These writ petitions are filed with reference to issues relating to an order dated 10/06/2014 passed by the Registrar of Firms in the matter of re-constitution deed of a partnership Firm M/s.Chandragiri Constructions (hereinafter referred to as the 'Firm') and hence decided together.
2. The short facts involved in the writ petition would disclose that the Firm is a family concern and as per the partnership deed dated 01/04/2000, the Firm consisted of seven partners. The Firm is involved in the business of undertaking and executing works on contract basis from Government and its Departments. One of the partners, Sri.Kunhimahin Haji passed away on 13/12/2013. The partners of the Firm executed a re-constitution deed dated 11/04/2014.
W.P.C.Nos.15281/2014 & 15845/2014 2
3. The petitioner in WPC No.15281/2014, Sri.K.M.Ahammed Nizar (hereinafter referred as 'erstwhile partner') was not included as a partner in the re-constitution deed. It was executed only by the other partners. The Firm submitted the re-constitution deed dated 11/04/2014 for registration and has also sought for notice of change in the constitution of the Firm under Section 63(1) of the Indian Partnership Act, 1932.
4. The erstwhile partner submitted an objection on 08/04/2014 to the notice of change in constitution of the Firm. The Registrar of Firms considered the matter as directed by this Court in the judgment dated 22/05/2014 in WPC No.11137/2014. The petitioner as well as contesting parties were heard on 23/05/2014 and the Registrar passed Ext.P11 order dated 10/06/2014 rejecting the objection. The Registrar formed an opinion that the reconstitution was done in furtherance of an intention expressed in Clause 12 of the Partnership deed of 01/04/2000. It is also found that the decision to opt out W.P.C.Nos.15281/2014 & 15845/2014 3 from the re-constituted partnership was practically taken by the erstwhile partner himself and therefore it was felt that the objection to the notice of change filed under Section 63 of the Act need not be entertained.
5. WPC No.15845 of 2014 is filed by the Firm as well as one of the partners seeking for a direction to the Registrar of Firms to issue extract of the Register of Firms as sought for in Ext.P6 after recording the changes in the Constitution of the Firm as per the re-constituted deed dated 11/04/2014. It is inter alia contended that though the objection of the erstwhile partner was rejected, still the Registrar of Firms did not make changes in the Register of Firms maintained under Section 59 of the Act. It is contended that the entry after a partner ceased to be so on account of death and on account of re-constitution is not recorded and only an entry regarding notice of change is incorporated. Ext.P8 is the copy of certified extract of the Register of Firms. It is contended that the Firm being a contracting concern, it has several pending W.P.C.Nos.15281/2014 & 15845/2014 4 contracts and unless the appropriate entries are made in the Register of Firms as claimed in Ext.P6, they will not be in a position to proceed with the contractual obligation with reference to the works undertaken by them, execution of contract etc.
6. Heard Sri.M.Ramesh Chander and Sri.Babu Thomas.K, the learned counsel for the petitioners in the writ petitions as well as contesting party respondents and the Learned Government Pleader.
7. Learned counsel for the erstwhile partner submits that the Registrar of Firms, being a statutory authority, ought to have rejected the change in reconstitution of the Firm especially in an instance where one of the partners, as per the previous partnership deed, was excluded from being a partner in the reconstituted deed. It is argued that when an objection has been raised by the erstwhile partner, the Registrar of Firms, while considering the question as to whether the partnership could be reconstituted by excluding an eligible person, W.P.C.Nos.15281/2014 & 15845/2014 5 there was no necessity to come to a finding that the erstwhile partner himself has expressed his desire not to be a partner of the reconstituted Firm. He relied upon a Division Bench judgment of Calcutta High Court in Durga Prasad Sarawagi and Others v. Registrar of Firms, West Bengal and Another [AIR 1966 Calcutta 573]. It is held with reference to Section 71(2) and Rule 8 of the Rules that the Registrar has jurisdiction to make such enquiries or make such investigation in respect of any matters as may, in his opinion, be necessary for the proper performance of his duties and administration of the Act especially when a dispute arises among several partners of the Firm. It is found that Rule 8 indicates that a discretion is given to the Registrar to make enquiries. The Division Bench opined that by making such enquiry, the Registrar acts in a quasi judicial manner. On this basis, it is contended that being a quasi judicial authority, the Registrar did not consider the relevant matters before registering the deed dated 11/04/2014 and therefore the W.P.C.Nos.15281/2014 & 15845/2014 6 order is liable to be set aside.
8. On the other hand, it is argued by Sri.Babu Thomas, learned counsel appearing on behalf of the rival group that the erstwhile partner himself has expressed his desire not to join the partnership and despite giving him several opportunities he did not come forward to execute the deed, whereas he was insisting on matters which were outside the control of the other partners. Further, he was acting against the interest of the Firm by issuing letters to financial institutions and other creditors and stopping all financial transactions. This has resulted in a situation where the Firm was not in a position to carry on with the business activities. After issuing appropriate notice to him, the reconstitution deed was executed. That apart, reconstitution of deed and change in entries in the Register of Firms were absolutely essential to continue with the existing contracts. The Registrar of Firms, while considering the objection had passed the order dated 10/06/2014 after considering all relevant matters which do W.P.C.Nos.15281/2014 & 15845/2014 7 not call for any interference in a proceeding under Article 226 of the Constitution of India. He also relied upon the judgment of the learned Single Judge of Allahabad High Court in Subhash Chandra Kesarwani v. Assistant Registrar, Firms, Societies and Chits, Allahabad [AIR 2003 Allahabad 254]. In the said judgment, it was held that when one of the partners die and there was refusal on the part of a partner to continue the partnership by way of reconstitution, the partnership does not dissolve and do not require a fresh registration. What was required is only a notice to the Registrar to register the re- constitution deed. In the said case, it is held that he who doesn't join the firm may have a right as an outgoing partner to be paid only the agreed balance in his capital account in the firm. That was a case where the partner who did not want to join, took a contention that the Firm was dissolved and the remaining partners played fraud upon him by executing and registering a reconstituted Firm. Therefore it is argued that the order registering re- W.P.C.Nos.15281/2014 & 15845/2014 8 constituted firm does not suffer from any error of law.
9. Apparently this is a case in which the dispute between the two groups is in regard to the reconstitution of the Firm. Being private parties, any such dispute is to be resolved only by initiating appropriate proceedings before a civil court or by way of Arbitration if the parties have agreed for resolving their disputes by Arbitration. It is incidentally submitted by the learned counsel appearing for either parties that Arbitration is pending in respect of several other matters. The facts being so, the first question that arises for consideration in these writ petitions is whether the order dated 10/06/2014 is bad in law. To what extent can Registrar of Firms exercise jurisdiction in the matter is the question. Rule 8 of the Kerala Partnership (Registration of Firms) Rules, 1959 reads as under:
"8. The Registrar's powers of inquiry and investigation.- The Registrar may, in case of dispute, institute such inquiries or make such investigations as may in his opinion, be W.P.C.Nos.15281/2014 & 15845/2014 9 necessary for the proper performance of his duties under the Act."
Reference to the aforesaid rule indicates that an enquiry can be done by the Registrar of Firms only in respect of matters coming within his jurisdiction and which the Registrar of Firms is empowered to do under the provisions of the Act. Of course, maintenance of Register of Firms is one among the functions of the Registrar. When a partnership deed is produced before the Registrar for registration, especially when it is a re-constitution deed, is it necessary for the Registrar of Firms to consider whether all the previous partners have agreed to the reconstitution of the Firm. This is a case where the erstwhile partner has submitted objection when a request for change in Register was made by the Firm under Section 63(1) of the Partnership Act, on the ground that he was excluded from the reconstituted Firm. Going by the provisions of the sections 32 and 33 of Partnership Act, it is clear that a partner can either retire or he could be expelled. Section 33 of the Partnership Act reads as W.P.C.Nos.15281/2014 & 15845/2014 10 under:
"33.Expulsion of a partner (1) A partner may not be expelled from a firm by any majority of the partners, save in the exercise in good faith of powers conferred by contract between the partners.
(2) The provisions of sub-sections (2), (3) and (4) of section 32 shall apply to an expelled partner as if he were a retired partner.
10. True that, on death of one of the partners, there is no dissolution of the Firm in terms of Clause 12 of partnership deed dated 01/04/2000. But when one partner dies, it is always open for the surviving partners to execute a reconstitution deed and correspondingly necessary changes are to be made in the Register of Firms. According to the Firm, the erstwhile partner was not willing to execute the reconstitution deed though a draft of the deed was forwarded to him. He was raising unnecessary disputes, the resolution of which may take substantial time. Hence reconstitution deed was prepared by the other partners in a joint meeting. The argument of Sri.Babu Thomas is that execution of reconstitution deed W.P.C.Nos.15281/2014 & 15845/2014 11 was justified in the light of the factual circumstances, and it is a bonafide decision.
11. The question therefore would be whether the Registrar could inquire into the validity of such a decision, whether there was an agreement as contemplated by Section 33 and whether the decision was bonafide.
12. Section 63 of the Partnership Act reads as under:
"63. Recording of changes in, and dissolution of, a firm.- (1) When a change occurs in the constitution of a registered firm, any incoming, continuing or outgoing partner, and when a registered firm is dissolved, any person who was a partner immediately before the dissolution, or the agent of any 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 a 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."
W.P.C.Nos.15281/2014 & 15845/2014 12 The disputes now raised by the erstwhile partner, cannot be adjudicated by the Registrar of Firms while exercising power under Section 63(1) of the Indian Partnership Act. As far as the Registrar of Firms is concerned, Rule 8 enquiry is of a very limited scope and cannot be pressed into service for adjudicating the validity of decision taken by the majority partners excluding the erstwhile partner. Such matters, according to me, cannot be adjudicated by the Registrar of Firms in a Rule 8 enquiry, as well. The enquiry in this regard is of a limited nature. What is to be verified or enquired is only to understand whether a change has occurred in the constitution of the registered firm.
13. Perusal of order dated 10/06/2014 also indicates that the Registrar of Firms did not venture to adjudicate upon the dispute between the parties whereas it had only relied upon the documents made available and observed that the material on record indicates that the petitioner was not interested to join the Firm. When such a view is W.P.C.Nos.15281/2014 & 15845/2014 13 taken by the Registrar of Firms and it has proceeded to register the reconstituted deed and effect changes, having regard to the power available to the existing partners in terms of Section 33 of the Partnership Act, I am of the view that the remedy of the petitioner is only to approach the Civil Court/ Arbitration Tribunal for appropriate reliefs and cannot agitate the issue before the Registrar of Firms. It is however made clear that any of my findings in this regard shall not affect any of the parties to this lis in any other proceedings that may be initiated to resolve their disputes.
14. With reference to W.P.(C) No.15845/2014, the Learned Government Pleader submits that the Registrar of Firms did not make any changes in the Register only on account of the pendency of these writ petitions and appropriate entries in the Register will be made after disposal of the writ petition.
Under these circumstances, these writ petitions are disposed of as under:
W.P.C.Nos.15281/2014 & 15845/2014 14
i) W.P.C.No.15281/2014 is dismissed, however making it clear that the findings in Ext.P11 or my observations in this judgment, shall not affect the right or interest of the petitioner in any other proceeding before an appropriate forum.
ii) W.P.C.No.15845/14 is allowed directing the 1st respondent to make necessary corrections in the Register of Firms as per the available documents, which shall be done forthwith, on receipt of a copy of this judgment.
(sd/-) A.M.SHAFFIQUE, JUDGE jsr