Defendant is the civil revision petitioner. Aggrieved by the order in I.A.No. 104 of 2007 in O.S.No. 533 of 2006 on the file of the Principal District Court, Coimbatore, this revision petition has been filed.
2. Brief facts of the case are as follows:-
(i) The respondent/plaintiff filed a suit for recovery of money against the present revision petitioner/defendant. The cause of action for filing the suit arose after the dissolution of the partnership firm viz., R.R.Industries on 31.7.2005 and the settlement arrived between parties by a Deed of Dissolution dated 3.8.2005. Consequent to the dissolution of the partnership, the accounts were reconciled and the revision petitioner/defendant agreed to pay certain amounts as per the terms contained in the Deed of Dissolution. Since the revision petitioner/defendant failed to pay the amount as per the agreement, the suit has been filed.
(ii) The revision petitioner/defendant filed I.A.No 104 of 2007 under Order VII, Rule 11 of the Code of Civil Procedure to reject the plaint stating that the suit in O.S.No.533 of 2006 is barred under law in terms of
Section 69 of the Indian Partnership Act (herein after referred to as 'The Act'). The respondent/ plaintiff filed a counter and opposed the application stating that the claim of the respondent/ plaintiff is covered by
Section 69 (3)(a) of the Act. The bar under
Section 69(1) and (2) of the Act is not applicable to the present suit claim. The Court below accepted the stand of the respondent/ plaintiff and dismissed the I.A.104 of 2007. Aggrieved thereby, the present civil revision petition has been filed by the defendant.
3. Learned counsel for the revision petitioner/ defendant submitted that the dissolved firm is an unregistered partnership firm and therefore, the suit filed by a partner of erstwhile unregistered partnership firm is not maintainable in terms of
Section 69 of the Indian Partnership Act.
4. Per contra, the learned counsel for the respondent/ plaintiff submitted that admittedly, the partnership firm though unregistered, has been dissolved and the partners agreed to certain terms with regard to payment of money. The suit is to enforce the claim as per the agreement for payment of money consequent to the dissolution of the partnership firm.
5. The suit has been filed in an individual capacity and not as a partner of an existing or dissolved firm. Therefore, the provision of
Section 69 (1) and (2) of the Act will not be applicable. The suit claim is maintainable as provided under
Section 69(3)(a) of the Act.
6.
Section 69 (1)(2) and (3) reads 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 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.
(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 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, or the Provincial Insolvency Act, 1920, to realise the property of a insolvent partner."
7. From the reading of the document viz., the Deed of Dissolution dated 3.8.2005, it clearly reveals that the partnership firm stood dissolved on 31.7.2005 and the agreement between the parties is for payment of certain amount. According to the terms of the agreement, the revision petitioner/ defendant has to pay certain amounts to the respondent/plaintiff. The rights of two erstwhile partners is settled in the agreement. It is only for the amount payable by the defendant - retired partner, the suit has been filed. This fact is not disputed by the Revision Petitioner/ defendant. It is therefore clear that the agreement is to pay certain amount consequent to the dissolution of the partnership firm. The partnership firm is no more in existence. In any event, since the partnership firm has already been dissolved and the agreement is only for payment of certain amounts consequent to the dissolution of the firm,
Section 69 (1) and (2) will not apply to the facts of the present case. The respondent/ plaintiff has filed the suit for recovery of the amount in terms of the agreement entered into consequent to the dissolution of the firm.
8. The learned counsel for the respondent/ plaintiff submitted that in similar circumstances, this Court has upheld such a claim by the erstwhile partner of the dissolved firm in a suit for recovery of money where one partner agreed to pay to other under the agreement after the dissolution of the partnership firm. He relied on the following decisions.
(1)S.A.Abdul Subhan Sahib Vs. - M. Abdul Ravoof Sahib ( AIR (29) 1942 Madras 707), wherein it has been held as follows:-
" The suit was for the recovery of money agreed to be paid by one partner to another under an agreement entered after the partnership was disolved and accounts were looked into." ....
The section has to be strictly construed and I do not think on reading the section as it stands I will be justified in holding that the bar extends to suits for recovery of money due on a contract entered into between the partners of an unregistered firm in pursuance of an agreement entered into after dissolution and the taking of the accounts. As a matter of fact S.69 (3)(a) states that sub.ss.(1) and (2) shall not affect the enforcement of any right to sue for the dissolution of a firm or for accounts of a dissolved firm. This is a case in which the firm was dissolved, the accounts were taken and in pursuance of the taking of the accounts certain amounts found due to the respondent plaintiff were agreed to be paid by the appellant defendant. I do not think it can be said that it was contemplated by the Legislature that the prohibition under S.69 should apply to enforcement of contracts of this kind. In the result, the appeal fails and is dismissed with costs. Leave refussed."
(2) In the decision reported in Bedabar Sahu Vs. - Khetramani Barik AIR 1969 Orissa 194, it has been held as follows:-
" The question for consideration is whether the dues of the plaintiff against the defendant after accounts being taken retain the character of the property of a dissolved firm. In one sense, it can be, namely, this property had belonged to the firm before dissolution and after dissolution and accounting it came to the hands of the plaintiff, who has the right to realise it from the defendant. The present case comes within this exception."
9. The learned counsel for the petitioner/ defendant relied upon the Apex Court decision cited below and stated that the suit is barred in terms of
Section 69. This plea cannot be accepted as the suit claim in the present case is different. The Plaintiff has filed the present suit for recovery of money on an agreement. There is no firm in existance. None of the parties in the suit are partners of any firm. The Apex Court decision will not apply to the facts of the present case. The exception to
Section 69(1) and (2) of Indian Partnership Act is emphasised at the end of para 21 of the Apex Court decision in AIR 1977 S.C. 336 (Loonkaran Sethia etc. - Vs. - Mr.Ivan E.John and others) and it is as follows.
Para-21:-
" 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 Sec. 69 of the Partnership Act. In the instant case, Seth Suganchand had to admit in unmistakable terms that the firm 'Sethiya and Co.' was not registered under the Indian Partnership Act. It cannot also be denied that the suit out of which the appeals have arisen was for enforcement of the agreement entered into by the plaintiff as partner of Sethiya and Co., which was an unregistered firm. That being so, the suit was undoubtedly a suit for the benefit and in the interest of the firm and consequently a suit on behalf of the firm. It is also to be borne in mind that it was never pleaded by the plaintiff, not even in the replication, that he was suing to recover the outstandings of a dissolved firm. " (emphasis supplied) In the present case, the suit is filed by an individual for recovery of money payable by one person to another, who were partners of a dissolved firm.
11. The revision petitioner's plea is not applicable to the facts of the present case. In this case, the suit has been filed for recovery of money by individual against another consequent to the agreement to pay certain amount after dissolution of the partnership firm. Therefore,
Section 69 (3)(a) of the Act alone will apply to the facts of the present case. The bar under
Section 69(1) and (2) does not apply to the facts of the present case. Hence, the order of the Court below is in accordance with the provision of the Act. I find no merit to interfere with the order passed by the lower Court. Accordingly, this civil revision petition is dismissed. No costs. Consequently, connected miscellaneous petition is closed.
ra To The Principal District Judge, Coimbatore