(In pursuance of an order of reference to the Division Bench by Rajamannar J. dated 3-4-1947, this appeal coming on for hearing, the Court delivered the following):
JUDGMENT
The Chief Justice:—This second appeal was referred to a Division Bench by Rajamannar J. by reason of a conflict between the decision of Bell J. in A.T. Ponnappa Chettiar v. Bodappa Chettiar (4), and the opinion of Sir John Beaumont C.J in Appayya Nijlingappa v. Subrao Babaji (5), Rajamannar J. preferring the opinion of Sir John Beaumont C.J to that of Bell J. made the reference as above stated.
The facts are as follows: From the 2nd March 1940 until the 31st March 1942 the plaintiff and the deceased husband of the second defendant carried on business in partnership. During that period dealings and transactions took place with the first defendant. As a result, his indebtedness to the partnership amounted to a sum of Rs. 819-14-0, and, by the date of suit that amount was increased by a sum of Rs. 94-4-0 to a sum of Rs. 914-2-0, the amount for which the suit was instituted. It is alleged, and, so far as the matters relevant to this appeal are concerned, it is not in dispute, that there was some arrangement by which the plaintiff became entitled to the whole of the monies alleged to be recoverable from the first defendant. Hence the suit was brought, by the plaintiff alone but since the second defendant's husband had died before the suit the second defendant was joined by way of abundant caution. The only other material fact to be recorded is that the partnership was never registered as required by S. 58 of the Indian Partnership Act.
The suit was instituted in the Court of the Additional District Munsif of Arni. By his written statement the first defendant made a number of pleas one of which was that the suit was not maintainable by reason of the provisions of S. 69 of the Partnership Act, particularly Sub-S. 2 which provides that a suit to enforce a right arising from a contract is not enforceable when the suit is instituted by an unregistered partnership firm. That was the only issue which the learned District Munsif tried, and, following the decision of Bell J. to which reference was made above, the suit was dismissed. An appeal by the plaintiff to the learned District Judge of Vellore was unsuccessful. The learned District Judge, expressing himself to be bound by the decision of Bell J. as indeed he was, as also was the learned District Munsif in the lower Court, followed that decision and the appeal failed.
Sub-Ss. (1) and (2) of S. 69 of the Partnership Act forbid the institution of a suit to enforce a right arising from a contract in respect of a partnership when the partnership is not registered. Sub-S. (3) of the same section, however, provides that the provisions of Sub-Ss. (1) and (2) shall not affect any right or power to realise the property of a dissolved firm. It is to be noticed that the Indian Partnership Act places no prohibition upon an unregistered partnership making contracts either between the partners inter se or with some third party, nor upon an unregistered partnership acquiring property or assets. All that it does is to make a suit instituted by an unregistered partnership, to recover property, unenforceable. But relief from the disability can be obtained at any time as long as the partnership is in existence, and if the partnership is registered before the suit is instituted the partnership can recover its property and sue on contracts made with third parties even when those contracts were entered into at a time when the partnership was not registered. In Ponnappa Chettiar's case (1). Bell J. came to the conclusion that where an unregistered partnership has been dissolved any contract made with the partnership or moneys due to it in respect of dealings during the subsistence of the partnership cannot be enforced by a suit and that Sub-S. (2) of S. 69 prevents such a suit succeeding. But, it has to be noticed, that in that case there was no appearance on behalf of the partners of the partnership then under consideration; nor, it seems to us, was the learned Judge's attention drawn to Sub-S. (3) of S. 69.
In Appayya Nijlingappa v. Subrao Babaji (2), the learned Chief Justice Sir John Beaumont took the contrary view to that expressed by Bell, J. He came to the conclusion that the words in Sub-S. (3) of S. 69, particularly “or any right or power to realise the property of a dissolved firm”, remove any disability which existed during the continuance of the partnership.
When a firm has been dissolved, thereafter it is impossible for registration ever to be effected. Consequently the disability of non-registration cannot be overcome, as it can be during the continuance of the partnership, when the partners can, at any time, register as required by the Act and any disability existing up to that time regarding enforcement by suit of contracts and debts due to the partnership can be removed.
The words in Sub-S. (3) of S. 69 which I have quoted above are very wide. The sub-section enacts that the provisions of the two previous sub-sections shall not affect any right or power to realise the property of a dissolved firm. It is the right of all the partners, or by some arrangement as between themselves, one or more, to realise the property of their late partnership. In the course of the argument it has not been suggested the moneys due to the partnership from a third party in respect of dealings between him and the partnership do not form part of the partnership property. It seems to me that the intention of the Legislature was to inflict disability for non-registration only during the subsistence of the partnership and, in doing that at the same time there is provision that the partnership can cause the disability to be removed by registration before action is brought, although there was disability, by reason of non-registration existing, at the time the contract was made or the debt incurred. When a partnership has been dissolved the disability cannot be removed. Consequently it will be impossible, if a different view were taken of the provisions of Sub-S. (3), for a dissolved unregistered partnership to recover by suit its assets and property.
With respect I agree with the decision of Sir John Beaumont C.J The same opinion was expressed by Chagla J. in Bhagwanji Morarji v. Alembic Chemical Works , and by Iqbal Ahmad C.J and Sinha J. of the Allahabad High Court in Ram Kumar v. Kisharilal .
In my opinion this appeal should succeed and the dismissal of the suit set aside. The suit will be remanded back to the learned District Munsif of Arni to try all the issues arising in the suit, except that which has been the subject of this appeal. The appellant is entitled to his costs in the lower appellate Court and in this Court. The costs of the hearing before the learned Additional District Munsif will abide the result of the trial which is now ordered to take place.
The court-fee paid on the memorandum of second appeal will be refunded.
Govindarajachari, J:—I agree.
N.R.R