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2023 DIGILAW 90 (GUJ)

Dhanesh Bhadarmal Jain v. Registrar Of Firm

2023-01-10

ARAVIND KUMAR, ASHUTOSH J.SHASTRI

body2023
JUDGMENT : Aravind Kumar, J. 1. Though the matter is listed for admission, the learned advocates appearing for the appellants and the second respondent have elaborately canvassed their arguments. Hence, we have thought it fit and appropriate to dispose of this appeal particularly having bestowed precious judicial time, since adjourning this matter to any other date would not be in the interest of justice. Essentially the dispute is between second respondent and the appellants though the impugned order has been passed by the first respondent. Hence, Mr.Sahil Trivedi, learned Assistant Government Pleader has accepted and waived notice for respondent No.1. 2. In this Letters Patent Appeal, the correctness and legality of the judgment dated 15.12.2022 passed in Special Civil Application No.22223 of 2022 has been called in question. BRIEF BACKGROUND OF THE CASE : 3. Appellants herein challenged the order dated 05.09.2022 passed by respondent No.1 whereunder first respondent herein has declared the partnership firm M/s.Samkit Infracon, having Registration No.GUJAH 1100224 as dissolved and has further ordered that said firm is being treated as dissolved. 4. The partnership firm namely M/s.Samkit Infracon was registered with the first respondent on 25.03.2016 with five partners. There was a reconstitution of the said firm on 12.08.2016 namely Mr.Dhanesh Bhadarmal Jain and Mr.Bhadarmal Modiram Jain were continued as partners and the remaining three partners retired. The said partnership firm is carrying on the business of land and building development, civil construction and other businesses incidental thereto. The firm is said to have executed a Sale Deed dated 28.12.2018 in favour of the second respondent i.e. M/s.Madhav Associates in respect of which Special Civil Suit No.207 of 2020 has been filed by the partnership firm and same is pending before the Civil Court, Ahmedabad. It also appears that several disputes have arisen between writ applicants and the second respondent. One of the partners of the firm namely Shri Bhadarmal Modiram Jain expired on 16.08.2021. Thereafter, a Deed of Change in Partnership came to be entered into between the then erstwhile partners Shri Dhanesh Bhadarmal Jain and Smt.Babita Dhanesh Jain under the deed dated 18.09.2021. Said partnership deed was presented for registration before the first respondent – Registrar of Firms, who registered the same on 16.12.2021 and was approved by the said authority, as evident from Form No.C issued by the Registrar of Firms found at page 24/E of the appeal compilation. 5. Said partnership deed was presented for registration before the first respondent – Registrar of Firms, who registered the same on 16.12.2021 and was approved by the said authority, as evident from Form No.C issued by the Registrar of Firms found at page 24/E of the appeal compilation. 5. In the meanwhile, the second respondent is said to have ignited proceedings before the Real Estate Regulatory Authority (RERA) against the Partnership Firm which had filed Special Civil Suit No.207 of 2020. Being aggrieved by acceptance of the change and challenging the same, Special Civil Application No.13610 of 2022 was filed wherein 2nd respondent sought for declaring that the partnership firm had stood dissolved by virtue of application of Section 42 of the Indian Partnership Act, 1932. During the pendency of the petition, a draft amendment was moved by petitioner therein namely 2nd respondent herein which was granted on 21.07.2022 whereunder petitioner therein sought for a direction to the respondent to pass orders on the representation said to have been preferred by the writ applicant therein (2nd respondent herein). Learned Single Judge of this Court without issuing notice to the firm which would ultimately be the aggrieved party directed the first respondent to pass appropriate reasoned order on the representation dated 25.07.2022 filed by the writ applicants within a period of six months and strangely extended an opportunity of hearing to the writ applicant also. On the basis of said order, first respondent herein namely the Registrar of Firms by impugned order dated 05.09.2022 has held that partnership firm is treated as dissolved. On the basis of said order, first respondent herein namely the Registrar of Firms by impugned order dated 05.09.2022 has held that partnership firm is treated as dissolved. Being aggrieved by the same, a writ application was filed by the appellants herein before the learned Single Judge who by impugned order dismissed the petition by arriving at a conclusion that Section 42 (c) read with Section 63 of the Partnership Act would indicate that on certain contingency happening the firm stands dissolved and reconstitution of a firm under Section 63 can be done in case of dissolution of the firm which brings into effect a new partnership firm and therefore, by operation of law, the partnership firm stood dissolved and no application could have been made under the Deed of Change of Partnership on 18.09.2021 by a partnership firm which did not exist and a contract for bringing in Smt.Babita Jain as a successive partner was no contract between the partnership firm which did not exist on the death of one of the two partners. Hence, the partners of said firm are before this Court challenging the said order. 6. We have heard Mr.Percy Kavina, learned Senior Counsel appearing for the appellants, Shri R.S.Sanjanwala, learned Senior Counsel appearing for respondent No.2 and Mr.Sahil Trivedi, learned Assistant Government Pleader appearing for the State. Perused the records. 7. It is the contention of Mr.Percy Kavina, learned Senior Counsel appearing for the appellants that Registrar of Firms committed a serious error in setting aside the registration already made by ignoring the provisions of Section 63 of the Indian Partnership Act, 1932, inasmuch as neither said provision nor any other provision of the Partnership Act would provide for dissolution of the firm by 1st respondent and the only power which could have been exercised even if any was with regard to record and entry of changes relating to the firm. Contending that Registrar of Firms do not have power to adjudicate the issue of dissolution of firm and this aspect has not been considered by the learned Single Judge in proper perspective and thereby it has resulted in great failure of justice. He would also contend once first respondent having recorded and moved the entry of change relating to the reconstitution of the firm on 16.12.2021, subsequent impugned order of dissolving the firm is without jurisdiction. He would also contend once first respondent having recorded and moved the entry of change relating to the reconstitution of the firm on 16.12.2021, subsequent impugned order of dissolving the firm is without jurisdiction. He would also submit that reconstitution of the firm has taken place by virtue of death of one of the partners and said recording of change has been taken place and accordingly, recorded by the Registrar of Firms and as such, the first respondent had no power to adjudicate or to make any such entry that firm is dissolved. He would also submit that judgments relied upon by the learned Single Judge would not be attracted to the facts and circumstances of the present case and as such, he would submit that order of the learned Single Judge as well as the impugned order are liable to be set aside and prays for appeal being allowed. 8. Per contra, Mr.R.S.Sanjanwala, learned Senior Counsel appearing for respondent No.2 would contend that second respondent is a person who is litigating with the partnership firm and as such he has every locus standi to question the authority of the firm and all proceedings arising thereunder. He would submit that undisputedly the partnership firm has filed a Civil Suit in Special Civil Suit No.207 of 2020 for cancellation of the sale deed dated 28.12.2018, wherein the second respondent has specifically pleaded and contended that on account of death of one of the partners of the firm, the partnership firm had stood dissolved and this aspect has been taken into consideration by the Registrar of Firms as well as learned Single Judge to turn down the claim of the writ applicants and there is no error committed by the learned Single Judge and hence, he prays for rejection of the appeal and seeks for upholding the order passed by the learned Single Judge. He would also submit that by virtue of Section 42(c) of the Indian Partnership Act, 1932, on death of one of the partners, the firm would stand automatically dissolved and change in the constitution of the firm would not revive the existing firm and this aspect having not been taken into consideration by the Registrar of Firms had resulted in a representation being filed before the said authority seeking rectification of the Register of Firms and based upon the direction issued by the learned Single Judge in Special Civil Application No.13610 of 2022 on 27.07.2022, the claim of the second respondent has been considered and upheld by first respondent which does not call for interference and he prays for dismissal of the appeal. 9. Mr.Sanjanwala, learned Senior Counsel would elaborate his submissions by contending that Section 72 mandates that a public notice is to be given and thereby any person aggrieved by reconstitution of a partnership firm would have a right to object to its reconstitution and it is by virtue of the same, second respondent who was having a privity of contract with the erstwhile partnership firm had raised a plea of the firm having come to an end by virtue of dissolution by operation of law and subsequent registration would not revive the firm and as such, the impugned order passed by the first respondent is just and proper and he prays for dismissal of the appeal. Mr.Sahil Trivedi, learned Assistant Government Pleader would support the impugned order. 10. Having heard the learned advocates appearing for the parties and on perusal of the records as well as the impugned order passed by the learned Single Judge, we are of the considered view that there cannot be any dispute with regard to the proposition of law that where there are two partners in a partnership firm, on death of one of the partners of the firm, the partnership firm stands dissolved, in view of the mandate of clause (c) of Section 42 of the Indian Partnership Act, 1932. This issue has been dealt elaborately by the learned Single Judge. We are also in full agreement with the said proposition of law as discussed by the learned Single Judge vis-a-vis Section 42(c) only. 11. This issue has been dealt elaborately by the learned Single Judge. We are also in full agreement with the said proposition of law as discussed by the learned Single Judge vis-a-vis Section 42(c) only. 11. Having said so, it requires to be noticed that in the present facts and circumstances which has been obtained would disclose that initially there were two partners after reconstitution of the firm on 12.08.2016 namely Shri Dhanesh Bhadarmal Jain and Shri Bhadarmal Modiram Jain were the partners of the firm M/s.Samkit Infracon. Said Bhadarmal Modiram Jain expired on 16.08.2021. Said firm stood dissolved. However, on the same day said Shri Dhanesh Bhadarmal Jain and Smt.Babita Dhanesh Jain decided to carry on the same business which was carried on by M/s.Samkit Infracon under the same name and style and as such, constituted a partnership firm and a Deed of Partnership came to be executed on 18.09.2021, a copy of which is placed along with writ papers would disclose that said firm would carry on same business as was being carried on by the erstwhile firm. The said clause of Partnership Deed dated 18.09.2021 reads: “AND NOW WHEREAS the parties of Second Parts died on 16th August, 2021 and THIRD Parts entered into partnership on the same day and THIRD Part along with FIRST part have decided to carry on the same business of Land & Building Development, Civil Construction, Contractors and any other business Incidental thereto and such other business in the Name M/s. SAMKIT INFRACON at 401, Alpha Megacon House, Sindhu Bhuvan Road, Bodakdev Road, Ahmedabad – 380054. And the Administrative Office is situated at the above mention place with effect from 16th August, 2021.” 12. It is this Deed of Partnership viz. dated 18.09.2021 which came to be placed before the first respondent which was approved and registered in the ‘Register of Firms’ on 16.12.2021 as contemplated under Section 58 of the Indian Partnership Act, 1932. And the Administrative Office is situated at the above mention place with effect from 16th August, 2021.” 12. It is this Deed of Partnership viz. dated 18.09.2021 which came to be placed before the first respondent which was approved and registered in the ‘Register of Firms’ on 16.12.2021 as contemplated under Section 58 of the Indian Partnership Act, 1932. Hence, the contention of Mr.Sanjanwala, learned Senior Counsel appearing for the second respondent that a change has been brought about in the firm and same has been erroneously recorded and validity thereof was required to be considered by 1st respondent and this exercise having been done by 1st respondent and holding the firm as having stood dissolved by order dated 05.09.2022 requires to be considered for the purposes of rejection and accordingly, we reject said contention for reasons indicated hereinbelow. 13. Undisputedly, the second respondent is a stranger to the firm namely he does not have any right in the business and management of the partnership firm. Merely because the firm had sold a property to him and as such as an offshoot of such transaction, there existed privity of contract, would not give a right to a person like the second respondent who is a third party and stranger to the firm to question the constitution or reconstitution or registration of the partnership firm, that too, before the Registrar of Firms. At the most he can contend said registration would not bind him. The rectification of the Register of Firms even if any were to be carried out as contemplated under Section 64 of the Act, the said power would be exercised by the Registrar of Firms only on an application made by the parties who have signed a document or deed relating to the partnership firm and not otherwise. In other words, third parties who are to be construed as inter-meddlers or strangers to firm would have no right whatsoever to question before the Registrar of Firms either change in the constitution of the firm being brought about or the registration of firm registered by the Registrar of Firms. In other words, third parties who are to be construed as inter-meddlers or strangers to firm would have no right whatsoever to question before the Registrar of Firms either change in the constitution of the firm being brought about or the registration of firm registered by the Registrar of Firms. If at all, if there is any such grievance, it has to be necessarily espoused by invoking Section 9 of Code of Civil Procedure, 1908, before the competent and jurisdictional Civil Court to work out the civil rights, if any and/or raise it by way of defense in any proceedings including collateral. For this reason also, we are of the considered view that second respondent who was only a purchaser of a portion of the building constructed by the firm would have no locus to question the reconstitution of the partnership firm before Registrar of Firms and he would not have locus to question the same. 14. The Hon’ble Apex Court in the case of Sharad Vasant Kotak and others vs. Ramniklal Mohanlal Chawda and another reported in AIR 1998 SC 877 , has discussed with regard to the status of a registered firm. It has been held on death of one partner, if new partner is inducted in his place, existing firm could only be said to be reconstituted and there is no need or necessity of obtaining new registration of such firm. It has been held as under : “25. The next question is whether the registration given to the firm under the first Partnership Deed ceases when a new partner was introduced into the firm. For this, we refer to Sections 58, 59 and 63, the relevant portions have already been extracted. Rules 3, 4,6 and 17 have also been extracted. The forms prescribed in this connection have also been extracted. A close perusal of these provisions with Forms "A", "E", "G" and "H" will show that there is a definite distinction between the Certificate of Registration given to the firm and any alterations to be entered in the Register of Firms. This will suggest in no uncertain terms that the changes in the constitution of the firm will not affect the registration once made. In other words, it is not required that every time a new partner is inducted fresh registration has to be applied and obtained. However, information about changes have to be given. This will suggest in no uncertain terms that the changes in the constitution of the firm will not affect the registration once made. In other words, it is not required that every time a new partner is inducted fresh registration has to be applied and obtained. However, information about changes have to be given. Failure to comply attracts penalties under Sections 69A of the Act. In this contend, the judgment in Maddi Sudarsanam (supra) can be usefully cited. It was held that :- "The second condition laid down in Sections 69(2) is also satisfied. The persons now suing i.e. the present partners are shown in the Register of Firms as partners of the firm. though the same Register shows two other partners., one of whom died and the other retired. It may be that the fact of retirement of one of the partners and the death of another should have been notified to the Registrar under Sections 63(1) as the said events effected a change in the constitution of the firm. But the default made by the firm in considering the question of the maintainability of the suit under Sections 69(2). There is the essential distinction between the constitution of a firm and its dissolution. Non-compliance with the provisions of Sections 63(1) may have only other consequences, but under Sections 69(2) only two conditions should be complied with by a firm to enforce a right arising from a contract and those two conditions are complied with in the present case.” 15. Turning our attention back to the core issue as to whether for rectification of mistakes if any having occurred in the Register of Firms is to be exercised by the Registrar at the instance of a third party or an objector, it would lead us to the irresistible conclusion that proceedings for rectification of mistakes can be initiated by Registrar only on application made by all the parties who have signed the document relating to the firm which has been filed before the Registrar and not otherwise. This is the plain meaning of Section 63. This is the plain meaning of Section 63. By reading into said provision that even a third party who might have some transaction with the partnership firm by virtue of which a privity of contract having existed, would also get a right to question the constitution of the firm before the Registrar of Firms would amount to doing violence to the provision of law. Hence, we desist from accepting the attractive argument proposed by Shri Sanjanwala. 16. The dispute which the second respondent has proposed to raise is an issue which will have to be thrashed out in civil proceedings and not in the proceedings before the Registrar of Firms. Hence, the only remedy which is available to the second respondent is to approach the Civil Court and work out his rights and the said issue cannot be agitated before the Registrar of Firms. Yet another reason which persuade us to quash the impugned order by setting aside the findings of the learned Single Judge is the fact that Registrar of Firms having accepted the Deed of Constitution of the firm dated 18.09.2021 on 16.12.2021 had ceased to exercise the power with regard to entertaining any grievance in that regard by a third party. In other words, on such order having been passed accepting the registration, he becomes functus officio at least to the third parties. To put it differently, save as otherwise provided under Section 63 of the Act, the Registrar would have no other power like review of his order of acceptance as has been done in the instant case by the impugned order dated 05.09.2022. For that reason also, we are of the considered view that representation of the petitioners ought not to have been entertained. However, the second respondent armed with the order dated 27.07.2022 passed in Special Civil Application No.13610 of 2022 insisted for the first respondent to adjudicate his claim and by virtue of such directions having been issued by the learned Single Judge, the Registrar of Firms was perforced to consider the claim and accept the same by passing a non-speaking order dated 05.09.2022. We say that impugned order dated 05.09.2022 being a non-speaking for the simple reason that it does not even remotely suggest as to how he has exercised the power; under which provision of law; the basis on which such power is being exercised; and as to how the case laws which has been pressed into service and relied upon in the said order was applicable to the facts on hand. For all these cumulative reasons also, the impugned order dated 05.09.2022 is not sustainable. 17. For the reasons aforestated, we proceed to pass the following : JUDGMENT (i) Appeal is allowed. (ii) The order dated 15.12.2022 passed in Special Civil Application No.22223 of 2022 is set aside. Special Civil Application No.22223 of 2022 is allowed. The order dated 05.09.2022 (Annexure-A) is hereby quashed. (iii) Pending application/s if any stands consigned to records. (iv) No orders as to costs.