Gujarat Water Supply & Sewage Board vs Evergreen Trading & Construction ...

Gujarat High Court

Gujarat Water Supply & Sewage Board vs Evergreen Trading & Construction ... on 20 April, 2026

                                                                                                                NEUTRAL CITATION




                           C/FA/4979/2001                                    CAV JUDGMENT DATED: 20/04/2026

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                                                                            Reserved On   : 15/04/2026
                                                                            Pronounced On : 20/04/2026

                                     IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

                                               R/FIRST APPEAL NO. 4979 of 2001
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                                    GUJARAT WATER SUPPLY & SEWAGE BOARD & ANR.
                                                      Versus
                                    EVERGREEN TRADING & CONSTRUCTION COMPANY
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                      Appearance:
                      MR.VISHRUT R. JANI FOR MR RC JANI(357) for the Appellant(s) No. 1,2
                      MR KG SUKHWANI(871) for the Defendant(s) No. 1
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                         CORAM:HONOURABLE MR. JUSTICE J. C. DOSHI


                                                        CAV JUDGMENT

1. By way of the present First Appeal under Section 96 of the Code of Civil Procedure, 1908 (for short the "Code"), the appellants, who are the original defendants, challenge the judgment and decree dated 23.03.2001 passed by learned Civil Judge (S.D.), Nadiad in Special Civil Suit No.312 of 1985, whereby the suit filed by the plaintiff was decreed against the defendants holding that the plaintiff is entitled to recover Rs.5,08,422/- with 18% interest from the date of filing of the suit till realization.

2. For the sake of brevity and convenience, the parties are referred to their original status and position to the learned Trial Court.

3. The brief facts borne out of the record are that the plaintiff is a registered partnership firm and an approved Class-A contractor with the defendants. The Executive Engineer invited a public tender for the work of construction of an Underground Drainage Scheme (Sewerage Collecting Page 1 of 18 Uploaded by MANOJ KUMAR(HC01092) on Mon Apr 20 2026 Downloaded on : Mon Apr 20 22:05:49 IST 2026 NEUTRAL CITATION C/FA/4979/2001 CAV JUDGMENT DATED: 20/04/2026 undefined System) at Petlad. The plaintiff submitted its tender, which was found to be competitive, and accordingly, the tender was accepted. Consequently, an Agreement bearing No. B/2/32/1980-81 was executed between the parties at an estimated cost of Rs.2,22,280/-. The plaintiff's tender amount, however, was Rs.6,19,399.66 paisa, which was much higher than the estimated cost. In spite of that, defendant No.1- Gujarat Water Supply & Sewage Board, issued a work order on 18.10.1980.

3.1 As per the terms and conditions of the agreement, the work was to be completed within 12 months from the date of issuance of the work order, i.e. on or before 17.10.1981. The plaintiff furnished Rs.4,660/- as a security deposit in the form of a bank guarantee and the remaining amount of Rs.4,660/- was deducted from the running bill. Thus, in total, plaintiff deposited Rs.9,320/- as security for the due performance of the contract.

3.2 The plaintiff's case is that it could not complete the work within the stipulated time due to full and partial hindrances caused by the defendant No.1. It is alleged that adequate funds were not available with the defendant No.1, which resulted in delay, and the work was ultimately completed in May, 1993. The plaintiff further contended that the initial width of excavation was only 0.75 mts. which was not workable, and there was substantial excess over the tender quantity. Additionally, the pipes required for laying in the excavated trenches were not made available in time, which further delayed completion of contract.

NEUTRAL CITATION C/FA/4979/2001 CAV JUDGMENT DATED: 20/04/2026 undefined 3.3 The plaintiff also pleaded that the excavated trenches crossed a railway line, and the necessary permissions from the Railway authorities were not granted within the stipulated time, causing further delay in completion of the work.

3.4 In view of the above circumstances, the plaintiff contended that due to the failure of reciprocal obligations on the part of defendant No.1, it could not complete the work within the stipulated time and suffered various monetary losses. Accordingly, the plaintiff raised as many as nine claims, as stated hereunder:

Claim No.1: Amounting to Rs.85,944-74 ps. on account of work done not paid.

Claim No.2: Amounting to Rs.40,982-64 ps. on account of unexecuted work.

Claim No.3: Amounting to Rs.1.50,000-00 on account of extra Item for search in chambers.

Claim No.4: Amounting to Rs.1,12,500/- on account of removing the surplus earth.

Claim No.5: Amounting to Rs.5000/- on account of delay in releasing the security deposit.

Claim No.6: Amounting to Rs.25,000/- on account of work carried out in the year 1982-83.

Claim No.7: Amounting to Rs.1,41,954-50 ps. on account of rise in material labour, petroleum etc. Claim No.8: Amounting to Rs.50,000/- on account of overhead and over stay of capital, machineries, etc. Claim No.9: On account of interest at the rate of 18% on amount claimed from claim no.1 to 8:

NEUTRAL CITATION C/FA/4979/2001 CAV JUDGMENT DATED: 20/04/2026 undefined 3.5 On the basis of the aforesaid claims, plaintiff claimed recovery of Rs.8,86,503.25 paisa along with interest at the rate of 18% from the defendants. The defendants filed Written Statement alongwith a counterclaim at Ex.16. It is, inter alia, contended that the suit of the plaintiff is not maintainable and is barred under Section 69 of the Indian Partnership Act, 1932, on the ground that the plaintiff firm was not duly registered in accordance with the law. It is further contended that the plaintiff must strictly prove its claims and cannot merely on mere surmises and conjectures.

It is also contended that the plaintiff was at fault and failed to complete the work within the stipulated time, and therefore is not entitled to claim damages; rather, it is liable to compensate defendant No.1-Gujarat Water Supply & Sewage Board. The remaining averments made by the plaintiff were denied.

3.6 The learned Trial Court framed the issues at Ex.19 and after permitting both parties to lead evidence, partly decreed the suit.

3.7 Being aggrieved, the original defendants have preferred the present First Appeal before this Court, inter alia, on the grounds raised in the appeal memo.

4. I have heard learned advocate Mr.Vishrut Jani appearing for the appellants - original defendants and learned advocate Mr.Paras Sukhwani for the defendant - original plaintiff.

NEUTRAL CITATION C/FA/4979/2001 CAV JUDGMENT DATED: 20/04/2026 undefined

5. Learned advocate Mr.Jani firstly argued that the suit has been filed by Evergreen Trading & Construction Company - plaintiff, claiming it to be a registered partnership firm, without impleading its partners. He further submitted that this defect affects the jurisdiction, as a partnership firm is merely a compendious name of its partners and does not have a separate legal entity. Therefore, a civil suit cannot be maintained against the defendants for any liability arising out of the contract executed between the parties in absence of the partners being joined.

5.1 In support of his submissions, learned advocate Mr.Jani referred to Order XXX of the Code of Civil Procedure, as well as Section 69 of the Indian Partnership Act, 1932. He also placed reliance upon the judgment of the Hon'ble Supreme Court in the case of Dhanasingh Prabhu Vs. Chandrasekar & Anr. reported in (2025) INSC 831.

5.2 In view of the aforesaid submissions, learned advocate Mr.Jani, contended that the learned Trial Court has committed a jurisdictional error in entertaining the suit filed by the partnership firm without impleading its partners. He therefore submitted that the present appeal deserves consideration and is required be allowed and the judgment and decree be quashed and set aside.

5.3 Alternatively, he took this Court through the findings of the learned Trial Court with regard to the claims partly allowed and submitted that such findings are based on surmises and conjectures without any supporting evidence led Page 5 of 18 Uploaded by MANOJ KUMAR(HC01092) on Mon Apr 20 2026 Downloaded on : Mon Apr 20 22:05:49 IST 2026 NEUTRAL CITATION C/FA/4979/2001 CAV JUDGMENT DATED: 20/04/2026 undefined by the plaintiff. He further submitted that loss of profit cannot be awarded in absence of specific and cogent evidence. In support of this submission, learned advocate Mr.Jani relied upon the decision of the Hon'ble Supreme Court in the case of M/s Unibros Vs. All India Radio reported in (2023)LawSuit(SC) 1052 and submitted that, firstly, there was a delay in completion of the contract; second, such delay is not attributable to the claimant, thirdly, the claimant's status as an established contractor, handling substantial projects and fourthly, credible evidence to substantiate the claim of loss of profitable arises.

5.4 He submitted that, in the present case, none of such contention has been pleaded or proved by the plaintiff, and yet the decree has been granted in favour of the plaintiff i.e. too on mere presumption.

5.5 On the basis of the aforesaid submissions, learned advocate Mr.Jani submitted that the present First Appeal be allowed.

6. Per contra, learned advocate Mr.Sukhwani referred to the written arguments running into 46 pages filed before the learned Trial Court. He submitted that exhaustive arguments were canvassed by learned advocate before the learned Trial Court, which satisfy that therefore the impugned judgment and decree has been rightly passed by the learned Trial Court, deserves no interference.

6.1 He further submitted that the issue of maintainability of the suit was not raised before the learned Page 6 of 18 Uploaded by MANOJ KUMAR(HC01092) on Mon Apr 20 2026 Downloaded on : Mon Apr 20 22:05:49 IST 2026 NEUTRAL CITATION C/FA/4979/2001 CAV JUDGMENT DATED: 20/04/2026 undefined Trial Court, and no such issue was framed by the learned Trial Court. Therefore, the same cannot be entertained at this juncture.

6.2 Learned advocate Mr.Sukhwani relied upon the following judgments:-

(i) M/s.A.T.Brij Paul Singh & Bros. vs. State of Gujarat reported in AIR 1984 Supreme Court 1703;

(ii) M/s. Associated Construction vs.Pawanhansh Helicopters Pvt. Ltd. reported in AIR 2008 Supreme Court 2911;

(iii) Vadodara Municipal Corporation & Ors. Vs. M/s.

Sona Builders passed by the Division Bench of this Court in First Appeal No.339 of 2026 on 05.02.2026;

(iv) State of West Bengal & Ors. vs. S.K.Maji reported in 2025 SCC OnLine Cal 3945:

(v) M/s. Hind Construction Contractors by its sole proprietor Bhikamchan Mulchand Jain (Dead) by L.Rs.

vs. State of Maharashtra reported in AIR 1979 Supreme Court 720;

6.3 In view of the aforesaid decisions, he submitted that in a work contract, where breach occurs due to the fault of the promisor, the contractor is entitled to claim damages on the basis of expected profit on the balance of work. He further submitted that the suit is maintainable, as the plaintiff is a registered partnership firm. Referring to the documents on record, he submitted that the Registration Certificate is produced at Ex.71 and therefore, in view of Section 69(1) of the Indian Partnership Act, plaintiff is entitled to maintain the suit against defendant No.1-Gujarat Water Supply & Sewage Board for liability arising out of the contract.

NEUTRAL CITATION C/FA/4979/2001 CAV JUDGMENT DATED: 20/04/2026 undefined 6.4 In view of the aforesaid submission, he prayed for dismissal of the present First Appeal.

7. I have heard learned advocate for both sides and perused the impugned judgment alongwith the paper book, as well as the record and proceedings. The issue as to whether a registered partnership firm can sue in its own name or must sue through its partners is a jurisdictional issue and can be raised and decided at the stage of First Appeal, even if it is not raised or decided during the Trial. Whether the respondent herein argued issue, can sue only on partnership firm name or has to sue defendant through its partners, is a jurisdictional issue, and can be raised and decided during the proceedings of the First Appeal. Because they are pure question of law and they go to the root of the matter. In fact, the Courts are duty- bound to examine the jurisdiction and maintainability of a suit at any stage. Such objections are not barred merely because they were omitted earlier. The Hon'ble Supreme Court, in its recent judgment in the case of Annamalai vs. Vasanthi & Ors. reported in (2025) INSC 1267 , clarified that a plea regarding the maintainability of a suit can be raised at the appellate stage, notwithstanding that it was not raised in the written statement, as no new facts or evidence is required to adjudicate the same.

8. Thus, argument of learned advocate Mr.Sukhwani that since the issue is not raised during the trial, it cannot be raised at First Appeal proceedings is negated. From the cause title of the Special Civil Suit, it is evident that none of the partners of Evergreen Trading & Construction Company -

NEUTRAL CITATION C/FA/4979/2001 CAV JUDGMENT DATED: 20/04/2026 undefined plaintiff have been impleaded and the suit has been filed in the name of firm alone.

9. Learned advocate Mr.Paras Sukhwani submitted that the learned Trial Court has directed the plaintiff to produce the Registration Certificate, which was produced at Ex.71 and therefore the suit is maintainable under Section 69(1) of the Indian Partnership Act.

10. At this stage, it would be appropriate to refer to Sections 69(1) of the Indian Partnership Act, which read as under:-:-

"69(1) No suit to enforce a right arising from a contract or con- ferred by this Act shall be instituted in any court by or on be- half 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.

11. Section 69(1) of the Indian Partnership Act, stipu- lates that even if the firm is registered, a suit to enforce a right arising from a contract or conferred by the Partnership Act, shall be instituted in any Court by or on behalf of any per- son suing in a firm against the firm or any person alleged to be or to have been partner in the firm. Thus, it is evident that even in the case of a registered partnership firm, the suit must be instituted by one or more partners on behalf of any person is required to be brought on behalf of the firm.

12. It would also be relevant to refer Rule (1) & (2) Order XXX of the Code of Civil Procedure, 1908, which reads as under:-

Suits by or against Firms and Persons carrying on business in names other than their own Page 9 of 18 Uploaded by MANOJ KUMAR(HC01092) on Mon Apr 20 2026 Downloaded on : Mon Apr 20 22:05:49 IST 2026 NEUTRAL CITATION C/FA/4979/2001 CAV JUDGMENT DATED: 20/04/2026 undefined

1. 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 in the name of the firm (if any) of which such persons were partners at the time of the 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 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 such pleading or other document is signed, verified or certified by any one of such persons.

2.168

2. 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.]

13. Recently, this Court in the case of Jayantilal Hargovandas Thakkar Vs. Gram Panchayat, Ratangadh, reported in 2026(0)AIJEL-HC253062, had occasion to interpret the identical arguments, in paragraph Nos.11 to 17, this Court has observed as under:-

NEUTRAL CITATION C/FA/4979/2001 CAV JUDGMENT DATED: 20/04/2026 undefined "11.The core dispute between the parties is whether the partnership firm, as plaintiffs, have filed the suit are three brothers as co-owners have filed suit? The title of the plaint indicates that plaintiff Nos.1, 2, and 3 have filed the suit as persons carrying on business under the name and style of Jayantilal Hiralal & Amrutlal Company. This suggests that the suit has been filed in terms of Order XXX of the Code of Civil Procedure. However, the averments in the plaint do not clearly specify whether the plaintiffs have filed the suit as partners of a partnership firm or in the individual capacity in the name and style of the business under the ownership. In the absence of specific pleadings, describing the title in the name of a firm without clarification would suggest that the suit has been filed by a partnership firm as contemplated under Order XXX of the CPC.

12. It is an admitted position that the plaintiffs did not produce the registration certificate of the partnership firm along with the plaint. The plaintiffs have also failed to plead the date of registration of the partnership firm or disclose the names of its partners. Plaintiff No.2 entered into the witness box at Ex.66 as P.W.1. In cross-examination, he admitted that, at the time of filing the suit, the partnership firm was unregistered. Simultaneously, he did not clarify whether the suit had been filed by the firm or by three brothers in their individual capacity as co-owners. Such silence assumes significance as Ratangadh Gram Panchayat in its written statement raised this issue with specific contention. He further admitted that he was unaware whether the partnership firm is registered. In the cross-

examination by the learned advocate for defendant No. 2, he admitted that the public auction took place on 16th June, 1981, and the partnership firm came into existence in 1984. Thus, at the time of the public auction, the partnership firm was not in existence. He further admitted that although the firm was not in existence, there was an understanding of partnership among the three brothers prior to the auction. It was also admitted that such partnership was not registered at the time of the auction and was registered subsequently. Apt to note that the written statements filed by defendant Nos.1 and 2 raised a specific objection that the partnership firm was unregistered.

13. In the backdrop of the aforesaid pleadings and factual aspects as well as evidence, reference made to Section 69(2) of the Indian Partnership Act, which reads as under:-

"69(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 Page 11 of 18 Uploaded by MANOJ KUMAR(HC01092) on Mon Apr 20 2026 Downloaded on : Mon Apr 20 22:05:49 IST 2026 NEUTRAL CITATION C/FA/4979/2001 CAV JUDGMENT DATED: 20/04/2026 undefined firm is registered and the persons suing are or have been shown in the Register of Firms as partners in the firm."

14. The plain reading of Section 69(2) of the Act stipulates that the suit to enforce a right arising from a contract shall not be instituted in any Court by or on behalf of a firm against the third party unless the firm is registered and the persons suing are or have been shown in the register of firm as partners in the firm.

15. The Hon'ble Supreme Court, in the case of M/s Shriram Finance Corporation (supra), in para 6, has explained the effect of Section 69(2) of the Partnership Act, which is as under:-

"6.In the present case the suit filed by the appellants is clearly hit by the provisions of sub-section (2) of section 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 regard- ing which no notice was given to the 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. The result is that the suit was not maintainable in view of the provisions of sub-section (2) of section 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.

16. Yet in judgment in the case of Purshottam (supra), in para 8, the Hon'ble Apex Court has held as under:-

"8. The question as to whether the subsequent registration of the firm would cure the initial defect in the filing of the suit arose for consideration in D.D.A. Vs. Kochhar Construction Work and Anr. (1998) 8 SCC

559. This Court held that in view of the clear provision of the Act it was not possible to subscribe to the view that subsequent registration of the firm may cure the initial defect, because the proceedings were ab initio defective as they could not have been instituted since the firm in whose name the proceedings were instituted was not a registered firm on the date of the institution of the proceedings. This Court also noticed the difference of opinion amongst the High Courts and concluded thus:- (SCC P.562 para 4) "4.Counsel for the respondents, however, invited our Page 12 of 18 Uploaded by MANOJ KUMAR(HC01092) on Mon Apr 20 2026 Downloaded on : Mon Apr 20 22:05:49 IST 2026 NEUTRAL CITATION C/FA/4979/2001 CAV JUDGMENT DATED: 20/04/2026 undefined attention to two decisions which take a view that subsequent registration of the firm can cure the initial defect provided the registration is before the period of limitation has run out. Our attention was drawn to M.S.A. Subramania Mudaliar Vs. East Asiatic Co. Ltd. and Atmuri Mahalakshmi Vs.Jagadeesh Traders. However, the High Court of Patna in Laduram Sagarmal Vs. Jamuna Prasad Chaudhuri and the High Court of Madras in T. Savariraj Pillai Vs. R.S.S. Vastrad & Co. take a contrary view and hold that the suit is incompetent ab initio. We have considered these decisions, but in the light of the plain language of Section 69 of the Partnership Act read with Section 20 of the Arbitration Act and in view of the decision of this Court reported in Shreeram Finance Corpn. We are clearly of the opinion that proceedings under Section 20 of the Arbitration Act were ab initio defective since the firm was not registered and the subsequent registration of the firm cannot cure that defect".

The same view was also reiterated in U.P. State Sugar Corpn. Ltd. v. Jain Construction Co.

17. In view of the aforesaid aspect, according to this Court, the plaintiffs have miserably failed to establish their right to file the suit for enforcement of a contractual right. It implies that the learned Trial Court has not committed any error in deciding the issue against the plaintiffs. The contention of the learned advocate Ms.Acharya that the plaintiffs were carrying on business as co-owners appears to be an afterthought. The pleadings and evidence on record clearly indicate that the suit has been filed by a partnership firm which was not registered on the date of institution of the suit. Even though the firm was subsequently registered, such registration does not cure the defect under Section 69(2) of the Partnership Act. Accordingly, the first contention raised by the learned advocate Ms. Acharya, is rejected.

14. The Hon'ble Supreme Court in case of Dhanasingh Prabhu (supra) while dealing with the related issue under Section 141 of the Negotiable Instruments Act, 1881, made important observations in paragraph Nos.7.2 to 7.11 which read as under:

NEUTRAL CITATION C/FA/4979/2001 CAV JUDGMENT DATED: 20/04/2026 undefined "7.2 Section 4 of the Partnership Act defines a partnership, partner, firm and firm name as follows:

"4. Definition of "partnership","partner", "firm" and "firm name"-

"Partnership" is the relation between persons who have agreed to share the profits of a business carried on by all or any of them acting for all.

Persons who have entered into partnership with one another are called individually "partners" and collectively "a firm", and the name under which their business is carried on is called the "firm name".

(underlining by us) 7.3 The definition in Section 4 of the Partnership Act is a departure from the erstwhile definition of partnership in Section 239 of ICA. A significant departure, inter alia, is the insertion of "acting for all" which brings in the concept of agency. An amendment of substantial import carried out by the Special Committee was with the intent to elucidate clearly the fundamental principle that the partners when carrying on the business of the firm are agents as well as principals.1 Pollock & Mulla also notes the salient distinction between the meanings of 'partnership' and 'firm'. Tracing from Section 4, Pollock & Mulla clarifies that the word "partnership" is used throughout the Partnership Act in the defined sense of a relationship and where the partners are referred to 1 Chapter 2, Pollock & Mulla, The Indian Partnership Act, 8th Edn. Lexis Nexis Butterworths. collectively, the word "firm" is used. It is pertinent to recall that Explanation to Section 141 of the Act provides that for the purposes of that section, a company includes a firm or other association of individuals. Nevertheless, the distinction is crucial because it lends credence to the interpretation that reference in Section 141 is as much to the partners of the firm as it is to directors of a company.

7.4 According to Pollock and Mulla, 8th Edition, the definition of partnership in Section 4 of the Partnership Act contains three elements; (i) there must be an agreement entered into by all the persons concerned;

(ii) the agreement must be to share the profits of a business; and (iii) the business must be carried on by all or any of the persons concerned, acting for all. All these elements must be present before a group of associates can be held to be partners. These three elements may appear to overlap, but they are nevertheless distinct. The third element shows that the persons of the group Page 14 of 18 Uploaded by MANOJ KUMAR(HC01092) on Mon Apr 20 2026 Downloaded on : Mon Apr 20 22:05:49 IST 2026 NEUTRAL CITATION C/FA/4979/2001 CAV JUDGMENT DATED: 20/04/2026 undefined who conduct the business do so as agents for all the persons in the group and are therefore liable to account for all. This Court while elaborating the third essential element has held that the position of a partner in the firm is thus not of a master and a servant or employer and employee which concept involves an element of subordination, but that of equality. It may be that a partner is being paid some remuneration for any special attention which he devotes but that would not involve any change of status or bring him within the definition of employee, vide Regional Director, Employees' State Insurance Corporation vs. Ramanuja Match Industries, (1985) 1 SCC 218, Paras 4 and 9.

7.5 In Section 4 of the Partnership Act, it is clearly stated that persons who have entered into partnership with one another are individually called partners and collectively a firm and the name under which their business is carried out is called a firm name. Thus, while partnership is the relation between persons who have agreed to share profits of the business carried on by all or any of them acting for all, the persons are collectively called a firm and the name of the firm is the firm name which is a compendious or collective term of partnership of the partners. The said Section also clearly implies that a firm or partnership is not a legal entity, separate and distinct from its partners. 7.6 As already stated above, the firm is a compendious term not distinct of the individuals who compose the firm. In other words, partnership is merely a convenient name to carry out business by partners. Thus, a firm is not an entity of persons in law but is merely an association of individuals and firm name is only a collective name of those individuals who constitute the firm. In other words, the firm name is merely an expression, only a compendious mode of designating the persons who have agreed to carry on business in partnership.

Thus, a firm may not be a legal entity in the sense of a corporation or a company incorporated under the Companies Act, 1956 or 2013, but it is still an existing concern where business is done by a number of persons in partnership. 7.7 Insofar as the statutory definition of a company is concerned, the legislature has found it particularly cumbersome to provide a descriptive and inclusive definition. Perhaps this is why the Parliament in its wisdom defined 'company' in Section 2(2) of the Companies Act, 2013 ('Companies Act') not by enumerating the essential features of a company but "as a company incorporated under this Act or under any previous company law".2 Keeping aside the omnibus statutory definition, several jurists have attempted to outline a definition of a company for doctrinal Page 15 of 18 Uploaded by MANOJ KUMAR(HC01092) on Mon Apr 20 2026 Downloaded on : Mon Apr 20 22:05:49 IST 2026 NEUTRAL CITATION C/FA/4979/2001 CAV JUDGMENT DATED: 20/04/2026 undefined and precedential analysis. Lindley, a Jurist and Judge defined a company in the following terms:

"A company is an association of many persons who contribute money or monies worth to a common stock and employed in some trade or business and who share the profit and loss arising therefrom. The common stock so contributed is denoted in money and is the capital of the company. The persons who contribute to it or to whom it pertains are members. The proportion of capital to which each member is entitled is his share. The shares are always transferable although the right to transfer is often more or less restricted."3 Section 9 of the Companies Act, 2013 provides as follows:

"9. Effect of registration From the date of incorporation mentioned in the certificate of incorporation, such subscribers to the memorandum and all other persons, as may, from time to time, become members of the company, shall be a body corporate by the name contained in the memorandum, capable of exercising all the functions of an incorporated company under this Act and having perpetual succession with power to acquire, hold and dispose of property, both movable and immovable, tangible and intangible, to contract and to sue and be sued, by the said name".

7.8 While modern legislations and instruments have outlined and carved out more complex features, rights and obligations of a 'company', the fundamentals of Lindley's definition continue to hold ground. The salient distinctions between a company and a partnership, including the rights and obligations flowing therefrom which are fundamental to common law, as well as the relevant statutes promulgated by the Parliament could be discussed at this stage.

Separate Legal Personality:

7.9 A partnership firm, unlike a company registered under the Companies Act, does not possess a separate legal personality and the firm's name is only a compendious reference for describing its partners. This fundamental distinction between a firm and a company rests on the premise that the company is separate from its shareholders. In that context, the words of Lord Page 16 of 18 Uploaded by MANOJ KUMAR(HC01092) on Mon Apr 20 2026 Downloaded on : Mon Apr 20 22:05:49 IST 2026 NEUTRAL CITATION C/FA/4979/2001 CAV JUDGMENT DATED: 20/04/2026 undefined Macnaghten in Salomon vs. Salomon & Co. Ltd., [1897] AC 22 (HL), ("Salomon") are instructive:

"the company is at law a different person altogether from the subscribers......; and though it may be that after incorporation the business is precisely the same as it was before and the same persons are managers and the same hands receive the proceeds, the company is not in law, the agent of the subscribers or trustee for them. Nor are the subscribers as members liable, in any shape or form, except to the extent and in the manner provided by the Act."

7.10 This distinction does not, however, continue to hold true for a partnership firm. In the seminal case of Bacha F. Guzdar vs. CIT, (1954) 2 SCC 563, this Court had an opportunity to briefly address this distinction between a partnership firm and a company, wherein it was observed thus:

"13. It was argued that the position of shareholders in a company is analogous to that of partners inter se. This analogy is wholly inaccurate. Partnership is merely an association of persons for carrying on the business of partnership and in law the firm name is a compendious method of describing the partners. Such is, however, not the case of a company which stands as a separate juristic entity distinct from the shareholders."

7.11 The partnership name being only a compendious method of describing the partners, it stands to reason that a reference to the partners in their capacity as partners of the firm will be sufficient to impute liability on the partners themselves, whereas directors of a company are made liable vicariously through the company, upon whom falls the primary liability. Thus, the partners and the partnership firm are one and the same. Unlike a company, a partnership firm has no independent corporate existence and has no distinct legal persona independent of its partners. Similarly, the partners of a firm are co-owners of the property of the firm unlike shareholders in a company who are not co- owners of the property of the company. This principle was also explained by the Calcutta High Court in Re:

The Kondoli Tea Co. Ltd., (1886) ILR 13 Cal 43 where the transferors of a tea estate claimed that they were eligible to claim exemption from payment of ad valorem duty because the transferee was a company in which they themselves were shareholders. Negativing this Page 17 of 18 Uploaded by MANOJ KUMAR(HC01092) on Mon Apr 20 2026 Downloaded on : Mon Apr 20 22:05:49 IST 2026 NEUTRAL CITATION C/FA/4979/2001 CAV JUDGMENT DATED: 20/04/2026 undefined contention, it was held that the company was a separate person and the transfer of the tea estate was a conveyance and in substance, a transfer to another person.

15. In the present case, the suit has been filed in the name of firm alone without impleading any partner is not maintainable. In other words, partnership firm believing to have legal identity, has filed suit on its own name, and not through a partners. According to this Court, the learned Trial Court has committed a serious and manifest error in allowing the suit. Since the suit itself is not maintainable, this being a core jurisdictional issue that ought to have been decided in favour of the appellant herein, this Court does not deem it necessary to decide the merits of the case.

16. The judgments relied upon by learned advocate Mr.Sukhwani are not helpful to the facts of the present case.

17. For the foregoing reasons, the present First Appeal is allowed. The impugned judgment and decree dated 23.03.2001 passed by the learned Civil Judge (S.D.), Nadiad, is hereby quashed and set aside holding that the suit is not maintainable. R& P, if any, be sent back to the concerned Court.

18. Civil Application, if any, does not survive and stands disposed of accordingly.

(J. C. DOSHI,J) MANOJ Page 18 of 18 Uploaded by MANOJ KUMAR(HC01092) on Mon Apr 20 2026 Downloaded on : Mon Apr 20 22:05:49 IST 2026