Bhavya Builders vs Super Properties

B.S. Patil, J.—This revision petition is filed challenging the order dated 11.08.2014 passed by the court below dismissing IA-III filed by 7th defendant under Order VII Rule 11(d) CPC seeking rejection of the plaint.

The suit has been filed seeking dissolution of the 1st defendant firm and for rendition of accounts. A declaration that Item Nos. 1 & 2 of the suit schedule properties were purchased by 2nd defendant - partner of the firm by using the funds of the firm and hence they were the properties of the plaintiff-firm has been sought. A further declaration that gift deeds dated 16.11.2010 executed by 2nd defendant in favour of 4th defendant and the sale deed dated 14.06.2013 executed by defendants 2 & 4 to 6 in favour of 7th defendant were not binding on the plaintiff-firm because they were sham transactions, is also sought. Another declaration is sought to the effect that the agreement of sale entered into on 06.06.2006 by the 2nd defendant - partner of the firm to purchase Item No. 3 of the suit schedule property was for and on behalf of the firm.

It was contended by the 7th defendant in support of the application filed seeking rejection of the plaint that there was no cause of action for the relief sought against the 7th defendant and that the suit filed by the plaintiff was hit by Section 69 of the Indian Partnership Act, 1932 (for short, the Act), as the partnership-firm was an unregistered firm. It was also urged that on the basis of the plaint averments, it was apparent that the suit was barred by time and the court in which the suit was instituted did not have jurisdiction to entertain the same.

The application was resisted by the plaintiff. The Trial Court having considered the pleadings and the respective contentions of the parties, has held that question regarding jurisdiction of the court has to be examined by framing necessary issue and the question of bar of limitation being a mixed question of law and fact would be examined at the stage of trial. However, as regards the bar contained under Section 69(2) of the Act for maintaining a suit by an unregistered firm, the Trial Court has held that the nature of relief sought by the plaintiff-firm were not hit by the provisions of Section 69(2) of the Act. It is in this background, this revision petition has been filed challenging the legality and correctness of the order.

I have heard the learned Counsel for both parties.

Section 69(2) of the Act states that no suit to enforce a right arising from a contract shall be instituted in any court by or on behalf of any 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. It is an admitted fact that the plaintiff-firm is an unregistered firm. The question is whether relief sought by the plaintiff-firm for enforcement of right arising from a contract has been sought by the firm against any third party, has to be examined and ascertained. In the case of Purushottam and Another Vs. Shivraj Fine Art Litho Works and Others, , dealing with the scope and effect of Section 69(2) and the expression ''right arising from a contract'' used therein, the Apex Court approving the principles enunciated in M/s. Haldiram Bhujiawala and Another Vs. M/s. Anand Kumar Deepak Kumar and Another, , has held as under:

"24. With respect, we find ourselves in complete agreement with the principles enunciated in Haldiram Bhujiawala and Anr. (supra). Having regard to the purpose Section 69(2) seeks to achieve and the interest sought to be protected, the bar must apply to a suit for enforcement of right arising from a contract entered into by the unregistered firm with a third party in the course of business dealings with such third party. If the right sought to be enforced does not arise from a contract to which the unregistered firm is a party, or is not entered into in connection with the business of the unregistered firm with a third party, the bar of Section 69(2) will not apply."

Now coming to the relief sought in the present suit as already adverted to above, plaintiff-firm is not seeking enforcement of any right arising from a contract to which it is a party. Therefore, as rightly held by the court below, the suit is not hit by the provisions of Section 69(2) of the Act although plaintiff-firm is an unregistered firm.

However, it has to be emphasized that the court below has not dealt with the other important question regarding jurisdiction of the court to entertain the suit, having regard to the assertions made by the 7th defendant that cause of action did not arise within the jurisdiction of the Court at Bengaluru. The court below has, however, made it clear that the said question has to be dealt with separately by framing an issue. The question which touches the jurisdiction of the court has to be raised and answered by the court below as a preliminary issue before proceeding with the merits of the case.

In so far as bar of limitation referred to by the court below, the same has to be dealt with by framing necessary issue. Regarding sufficiency of court fee paid, no opinion is expressed in this order and it will be open to the defendant to urge the same.

With the above directions, this revision petition is disposed of.