M/S Om Prakash Champalal Dal & Oil ... vs M/S Kisan Ginning & Cressing ...
2023 Latest Caselaw 1372 MP

                                                        F.A.No.316/1999
                             1

IN THE HIGH COURT OF MADHYA PRADESH
            AT JABALPUR
                     BEFORE
  HON'BLE SHRI JUSTICE GURPAL SINGH AHLUWALIA
           ON THE 24th OF JANUARY, 2023
                   FIRST APPEAL No. 316 of 1999

BETWEEN:-

M/S OM PRAKASH CHAMPALAL DAL & OIL
MILL RAM KRISNAGANJ, KHANDWA (MADHYA
PRADESH)
                                                      .....APPELLANT
(BY SHRI NILESH KOTECHA - ADVOCATE)

AND

M/S KISAN GINNING & CRESSING FACTORY,
RENUKA MATA ROAD, BURHANPUR, THROUGH
PARTNER SHRI ZAFAR KHAN, SON OF GULAB
KHAN, R/O MOHALLA SONARPATTI, TOWN &
TEHSIL BURHANPUR, DISTRICT KHANDWA
(MADHYA PRADESH)
                                                   .....RESPONDENTS
(NONE FOR THE RESPONDENT)


Reserved on    :      16.1.2023.
Pronounced on :       24.1.2023.

      This appeal having been heard and reserved for judgment,
coming on for pronouncement this day, the court passed the following:

                           JUDGMENT

F.A.No.316/1999

1. This First Appeal under Section 96 of CPC has been filed against the Judgment and Decree dated 24-3-1999 passed by Additional District Judge, Burhanpur in C.S. No. 53-B of 1998.

2. The facts of the present case in short are that the plaintiff/respondent is a partnership firm engaged in sale and purchase of cotton seeds. The plaintiff sold cotton seeds worth Rs. 4,30,110 to the appellant, but the appellant/defendant has paid only Rs. 4,11,660/-. Therefore, the suit for recovery of Rs. 18,450/- with interest was filed.

3. The Appellant filed its written statement and denied that the plaintiff is a registered partnership firm. It was also pleaded that the cotton seed supplied by bill no. 15,16,17,18 and 19 were not of specified quality therefore, a settlement took place, and an amount of Rs. 12,000/- was adjusted in favour of the defendant. Further there was a short supply of cotton seeds which were sent between 2-4- 1992 to 8-4-1992, therefore, the said amount was adjusted.

4. The Trial Court by Judgment and Decree dated 24-3-1999, decreed the suit.

5. Challenging the Judgment and Decree passed by the Trial Court, it was submitted by the Counsel for the Appellants that the suit filed by the plaintiff was not maintainable as it is an unregistered partnership firm. Further the Trial Court should not have disbelieved the evidence of Santosh Kumar Tiwari (D.W.2) who had proved the adjustment of amount of Rs. 17,000/-.

6. None appears for the respondent, though served.

7. Heard the learned Counsel for the Appellant.

F.A.No.316/1999

8. Before considering the facts and circumstances of the case, this Court would like to consider the law governing the maintainability of suit by an unregistered partnership firm.

9. The Supreme Court in the case of Shiv Developers through its partner Sunilbhai Somabhai Ajmeri Vs. Aksharay Developers and others by order dated decided in C.A. No. 785 of 2022 has held as under :

19. Taking up the facts of the present case, one of the significant features herein is that the transaction in question, i.e., sale of its share by the plaintiff firm to the contesting defendants has not been the one arising out of the business of the plaintiff firm. This factual aspect is apparent from the basic plaint averments and is fortified by the concurrent findings of the Trial Court as also of the High Court. Though the High Court endorsed the finding that the transaction in question was not arising out of the business of the plaintiff firm but, it appears that the implication of this crucial finding has not acquired the requisite attention of the High Court. The decision of this Court in the case of Purushottam (supra) was cited before the High Court but, while referring to the same in paragraph 33 of the impugned judgment, the High Court probably looked only at the editor's headnote and in any case, missed out the ratio and principles therein, as reiterated with reference to the previous decisions. The decision in Haldiram Bhujiawala (supra) seems to have not gone into consideration of the High Court although this decision formed the sheet anchor of the order of the Trial Court.

10. The Supreme Court in the case of Haldiram Bhujiawala v. Anand Kumar Deepak Kumar, reported in (2000) 3 SCC 250 has held as under :

F.A.No.316/1999

8. The points that arise for consideration are:

(i) Whether Section 69(2) bars a suit by a firm not registered on the date of suit where permanent injunction and damages are claimed in respect of a trademark as a statutory right or by invoking common law principles applicable to a passing-off action?

(ii) Whether the words "arising from a contract" in Section 69(2) refer only to a situation where an unregistered firm is enforcing a right arising from a contract entered into by the firm with the defendant during the course of its business or whether the bar under Section 69(2) can be extended to any contract referred to in the plaint unconnected with the defendant, as the source of title to the suit property?

Point 1

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 Raptakas 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 that 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 right 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.

F.A.No.316/1999

10. The next question is as to the nature of the right that is being enforced in this suit. It is well settled that a passing- off action is a common law action based on tort (vide Bengal Waterproof Ltd. v. Bombay Waterproof Mfg. Co.). Therefore, in our opinion, a suit for perpetual injunction to restrain the defendants not to pass off the defendants' goods as those of the plaintiffs by using the plaintiffs' trademark and for damages is an action at common law and is not barred by Section 69(2). The decision in Virendra Dresses v. Varinder Garments and the decision of the Division Bench of the Delhi High Court in Bestochem Formulations v. Dinesh Ayurvedic Agencies state that Section 69(2) does not apply to a passing-off action as the suit is based on tort and not on contract. In our opinion, the above decisions were correctly decided. (Special Leave Petition No. 18418 of 1999 against the latter was in fact dismissed by this Court on 28-1-2000.) The learned Senior Counsel for the appellants no doubt relied upon Ruby General Insurance Co. Ltd. v. Pearey Lal Kumar. That was an arbitration case in which the words "arising out of a contract" were widely interpreted but that decision, in our view, has no relevance in interpreting the words "arising from a contract" in Section 69(2) of the Partnership Act.

11. Likewise, if the reliefs of permanent injunction or damages are being claimed on the basis of a registered trademark and its infringement, the suit is to be treated as one based on a statutory right under the Trade Marks Act and is, in our view, not barred by Section 69(2).

12. For the aforesaid reasons, in both these situations, the unregistered partnership in the case before us cannot be said to be enforcing any right "arising from a contract". Point 1 is therefore decided in favour of the respondent- plaintiffs.

* * * *

21. The above Report and provisions of the English Acts, in our view, make it clear that the purpose behind F.A.No.316/1999

Section 69(2) was to impose a disability on the unregistered firm or its partners to enforce rights arising out of contracts entered into by the plaintiff firm with the third-party defendants in the course of the firm's business transactions.

22. In Raptakos Brett and Co. it was clarified that the contractual rights which are sought to be enforced by the plaintiff firm and which are barred under Section 69(2) are "rights arising out of the contract" and that it must be a contract entered into by the firm with the third-party defendants. Majmudar, J. stated as follows: (SCC p. 191, para 9) "A mere look at the aforesaid provision shows that the suit filed by an unregistered firm against a third party for enforcement of any right arising from a contract with such a third party would be barred...."

(emphasis supplied) From the above passage it is firstly clear that a contract must be a contract by the plaintiff firm not with anybody else but with the third-party defendant.

23. The further and additional but equally important aspect which has to be made clear is that the contract by the unregistered firm referred to in Section 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 firm with such third-party defendant.

11. If the facts and circumstances of the present case are seen, then it is clear that the plaintiff has specifically stated that it is a registered partnership firm and the registration details, Ex. P.1 has been filed. However, in the written statement, the appellant had given an evasive reply pleading inter alia that the details of plaintiff firm are denied for want of knowledge. Thus, it is held that the F.A.No.316/1999

Plaintiff/respondent is a registered partnership firm and the suit filed by it is maintainable.

12. The appellant in its written statement admitted that cotton seed was sold by the plaintiff, but claimed that the goods which were sent along with bill no. 16,17,18, and 19 were not upto the specification and accordingly the Santosh Agent compromised the matter and an amount of Rs. 12,000/- was adjusted in favour of the defendant. It was admitted that an 22-5-1992, an amount of Rs. 5,000/- was outstanding against the defendant. It was further pleaded that the aforesaid amount was adjusted against the short supply made by the plaintiff during 2-4-1992 to 8-4-1992. Thus, it is clear that the question of contract between the plaintiff and defendant was not denied by the defendant, but claimed that an amount of Rs. 12,000/- was settled in favour of the defendant and Rs. 5,000/- were adjusted against short supply of goods. Thus, the burden to prove that there was a settlement or there was a short supply of goods by the plaintiff is on the appellant/defendant.

13. In order to prove the settlement, the Appellant examined Santosh Kumar Tiwari (D.W.2) who stated that he was the commission agent and a contract took place between the plaintiff and defendant for supply of 900 quintals of Cotton seeds. It was stated that there was some dispute with regard to quality of goods and it is the duty of the commission agent to resolve the same, therefore, settlement took place between the plaintiff and dependent. The carbon copy of the settlement is Ex. D.3. According to settlement Rs. 12,000/- were settled in favour of defendant/appellant. Again there was dispute F.A.No.316/1999

with regard to short supply and settlement took place for Rs. 5,000/- and the settlement is Ex. D.4.

14. Thus, the only question for consideration is that whether there were some dispute regarding short supply as well as supply of inferior quality of goods and accordingly, Rs. 12,000/- were settled in favour of defendant and later on Rs. 5,000/- were also settled in favour of defendant or not?

15. It is the case of Santosh Kumar Tiwari (D.W.2) that the documents of settlement were prepared in triple copy. One was kept by seller and another was kept by purchaser and the third copy is kept by the commission agent/mediator. Therefore, one copy of settlement should have been in possession of the defendant, but the same was not filed. Further it is clear from settlement, Ex. D.3 and D.4, they do not contain the signatures of the seller and purchaser. Thus, it is clear that although the defendant had entered into the contract and accepted the supply of cotton seed, but tried to avoid payment of full consideration amount on the ground that either the cotton seeds were not in accordance with specifications as agreed upon by the parties, or there was short supply. Further, the defendant did not send any reply to the notice given by the Plaintiff. If there was any settlement between the parties, then the same would have been clarified by the defendant by sending his reply to the notice. Further, in the written statement there is no pleading that a settlement also took place through Santosh Kumar Tiwari (D.W.2) for adjusting Rs. 5,000/-. The plaintiff has filed the bills of goods supplied by it on 2-4-1992, Ex. P.2, 2-4-1992, Ex. P.3, 3-4-1992, Ex.

F.A.No.316/1999

P.4,7-4-1992, Ex. P.57-4-1992, Ex. P.6,P.7 and 8-4-1992 Ex. P.8, however, the defendant did not file any document to show that any information in writing was ever given to the plaintiff regarding short supply of cotton seeds. Under these circumstances the burden to prove the shortage in supply and inferior quality of goods was on the defendant. However, the defendant has miserably failed to discharge his duty. The findings recorded by the Trial Court that the settlement Ex. D.3 and D.4 are forged documents appear to be plausible.

16. Since, the Trial Court has decreed the suit after appreciating the evidence on record in its true perspective, therefore, this Court is of the considered opinion that the findings recorded by the Trial Court do not call for any interference.

17. Ex-consequenti, the judgment and decree dated 24-3-1999 passed by Additional District Judge, Burhanpur in C.S. No. 53-B of 1998 is hereby affirmed.

18. The Appeal fails and is hereby Dismissed.

Decree be drawn accordingly.

(GURPAL SINGH AHLUWALIA) JUDGE HEMANT SARAF 2023.01.27 16:32:16 +05'30' F.A.No.316/1999

HS