the Act of
1932, the contract in question must be the one entered into by firm with
the third-party defendant and must also be the one entered into by the
plaintiff firm in the course of its business dealings; and that Section 69(2)
of the Act of 1932 is not a bar to a suit filed by an unregistered firm, if the
same is for enforcement of a statutory right or a common law right.
16. Briefly put, the relevant factual aspects in the case of Haldiram
Bhujiawala (supra) had been as follows: The suit in that case was filed
by the plaintiffs seeking perpetual injunction to restrain the defendants
from infringing the trademark and from using the trademark/name
‘Haldiram Bhujiawala’. There were two plaintiffs, the first being a
partnership firm comprising of three sons of Moolchand whereas the
second plaintiff was his fourth son. The historical facts were that the
business in the name of “Haldiram Bhujiawala” was being carried on by
one Ganga Bishan alias Haldiram since the year 1941. In the year 1965,
he constituted a partnership with his two sons Moolchand, Shiv Kishan
and his daughter-in-law Kamla Devi (wife of another son R.L. Aggarwal)
to carry on business under the same name. The said firm was granted
registration of the said trade name. However, on 16.11.1974, the said
partnership was dissolved and in terms of the dissolution deed, the above
16
trademark fell exclusively to the share of Moolchand for whole of the
country except the State of West Bengal whereas the said Smt. Kamla
Devi was given ownership of the trademark rights for the State of West
Bengal. The four sons of Moolchand got their names recorded as
subsequent joint proprietors of the trademark. Three of them formed a
partnership (the plaintiff No. 1 in the subject suit) in the year 1983 and
were running a shop at Chandni Chowk, Delhi. In the meantime, on
10.10.1977, the said R.L. Aggarwal and his son applied in Calcutta for
registration of the same trademark while claiming themselves to be the
full owners thereof without disclosing the dissolution deed dated
16.11.1974. One Ashok Kumar, son of Smt. Kamla Devi, constituted a
new firm and opened a shop at Arya Samaj Road, Karol Bagh, New Delhi.
In the given circumstances, the plaintiffs of the subject suit claimed the
reliefs of injunction, damages, and for destruction of material etc., while
claiming their rights of using the said trademark. The defendants sought
rejection of the plaint for the reason that the plaintiff No. 1 was not a
registered partnership firm on the date of filing of the suit. The application
was dismissed by the Trial Court as also by the High Court. Hence, the
matter was in appeal before this Court. The points arising for
determination in the said matter were formulated by this Court in the
following terms: –
“8. The points that arise for consideration are:
(i) Whether Section 69(2) bars a suit by a firm not registered
on the date of suit where permanent injunction and damages are
17
claimed in respect of a trademark as a statutory right or by
invoking common law principles applicable to a passing-off action?
(ii) Whether the words “arising from a contract” in Section
69(2) refer only to a situation where an unregistered firm is
enforcing a right arising from a contract entered into by the firm
with the defendant during the course of its business or whether the
bar under Section 69(2) can be extended to any contract referred
to in the plaint unconnected with the defendant, as the source of
title to the suit property?
16.1. Answering the first question in the negative, this Court referred to
the previous decision in Raptakos Brett & Co. Ltd. (supra) and held as
follows: –
“9. The question whether Section 69(2) is a bar to a suit filed by an
unregistered firm even if a statutory right is being enforced or even
if only a common law right is being enforced came up directly for
consideration in this Court in Raptakas Brett Co. Ltd. v. Ganesh
Property [(1998) 7 SCC 184]. In that case, Majmudar, J.
speaking for the Bench clearly expressed the view that
Section 69(2) cannot bar the enforcement by way of a suit by
an unregistered firm in respect of a statutory right or a
common law right. On the facts of that case, it was held that the
right to evict a tenant upon expiry of the lease was not a right
“arising from a contract” but was a common law right or a statutory
right under the Transfer of Property Act. The fact that the plaint in
that case referred to a lease and to its expiry, made no difference.
Hence, the said suit was held not barred. It appears to us that in
that case the reference to the lease in the plaint was obviously
treated as a historical fact. That case is therefore directly in point.
Following the said judgment, it must be held in the present case
too that a suit is not barred by Section 69(2) if a statutory
right or a common law right is being enforced.
xxxx xxxx xxxx
11. Likewise, if the reliefs of permanent injunction or damages are
being claimed on the basis of a registered trademark and
its infringement, the suit is to be treated as one based on a
statutory right under the Trade Marks Act and is, in our view, not
barred by Section 69(2).
12. For the aforesaid reasons, in both these situations, the
unregistered partnership in the case before us cannot be said to
be enforcing any right “arising from a contract”. Point 1 is therefore
decided in favour of the respondent-plaintiffs.”
(emphasis supplied)
18
16.2. This Court further exposited on the scope of the words “enforcing
a right arising under the contract”, as used in Section 69(2) of the Act of
1932; and after a detailed survey of the reports and precedents which led
to the frame of the said provision as also after reference to various
authorities on the point, this Court explained the rationale and object of
the provision that the same was intended to protect those in commerce
who deal with a partnership firm in business, inasmuch as they ought to
be enabled to know the names of the partners of the firm before they deal
with them in business; and the bar of Section 69(2) is not attracted to any
and every contract referred to in the plaint as a source of title to an asset
owned by the firm. This Court held and explained as under: –
“23 The further and additional but equally important aspect which
has to be made clear is that the contract by the unregistered firm
referred to in Section 69(2) must not only be one entered into by
the firm with the third-party defendant but must also be one
entered into by the plaintiff firm in the course of the business
dealings of the plaintiff firm with such third-party defendant.
24… The real crux of the question is that the legislature,
when it used the words “arising out of a contract” in Section
69(2), it is referring to a contract entered into in course of
business transactions by the unregistered plaintiff firm with
its defendant customers and the idea is to protect those in
commerce who deal with such a partnership firm in business.
Such third parties who deal with the partners ought to be enabled
to know what the names of the partners of the firm are before they
deal with them in business.
25 Further, Section 69(2) is not attracted to any and every
contract referred to in the plaint as the source of title to an
asset owned by the firm. If the plaint referred to such a contract
it could only be as a historical fact. For example, if the plaint filed
by the unregistered firm refers to the source of the firm’s title to a
motor car and states that the plaintiff has purchased and received
a motor car from a foreign buyer under a contract and that the
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defendant has unauthorisedly removed it from the plaintiff firm’s
possession, — it is clear that the relief for possession against the
defendant in the suit does not arise from any contract which the
defendant entered into in the course of the plaintiff firm’s business
with the defendant but is based on the alleged unauthorised
removal of the vehicle from the plaintiff firm’s custody by the
defendant. In such a situation, the fact that the unregistered firm
has purchased the vehicle from somebody else under a contract
has absolutely no bearing on the right of the firm to sue the
defendant for possession of the vehicle. Such a suit would be
maintainable and Section 69(2) would not be a bar, even if the firm
is unregistered on the date of suit. The position in the present case
is not different.”
(emphasis supplied)
17. The aforesaid decision in Haldiram Bhujiawala (supra) was
further considered and applied by this Court in the case of Purushottam
(supra) while holding as under: –
“24. With respect, we find ourselves in complete agreement with
the principles enunciated in Haldiram Bhujiawala. Having regard to
the purpose Section 69(2) seeks to achieve and the interest
sought to be protected, the bar must apply to a suit for
enforcement of right arising from a contract entered into by the
unregistered firm with a third party in the course of business
dealings with such third party. If the right sought to be enforced
does not arise from a contract to which the unregistered firm is a
party, or is not entered into in connection with the business of the
unregistered firm with a third party, the bar of Section 69(2) will not
apply.”
18. Nothing contrary to the foregoing discussion is to be found in the
decisions cited on behalf of the contesting respondents. The case of
Umesh Goel (supra) essentially related to the operation of the provision
contained in Section 69(3) of the Act of 1932 and interpretation of the
expression “other proceedings” in the wake of the question as to whether
arbitral proceedings and the award passed therein could be read into the
expression “other proceedings”. The said decision has no relevance to
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the questions at hand. In the case of Farooq (supra), this Court found,
after a wholesome reading of the plaint, that the suit was based on clause
25(d) of the partnership deed which specifically stated that ‘no partners of
the firm shall without the consent in writing of the other partners being
entitled to transfer immovable property belonging to the firm’. In that case,
two partners of an unregistered firm had sued for cancellation of a sale
made by the defendant partner without the consent of all the partners.
This Court found that the suit was only to enforce a right arising from the
terms of said partnership deed and hence, it attracted the bar of Section
69(2) of the Act of 1932. The said decision, for an entirely different fact
situation and different claim, has no application to the facts of the present
case.
Application of the relevant principles to the subject suit
19. Taking up the facts of the present case, one of the significant
features herein is that the transaction in question, i.e., sale of its share by
the plaintiff firm to the contesting defendants has not been the one arising
out of the business of the plaintiff firm. This factual aspect is apparent
from the basic plaint averments and is fortified by the concurrent findings
of the Trial Court as also of the High Court. Though the High Court
endorsed the finding that the transaction in question was not arising out of
the business of the plaintiff firm but, it appears that the implication of this
crucial finding has not acquired the requisite attention of the High Court.
The decision of this Court in the case of Purushottam (supra) was cited
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before the High Court but, while referring to the same in paragraph 33 of
the impugned judgment, the High Court probably looked only at the
editor’s headnote and in any case, missed out the ratio and principles
therein, as reiterated with reference to the previous decisions. The
decision in Haldiram Bhujiawala (supra) seems to have not gone into
consideration of the High Court although this decision formed the sheet
anchor of the order of the Trial Court.
19.1. As noticed, the crucial and key factor in the present case remains
that the sale transaction in question is not arising out of the business of
the appellant firm. Equally significant fact is that the subject suit is for
enforcing a right of avoidance of a document on the ground of fraud and
misrepresentation as also the statutory rights of seeking declaration and
injunction. Significantly, the composition of defendant firm “Aksharay
Developers” (defendant No. 1) has itself been questioned by the plaintiff-
appellant while alleging that on 22.04.2014, this firm was constituted with
four partners but later on, the defendant Nos. 2 and 3 (respondent Nos. 2
and 3 herein), constituted another firm in the same name with themselves
as partners while leaving aside the other two.
19.2. We are not commenting on the merits of the case of either of the
parties but this much is apparent from a look at the frame and contents of
the plaint as also the prayers therein that the present one cannot be said
to be such a suit by the unregistered firm which would attract the bar of
Section 69(2) of the Act of 1932.
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20. To put it differently, the relevant principles, when applied to the
facts of the present case, leave nothing to doubt that the transaction in
question was not the one entered into by the plaintiff firm during the
course of its business (i.e., of building construction); and it had been an
independent transaction of sale, of the firm’s share in the suit property, to
the contesting defendants. The bar of Section 69(2) is not attracted in
relation to the said sale transaction. Moreover, the subject suit cannot be
said to be the one for enforcement of right arising from a contract; rather
the subject suit is clearly the one where the plaintiff seeks common law
remedies with the allegations of fraud and misrepresentation as also of
the statutory rights of injunction and declaration in terms of the provisions
of the Specific Relief Act, 1963 as also the Transfer of Property Act, 1882
(while alleging want of the sale consideration). Therefore, the bar of
Section 69(2) of the Act of 1932 does not apply to the present case.
Conclusion
21. The upshot of the foregoing discussion is that, for the purpose of
Section 69 of the Act of 1932, the present case is governed by the
principles laid down in Raptakos Brett & Co. Ltd. (supra), as further
exposited in Haldiram Bhujiawala (supra). Hence, the bar of Section
69(2) is not attracted to the suit filed by the appellant. The Trial Court had
rightly appreciated the facts of the case and had rightly rejected the
baseless application moved by the contesting respondents. The
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impugned order of the High Court, being not in conformity with the
applicable legal principles, is required to be set aside.
22. Accordingly, this appeal is allowed; the impugned judgment and
order dated 15.02.2018, as passed by the High Court of Gujarat in Civil
Revision Application No. 241 of 2017 is set aside; and the order dated
07.04.2017 as passed by the 9th Additional Senior Civil Judge, Vadodara in
Special Civil Suit No. 333 of 2015 is restored. The Trial Court shall now be
expected to proceed with trial of the suit in accordance with law.
………….…….…………. J.
(DINESH MAHESHWARI)
……………………………J.
(VIKRAM NATH)
New Delhi;
Dated: January 31, 2022
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