RFA No.1468/2006

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® IN THE HIGH COURT OF KARNATAKA AT BANGALORE

DATED THIS THE 8TH DAY OF NOVEMBER 2013

PRESENT

THE HON’BLE Dr. JUSTICE K.BHAKTHAVATSALA

AND

THE HON’BLE Mrs. JUSTICE B.S.INDRAKALA

R.F.A.NO.1468/2006 (DEC)

BETWEEN

1. Smt.Sandhya Anthraper Kurishingal, W/o Tarun Kurishingal, Aged about 29 years, Residing at No.CA-132, Riviera Retreat Thevara Waterfront, Kochi-682 013, Rep. by GPA Holder Smt.Cecilia Anthraper.

2. Mr.Vinod Vijayakumar,

S/o.Dr.V.Vijayakumar, Aged about 28 years, Residing at No.4, Langford Gardens, Bangalore-560 025, Rep. by GPA Holder Dr.V.Vijayakumar. …APPELLANTS

(By Sri.Udaya Holla, senior counsel

for M/s.Holla & Holla, Advs.)

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AND: 1. Manju Kathuria,

W/o.Virendra Kathuria, Aged about 52 years, Residing at Sompur Gate, Sarjapur Road, Bangalore-562 125.

2. M/s.Fortune Projects,

A partnership firm, Having its principal Place of business at No.98/1, 1st Floor, 1st Block, Koramangala, Sarjapura Main Road, Bangalore-560 034.

3. M.Shivananda,

Major, S/o.unknown partner, M/s.Fortune Projects, No.98/1, 1st Floor, 1st Block, Koramangala, Sarjapura Main Road, Bangalore-560 034.

4. D.V.Bhuvanesh,

Major, S/o.unknown partner, M/s.Fortune Projects, No.98/1, 1st Floor, 1st Block, Koramangala, Sarjapura Main Road, Bangalore-560 034.

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5. Sri.Farooq, Major, S/o.unknown partner, M/s.Fortune Projects, No.98/1, 1st Floor, 1st Block, Koramangala, Sarjapura Main Road, Bangalore-560 034. …RESPONDENTS

(By M/s.Kamal & Bhanu, Advs. for R-2 to 5, Sri.Ravi V.Hosmani, Adv. for proposed impleading

Respondents, 9 9-A, 13, 16, 18-A, 20 and 26 in I.A.I/2006, Smt.Lata Sawant, for M/s.Fortune Law Firm, Advs. for proposed Impleading respondents 1, 3, 3A, 4, 5, 5A, 6, 6A, 7, 7A, 8, 11, 12, 12A, 14, 15, 17, 18, 19, 21, 22 23, 23A, 24, 24A and 27 in I.A.I/06)

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This RFA is filed u/s.96 of CPC against the Judgment & Decree dt.19.4.2006 passed in O.S.No.1071/2003 on the file of the I Addl. Civil Judge (Sr. Dn.), Bangalore Rural Dist., Bangalore, dismissing the suit for declaration and injunction.

This Appeal being heard and reserved, coming on for pronouncement of Judgment, this day, Dr.Bhakthavatsala, J, delivered the following:-

JUDGMENT

A short question that arises for our consideration in

this appeal is -

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“Whether the dismissal of the suit in

O.S.No.1071/2003 on the file of I Addl. Senior

Civil Judge, Bangalore Rural District, Bangalore,

as not maintainable under Section 69(2) of the

Partnership Act, 1932 (in short, “the Act”) calls

for interference of this Court ?”

2. Our answer to the above point is in the affirmative

for the following reasons:

Appellants who are plaintiffs/partners of an

unregistered firm of M/s.Windsor Wings Developers, filed a

suit against the defendants in O.S.No.1071/2003 on the file

of Senior Civil Judge, Bangalore Rural District, Bangalore,

for the relief of declaration that the registered Sale deed

dated 26.04.2003 executed by defendant No.1 is invalid,

illegal and not binding on the plaintiffs, cancellation of the

sale deed and for permanent injunction restraining the

defendants 2 to 5 from selling, leasing, mortgaging or

otherwise alienating and interfering with their peaceful

possession of the suit schedule property. It is the case of the

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plaintiffs that the suit schedule property was purchased in

the name of the Firm and RTC entries stands in the name of

the Firm. In the year 2003, due to growth of I.T corridor in

the area, market value of the suit property was

`30,00,000/-. The plaintiffs, in the month of March 2003,

brought up the subject of selling the suit schedule property

to the 1st defendant. But, the 1st defendant objected for sale.

Again, when the plaintiffs raised the subject in the month of

November, 2003, the 1st defendant avoided the discussion

and the plaintiffs suspected the conduct of the 1st defendant

and they made enquiries about the suit schedule property in

the Office of the Sub-Registrar and discovered that the 1st

defendant, who had no authority to sell the immovable

property belonging to the Firm, without their consent had

executed a sale deed dated 26.4.2003 on behalf of the Firm,

in favour of the 2nd defendant for a consideration of

`16,66,620/- though the property was worth more than

`30,00,000/-. It is contended that the sale deed is invalid,

void, fraudulent and the same is executed clandestinely with

an intention of cheating the plaintiffs. In para-14 of the

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plaint, it is pleaded that defendants 2 to 5 are trying to

dispossess the plaintiffs and also trying to alienate the suit

schedule property and therefore filed the Suit for the relief,

as prayed for.

3. For the purpose of convenience ‘the appellants’ and

‘the respondents’ are hereinafter referred to as ‘the plaintiffs’

and ‘the defendants’ as arrayed in the Suit.

4. The defendants entered appearance and filed their

written statement.

5. The defendants have taken up the contention that

the Suit is barred under Section 69(2) of the Partnership Act.

6. The trial Court framed as many as eight issues and

the issue No.5 is on the point-

“Whether the plaintiffs prove that the suit of

the plaintiffs is not maintainable in view of

Section 69(2) of the Partnership Act ?”

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The above-said issue No.5 was treated as preliminary

issue. The trial Court, after hearing on the preliminary

issue, answered the same in the affirmative in favour of the

defendants and dismissed the Suit as not maintainable

under Section 69(2) of the Act. This is impugned in this

Appeal.

7. Sri.Udaya Holla, learned senior counsel appearing

for the plaintiffs along with the Counsel on record

submitted that the Court below erred in dismissing the suit

as not maintainable under sub-section (2) of Section 69 of

the Act. He further submitted that the appellants are

neither enforcing any contract nor the contract of

partnership and therefore the Suit is maintainable and

Section 69 of the Act does not bar the suit. He has cited

the following decisions:

i) 2003 (3) SCC 229 (N.KHADERVALI SAHEB (DEAD) BY

L.Rs AND ANOTHER vs. N.GUDU SAHIB (DEAD) AND

OTHERS) on the point that partnership is not an

independent legal entity and the Firm name is only

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compendious name given to partnership and the

partners are the real owners of its assets;

ii) 2009(5) SCC 608 (V.SUBRAMANIAM vs. RAJESH

RAGHUVANDRA RAO) on the point that the

partnership is a compendium of its partners, the

Partners of the firm are co-owners of the property of

the firm. Absence of registration does not mean that

the partners of the firm are deprived of rights in the

said firm or its members and hence, cannot file a suit

for its assets or dissolution or for realization of the

property in the firm;

iii) 2007(15) SCC 58 (PURUSHOTTAM AND ANOTHER vs.

SHIVRAJ FINE ARTS LITHO WORKS AND OTHERS) on

the point that concept of partnership is to embark

upon a joint venture and for that purpose, to prove

capital money or even property included as immovable

property and interest in properties to their share in the

joint venture of the business of the partnership;

8. On the other hand, learned counsel for defendants 2

to 5 submits that as the plaintiffs’ partnership firm is

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unregistered, the Suit is not maintainable under sub-

section (2) of Section 69 of the Act. He has contended that

according to sub-section (1) of Section 69, no suit to

enforce a right arising from a contract or conferred by the

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 Registrar of firms as a partner in the

firm.

9. According to the Partnership Deed dated

29.12.1995, the defendant No.1 is the partner No.1 and the

plaintiffs 1 and 2 are the partner Nos. 2 and 3, respectively,

of the Firm called M/s. Windsor Wings Developers. The

main business of the firm is to deal in real estate, buy, sell,

acquire immovable property, develop property, construct

building, sell viable sites, commercial, residential or

industrial or any other business as may be decided upon by

the partners from time to time. All the partners are working

partners.

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10. According to Clause 25 of the Partnership deed, no

partners of the firm shall, without the consent in writing of

the other partners, be entitled to deal with the items

mentioned in sub-Clauses-(a) to (h). Sub-clause (d) of

Clause 25 of the Partnership deed says that no partners of

the firm, shall, without consent in writing of the other

partner, is entitled to transfer immovable property

belonging to the firm. Therefore, it is contended by the

learned counsel for the defendant Nos. 2 to 5 that the

plaintiffs are enforcing their right under sub-clause (d) of

Clause 25 under the partnership deed by filing the Suit and

therefore, suit is not maintainable even under sub-section

(1) of Section 69 of the Act. His further contention is that as

per sub-Section (2) of Section 69, the plaintiffs/partners

are not entitled to enforce their right in respect of the suit

schedule property belonging to the un-registered Firm

against the defendants 2 to 5. He has cited the following

decisions:

i) AIR 1978 DELHI 255 (M/S.SHANKAR HOUSING

CORPORATION vs. SMT.MOHAN DEVI AND OTHERS);

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ii) AIR 1977 SC 336 (LOONKARAN SETHIA ETC., vs.

MR.IVAN E.JOHN AND OTHERS);

iii) AIR 1992 DELHI 92 (KAVITHA TREHAN AND OTHERS

vs. BALSARA HYGIENE PRODUCTS LTD.);

iv) AIR 1989 SC 1769 (M/S.SHREERAM FINANCE

CORPORATION vs. YASIN KHAN AND OTHERS);

v) 1985(1) WLN 791 (RAJASTHAN HIGH COURT

SOHANLAL BASANT KUMAR vs. UMRAOMAL

CHOPRA).

11. It is useful to excerpt Section 69 of the Indian

Partnership Act, 1932, for immediate reference, which reads

as under:

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.

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(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

using 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

(b) the powers of an official assignee,

receiver or Court under the

Presidency-towns Insolvency Act, 1909

(3 of 1909) or the Provincial Insolvency

Act, 1920 (5 of 1920) to realise the

property of an insolvent partner.

(4) This section shall not apply,-

(a) to firms or to partners in firms

which have no place of business in the

territories to which this Act extends, or

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whose places of business in the said

territories, are situated in areas to

which, by notification under section 56,

this Chapter does not apply, or

(b) to any suit or claim of set-off not

exceeding one hundred rupees in value

which, in the Presidency-towns, is not

of a kind specified in section 19 of the

Presidency Small Cause Courts Act,

1882 (5 of 1882), or, outside the

Presidency-towns, is not of a kind

specified in the Second Schedule to the

Provincial Small Cause Courts Act,

1887 (9 of 1887), or to any proceeding

in execution or other proceeding

incidental to or arising from any such

suit or claim.

12. The sum and substance of sub-section (1) of

Section 69 of the Act is that no suit to enforce a right

arising from a contract or conferred by this Act shall be

instituted in any Court and the 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

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and the person suing is or has been shown in the Register

of Firms as a partner in the firm.

13. The defendants have not pleaded that the suit is

barred under sub-section (1) of Section 69, but in this

Appeal, it is contended that the suit is not maintainable

both under sub-sections (1) and (2) of Section 69 of the

Act.

14. The plaintiffs who are partners of unregistered firm

are neither enforcing their right arising from a contract nor

the right conferred by the Act. But, the learned counsel for

respondents/defendants is that the plaintiffs are enforcing

their right under the contract of partnership deed dated

29.12.1995 and specifically Clause 25(d) which says that

no partner of the firm shall, without the consent in writing

of the other partners, be entitled to transfer immovable

property belonging to the Firm, but the defendant No.1, as

a partner of the partnership firm, has sold the suit land in

favour of defendants 2 to 5. Though it is stated in sub-

clause (d) of clause 25 of the partnership deed that no

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partner of the firm shall without the consent in writing of

the other partner, be entitled to transfer immovable

property belonging to the firm, the appellants/plaintiffs

seek to enforce their right conferred upon them under the

Transfer of Property Act. It is well settled principle that a

‘partnership firm’ has ‘no separate legal entity’. It is always

understood that “firm” means ‘partners’, ‘partners’ means

collectively a ‘firm’. Thus the property belonging to a

partnership firm is the property of the partners of the firm.

In view of the above, under the Transfer of Property Act,

each of the partner is entitled to claim his right to the

immovable property of the firm, as co-owner. Under such

circumstances, the contention of the learned counsel for

Respondents 2 to 5 that the suit filed by the plaintiffs

enforcing their right under the contract of partnership

deed, holds no water.

15. Now, we refer to sub-section (2) of Section 69.

According to that 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

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and the persons suing are or have been shown in the

Register of Firms as the partners in the firm. In the instant

case, there is no contract between the plaintiffs on one side

and defendants 2 to 5 on the other and thus, there is no

question of plaintiffs enforcing a right arising from a

contract and thus the Suit is not hit under sub-Section (2)

of Section 69 of the Act.

16. As per Section 69(1) of the Act, an unregistered

partnership firm or partners are disabled from enforcing a

right arising from a contract or the right conferred by the

Partnership Act, 1932, but the provision does not take

away the right of the partners of an unregistered firm to

enforce their right under other enactments. According to

Article 300-A of the Constitution of India, no person shall

be deprived of his property save by authority of law.

17. It is pertinent to mention that 8 guntas of land in

Survey No.24/1, 2 acres 30 guntas of land in Survey

No.24/4 and 1 acre 12 guntas of land in Survey No.29, all

situated at Goppasandra village, Sarjapur Hobli, Anekal

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Taluk, i.e., in all 4 acres 10 guntas of land bounded on the

East by land of Lakshmaiah Reddy, west by land of

Narayana Reddy, north by land of Chikkapullappa, south

by land of Rajappa, is the property of the partnership firm,

was purchased under three registered Sale deeds dated

20.01.1996 by the partnership firm, viz., M/s.Windsor

Wings Developers, out of the funds of the firm. Thus, the

property becomes the property of the partners and they are

co-owners. Apart from that the sale of the property entire

property measuring 4 acres 10 guntas of land by

defendant No.1 in favour of the defendant No.2, cannot be

said to be a business transaction as the business of the

firm is to acquire immovable property, develop property,

construct buildings, sell viable sites, commercial,

residential or industrial or any other business as may be

mutually decided upon by the partners from time to time.

In other words, land measuring in all 4 acres 10 guntas

was purchased by the Firm with an intention to develop

and make sites and sell it. Therefore, the plaintiffs are

entitled for the relief sought for. Defendant No.1 has

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committed breach of trust, which is an offence under the

Indian Penal Code. It is useful to refer to some of the

decisions on the point.

i) In the decision reported in AIR 1982 DELHI 482

(M/s.VIRENDRA DRESSES vs. M/s.VIRENDRA

GARMENTS), the Delhi High Court has held that an

unregistered partnership firm is entitled to file a suit

for permanent injunction for passing off and remission

of accounts against the defendant and enforce the

right under the Trade and Merchandise Marks Act,

1958;

ii) In AIR 2006 BOMBAY 76 (CHANDRAIYYA MUTWAYYA

IRABOLTI vs. SIDRAM GANPAT INGLE), the Bombay

High Court has held that a suit for recovery of

damages for a misconduct committed by another

partner of the partnership firm and taking away

certain articles lying therein and another wrongful act

attributed is surrounding a godown and collecting

money from the owner; is maintainable;

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iii) In the decision reported in AIR 1975 KERALA 144

(KERALA ARECANUT STORES vs. RAMKISHORE

SONS AND ANOTHER), the Division Bench of the

Kerala High Court has held that a suit by partner of an

unregistered firm for recovery of money under

Negotiable Instrument Act on account of dishonour of

a cheque endorsed in favour of a firm, is not barred.

iv) In the decision reported in AIR 1990 PATNA 95

(PADAM SINGH JAIN vs. CHANDRA BROTHERS AND

OTHERS), the Patna High Court has held that eviction

suit under Bihar Buildings, Lease, Rent and Eviction

(Control) Act, 1983, by an unregistered firm is not for

enforcement of agreement and the right to sue for

eviction is a statutory right and therefore, Section

69(2) of Partnership Act, does not apply to eviction

suit.

18. As per the above decisions, the plaintiffs are

enforcing their right as co-owners of the suit property

conferred under the Transfer of Property Act and the

Partnership Act does not bar the partners of an

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unregistered firm from enforcing their right conferred under

the other enactments. In other words, at the cost of

repetition, it must be mentioned that what is prohibited

under Section 69 of the Act is enforcement of contract of

partnership, provisions of the Partnership Act, 1932 and

enforcement of right arising from a contract (between the

firm and third party) and not the rights conferred under

the other enactments. Therefore, we are of the opinion that

the trial Court erred in dismissing the suit as barred by

sub-section (2) of Section 69 of the Partnership Act, 1932.

The decisions relied upon by the learned Counsel for the

respondents/defendants are of no avail to the case of the

defendants. For the reasons stated above, we answer point

for consideration in the affirmative in favour of the

appellants/plaintiffs and against the respondents/

defendants.

19. In the result, we pass the following Order:

Appeal is allowed. The impugned Order dated

19.04.2006 made in O.S.No.1071/2003 on the file of Senior

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Civil Judge, Bangalore Rural District, Bangalore, is set

aside and the suit is remitted to the trial Court for disposal,

in accordance with law.

Registry is directed to refund the entire Court Fee paid

on the memorandum of appeal.

Sd/-

JUDGE

Sd/-

JUDGE Bnv Bjs