The Andhra Pradesh C... v. G. Mahanandi And Com...

Chelameswar, J.

1. This is an appeal filed against the judgment and decree dated 29.2.1996 in Original Suit No. 52 of 1990 on the file of the Sub-Court, Mahaboobnagar. Defendants 4 and 3 are the appellants herein respectively. The first respondent herein is the plaintiff. Respondents 2 and 3 herein are the defendants 1 and 2 in the suit. The suit is filed for the recovery of an amount of Rs. 3,96,684.42 ps., being the balance of the unpaid price of the wool supplied by the plaintiff to the first appellant herein. The further details of the suit may not be necessary in view of the submissions made by the learned Counsel for the appellants which are purely questions of law. From the above, it goes without saying that the suit was decreed.

2. The basic facts are not in dispute that the first respondent has supplied some quantity of wool to the first appellant herein: towards the price of which, certain amounts admittedly were paid by the first appellant herein to the first respondent herein. According to the first respondent the suit claim is still outstanding and is liable to be paid.

3. Learned Senior Counsel Sri J.V. Suryanarayana appearing for the appellants made 3 submissions:

(1) the first respondent-plaintiff having been shown as a partnership firm, the first respondent must have necessarily pleaded and proved that the first respondent is a registered firm to maintain the present suit and in the absence of any such plea and proof, the suit itself is barred by Section 69(2) of the Indian Partnership Act;

(2) the suit is barred by virtue of the operation of the provisions of the Andhra Pradesh Relief Undertakings (Special Provisions) Act, 1971 - more particularly under Section 4(1)(a)(iv) of the said Act;

(3) that Ex. A8 is not an acknowledgement of the debt at all; but the Court-below erroneously considered it to be an acknowledgement of the debt owed by the first appellant herein which saved the limitation of the suit; but for which fact the suit would have been barred by limitation.

4. The learned Counsel for the respondents on the other hand argued that the objection of the bar under Section 69(2) of the Indian Partnership Act was not raised in the Court-below and therefore the appellants should not be permitted to raise the same at this stage. Secondly he argued that the prohibition contained under Section 4 of the Andhra Pradesh Relief Undertakings (Special Provisions) Act, 1971 extended only to the rights and obligations arising either from the laws mentioned in the II Schedule of the said Act or any other instrument emanating from such laws, but not the other obligation such as the one in question in the present case. Lastly the learned Counsel submitted that the Trial Court rightly came to the conclusion that the document Ex. A8 is an acknowledgement of the debt on the part of the first appellant herein which saved the suit from the Law of Limitation.

5. We shall first deal with the objection regarding the maintainability of the suit in view of the prohibition contained under Section 69(2) of the Indian Partnership Act. The said section reads as follows:

"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."

6. Elaborating his first submission, the learned Counsel for the appellants argued that the first respondent-plaintiff is not shown to be a registered partnership firm and therefore the suit is barred. The learned Counsel placed reliance on a judgment of the Calcutta High Court reported in Sunderlal and Sons v. Y.N. Singh, , Justice Sabhyasachi Mukherjee, as he then was, dealt with the question in the context of the execution of a decree obtained by an unregistered firm. The question was whether such a decree should be executed. The learned Judge held that the decree itself being a nullity could not be executed in the following words:

In this case the decree has been passed. If the decree is a nullity then of course this point can be taken. But the question is whether a decree passed without this point having been taken is nullity or not. In view of the language of the section, in my opinion, a plaint filed by an unregistered firm would not be a plaint at all. If that be so, all proceedings thereunder will be proceedings without jurisdiction. Support for this proposition can be had from the observations of the Division Bench of Madras High Court in the case of K.K.A. Ponnuchami Gounder v. Mathusami Goundar, AIR 1942 Mad. 252. Similar view was taken in the case of A.T. Ponnappa Chettiar v. Podappa Chettiar, AIR 1945 Mad. 146, Shriram Sardarmal Diwani v. Gourishankar, , Firm Laduram Sagarmal v. Jamuna Prosad Chaudhuri, AIR 1939 Pat. 239 and Dwijendra Nath Singh v. Govinda Chandra, . This contention, in my opinion, can also be taken at this stage. Reliance in this connection may be placed on the observations of the Judicial Committee in the case of Surajmall Nagoremull v. Triton Insurance Co., Ltd, 52 Ind App 126 - (AIR 1925 PC 83) and in the case of Gopinath Motilal v. Ramdas, AIR 1936 Cal. 133. In the aforesaid view of the matter I am of the opinion that the firm not being registered the decree was a nullity and as such cannot be executed.

".....Jurisdiction as observed by Lord Reid, in the case of Anisminic Ltd. v. Foreign Compensation Commission, (1969) 2 AC 147, at p. 171 of the report of the entitlement of the tribunal to enter upon the inquiry in question. That entitlement in my opinion can only arise from a competent plaint instituted by a plaintiff. If the plaint was incompetent, there was no plaint. There was no suit. Ex facie and without any dispute there was no valid suit. A decree based on such a patent and indisputable error would be an error of jurisdiction and decree passed on such error would be nullity. It, however, the error depends upon adjudication of disputes, either of fact or law different considerations would apply. After all as the Supreme Court has observed that the question whether there was an error within the jurisdiction or an error of jurisdiction depends upon the nature of the error. In view of the express provision and public policy indicated in Section 69 of the Partnership Act in my opinion entertaining a suit in derogation of that mandatory provision would defeat the purpose of the statute and such an error would amount to an error of jurisdiction and a decree passed on such an error would be a nullity. In the aforesaid view of the matter, in my opinion, on this ground also this decree cannot be executed.

7. Learned Counsel also brought to our notice a judgment of the Division Bench of the Delhi High Court reported in Shankar Housing Corpn. v. Mohan Devi, AIR 1978 SC 255. The Division Bench held as follows:

"Under Section 69(2), a suit to enforce a right arise from a contract can be instituted by or on behalf of a firm against any third party only if (a) the firm is registered and (2) the persons suing i.e., all the partners of the firm at the time of the institution of the suit are or have been shown in the Register of Firms as partners in the firm...."

".. ..In such a case, if a suit to enforce a right arising from a contract is to be instituted by or on behalf of a firm against any third parry, the firm has to be a registered firm, and the partners of the firm as on the date of the institution of the suit must have been shown in the Register of Firms as partners in the firm, and further they must have been partners of the firm at the time of the accruing of the cause of action."

8. The Division Bench after noticing a large number of cases dealing with the scope and ambit of Section 69(2) of the Indian Partnership Act noticed that there was a divergence of opinion, but came to the conclusion, the relevant portion of which is already extracted earlier.

9. The learned Counsel also relied on a judgment of this Court reported in Ramachandraiah Gupta v. Ravula Venkat Reddy, 1971 An.WR. 243. A learned Single Judge of this Court - Justice O. Chinnappa Reddy, as he then was, held as follows:

Now, a firm is not a legal entity at all, but is a mere abbreviated name for the several partners of which it consists. Ordinarily, therefore, a suit may not be brought by a firm in its own name but a suit may be brought by all the partners acting together or by some of the partners only but impleading the other partners also as parties to the suit. However Order 30, Rule 1 of the Civil Procedure Code prescribes a special procedure by which a suit may be brought in the name of the firm. It provides that any two or more persons claiming or being liable as partners and carrying on business may sue or be sued in the name of the firm of which such persons were partners at the time of the accruing of the cause of action and that in such a case it shall suffice if one of such persons signs, verifies or certifies any pleadings or document required by the Code to be signed, verified and certified by the plaintiff or the defendant. The effect of a suit instituted in the name of the firm in the manner, prescribed by Order 30, Rule 1 is as if the suit is filed by all the partners collectively. Whether the suit is filed by all the partners collectively or by some only of the partners impleading the rest as parties to the suit or whether it is filed in the name of the firm prescribed by Section 69(2) must be fulfilled. They are (1) that the firm must be registered and (2) that the persons suing are or have been shown in the Register of Firms as partners in the Firm....

10. On the other hand the learned Counsel for the first respondent argued that the objection under Section 69(2) of the Indian Partnership Act was not raised before the Court-below or in the grounds of appeal. Learned Counsel submitted that whether the firm is a registered firm or not is a question of fact; therefore in view of the provisions contained under Order 8, Rule 2 of the Code of Civil Procedure, the appellants should have specifically pleaded such an objection to enable the first respondent to establish the fact that the first respondent firm is a registered firm. Learned Counsel also relying on the following decisions of the Madras High Court :

; , - that such an objection cannot be raised for the first time in the appeal. Order 8, Rule 2 reads as follows:

"New facts must be specifically pleaded :--The defendant must raise by his pleading all matters which show the suit not to be maintainable, or that the transaction is either void or voidable in point of law, and all such grounds of defence as, if not raised would be likely to take the opposite party by surprise, or would raise issues of fact not arising out of the plaint, as for instance, fraud, limitation, release, payment, performance, or facts showing illegality."

11. The question is whether the appellants - defendants herein were under an obligation to take a defence in their written statement that the plaintiff firm is not a registered firm and therefore the suit is not maintainable. Whether Order 8, Rule 2 creates such an obligation on the part of the defendants -appellants herein.

Order 6, Rule 2 stipulates that:

"every pleading shall contain and contain only a statement in concise form of material facts on which the party pleading relies for his claim or defence, as the case may be....."

12. Order 8, Rule 2 must be construed harmoniously with Order 6, Rule 2 to be stipulating only those facts on which the parties rely either for their claim or the defence as the case may be. The defence that a suit by a firm which is not established to be a registered firm is not maintainable-in our view is not defence based on facts on which the party relies forms upon the existence or otherwise of a jurisdictional facts. Assuming for the sake of argument the appellants herein took such a plea; they could not have established the fact that the first respondent firm is an unregistered firm as it is a negative fact. It is only the plaintiff who can plead and prove that the firm is a registered firm if at all it is; in our view the burden to plead and prove that the plaintiff is a registered firm and therefore is entitled to maintain the suit against a third party is always on the firm in view of the legislative mandate under Section 69(2) of the Indian Partnership Act - otherwise the cause of action for such a suit is not complete. The Supreme Court in Bloom Dekor Limited v. Subhash Himat Lal Desai, , as follows:

"By "cause of action" it meant every fact, which, if traversed, it would be necessary for the plaintiff to prove in order to support his right to a judgment of the Court. In other words, a bundle of facts which it is necessary for the plaintiff to prove in order to succeed in the suit..."

13. In the context of a suit by a partnership firm the fact that the partnership firm is a registered firm and therefore entitled to maintain a suit against a third party becomes a jurisdictional fact and becomes part of the cause of action in the absence of any pleading or proof in that regard that cause of action is incomplete. In our view the suit must fail on that count. The Supreme Court in Jaswant Singh v. Custodian of Evacuee Property, New Delhi, held as follows:

".. ..A cause of action for a proceeding has no relation whatever to the defence which may be set up nor does it depend upon the character of the relief prayed for by the plaintiff or the applicant. It refers entirely to the grounds set forth in the plaint or the application as the case may be to the cause of action or in other words to the media upon which the plaintiff or the applicant asks the Courts to arrive at a conclusion in his favour....."

14. Partnership is an aspect of right of association guaranteed under Article 19(1) (c) of the Constitution of India, which right is always subject to reasonable restrictions imposed by the law from time to time. The rights and obligations of a partnership firm which has no distinct legal existence but only a compendious name for the partners are regulated by the provisions of the Indian Partnership Act. The law refuses to recognise the right of a partnership firm to sue third parties unless it is a registered partnership firm. Those who desirous to avail the facility provided under the law to sue in the name of or on behalf of a partnership firm must establish the basic facts that such a suit is maintainable. The legislative mandate always indicates the public policy of the State; the Courts are bound to give effect to the public policy but not to defeat the public policy on the ground that the defence of such public policy was not specifically pleaded taken. We therefore, respectfully agree with the view taken by Justice Sabkyasachi Mukherjee and hold that the present suit is not maintainable for the reasons discussed above.

15. In view of the above findings recorded by us, we do not propose to go into the other questions involved in the present appeal and the appeal is therefore allowed. But, in the circumstances without costs.