Mitali Palnitkar
Published On: February 01, 2022 at 13:35 IST
Supreme Court held that to attract Section 69(2) of the Partnership Act, 1932, the Contract must be entered into by a partnership firm with the third-party defendant. Also, it must be entered into by the Plaintiff firm during the course of its business dealings.
The Bench comprised of Justices Dinesh Maheshwari and Vikram Nath. It had observed that if a Statutory right or a Common law right is to be enforced then Section 69(2) is not a bar to a Suit filed by an unregistered firm.
In the Case, an unregistered partnership firm had instituted the subject Suit and sought perpetual injunction and declaration of a Sale Deed as null and void.
The Defendants filed an Application before the Trial Court under Order VII Rule 11(d), Section 151 of the Code of Civil Procedure (CPC) read with Section 69 of the Indian Partnership Act for rejecting the Plaint as the Suit was filed by an unregistered partnership firm which was barred by law.
The Trial Court had dismissed the Application and held that the matter was in relation with the validity of the Sale Deed; the bar of Section 69(2) was not operating against the Suit. The High Court had held that the Plaint was filed by an unregistered firm and thus the Plaintiff would be barred from enforcing a right with respect to Section 69(2) of the Partnership Act.
The Appellant contended before the Supreme Court that the Section in question did not bar all Suits by an unregistered firm against third parties. The Contract was also not in regular business dealings of the firm. Also, the words ‘Enforcing a Right arising under the contract” were used to indicate the rights arising out of contracts with respect to the business transactions of firm.
The Respondents contended that the Suit was hit by bar under Section 69(2) of the Act as the said document was related to the business firm.
The Court referred to various Cases such as Raptakos Brett & Co Ltd v Ganesh Property (1998), Haldiram Bhujiawala and Anr v Anand Kumar Deepak Kumar and Anr (2000), Purushottam and Anr v Shivraj Fine Art Litho Works (2007).
The Court noted that the transaction was not entered by the Plaintiff during the course of business. Also, the Suit was not related to enforcing a right arising out of a contract rather the Suit was where the Plaintiff sought common law remedies with allegations of fraud and misrepresentation in relation to Statutory rights of injunction and declaration with respect to provisions of Specific Relief Act, 1963 and Transfer of Property Act, 1882.
Therefore, the Court held that the bar of Section 69(2) of the Partnership Act did not apply to the Case.
Also Read- Disposal of Property Under Criminal Procedure Code, 1973