DATED THIS THE 8TH DAY OF NOVEMBER 2013 -...
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RFA No.1468/2006
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® IN THE HIGH COURT OF KARNATAKA AT BANGALORE
DATED THIS THE 8TH DAY OF NOVEMBER 2013
PRESENT
THE HON’BLE Dr. JUSTICE K.BHAKTHAVATSALA
AND
THE HON’BLE Mrs. JUSTICE B.S.INDRAKALA
R.F.A.NO.1468/2006 (DEC)
BETWEEN
1. Smt.Sandhya Anthraper Kurishingal, W/o Tarun Kurishingal, Aged about 29 years, Residing at No.CA-132, Riviera Retreat Thevara Waterfront, Kochi-682 013, Rep. by GPA Holder Smt.Cecilia Anthraper.
2. Mr.Vinod Vijayakumar,
S/o.Dr.V.Vijayakumar, Aged about 28 years, Residing at No.4, Langford Gardens, Bangalore-560 025, Rep. by GPA Holder Dr.V.Vijayakumar. …APPELLANTS
(By Sri.Udaya Holla, senior counsel
for M/s.Holla & Holla, Advs.)
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AND: 1. Manju Kathuria,
W/o.Virendra Kathuria, Aged about 52 years, Residing at Sompur Gate, Sarjapur Road, Bangalore-562 125.
2. M/s.Fortune Projects,
A partnership firm, Having its principal Place of business at No.98/1, 1st Floor, 1st Block, Koramangala, Sarjapura Main Road, Bangalore-560 034.
3. M.Shivananda,
Major, S/o.unknown partner, M/s.Fortune Projects, No.98/1, 1st Floor, 1st Block, Koramangala, Sarjapura Main Road, Bangalore-560 034.
4. D.V.Bhuvanesh,
Major, S/o.unknown partner, M/s.Fortune Projects, No.98/1, 1st Floor, 1st Block, Koramangala, Sarjapura Main Road, Bangalore-560 034.
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5. Sri.Farooq, Major, S/o.unknown partner, M/s.Fortune Projects, No.98/1, 1st Floor, 1st Block, Koramangala, Sarjapura Main Road, Bangalore-560 034. …RESPONDENTS
(By M/s.Kamal & Bhanu, Advs. for R-2 to 5, Sri.Ravi V.Hosmani, Adv. for proposed impleading
Respondents, 9 9-A, 13, 16, 18-A, 20 and 26 in I.A.I/2006, Smt.Lata Sawant, for M/s.Fortune Law Firm, Advs. for proposed Impleading respondents 1, 3, 3A, 4, 5, 5A, 6, 6A, 7, 7A, 8, 11, 12, 12A, 14, 15, 17, 18, 19, 21, 22 23, 23A, 24, 24A and 27 in I.A.I/06)
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This RFA is filed u/s.96 of CPC against the Judgment & Decree dt.19.4.2006 passed in O.S.No.1071/2003 on the file of the I Addl. Civil Judge (Sr. Dn.), Bangalore Rural Dist., Bangalore, dismissing the suit for declaration and injunction.
This Appeal being heard and reserved, coming on for pronouncement of Judgment, this day, Dr.Bhakthavatsala, J, delivered the following:-
JUDGMENT
A short question that arises for our consideration in
this appeal is -
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“Whether the dismissal of the suit in
O.S.No.1071/2003 on the file of I Addl. Senior
Civil Judge, Bangalore Rural District, Bangalore,
as not maintainable under Section 69(2) of the
Partnership Act, 1932 (in short, “the Act”) calls
for interference of this Court ?”
2. Our answer to the above point is in the affirmative
for the following reasons:
Appellants who are plaintiffs/partners of an
unregistered firm of M/s.Windsor Wings Developers, filed a
suit against the defendants in O.S.No.1071/2003 on the file
of Senior Civil Judge, Bangalore Rural District, Bangalore,
for the relief of declaration that the registered Sale deed
dated 26.04.2003 executed by defendant No.1 is invalid,
illegal and not binding on the plaintiffs, cancellation of the
sale deed and for permanent injunction restraining the
defendants 2 to 5 from selling, leasing, mortgaging or
otherwise alienating and interfering with their peaceful
possession of the suit schedule property. It is the case of the
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plaintiffs that the suit schedule property was purchased in
the name of the Firm and RTC entries stands in the name of
the Firm. In the year 2003, due to growth of I.T corridor in
the area, market value of the suit property was
`30,00,000/-. The plaintiffs, in the month of March 2003,
brought up the subject of selling the suit schedule property
to the 1st defendant. But, the 1st defendant objected for sale.
Again, when the plaintiffs raised the subject in the month of
November, 2003, the 1st defendant avoided the discussion
and the plaintiffs suspected the conduct of the 1st defendant
and they made enquiries about the suit schedule property in
the Office of the Sub-Registrar and discovered that the 1st
defendant, who had no authority to sell the immovable
property belonging to the Firm, without their consent had
executed a sale deed dated 26.4.2003 on behalf of the Firm,
in favour of the 2nd defendant for a consideration of
`16,66,620/- though the property was worth more than
`30,00,000/-. It is contended that the sale deed is invalid,
void, fraudulent and the same is executed clandestinely with
an intention of cheating the plaintiffs. In para-14 of the
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plaint, it is pleaded that defendants 2 to 5 are trying to
dispossess the plaintiffs and also trying to alienate the suit
schedule property and therefore filed the Suit for the relief,
as prayed for.
3. For the purpose of convenience ‘the appellants’ and
‘the respondents’ are hereinafter referred to as ‘the plaintiffs’
and ‘the defendants’ as arrayed in the Suit.
4. The defendants entered appearance and filed their
written statement.
5. The defendants have taken up the contention that
the Suit is barred under Section 69(2) of the Partnership Act.
6. The trial Court framed as many as eight issues and
the issue No.5 is on the point-
“Whether the plaintiffs prove that the suit of
the plaintiffs is not maintainable in view of
Section 69(2) of the Partnership Act ?”
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The above-said issue No.5 was treated as preliminary
issue. The trial Court, after hearing on the preliminary
issue, answered the same in the affirmative in favour of the
defendants and dismissed the Suit as not maintainable
under Section 69(2) of the Act. This is impugned in this
Appeal.
7. Sri.Udaya Holla, learned senior counsel appearing
for the plaintiffs along with the Counsel on record
submitted that the Court below erred in dismissing the suit
as not maintainable under sub-section (2) of Section 69 of
the Act. He further submitted that the appellants are
neither enforcing any contract nor the contract of
partnership and therefore the Suit is maintainable and
Section 69 of the Act does not bar the suit. He has cited
the following decisions:
i) 2003 (3) SCC 229 (N.KHADERVALI SAHEB (DEAD) BY
L.Rs AND ANOTHER vs. N.GUDU SAHIB (DEAD) AND
OTHERS) on the point that partnership is not an
independent legal entity and the Firm name is only
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compendious name given to partnership and the
partners are the real owners of its assets;
ii) 2009(5) SCC 608 (V.SUBRAMANIAM vs. RAJESH
RAGHUVANDRA RAO) on the point that the
partnership is a compendium of its partners, the
Partners of the firm are co-owners of the property of
the firm. Absence of registration does not mean that
the partners of the firm are deprived of rights in the
said firm or its members and hence, cannot file a suit
for its assets or dissolution or for realization of the
property in the firm;
iii) 2007(15) SCC 58 (PURUSHOTTAM AND ANOTHER vs.
SHIVRAJ FINE ARTS LITHO WORKS AND OTHERS) on
the point that concept of partnership is to embark
upon a joint venture and for that purpose, to prove
capital money or even property included as immovable
property and interest in properties to their share in the
joint venture of the business of the partnership;
8. On the other hand, learned counsel for defendants 2
to 5 submits that as the plaintiffs’ partnership firm is
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unregistered, the Suit is not maintainable under sub-
section (2) of Section 69 of the Act. He has contended that
according to sub-section (1) of Section 69, no suit to
enforce a right arising from a contract or conferred by the
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 Registrar of firms as a partner in the
firm.
9. According to the Partnership Deed dated
29.12.1995, the defendant No.1 is the partner No.1 and the
plaintiffs 1 and 2 are the partner Nos. 2 and 3, respectively,
of the Firm called M/s. Windsor Wings Developers. The
main business of the firm is to deal in real estate, buy, sell,
acquire immovable property, develop property, construct
building, sell viable sites, commercial, residential or
industrial or any other business as may be decided upon by
the partners from time to time. All the partners are working
partners.
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10. According to Clause 25 of the Partnership deed, no
partners of the firm shall, without the consent in writing of
the other partners, be entitled to deal with the items
mentioned in sub-Clauses-(a) to (h). Sub-clause (d) of
Clause 25 of the Partnership deed says that no partners of
the firm, shall, without consent in writing of the other
partner, is entitled to transfer immovable property
belonging to the firm. Therefore, it is contended by the
learned counsel for the defendant Nos. 2 to 5 that the
plaintiffs are enforcing their right under sub-clause (d) of
Clause 25 under the partnership deed by filing the Suit and
therefore, suit is not maintainable even under sub-section
(1) of Section 69 of the Act. His further contention is that as
per sub-Section (2) of Section 69, the plaintiffs/partners
are not entitled to enforce their right in respect of the suit
schedule property belonging to the un-registered Firm
against the defendants 2 to 5. He has cited the following
decisions:
i) AIR 1978 DELHI 255 (M/S.SHANKAR HOUSING
CORPORATION vs. SMT.MOHAN DEVI AND OTHERS);
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ii) AIR 1977 SC 336 (LOONKARAN SETHIA ETC., vs.
MR.IVAN E.JOHN AND OTHERS);
iii) AIR 1992 DELHI 92 (KAVITHA TREHAN AND OTHERS
vs. BALSARA HYGIENE PRODUCTS LTD.);
iv) AIR 1989 SC 1769 (M/S.SHREERAM FINANCE
CORPORATION vs. YASIN KHAN AND OTHERS);
v) 1985(1) WLN 791 (RAJASTHAN HIGH COURT
SOHANLAL BASANT KUMAR vs. UMRAOMAL
CHOPRA).
11. It is useful to excerpt Section 69 of the Indian
Partnership Act, 1932, for immediate reference, which 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.
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(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
using 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
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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.
12. The sum and substance of sub-section (1) of
Section 69 of the Act is that no suit to enforce a right
arising from a contract or conferred by this Act shall be
instituted in any Court and the 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
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and the person suing is or has been shown in the Register
of Firms as a partner in the firm.
13. The defendants have not pleaded that the suit is
barred under sub-section (1) of Section 69, but in this
Appeal, it is contended that the suit is not maintainable
both under sub-sections (1) and (2) of Section 69 of the
Act.
14. The plaintiffs who are partners of unregistered firm
are neither enforcing their right arising from a contract nor
the right conferred by the Act. But, the learned counsel for
respondents/defendants is that the plaintiffs are enforcing
their right under the contract of partnership deed dated
29.12.1995 and specifically Clause 25(d) which says that
no partner of the firm shall, without the consent in writing
of the other partners, be entitled to transfer immovable
property belonging to the Firm, but the defendant No.1, as
a partner of the partnership firm, has sold the suit land in
favour of defendants 2 to 5. Though it is stated in sub-
clause (d) of clause 25 of the partnership deed that no
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partner of the firm shall without the consent in writing of
the other partner, be entitled to transfer immovable
property belonging to the firm, the appellants/plaintiffs
seek to enforce their right conferred upon them under the
Transfer of Property Act. It is well settled principle that a
‘partnership firm’ has ‘no separate legal entity’. It is always
understood that “firm” means ‘partners’, ‘partners’ means
collectively a ‘firm’. Thus the property belonging to a
partnership firm is the property of the partners of the firm.
In view of the above, under the Transfer of Property Act,
each of the partner is entitled to claim his right to the
immovable property of the firm, as co-owner. Under such
circumstances, the contention of the learned counsel for
Respondents 2 to 5 that the suit filed by the plaintiffs
enforcing their right under the contract of partnership
deed, holds no water.
15. Now, we refer to sub-section (2) of Section 69.
According to that 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
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and the persons suing are or have been shown in the
Register of Firms as the partners in the firm. In the instant
case, there is no contract between the plaintiffs on one side
and defendants 2 to 5 on the other and thus, there is no
question of plaintiffs enforcing a right arising from a
contract and thus the Suit is not hit under sub-Section (2)
of Section 69 of the Act.
16. As per Section 69(1) of the Act, an unregistered
partnership firm or partners are disabled from enforcing a
right arising from a contract or the right conferred by the
Partnership Act, 1932, but the provision does not take
away the right of the partners of an unregistered firm to
enforce their right under other enactments. According to
Article 300-A of the Constitution of India, no person shall
be deprived of his property save by authority of law.
17. It is pertinent to mention that 8 guntas of land in
Survey No.24/1, 2 acres 30 guntas of land in Survey
No.24/4 and 1 acre 12 guntas of land in Survey No.29, all
situated at Goppasandra village, Sarjapur Hobli, Anekal
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Taluk, i.e., in all 4 acres 10 guntas of land bounded on the
East by land of Lakshmaiah Reddy, west by land of
Narayana Reddy, north by land of Chikkapullappa, south
by land of Rajappa, is the property of the partnership firm,
was purchased under three registered Sale deeds dated
20.01.1996 by the partnership firm, viz., M/s.Windsor
Wings Developers, out of the funds of the firm. Thus, the
property becomes the property of the partners and they are
co-owners. Apart from that the sale of the property entire
property measuring 4 acres 10 guntas of land by
defendant No.1 in favour of the defendant No.2, cannot be
said to be a business transaction as the business of the
firm is to acquire immovable property, develop property,
construct buildings, sell viable sites, commercial,
residential or industrial or any other business as may be
mutually decided upon by the partners from time to time.
In other words, land measuring in all 4 acres 10 guntas
was purchased by the Firm with an intention to develop
and make sites and sell it. Therefore, the plaintiffs are
entitled for the relief sought for. Defendant No.1 has
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committed breach of trust, which is an offence under the
Indian Penal Code. It is useful to refer to some of the
decisions on the point.
i) In the decision reported in AIR 1982 DELHI 482
(M/s.VIRENDRA DRESSES vs. M/s.VIRENDRA
GARMENTS), the Delhi High Court has held that an
unregistered partnership firm is entitled to file a suit
for permanent injunction for passing off and remission
of accounts against the defendant and enforce the
right under the Trade and Merchandise Marks Act,
1958;
ii) In AIR 2006 BOMBAY 76 (CHANDRAIYYA MUTWAYYA
IRABOLTI vs. SIDRAM GANPAT INGLE), the Bombay
High Court has held that a suit for recovery of
damages for a misconduct committed by another
partner of the partnership firm and taking away
certain articles lying therein and another wrongful act
attributed is surrounding a godown and collecting
money from the owner; is maintainable;
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iii) In the decision reported in AIR 1975 KERALA 144
(KERALA ARECANUT STORES vs. RAMKISHORE
SONS AND ANOTHER), the Division Bench of the
Kerala High Court has held that a suit by partner of an
unregistered firm for recovery of money under
Negotiable Instrument Act on account of dishonour of
a cheque endorsed in favour of a firm, is not barred.
iv) In the decision reported in AIR 1990 PATNA 95
(PADAM SINGH JAIN vs. CHANDRA BROTHERS AND
OTHERS), the Patna High Court has held that eviction
suit under Bihar Buildings, Lease, Rent and Eviction
(Control) Act, 1983, by an unregistered firm is not for
enforcement of agreement and the right to sue for
eviction is a statutory right and therefore, Section
69(2) of Partnership Act, does not apply to eviction
suit.
18. As per the above decisions, the plaintiffs are
enforcing their right as co-owners of the suit property
conferred under the Transfer of Property Act and the
Partnership Act does not bar the partners of an
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unregistered firm from enforcing their right conferred under
the other enactments. In other words, at the cost of
repetition, it must be mentioned that what is prohibited
under Section 69 of the Act is enforcement of contract of
partnership, provisions of the Partnership Act, 1932 and
enforcement of right arising from a contract (between the
firm and third party) and not the rights conferred under
the other enactments. Therefore, we are of the opinion that
the trial Court erred in dismissing the suit as barred by
sub-section (2) of Section 69 of the Partnership Act, 1932.
The decisions relied upon by the learned Counsel for the
respondents/defendants are of no avail to the case of the
defendants. For the reasons stated above, we answer point
for consideration in the affirmative in favour of the
appellants/plaintiffs and against the respondents/
defendants.
19. In the result, we pass the following Order:
Appeal is allowed. The impugned Order dated
19.04.2006 made in O.S.No.1071/2003 on the file of Senior
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Civil Judge, Bangalore Rural District, Bangalore, is set
aside and the suit is remitted to the trial Court for disposal,
in accordance with law.
Registry is directed to refund the entire Court Fee paid
on the memorandum of appeal.
Sd/-
JUDGE
Sd/-
JUDGE Bnv Bjs