1. This revision petition is directed against the judgment of the Subordinate Judge, Narsapur, given on 18-7-1964 whereby he allowed the appeal and dismissed the plaintiffs' suit. The necessary facts are that the plaintiffs petitioners before, me filed the suit for recovery of a sum of Rs. 628-81 nP. from the first defendant being the balance of principal and interest due on a promissory note, Ex. A-1, dated 14-10-1959, executed by the first defendant in favour of the plaintiffs for Rs. 900 and another sum of Rs. 314 due as balance of the amount due on Chit No. 7 as per the account maintained in regular course of business by the plaintiffs. The second defendant was the partner of the firm. He was impleaded although it was alleged by the plaintiffs that the second defendant had given up his rights in the firm by virtue of a letter in favour of the second plaintiff. The first plaintiff is the firm, the second plaintiff being the sole surviving partner of the firm said to have been dissolved.
2. The first defendant raised number of pleas. I am not, however, concerned with most of them. The only contention with which I am concerned is that the defendant raised an objection that the previous decision in O.S No. 124 of 1961 operates as res judicata. He, therefore, demanded that the plaintiffs' suit should be dismissed on that account.
3. The trial Court rejecting all the contentions of the defendant except that he was an agriculturist and that he is entitled to get the benefits of Madras Act 4 of 1938, consequently reduced the interest and decreed the plaintiffs' suit for a sum of Rs. 563-25 nP., as against the first defendant and dismissed it in regard to the balance.
4. Aggrieved by that judgment the first defendant preferred an appeal to the Subordinate Judge, who, by his judgment, as stated earlier, allowed the appeal solely on the ground that the previous decision in O.S No. 124 of 1961 operates as res judicata and dismissed the plaintiffs' suit. He did not go into the other contentions raised by the defendant and discussed by the trial Court in its judgment. It is this view of the learned Subordinate Judge that is now challenged by the plaintiffs in this revision petition.
5. The only contention raised by Mi. T. Veerabhadrayya the learned counsel for the petitioners, is that since the firm had been dissolved, for the recovery of property which includes the debt, a sole surviving partner of the dissolved firm can institute a suit although the firm was not registered or thar the registration of a dissolved firm was found to be bad in law. His contention was that the previous decision in O.S No. 124 of 1961 does not bar the present suit.
6. In order to appreciate the implications of this contention it is necessary to mention a few more facts. The second plaintiff, styling himself as the proprietor of Sri Baba Commercial Syndicate. Bhimavaram, instituted O.S No. 124 of 1961 in the Court of the Principal District Munsiff, Bhimavaram, for the recovery of the suit debt. The first defendant who was defendant there, raised all the pleas which he had raised in this suit. Although the Distinct Munsif had negatived all the contentions of the defendant, yet dismissed the suit on the ground that the suit was filed by a wrong plaintiff and that the firm which conducted its business in chit fund was not registered under the Indian Partnership Act. The firm Sri Baba Commercial Syndicate, Bhimavaram, consisted of two partners, the second plaintiff and the second defendant. It was an unregistered firm. When O.S No. 124 of 1961 was instituted, the said unregistered firm was in existence. The suit was dismissed as stated above on 30-9-1961. Subsequent to the dismissal of the said suit on the grounds stated earlier, the second defendant gave up his share in the partnership on 15-2-1962, after the firm was dissolved on 31-12-1961. After the dissolution of the said firm, therefore, the second plaintiff became exclusively entitled to the assets and was responsible for all the liabilities of the said firm. It is in these circumstances that he filed the present suit on 6-9-1962.
7. Section 69, in so far as is relevant, is in the following terms:—
(1) No suit to enforce a right arising from a contract or conferred by this Act shall be instituted in any Court by of on behalf of any person suing as a partner in a firm against a 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.
(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.
(3) The provisions of sub-sections (1) and (2) shall apply also to a claim of set off or other proceeding to enforce a right arising from a contract, but shall not affect—
(a) 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.”.
8. It would be evident that Section 69 lays down the effect of non-registration of a firm on suits to enforce a right arising from a contract by or on behalf of a firm against any third party and provides that such a suit shall not fee entertained witless the firm is registered and the person suing is or has been shown in the Register of Firms as a partner in the firm. A suit by a partner in his own name in respect of a debt due to the firm would undoubtedly be a suit by a partner as such and would naturally be hit by Section 69 of the Act and would not be maintainable. It must, however, be remembered that the section applies only to a suit by or on behalf of a partner or by a partner on behalf of the firm. It would not apply to suits to enforce contracts entered into between the partners of an unregistered firm after dissolution.
9. Sub-section (2) of Section 69 bars the institution of a suit to enforce a right arising out of a contract, as stated above, by a firm or on behalf of a firm against any third party 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. Sub-section (3) to Section 69, however, provides certain exceptions to the general rule laid down in sub-sections (1) and (2). It provides that a partner can enforce any right to sue for realising the property or a dissolved firm. Now the word property is used in its widest sense and would inevitably include realisation of the debt due to the partnership firm from a third party. On the dissolution of the firm, therefore, the obligations of third par ties to the firm may be enforced in the course of the winding up of the firm even though the firm was not a registered one. It can also be enforced if the firm is dissolved and by an arrangement the collection of the debts is entrusted to one of the partners or if one partner gives up his right as is the case here and the remaining sole partner is the only partner left. Sub-section (3) is attracted in all such cases and a suit can thus be instituted against a third party for the realisation of a debt. It will thus be plain that although an unregistered firm or any partner of such a firm has to right to bring a suit to enforce a right arising out of a contract, yet, after the dissolution of such a firm a suit brought to realise the debt due on a contract is maintainable as it is expressly saved by sub-section ((3), Cl. (a) of Section 69. The words “power to realise the property of a dissolved firm” are wide enough to enable such a suit being brought. I have already stated that the words “power to realise the property of a dissolved firm” have to be construed in the widest sense and they undoubtedly include a right to realise a debt due to the firm. I have, therefore, no maimer of doubt that since the firm is dissolved and the second defendant has walked out of the partnership leaving the 2nd plaintiff alone as the sole surviving partner of the dissolved firm, the second plaintiff can institute a suit for realising the debts based on a contract due to the dissolved firm from the first defendant. The lower Appellate Court has obviously gone wrong in dismissing the plaintiffs' suit.
10. It is no doubt true that an existing unregistered firm can get over the disability imposed by Section 69 by registering before it brings a suit. It is, however, clear that an unregistered firm cannot get itself registered after it has ceased to exist. In the case of dissolved firm the bar imposed by Section 69 cannot be got rid of by subsequent registration. The Partnership Act does not contemplate the registration of a dissolved firm. The registration of the plaintiffs firm attend its dissolution is bad in law and that registration has necessarily to be ignored this, however, does not come in the way of tiling a suit for the realisation of a debt due to a dissolved on registered firm. The sole surviving partner can in such a case institute the suit under Section 69(3) of the Act as held by me above.
11. The only point which remains to be considered ts whether the previous decision in O.S No. 124 of 1961 operates as res judicata. I think it is now a firmly settled view of law that the decision of a suit under Section 69 of the Indian Partnership Act is not one on merits and no such decision can operate as res judicata What must necessarily follow is that a fresh suit can be brought after the registration of a firm or of after the name of a partner has been brought on the Register of Firms of after the firm is dissolved by the partners of a firm or any one Authorised on behalf of the partners or the sole surviving partner. Assuming that the previous suit which was instituted by the second plaintiff styling himself as the proprietor of Sri Baba Commercial Syndicate, Bhimavaram, was a suit by a partner id his own name in respect of a debt due to the firm and is a suit by a partner as such and was hit by Sec. 69 and was, therefore, not maintainable, even then it does not bad a fresh suit on behalf of the second plaintiff the previous decision dismissed the suit Mainis on two grounds; firstly, that the frame of the suit was bad as one partner alone wrongly styling himself as the proprietor of the firm had instituted the suit; and secondly that the firm of which the second plaintiff was a partner was an unregistered one in either case the decision was not on merits it is not in doubt that the bar of Section 69 hits at the very root of the case, that is to say that it bars the very institution of the suit. Any objection raised in that behalf, there tore, has only to be considered at the threshold of the first hearing and once that point is decided against the plaintiff the suit has to be dismissed because Section 69 acts as a bar but in no case such a decision can be a fresh suit I am therefore, satisfied that the Court below has erred in treating the previous judgment operating as res judicata and dismissing the present suit I am fortified in this view of mine by a decision of the Madras High Court in Snanmugha v. Rathirm AIR 1948 Mad 187.
12. The two decisions relied upon by Mr. P. Ramachandra Rao, the learned counsel for the respondent Ponnuchami Goundai v. Muthusaini Goundar 1941-2 Mad LJ 968 : (AIR 1942 Mad 252) and Puran Mal v. Central Bank of India. AIR 1953 Punj 235, are not relevant for the present purpose because what they hold is that the registration of the firm during the pendency of the suit does not validate the institution of the suit by an registered firm or any partner of such firm, the institution being a nullity. No such situation arises in this case. For the aforesaid reasons I would allow the revision, set aside the judgment and decree of the lower Appellate Court and remit the case to it to decide the appeal on other points discussed and disposed of by the trial Court. The costs of this revision petition will depend upon the result of the appeal by the lower Appellate Court.
HGP/D.V.C
13. Order accordingly.