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Firm Laduram Sagarmal v. Jamuna Prasad Chaudhuri

Patna High Court

Oct 28, 1938

Judgment

Subsequent
References

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Structured Summary of the Opinion

Factual and Procedural Background

This is the plaintiff's second appeal against concurrent decrees of the Courts below dismissing his claim. The suit was for recovery of money said to be due on certain bahikhata accounts (the plaintiff firm claimed Rs. 1,693). The plaintiff firm were wholesale cloth dealers and the defendants retail cloth dealers; over time the defendants purchased cloth from the plaintiff and the parties adjusted accounts. The defendants raised several defences, but the pivotal defence in this appeal was that the suit was not maintainable because, on the date of institution (21 November 1935), the plaintiff firm had not been registered under the Partnership Act.

Procedural history (as given in the opinion):

Trial Court dismissed the suit on the ground of non-maintainability under Section 69 of the Partnership Act.
The lower Appellate Court held the suit was not maintainable when instituted but treated it as having become maintainable at a later date when the firm was registered; it also found part of the claim barred by limitation and that the remainder had been satisfied by payment, and thus upheld the decision below though on different grounds.
The plaintiff firm applied for registration on 10 December 1935 and registration was effected on 18 January 1936.
The present appeal challenges the dismissal and contends the suit should be treated as instituted on the date of registration.

Legal Issues Presented

Whether a suit instituted by a firm that is unregistered at the date of institution (and thus falling within Section 69(2) of the Partnership Act) can be subsequently treated as validly instituted by deeming the filing date to be the date on which the firm is later registered.
Whether subsequent registration of a firm cures the initial procedural defect of non-registration at the date of institution so as to render the originally-filed plaint effective.

Arguments of the Parties

Appellant's Arguments

The appellant (plaintiff firm) argued that although the suit was not maintainable when instituted (21 November 1935), the Court was entitled to treat the suit as properly instituted on the later date of registration (18 January 1936), thereby curing the defect.
The appellant relied heavily on the decision reported at 41 CWN 534 and the single-Judge Madras decision in AIR 1937 Mad 767 as authorities supporting the proposition that the suit can be deemed instituted on the date of registration when registration occurs during the pendency of proceedings.

Respondents' Arguments

The respondents contended that because the suit was not maintainable when instituted, subsequent events (including registration) could not affect the maintainability of that particular suit.
The respondents relied on a number of authorities from various High Courts (including AIR 1935 Lah 893; AIR 1938 Lah 767; AIR 1936 Mad 991; AIR 1935 All 898) which, according to them, hold that registration after institution does not retroactively validate a suit instituted by an unregistered firm.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
41 CWN 534	Held that where a firm was unregistered when suit was instituted but registered before final hearing, the Court may deem the suit to have been instituted on the date of registration (i.e., treat the filing as if subsequent to registration).	The appellant relied on this case. The court examined it but found it provided sympathy-based reasons rather than a statutory basis; the majority rejected extending its reasoning to override the mandatory provisions of s.69(2).
AIR 1937 Mad 767	Single Judge held it inequitable to dismiss a suit where registration occurred before hearing and therefore allowed the suit to be treated as instituted on the registration date.	The court noted this decision supported the appellant's position but held that no statutory provision permits treating a plaint as filed on a later date; the decision was described as a "fair view" but not grounded in law permitting date alteration.
AIR 1935 Lah 893	Bench of Lahore High Court: s.69 clearly bars institution of suits by unregistered firms; such suits must be dismissed and subsequent registration cannot validate the earlier-filed suit.	The court treated this authority as supporting the respondents' contention and as part of the prevailing trend that subsequent registration cannot cure the defect.
AIR 1938 Lah 767	Single Judge of Lahore held that a suit by an unregistered firm was invalid and that subsequent registration did not relate back to make the suit valid.	The court cited this case as further support for the proposition that registration after filing does not validate the already-filed suit.
AIR 1936 Mad 991	Held that after objection and subsequent registration, an application to amend the plaint so as to treat the suit as instituted on a later date could not relate back to cure the original defect because the plaint was "not a plaint at all" at the time of filing.	The court relied on this authority to support the conclusion that amendment or subsequent registration cannot cure the defect in institution.
AIR 1935 All 898	Kendall J.: before instituting a suit by a partner against a firm, the firm must be duly registered and the registrar must record the person suing as a partner; s.69 is mandatory and subsequent registration or amendment does not validate the institution.	The court cited this decision as consistent with the view that s.69 is mandatory and that subsequent events cannot validate an improperly instituted suit.
21 CWN 209	Referenced in 41 CWN 534 as a case under the Bengal Tenancy Act whose reasoning was applied by analogy in 41 CWN 534.	The court observed that the use of that decision in 41 CWN 534 was by analogy and that analogy to a different statutory scheme (Bengal Tenancy Act) does not supply a legal basis for circumventing the mandatory provisions of s.69.

Court's Reasoning and Analysis

The court's analysis proceeds in these principal steps (capturing only what appears in the opinion):

Identification of the legal defect: Section 69 of the Partnership Act makes claims arising out of certain contracts unenforceable if the firm is unregistered at the date of institution of the suit. The trial Court dismissed on this ground; the lower Appellate Court concluded the suit was not maintainable when instituted but treated it as made maintainable by subsequent registration.
Examination of authorities: The court reviewed authorities on both sides. Two single-judge decisions (41 CWN 534 and AIR 1937 Mad 767) treated suits as capable of being deemed instituted on the date of registration. However, multiple other decisions (including AIR 1935 Lah 893; AIR 1938 Lah 767; AIR 1936 Mad 991; AIR 1935 All 898) hold that the institution of a suit by an unregistered firm is barred and that subsequent registration does not validate the earlier filing.
Legal characterization of the plaint: The court reasons that a plaint filed by an unregistered firm is "in effect no plaint at all" because s.69 makes such claims unenforceable at the time of filing. Because an unregistered firm has no right to sue, the original filing has no legal effect and there is no provision allowing the court to treat the filing date as later than the actual date of filing.
Analogy to premature suits: The court analogises to the situation where a plaintiff files prematurely (i.e., has no cause of action at the date of institution). If at the filing date there is no cause of action, a subsequent accrual of the cause of action does not cure the defect — similarly, subsequent registration cannot cure the initial legal incapacity to sue.
Evaluation of the decisions relied upon by the appellant: The court finds that the reasons in 41 CWN 534 (and the Madras single-Judge case that followed it) are based more on equitable sympathies and analogy (21 CWN 209 under the Bengal Tenancy Act) than on any statutory provision authorizing alteration of the date of institution; thus those decisions do not supply a statutory basis for treating the plaint as filed on a subsequent date.
Conclusion of law: Given the mandatory nature of s.69 and the weight of authority holding that subsequent registration cannot validate a prior defective institution, the court concludes the suit was not maintainable and must be dismissed.

The court also observed it agreed with the trial Court's reasoning (that the suit was not maintainable under s.69) and considered the lower Appellate Court to have been in error in treating the suit as becoming maintainable by virtue of subsequent registration.

Holding and Implications

Holding: Appeal dismissed.

Direct consequences for the parties (as stated in the opinion):

The suit instituted by the plaintiff firm (unregistered at the date of institution) was held not maintainable and is dismissed.
The appeal against the concurrent decrees dismissing the claim is dismissed; costs were awarded against the appellant.

Broader implications (as expressed or implied in the opinion):

The court applied the prevailing trend of authority to hold that subsequent registration of a firm does not cure the defect of non-registration at the date of institution; the crucial date is the date of institution of the suit.
The opinion emphasizes that there is no statutory provision permitting a court to treat a plaint as filed on a date later than the actual filing date; thus, courts should not adopt equitable devices to circumvent the mandatory wording of s.69.

The opinion does not purport to establish a novel statutory exception; it resolves the dispute by applying existing authorities and the mandatory terms of the Partnership Act as interpreted by prior decisions cited in the text.

Source: Opinion of Harries, C.J. (concurring judgment of Varma, J. noted). The summary above is based exclusively on the content supplied in the provided opinion.

Show all summary ...

Harries, C.J:— This is a plaintiff's second appeal against concurrent decrees of the Courts below dismissing his claim. The suit out of which this appeal arises was for the recovery of money due on certain bahikhata accounts. The plaintiff firm carried on business as wholesale cloth dealers, whereas the defendants carried on a retail cloth business. Over a period of time the defendants had made purchases of cloth from the plaintiff firm, and eventually the parties adjusted the accounts. It was the plaintiff's case that a sum of Rs. 1693 was due from the defendants to the plaintiff firm upon this account. The defendants raised a number of defences, but it is only necessary for me to deal with one of them. Defendants contended that the suit as instituted was not maintainable as at the date of the institution of the suit the plaintiff firm had not been registered in accordance with the provisions of the Partnership Act. The other defences, namely limitation and denial of the accuracy of accounts, do not arise in this appeal.

2. The trial Court dismissed the suit on the ground that it was not maintainable by reason of Section 69 of the Partnership Act. The lower Appellate Court was of opinion that the suit was not maintainable when instituted but that it became maintainable at a later date when the plaintiff firm was registered. It further held that part of the claim was barred by limitation and that the remainder had been satisfied by payment. It accordingly upheld the decision of the trial Court though upon different grounds. It has been strenuously argued by Mr. Bose in this appeal that the suit was maintainable and that the lower Appellate Court was right in treating the suit as having been instituted on the date when the firm was registered. The suit was instituted on 21st November 1935, and it is common ground that upon that date the firm was an unregistered one. On 10th December 1935, the plaintiff firm applied for registration under the Partnership Act and on 18th January 1936 registration was effected. It has been contended on behalf of the appellant that though the suit was not maintainable when instituted, the Court was entitled to treat the suit as properly instituted on 18th January 1936.

3. On behalf of the respondents it has been contended that as the suit was not maintainable when instituted, nothing that happened afterwards could affect the maintainability of this particular suit. Reliance has been placed by the advocate for the appellant upon the case in 41 CWN 534.1 In that case a suit was instituted by an unregistered firm on 25th May 1934, and no exception was taken in the written statement on the ground of non-registration of the firm. The suit proceeded to trial and was decreed on contest against the answering defendant and ex parte against the others. The answering defendant appealed, but that appeal was not proceeded with, as there was an application to have the ex parte decree set aside by those defendants against whom the ex parte decree was passed. That ex parte decree was set aside and the suit came on for hearing afresh. At that hearing a plea was taken that the suit was not maintainable under Section 69(2) of the Partnership Act, on the ground of nonregistration of the firm at the date of the institution of the suit. The firm was as a matter of fact registered on 20th June 1934. The objection was upheld by the Courts below and the suit dismissed. On appeal Mitter J. held that the suit ought not to have been dismissed merely on the ground of non-registration of the firm at the date of the institution of the suit but that it ought to have been deemed to have been instituted on the date when the firm was registered.

4. This case was followed by Horwill J. of the Madras High Court in AIR 1937 Mad 767.2 In that case an unregistered firm had instituted a suit and during the course of the proceedings had registered itself in accordance with the Partnership Act. On objection being raised that the firm was not registered at the date of the institution of the suit, the suit was dismissed though registration had taken place before the hearing. Horwill J. held that it would be most inequitable for the firm to have its suit dismissed and be forced to file another after paying fresh court-fee. Accordingly he allowed the suit to be treated as instituted at the date when the firm was registered.

5. These two single Judge cases undoubtedly support the argument of the appellant. But Mr. Mitter on behalf of the respondents has cited a large number of authorities of various Courts which take the opposite view. In AIR 1935 Lah 8933 a Bench of the Lahore High Court held that a suit instituted by an unregistered firm must be dismissed. According to the learned-Judge Section 69 of the Partnership Act, clearly said that no suit falling within its purview should be instituted. It was the institution of the suit that was barred; hence an unregistered firm could not file a suit, nor could it after filing get the suit, stayed till it got itself registered. Such a suit would have to be dismissed, though the dismissal of such suit would be no bar to a fresh suit after registration, if such was within time. In this case the Bench certainly took the view that a suit instituted by an unregistered firm was bound to fail and that registration after the filing of the suit could not possibly affect the maintainability of that particular suit. A similar view was expressed by learned single Judge of the Lahore High Court in AIR 1938 Lah 767.4 In that case it was held that a suit by an unregistered firm was invalid and that registration of the firm after the suit had been instituted did not relate back so as to make the suit valid.

6. Another case to the same effect is the case in AIR 1936 Mad 991.5 In that case an unregistered firm instituted a suit and after objection was raised, obtained registration under the Partnership Act. Thereafter it applied for amendment praying that the suit should be treated as having been instituted on the date of the application for amendment. It was held that any subsequent amendment of the petition after getting the firm registered under the Partnership Act could not relate back to the date of the institution of the suit so as to cure the defect which existed at the time of institution, as the plaint was not a plaint at all, hence the order of amendment could not be granted.

7. In AIR 1935 All 8986 Kendall J. held that before instituting a suit by a partner against a firm, the firm must be duly registered and the Registrar must have recorded the person suing as a partner in the firm. Subsequently registering the firm and amending the plaint did not make a valid institution; merely making an application for registration before suit was not sufficient. S. 69 was mandatory.

8. It is therefore clear that the trend of authority is in favour of the respondents' contention in this case, namely that a suit which is not maintainable by reason of non-compliance with Section 69 of the Partnership Act, cannot become maintainable at a later stage by reason of registration. In my view subsequent registration cannot cure the initial defect. A plaint filed by an unregistered firm is in effect no plaint at all because Sec. 69 makes claims arising out of a contract unenforceable if the firm is unregistered at the date of the institution of the suit. An unregistered firm has no right to sue, and therefore a plaint filed by it has no legal effect. If at the time the plaint is filed the claim is bound to fail, I cannot see how subsequent registration can improve the position. The single Judge of the Calcutta High Court held that there was no reason why the Court should not treat the plaint as filed on the date of registration. That is possibly a very fair view to take; but I know of no provision of law which permits a Court to treat the plaint as filed on a date subsequent to the date upon which it was actually filed. In neither of the cases cited on behalf of the appellant is any authority cited which would enable a Court to treat a suit as being instituted months later than the date upon which it was in fact instituted. In my view the crucial date is the date of the institution of the suit. If on that date the suit was bound to fail, nothing that happens subsequently can give the plaintiff a right to sue. The case is very similar to a case where a plaintiff brings a suit prematurely. If it is held that he had no cause of action at the date of the institution of the suit, then it does not avail him in the slightest to show that his cause of action did come into existence a few days after the filing of the suit. If the plaintiff had no cause of action when the suit was filed, then such a suit is bound to fail, though a cause of action might come into existence within a very short time after the institution of the suit. For the same reason, I cannot understand how an unregistered firm can file a suit and the defect be cured by subsequent registration. It appears to me that if the suit as filed was not maintainable, then it must be dismissed.

9. For the reasons which I have given, I am satisfied that this suit was not maintainable. In my view the lower Appellate Court rightly dismissed this suit though I am unable to agree with the reasons which it gave for doing so.

10. In my judgment the learned Munsif and not the lower Appellate Court gave the true grounds for dismissing this claim. I would therefore dismiss this appeal with costs.

Varma, J.:— I agree. Mr. S.N Bose for the appellants has laid great stress upon the decision in 41 CWN 534 and I should like to examine the reasons given in that judgment for allowing the suit to be deemed to have been filed after the date of registration. The reasons which I gather from the judgment are these; that the plea of non-registration was not taken till the second hearing began, that the plaint was allowed to remain on the file till the date of registration and that the view which the learned Judge took in holding that the plaint should be deemed to have been filed after the date of registration was in accordance with justice. Looking at all these reasons separately and collectively, I find that they may be very good grounds for creating sympathy in favour of the plaintiff, but they do not supply any legal reasons for getting round the provisions of Section 69(2) of the Partnership Act, which have been declared to be imperative. No reason appears to have been given in that judgment for the proposition that a plaint which is filed on one date may under certain circumstances be deemed to have been filed on a subsequent date. The case which has been referred to in that judgment is the case in 21 CWN 209.7 But that was a case under the Bengal Tenancy Act. The reasons given in that judgment would be applicable to the facts of the present case only by analogy and it is needless to say that arguments by analogy are not always safe. For these reasons, I fail to see any reason in that judgment for extending the provisions of Section 69(2) of the Partnership Act, which are imperative. I agree with the view expressed in AIR 1935 Lah 893, AIR 1935 All 898, AIR 1938 Lah 767 and AIR 1936 Mad 991 and dismiss the suit. The trial Court dismissed the suit on this ground but the lower Appellate Court relying on the Calcutta Weekly Notes decision held that although the suit was not maintainable, it should be deemed to have been filed on a date subsequent to the date of registration. For the reasons given in the earlier part of this judgment I would uphold the view of the trial Court on this point. The appeal is dismissed with costs.

R.M/R.K

11. Appeal dismissed.