North Delhi Power Limited vs Jagdamba Gasket (India)
2010 Latest Caselaw 2480 Del

* IN THE HIGH COURT OF DELHI AT NEW DELHI

+             RSA No.178/2008 & CM No.10951/2008

                                  Date of Decision: May 10, 2010

      NORTH DELHI POWER LIMITED                ..... Appellant
                      Through: Ms.Saahila Lamba, Advocate.
               Versus
      JAGDAMBA GASKET (INDIA)                 ..... Respondent
                      Through: None.

                                  AND

+             RSA No.180/2008 & CM No.10983/2008

      NORTH DELHI POWER LIMITED                ..... Appellant
                      Through: Ms.Saahila Lamba, Advocate.
               Versus
      JAGDAMBA GASKET (INDIA)                 ..... Respondent
                      Through: None.
      %
      CORAM:
      HON'BLE MS. JUSTICE ARUNA SURESH

     (3) Whether reporters of local paper 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

                            JUDGMENT

ARUNA SURESH, J. (Oral)

1. Parties to both the appeals are same. Since similar substantial

question of law has been formulated in both the appeals on 21st April 2010,

therefore, vide this common order both the appeals are being decided.

2. Respondent (plaintiff in the suit) is a partnership firm carrying

on its business of manufacturing gasket at B-101, Rishi Nagar, Shakur

Basti, Delhi. It is electricity consumer of North Delhi Power Limited, the

appellant (hereinafter referred to as „NDPL‟) (defendant in the suit) through

K. No.506-1737717 IP. Appellant has been raising regular bills for

consumption of electricity which were being paid by the respondent.

3. Respondent filed a suit for permanent injunction against the

appellant for restraining it from disconnecting supply of electricity in the

said premises. Trial Court vide its order dated 14th August, 2002 allowed

the application of the appellant filed under Order 7 Rule 11 of the Code of

Civil Procedure (hereinafter referred to as „CPC‟), seeking rejection of the

plaint on the grounds that suit was hit under Section 69(2) of the Indian

Partnership Act (hereinafter referred to as „the Act‟), respondent being an

unregistered partnership firm. It rejected the plaint holding that suit filed by

an unregistered partnership firm i.e. respondent was hit by provisions of

Section 69(2) of the Act.

4. Respondent challenged the order of the Trial Court in regular

civil appeal. Appellate Court, while relying upon 'M/s. Raptakos Brett &

Co. Ltd. Vs. Ganesh Property', AIR 1998 SC 3085 held that even if the suit

had been filed by an unregistered partnership firm against the third party

and was treated as incompetent as per provisions of Section 69(2) of the

Act, but since during pendency of the said suit, the firm in order to put its

house in order, got itself registered, which fact was brought on record by

the firm by placing Form A before the Appellate Court showing registration

of the firm w.e.f. 16 th January 1997, the defect in filing the earlier plaint

was cured and it no longer survived. Appellate Court further observed that

suit in question would be deemed to be instituted from the date of

registration i.e. 16th January, 1997. It allowed the appeal, set aside the Trial

Court‟s order dated 14th August, 2002 and remanded back the case for trial.

5. In these appeals, appellant has challenged the order of the

Appellate Court alleging that the Appellate Court did not properly interpret

Section 69(2) of the Act, while allowing the appeals and subsequent

registration of the firm could not have cured the inherent defect in filing the

suit by an unregistered partnership firm.

6. After receipt of notice of the appeal, respondent put in

appearance through Mr. Hari Narayan Takkar, Advocate on three occasions

but none appeared on its behalf on 21 st April 2010, therefore, in the absence

of respondent, following substantial question of law was formulated:-

"Whether subsequent registration of partnership firm during pendency of the suit cures the inherent defect of suit having been filed by an unregistered firm?"

7. None has appeared on behalf of the respondent. Ms.Saahila

Lamba on behalf of the appellant has argued that the Appellate Court

committed an error in law by holding that subsequent registration of an

unregistered firm cures the inherent defect in filing the suit as the suit was

filed by an unregistered firm, which is barred under Section 69(2) of the

Act.

8. Section 69(2) of the Act, so far as is relevant for the purpose

of just decision of these appeals read as follows;-

"69. Effect of non-registration (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."

9. Thus, it is clear that this Section bars enforcement of a claim

by an unregistered firm against a third party to enforce a right arising from a

contract. Not only this, persons suing should have been shown in the

Register of Firms as partners in the firm.

10. Eventually, under this Section, firms which did not choose to

register under the provisions of the Act have been put in a disability as

regards their right to sue. Section 69(2) of the Act is not retrospective in

nature. Perception of Section 69 of the Act is against institution of the suit

itself and its applicability has to be judged in the first instance at the

earliest stage of the suit. Therefore, a suit by an unregistered firm cannot be

valid by the subsequent registration of the firm as, subsequent registration

cannot cure the defect which existed at the time of institution of the suit.

Registration of a firm is a pre-condition to its right to institute a suit of the

nature mentioned in Section 69 (2) of the Act. Therefore, if a suit is filed

by an unregistered firm, it is liable to be dismissed.

11. Provisions of Section 69 of the Act are mandatory in nature

and there is no power with the High Court to grant the defaulting

partnership firm any relief against the disability imposed by the Section.

Registration of a firm after institution of the suit does not save it from bar of

Section 69(2) of the Act. Intention of the legislature is clear from bare

perusal of the Section that only a registered partnership firm can file a suit

to enforce a contract with a third party. It would be incorrect to say that if

partnership firm is subsequently registered, the suit may be considered to

have been instituted on the date when the firm was registered if it was not

otherwise barred on that date, as there is no provision of law which permits

the court to treat the plaint as filed on a date which is other than the date on

which it was actually filed. So if the partnership firm is not registered on

the date of institution of the suit, subsequent registration cannot validate the

suit and the court cannot allow the suit to proceed.

12. In 'M/s. Shreeram Finance Corporation Vs. Yasin Khan &

Ors.', (1989) 3 SCC 476, in similar circumstances it was held:-

"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 regarding which no notice was given to the Registrar of Firms. Thus, the persons suing, namely, the current partners as on the dale 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. Although the plaint was amended on a later date that cannot save the suit. Reference has been made to some decisions in the judgment of the trial court; however, we do not find it necessary to refer to any of them as the position in law, in our opinion, is clear on a plain reading of sub- section (2) of Section 69 of the said Partnership Act."

13. Similarly, in 'Delhi Development Authority Vs. Kochhar

Construction Work & Anr.', (1998) 8 SCC 559, a suit was instituted by an

unregistered partnership firm, it has been held that from bare reading of

Section 69(2) of the Act, it is clear that institution of the suit by an

unregistered partnership firm against any third party is not valid unless firm

is registered and the persons suing are or have been shown in the Register

of Firms as partners of the firms. [Reliance was placed on M/s. Shreeram

Finance Corporation's case (supra)].

14. Appellate Court while rejecting the application of the

appellant relied upon M/s. Raptakos Brett & Co. Ltd.'s case (supra). In

the said case while expressing its opinion to the fate of a case if partnership

is registered during the pendency of the suit, it observed that if pending the

suit before decree is obtained, the plaintiff put its house in order and got

itself registered, the defect in the earlier filing, which even though might

result in treating the original suit as still born, would no longer survive if

the suit is treated to be deemed to be instituted on the date on which

registration is obtained. However, the Court did not express any final

opinion on this question and also did not feel the necessity of referring the

said question to the Larger Bench for reconsideration. In the said case, the

Court was dealing with two aspects of the matter, firstly, enforcement of a

contract against a third person and secondly, enforcement of a statutory

right or a common law right. The Court did hold that as regards

enforcement of a contract by a third party, the suit was barred under Section

69(2) of the Act. However, so far as it related to enforcement of a statutory

right or a common law right it was maintainable.

15. In the present case, respondent has sought enforcement of a

contract against the appellant department and did not seek enforcement of

any statutory right or common law right. This suit was admittedly filed by

an unregistered partnership firm seeking a relief of injunction against the

appellant department. There is no dispute that the suit was filed to enforce

a right arising from the contract between the parties to the suit. Therefore,

subsequent registration of the firm during pendency of the suit could not

cure the inherent defect in filing the suit, filed by an unregistered firm in

view of provisions of sub-section (2) of Section 69 of the Act. Trial Court

committed an error in law by treating the suit having been filed on the date,

when respondent firm got itself registered after filing of the suit.

16. In 'Haldiram Bhujiawala & Anr. Vs. Anand Kumar Deepak

Kumar & Anr.', (2000) 3 SCC 250, M/s. Raptakos Brett & Co. Ltd.'s case

(supra) was considered by the Supreme Court and it was held:-

"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 M/s. Raptokas Brett Co. Ltd. v. Ganesh Property. In that case, Majmudar J. speaking for the Bench clearly expressed the view that Section 69(2) cannot bar the enforcement by 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 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 tight 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 that 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 present case too that a suit is not barred by Section 69(2) if a statutory right or a common law right is being enforced."

17. It was further observed:-

"26. 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 defendant in the suit does not arise from any contract with defendant entered into in the course of plaintiff firms' business with defendants 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."

18. In view of my observations and discussion as above, I hold

that subsequent registration of a partnership firm during the pendency of the

suit for enforcement of a contract against the appellant by an unregistered

partnership firm was an inherent defect which could not be cured.

19. Appeal is allowed. Judgment and decree of the First

Appellate Court dated 6th February, 2008 is accordingly set aside and that of

the Trial Court dated 14th August, 2002 is upheld. Under these

circumstances, there are no orders as to costs.

CM Nos.10951/2008 (for stay) in RSA 178/2008 & 10983/2008(for stay) in RSA 180/2008

20. With disposal of both the appeals, these applications have

become infructuous. Hence, the same stand dismissed accordingly.

(ARUNA SURESH) JUDGE MAY 10, 2010 sb