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M/S. Hindustan Infra... v. M/S. R.S. Woods Inte...
Summary of Legal Opinion: C.R.P. No.19/2018 & C.M. Nos.4276-4277/2018 (High Court of Delhi)
Factual and Procedural Background
Date of Order: 13.12.2018. Petitioners: M/s. Hindustan Infrastructure Construction Corporation Limited & Anr. Respondents: M/s. R.S. Woods International & Ors. The petition under review is C.R.P. No.19/2018 (with ancillary C.M. Nos.4276-4277/2018) challenging an impugned order dated 09.10.2017 of the learned Additional District Judge-03, West District, Tis Hazari Courts, Delhi ('ADJ') in Civil Suit No.613734/16 titled M/s. R.S. Wood International vs. M/s. Bhayana Builders Hindustan Infrastructure JV Pvt. Ltd. & Ors.
The petitioners (defendant Nos.2 & 3 in the suit) had moved under Order VII Rule 11 CPC for rejection of the plaint on the ground that the suit was barred by Section 69(2) of the Indian Partnership Act, 1932 because the firm was not registered. The ADJ dismissed that Order VII Rule 11 application, relying on a Kerala High Court judgment (Afsal Baker vs. Maya Printers 2016 SCC OnLine Ker 29914). The underlying civil suit filed by the respondents/plaintiffs seeks recovery of Rs.24,41,967/- on account of dishonour of five cheques (numbers and dates and amounts are set out in the plaint and quoted in the opinion).
Legal Issues Presented
- Whether a suit founded on dishonour of cheques (enforcing liability created under Section 30 and Section 37 of the Negotiable Instruments Act, 1881) is a suit to enforce a right "arising from a contract" so as to be barred by Section 69(2) of the Indian Partnership Act, 1932 where the firm is unregistered.
- Whether the ADJ committed error in dismissing the petitioners' application under Order VII Rule 11 CPC seeking rejection of the plaint on the ground of non-registration of the firm (i.e., whether the impugned order is vitiated by illegality or infirmity).
Arguments of the Parties
Petitioners' Arguments
- The petitioners (defendant Nos.2 & 3) applied under Order VII Rule 11 CPC to reject the plaint on the ground that the suit is barred by Section 69(2) of the Indian Partnership Act, 1932 because the firm is unregistered, and therefore no suit to enforce a right arising from a contract could be instituted by or on behalf of the firm against a third party.
The opinion does not contain a detailed account of the respondents' legal arguments in opposition beyond the fact that the respondents/plaintiffs have filed a suit for recovery based on dishonour of cheques and that the ADJ relied on the Kerala High Court decision in Afsal Baker.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Afsal Baker vs. Maya Printers 2016 SCC OnLine Ker 29914 | That liability arising on dishonour of a cheque under Sections 30 and 37 of the Negotiable Instruments Act is a statutory liability (dehors the original contract) and therefore a suit founded on such statutory liability is not a suit "to enforce a right arising from a contract" within the meaning of Section 69(2) of the Indian Partnership Act. | The ADJ relied on this decision in dismissing the petitioners' Order VII Rule 11 application; the High Court in the present revision accepted the reasoning and applied it to hold that the suit is based on statutory liability under the Negotiable Instruments Act and hence not barred by Section 69(2). |
Court's Reasoning and Analysis
The court first recorded the relevant provisions of Section 69(1) and (2) of the Indian Partnership Act, 1932, which address the effect of non-registration of a firm and bar suits to enforce rights "arising from a contract" by or on behalf of an unregistered firm against third parties unless registration and registration of the suing partners is shown.
The court noted the admitted nature of the plaint: a recovery suit for Rs.24,41,967/- founded on the dishonour of five cheques. The ADJ had relied on the Kerala High Court's reasoning in Afsal Baker, which distinguishes between suits founded on original contractual rights and suits founded on the statutory liability created by the Negotiable Instruments Act upon dishonour of a cheque (Sections 30 and 37).
Applying that principle, the court held that where the cause of action is the statutory liability created by Sections 30 and 37 of the Negotiable Instruments Act (i.e., the suit is laid on the instrument itself), the bar in Section 69(2) of the Partnership Act does not apply because the suit is not one to enforce a contractual right but to enforce a statutory right/liability. On that basis the court found no infirmity or illegality in the ADJ's order dismissing the petitioners' Order VII Rule 11 application.
Holding and Implications
HOLDING: The revision petition along with the connected application (C.M. No.4276/2018) is dismissed.
Implications: The impugned order of the learned Additional District Judge (dismissing the petitioners' application under Order VII Rule 11 CPC) is upheld; the suit founded on dishonour of cheques proceeds because the court held the cause of action to be statutory liability under Sections 30 and 37 of the Negotiable Instruments Act, and therefore not barred by Section 69(2) of the Indian Partnership Act. There is no order as to costs. The opinion does not discuss any broader precedential consequences beyond the direct effect on the parties.
Judge: HON'BLE MR. JUSTICE VINOD GOEL
Order Date: DECEMBER 13, 2018
$~6 * IN THE HIGH COURT OF DELHI AT NEW DELHI
% Date of Order: 13.12.2018 + C.R.P. No.19/2018 & C.M. Nos.4276-4277/2018
M/S. HINDUSTAN INFRASTRUCTURE CONSTRUCTION CORPORATION LIMITED & ANR. ..... Petitioners
Through: Mr. Anirudh Bakhru, Mr. Shadman Siddiqui & Mr. Ayush Puri, Advocates.
Versus
M/S. R.S. WOODS INTERNATIONAL & ORS. ....Respondents
CORAM:
HON'BLE MR. JUSTICE VINOD GOEL C.M. No.4277/2018 (for exemption)
Allowed, subject to all just exceptions. The application is disposed of.
C.R.P. No.19/2018 & C.M. No.4276/2018 (for stay)
1. The impugned order dated 09.10.2017 passed by the court of learned Additional District Judge-03, West District, Tis Hazari Courts, Delhi ('ADJ') in Civil Suit No.613734/16 titled as M/s. R.S. Wood International vs. M/s. Bhayana Builders Hindustan Infrastructure JV Pvt. Ltd. & Ors. dismissing the application of the petitioners/defendants under Order VII Rule 11 of the Code of Civil Procedure, 1908 ('CPC') is the subject-matter of challenge in this revision petition.
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2. The petitioners/defendants Nos.2 & 3 have filed an application under Order VII Rule 11 CPC for rejection of the plaint on the ground that the suit is barred under Section 69 (2) of the Indian Partnership Act, 1932 ('the Act').
3. By the impugned order, the learned ADJ dismissed the application of the petitioners by relying upon a judgment of the Kerala High Court in Afsal Baker vs. Maya Printers 2016 SCC OnLine Ker 29914. The Ld. ADJ held that „keeping in view the fact that the present case is also based on dishonoured cheque and not a contract between the parties, the application under Order 7 Rule 11 CPC is hereby dismissed inasmuch as the suit cannot be said to be not maintainable by virtue of provision of Section 69 (2) of the Indian Partnership Act. Ordered accordingly."
4. For convenience, Section 69 (1) and (2) of the Act reads as under :-
"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."
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5. The above provision deals with the effect of non-registration of a partnership firm and bars filing of a suit by or on behalf of such firm to enforce a right arising from a contract by or on behalf of such firm against any third party.
6. Admittedly the respondents/plaintiff has filed a Civil Suit for recovery of Rs.24,41,967/- against the petitioners/defendant on account of dishonour of cheques bearing no.482933 dated 18.11.2013 for Rs.5 lacs, no.482934 dated 19.11.2013 for Rs.5 lacs, no.482935 dated 20.11.2013 for Rs.5 lacs , no.709846 dated 18.11.2013 for Rs.5 lacs and no.709845 dated 20.11.2013 for Rs.4,41,967/-, total of which comes to Rs.24,41,967/-, which is the suit amount.
7. The Kerala High Court in Afsal Baker (surpa) observed as under :-
"10. In the instant case, as noticed above, by virtue of Section 30 and 37 of the Negotiable Instruments Act, on the dishonour of a cheque, the statute creates a liability on the drawer, apart from the general law of contracts. The right to sue on the contract is available and open to the party. However, apart from that, the statute creates a liability as against the drawer of the instrument. If the suit is on the original cause of action based on the original contract between the parties, there is no doubt, the suit would be hit by Section 69
(2) of the Indian Partnership Act. But, in the instant case, what is sought to be enforced is the liability created under the Negotiable Instruments Act. It is not a case where suit is filed on the original cause of action by producing the cheques as a piece of evidence to prove the liability under the original contract. Here, the suit itself is laid on the instrument. A reading of the
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plaint leaves no room for doubt regarding that. The bar under Section 69(2)of the Indian Partnership Act would apply only where the suit is sought to be laid on a contract and not in a case where statutory right/liability is sought to be enforced. In the instant case, the suit being purely based on the liability under Section 30 and 37of the Negotiable Instruments Act, it is a suit based on statutory liability dehors the contract between the parties. The suit cannot be held to be barred under Section 69(2) of the Indian Partnership Act.
11. In the circumstances, I find no reason to differ from the conclusion arrived at by the court below to the effect that the suit is not barred under Section 69(2) of the Indian Partnership Act and that it is maintainable."
8. In the instant case, the respondent is seeking enforcement of the liability of the petitioners created under Section 30 and 37 of the Negotiable Instruments Act, 1881 as the cause of action for the plaint is based on the dishonour of the said cheques. Since, the suit is not based on any contract between the parties, the bar under Section 69 (2) of the Act would not apply.
9. In view of this, I do not find any illegality or infirmity in the impugned order. Accordingly, the revision petition along with application, being C.M. No.4276/2018, is dismissed with no order as to costs.
(VINOD GOEL)
JUDGE
DECEMBER 13, 2018
'AA'
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