M/S Vesco Product Company vs Sh.Rajinder Nath Pathak
2010 Latest Caselaw 5591 Del

R-117
*    IN THE HIGH COURT OF DELHI AT NEW DELHI

%                    Judgment Reserved on: 06.12.2010
                    Judgment Delivered on: 08.12.2010

+       RSA No.182/2002 & CM No.497/2002 (for stay)


M/S VESCO PRODUCT COMPANY       ...........Appellant
             Through: Mr.O.P.Sharma, Advocate.

                     Versus

SH.RAJINDER NATH PATHAK           ..........Respondent
              Through: Mr.Aditya Kala, Advocate.


        CORAM:
        HON'BLE MS. JUSTICE INDERMEET KAUR

     1. Whether the Reporters of local papers may be allowed to
        see the judgment?

     2. To be referred to the Reporter or not?               Yes

     3. Whether the judgment should be reported in the Digest?
                                                          Yes

INDERMEET KAUR, J.

1. The plaintiff M/s Vesco Products Company has filed the

present suit through its partner Seva Nath Pathak. It was a suit

for possession. The averment is that the plaintiff is partnership

firm registered with the Registrar of Firm, Calcutta of whom Seva

Nath Pathak was one of the partners. Plaintiff is the owner of the

property bearing No.17-B/30, Desh Badhu Gupta Road, New Delhi.

This property was purchased by the plaintiff vide sale deed dated

17.3.1969. Defendant Rajinder Nath Pathak is the son of Seva

Nath Pathak and brother of Sarvshri Birendra Nath Pathak and

Vasisth Yogendra Nath Pathak who are the other partners in the

firm. The plaintiff firm consists of only three partners Sarvshri

Seva Nath Pathak and his two sons Birendra Nath Pathak and

Vasisth Yogenera Nath Pathak. The plaintiff because of his close

relation with the defendants allowed the defendant to remain in

possession of three rooms, one bath, one latrine and entire terrace

in the aforenoted property. Defendant is living there only as a

licencee; he has no right or interest in the property. In spite of the

requests to the defendant to vacate the suit property he has not

done so. Present suit was accordingly filed.

2. The written statement filed by the defendant has contested

the suit; it is stated that the parties are governed by a landlord-

tenant relationship and not by a licensor-licencee relationship.

3. Trial Judge framed the following three issues:

1.Whether the present suit is barred under Delhi Rent Control Act. OPD

2.Whether the plaintiff is entitled to the relief claimed for? OPP

3.Relief.

4. On the basis of the oral and documentary evidence, the suit

of the plaintiff was decreed; defendant was directed to hand over

peaceful possession of the suit property to the plaintiff.

5. In appeal, the impugned judgment dated 03.9.2002 had

reserved the finding of the Trial Judge. Suit of the plaintiff was

dismissed being barred under the provisions of Section 69(2) of the

Indian Partnership Act, 1932.

6. This is a second appeal. It was admitted on 12.7.2007 and

the following substantial question of law was formulated. It inter

alia reads as under:

Whether memorandum Ex.PW-1/2 produced before the Civil Court can be treated as registration of the firm, if so to what effect?

7. On behalf of the appellant, it has been urged that the plaintiff

has been non-suited before the appellate Court only on the ground

that the partnership was not registered under Section 69 (2) of the

Indian Partnership Act 1932. It is submitted that the provisions of

the said Section were inapplicable. The present suit had been filed

by the plaintiff against the defendant who was a licencee and

trespasser in the suit property. Even presuming that the firm was

unregistered (although not admitting) yet a suit of this nature was

not barred as it was not a suit for the enforcement of a right arising

out of a contract entered into by the unregistered firm with the

defendant. This suit was not in any manner related to the firm

business. For this proposition reliance has been upon AIR 2000 SC

1267 M/s Haldiram Bhujiawala and Anr. Vs. M/sanand Kumar

Deepak Kumar & Anr.

8. On merits, it is stated that the present partnership firm had

been partnership had been constituted in the year 1964 ad it had

been duly registered in 1973 which is evident from Ex.PW-1/2.

Ex.PW-1/2 which is the memorandum reads as follows:

"The Registrar of Firms, West Bengal, hereby acknowledges receipt of the undermentioned document and intimates that it has been filed/recorded/registered pursuant to the Indian Partnership Act, 1932 (Act IX of 1932.)"

It is pointed out that this document clearly establishes that

the firm stood registered. The partnership of the year 1993 was

only a continuation of this first partnership of the year 1964.

Retirement of a partner did not lead to any automatic dissolution of

the firm and this had also clearly been stated in the document Ex.

PW-1/5 which in fact had recited that this is a supplementary deed

of partnership in continuation of earlier partnership of 09.12.1964.

Ex.PW-1/2 had shown that the firm was registered. On this count

also the suit of the plaintiff could not have been dismissed.

9. Arguments have been countered. It is pointed out that the

first partnership which had been entered between the parties on

09.12.1964 was never a document which was proved on record. A

new partnership had been constituted vide Ex.PW-1/5 dated

7.4.1993 between two partners only. The present suit had been

filed in the year 1992. The question of the registration firm which

had been constituted in the year 1993 being registered at the time

of the institution of the suit in the year 1992 did not arise.

10. The question of law as formulated has been noted

hereinabove. Record shows that a partnership of three partners

had been entered into in the year 1964 i.e. on 09.12.1964. This

document was not proved. It was marked as mark A. This firm

which had been constituted on 09.12.1964 had been registered

vide Ex.PW-1/2 i.e. on 27.02.1973. Recitals in the document

establish this. However, it is not in dispute that thereafter one

partner had retired; a new partnership was constituted which is Ex.

PW-1/5. This partnership deed is dated 07.4.1993. Page 3 of the

document clearly states that one partner Seva Nath Pathak has

voluntarily retired w.e.f 02.01.1993; partnership is dissolved; new

partnership is constituted between the two partners i.e. the first

and second partner. Ex.PW-1/5 categorically recites that this was a

new deed which had been entered into between the two partners;

terms and conditions were stipulated therein. This document runs

into 18 pages. This document was not registered. It is also not the

case of the appellant before this Court that Ex.PW-1/5 was

registered.

11. The question, however, which has to be answered is as

whether to enforce a suit for possession by the plaintiff against the

defendant who was stated to be a licencee, registration of the firm

under Section 69(2) of the Indian Partnership Act was mandatory

and if so its effect.

12. There is no dispute to the proposition that provisions of

Section 69(2) are mandatory in character and a suit in respect of a

right vested in the plaintiff under a contract which he has entered

into as partner of the unregistered firm would be void. A suit by an

unregistered firm also could not be validated by a subsequent

registration of the firm. Section 69(2) prohibits the enforcement of

a right in respect of an unregistered firm. Section 69(3) carves out

three exceptions which admittedly are not applicable in the instant

case.

13. Relevant would it be to extract the provision Section 69(2) of

the Indian Partnership Act, 1932; it reads as follows;

"(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."

14. It is clear that the provisions of Section 69(2) is not attracted

to any and every contract between the parties. A contract by an

unregistered firm referred to in Section 69(2) must only be entered

into by the firm with the third party-defendant in the course of the

business dealings of the plaintiff firm with such a third party-

defendant. The word used in Section 69(2) "arising out of a

contract" necessarily refers to a contract entered into in the

course of a business transaction by the unregistered plaintiff firm

with the defendant/its customer; the idea is to protect those who

were in commerce who deal with such a partnership firm to know

the names of the partners of the firm before they deal with them in

business.

15. Plaintiff M/s Vesco Products Company has filed the present

suit for possession against Rajinder Nath Pathak. Plaintiff is stated

to be the owner of the said property bearing No.17-B/30, Desh

Bandhu Gupta Road, New Delhi which he had purchased vide sale

deed dated 17.3.1969. Plaintiff firm at that time was comprised of

three partners namely Seva Nath Pathak, Birendra Nath Pathak

and Yogendra Nath Pathak. The defendant is another son of Seva

Nath Pathak. Because of the close relations between the parties,

the plaintiff firm had permitted the defendant to occupy a portion

of the suit property; he was stated to be a licencee having no right

or interest in the suit property; defendant had gone to the extent

assaulting his father namely Seva Nath Pathak through whom this

suit had been instituted; in spite of repeated requests defendant

did not vacate the suit property.

16. Trial judge as noted hereinabove had decreed the suit of the

plaintiff and defendant was directed to handover vacant possession

of the suit property to the plaintiff.

17. In appeal the judgment was set aside. The merits of the case

were not discussed. Reversal was only on the ground that the suit

of the plaintiff was barred under Section 69(2) of the Indian

Partnership Act.

18. This aforenoted statutory provisions makes it mandatory that

every partnership filing a suit against a third party for enforcement

of a right arising out of a contract against a third party would be

barred.

19. The Supreme Court had analyzed this proposition in the case

of M/s Haldiram (supra). While dealing with the ambiguity in

Section 69(2) of the said Act, the Court had held as follows:

"There is considerable ambiguity in S.69(2) (unlike the English Statute of 1916 and 1985) as to what is meant by the words „arising out of a contract‟ inasmuch as the provision does not say whether the contract in S.69(2) is one entered into by the firm with the defendant or with somebody else who is not a defendant, nor to whether it is a contract entered into with the

defendant in business or unconnected with business. Hence, it is permissible to look into the Report of Special Committee which preceded Partnership Act, 1932 even for purpose of construing S.69(2).

The contract by the unregistered firm referred to in S. 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‟s firm with such third party-defendant. Thus, the legislature when it used the words "arising out of a contract" in S.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 partners of the firm are before they deal with them in business.

Further S.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. In fact, the Act has not prescribed that the transactions or contracts entered into by a firm with a third party are bad in law if the firm is an unregistered firm."

20. In AIR1988 SC 3085 M/s Raptakos Brett & Co. Ltd. Vs.

Ganesh Property, the Court had reiterated that Section 69(2) does

not bar the enforcement by way of suit by a unregistered firm, the

institution of a statutory right or a common law right. In the said

case it was held that the right to vacate a tenant upon the expiry of

the lease was not a right arising from a contract but it was a

common law right under the Transfer of Property Act or a statutory

right under the said Act. Suit was held not to be barred even in the

absence of the registration of the partnership firm.

21. The ratio of this judgment is directly in issue in the instant

case. Plaintiff had filed a suit against the defendant alleging that

he was a licencee; inspite of request he had failed to vacate the suit

property; he was an unauthorized occupant. Plaint as framed

clearly depicts that what the plaintiff was seeking to enforce was

his statutory right under Section 60 of the Indian Easement Act,

1952; registration of the partnership firm was not necessary.

The defendant was a mere licencee not having any business

dealing with the plaintiff firm. The object of this provision as is

evident from the report of the Special Committee which had

preceded this enactment i.e. the Indian Partnership Act 1932 was

for protecting business interests of a third party while dealing with

the such a partnership to know the names of the said persons with

whom they are so dealing.

22. In view of aforenoted discussion, the appeal is allowed;

impugned judgment is set aside. Suit of the plaintiff is decreed.

Stay application is also disposed of.

INDERMEET KAUR, J.

DECEMBER 08, 2010 nandan