Civil Revision Application No. 237 of 2001

1st December, 2004

Petitioner Counsel: A. S. CHANDURKAR
Respondent Counsel: R. AGRAWAL

Cases Cited:
Khatuna Vs. Rameswak Kashinath, AIR 1986 Orissa 1 [Para 5,9]
M. L. Chaturvedi Vs. M/s. Sanjay Finance Corporation, 1998(1) Bom.C.R.782 [Para 6,9]
Haldiram Bhujiawala Vs. Anand Kumar Deepak Kumar, 2000(3) SCC 250 [Para 8,9]

JUDGMENT

JUDGMENT :- This Civil Revision Application has been filed against the order dated 8th September, 2000, passed by the Joint Civil Judge (Jr.Dn.), Kamptee, rejecting the applicant/plaintiffs' application for permission to withdraw the suit with leave to file a fresh suit on the same cause of action.

2. The applicants' case is that the parties to the suit carry on business as partners in the firm name and style of M/s. National Security Services as per a deed of partnership dated 4th April, 1997. The applicants filed this suit on 9th March, 2000 inter-alia for a declaration that the said firm is a partnership firm, for a decree of permanent injunction restraining the defendants from using the firm name as a proprietory concern, and from carrying on business similar to that of the partnership firm and for an order directing the defendants to produce the books of accounts duly audited and to pay the applicants their share of profits in the firm.

3. Admittedly, when the suit was filed the firm was not registered under Section 59 of the Indian Partnership Act, 1932 (hereinafter referred to as the said Act). The application for registration was made on 31st August, 1997. The firm was however registered only on 28th April, 2000 i.e. after the suit was filed.

Realising that the defect arising as a result of the non-registration of the firm on the date on which the suit was filed may lead to a dismissal of the suit in view of the provisions of Section 69 of the Act as amended by the Indian Partnership (Maharashtra Amendment) Act, 1984 which inserted Section 69-A in the said Act, the plaintiff filed the said application for permission to withdraw the suit with leave to file a fresh suit on the same cause of action. A fresh suit would not be barred by the provisions of Section 69 of the Act, as the firm had thereafter been registered on 28th April, 2000.

4. The learned Judge rejected the applicant's application relying upon a judgment of a learned Single Judge of the Orissa High Court. The order was sought to be supported on behalf of the respondent by relying upon a judgment of a Division Bench of this Court. These judgments do support the respondent's case. I have however come to the conclusion that both these judgments have been impliedly overruled by a judgment of the Supreme Court. I shall proceed to refer now to these judgments.

5. The learned Judge rejected the above application holding that the defect of non-registration is not a formal defect within the meaning of Order 23 Rule 1 of the Code of Civil Procedure, 1908, as the suit was itself not maintainable and barred under Section 69 of the Act. The learned Judge relied upon the judgment of a learned Single Judge of the Orissa High Court in Khatuna Vs. Rameswak Kashinath, AIR 1986 Orissa 1, which is directly on the point and supports the case of the respondents.

6. Mr. Agrawal, the learned counsel appearing on behalf of the respondents/defendants also relied upon the judgment of a Division Bench of this court in the case of M. L. Chaturvedi Vs. M/s. Sanjay Finance Corporation, 1998(1) Bom.C.R.782. This judgment also supports the respondent's case. In that case a learned Single Judge granted the plaintiff permission to withdraw the summary suit filed by him with liberty to file a fresh suit. The Appeal Court which set aside the order held as under:-

"6. In A.I.R. 1977 S.C. 330 (Loonkaran Sethia Vs. Ivan E. John), interpreting the provisions of section 69, the Supreme Court made the following observations :-

"A bare glance at the section is enough to show that it is mandatory in character and its effect is to render a suit by a plaintiff in respect of a right vested in him or acquired by him under a contract which he entered into as a partner of an unregistered firm, whether existing or dissolved, void. In other words, a partner of an erstwhile unregistered partnership firm cannot bring a suit to enforce a right arising out of a contract falling within the ambit of section 69 of the Partnership Act."

"The Supreme Court reiterated this position in 1989 Bank.J.572 (SC) : 1989 Mh.L.J. 849 (Shreeram Finance Corporation Vs. Yasin Khan and others), it was held that since the persons suing namely, the current partners as on the date of suit were not shown as partners in the Register of Firms, the suit was not maintainable in view of the provisions of section 69(2) of the Partnership Act. Although the plaint was amended on a later date that could not save the suit. In the light of the principle laid down in the aforesaid decisions, it appears that the law is well settled that a firm not registered under section 59 suffers from the legal disability of enforcing a right arising from a contract by instituting a suit against a third party by operation of section 69(2) of the Act. Non-registration of the firm therefore, is not a formal defect, but a defect affecting the merits of the suit, in other words, the very root of the plaintiff's suit. It is, therefore, clear that such a defect in the suit is not a formal defect. The learned Judge was clearly in error in permitting the plaintiff to withdraw the suit with liberty to file a fresh one. The view which we are taking is supported by decisions of various other High Courts. See in this connection (Khatunna Vs. Ramsevak Kashinath) A.I.R. 1986 Orissa 1, (Wardman Finance Corporation Vs. Ghulam Ahmad Lone), A.I.R. 1982 N.O.C. 142 (J & K) and (T. Savriraj Pillai Vs. R.S.S. Vastrad and Company), A.I.R. 1990 Madras 198."

7. The above judgments clearly support the defendants/respondents case. Had the authorities rested there I would be bound to dismiss this C.R.A.

8. However, Mr. Chandurkar, the learned counsel appearing on behalf of the applicants/plaintiffs invited my attention to a judgment of the Supreme Court in the case of Haldiram Bhujiawala Vs. Anand Kumar Deepak Kumar, 2000(3) Supreme Court Cases 250. In that case a suit was filed by the plaintiff for a permanent injunction restraining the defendants from using the plaintiff's trade marks and for damages. The Supreme Court held that the suit was not barred by Section 69(2) of Partnership Act, 1932. The Supreme Court also held as under:-

"26. In fact, the Act has not prescribed that the transactions or contracts entered into by a firm with a third party are bad in law if the firm is an unregistered firm. On the other hand, if the firm is not registered on the date of suit and the suit is to enforce a right arising out of a contract with the third-party defendants in the course of its business, then it will be open to the plaintiff to seek withdrawal of the plaint with leave and file a fresh suit after registration of the firm subject of course to the law of limitation and subject to the provisions of the Limitation Act. This is so even if the suit is dismissed for a formal defect. Section 14 of the Limitation Act will be available inasmuch as the suit has failed because the defect of non-registration falls within the words "other cause of like nature" in Section 14 of the Limitation Act, 1963. (See Surajmal Dagdurmji Shop Vs. Shrikisan Ramkisan.)" (emphasis supplied)

9. The Supreme Court has expressly held that even if the suit is barred under Section 69 of the Act, it will be open to a plaintiff to seek withdrawal of the plaint with leave to file a fresh suit after registration of the firm. The ratio of the judgment of this court in M. L. Chaturvedi Vs. Sanjay Finance Corporation (supra) is therefore contrary to the judgment of the Supreme Court. The observations at the very least constitute obiter-dicta of the Supreme Court and are therefore binding on the High Court. They cannot be brushed aside as merely casual observations. Mr. Agrawal was unable to distinguish the judgment of the Supreme Court from the facts of this case.

It must therefore, with great respect, be held that the judgment of this Court in M. L. Chaturvedi Vs. M/s. Sanjay Finance Corporation (Supra) and the judgment of the Orissa High Court in Khatuna Vs. Ramsewak Kashinath (supra) are impliedly overruled by the judgment of the Supreme Court in Haldiram Bhujiawala Vs. Anand Kumar Deepak Kumar, 2000(3) Supreme Court Cases 250.

10. This leaves for consideration the matter on merits. In my view, there is no reason why the applicants/plaintiff's application ought not to be granted. On 31st August, 1997 i.e. within four months of the formation of the partnership firm, an application for registration thereof was duly made with the Registrar of firms. The suit was filed on 9th March, 2000. The applicants/plaintiffs were not responsible for the delay. The respondents/defendants cannot be prejudiced in any manner by the application/plaintiffs being permitted to agitate their rights. The affidavit in reply discloses no reasons why any prejudice would be caused to the respondents if the application is allowed. That the applicants alleged in the plaint that the firm was registered is not relevant in deciding this application. It is an aspect which will fall for consideration when the applicants plead grounds for saving the bar of limitation in the fresh suit which they may file. Suffice it to say that there are several obvious bona-fide reasons why this erroneous plea was taken.

11. In the circumstances the impugned order dated 8th September, 2000 is set aside. The plaintiff/applicant's original application in R.C.S.No.44/2000 below Exh.25 is allowed as prayed. The fresh suit shall be subject to the law of limitation. The counter-claim filed by the respondents/defendants shall be treated as a separate suit. There shall be no order as to costs.

Application allowed.