Is there Conflict Between Sec. 69(2) Partnership Act and Order 30 Rule 1 CPC?

Saji Koduvath, Advocate, Kottayam.

Contents in Nutshell

Rules 1 of Order 30 CPC

Rules 1 of Order 30 CPC provides only an enabling method to sue, or be sued, partners of a firm (both Registered and Unregistered), at the time of the accruing of the cause of action, in the name of the firm. Suit by or against a firm is suit by or against its partners.
- Order 30 Rule 1 do not apply when suit is instituted not in the name of the firm (instead, suit by all partners).
- When all partners are in the party array (in a suit), impleading of the firm is surplusage,
The purpose of using the name of the firm, in a suit, is merely to encompass all the partners (even if none of them is not named as parties to the suit).
Rule 3 of Order 30 provides that summons to firm shall be served either-
- (a) upon any one or more of the partners, or
- (b) upon any person having the control or management of the partnership business, at the principal place at which the partnership business is carried:
Though no partner need comes as a plaintiff (under Rules 1 of Order 30 CPC), if so demanded by the defendant, the names and details of such partners should be revealed, forthwith, by the plaintiffs (Rule 2 of Order 30).
Judgment/Decree in the name of the firm (without joining any partner), has the same effect as a Judgment/ decree in favour of or against all its partners.
The partners are not necessary parties in trial-stage, to proceed in execution against all partners. The question as to who are the persons who constitute the firm can be decided in execution proceedings (Order 21, Rule 50 CPC).

Section 69(2) Partnership Act

Section 69(1) Partnership Act directs that the registration of the firm is mandatory, and a condition precedent, to institute a suit by one partner against the firm or another partner.
Section 69(2) directs that registration of the firm is necessary for suit by or on behalf of a firm (that is, by the firm or its partners) (i) against a third party (ii) to enforce a contract with the firm.
- Note: Sec. 69 (2) is not attracted when a suit is filed against a third party for reliefs other than enforcement of contract – like enforcement of a statutory right (trade mark) or a common law right or a right under TP Act (eviction of tenant).
Section 69(3) directs that registration of firm is necessary for claiming ‘set off’.
- Though the stipulation in Section 69 (which requires registration for filing certain suits) may appear harsh, the historical basis of this provision (enacted in 1932) justifies its legitimacy (making Registration compulsory, for filing certain suits). English law, stood at that time, required compulsory registration of partnership, and contravention thereof was made punishable.
- After independence also, the provisions as to registration of firms were not changed (so as to make Registration compulsory). Obviously, it is also because of the proclamations in Article 19(1) of the Constitution of India (in Fundamental Rights Chapter)
Section 69 requires that (i) all the partners at the time of the institution of the suit must be parties to the suit and (ii) their names also be in the Register of Firms, to proceed to obtain the reliefs stated in Sec. 69 (though Or. 30 r. I enables – two or more partners to sue).
Order 30 and Section 69(2) of the Partnership Act are independent provisions, that operate separately. They deal with different aspects.
Both these provisions must be complied with, when a suit is instituted (i) to enforce a contract, (ii) by or on behalf of a firm and (iii) against a third party.
A partnership (that arises by an agreement to share profits or loss) cannot be put an end by a partner without consent of others; whereas in a co-ownership venture, a co-owner can transfer his interest. Because co-ownership activities are not governed by Partnership Act, Sec. 69 Bar is not applicable to the same.
Practical Note – Under Order 30 Rule 1, to sue a firm, either the firm be made as a party, in addition to one or more of the partners; or
- the firm alone be made as the party, naming the (one or more) partners or any person having the control (or management of the partnership business, at its principal place of business) upon whom the summons be served by the conjuncture “by”, “through” or “represented by”; because, Order 30 rule 1 says – partners “may sue or be sued with (or, in) the name of the firm”.

Order 30, Rule I, CPC lays down –

persons sue or be sued “with (or in) the name of the firm” should be
partners at the time of the accruing of the cause of action.

Order 30 Rule 1 – Reads: Suing of partners in name of firm

(1) Any two or more persons claiming or being liable as partners and carrying on business in India may sue or be sued with the name of the firm (if any) of which such persons were partners at the time of accruing of the cause of action, and any party to a suit may in such case apply to the Court for a statement of the names and addresses of the persons who were, at the time of the accruing of the cause of action, partners in such firm, to be furnished and verified in such manner as the Court may direct.
(2) Where persons sue or are sued were partners in the name of their firm under Sub-rule (1), it shall, in the case of any pleading or other document required by or under this Code to be signed, verified or certified by the plaintiff or the defendant, suffice if such pleading or other document is signed, verified or certified by any one of such persons.

Order 30 Rule 2 – Reads: Disclosure of partners’ names

(1) Where a suit is instituted by partners in the name of their firm, the plaintiffs or their pleader shall, on demanding writing by or on behalf of any defendant, forthwith declare in writing the names and places of residence of all the persons constituting the firm on whose behalf the suit is instituted.
(2) Where the plaintiffs or their pleader fail to comply with any demand made under sub-rule (1) all proceedings in the suit may, upon an application for that purpose, be stayed upon such terms as the Court may direct.
(3) Where the names of the partners are declared in the manner referred to in sub-rule (1) the suit shall proceed in the same manner, and the same consequences in all respects shall follow, as if they had been named as plaintiffs in the plaint:
Provided that all proceedings shall nevertheless continue in the name of the firm, but the name of the partners disclosed in the manner specified in sub-rule (1) shall be entered in the decree.

Section 69 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.
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
- (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 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.

Benefits of Registration Partnership

See blog: What is Partnership, in Law? How to Sue a Firm?

Sec. 69(2) and Order 30 Rule 1 deal with different aspects and operate separately

Rules I of Order 30 deals with the mode or form in which the suit to be instituted. It requires that the persons suing ‘in the name of the firm‘ should be partners at the time of the accruing of the cause of action.
Section 69(2) of the Partnership Act should be satisfied in order that a suit can be instituted. That is, to institute a suit (i) to enforce a contract (ii) by or on behalf of a firm (iii) against a third party, (a) the registration of a firm is a condition precedent, and (b) the name of the partners suing must have been shown in the Register of Firms.
In short, these two independent provisions must be complied, when a suit is instituted (i) to enforce a right from a contract (ii) (in a contract) with the firm and (iii) against any third party.
Section 69 requires that (i) all the partners at the time of the institution of the suit must be parties to the suit and (ii) their names also be in the Register of Firms- to proceed with the matters stated in Sec. 69 (though Or. 30 r. I enables – two or more partners to sue). (See: Firm of V. Ramchandraiah Gupta v. Ravula Venkat Reddy, 1970 (1) Andhra WR 243 Hansraj Manot’s (1962) 66 Cal WN 262; Sohanlal Basant Kumar vs Umraomal Chopra, 1985 (1) WLN 791.
Note:
- If the partners at the time of accruing of the cause of action (to enforce a contract) and the partners at the time of instituting the suit are different, to institute a suit by or on behalf of a firm , against a third party following persons must be in the party array –
  - (i) all partners at the time of cause of action and
  - (ii) all partners at the time of filing the suit.
- Note – Rule 1(1) of Order 30 CPC says – “with the name of the firm” and Rule 1(2) says – “in the name of their firm“.
The firm can be made as a party, in addition to the partners; or the firm alone be made as the party, naming the partners thereafter followed by the words – “represented by”.

Plaint must be signed by the Partners in the Register of Firms on the DATE OF THE SUIT

In M/s. Shreeram Finance Corpn. v. Yasin Khan, AIR 1989 SC 1769, the Supreme Court has held that the plaint verified and signed by the partners as on the date of the suit who were not shown as partners in the register of firms, is not maintainable in view of S. 69(2) of the Indian Partnership Act. In para 6 of the judgment the Supreme Court has observed as follows:

“6. In the present case the suit filed by the appellants is clearly hit by the provisions of sub-s. (2) of S. 69 of the said Partnership Act, as on the date when the suit was filed, two of the partners shown as partners as per the relevant entries in the Register of Firms were not, in fact, partners, one new partner had come in and two minors had been admitted to the benefit of the partnership firm regarding which no notice was given to me Registrar of Firms. Thus, the persons suing, namely, the current partners as on the date of the suit were not shown as partners in the Register of Firms. In the result is that the suit was not maintainable in view of the provisions of sub-s. (2) of S. 69 of the said Partnership Act and the view taken by the Trial Court and confirmed by the High Court in this connection is correct”.

S. 69(2) directs ‘all partners’ must sue

Prior to M/s. Shreeram Finance Corpn. v. Yasin Khan, AIR 1989 SC 1769 (supra), there was difference of opinion as to ‘persons suing’ in Section 69(2) –

(i) it is the partners on the date of the institution of the suit. (Shanker Housing Corporation v. Mohan Devi, AIR 1978 Del 255. Also see decisions referred to therein – given below)
(ii) it is the partners (also) at time of the accruing of the cause of action (Bharat Sarvodaya Mills Co. Ltd. v. Mohatta Brothers, AIR 1969 Guj 178; Gandhi Company v. Krishna Glass Pvt. Ltd. (1983) 85 BomLR 179; Gurushiddayya Kalkayye Delimath v. Shah Hirachand Venechand and Co., AIR 1972 Mys 209; Sohanlal Basant Kumar v. Umraomal Chopra, 1985 (1) WLN 791)
- The line of decisions in this way are not good law in the light of M/s. Shreeram Finance Corpn. v. Yasin Khan, AIR 1989 SC 1769.

In Shanker Hoursing Corporation v. Mohan Devi, AIR 1978 Del 255 (D.B), it is held that the expression ‘persons suing’ in Section 69(2) of the Partnership Act means “all the partners of the firm who are its partners at the time of the institution of the suit“. But, under Rule I of Order 30 CPC provides that two or more partners can sue.

The contention raised in the case (the court rejected it) was the following-

“Rule I of Order 30 requires that the persons suing in the name of the firm should be partners at the time of the accruing of the cause of action, and, therefore, the same meaning should be given to the words “persons suing” in Section 69(2) of the Partnership Act, 1932, and the “persons suing” in requirement (b) therein means the person who were partners at the time of the accruing of the cause of action and not on the date of the institution of the suit and it is sufficient for the purposes of requirement (b) if they have been shown in the Register of Firms as partners in the firm.”

The Delhi High Court pointed out that Section 69(2), makes the registration of a firm a condition precedent to the institution of a suit by or on behalf of a firm against a third party. It deals with the question as to when a firm can sue, or be sued by, a third party in respect of a right arising from a contract, and provides certain requirements as conditions precedent for the institution of the suit, viz.. (a) that the firm is a registered firm, and (b) the persons suing are or have been shown in the Register of Firms as partners in the firm. On the other hand, Rules I and 2 of Order 30 of the Code of Civil Procedure provide the mode or form and the procedure for suits by or against a firm. In other words, the requirements in Section 69(2) should be satisfied first in order that a suit can be instituted, and then the provisions of Rules I and 2 of Order 30 are attracted as regards the mode or form in which the suit may be instituted as well as the procedure applicable to the said suit. In providing the mode Rule I prescribes a certain requirement, viz., that the persons mentioned therein must have been partners at the time of the accruing of the cause of action.

Then the court observed as under:

(16) Thus, the provisions in Section 69(2) of the Partnership Act and those in Rule 1 of Order 30 deal with different aspects and operate separately. The former deals with the question as to when a firm can sue or be sued by a third party in respect of a right arising from a contract and prescribes certain requirements for the same, while the latter deals with the mode or form and the procedure for suits by or against firms, and prescribes a certain requirement for the same. It would not, therefore, be correct to interpret the. words “persons suing” in Section 69(2) and the point of time at which the requirements in Section 69(2) are to be fulfilled, by referring to the provision in Rule 1 of Order 30. In our opinion, the scope and effect of the two sets of provisions may be stated thus :
(17) Under Section 69(2), a suit to enforce a right arising from a contract can be instituted by or on behalf of a firm against any third party only if (a) the firm is registered and (b) the persons suing, i.e., all the partners of the firm at the time of the institution of the suit, are or have been shown in the Register of Firms as partners in the firm, while under Rule I of Order 30 two or more persons who claim as partners may sue, or who are liable as partners may be sued, in the name of the firm (if any), provided such persons were partners at the time of the accruing of the cause of action. If the facts in a given case are such as to attract the applicability of the provisions in both Section 69(2) and Rule I of Order 30, the requirements in both the provisions should be fulfilled. In such a case, if a suit to enforce a right arising from a contract is to be instituted by or on behalf of a firm against any third party, the firm has to be a registered firm, and the partners ‘ of the firm as on the date of the institution of the suit must have been shown in the Register of Firms as partners in the firm, and further they must have been partners of the firm at the time of the accruing of the cause of action.
(18) As regards the scope and effect of Section 69(2) of the Partnership Act, at view similar to the one expressed by us above baa been taken in the following decisions, vide-
(1)Firm Manghoomal Jethamal v. Finn Aratmal Satramdas Air 1922 Sind 13 ;
(2)Pratapchand Ramchand &Co. v. Jehangiriji Air 1940 Bom 257;
(3)Sri Meenakshi Mills v. C. Swaminatha Mudaliar and Bros. AIR 1944 Mad 443;
(4)Bank of Koothathikulam v. Itten Thomas. Air 1955 Travancore-Cochin, 155.
(5)Dr. V. S. Bahl v. M/s. S. L. Kapur ami Co., AIR 1978 Delhi 255;
(6)Kesrimal v. Dalichand A.IJt. 1959 Raj 140;
(7)Hansraj Manot. M/s. Goraknatth Champalal Pandey, 66 C.W.N. 262;
(8)Firm Buta Mal Dev Raj v.-Chanan Mal and others. A.I.R. 1964 Punjab 270;
(9)Firm Alwar Iron Syndicate v. Union of India, AIR 1970 Raj 86,
(10)M/s. Badrimal Ramcharan & Co. v. M/s. Gana Kaul & Sons Air 1971 J&K 109;
(11)M/s. Chandrabhan Bansilal Ramratan Dass v. Municipal Council, Bikaner, AIR 1975 Raj 35 and
(12)Ram Kumar Shew Chandrai v. Dominion of India. AIR 1977 Cal 37.”

In Firm Buta Mai Dev Raj v. Chanan Mai, AIR 1964 Punj 270, it was pointed out that in order to institute a suit, a partnership firm must not only be a registered firm but also all the persons who are partners in the firm at the time of the institution of the suit must be, or have been, shown as such in the Register. The expression “the persons suing” in Section 69(2) must mean the partners in the firm. The use of the plural “persons” is obviously deliberate, since -while a singular may also mean the plural, the plural can never mean, singular. When a suit is instituted in the name of a firm the suit is on behalf of all the partners, and not only such of them as are shown, in the Register as such, and all the partners must be “the persons suing” contemplated in Section 69(2).

In Firm Alwar Iron Syndicate v. Union of India, AIR 1970 Raj 86, it is observed as under:

“6. It appears to me, however, that there is really no room for any controversy in regard to the correct meaning and purpose of Sub-section (2) of Section 69. It is well settled that a firm as such is not an entity in aw and is not a “person” within the meaning of Section 4 of the Partnership Act. Its name is therefore a mere abbreviated name of all its partners: Dulichand Laxminarayan v. Commr. of Income-tax, Nagpur, AIR 1956 SC 354. It is for this reason that special provisions have been made in Order 30, P. C. regarding suits by or against firms and persons carrying on business in names other than their own. So it is beyond doubt that even if a suit is brought in the name of a firm, it is really a suit by all its partners under the firm name. In other words, the persons suing are all the partners of the firm at the relevant date and none of them can, or obvious reasons, be left out for purposes of the suit. So it is incorrect to say that subsection (2) of Section 69 merely requires that only the person or persons actually signing the plaint on behalf of the firm should be shown in the Register of Firms as its partners. The word “persons” in the subsection has been used in the plural by design and serves an important purpose for it brings, out the real nature of a partnership firm which cannot consist of a single person. This is the view taken in –
Kapur Chand Bhagaji, Firm v. Laxrnan Trimbak, AIR 1952 Nag 57 and
Dr. V. S. Bahal v. S. L. Kapur and Co., AIR 1956 Punj 24.
The decision in Dr. V. S. Bahal’s case, AIR 1956 Punj 24 does not appear to have been noticed in AIR 1959 Punj 530 on which reliance has been placed by Mr. J. P. Jain, but it has been followed in AIR 1964 Punj 270.
It has also been followed in Hansraj Manot v. Gorak Natb Champalal Pandey, (1962) 66 Cal WN 262 and, if I may say so with respect, these judgments lay down the correct law on the point.”

Court will have no jurisdiction to entertain a suit in violation of Section 69(1)

In Abani Kanta Pal v. Unknown, AIR 1986 Cal. 143, it is stated as under:

“9.In our opinion, it may be that S. 13(6) of the West Bengal Premises Tenancy Act puts an embargo on the plaintiff and does not oust the jurisdiction of the Court. A defendant in a suit for eviction may waive service of a notice under Section 13 (6). Section 69 (1) of the Partnership Act, however, stands on a different footing. The embargo that has been put on the plaintiff under sub-sections (1) and (2) of Section 69 is not for the purpose of protecting the interest of any party, but it is based on public policy. The requirements of sub-sections (1) and (2) of Section 69 cannot be waived by the defendant, and the Court is debarred from entertaining a suit ignoring the fulfilment of such requirements. So, if a firm is not registered, excepting a suit as contemplated by Section 69 (3), the Court will have no jurisdiction to entertain a suit in violation of Section 69(1). In other words, the plaint that has been filed by the plaintiff will be considered a void plaint, if it contravenes the provisions of sub-sections (1) and (2) of Section 69 of the Partnership Act. This view finds support from a decision of the Supreme Court in Loonkaran Sethia Vs. Ivan E. John, AIR 1977 S.C.336. In that case, sub sections (1) and (2) of Section 69 were involved. The Supreme Court made the following observations;
“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 Section 69 of the Partnership Act.”

Defect (not signing by Partner) Cannot be Cured by Amendment of Plaint

The plaintiff in Popular Automobiles v. Chami, was a partnership firm and the plaint is verified, signed and filed by the Manager claiming that he had been authorised by one of the partners. The Kerala High Court (1 February, 2001) relying on M/s. Shreeram Finance Corpn. v. Yasin Khan, AIR 1989 SC 1769, held that the suit was filed in violation of the mandatory provisions of S. 69(2) of the Indian Partnership Act; and therefore, the petition to amend the plaint was not sustainable.

Bar under Sec. 69 Partnership Act is absolute

Section 69(1) Partnership Act directs that the registration of a firm is mandatory, and a condition precedent, to institute a suit by one partner against the firm or another partner.
Section 69(2) directs that registration is necessary for suit by or on behalf of a firm (that is, by the firm or its partners) (i) against a third party (ii) to enforce a contract with the firm.
Section 69(3) directs that registration is necessary for claiming ‘set off’.

Unregistered Partnership Firm Cannot Bring A Suit for Enforcement of Contract

In Loon Koran v. Ivan E. John, AIR 1977 SC 336, it is observed as under:

“A bare glance at the section is enough to show that it 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 a erstwhile unregistered partnership firm cannot bring a suit to enforce a right arising out of a contract falling within the ambit of section 69 of the Partnership Act.” (quoted in: V.A. Abdul Wahab Sahib v. Abdul Subhan Sahib, (1998) 2 MLJ 720).

A co-ownership venture is not a Partnership; It is not Affected by Sec. 69 Bar

A partnership (that arises by an agreement to share profits or loss) cannot be put an end by a partner without consent of others; whereas in a co-ownership venture, a co-owner can transfer his interest. Because co-ownership activities are not governed by Partnership Act, Sec. 69 Bar is not applicable to the same.

Bar under Section 69 to ‘Other Proceedings’ also – to Get Rent Reduced

A suit by a tenant to get the rent reduced is thus a suit to enforce a right arising out of a contract of tenancy. The suit therefore falls under Section 69 of the Partnership Act. See: Gappulal Gordhandas v. Chunilal Shyam Lal, AIR 1961 Raj 286.

No Bar to Arbitration

It is held by our Apex Court in Kamal Pushp Enterprises v. DR Construction Company, AIR 2000 SC 2676, that Section 69 of the Partnership Act has no application to proceedings before an Arbitrator; and therefore, an Arbitration and Award would not be vitiated. (But see: Jagdish Chander Gupta v. Kajaria Traders (India) Ltd., AIR 1964 SC 1882)

Bar to Claim Restoration of Benefits under S. 65 Contract Act

According to Section 65 of the Indian Contract Act, when an agreement is discovered to be void, or when a contract becomes void, any person who has received any advantage under such agreement or contract is bound to restore it, or to make compensation for it, to the person from whom he received it. Because of the bar under the provisions of Section 69 of the Partnership Act, it is found in Bijendra Prasad v. Smt. Duleshwari Devi, AIR 1998 Pat 122, that the partners of the unregistered partnership cannot claim benefits under Sec. 65 of the Contract Act.

Partnership Cannot Amend to Become a Proprietorship

S. Krishnan v. Aruna and Associates, (1979) 2 MLJ 1, it is held that a suit filed as a partnership cannot amend to become a proprietorship. It is observed as under:

“When once he takes up a stand that it is a partnership firm, he should stand by it. Once he takes up the position that it is a dissolved firm, equally he should be prepared to substantiate it. But he cannot have a third way out of it by bringing in a person who was a quondam partner of the unregistered firm as if he has become the proprietor thereto on dissolution. This metamorphosis is not available in law.”

The Supreme Court Haldiram Bhujiawala v. Anand Kumar Deepak Kumar, in (2000) 3 SCC 250, observed as under:

“The points that arise for consideration are:
(I)Whether Section 69 (2) bars a suit by a firm not registered on the date of suit where permanent injunction and damages are claimed in respect of a trademark as a statutory right or by invoking common law principles applicable to a passing-off action?
(II) Whether the words” arising from a contract” in Section 69 (2) refer only to a situation where an unregistered firm is enforcing a right arising from a contract entered into by the firm with the defendant during the course or its business or whether the bar under Section 69 (2) can be extended to any any contract referred to in the plaint unconnected with the defendants, as the source of title to the suit property?

On question No. 1 the Supreme Court held as under:

“(9) The question whether Section 69(2) is a bar to a suit filed by an unregistered firm even if a statutory right is being enforced or even if only a common law right is being enforced came up directly for consideration in this Court in Raptakas Brett Co. Ltd. Vs. Ganesh Property. In that case, Majumdar J.. speaking for the Bench clearly expressed the view that Section 69 (2) can not bar the enforcement by a way of a suit by an unregistered firm in respect of a statutory right or a common law right. On the facts of that case, it was held that the right to evict a tenant upon expiry of the lease was not a right ” arising from a contract” but was a common law right or a statutory right under the Transfer of Property Act. The fact that the plaint in that case referred to a lease and to its expiry, made no difference. Hence, the said suit was held not barred. It appears to us that in tht case the reference to the lease in the plaint was obviously treated as a historical fact. That case is therefore directly in point. Following the said judgment, it must be held in the presence case too that a suit is not barred by Section 69 (2) if a statutory right or a common law right is being enforced.

It is held while answering question No. 2:

“The above provision clearly signifies that the right that is sought to be enforced by the unregistered firm and which is barred must be a right arising out of a contract with a third party – defendant in respect of the firm’s business transactions….. The real crux of the question is that the legislature when it used the word “arising out of a contract” in Section 69(2), it is referring to a contract entered into in course of business transaction by the unregistered plaintiff firm with its customers – defendants and the idea is to protect those in commerce who deal with such a partnership firm in business. Such third parties who deal with the partners ought to be enabled to know what the names of the firm are before they deal with them in business.”

In this case our apex court pointed out as under:

if the firm is not registered on date of suit and the suit is to enforce a right arising out of a contract with the third party- defendant in the course of its business, then it will be open to the plaintiff to seek withdrawal of the plaint with leave and file a fresh suit after registration of the firm subject of course to the law of limitation and subject to the provisions of the Limitation Act. This is so even if the suit is dismissed for a formal defect. Section 14 of the Limitation Act will be available inasmuch as the suit has failed because the defect of non-registration falls within the words “other cause of like nature” in section 14 of the Limitation Act, 1963. See Surajmal Dagduramji Shop v. M/s. Srikishan Ram Kishan, AIR (1973) Bom. 313.”

In Ramachandraiah Gupta v. Ravula Venkat Reddy, 1971 Andhra WR. 243 (Justice O. Chinnappa Reddy) held as under:

“Now, a firm is not a legal entity at all, but is a mere abbreviated name for the several partners of which it consists. Ordinarily, therefore, a suit may not be brought by a firm in its own name but a suit may be brought by all the partners acting together or by some of the partners only but impleading the other partners also as parties to the suit. However Order 30, Rule 1 of the Civil Procedure Code prescribes a special procedure by which a suit may be brought in the name of the firm. It provides that any two or more persons claiming or being liable as partners and carrying on business may sue or be sued in the name of the firm of which such persons were partners at the time of the accruing of the cause of action and that in such a case it shall suffice if one of such persons signs, verifies or certifies any pleadings or document required by the Code to be signed, verified and certified by the plaintiff or the defendant. The effect of a suit instituted in the name of the firm in the manner, prescribed by Order 30, Rule 1 is as if the suit is filed by all the partners collectively. Whether the suit is filed by all the partners collectively or by some only of the partners impleading the rest as parties to the suit or whether it is filed in the name of the firm prescribed by Section 69(2) must be fulfilled. They are (1) that the firm must be registered and (2) that the persons suing are or have been shown in the Register of Firms as partners in the Firm….”

S. 69(2) – No Bar for Enforcement of a Statutory Right or a Common Law Right

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 (like, trade mark) or a common law right or a right under TP Act (like, eviction of tenant – Govindaraja Naicker v. Sapthagiri Complex, ILR 1994 Kar 1832).).

To attract the bar of Section 69(2) of the Act of 1932, the contract in question (i) must be the one entered into by firm with the third-party defendant and (ii) must also be the one entered into by the plaintiff firm in the course of its business dealings.

Raptakos Brett & Co. Ltd. v. Ganesh Property: (1998) 7 SCC 184, Haldiram Bhujiawala v. Anand Kumar Deepak Kumar: (2000) 3 SCC 250. Referred to in: Shiv Developers v. Aksharay Developers, 2022 SCC OnLine SC 114.

Contract must be one in the Course of the Business Dealings

In Raptakos Brett & Co. Ltd. v. Ganesh Property, (1998) 7 SCC 184, it is held as under:

“23 The further and additional but equally important aspect which has to be made clear is that the contract by the unregistered firm referred to in Section 69(2) must not only be one entered into by the firm with the third-party defendant but must also be one entered into by the plaintiff firm in the course of the business dealings of the plaintiff firm with such third-party defendant.
24… The real crux of the question is that the legislature, when it used the words “arising out of a contract” in Section 69(2), it is referring to a contract entered into in course of business transactions by the unregistered plaintiff firm with its defendant customers and the idea is to protect those in commerce who deal with such a partnership firm in business. Such third parties who deal with the partners ought to be enabled to know what the names of the partners of the firm are before they deal with them in business.”
25 Further, Section 69(2) is not attracted to any and every contract referred to in the plaint as the source of title to an asset owned by the firm. If the plaint referred to such a contract it could only be as a historical fact. For example, if the plaint filed by the unregistered firm refers to the source of the firm’s title to a motor car and states that the plaintiff has purchased and received a motor car from a foreign buyer under a contract and that the defendant has unauthorisedly removed it from the plaintiff firm’s possession — it is clear that the relief for possession against the defendant in the suit does not arise from any contract which the defendant entered into in the course of the plaintiff firm’s business with the defendant but is based on the alleged unauthorised removal of the vehicle from the plaintiff firm’s custody by the defendant. In such a situation, the fact that the unregistered firm has purchased the vehicle from somebody else under a contract has absolutely no bearing on the right of the firm to sue the defendant for possession of the vehicle. Such a suit would be maintainable and Section 69(2) would not be a bar, even if the firm is unregistered on the date of suit. The position in the present case is not different. (Quoted in: Shiv Developers v. Aksharay Developers, 2022 SCC OnLine SC 114)

In Shiv Developers v. Aksharay Developers, 2022 SCC OnLine SC 114, it is held as under:

“The relevant principles, when applied to the facts of the present case, leave nothing to doubt that the transaction in question was not the one entered into by the plaintiff firm during the course of its business (i.e., of building construction); and it had been an independent transaction of sale, of the firm’s share in the suit property, to the contesting defendants. The bar of Section 69(2) is not attracted in relation to the said sale transaction. Moreover, the subject suit cannot be said to be the one for enforcement of right arising from a contract; rather the subject suit is clearly the one where the plaintiff seeks common law remedies with the allegations of fraud and misrepresentation as also of the statutory rights of injunction and declaration in terms of the provisions of the Specific Relief Act, 1963 as also the Transfer of Property Act, 1882 (while alleging want of the sale consideration). Therefore, the bar of Section 69(2) of the Act of 1932 does not apply to the present case.”

Suit by Sole (remaining) Partner Maintainable

In Gujarat Water Supply and Severage v. Sundardas Hukumatram Shivanani, AIR 1991 Guj 170, a contract was entered into by a partnership firm with the Government. One among the three partners of the firm was the plaintiff. Before filing the suit, other two partners had been retired. The plaintiff filed the suit for recovery of rights and liabilities of the dissolved firm. The High Court held that the suit was maintainable though the partnership firm was not registered.

A suit by one partner against another for damages on the grounds of the misconduct of his partner was held to be maintainable in Navinchandra Jethabhai v. Moolchand Sadaram Gindodiya, AIR 1966 Bom 111.

Registration of the Firm Must be proved by Certified Copy of Register

Nagpur High Court in Kapurchand Begaji Firm v. Laxman Triabuk, AIR 1952 Nag 57, held that the Register of Firms being a public document the requirements of Section 69(2) were to be complied with by producing a certified copy of an entry from that register; and that the oral evidence of the plaintiff-partner is not admissible as secondary evidence. The same view was taken in Chhotelal Darbarilal v. Mohammed Hussain AIR 1955 VP 44, M/s Badrimal Ramcharan and Co. v. M/s. Gama Kaul and Sons, AIR 1971 J&K 103; Sohanlal Basant Kumar vs Umraomal Chopra, 1985 (1) WLN 791.

Firm Need not be a Party

In M.S. Pearl Sound Engineer v. M/s. Poonam Chand, it was held that when the suit is instituted by all the partners, it was not necessary to implead the firm, and impleading the firm was merely a surplusage. (Referred to in: Sohanlal Basant Kumar vs Umraomal Chopra, 1985 (1) WLN 791).

Death of a Partner in the Registered Firm

In M/s Durga Das Janak Ram v. Preete Shah Sant Ram, AIR 1959 P H 530, Punjab High Court, following the decision of the Bombay High Court in Pratapchand Ramchand & Co. v. Jahangirji Bomanji, AIR 1940 Bom 237 held that the firm continued to be registered in spite of the death of one of the partners (and non-reporting of this fact to the Registrar) and the remaining partners were was entitled to institute a suit. But, in Krishna Chandra Agarwalla v. Shanti Prasad Jain, AIR 1981 Cal 199, it was held that if firm could not be maintained without the son of the deceased partner and his name did not appear in the Register of Firms, the suit filed by the firm could not be proceeded with. (See also: Maddi Sudarsanam v. Borogu Viswanadham Brothers, AIR 1955 AP 12; Sohanlal Basant Kumar vs Umraomal Chopra, 1985 (1) WLN 791).

Cause of action on dishonour of cheques & contract under Sec. 69

In Afsal Baker vs. Maya Printers, 2016 SCC OnLine Ker 29914, it is held that the suit on the cause of action on dishonour of cheques can be brought independent of Sec. 69 of the Partnership Act, as it is not on a ‘contract’ stated in Sec. 69.

Decree Obtained Against a Partner Cannot be Executed Against Legal Heirs

In SP Misra v. Mohd. Laiquddin Khan, (2019) 10 SCC 329, it is held that a partnership firm stands dissolved, on the death of a partner, by operation of law under Section 42(c) of the Indian Partnership Act, 1932; and therefore, the decree obtained against a partner cannot be executed against his legal heirs.

When all Partners are Necessary Parties

Partition of partnership property
Suit for settling the accounts of the dissolved firm
When firm constituted to take up a venture – after the completion of such venture.

Subsequent Registration Will Not Cure the Defect

In Delhi Development Authority v. Kochhar Construction Work, (1998) 8 SCC 559, following Shreeram Finance Corporation, it was held that proceedings under the Arbitration Act were ab initio defective for the firm was not registered; and that the subsequent registration of the firm could not cure that defect. (Followed in U.P. State Sugar Corporation Ltd vs Jain Construction Co. (2004) 8 SCC 559) See also: Haldiram Bhujiawala v. Anand Kumar Deepak Kumar, 2000(3) SCC 250.

In Dwijendra Nath Singh v. Govinda Chandra, AIR 1953 Cal 497 (Dasgupta, G Ray, JJ.) the suit was brought by two persons who are described as the owners of the firm Samanta Naskar and Co. When the suit was instituted this firm had not been registered. It however was registered before the suit came to be heard. It was held following Firm Laduram Sagarmal v. Jamuna Prasad, AIR 1939 Pat 239 and Varadarajulu v. Rajmanika, AIR 1937 Mad 767, that a suit which was not maintainable by reason of non-compliance with S. 69 of the Partnership Act cannot become maintainable at a later stage by reason of registration and the subsequent registration cannot cure the initial defect.

Apex Court Impleaded Partners, Suo Moto, as Proper Parties, in eviction Case

In Richard Lee v. Girish Soni, (2017) 3 SCC 194, our Apex Court it was ruled that there was no doubt that all the partners are not necessary parties ‘form the point of view of the eviction petitioners’ and that both the firm and all its partners should be on the array of parties as proper party for properly adjudicating the issue before the Rent Controller in view of the contentions taken by the parties. The Apex Court impleaded the partners suo moto observing that the Court has a duty to see whether the presence of the proper parties would facilitate the complete determination of the matter in dispute.

Clauses impose obligations to legal heirs are opposed to public policy

In SP Misra v. Mohd. Laiquddin Khan, (2019) 10 SCC 329, it is held as under:

“When such legal representative are not parties to the contract, such contract cannot confer rights or impose obligations arising under it on any third party, except parties to it. No one but the parties to the contract can be entitled under it or born by it. Such principle is known as ‘Privity of Contract’. When the partnership stands dissolved by operation of law under Section 42(c) of the Indian Partnership Act, 1932, the question of execution in pursuance of the decree does not arise. There cannot be any contract unilaterally without acceptance and agreement by the legal heirs of the deceased partner. If there are any clauses in the agreement, entered into between the original partners, against the third parties, such clauses will not bind them, such of the clauses in the partnership deed, which run contrary to provisions of Indian Partnership Act, 1932, are void and unenforceable. Such clauses are also opposed to public policy.”

Execution Against a Partner who was not a Party in Trial

In J.K. Jute Mills Co. Ltd. v. Firm Birdhichand Sumermal (Mukerji, Beg, Agarwala, JJ) AIR 1958 All 176, while interpreting Order 21, Rule 50 CPC, Beg, J. (concurred by Mukerji, J.) referring earlier judgments, it was held that all the partners were not necessary parties in trial, to proceed in execution. Beg, J. summed up his Judgment observing the following:

The decree can be satisfied not only from the property of the partnership, but also from the personal property of each of the partners.
The question as to who are the persons who constitute the firm can be decided in execution proceedings.
Order 21, Rule 50 is designed to define the scope and to lay down the mode and method of such an enquiry.
Effect of Contrary View: If a partner (not impleaded or served) succeeds when re-agitate in execution proceedings, he would be fully bound by the decree which has already been passed in the suit against the firm, yet according to the order of the same Court at the execution stage in the same suit, he would not be so bound.
A contrary view might result in a conflict between the findings at the trial and at the execution stage in the same case.
Further, in such a case he would have to be held to be immune from personal liability as a partner even though his property as a partner would be liable for the satisfaction of the decree under Order 21, Rule 50(1) (a).
Again, if a partner not impleaded or served in the suit is allowed to re-agitate the whole matter on merits, then it would be open to him to raise again the same pleas which were raised by other partners who were served in the suit.
If the decision in the suit is not to be treated as res judicata against all partners, then it would be open to the same Court at the execution stage to take a different view of the same plea.
The result would be that on the same point there would be two conflicting findings at two stages of the same case.
Moreover, as a result of his objection at the execution stage, the claim might be found to be good against the firm only partially, even though the decree in the suit might postulate the liability in respect of the entire claim.
The contrary view might result not only in a conflict between the decree in the suit and the order in execution proceedings in the same suit, but also in a conflict between various orders at the execution stage itself.
Thus, where the number of partners who had not been served in the proceedings and against whom applications under Sub-rule (2) might be given is a very large and they are allowed to re-agitate the whole matter, the result would be that each time a fresh application against each of such persons is made, fresh objections might be taken.
If this procedure is allowed, then there would neither be any consistency in findings nor would there be any finality of decisions in the same matter. The situation thus created would be a highly embarrassing and confusing one.
If collusion, the matter has to be re-agitated either by a separate suit to have the decree set aside or by reviving the proceedings in the same suit itself.
The Legislature has, also, provided some safeguard by making the leave of the Court necessary for proceedings under Sub-rule 2.
Where facts are such as to raise the suspicion of collusion between the parties, the Court may refuse such permission. The enquiry contemplated against a person proceeded against under Sub-rule (2) was of a restricted character.

Order 21 Rule 50 CPC Reads As Under:

“50. Execution Of Decree Against Firm.

(1) Where a decree has been passed against a firm, execution may be granted-
- (a) against any property of the partnership;
- (b) against any person who has appeared in his own name under rule 6 or rule 7 of Order XXX or who has admitted on the pleadings that he is, or who has been adjudged to be, a partner;
- (c) against any person who has been individually served as a partner with a summons and has failed to appear:
Provided that nothing in this sub-rule shall be deemed to limit or otherwise affect the provisions of section 30 of the Indian Partnership Act, 1932 (9 of 1932).
(2) Where the decree-holder claims to be entitled to cause the decree to be executed against any person other than such a person as is referred to in sub-rule (1), clauses (b) and (c), as being a partner in the firm he may apply to the Court which passed the decree for leave, and where the liability is not disputed, such court may grant such leave, or, where such liability is disputed, may order that the liability of such person be tried and determined in any manner in which any issue in a suit may be tried and determined.
(3) Where the liability of any person has been tried and determined under sub-rule (2) the order made thereon shall have the same force and be subject to the same conditions as to appeal or otherwise as if it were a decree.
(4) Save as against any property of the partnership, a decree against a firm shall not lease, render liable or otherwise affect any partner therein unless he has been served with a summons to appear and answer.
(5) Nothing in this rule shall apply to a decree passed against a Hindu Undivided Family by virtue of the provision of rule 10 of Order XXX.”

End Notes

In Sohanlal Basant Kumar v. Umraomal Chopra, 1985 (1) WLN 791, after referring various previous decisions the Division Bench of the Rajasthan High Court (D P Gupta, K Lodha, JJ.) came to the following conclusions:

A firm is not a legal entity at all but is the collective term or an abbreviated name for all the persons who are partners thereof.
All such persons who have entered into a partnership with one another are individually called partners and collectively they are called a firm and the name under which their business is carried on is called the firm name.
Ordinarily, a suit may not be brought by a firm in its own name but a suit may be filed by all the partners acting together or by some of the partners only, but impleading the remaining partners also as parties to the suit.
However, Order 30 Rule 1 of the Code of Civil Procedure prescribes a special procedure by which a suit may be brought in the name of the firm.
Order 30 Rule 1 of the Code of Civil Procedure enables two or more persons, claiming or being liable as partners and carrying on business in partnership, to sue or be sued in the name of the firm, of which such persons are partners at the time of the accrual of the cause of action.
Any party to a suit, in such a case, may apply to the court for a statement of the names and addresses of the persons who were at the time of the accrual of the cause of action partners in such firm.
Where persons sue or are sued as partners in the name of the firm, it shall suffice if any of the partners may sign, verify or certify any pleadings or other documents required under the Code of Civil Procedure to be signed, verified or certified by the plaintiff or the defendant, as the case may be.
If a demand is made as mentioned above, in the case of a suit instituted by the partners in the name of the firm, the plaintiffs shall forthwith declare in writing the names and places of residence of all partners constituting the firm on whose behalf the suit is instituted.
Thus, there can be no doubt that a suit brought in the name of the firm is actually one by all the persons who were partners of the firm at the time of the institution of the suit.
Thus although the firm is not a legal entity, yet the provisions of Order 30 Rules 1 and 2 C.P.C. enable several persons doing business as partners to sue or be sued in the name of the firm.
The effect of a suit instituted in the name of the firm in the manner prescribed by Order 30 Rule 1 C.P.C. is as if the suit is filed by all the persons collectively.
Whether the suit is filed by all the partners collectively or by some only of the partners impleading the rest as parties to the suit or whether it is filed in the name of the firm by one or more partners in the manner indicated by Order 30 rule I C.P.C. the conditions prescribed by Section 69(2) must be fulfilled.
They are:
- (1) that the firm must be registered; and
- (2) that the persons suing are or have been shown in the Register of Firms as partners in the Firm.
The second condition requires that the names of the persons suing are presently shown or have been previously shown in the Register of Firm as partners in the firm. That appears to fallow pliantly from the provisions of Section 69(2).
The use of the conjunction ‘and’ shows that both the aforesaid conditions must exist together on the date of the institution of the suit.
As a matter of fact, these two requirements constitute the conditions precedent to the institution of the suit.
It may be pointed out that merely filing a statement under Section 58(1) of the Act in the office of the Registrar of Firms in the prescribed form, giving the particulars of the partnership firm and its partners together with the prescribed fee would not be enough for the fulfillment of the aforesaid conditions.
A certificate of registration in the prescribed form should be made available to the partners of the firm and an entry of the statement filed under Section 58(1) should be recorded by the Registrar in the Register of Firms before the institution of the suit.
Thus, even if the certificate of registration is made available, yet the second requirement of Sub-section (2) of Section 69 cannot be fulfilled merely by sending or delivering to the Registrar of Firms the statement required by Section 58, but it must also be shown that an entry of the statement so furnished was made by the Registrar in the Register of Firms before the date of the institution of the suit.
Similar is the position of a statement sent to the Registrar under Section 65 of the Act intimating the alterations or changes occurring in the constitution of the firm on account of addition, death or retirement of some of the partners.
Use of the expression ‘person suing” in Section 69(2) of the Act is significant.
Ordinarily a singular used in an enactment includes a plural, but the use of the word ‘persons’ in the aforesaid provision indicates that the legislature intended to refer to all those persons who are the partners of the firm at the time of the institution of the suit.
The reason is simple, as all these persons who desire to obtain a decree in their favour in a suit must become plaintiffs in the suit and all those persons against whom a decree is to be passed must similarly be made defendants in the suit.
When the suit is filed by or on behalf of the partnership firm, either all the partners of the firm should individually be named as plaintiffs in the suit or some of them maybe named as plaintiffs, while the remaining partners may be named as proforma defendants in the plaint.
Another alternative mode has been provided by Order 30 Rule 1 C.P.C. in such cases and the suit may be filed in the name of the firm, which name collectively represents all the partners of the firm at the time of institution of the suit.
Such a suit filed in the name of the firm shall be deemed to be a suit on behalf of all the partners of the firm.
The other limb of the requirement contained in Sub-section (2) of Section 69 is that all such persons who are partners of the firm at the time of the institution of the suit must be or have been shown in the Register of Firms as partners of the plaintiff firm.
The expression “is or have been” refers to such persons whose names were entered in the Register of Firms as partners in the firm at the time of accrual of the cause of action and continues to remain so entered in the Register of Firms at the time of the institution of the suit._{(It stands contrary to M/s. Shreeram Finance Corpn. v. Yasin Khan, AIR 1989 SC 1769.)}
Thus either the persons whose names were entered in the Register of Firms as partners in the firm at the time of the accrual of cause of action and continued to remain so entered therein until the institution of the suit or persons whose names were entered in the Register of Firms as partners of the firm at the time of the institution of the suit could maintain a suit in the name of the firm or on behalf of the firm.
It has also been held in some of the cases that all the persons whose names were entered in the Register of Firms on the date of the institution of the suit could file a suit notwithstanding the fact that the names of some other persons also find place in the Register of Firms as partners of the firm, who have either died or have since retired and thus ceased to be partners of the firm at the time of the institution of the suit.
The crux of the matter is that the names of all those persons, who continued to hold together as partners of the firm at the time of the institution of the suit must be shown to be entered in the Register of Firms on the date of the institution of the suit.
If the relevant entry in the Register of Firms containing some other names of persons who have either died or have retired from the partnership, the same would not affect the maintainability of the suit, in as much as the suit in the name of the firm could be filed only by or on behalf of the surviving partners of the firm.
But if the name of one or more of the existing partners of the firm at the time of institution of the suit does not find place in the Register of Firms on that date, then the suit by or on behalf of the partnership firm is not maintainable.
It is also clear that no oral evidence can be taken for the purpose of deciding as to who were the partners of the plaintiff firm at the time of the institution of the suit and the names of the persons suing must be shown in the Register of Firm as partners of the plaintiff firm at the time of the institution of the suit, as the suit in the name of the firm is virtually a suit by all the partners of the firm and in order to prove the fact as to who were the partners of the plaintiff firm at the time of the institution of the suit, the only evidence admissible is a certified copy of the relevant entry in the Register of Firms.
Thus the only possible interpretation to be placed on the expression ‘are or have been shown in the Register of Firms’ could be the persons suing must either be presently shown in the Register of Firms as partners of the firm at the time of the institution of the suit or they must have been earlier shown in the said Register of Firms as partners of the firm, no other interpretation is possible so as to give a rational meaning to the provision.

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Is there Conflict Between Sec. 69(2) Partnership Act and Order 30 Rule 1 CPC?

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