Neelakantan Omana and ors. Vs. Neelakantan Raveendran and ors. - Court Judgment

SooperKanoon Citationsooperkanoon.com/718582
SubjectCommercial
CourtKerala High Court
Decided OnOct-29-1992
Case NumberA.S. No. 158 of 1988
Judge G. Rajasekharan, J.
Reported inAIR1993Ker196
ActsPartnership Act, 1932 - Sections 69
AppellantNeelakantan Omana and ors.
RespondentNeelakantan Raveendran and ors.
Appellant Advocate S.V. Balakrishna Iyer and; A.M. Pratap Singh, Advs.
Respondent Advocate B. Krishnamani, Adv.
DispositionAppeal dismissed
Cases ReferredRampa Devi v. Bishambhar Nath Puri
Excerpt:
- - 8. various high courts as well as the supreme court of india have uniformly held that it is a condition precedent that the firm should be a registered one for instituting a suit to enforce a right arising from a contract or conferred by the partnership act by or on behalf of any person suing as a partner in the firm against the firm or any person alleged to be or to have been a partner in the firm.g. rajasekharan, j.1. plaintiffs in a suit for declaration of shares in the firm, rendition of acconts, evolving a scheme and consequentialreliefs are the appellants.2. one neelakantan and krishnan -- two brothers -- acquired the plaint schedule land and started a tile factory there in 1950. they invested in equal shares and they were sharing the profits equally. on 9-3-1957 neelkantan died. karthiyayani, plaintiffs i, 3 and 4 and the defendants are the widow and children of neelakantan. on 12-8-1957, the widow and children of neelakantan and krishnan together entered into a partnership agreement a (ext. a 1) stipulating the terms and conditions under which the business is to be run. the business was being carried on under the provisions of ext. a 1 and share of profits taken by the parties. krishnan was to be the manager during his lifetime as per the terms of ext. a 1. krishnan died leaving behind his widow ammakunju and son sugathan. they, on 28-12-1981 assigned (ext. a2) their share in the partnership business in favour of defendants 2 and 3. subsequent to that, on 26-4-1983, plaintiffs 1, 3 and 4 took assignment (ext. a3) of the shares of karthiyayani and mohanan -- the widow and one of the sons of deceased neelakantan. on the plea that the business is being mismanged and assets misappropriated by the second defendant, the suit has been instituted for a declaration of the plaintiffs shares and other reliefs as mentioned earlier. the plaintiffs have another claim that ext. a2 taken by defendants 2 and 3 enures to the benefit of the firm and so, the plaintiffs 1, 3 and 4 are claiming 3/7 share in the partnership business. they want to get the accounts rendered and a scheme evolved for the proper running of the firm in future.3. defendants 2 and 3 contest the case and according to their contentions, the suit is not maintainable by virtue of section 69 of indian partnership act, that ext. a2 enures to the benefit of defendants 2 and 3 alone, that thereis no mismanagement and that the plaintiffs are not entitled to any reliefs prayed for.4. necessary issues arising out of the pleadings were raised by the trial court. the trial court held that the suit is hit by section 69(1) of the indian partnership act and accordingly the plaintiffs were non-suited. the court further held that exts. a2 and a3 are valid transfers of shares and by those transfers the assignees have obtained the rights of the assignors. then the court proceeded to render a finding regarding the shares to which the parties are entitled.5. the judgment and decree are challenged by the plaintiffs and according to them, the suit should have been decreed and their shares declared as 3/7.6. the learned counsel for the appellants relied on air 1976 all 19, rampa devi v. bishambhar nath puri in support of his proposition that at least the second prayer in the suit namely rendition of accounts should have been granted, because as regards that the suit is maintainable. a reading of the head notes of the decision may lead to think that the decision was to the effect that a suit for rendition of accounts by one or some of the partners of an unregistered firm against the firm or other partners is maintainable.7. that was a case where the accounts were sought to be rendered and in the alternative prayed for the dissolution of the firm. it was such a suit, that the court held maintainable. there was an unregistered partnership firm and some of the partners made an application under section 20 of the arbitration act for appointment of an arbitrator in terms of the arbitration agreement contained in the deed of partnership. that application was rejected for the reason that the firm was not registered and section 69 bars the relief. it was subsequent to that the said suit was filed for accounts and in the alternative for dissolution of the firm and accounts: the facts of that case have no bearing with the facts of the suit at hand and that decision has no application.8. various high courts as well as the supreme court of india have uniformly held that it is a condition precedent that the firm should be a registered one for instituting a suit to enforce a right arising from a contract or conferred by the partnership act by or on behalf of any person suing as a partner in the firm against the firm or any person alleged to be or to have been a partner in the firm.9. sub-section (3) of section 69 of the act saves some categories of suits by partners of an unregistered firm. clause (a) of sub-section (3) of section 69 says that provisions of sub-sections (1) and (2) (which bar the suits by an unregistered firm or partners of an unregistered firm) shall not affect the enforcement of any right to sue for the dissolution of a firm or for accounts of a dissolved firm, or any right or power to realise the property of a dissolved firm.10. s.t. desai on the law of partnership in india, sixth edition says about section 69 of the indian partnership act:--'the section enacts provisions which are express and mandatory and it is the paramount duty of the judicial interpreter to give full effect to the language used by the lawmaker. the mischief primarily intended to be prevented by the mandatory provisions of this section was the hardship and difficulty to which third parties dealing with a firm were subjected in the matter of proving as to who were the persons carrying on the business of that firm as partnership. as to the provisions affecting partners themselves it seems clear that the main object and intention of the legislature was to prevent a partner from enforcing his claims against his fellow partners if the firm was not registered and to compel in such a case dissolution of the firm by laying down that the court will entertain suits between partners relating to partnership business only where dissolution and account and winding up of the affairs of the firm is sought or where account and winding up of the affairs of an already dissolved firm is sought.' so, the legal position is that a suit by a partner/partners of an unregistered firm against the firm or fellow partners foraccounts without a prayer for dissolution of the firm is not maintainable. the trial court has rightly held that the suit is not maintainable. no interference is called for.11. even though the trial court has held that the suit is not maintainable incidentally it has quantified the shares of the partners. the learned counsel appearing for the appellants would submit that this in future, is a properly instituted suit, may stand in the way of the plaintiffs in claiming their legitimate share of 3/7 in the partnership assets. according to the learned counsel ext. a2 is incompetent for the reason that as per the provisions of ext. a1, a partner who does not want to continue in the partnership has to give notice to all the partners intimating the intention to retire and has to wait for six months for getting the share due to him after assessing the assets and liabilities of the firm. only if within six months, that particular partner is not paid he becomes entitled to transfer his rights in the partnership. according to the counsel, before ex. a2 no notice was given to all the other parties and so, ext. a2 was an incompetent transaction. learned counsel for the respondents would submit that ext. a3 in favour of the plaintiffs also stands on the same footing as ext. a2. whatever that be, those are matters to be agitated and decided in a properly instituted suit. in this suit, which is hit by section 69 of the act it was not necessary to ascertain or declare the shares of the respective parties. so the question as to the due shares of the partners of the firm is left open to be decided in a properly instituted suit.with the above observations, the judgment and decree are confirmed and the appeal is dismissed. in the circumstances of the case, there wil be no order as to costs.
Judgment:

G. Rajasekharan, J.

1. Plaintiffs in a suit for declaration of shares in the firm, rendition of acconts, evolving a scheme and consequentialreliefs are the appellants.

2. One Neelakantan and Krishnan -- two brothers -- acquired the plaint schedule land and started a tile factory there in 1950. They invested in equal shares and they were sharing the profits equally. On 9-3-1957 Neelkantan died. Karthiyayani, plaintiffs I, 3 and 4 and the defendants are the widow and children of Neelakantan. On 12-8-1957, the widow and children of Neelakantan and Krishnan together entered into a partnership agreement a (Ext. A 1) stipulating the terms and conditions under which the business is to be run. The business was being carried on under the provisions of Ext. A 1 and share of profits taken by the parties. Krishnan was to be the manager during his lifetime as per the terms of Ext. A 1. Krishnan died leaving behind his widow Ammakunju and son Sugathan. They, on 28-12-1981 assigned (Ext. A2) their share in the partnership business in favour of defendants 2 and 3. Subsequent to that, on 26-4-1983, plaintiffs 1, 3 and 4 took assignment (Ext. A3) of the shares of Karthiyayani and Mohanan -- the widow and one of the sons of deceased Neelakantan. On the plea that the business is being mismanged and assets misappropriated by the second defendant, the suit has been instituted for a declaration of the plaintiffs shares and other reliefs as mentioned earlier. The plaintiffs have another claim that Ext. A2 taken by defendants 2 and 3 enures to the benefit of the firm and so, the plaintiffs 1, 3 and 4 are claiming 3/7 share in the partnership business. They want to get the accounts rendered and a scheme evolved for the proper running of the firm in future.

3. Defendants 2 and 3 contest the case and according to their contentions, the suit is not maintainable by virtue of Section 69 of Indian Partnership Act, that Ext. A2 enures to the benefit of defendants 2 and 3 alone, that thereis no mismanagement and that the plaintiffs are not entitled to any reliefs prayed for.

4. Necessary issues arising out of the pleadings were raised by the trial Court. The trial Court held that the suit is hit by Section 69(1) of the Indian Partnership Act and accordingly the plaintiffs were non-suited. The Court further held that Exts. A2 and A3 are valid transfers of shares and by those transfers the assignees have obtained the rights of the assignors. Then the Court proceeded to render a finding regarding the shares to which the parties are entitled.

5. The judgment and decree are challenged by the plaintiffs and according to them, the suit should have been decreed and their shares declared as 3/7.

6. The learned counsel for the appellants relied on AIR 1976 All 19, Rampa Devi v. Bishambhar Nath Puri in support of his proposition that at least the second prayer in the suit namely rendition of accounts should have been granted, because as regards that the suit is maintainable. A reading of the head notes of the decision may lead to think that the decision was to the effect that a suit for rendition of accounts by one or some of the partners of an unregistered firm against the firm or other partners is maintainable.

7. That was a case where the accounts were sought to be rendered and in the alternative prayed for the dissolution of the firm. It was such a suit, that the Court held maintainable. There was an unregistered partnership firm and some of the partners made an application under Section 20 of the Arbitration Act for appointment of an arbitrator in terms of the arbitration agreement contained in the deed of partnership. That application was rejected for the reason that the firm was not registered and Section 69 bars the relief. It was subsequent to that the said suit was filed for accounts and in the alternative for dissolution of the firm and accounts: The facts of that case have no bearing with the facts of the suit at hand and that decision has no application.

8. Various High Courts as well as the Supreme Court of India have uniformly held that it is a condition precedent that the firm should be a registered one for instituting a suit to enforce a right arising from a contract or conferred by the Partnership Act by or on behalf of any person suing as a partner in the firm against the firm or any person alleged to be or to have been a partner in the firm.

9. Sub-section (3) of Section 69 of the Act saves some categories of suits by partners of an unregistered firm. Clause (a) of Sub-section (3) of Section 69 says that provisions of Sub-sections (1) and (2) (which bar the suits by an unregistered firm or partners of an unregistered firm) shall not affect the enforcement of any right to sue for the dissolution of a firm or for accounts of a dissolved firm, or any right or power to realise the property of a dissolved firm.

10. S.T. Desai on The Law of Partnership in India, Sixth Edition says about Section 69 of the Indian Partnership Act:--

'The section enacts provisions which are express and mandatory and it is the paramount duty of the judicial interpreter to give full effect to the language used by the lawmaker.

The mischief primarily intended to be prevented by the mandatory provisions of this section was the hardship and difficulty to which third parties dealing with a firm were subjected in the matter of proving as to who were the persons carrying on the business of that firm as partnership. As to the provisions affecting partners themselves it seems clear that the main object and intention of the Legislature was to prevent a partner from enforcing his claims against his fellow partners if the firm was not registered and to compel in such a case dissolution of the firm by laying down that the Court will entertain suits between partners relating to partnership business only where dissolution and account and winding up of the affairs of the firm is sought or where account and winding up of the affairs of an already dissolved firm is sought.'

So, the legal position is that a suit by a partner/partners of an unregistered firm against the firm or fellow partners foraccounts without a prayer for dissolution of the firm is not maintainable. The trial Court has rightly held that the suit is not maintainable. No interference is called for.

11. Even though the trial Court has held that the suit is not maintainable incidentally it has quantified the shares of the partners. The learned counsel appearing for the appellants would submit that this in future, is a properly instituted suit, may stand in the way of the plaintiffs in claiming their legitimate share of 3/7 in the partnership assets. According to the learned counsel Ext. A2 is incompetent for the reason that as per the provisions of Ext. A1, a partner who does not want to continue in the partnership has to give notice to all the partners intimating the intention to retire and has to wait for six months for getting the share due to him after assessing the assets and liabilities of the firm. Only if within six months, that particular partner is not paid he becomes entitled to transfer his rights in the partnership. According to the counsel, before Ex. A2 no notice was given to all the other parties and so, Ext. A2 was an incompetent transaction. Learned counsel for the respondents would submit that Ext. A3 in favour of the plaintiffs also stands on the same footing as Ext. A2. Whatever that be, those are matters to be agitated and decided in a properly instituted suit. In this suit, which is hit by Section 69 of the Act it was not necessary to ascertain or declare the shares of the respective parties. So the question as to the due shares of the partners of the firm is left open to be decided in a properly instituted suit.

With the above observations, the judgment and decree are confirmed and the appeal is dismissed. In the circumstances of the case, there wil be no order as to costs.