SEC 69(2) IPA
Shiv Developers Through Its Partner Sunilbhai Somabhai Ajmeri Vs Aksharay Developers, SC 2022
FACTS – The appellant herein is an unregistered partnership firm by the name “Shiv Developers”. It comprises of two equal partners, namely, Mr. Sunilbhai Somabhai Ajmeri and Mr. Jignesh Kanubhai Desai.
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) have been joined in their capacity as the partners of the defendant No. 1 firm. 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.
The plaintiff-appellant has averred that on 26.11.2013, the appellant and the respondent Nos. 2 and 3 purchased a property 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.
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 Understanding was signed by the partners 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 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.
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.
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 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.
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.
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.
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.
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 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.
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, 1932 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.
CAUSE – The judgment and order dated passed by the High Court of Gujarat , in Civil Revision Application, whereby the High Court has allowed the revision application filed by the contesting defendants.
ARGUMENTS – 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) and Purushottam and Anr. v. Shivraj Fine Art Litho Works and Ors. (2007) 15 SCC 58.
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 case.
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 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.
ISSUE – Whether the present case, suit is hit by the bar of Section 69(2) of the Act of 1932?
DECISION – 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.
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.
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. v. Ganesh Property: (1998) 7 SCC 184 as further exposited in Haldiram Bhujiawala case. 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 impugned order of the High Court, being not in conformity with the applicable legal principles, is required to be set aside.
We may take note of the principles vividly exposited in the case of Haldiram Bhujiawala case 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.
Accordingly, this appeal is allowed; the impugned judgment and order dated , as passed by the High Court of Gujarat in Civil Revision Application is set aside; and the order as passed by the 9th Additional Senior Civil Judge, Vadodara is restored. The Trial Court shall now be expected to proceed with trial of the suit in accordance with law.