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Farooq (S) v. Sandhya Anthraper Kurishingal & Ors. (S)
Factual and Procedural Background
On 11 December 2003, two partners filed Original Suit No. 1071 of 2003 against the third partner and an unregistered partnership firm seeking cancellation of a sale deed dated 26 April 2003 executed by the defendant partner without their consent. A preliminary objection under Section 69 of the Indian Partnership Act, 1932—pertaining to the bar on suits by or on behalf of unregistered firms—was raised. The Trial Court, by judgment dated 19 April 2006, dismissed the suit as barred under Section 69. On appeal, the High Court of Karnataka (RFA No. 1468/2006, judgment dated 8 November 2013) reversed the Trial Court, holding that the plaintiffs were suing as co-owners rather than as partners. The present appeal before the Supreme Court challenges that High Court decision.
Legal Issues Presented
- Whether the suit, as pleaded, sought to enforce a right arising from the partnership and was therefore barred by Section 69 of the Indian Partnership Act, 1932 due to non-registration of the firm.
- Whether the plaintiffs could maintain the suit independently as co-owners notwithstanding the partnership relationship.
Arguments of the Parties
Appellant's Arguments
- The plaint expressly relies on clause 25(d) of the partnership deed, which prohibits transfer of firm property without written consent of all partners, demonstrating that the right asserted arises from the contract of partnership.
- Consequently, Section 69(1) squarely bars the suit because the firm is unregistered and the plaintiffs are suing in their capacity as partners.
- The Trial Court correctly applied Section 69; the High Court erred in treating the plaintiffs as mere co-owners.
Respondents' Arguments
- Paragraph 18 of the plaint states that the plaintiffs, as partners, are co-owners of the property and thus entitled to sue independently of the firm.
- The cause of action is presented as arising from co-ownership, not from enforcement of partnership rights, bringing the suit outside the bar of Section 69.
- The High Court’s interpretation of the plaint was therefore correct and should be upheld.
Table of Precedents Cited
No precedents were cited in the provided opinion.
Court's Reasoning and Analysis
The Supreme Court examined the plaint in its entirety and found that:
- The plaintiffs explicitly invoked clause 25(d) of the partnership deed, which restricts transfer of firm property without unanimous written consent.
- The suit schedule property was purchased with partnership funds for development and sale; thus, the asserted right emanates from the partnership agreement.
- Allegations that the first defendant lacked authority to sell the property directly relate to the contractual obligations among partners.
- Paragraph 18’s reference to co-ownership does not alter the fundamental basis of the claim, which is rooted in partnership rights.
- Accordingly, the bar under Section 69 of the Partnership Act applies, rendering the suit not maintainable since the firm was unregistered and the plaintiffs sued in the capacity of partners.
Holding and Implications
Held: The appeal is allowed; the High Court’s judgment is set aside and the Trial Court’s dismissal of the suit is restored.
Implications: The decision reinforces the statutory bar under Section 69 against suits by partners of an unregistered firm seeking to enforce partnership rights. It clarifies that merely labeling oneself as a co-owner will not bypass the bar when the substantive right asserted derives from the partnership agreement. The ruling affects the parties by denying them relief in the present suit; no new legal precedent beyond application of Section 69 was articulated.
1. Leave granted.
2. The present appeal arises from a suit being OS No. 1071 of 2003 filed on 11 December, 2003 by two partners against the remaining partner and an unregistered firm seeking to cancel a sale made on 26 April, 2003 by the defendant partner without the consent of all the partners. A preliminary objection was taken stating that the suit was hit by Section 69 of the Indian Partnership Act, which reads as follows:—
69. Effect of non-registration.—
(1) No suit to enforce a right arising from a contract or conferred by this Act shall be instituted in any court by or on behalf of any person suing as a partner in a firm against the 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, or
(b) the powers of an official assignee, receiver or Court under the Presidency-towns Insolvency Act, 1909 (3 of 1909) or the Provincial Insolvency Act, 1920 (5 of 1920) to realise the property of an insolvent partner.
(4) This section shall not apply—
(a) to firms or to partners in firms which have no place of business in the territories to which this Act extends or whose places of business in the said territories, are situated in areas to which, by notification under Section 56, this Chapter does not apply, or
(b) to any suit or claim of set-off not exceeding one hundred rupees in value which, in the Presidency-towns, is not of a kind specified in section 19 of the Presidency Small Cause Courts Act, 1882 (5 of 1882), or, outside the Presidency-towns, is not of a kind specified in the Second Schedule to the Provincial Small Cause Courts Act, 1887 (9 of 1887), or to any proceeding in execution or other proceeding incidental to or arising from any such suit or claim.
3. The trial court, by a Judgment dated 19 April, 2006, held, on a reading of the plaint as a whole, that the suit was hit by the said Section and, therefore, was not maintainable. The High Court in appeal against the said Judgment reversed the finding of the Trial Court by the impugned judgment dated 8 November, 2013, holding that a reading of the plaint leads to the conclusion that the plaintiffs are actually enforcing their rights as co-owners of the property, and not as partners of a firm and, therefore, the suit would be maintainable.
4. Shri S. Gurukrishna Kumar, learned Senior counsel appearing on behalf of the appellant, pressed into service Section 69 of the Act after copiously reading the plaint before us. According to him, the plaint, if read as a whole, would show that the suit was only to enforce a right arising from the partnership itself, in that clause 25(d) of the partnership deed was specifically set out in the plaint. This being the case, according to him, the trial court was correct and the High Court was in error.
5. Shri Subramonium Prasad, learned Senior counsel appearing on behalf of the respondents supported the High Court's Judgment, and in particular, drew our attention to paragraph 18 of the plaint which reads as follows:—
“Although the suit schedule property belongs to M/s. Windsor Wings Developers, the plaintiffs, being partners of the said firm, are co-owners of the same. Hence, the plaintiffs are entitled to file this suit even independently of the partnership firm. The cause of action for filing this suit is common to both the plaintiffs and has arisen in common against all the defendants. The plaintiffs are represented by their respective constituted attorneys in this case. The concerned powers of attorney are produced herewith as Document Nos. 16 and 17.”
6. Having heard the learned Senior counsel appearing for the parties, it is clear that the plaint, read as a whole, relied upon clause 25(d) of the Partnership Deed which specifically states that no partners of the firm shall without the consent in writing of the other partners be entitled to transfer immovable property belonging to the firm. The plaint then goes on to say that the suit schedule property was purchased out of the funds of the firm for the purpose of development and sale. In paragraph 11, the plaintiffs discovered that a sale deed has been executed by the first defendant. It has been specifically stated that the plaintiffs had never consented to the same and the first defendant has no authority to sell any immovable property belonging to the firm. The plaint, read as a whole, leaves no manner of doubt that the basis for the suit is Section 69 of the Partnership Act read with clause 25(d) of the Partnership Deed dated 29 December, 1995. Paragraph 18 of the plaint does not carry the matter further inasmuch as the only sentence which could possibly be relied upon, and which was relied upon by the High Court, is that the plaintiffs are entitled to file the suit even independently of the partnership firm. Having found that the basis of the suit is the factum of partnership and having relied upon clause 25(d) of the Partnership Deed, it is clear that the Trial Court correctly found that the bar of Section 69 of the Act was attracted in the facts of this case.
7. Accordingly, we set aside the Judgment of the High Court and restore that of the Trial Court.
8. The appeal is allowed in the above terms.
SUPREME COURT OF INDIA
RECORD OF PROCEEDINGS
Petition(s) for Special Leave to Appeal (C) No(s). 8363/2014
(Arising out of impugned final judgment and order dated 08/11/2013 in RFA No. 1468/2006 passed by the High Court of Karnataka at Bangalore)
Farooq.….Petitioner(s)
v.
Sandhya Anthraper Kurishingal & Ors.….Respondent(s)
(With interim relief and office report)
Date: 24/04/2017 This petition was called on for hearing today.
(Before Rohinton Fali Nariman and Mohan M. Shantanagoudar, JJ.)
For Petitioner(s) Mr. S. Gurukrishna Kumar, Sr. Adv.
Mr. S. Hari Haran, Adv.
Mr. Vikash Singh, AOR
For Respondent(s) Monisha Handa, Adv.
Mr. Mohit D. Ram, AOR
Mr. Joseph Pookkatt, Adv.
Mr. Prashant Kumar, Adv.
Mr. Dhawesh Pahuja, Adv.
For M/s. Ap & J Chambers, Advts.
Mr. Subramonium Prasad, Sr. Adv.
Mr. Shiv Shankar P., Adv.
Ms. Ranjeeta Rohatgi, AOR
Ms. Samten Doma, Adv.
Mr. Anmol Diwan, Adv.
UPON hearing the counsel the Court made the following
9. Leave granted.
10. The appeal is allowed in terms of the signed order.
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