[Cites 29, Cited by 0]
Gujarat High Court
Chairman,Gujarat Housing Board vs Western Bharat Construction Co on 23 April, 2026
NEUTRAL CITATION
C/FA/4336/1997 CAV JUDGMENT DATED: 23/04/2026
undefined
Reserved On : 25/03/2026
Pronounced On : 23/04/2026
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/FIRST APPEAL NO. 4336 of 1997
FOR APPROVAL AND SIGNATURE:
HONOURABLE MR. JUSTICE J. C. DOSHI Sd/-
=====================================================
Approved for Reporting Yes No
Yes
=====================================================
CHAIRMAN,GUJARAT HOUSING BOARD & ANR.
Versus
WESTERN BHARAT CONSTRUCTION CO.
=====================================================
Appearance:
MR HS MUNSHAW(495) for the Appellant(s) No. 1,2
SR. ADV. MR. B.B. NAIK & MR. P.Y. GOHIL assisted by
MR. EKANT G. AHUJA(5323) for the Defendant(s) No. 1
=====================================================
CORAM:HONOURABLE MR. JUSTICE J. C. DOSHI
CAV JUDGMENT
1. This first appeal under Section 96 of the Code of Civil
Procedure, 1908 (hereinafter referred to as 'the Code') takes
exception to the judgment and decree passed in Special Civil
Suit No.587 of 1988 by the learned Joint Senior Civil Judge,
Vadodara (learned trial Court) dated 28.02.1997, whereby the
suit filed by the respondent has been partly allowed and the
appellant is directed to pay Rs.4,36,243/- along with 18%
interest from the date of the suit till realization along with a sum
of Rs.39,214.80/-.
NEUTRAL CITATION
C/FA/4336/1997 CAV JUDGMENT DATED: 23/04/2026
undefined
2. The appellant is the original defendant and
respondent is the original plaintiff. For brevity, they will be
referred to as per their status before the trial Court.
3. The brief facts of the case, in a nutshell are as
under:-
3.1 The plaintiff filed a suit for recovery of
Rs.5,27,124.35/- from the defendant along with 18% interest per
annum from the date of the suit till realization and with the
averment that the plaintiff is a registered partnership firm and is
a registered contractor approved in a list maintained by the
Public Works Department (PWD, in short) as well as by the
Gujarat Housing Board (GHB, in short).
3.2 In response to the tender floated by the GHB for
construction of 284 TS under LIGH at Gotri, Vadodara, plaintiff
applied and since his rate found competitive, the tender
submitted by the plaintiff was accepted on 29.12.1981.
3.3 As per the terms and conditions of the tender, the
plaintiff was required to pay a security deposit for due
performance of the contract. Upon receipt of intimation,
according to plaintiff, he paid Rs.45,902/- towards the security
deposit initially and as per the terms and conditions, it was
agreed to pay further Rs.45,902/- by deducting from the
running account bill. Thus, in all plaintiff owes to pay
Rs.91,804/- towards security deposit. The formal agreement was
executed between the parties and consequently, plaintiff was
issued a work order for construction of LIGH at Gotri
NEUTRAL CITATION
C/FA/4336/1997 CAV JUDGMENT DATED: 23/04/2026
undefined
commencing from 21.01.1982 for a period of 18 months. The
work was, therefore, to be completed before 31.07.1983.
3.4 The work, which was to be carried out, was
amounted to Rs.39,93,430.50/-. Plaintiff claimed that the work
contract given to the plaintiff creates bilateral and reciprocal
mutual promises and obligations and some of them were first to
be performed by the defendant and consequent to the
performance by the defendant, plaintiff was required to perform
his part of the reciprocal contract. It is governed by Section 52 of
the Indian Contract Act, 1872 (hereinafter referred to as the
'Contract Act').
3.5 Plaintiff claimed that at the instances of the
defendant, hindrance, hiccups and delay occurred in performing
the part by plaintiff, which is the reciprocal promise, and thus,
plaintiff could not complete the work within stipulated time
period. Various reasons are stated by the plaintiff in para 6 of
the plaint for non-completion of the work within the stipulated
time period.
3.6 The plaintiff, due to the various circumstances, could
not complete the work in the given time period, and therefore, he
sought an extension for completion of the work. The extension
was duly accorded by the Gujarat Housing Board till its
completion i.e. 28.07.1984.
3.7 On the basis of the aforesaid averments, plaintiff
preferred various claims in para 7 of the plaint for recovery of
Rs.5,37,124.38/- along with interest.
NEUTRAL CITATION
C/FA/4336/1997 CAV JUDGMENT DATED: 23/04/2026
undefined
3.8 Claim 1(A) was preferred for recovery of Rs.46,480/-
on the ground that the claim was linked to item No.7 of the
tender contract for 15 "Dia mm 'A' class GI pipeline with
specials". Plaintiff claimed that these charges consists of cost of
ferrale and it is made from gun metal and 7 kinds of valve. Since
it was not a GI material and was not covered under the tender
item, the plaintiff claimed that, therefore, the charges for fixing
the same was also not forming the part of the tender contract.
Also, to fix the valve, the plaintiff had to dig the land. It was a
special job. Similarly, for the cost of 0.5 MT of 15 Dia GI pipes
provided and fixed by Vadodara Municipal Corporation, plaintiff
averred that he has worked up to 0.5 meters away from main
line. Plaintiff was then not permitted by the Deputy Executive
Engineer to lay pipeline up to the main line, and thus, same was
not executed and execution of such work from other agency was
done without the knowledge of the plaintiff.
In a nutshell, it is claimed that the defendant did not
measure the 0.5 MT GI pipeline and the same was not paid to
the plaintiff. Therefore, the defendant has no right to recover the
said amount for the said work as risk and cost. Therefore, the
recovery of Rs.46,480/- found to be excessive and it was the
claim number 1(A).
3.9 Octroi charges were claimed as claim number 1(B).
Plaintiff claimed that the cement required to be issued to the
contractor was fixed at Rs.425/- per metric ton, FOR Baroda.
The GHB carried higher billing for the cement procured, in turn,
plaintiff was required to pay the extra octroi charge to the
Vadodara Municipal Corporation, which is a breach of the terms
NEUTRAL CITATION
C/FA/4336/1997 CAV JUDGMENT DATED: 23/04/2026
undefined
and condition and plaintiff, therefore, was required to be
refunded Rs.20,016.14/- which he paid towards the extra octroi
charge.
3.10 Claim 1(C) was made in regards to sum of
Rs.15,797.92/- on the ground that delivery of the cement, as per
Schedule-A attached with the plaint, was to be delivered on the
terms of FOR Vadodara. However, the cement was supplied to
the plaintiff directly on the site and was unloaded on the site.
Therefore, the defendant did not incur any expense for delivering
the cement to the plaintiff's site and yet, the defendant has
recovered the delivery charges in the tune of Rs.15,797.92/-,
which is in defiance of the terms and conditions of the contract.
3.11 Claim 1(D) was preferred on the ground that
defendant delayed in releasing the final bill and security deposit.
Loss of Rs.50,000/- has been claimed towards delay in releasing
of final bill and security deposit.
3.12 Claim 2 was separated into multiple parts. Claim 2(A)
is made about Rs.1,77,000/- and this claim was made on
account of delay in completion of the work and loss suffered.
Plaintiff claimed that failure to meet with the promise made by
the defendant and reciprocating the contract, plaintiff could not
complete the work within the stipulated time period and as such,
suffered the loss to the tune of Rs.1,77,000/-. Moreover, rise in
material, labour and petroleum etc. was to the tune of 15% and
this is claimed as additional expenditure incurred.
NEUTRAL CITATION
C/FA/4336/1997 CAV JUDGMENT DATED: 23/04/2026
undefined
Claim 2(B) is regarding the overhead expenditure for
a prolonged period is claimed as Rs.1,76,950.50/-.
Claim 2(C) was in respect to claim of interest at the
rate of 12% from the defendant on sum of Rs.82,283 from
23.01.1986 till 05.07.1988 amounting to Rs.24,687.90/- and
further, the plaintiff is entitled for an interest on sum of
Rs.4,86,244.56/-. The Gujarat Housing Board has allegedly
illegally and unwarrantedly withheld the said amount. Thus, a
total sum of Rs.40,879.82/- is claimed on account of interest.
3.13 Plaintiff, making aforesaid averments, claimed
recovery of Rs.5,27,124.38/- from the defendant with interest
and cost.
3.14 The defendant, having been served, filed a written
statement at Exhibit-9 raising multiple contentions with the root
contention that the plaintiff - partnership firm, without joining
the partner, having no legal entity cannot maintain a suit
against the defendant. It is not entitled to recover any amount
towards compensation for damage until the breach of the
contract on the part of defendant is occasioned and proved and
secondly, until proving actual damage, the plaintiff is not
entitled to claim any amount on speculation or estimation. It is
contended that the plaintiff has not deposited security deposit of
Rs.45,910/-, but it was given by a bank guarantee. Therefore,
the actual cheque never came to the defendant. The remaining
part of the security deposit has been deducted to the tune of
Rs.43,902/- from running bills of the plaintiff. It is denied that
work was not completed due to fault of the defendant. It is also
NEUTRAL CITATION
C/FA/4336/1997 CAV JUDGMENT DATED: 23/04/2026
undefined
denied that the plaintiff was first required to perform his part
and then only the defendant is to perform his part subsequently,
and further claimed that no such terms and conditions are
engrossed in the 'Contract Act'.
3.15 The defendant denies delay, hiccups, hindrances and
glitches alleged to have been committed by the defendant, but
rather puts it on the shoulders of the plaintiff that he seeks
extension for completion of the work, and therefore, the plaintiff
cannot now throw burden upon the defendant to say that the
contract was not completed within the stipulated time period
because of delay, hindrances and hiccups or obstacles
committed by the defendant - GHB.
3.16 It is further contended that, though it is
responsibility of the GHB to supply the cement, it is always
subject to availability of cement with State Government and that
being a specific stipulation in the terms and conditions, will not
give a reason to claim the breach of terms and conditions.
3.17 All other allegations leveled in the plaint are
ultimately denied by the GHB. The GHB submitted to dismiss
the suit.
3.18 The learned trial Court fixed the issues and
ultimately granted Rs.82,293/-, towards Claim No.1(A), 1(B),
1(C) & 1(D) and Rs.3,53,950/- towards Claim No.2(A), 2(B), 2(C)
and passed the decree in the aforesaid terms.
3.19 Being aggrieved, the original defendant preferred the
present first appeal.
NEUTRAL CITATION
C/FA/4336/1997 CAV JUDGMENT DATED: 23/04/2026
undefined
4. It is in aforesaid background, learned advocate Mr.
H.S. Munshaw appearing for the appellant - Gujarat Housing
Board filed the written argument notes. In the written
arguments, mainly it is contended that the plaintiff - Western
Bharat Construction Company, though is a registered
partnership firm, it has no legal entity and filing of the suit
without joining the partners or through the partners is hit by
provision of Section 69(1) of the Indian Partnership Act, 1932
(hereinafter referred to as 'the Act'). This being a vitally
important issue touching the jurisdiction of the first appeal is
sufficient alone to allow this first appeal and to quash and set
aside the impugned judgment.
4.1 In support of this argument, he relied upon the
judgment of the Supreme Court in the case of M/s. Malabar
Fisheries Co. Calicut v. Commissioner of Income Tax,
Kerala, reported in (1979) 4 SCC 766.
4.2 It is further contended that trial Court committed
serious and manifest error in not just granting the interest, but
also of 18% interest, without having any contract executed
between the parties and without referring to any such clauses of
the contract is a manifest error. He would submit that at the
most, any interest is to be paid would be 6% to 7% being a
statutory interest.
4.3 He would further submit that to sustain the claim
No.2 i.e. Rs.1,77,000/- on account of delay in completion of the
work, and loss suffered as well as claim No.2(B), i.e. of
NEUTRAL CITATION
C/FA/4336/1997 CAV JUDGMENT DATED: 23/04/2026
undefined
Rs.1,76,950.50/- due to rise of price of the material, labor and
petroleum in the amount of work executed beyond prescribed
time limit is concerned, in absence of iota of evidence or material
evidence, which established the actual damage, the plaintiff
cannot succeed in getting the compensation or damage of both
the item under Section 73 of the 'Contract Act'.
4.4 It is further submitted that, as per the terms and
conditions of the contract, GHB was required to supply the
cement bags FOR Baroda, instead GHB supplied the cement on
the site at Baroda. Thereby, saved the transportation cost to be
borne by the plaintiff, and therefore, charging of the
transportation from Baroda to site and directly at the site and
adding the same on the bill is just the correct approach on the
part of the GHB. It cannot be considered to be an illogical
deduction.
4.5 Payment of first octroi is an issue between the
plaintiff and the Vadodara Municipal Corporation and it cannot
be said that due to some higher amount of cement, the plaintiff
was required to pay extra octroi and therefore, he is required to
receive the amount from the GHB.
4.6 In nutshell, it is argued that, in absence of any actual
proof of damages, the grant of compensation for the alleged
breach of the terms and conditions of the contract is an
erroneous approach on the part of the trial Court.
4.7 Mainly upon aforesaid arguments, learned advocate
Mr. H.S. Munshaw would submit to allow this appeal and to
NEUTRAL CITATION
C/FA/4336/1997 CAV JUDGMENT DATED: 23/04/2026
undefined
quash and set aside the impugned judgment and decree and to
dismiss the suit of the plaintiff.
5. Learned Senior Counsel Mr. B.B. Naik assisted by
learned advocate Mr. P.Y. Gohil for learned advocate Mr. Ekant
G. Ahuja appearing for the respondent - plaintiff, also filed the
written arguments with the main contention that the plaintiff is
undoubtedly a registered partnership firm, registration certificate
of which is produced at Exhibit-17, thereby it is established that
the plaintiff, being a registered partnership firm, is entitled to
sue and be sued in the name of the partnership firm. Therefore,
there is no breach of the provision of law and thereby, no
jurisdictional issue arises in the matter.
5.1 It is further contended that upon floating of the
tender, plaintiff being a successful bidder was issued the work
for LIGH, Gotri at Vadodara at sum of Rs. 39,93,430.50/- is an
undisputed fact. The plaintiff was required to complete the work
within 18 months ensuing from 21.01.1982 completing on
31.07.1983 is also an undisputed fact. Alike the contract
between the parties, bilateral, mutual and reciprocal, creating
promises and obligations between the parties is also
unquestionable.
5.2 The plaintiff has to seek for extension for completing
the said work on various reasons, whereby mainly the defendant
was at fault and accordingly, the extension was also
recommended up to 28.03.1984, again is undisputed.
NEUTRAL CITATION
C/FA/4336/1997 CAV JUDGMENT DATED: 23/04/2026
undefined
5.3 Treating aforesaid facts as undisputed aspects,
learned Senior Counsel for plaintiff mainly argued that
considering the rival evidence led by the learned advocates for
both the sides, it is evidently proved that the plaintiff has
succeeded in proving the claim Nos.1 and 2.
5.4 The various documentary evidence produced on
record sufficiently say that plaintiff suffered loss on account of
the delayed completion of the work, whereby delay is attributable
to the defendant.
5.5 He would further submit that since the defendant
was in a master position and plaintiff has to carry out his work,
defendant has wrongly deducted amount of GI pipe work,
payment of octroi charges, transportation, etc. and plaintiff
genuinely suffered loss of escalation of the price and interest as
the work got delayed.
5.6 Supporting the impugned judgment, it is argued that
the learned trial Court has comprehensively discussed the
reasons to decide the suit. Therefore, in the first appeal, the
Court should refrain from interfering with the well reasoned
judgment and decree passed by the learned trial Court.
6. Apt to note that, first appeal is a valuable right and
the parties have the right to be heard both on question of law
and on facts and the judgment in the first appeal, therefore,
must address itself to all the issues of law and fact and has to be
decided by giving reasons in support of the finding. The appellate
Court, while exercising the appellate jurisdiction, is required to
NEUTRAL CITATION
C/FA/4336/1997 CAV JUDGMENT DATED: 23/04/2026
undefined
discuss in detail the various aspects. Though while confirming
an issue, there may not be necessity for repeating the reasons
and the appeal, in such circumstances, be disposed of by briefly
describing the pointed issue, reasoning adopted by the Court
below in a view of affirmation by the appellate Court, but where
the reasoning on fact and the reason of the law, both intended to
be upset, it is desirable that reasons should be ascribed in
support of the view and the conclusion.
7. First appellate Court is last Court of facts and thus, it
is a duty of the first appellate Court to scrutinize the order
impugned and then decide the rival contention in background of
analysis of evidence again. Even an appeal could be entertained
by the first appellate Court only on the question of law as the
first appeal is a creature of statute.
8. In the backdrop of the aforesaid legal provision, let
first notice issues framed by the learned Court below vide
Exhibit-10:-
"(1) Whether the plaintiff proves that, it is a registered
partnership firm?
(2) Whether the plaintiff proves that, they have entered
into the agreement with the defendants?
(3) Whether the plaintiff proves that on account of delay,
hindrance and breaches committed by the defendant, the
which was delayed and the work was ultimately completed
on 28-7-84 ?
(4) Whether the plaintiff proves that the claim as narrated
in para-7, claim No.1(a), (b), (c), (d) are are tenable and
payable ? If yes, to what extent?
NEUTRAL CITATION
C/FA/4336/1997 CAV JUDGMENT DATED: 23/04/2026
undefined
(5) Whether the plaintiff proves that claims are narrated
in para-7,claim no.2(a), (b) and (c) are tenable and payable?
If yes, at what extent?
(5/1) Whether this suit can be proceed without notice under
section -71 of Gujarat Housing Board Act?
(6) What order?"
9. Plaintiff - Maganbhai Zhaverbhai Patel entered into
the witness-box at Exhibit-13. He placed on record the
documentary evidence from Exhibits-17, 18, 19, 20, 21, 22, 23,
24, 25, 26, 27, 29 & 30 and Mr. Inami Gulamhusain Surati for
the GHB entered into the witness-box at Exhibit-61.
10 After permitting both the parties to lead the evidence,
Issue Nos.1 to 3, 5.1 are answered in affirmative. Issue No.4 and
5 are also answered in affirmative to the tune of Rs.82,283 and
Rs.3,53,950/-. The suit was decreed in view of answer to issue
No.6.
11. From the rival contention of the parties, the issues,
which arise for determination of this appeal, are that:-
i) Whether the plaintiff being a registered partnership firm
equate with the term 'legal entity' and can file suit without
joining the partners?
ii) Whether the plaintiff, not having objected to deduction of
the amount towards octroi charges or towards laying down of GI
pipes or towards transportation charge during the work, can
NEUTRAL CITATION
C/FA/4336/1997 CAV JUDGMENT DATED: 23/04/2026
undefined
question the same after completion of the work and can claim a
damage claiming it to be a breach of terms and agreement of the
contract?
iii) Whether in absence of any actual evidence in regards to
liquidated damage, whether the plaintiff can claim damage, as
claimed in claim 2(A), including interest ?
iv) What order ?
12. The first issue touches the root of the case.
Admittedly, the suit has been filed by the Western Bharat
Construction Company claiming itself as a registered
partnership firm and was signed by some person as a per-pro
partner.
13. Learned advocate Mr. H.S. Munshaw appearing for
the appellant - Gujarat Housing Board raised the issue on
maintainability of the suit arguing that plaintiff, though is a
registered partnership firm has no legal entity, it cannot file the
suit without joining the partner/s thereof.
14. It is admitted position that the plaintiff is a registered
partnership firm. The registration certificate is produced at
Exhibit-17. Again, it is an admitted position that on the
plaintiff's side, except Western Bharat Construction Company
partnership firm, no other person claiming to be a partner of the
Western Bharat Construction Company has sued the defendant.
It is again an undisputed fact that plaintiff is seeking the
NEUTRAL CITATION
C/FA/4336/1997 CAV JUDGMENT DATED: 23/04/2026
undefined
recovery of damage arising out of breach of the contract with
defendant.
15. At the outset, I may refer to Section 2A, which defines
the 'Act of a firm' of 'the Act' as under:-
"2. Definitions.--In this Act, unless there is anything
repugnant in the subject or context,--
(a) an"act of a firm" means any act or omission by all the
partners, or by any partner or agent of the firm which gives
rise to a right enforceable by or against the firm;"
16. Section 4 is also important to read, which reads as
under:-
"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"."
17. A conjoint and harmonious reading of Section 2A
with Section 4 of 'the Act' implies that, 'act of firm' means any
act or omission by all the partners or by any of the partners or
agent which gives a rise to a right enforceable by or against the
firm. Partnership is thus, a relation between the persons, who
have agreed to share the profit or loss of a business carried on
by all or any of them acting for all. The persons, who enter into
NEUTRAL CITATION
C/FA/4336/1997 CAV JUDGMENT DATED: 23/04/2026
undefined
the partnership firm, individually are called 'partners' and
collectively are called 'firm', and under the name they carry the
business is called the 'firm name'.
Thus, it is clear that a partnership firm by itself is
not a legal entity like a company. It's a group of individual
partners. [See: Comptroller & Auditor General v. Kamlesh
Vadilal Mehta, reported in (2003) 2 SCC 349].
What could be culled out, therefore, that the firm
name is only a compendious name given to a partnership and
the partners are the real owners of asset and partnership firm is
not a legal entity [See: N. Khadervali Saheb (Dead) By Lrs.
And ... v. N. Gudu Sahib(Dead) And Ors, reported in (2003) 3
SCC 229].
18. In view of Section 5 of 'the Act', the partnership is not
created by status.
"5. Partnership not created by status.--The relation of
partnership arises from contract and not from status;
and, in particular, the members of a Hindu undivided
family carrying on a family business as such, or a Burmese
Buddhist husband and wife carrying on business as such
are not partners in such business."
19. Worthy reference can be made in the case of
Bhagwanji Morarji Goculdas v. Alembic Chemcial Works Co.
Ltd., reported in AIR 1948 Privy Council 100, whereby the
Privy Council in para 10 of the judgment has observed as
under:-
NEUTRAL CITATION
C/FA/4336/1997 CAV JUDGMENT DATED: 23/04/2026
undefined
"Before the Board it was argued that under the Indian
Partnership Act, 1932, a firm is recognised as an entity
apart from the persons constituting it, and that the entity
continues so long as the firm exists and continues to carry
on its business. It is true that the Indian Partnership Act
goes further than the English Partnership Act, 1890, in
recognising that a firm may possess a personality distinct
from the persons constituting it; the law in India in that
respect being more in accordance with the law of Scotland,
than with that of England. But the fact that a firm possesses
a distinct personality does not involve that the personality
continues unchanged so long as the business of the firm
continues. The Indian Act, like the English Act, avoids
making a firm a corporate body enjoying the right of
perpetual succession. (Emphasis supplied)."
20. In Addanki Narayanappa & Anr. v. Bhaskara
Krishnappa and Ors., reported in AIR 1966 SC 1300, the
Supreme Court after quoting the aforementioned passage
occurring in the Lindley on Partnership, 12th Edition, made the
following observations in the context of partners' right during the
subsistence as well as upon the dissolution of a firm:
"No doubt since a firm has no legal existence, the
partnership property will vest in all the partners and in that
sense every partner has an interest in the property of the
partnership. During the subsistence of the partnership, how
ever, no partner can deal with any portion of the property as
his own nor can he assign his interest in a specific item of
property of any one. His right is to obtain such profits, if R
any, as fall to his share from time to time and upon the
dissolution of the firm to a share in the assets of the firm
which remain after satisfying the liabilities set out in clause
(a) and sub- clauses(i), (ii) and (iii) of clause(b) of Section
48."
NEUTRAL CITATION
C/FA/4336/1997 CAV JUDGMENT DATED: 23/04/2026
undefined
21. In M/s. Malabar Fisheries (Supra), after surveying
previous authoritative pronouncements, the Supreme Court in
para 18 observed as under:-
"Having regard to the above discussion, it seems to us clear
that a partnership firm under the Indian Partnership Act,
1932 is not a distinct legal entity apart from the partners
constituting it and equally in law the firm as such has no
separate rights of its own in the partnership assets and
when one talks of the firm's property. Or firm's assets all
that is meant is property or assets in which all partners
have a joint or common interest. If that be the position, it is
difficult to accept the contention that upon dissolution the
firm's rights in the partnership assets are extinguished. The
firm as such has no separate rights of its own in the
partnership assets but it is the partners who own jointly in
common the assets of the partnership and, therefore, the
consequences of the distribution, division or allotment of
assets to the partners which flows upon dissolution after
discharge of liabilities is nothing but a mutual adjustment of
rights between the partners and there is no question of any
extinguishment of the firm's rights in the partnership assets
amounting to a transfer of assets within the meaning of s.
(47) of the Act. In our view, therefore, there is no transfer of
assets involved even in the sense of any extinguishment the
firm's rights in the partnership assets when distribution
takes place upon dissolution."
22. It makes it evidently clear that partnership firm or
the firm name is a compendious title of a group of individual or it
may be a consortium working under a particular name, whereby
group of people or group of individuals are in relation and have
agreed to share the profit or loss to carry any business. It does
not by legal means a legal entity.
NEUTRAL CITATION
C/FA/4336/1997 CAV JUDGMENT DATED: 23/04/2026
undefined
23. At this juncture, worthy reference can be made to the
recent judgment of this Court in the case of Gujarat Water
Supply & Sewage Board v. Evergreen Trading &
Construction Company. This Court addressed the very same
issue. Relevant observation and finding are as under:-
"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
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'.
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
person 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
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
NEUTRAL CITATION
C/FA/4336/1997 CAV JUDGMENT DATED: 23/04/2026
undefined
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/4336/1997 CAV JUDGMENT DATED: 23/04/2026
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
NEUTRAL CITATION
C/FA/4336/1997 CAV JUDGMENT DATED: 23/04/2026
undefined
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 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.
NEUTRAL CITATION
C/FA/4336/1997 CAV JUDGMENT DATED: 23/04/2026
undefined
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
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.
NEUTRAL CITATION
C/FA/4336/1997 CAV JUDGMENT DATED: 23/04/2026
undefined
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:
"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
NEUTRAL CITATION
C/FA/4336/1997 CAV JUDGMENT DATED: 23/04/2026
undefined
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 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
NEUTRAL CITATION
C/FA/4336/1997 CAV JUDGMENT DATED: 23/04/2026
undefined
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
NEUTRAL CITATION
C/FA/4336/1997 CAV JUDGMENT DATED: 23/04/2026
undefined
"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 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
NEUTRAL CITATION
C/FA/4336/1997 CAV JUDGMENT DATED: 23/04/2026
undefined
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 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."
NEUTRAL CITATION
C/FA/4336/1997 CAV JUDGMENT DATED: 23/04/2026
undefined
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 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."
24. In the present case, learned Senior Counsel, though
argued that the plaintiff firm is a partnership firm, could not
capitalize that why the partners have not brought the suit and in
NEUTRAL CITATION
C/FA/4336/1997 CAV JUDGMENT DATED: 23/04/2026
undefined
what circumstances, 'partnership firm', which lacks legal
personality to act independently alike company has alone sued
the defendant for the recovery of the damage on allegation of
contractual breach. 'Partnership firm' name is convenient way to
conduct business. It does not provide independent corporate
existence to act like company. Thus, the suit deserves to be
dismissed only on the jurisdictional count that the plaintiff's suit
has not been instituted on account of following the correct
statutory provisions. Thus, there is fundamental jurisdictional
flaw. The suit was incompetent from inception. That
jurisdictional issue touches the root of the core and can be
decided in first appeal. In view of the finding, the appeal deserves
to be allowed only on this ground, without delving into the
further merits of the case.
25. Since there is a jurisdictional error in the institution
of the suit, this Court is not required to touch other merits or
demerits of the claim advanced by the plaintiff and the reasons
assigned by the learned trial Court in granting the decree in
favor of the plaintiff as the suit instituted before the Court was
bad on the count of jurisdictional error itself, and was not
maintainable.
26. Therefore, this Court, without touching other issue,
which are even otherwise not required to be discussed, I thought
it fit to allow this appeal.
27. Consequently, this appeal is allowed and the
impugned judgment and decree passed in Special Civil Suit
No.587 of 1988 is quashed and set aside.
NEUTRAL CITATION
C/FA/4336/1997 CAV JUDGMENT DATED: 23/04/2026
undefined
28. Decree to be drawn accordingly. Record &
Proceedings to be sent back to the concerned Court forthwith.
Sd/-
(J.C. DOSHI, J.)
Raj
