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2006 DIGILAW 4284 (PNJ)

Kanwaljit Singh v. Jarnail Singh

2006-11-07

HEMANT GUPTA

body2006
JUDGMENT Hemant Gupta, J. - The defendant is in second appeal aggrieved against the preliminary decree passed by the Courts below arising out of a suit for rendition of accounts and for mandatory injunction. 2. The plaintiff-respondents filed the suit aforesaid alleging that plaintiffs No. 1 and 2 and defendant executed a deed of partnership at Will on 1.4.1983 for running the business of Pharmaceuticals/Chemists under the name and style of M/s Indian Drug Store. The principal place of business of the firm was C- 657, G.T. Road, Karnal, a building owned by Ranjit Singh plaintiff No. 3. It was agreed between the parties under the partnership deed that in case the firm was dissolved or the business of the firm is discontinued, the tenancy rights and the right to occupy the property were to vest in plaintiff No. 2. It is the case set up by the plaintiffs that plaintiff No. 2 has served a notice under Section 43 of the Indian Partnership Act, 1932 (hereinafter to be referred as "the Act") to the defendant on 11.9.1987 which was duly served upon the defendant on 15.09.1987 whereby the defendant was duly informed that the said firm has been dissolved w.e.f. 15.10.1987. It was also pleaded that the said premises was given to the firm as a licensee. It was pleaded that since the firm stands dissolved, the licence has been revoked and it ceases to operate and, thus, plaintiffs No. 2 and 3 are entitled to restoration of vacant possession of the premises No. C-657, G.T. Road, Karnal. 3. The defendant-appellant has admitted the execution of deed of partnership but it was asserted that plaintiff No. 1 has always been managing the affairs of the business being the principal partner and the entire management of the business had always been in his hands and that plaintiff No. 2 was a sleeping partner but is in league with plaintiff No. 1. The defendant asserted that the firm is very much in existence and, in fact, plaintiff No. 1 signed a deed of retirement but before plaintiff No. 2 could sign, plaintiff No. 3 raised certain objections and snatched the deed from the hands of plaintiff No. 1. The defendant asserted that the firm is very much in existence and, in fact, plaintiff No. 1 signed a deed of retirement but before plaintiff No. 2 could sign, plaintiff No. 3 raised certain objections and snatched the deed from the hands of plaintiff No. 1. The defendant disputed the ownership of the shop in question and alleged that he and his brother Mohinder Pal Singh have become owner to the extent of 1/2 share in the shop in dispute. It was further pleaded that plaintiff No. 3 had also agreed to sell remaining 1/2 share of the shop to the defendant and his brother Mohinder Pal Singh vide agreement dated 10.08.1988. In the amended written statement, an objection was raised that the firm has not been registered under the law and, therefore, in view of Section 69 of the Act, the suit deserves dismissal. 4. The learned trial Court decided Issues No. 1, 2 and 3 together being inter-linked and held that the partnership was dissolved by legal notice Exhibit P-3 dated 11.09.1987 which was served upon the defendant on 15.09.1987 and resultantly a preliminary decree for rendition of accounts for the periods 1.4.1983 to 15.10.1987 was passed holding plaintiff No. 1 having 50% share whereas plaintiff No. 2 having 10% share and defendant having 30% share in the firm. Still further, in view of the undisputed partnership deed dated 1.4.1983, the defendant was directed to put plaintiff No. 2 in immediate possession of premises No. C-657, G.T. Road, Karnal relying upon judgment reported as Giani Ram v. Munshi Ram and others, (1965)67 Punjab Law Reporter 951. The appeal against the judgment of the trial Court was dismissed. 5. Before this Court, the defendant-appellant has moved Civil Misc. No. 9085-C of 2002 for permission to amend the written statement so as to raise a plea that the shop in dispute is, in fact, a joint Hindu family property. However, at the time of arguments, no reference was made by the learned counsel for the appellant in respect of such an application. No. 9085-C of 2002 for permission to amend the written statement so as to raise a plea that the shop in dispute is, in fact, a joint Hindu family property. However, at the time of arguments, no reference was made by the learned counsel for the appellant in respect of such an application. Even otherwise, the defendant cannot be permitted to amend the written statement so as to raise a plea that the shop in dispute is joint Hindu family property for the first time in second appeal as such amendment will necessitate de novo trial and such plea could have been taken by the defendant in the written statement originally filed. Therefore, I do not find any justification to entertain such application at this stage. 6. Another Civil Misc. No. 2362-C of 2006 has been filed by respondent No. 1 Jarnail Singh to the effect that he has withdrawn his application for preparation of final decree vide statement dated 7.6.2005 and, therefore, he has no objection if the appeal qua the said respondent is allowed. It is also pointed out that, in fact, respondent No. 2 has also moved an application on 7.5.2005 to the effect that the statement given by her on 12.06.2004 should not be acted upon. In fact, on 12.06.2004 statement of respondent No. 2 was recorded to withdraw her application for preparation of final decree. Admittedly, on the basis of statement recorded on 12.06.2004, an application for preparation of final decree has not been finally decided by the learned trial Court and the matter is pending adjudication. Learned counsel for the appellant has vehemently argued that the decree was passed in favour of plaintiff No. 2 Gurcharan Kaur whereas the premises are owned by Ranjit Singh, her husband. Therefore, in view of the statement dated 12.06.2004, the present appeal cannot proceed till the learned trial Court decides the question whether Gurcharan Kaur has rightly withdrawn the application for preparation of final decree. However, the objection is immaterial as in a suit for dissolution of partnership, a final decree can be sought by one or more partners. Since the application for preparation of final decree is still pending before the learned trial Court at the instance of one of the partners, therefore, there is no impediment in the decision of the present appeal. 7. Since the application for preparation of final decree is still pending before the learned trial Court at the instance of one of the partners, therefore, there is no impediment in the decision of the present appeal. 7. It is further pointed out that as per plaintiffs themselves, the possession of the firm was that of a licensee and, therefore, the suit by an unregistered firm is not maintainable by a partner of an unregistered firm in terms of the bar created by Section 69 of the Act. Reliance is placed upon the decisions reported as Loonkaran Sethia etc. v. Mr. Ivan E. John and others, A.I.R. 1977 S.C. 336 and M/s Raptakos Brett & Co. v. Ganesh Property, 1998(4) Recent Civil Reports 208 (SC). 8. At this stage, it will be relevant to reproduce Section 69 of the Indian Partnership Act, 1932, which is to the following effect : "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 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, or the Provincial Insolvency Act, 1920, to realise the property of an insolvent partner. (4) This Section shall not apply, - (a) to firms or to partners in firm 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, or outside the Presidency-towns, is not of a kind specified in the Second Schedule to the Provincial Small Cause Act, 1887, or to any proceeding in execution or other proceeding incidental to or arising from any such suit or claim." 9. Sub-section (1) of Section 69 of the Act contemplates that no suit to enforce a right arising from a contract shall be instituted in any Court against the firm or partner 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. Sub- section (2) of Section 69 of the Act deals with the enforcement of a right arising from a contract against a third person. Sub-section (3) of Section 69 of the Act creates an exception to the said embargo which contemplates that the provisions of sub-sections (1) and (2) shall not affect : (i) the enforcement of any right to sue for the dissolution of firm; (ii) for accounts of a dissolved firm or (iii) any right or power to realise the property of a dissolved firm. 10. Learned counsel for the appellant has vehemently argued that in terms of sub-section (3)(a) of Section 69 of the Act, though it may be open to a partner to seek dissolution of the firm or for accounts thereof, but the property which is referred to in sub-section (3) has to be the property of the partnership firm and not of the third person. Since the property is said to be in possession of the firm as a licensee, therefore, the shop cannot be said to be the property of a dissolved firm in respect of which embargo created in sub-section (1) of Section 69 of the Act will operate. Since the property is said to be in possession of the firm as a licensee, therefore, the shop cannot be said to be the property of a dissolved firm in respect of which embargo created in sub-section (1) of Section 69 of the Act will operate. On the other hand, learned counsel for the respondents has relied upon decision of the Honble Supreme Court reported as Mukund Balkrishna Kulkarni v. Kulkarni Powder Metallurgical Industries and another, (2004)13 Supreme Court Cases 750 to contend that a person suing as a partner can enforce a right under the contract for dissolution of firm and accounts in view of exception under sub- section (3) of Section 69 of the Act and the claim for possession would be a necessary corollary to a prayer for dissolution. It was held that without the prayer for specified share in the firms assets and business, the relief that may be granted in a suit for dissolution would be ineffective. 11. It cannot be disputed that enforcement of any right to sue for dissolution of firm or for accounts of the dissolved firm, the firm need not be registered. Reference may be made to Premlata (Smt.) and another v. M/s Ishar Dass Chaman Lal and others, (1995)2 Supreme Court Cases 145; and Bhartesh Chandra Jain v. Shoiab Ullah and others, (2004)13 Supreme Court Cases 358. 12. In Loonkarans case (supra), it was not denied that the suit out of which the appeals have arisen was for enforcement of the agreement by the plaintiff as a partner of Sethiya and Company which was an unregistered firm. Thus, it was found that the suit was undoubtedly a suit for the benefit and in the interest of the firm. Since the plaintiff has not sought to recover the outstanding of a dissolved firm, it was found that the suit was hit by Section 69 of the Act and was not maintainable. The said judgment has no applicability to the facts of the present case inasmuch as the plaintiffs have sought not only dissolution of firm but its accounts and also possession of the premises in possession of the firm. The said judgment, thus, provides little assistance to the appellant. 13. The said judgment has no applicability to the facts of the present case inasmuch as the plaintiffs have sought not only dissolution of firm but its accounts and also possession of the premises in possession of the firm. The said judgment, thus, provides little assistance to the appellant. 13. Similarly, the decision in M/s Raptakos Brett and Company (supra) again does not provide any assistance to the appellant inasmuch as it has been found in that case that the plaintiff has based its cause of action on the land of the law as well as on account of partnership. It was found that the common law of land under which the erstwhile tenant on expiry of the lease has to hand over vacant possession to the erstwhile landlord is statutorily recognized and the erstwhile landlord is entitled to base his cause of action on the statutory obligation of the erstwhile lessee on determination of the lease to put the lessor in possession of the property. The other cause of action is in respect of breach of covenant on the part of the defendant when it failed to deliver vacant possession to the plaintiffs on the expiry of lease. Thus, it has been held that though the suit is partly barred so far as it sought to enforce the obligation of the defendant under Clauses 14 and 17 of the contract of lease read with the relevant recitals of the lease deed but that part of cause of action which is based on law of land could be enforced by the plaintiff. 14. The said judgment has no applicability in the facts of the present case as clause 15 of the partnership deed itself contemplates that in case the firm or the business of the firm is discontinued, the tenancy right to occupy the premises shall vest in the second party. It is the said right which has been granted by the Courts below and the said right is part of exception of sub- clause (3)(a) of Section 69 of the Act. 15. The argument that the firm is only a licensee and, therefore, the said right cannot be enforced by the plaintiff is not tenable. The partners in the partnership deed have decided that in the event of dissolution of partnership, the right to occupy the premises shall vest in the second party i.e., plaintiff No. 2. 15. The argument that the firm is only a licensee and, therefore, the said right cannot be enforced by the plaintiff is not tenable. The partners in the partnership deed have decided that in the event of dissolution of partnership, the right to occupy the premises shall vest in the second party i.e., plaintiff No. 2. Such right with all its limitations is one which is covered by sub-section (3)(a) of the Act. Still further, in Giani Ram v. Munshi Ram and another, (1965)67 P.L.R. 951, wherein partnership itself contemplates that in the event of dissolution, the possession of the property shall go to the plaintiff, it was held to the following effect :- "......No doubt, while the partnership continued, the business premises were included in the capital asset of the partnership and, no doubt, ordinarily in taking accounts the value of the capital assets must necessarily come in, further when actual accounts are squared the rights and liabilities of the parties have to be adjusted taking into accounts as such capital assets, but when by express contract the parties themselves exclude from the manner and method of taking accounts certain property of the partnership, then how that property is to be handled on dissolution is determined in no other manner but the manner provided in the contract between the parties. It is according to that manner that the learned trial Judge has directed that the property in question be dealt with in view of the contract between the parties in clause 9 of the partnership deed. So that this argument does not carry the matter further to assist the case of the defendant." (emphasis supplied) 16. Still further, in Smt. Premlatas case (supra), the object of Section 69 of the Act appears to be that the partnership having been dissolved or having come to terminus, the rights of the parties are to be worked out in terms of the contract of the partnership entered by and between the partners and the rights engrafted therein. The exceptions carved out by sub-section (3) are to enforce those rights including the right to dissolution of the partnership despite the fact that the partnership firm was an unregistered one. The exceptions carved out by sub-section (3) are to enforce those rights including the right to dissolution of the partnership despite the fact that the partnership firm was an unregistered one. It was held to the following effect : ".......The object appears to be that the partnership having been dissolved or has come to a terminus, the rights of the parties are to be worked out in terms of the contract of the partnership entered by and between the partners and the rights engrafted therein. The exceptions carved out by sub-section (3) are to enforce those rights including the rights to dissolution of the partnership despite the fact that the partnership firm was an unregistered one...." 17. In the present case, the suit is for mandatory injunction claiming possession from defendant as partner of the firm. The possession of the firm may be that of a licensee but one of the partners is competent to enforce a clause in the partnership deed to claim possession as property of the dissolved firm. Such suit falls in the exception of clause 3(a) of Section 69 of the Act. 18. In view of the above discussion, I do not find that any ground for interference in second appeal at the instance of defendant-appellant is made out. Appeal dismissed.