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Karnataka High Court · body

2008 DIGILAW 632 (KAR)

Yessay Food oils v. P. A. Moosa

2008-10-24

V.JAGANNATHAN

body2008
Judgment :- Jagannathan, J. Whether the suit filed by an unregistered partnership firm for possession and mesne profits can be said to be not maintainable in view of the bar under Section 69(2) of the Indian Partnership Act, 1932 is the question that calls for an answer in this second appeal filed by the plaintiffs in the trial court. 2. The suit was instituted by the plaintiffs, who are the partners of an unregistered partnership firm, seeking the relief of possession and mesne profits with a direction to the defendant to deliver vacant possession of plaint `A schedule premises and for recovery of mesne profits at Rs.500/- per day till the date of delivery of the vacant possession and it is the case of the plaintiffs that the defendant was a tenant under them on a rent of Rs.70/- per day and following the defendant unlawfully subletting the plaint schedule premises to one Mohammed Kunhi, the plaintiffs had to terminate the tenancy by issuing a quit notice on 20.1.2003 requiring the defendant to quit and surrender the suit premises immediately after the end on 28.2.2003. 3. Theaforesaid suit of the plaintiffs was resisted by the defendant by denying the landlord-tenant relationship and also the fact of sub-letting by him and also took up the stand that the tenancy had not been validly terminated. 4. The trial court framed five issues in the light of the stand taken by the respective parties and; after appreciating the evidence on record, held that the landlord-tenant relationship is established and so also the fact of the plaintiffs having issued a valid notice of termination and the issue concerning mesne profits was answered partly in favour of the plaintiffs and were held to be entitled to the delivery of possession of the suit property. Following the said finding, the suit of the plaintiffs was decreed as prayed for except insofar as the amount of mesne profits per day is concerned and the trial court held that at the rate of Rs. 100/- per day, the mesne profits ought to be paid by the defendant and gave two months time to the defendant to hand over vacant possession of the suit premises. 5. 100/- per day, the mesne profits ought to be paid by the defendant and gave two months time to the defendant to hand over vacant possession of the suit premises. 5. The lower appellate court, on appeal by the defendant, held that the suit of the plaintiff was not maintainable because, the firm of which the plaintiffs were the partners was an unregistered firm and, therefore, the bar under Section 69(2) of the Partnership Act came in the way of maintaining the suit. The lower appellate court also noted the fact that the firm had been registered subsequent to the filing of the suit. Relying on several decisions, the lower appellate court, therefore, held that the suit instituted by the plaintiffs was not valid and the very fact of the firm being registered subsequent to the filing of the suit cannot come to the rescue of the plaintiffs and, therefore, the appeal preferred by the defendant was allowed and the trial courts judgment was set aside. Aggrieved by the reversal at the hands of the lower appellate court, the plaintiffs have come up in this second appeal. .6. I have heard the learned counsel for the parties and perused the entire record of this case as well as the judgments of the courts below. This court, at the time of admission of this appeal, had raised the following substantial question of law for consideration: ."Whether the learned judge of the lower appellate court was right in reversing the judgment and decree of the trial court which had decreed the suit for eviction, a suit filed by an unregistered partnership firm, only on the reasoning that the suit was not maintainable due to non-registration of the plaintiff-firm notwithstanding the law laid by the Supreme Court in the case of M/s. Raptocos Brett & Co. Ltd. Vs. Ganesh Property, reported in 1998(7) SCC 184 and followed in the case of M/s. Haldiram Bhujiawala & Another Vs. M/s Anand Kumar Deepak Kumar & Another, reported in JT 2000(2) SC 596, holding that non-registration of a firm will not affect the maintainability of a suit wherein the plaintiff firm is not enforcing contractual right vis-a-vis the defendant, even in terms of Section 69(2) of the Partnership Act, 1932." 7. M/s Anand Kumar Deepak Kumar & Another, reported in JT 2000(2) SC 596, holding that non-registration of a firm will not affect the maintainability of a suit wherein the plaintiff firm is not enforcing contractual right vis-a-vis the defendant, even in terms of Section 69(2) of the Partnership Act, 1932." 7. Learned Counsel Shri Kukkaje Ramakrishna Bhat for the appellants contended that the lower appellate court was totally in error in not noticing the well settled position in law as regards the maintainability of the suit and the learned judge of the lower appellate court failed in wrongly construing the decisions which were cited before him and a careful reading of the said decisions will make it clear that it is only where the suit is instituted on the basis of the terms of a contract existing between the parties that, in such an event, a suit by an unregistered partnership firth to enforce any of the contractual terms will not be maintainable and the lower appellate court, therefore, did not properly take note of the decisions cited before it. 8. Relying on the decisions rendered by the Apex Court in the cases reported in A.I.R. 1998 S.C. 3085, J.T. 2000(2) S.C. 596 and J.T. 2000(8) S.C. 347, the learned counsel for the appellants argued that it is clear from the aforesaid decisions of the Apex Court that Section 69(2) of the Partnership Act cannot be a bar for the enforcement of a statutory right or a common law right by an unregistered firm and the right to evict a tenant upon the expiry of the tenancy period was not a "right" arising from a contract, but it was a common law right or a statutory right under the Transfer of Property Act. Therefore, the view taken by the lower appellate court and the reliance placed by it on the decisions placed before it cannot be sustained in law. 9. Onthe other hand, the learned counsel Shri Pundikai Eshwara Bhat for the respondent-defendant placed reliance on the very decisions referred to by the lower appellate court and contended that the defendant continued to remain a tenant even after the quit notice was issued and, therefore, without the plaintiffs partnership firm being a registered firm as on the date of the suit, the lower appellate court was justified in holding that the suit of the plaintiffs was not maintainable. The further submission made is that the mere fact of the firm being registered subsequent to the filing of the suit will not be of any assistance in view of the law laid down by the Apex Court in this regard. The learned counsel for the respondent, therefore, placed reliance on the decisions reported in I.L.R. 2005 Karnataka 2162, 1989(3) S.C.C. 476 and 1998(8) S.C.C. 559 to support the above contentions of his. 10. Referring to the decision in the case of M/S Raptakos Brett & Co. Ltd. Vs Ganeshpropertv AIR 1998 SC 3085 , the learned counsel for the respondent submitted that a careful reading of the said decision will make it clear that the Apex Court left the question concerning the effect of subsequent registration and decided by observing in the course of its judgment at paragraph-30 that as far as point No.2 raised for consideration by it is concerned, the Apex Court left it unanswered by observing that it is not necessary to consider the said point No.2. Therefore, the submission made by the learned counsel is that the fact of subsequent registration cannot be of any assistance to the appellants. 11. In the light of the aforesaid contentions put forward and having gone through the judgments of the courts below, it is necessary to first mention the facts which are not in dispute and they are, that the relationship between the parties as landlord and tenant is admitted and secondly, payment of rent by the defendant is also not in dispute and the third aspect is the quit notice issued by the appellants pursuant to Section 111(h) of the Transfer of Property Act is also not disputed by the defendant and in fact, he has given his reply notice to the quit notice issued to him. As such, it is not necessary to deal with this aspect of the matter and the focus, therefore, will have to be mainly on the maintainability of the suit in view of the bar contained under Section 69(2) of the Partnership Act. .12. As such, it is not necessary to deal with this aspect of the matter and the focus, therefore, will have to be mainly on the maintainability of the suit in view of the bar contained under Section 69(2) of the Partnership Act. .12. Section 69(2) of the Partnership Act, 1932 reads as under: ."(2) No suits 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." 10.13. It is, therefore, clear from the above provision that bar that is contemplated is in respect of "enforcement of a right arising from a contract", if the firm is not a registered firm. Therefore, the point to be considered is whether the right sought to be enforced by the appellants can be called as a right arising from a contract. 114. It is an undisputed fact that the appellants issued quit notice to the respondent-defendant as per Section 111(h) of the T.P.Act. Whether following the quit notice issued as above, the contract between the parties still continues to subsist or not is the next point to be considered. The Apex Court has answered this point in the case of M/S Raptakos Brett & Co. Ltd. Vs Ganesh Property (Supra),. The Apex Court, in the said decision, has held as under: "A suit for restoration of possession against the erstwhile lessee was filed by the lessor, a unregistered firm. The averment in the plaint stated that the lease in respect of the suit premises terminated by efflux of time but the defendant-lessee has failed and neglected to quit, vacate and deliver up peaceful possession of suit premises to the plaintiff as required under the covenant of the said lease and law of land. The question was whether the suit is barred by S.69(2). Held, that the plaint as framed by the plaintiff-respondent is based on a composite cause of action consisting of two parts. One part refers to the breach of the covenant on the part of the defendant when it failed to deliver vacant possession to the plaintiff-lessor on the expiry of the lease and thereafter all throughout and thus it was guilty of breach of covenants 14 and 17 of the lease deed. One part refers to the breach of the covenant on the part of the defendant when it failed to deliver vacant possession to the plaintiff-lessor on the expiry of the lease and thereafter all throughout and thus it was guilty of breach of covenants 14 and 17 of the lease deed. The second part of the cause of action, however, is based on the statutory obligation of the defendant-lessee when it failed to comply with its statutory obligation under S.108(q) read with S.111 (a) of the Transfer of Property Act. So far as this second part of the cause of action is concerned it cannot certainly be said that it is arising out of the erstwhile contract. When the plaint in addition to breach of covenant of lease made a reference to right of the plaintiff to get possession under the law of the land, the plaintiff was seeking enforcement of its legal right to possession against the erstwhile lessee flowing from the provisions of S.108(q) r/w S.111(a) of the Transfer of Property Act which in turn also sought to enforce the corresponding statutory obligation of the defendant under the very same statutory provisions. So far as this part of the cause of action is concerned it stands completely outside the sweep of S.69, sub-section (2) of the Partnership Act. The cause of action based on the law of the land, namely, Transfer of Property Act whereunder the plaintiff had sought to enforce its statutory right under S.108(q) read with S.111(a) of the Transfer of Property Act had nothing to do with the earlier contract which had stood determined by efflux of time." 15. Apart from the above, the Apex Court also referred to certain earlier decisions rendered by it and the relevant observations made therein are also excerpted and they are as under: "13. On the other hand, Dr. Apart from the above, the Apex Court also referred to certain earlier decisions rendered by it and the relevant observations made therein are also excerpted and they are as under: "13. On the other hand, Dr. Singhvi appearing for the respondent rightly contended placing reliance on a catena of decisions of this court that on expiry of the period of lease, the erstwhile tenant who continues in possession, in the absence of being a tenant holding over, has to be treated as tenant at sufferance whose right of occupation arises not from the erstwhile contract which is dead and gone but which may arise under the general law of the land particularly against forcible re-entry by ex-landlord or under any statutory law protecting the possession of statutory tenants under the relevant Rent Act, if applicable. In this connection, Dr.Singhvi invited our attention to a decision of this court in Ganga Dutt Murarka vs. Kartik Chandra Das, (1961) 3 SCR 813 : ( AIR 1961 SC 1067 ), Shah,J, speaking for a three-Judge Bench of this court in the aforesaid decision held at page 819 (of SCR): (at p.1070 of AIR) of the Report that after the expiry of the lease if the erstwhile tenant continues in possession against the wish of the landlord he cannot be said to have continued in possession pursuant to a contract which is already non-existent. The following pertinent observations in this connection were pressed in service by Dr.Singhvi: "Occupation of premises by a tenant whose tenancy is determined is by virtue of the protection granted by the statute and not because of any right arising from the contract which is determined. The statute protects his possession so long as the conditions which justify a lessor in obtaining an order of eviction against him do not exist. Once the prohibition against the exercise of jurisdiction by the court is removed, the right to obtain possession by the lessor under the ordinary law springs into action and the exercise of the lessors right to evict the tenant will not unless the statute provides otherwise be conditioned." ….. …. …. … "8. Tenant at sufferance is one who comes into possession of land by lawful title, but who holds it by wrong after the termination of the term or expiry of the lease by efflux of time. The tenant at sufferance is, therefore. …. …. … "8. Tenant at sufferance is one who comes into possession of land by lawful title, but who holds it by wrong after the termination of the term or expiry of the lease by efflux of time. The tenant at sufferance is, therefore. one who wrongfully continues in possession after the extinction of a lawful title. There is little difference between him and a trespasser. In Mullas Transfer of Property Act (7 Ed.) at page 633, the position of tenancy at sufferance has been stated thus: A tenancy at sufferance is merely a fiction to avoid continuance in possession operating as a trespass. It has been described as the least and lowest interest which can subsist in reality. It, therefore, cannot be created by contract and arises only by implication of law. When a person who has been in possession under a lawful title continues in possession after that title has been determined, without the consent of the person entitled. A tenancy at sufferance does not create the relationship of landlord and tenant ….. " 16. It is, therefore clear from the aforesaid law laid down by the Apex Court that after the quit notice was issued as per Section 111(h) on the expiry of the lease period, the tenant cannot be said to have continued in possession pursuant to a contract which is already non-existent. 17. In the case of Kamal Pushp Enterprises Vs. D.R. Construction Company JT 2000 (8) SC 347, the Apex Court referred to the decision rendered in the case of Raptakos Brett Co. Ltd. and also to another decision in the case of Haldiram Bhujiawala Vs. Anand and held that the bar under Section 69(2) was not attracted to a case where a suit is for permanent injunction to restrain the defendants from using the plaintiffs trade mark/name which was based upon the statutory rights under the Trade Marks Act and on common law principles of tort applicable to passing off actions and not under the unregistered partnership agreement. Therefore, the settled position in law in the light of the aforesaid decisions of the Apex Court is that the bar under Section 69(2) of the Partnership Act has no application where a suit is filed in respect of the enforcement of statutory right or a common law right. Therefore, the settled position in law in the light of the aforesaid decisions of the Apex Court is that the bar under Section 69(2) of the Partnership Act has no application where a suit is filed in respect of the enforcement of statutory right or a common law right. In the instant case, the cause of action, according to the appellants, arose following the issue of quit notice under Section 111(h) of the T.P.Act. Therefore, the right sought to be enforced was under the general law of the land and there was no question of any contractual rights between the parties being sought to be enforced. 18. As far as the decisions referred to by the learned counsel for the respondent are concerned, the lower appellate court considered the very same decisions and held against the appellants. But, what the lower appellate court did not see was that the said decisions were in respect of the Arbitration proceedings where the terms of the contract between the parties contained an arbitration clause and, therefore, in respect of invoking an arbitration agreement, the suit filed by the unregistered partnership fire, was held to be not maintainable. As such, the decisions referred to by the lower appellate court can have no bearings on the facts and circumstances of the case on hand. 19. Insofar as the effect of subsequent registration of the firm is concerned, though the learned counsel for the respondent placed reliance on two decisions in this regard wherein it has been held that the firm must be registered at the time of institution of the suit and not later not, in the case on hand, that is not the question that requires to be considered but the question of law that is framed is as to whether a suit by the appellants can be held to be maintainable under the general law of the land despite the firm being an unregistered firm. Therefore, the rulings referred to by the learned counsel for the respondent cannot come to his aid. 20. Therefore, the rulings referred to by the learned counsel for the respondent cannot come to his aid. 20. In view of the law laid down by the Apex Court in Raptakoss case and also the other two cases referred to by the learned counsel for the appellants, I am of the view that the lower appellate court was not justified in taking up the view that the suit of the appellants was not maintainable merely because the plaintiffs firm was an unregistered firm as on the date of the filing of the suit. Since the plaintiffs were seeking to enforce the statutory right or, to put it in other words, common law right and pursuant to quit notice issued under Section 111(h) of the T.P.Act, the lower appellate court could not have held that the suit was not maintainable. As such, the said finding of the lower appellate court is erroneous in law and, therefore, one of the exceptions referred to by the Apex Court in regard to interference by the High Court in second appeal viz., where the finding of the courts is based on erroneous application of law, gets attracted. 21. As far as the submission made by the learned counsel for the respondent that the quit notice itself is invalid because, at the time when the firm took over the ownership of the suit premises, the firm itself was not registered is concerned, in view of the reply argument of the learned counsel for the appellants that no such ground was raised before the courts below, the question of considering the said issue now does not arise. In view of the said submission made by the learned counsel for the appellants, I do not find any merit in the submission by the learned counsel for the respondent that the quit notice is not valid in law. 22. The substantial question of law raised is, therefore, answered in the negative and the judgment of the lower Appellate Court is, therefore, set aside and that of the trial court stands restored by allowing this second appeal with costs. 22. The substantial question of law raised is, therefore, answered in the negative and the judgment of the lower Appellate Court is, therefore, set aside and that of the trial court stands restored by allowing this second appeal with costs. As far as grant of time is concerned, the learned counsel for the respondent prayed for two years time to vacate and deliver vacant possession to the appellants and, if the court is of the view that the said time sought is too long, then the court may consider granting reasonable time. For this, the submission made by the learned counsel for the appellants is that the H.R.C. proceedings were commenced in the year 1995 and as of now, 14 years have elapsed and moreover, the defendant has sub-let the premises to some third party and under these circumstances, no time be granted to the respondent. Considering the above submissions made by the learned counsel for the parties and taking note of the long period of litigation, I am of the view that the defendant can be granted six months time from the date of this judgment to hand over vacant possession of the suit premises to the appellant and the defendant to pay mesne profits as directed by the trial court.