Kerala High Court
M/S. National Collateral Management ... vs Valiyaparambil Traders on 29 May, 2025
Author: Sathish Ninan
Bench: Sathish Ninan
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IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT
THE HONOURABLE MR. JUSTICE SATHISH NINAN
&
THE HONOURABLE MR.JUSTICE P. KRISHNA KUMAR
THURSDAY, THE 29TH DAY OF MAY 2025 / 8TH JYAISHTA, 1947
RFA NO. 469 OF 2017
AGAINST THE JUDGMENT AND DECREE DATED 30.11.2016 IN OS NO.7
OF 2016 OF ADDITIONAL SUB COURT, NORTH PARAVUR
APPELLANTS/DEFENDANTS:
1 M/S. NATIONAL COLLATERAL MANAGEMENT SERVICE LTD.
GAYATRI TOWERS, 954, APPASAHEB MARATHE MARG,
PRABHADEVI, MUMBAI-400025,
REPRESENTED BY ITS MANAGING DIRECTOR.
2 THE STATE HEAD
NATIONAL COLLATERAL MANAGEMENT SERVICES
LTD.,283(1), THOPPUMKADAVY, BYE LANE NO.1, PERIYAR
GARDENS-GCDA,THOTTAKKATTUKARA,SEMINARIPADY JN.,(NH
47),ALUVA-683108,KERALA.
BY ADVS.
SRI.K.NARAYANAN (PARUR)
SRI.GILBERT GEORGE CORREYA
SRI.T. KRISHNANUNNI, SR.COUNSEL
RESPONDENTS/PLAINTIFFS:
1 VALIYAPARAMBIL TRADERS
NEDUMKANDAM, THOOKKKUPALAM,KALLAR.P.O,
PIN-685552, IDUKKI DISTRICT,
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R.F.A. No.469 of 2017
-: 2 :-
REPRESENTED BY THE MANAGING
PARTNER,SHAJAHAN.V.E.
2 SHAJAHAN.V.E
SON OF IBRAHIM RAWTHER,VALIYAPARAMBIL
HOUSE,THOOKKUPALAM,KALLAR.P.O,
PIN 685552,IDUKKI DISTRICT.
3 MAJIDA SHAJAHAN
WIFE OF SHAJAHAN,VALIYAPARAMBIL
HOUSE,THOOKKUPALAM,KALLAR.P.O,
PIN 685552,IDUKKI DISTRICT.
BY ADVS.
KUM.T.S.ATHIRA
SRI.M.P.JOSEPH TIJO
SRI.MILLU DANDAPANI
SRI.PREMCHAND R.NAIR
SMT.PRIYANKA RAVINDRAN
SRI.ROSHEN.D.ALEXANDER
SRI.ROY THOMAS MUVATTUPUZHA
SMT.TANYA JOY
SRI.S.VISHNU V-736
THIS REGULAR FIRST APPEAL HAVING COME UP FOR HEARING ON
29.05.2025, THE COURT ON THE SAME DAY DELIVERED THE
FOLLOWING:
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C. R.
SATHISH NINAN & P. KRISHNA KUMAR, JJ.
= = = = = = = = = = = = = = = = = =
R.F.A.No.469 of 2017
= = = = = = = = = = = = = = = = = =
Dated this the 29th day of May, 2025
JUDGMENT
Sathish Ninan, J.
The decree in a suit for money is under challenge
by the defendants.
2. The 1st plaintiff is a registered partnership
firm. Plaintiffs 2 and 3 are its partners. The
plaintiffs are engaged in trading of spices. The 1 st
defendant is a company engaged in the business of bulk
purchase of hill produces from traders. The 2nd
defendant is the Kerala State Head of the 1 st defendant
company. There were various business transactions
between the plaintiffs and the defendants. The
transactions were on credit basis. Alleging that the
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accounts were running irregular, the suit was filed for
recovery of money allegedly due to the plaintiffs.
3. The defendants in their written statement,
while admitted the business dealings with the
plaintiffs, denied the claim of the plaintiffs that any
amounts are due. It was contended that the suit is
barred by res judicata in view of the judgment in
O.S.No.314 of 2013. It was also contended that the suit
is barred by limitation.
4. The trial court held that the suit is not
barred by res judicata and is within the period of
limitation. The claim of the plaintiffs was upheld on
the merits and accordingly, the suit was decreed.
5. We have heard Shri.T. Krishnanunnni, the
learned Senior Counsel on behalf of the appellants-
defendants and Smt.Sumathi Dandapani, the learned Senior
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Counsel for the respondents-plaintiffs.
6. The point that arises for determination in
this appeal is;
"Was the trial court right in having held that, while computing
limitation, the plaintiffs are entitled for exclusion of the period
during which the earlier suit O.S.No.314 of 2013, was pending?"
7. The argument of the learned Senior Counsel for
the appellants is confined to the issue of limitation.
The plaintiffs had filed an earlier suit as O.S.No.314
of 2013 against the defendants for the very same relief.
The suit was dismissed as barred under Section 69(2) of
the Indian Partnership Act since the firm was
unregistered. Thereafter the present suit was filed. The
trial court erred in holding that the plaintiffs are
entitled for exclusion of the period during which the
earlier suit was pending. The benefit of Section 14 of
the Limitation Act would be available only if the
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earlier proceeding was prosecuted 'bonafide'. The
conduct of the plaintiffs in the earlier suit reveals
lack of bonafides. Hence, the plaintiffs are not
entitled to exclusion of the limitation under Section 14
of the Limitation Act, is the argument.
8. The learned Senior Counsel for the
respondents-plaintiffs would, on the other hand, submit
that, it is well settled that Section 14 of the
Limitation Act has to be liberally construed to save the
lis. The trial court has rightly done so and the decree
warrants no interference, it is argued.
9. Admittedly, for the very same relief, the
plaintiffs had earlier filed O.S.No.314 of 2013. At that
time the plaintiff firm was unregistered. Section 69 (2)
of the Partnership Act bars the institution of a suit on
a contract with a third party by an unregistered firm.
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In the suit, the defendants raised the plea of bar under
Section 69(2). After the trial, the court found that the
firm is unregistered, and accordingly dismissed the suit
as barred under Section 69(2). After the dismissal of
O.S.No.314 of 2013, the firm was got registered and the
present suit was filed.
10. That, if the period during which the earlier
suit was pending is not excluded, the present suit will
be barred by limitation, is not in dispute. It is not
attempted to contend otherwise. The plaintiffs claim
exclusion of the period during which the earlier suit
was pending, under Section 14(1) of the Limitation Act.
Section 14 (1) reads thus;
"In computing the period of limitation for any suit the time during
which the plaintiff has been prosecuting with due diligence another
civil proceeding, whether in a court of first instance or of appeal or
revision, against the defendant shall be excluded, where the
proceeding relates to the same matter in issue and is prosecuted in
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good faith in a court which, from defect of jurisdiction or other
cause of a like nature, is unable to entertain it."
For the applicability of the Section, the following
ingredients are to be satisfied;
(1) Both proceedings must be civil proceedings in a court.
(2) The earlier proceeding must have been prosecuted with due
diligence.
(3) The earlier proceeding must have been in respect of the same
matter in issue.
(4) The earlier proceeding must have been prosecuted in good
faith in a court which enable to entertain the suit for defect of
jurisdiction or other cause of a like nature.
11. In Haldiram Bhujiawala v. A.K. Deepak [(2000) 3 SCC 250] ,
the Apex Court held that if the suit by an unregistered
partnership firm is dismissed for the bar under Section
69 (2), it falls within the words "other cause of like
nature" in Section 14 of the Limitation Act and can seek
for exclusion of the period during which such suit was
pending.
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12. In Deena (Dead) through Lrs. v. Bharat Singh (Dead) through
Lrs. [(2002) 6 SCC 336], the Apex Court held that the words "or
other cause of a like nature" are to be construed
ejusdem generis with the words "defect of jurisdiction".
The defect must be of such a character as to make it
impossible for the court to entertain the suit.
13. Section 69(2) of the Partnership Act reads
thus;
"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."
Evidently, there is a prohibition against institution of
a suit on a contract by an unregistered firm. By virtue
of the prohibition, a court is disabled from
entertaining it. The prohibition is imperative and is
irrespective of whether the defendant sets up a plea of
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bar under Section 69(2) or not. (See: Capithan Exporting Co.
& ors. v. The New India Assurance Co.Ltd & ors. [2024 (6) KHC 69]). The
Apex Court has in Haldiram Bhujiawala (supra) held that
dismissal of a suit under Section 69(2) is a "cause of
like nature" under Section 14(1) of the Limitation Act.
14. Therefore, the dismissal of the earlier suit
on the ground of bar under Section 69 (2) falls within
the purview of Section 14 of the Limitation Act.
15. Now we proceed to the argument of the learned
Senior counsel that the earlier suit was not being
prosecuted bonafide and with due diligence, and hence
the plaintiffs cannot seek shelter under Section 14(1)
of the Limitation Act.
16. In the written statement in the earlier suit, a
specific plea was raised with regard to the bar of suit
under Section 69(2) of the Partnership Act. A specific
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issue was raised on such plea with regard to the
maintainability of the suit. In spite of the same, the
plaintiffs proceeded with trial of the suit and
ultimately invited a judgment holding the suit to be
barred under Section 69(2). It cannot be held that the
prosecution of the earlier suit even on the face of such
contention by the defendants was bonafide. Therefore,
the plaintiffs are not entitled for the benefit of
Section 14 of the Limitation Act, it is argued. To
substantiate the submission, the learned Senior Counsel
relied on the judgment of the Bombay High Court in
Surajmal Dagduramji, Shop v. M/s.Shrikisan Ramkisan [AIR 1973 Bom. 313].
17. As noticed earlier, having bonafide prosecution
of the earlier suit in a court unable to entertain it
and having prosecuted the suit with due diligence are
essential ingredients to seek exclusion under Section
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14(1). In Madhavrao Narayanrao Patwardhan v. Ramkrishna Govind
Bhanu and Ors. [AIR 1958 SC 767], the Apex Court noticed the
difference in the definition of the term "good faith" as
occurring in the General Clauses Act and in the
Limitation Act. It was held that while under the General
Clauses Act a mere honest action, even if negligent,
would amount to good faith, under the definition given
in Section 2(7) of the Limitation Act any act not done
with due care and attention is not deemed to be done in
good faith. The Apex Court held that, the definition in
the Limitation is to be applied while construing Section
14 of the Limitation Act and not the definition under
the General Clauses Act. The Court held,
"Both the courts below have viewed the controversy under Section
14 of the Limitation Act, as if it was for the defendant to show mala
fides on the part of the plaintiff when he instituted the previous suit
and was carrying on the proceedings in that court. In our opinion,
both the courts below have misdirected themselves on this question.
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Though they do not say so in terms, they appear to have applied the
definition of "good faith" as contained in the General Clauses Act,
to the effect that "A thing shall be deemed to be done in good faith
where it is in fact done honestly, whether it is done negligently or
not." But the Indian Limitation Act contains its own definition of
good faith to the effect that "nothing shall be deemed to be done in
good faith which is not done with due care and attention" - (Section
2(7)). We have, therefore, to see if the institution and prosecution of
the suit in the Munsiff's Court at Miraj, was done with due care and
attention."
The Apex Court further held,
"The question is not whether the plaintiff did it dishonestly or that
his acts or omission in this connection were mala fide. One the other
hand the question is whether, given due care and attention, the
plaintiff could have discovered the omission without having to wait
for about 10 years or more."
18. The very same principle was reiterated by the
Bombay High Court in Surajmal Dagduramji, Shop (supra) cited by
the learned Senior Counsel. Therein the Court held
that, if despite the defendant's plea in the written
statement with regard to the bar under Section 69(2),
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the plaintiff made no efforts to find out the true
position and went for regular trial and got the suit
dismissed, the proceedings could hardly be regarded as
bonafide.
19. In Rabindra Nath Samuel Dawson v. Sivakasi And Others (AIR
1972 SC 730), the Apex Court, while considering whether
the plaintiff therein is entitled to the benefit of
exclusion under Section 14(1), observed that therein the
objections as to maintainability was taken at the very
initial stage, but that was resisted and the suit
prosecuted. In that background it was held that, at
every stage thereafter, the plaintiff could not be said
to have been prosecuting the previous proceeding bona
fide. It was held that the plaintiff took a chance which
boomeranged against him, and thereafter it could not be
said that he was prosecuting the earlier proceedings
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bonafide.
20. In Mac-N-Hom Systems v. P.S. Varrier [2003 (3) KLT 1179],
this Court held,
"The cardinal policy of the provisions of Section 14 is to furnish
protection against the bar of limitation to a person who honestly and
diligently solicits a trial on merits in a forum having no jurisdiction
and which forum cannot afford him such a trial. Petitioner cannot
be said to have prosecuted the suit with due diligence within the
meaning of Section 14 when owing to his own negligence or default,
the suit is so framed that the court cannot try it on the merits."
21. Now coming to the facts of the present case,
Ext.B1 is the judgment in the earlier suit O.S.No.314 of
2013. It reveals that, even in the plaint it was pleaded
that the plaintiff firm is an unregistered one, and that
the defendants in their written statement had
specifically urged the plea that the suit is not
maintainable in view of Section 69(2) of the Indian
Partnership Act. An issue was raised on the
maintainability of the suit. Still the plaintiffs chose
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to proceed to trial and invited the judgment. Law in the
said regard, as notice supra, is categoric that such
prosecution of the suit even after being put on notice
with regard to the non-maintainability was at their
peril and cannot be said to be bonafide prosecution.
Hence, we have no hesitation to hold that the plaintiffs
are not entitled for the benefit of exclusion for the
period of limitation under Section 14 of the Limitation
Act. We are unable to agree with the view adopted by the
trial court to the contrary.
22. Though the learned Senior Counsel appearing
for the respondents would place a host of decisions to
contend that a liberal approach is to be taken in
interpreting the provisions of the Limitation Act,
especially under Section 14, to save a lis and not to
abort it, we are afraid that how much ever be the
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elasticity given, unless the ingredients mentioned in
Section 14 are not satisfied, the parties cannot claim
its benefit.
23. Having held that the plaintiffs are not
entitled for the benefit of exclusion of period of
limitation under Section 14 of the Act, the suit is
bound to fail.
Resultantly, the appeal is allowed. The decree and
judgment of the trial court are set aside and the suit
will stand dismissed.
Sd/-
SATHISH NINAN
JUDGE
Sd/-
P. KRISHNA KUMAR
JUDGE
yd
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The word "not" occurring between the words "Section
14 are" and "satisfied" at the last line of paragraph 22
in page No.15 of the judgment dated 29.05.2025 in
R.F.A.No.469/2017 stands deleted as per the order dated
02.06.2025 in R.F.A.No.469/2017.
Sd/-
Joint Registrar
