Appeal No.509 of 1997,Summ. No.301 of 1997,Suit No.5016 of 1994

15th July, 1997

Petitioner Counsel: D. S. PARIKH with SHAILESH SHAH i/b M/s PARIMAL K. SHROFF & CO
Respondent Counsel: MAHENDRA SHAH with R. C. SHAH

Cases Cited:
1997(3) ALL MR 557 [Para 1]
AIR 1969 Guj. 178 [Para 4]
AIR 1940 Bom. 257 [Para 5]
AIR 1959 Raj. 140 [Para 5]
1987 Mh.L.J. 885 [Para 6]
1994(1) Bom.C.R. 371 [Para 6]

JUDGMENT

JUDGMENT :- This appeal raises a short but interesting question relating to interpretation of Section 69(2A) of the Indian Partnership Act, 1932 (hereinafter called "the Act"). The facts, in so far as they are material, are not in dispute. Under a deed of partnership dated 29th November, 1979, a partnership firm by name M/s. Paramount Builders was constituted by the appellant, the respondents Nos.1 to 4, late Smt. Hemkuvar Kotak and late Shri Mohanlal Chawda. The firm was duly registered with the Registrar of Firms on 11th December, 1980 under registration No.158675. Mohanlal Chawda died on 6th May, 1986. Upon Mohanlal's death, the respondent No.5, his widow, was admitted to the partnership under a modified deed of partnership dated 20th October, 1986. On 3rd November, 1992 the partnership was modified by a further deed of partnership executed between the appellant and the respondents Nos.1 to 5 and late Smt. Hemkuvar Kotak. Smt. Hemkuvar Kotak died on 20th September, 1994. On her death the shares of the appellant and the respondent No.5 augmented from 12.5% to 16.25%, respectively. On 15th December, 1994 the appellant gave a notice of dissolution and thereafter the present suit was filed for dissolution and account. Along with the suit a notice of motion was taken out for interim reliefs. It seems that the application for interim reliefs was opposed by the contesting respondents mainly on the ground that the suit was not maintainable under Section 69(2A) of the Act. The appellant thereafter took out Chamber Summons No.301 of 1997 for amendment of the plaint. By the proposed amendment the appellant sought to contend that recording of changes and/or modifications under subsequent deeds of partnership dated 20th October, 1986 and 3rd November, 1992 are in the nature of ministerial acts which does not affect the original registration of the firm of M/s Paramount Builders, and in the alternative the validity and constitutionality of sub-section (2A) of Section 69 was challenged as being violative of Articles 14 and 19(1)(g) of the Constitution. By order dated 6th May, 1997 (now reported in 1997(3) ALL MR 557) the learned single Judge dismissed the chamber summons for amendment on the ground that the suit itself is not maintainable for non-compliance of the provisions of Section 69(2A) of the Act.

2. The short question that arises before us is whether the bar under the provisions of Section 69(2A) is attracted in the facts of the case. In order to appreciate the rival contentions it would be useful to note the provisions of Section 69 of the Act which deals with the effect of non-registration. Section 69 as amended by Maharashtra Act No.29 of 1984 can be conveniently divided into following heads : (i) suits by partners inter se, (ii) suits by a firm against third parties; (iii) suits for dissolution, accounts etc.; (iv) exceptions; (v) non-application of the provisions to certain suits. Sub-section (1) deals with suits between partners inter se and reads as follows:-

(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 persons 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:

Provided that the requirement of registration of firm under this sub-section shall not apply to the suits or proceedings instituted by the heirs or legal representatives of the deceased partner of a firm for accounts of the firm or to realise the property of the firm.

Suits by the firm against third parties are covered by sub-section (2) which is as follows:-

"(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 and the persons suing are or have been shown in the Register of Firms as partners in the firm.

The present suit is not covered by sub-sections (1) and (2). The relevant clause so far as the controversy is concerned is sub-section (2A) which provides as follows:-

(2A) No suit to enforce any right 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 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 have been a partner in a firm against the firm or any person alleged to be or 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:

Provided that the requirement of registration of firm under this sub-section shall not apply to the suits or proceedings instituted by the heirs or legal representatives of the deceased partner of a firm for accounts of a dissolved firm or to realise the property of a dissolved firm."

Sub-sections (3) and (4) provide that the section shall not apply to certain suits and are not relevant for our purposes.

3. Under the Central Act, suit for dissolution and accounts etc. falls under the excepted category. However, under sub-section (2A) inserted by Maharashtra Amendment it is provided that such a suit will not be maintainable 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. There is hardly any dispute that the suit firm viz. Paramount Builders as originally constituted under the partnership deed of 29th November, 1979 was duly registered with the Registrar of Firms under Section 59 of the Act. Thereafter due to the death of one of the partners, namely, Mohanlal Chawda, the respondent No.5, his widow was taken as a partner. However, the name of the respondent No.5 is not entered in the Register on the date of the suit. Now the argument of Shri Shah, Counsel for respondents Nos.1 to 4 is that once there is a reconstitution of the 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(2A) cannot be fulfilled. Shri Shah argues that unless the firm as constituted by insertion of the respondent No.5 as a partner, is registered under the provisions of the Act and the names of all the persons who were partners on the date of the suit for dissolution are shown in the Register, the suit for dissolution is expressly barred by Section 69(2A) of the Act. On the other hand, Shri Parikh, Counsel for appellant argues that the Act does not contemplate repeated registrations whenever a change occurs in the constitution of the firm. According to Shri Parikh, the registration of the firm is only once and for all. Shri Parikh argues that the firm, originally constituted, was admittedly registered and the name of person suing i.e., the present appellant was also shown in the Register on the date of the suit and, therefore, bar of Section 69(2A) is not attracted.

4. Section 69(2A) bars a suit to enforce right for the dissolution of a firm or for accounts of a dissolved firm or to realise the property of a dissolved firm unless two requirements are met viz. (i) that the firm must be a registered firm and (ii) the person suing is or has been shown in the Register of Firms as a partner in 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. As regards the first condition of firm being registered controversy raised before us is whether a fresh registration is required upon reconstitution of the firm by introduction of a new partner. There are number of sections in the Act which clearly demonstrate 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 registered with the Registrar of Firms under Section 59 of the Act. Chapter VII contains provisions relating to the 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 every incoming, continuing or outgoing partner, and when a registered firm is dissolved; every person who was a partner immediately before the dissolution or the agent of every 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 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 63(2) provides that when 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, shall within a period of 90 days from the date of his election, 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). In the context of Section 63 it is clearly seen 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 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 the light of the above discussion, it is clearly seen that so far as Section 69(2A) 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 reconstitution or dissolution of the continuing firm takes place. The firm retains its identity for the purpose 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 its existence. (see Bharat Sarvodaya Mills Vs. Mahatta Bros., AIR 1969 Guj. 178).

5. We are also supported in our view by a decision of this Court in Pratapchand Ramchand and Co. Vs. Jehangirjee Bomanjee Chinoy, AIR 1940 Bom. 257. There Blackwell, J. had to consider this question in the context of a reconstituted firm which was reconstituted by two of the original partners after the death of the third partner; Blackwell, J. proceeded on the footing that the suit firm was in fact dissolved on the death of the third partner. At page 258 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, require 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. Blackwell, J. observed 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 and that the names of the persons suing, the firm being a compendious name for the persons suing, were shown in the register on the date of the institution of the suit appeared to be a compliance with Section 69(2) of the Act. In this connection, a reference may also be made to a decision of the Rajasthan High Court in Kesrimal Vs. Dalichand, AIR 1959 Raj. 140. Mody, J. while dealing with Section 69(2) 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 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.

6. The second requirement of Section 69(2A) is that the name of the person suing is or has been shown in the Register of Firms as a partner in the firm. There is no dispute that in the present case the name of the person suing i.e. the present appellant is shown in the Register of Firms as a partner of the firm. Shri Shah, however, argues that the names of all the current partners must have been entered in the register on the date of the suit, Shri Shah relies upon two Division Bench judgments of this Court in Gandhi and Co. Vs. Krishna Glass, 1987 Mh.L.J. 885 and Swiss Bank Corporation Vs. Jai Hind Oil Mills Co., 1994(1) Bom.C.R. 371. In the first case of Gandhi and Co. the suit was filed by the firm against the third party for reliefs covered by Section 69(2). The name of the partner who declared the plaint was entered in the Register but the names of some other persons who were admittedly partners on the date of the suit did not appear in the Register. It was held by the Division Bench that the words "persons suing" in Section 69(2) mean all the persons who were partners on the date of the suit and unless their names are entered in the Register on the date of the suit, the bar under Section 69(2) is clearly attracted. The next decision in Swiss Bank Corporation (supra) is more or less on the same lines. In that case also the name of all the partners were not entered in the Register on the date of the suit and, therefore, it was held that the suit is barred under Section 69(2). In our view, these decisions have no application since the present case admittedly falls under Section 69(2A) and not under Section 69(2). Section 69(2) which deals with a suit against a third party uses the words "persons suing". The use of plural is made deliberately and consciously. When a firm sues a third party the "person suing" means all the partners who were partners of the firm on the date of the suit and unless their names are entered in the register on the date of the suit, the bar under that section will be attracted. In contrast, the expression used in sub-section (2A) is "person suing" i.e. the plaintiff who is seeking dissolution covered by sub-section (2A). If the name of such person is entered in the register as a partner in the firm, the requirement of the section must be held to be complied with. If the interpretation suggested by Shri Shah is to be accepted, it would virtually amount to adding words to the section. In our view, in the facts and circumstances of the case, the bar under Section 69(2A) is not attracted. The learned single Judge thus committed an error in holding that the suit is not maintainable.

7. The proposed amendment consists of two parts. The first part is only a factual aspect which has been sought to be introduced in order to demonstrate that the bar under Section 69(2A) is not attracted. There is no reason as to why such an amendment should not be granted. The second part of the amendment pertains to the constitutional challenge of the validity of Section 69(2A). As we have already taken a view that Section 69(2A) is not attracted, the question of challenge does not survive and, therefore, it is not necessary to grant the amendment containing constitutional challenge.

8. In the result, appeal is allowed. The order of the learned single Judge is set aside. Chamber summons is made absolute. The plaintiff is permitted to carry the amendment as per Ex."A" to the chamber summons excluding the bracketed portion. Amendment to be carried within six weeks.

On the oral application of Shri Shah, the operation of this order is stayed for four weeks.

Appeal allowed.