Firm Sitaram Agarwal vs Harnath and Another

P.N. Shinghal, J.—This second appeal is by the plaintiff who has been unsuccessful in both the courts below.

The two courts below have not gone into the merits of the controversy regarding the claim for the recovery of money, but have taken the view that the suit is barred u/s 69(2) of the Partnership Act, As this is the only point for consideration in this second appeal, it is not necessary to state all the facts. It will be sufficient to say that the plaintiff averred in paragraph 1 of the plaint that the plaintiff was a registered partnership firm of which Suraj Bux, Jagdish Narain, Nathulal and Sita Ram were the owners. This was denied by both the defendants. Defendant No. 2 pleaded that the plaintiff was an unregistered partnership concern of which Murlidhar and Daluram were also partners. In paragraph 7 of the written statement it was stated that unless the plaintiff could establish that the firm was registered and the names of all its partners including Murlidhar and Daluram were shown as partners, the suit would be barred u/s 69 of the Partnership Act.

The first issue therefore related to the question whether the plaintiff was a registered partnership firm. It has been admitted in this connection by the plaintiff that the application for registration was made on April 29, 1957 and while the registration fee was fully paid up on May 15, 1957, the actual registration was made by the Registrar of Firms on August 26, 1957. The suit was filed on July 15, 1957. On these admitted facts, both the Courts below have taken the view that the suit is not maintainable on account of the bar of Sub-section (2) of Section 69 of the Partnership Act. The question is whether this view is incorrect?

In order to appreciate the controversy, it will be desirable to make a reference to Sections 58, 59 and 69 of the Partnership Act for they are quite sufficient to show the scheme and the purpose of the provisions regarding the registration of firms and the effect of non-registration.

Sub-section (1) of Section 58 provides that the registration of a firm may be effected at any time by sending by post or delivering to the Registrar a statement in the prescribed form, along with the prescribed fee, giving the particulars mentioned in the sub-section. It is not disputed that such a statement was filed on behalf of the plaintiff on April 20, 1957 and the prescribed fee was paid on May 15, 1957. Thus these requirements of Section 58 were complied with before the institution of suit on July 15, 1957. But Section 59 of the Partnership Act is equally important for it provides as follows :--

"59. When the Registrar is satisfied that the provisions of Section 58 have been duly complied with, he shall record an entry of the statement in a register called the Register of Firms, and shall file the statements."

The Section thus provides that the Registrar has to (i) satisfy himself that the provisions of Section 58 have been complied with, (ii) record an entry of the statement (sent or delivered to him u/s 58 of the Act) in a register called the Register of Firms, and (iii) file the statement. It is therefore quite clear that the mere despatch or delivery of the statement referred to in Section 58, or the mere filing of the statement by the Registrar of Firms, does not have the effect of registering the firm.

In the present case, as has been stated, it is admitted that the statement referred to in Section 58 was filed on April 20, 1957, and the prescribed fee was paid on May 15, 1957, so that the completed statement, in the form prescribed by Section 58, was made available to the Registrar on May 15, 1957, two months before the filing of the suit. But it is also admitted that the Registrar did not record an entry of the statement in the Register of Firms until August 26, 1957, that is, more than a month after the institution of the suit. It cannot therefore be said that the plaintiff was a registered firm on the date of the suit or, in other words, it is quite clear that the suit was brought by the plaintiff at a time when it had not been registered u/s 59.

What then would be the effect of such non-registration? This is provided in Section 69 of the Partnership Act, Sub-section (2) of which reads as follows,--

"69(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 suing are or have been shown in the Register of Firms as partners in the firm."

Thus the sub-section prohibits the institution of a suit on behalf of a partnership firm unless two requirements are fulfilled: (i) the firm has been registered, and (ii) the persons suing are or have been shown in the Register of Firms as partners in the firm. As has been stated, it is beyond doubt that in the present case the plaintiff firm was not registered u/s 59 and the first requirement of Sub-section (2) of Section 69 was not therefore fulfilled before the institution of the suit. The two courts below were quite justified in deciding the first issue against the plaintiff and ordering the dismissal of the suit in view of the clear provisions of Sub-section (2) of Section 69.

The learned counsel for the plaintiff has however relied on the following observations in paragraph 10 of Jayalakshmi Rice and Oil Mill Contractors Co., Angalur Vs. Commissioner of Income tax Andhra Pradesh, Hyderabad, for the argument that mere presentation of the statement u/s 58 of the Partnership Act had the effect of completing the registration of the firm,--

"The words of the statute in Section 58 of the Partnership Act are express and clear that registration may be effected by delivering to the Registrar a statement. On the contrary, Section 59 mentions that the Registrar shall make an entry of the statement in the Register of Firms but does not say that, by such entry, registration is effected. Thus, the wording of the body of Section 59 is consonant with the wording of the body of Section 58 and the two sections indicate a scheme whereby the act of the party by way of presentation of statement u/s 58 makes effective registration whereas the action of the Registrar is only a clerical act of recording an entry in the Register of Firms and filing the statement regarding a firm which had already become effectively registered."

It has therefore been argued that the firm had been effectively registered when the registration fee was fully paid up on May 15, 1957, and that the suit which was filed on July 15, 1957 was quite in order.

I have gone through the judgment of their Lordships of the Andhra Pradesh High Court but, with all respect, I am unable to subscribe to the view taken by them. Among other reasons, their Lordships relied on the following passage at page 812 of "Lindley on the law of Partnership" 12th edition, --

"It is apprehended that registration is complete as soon as the prescribed statement has reached the registrar; and that the filing of the statement and issue of the certificate are ministerial acts the omission of which would not deprive a limited partnership of the benefit of the Act."

But this view has been taken on the wordings of Sections 8 and 13 of the Limited Partnership Act, 1907 of England, which are quite different from the provisions in Sections 58 and 59 of the Indian Partnership Act. Section 8 of the English Act provides that the registration of a limited partnership "shall be effected" by sending by post or delivering to the registrar a statement containing the particulars prescribed in the section, while Section 58 of the Indian Act provides that registration of a firm "may be effected'' by sending or delivering the required particulars so that there is this difference between the two sections. Moreover, whereas Section 13 of the English Act provides that on receiving any statement made in pursuance of that Act the Registrar "shall cause the same to be filed" the Indian Partnership Act requires that the Registrar should be "satisfied" that the provisions of Section 58 have been complied with and then he has to "record an entry of the statement in a register called the Register of Firms," and file the statement.

I have already made a reference to these three requirements of Section 59 and they bring out the difference between the provisions of the Limited Partnership Act, 1907 and the Indian Partnership Act. It cannot therefore be said that the portion extracted by their Lordships in Jayalakshmi Rice and Oil Mills Contractors Co.''s case, AIR 1967 Andh Pra 99 can be a proper guide for the interpretation of the provisions of Sections 58, 59 and 69 of the Indian Partnership Act. Their Lordships disagreed with the view taken in (Firm) Ram Prasad-Thakur Prasad Vs. (Firm) Kamta Prasad-Sita Prasad, and Bank of Koothattukulam v. Itten Thomas AIR 1955 ker 155 which followed (Firm) Ram Prasad-Thakur Prasad Vs. (Firm) Kamta Prasad-Sita Prasad, on the grounds that in the first of these cases the question whether "the act of the Registrar under S. 59 amounted to a mere clerical act of recording or discretionary act was not raised, considered or decided". In regard to the second case, they took the view that their Lordships of the Travancore-Cochin High Court did not give any reason for differing from the view of Lindley referred to above. In my opinion, however, both the cases dissented from by their Lordships of the Andhra Pradesh High Court were correctly decided and they fully support the reasoning adopted by me above on the wordings of Sections 58, 59 and 69 of the Indian Partnership Act.

I may in this connection give one more reason why it is not possible for me to subscribe to the view taken in Jayalakshmi Rice and Oil Mills Contractors Co.''s case, AIR 1967 Andh Pra 99. Their Lordships, in my humble opinion, did not fully appreciate that it is the requirement of Sub-section (2) of Section 69 that not only the firm instituting the suit should be registered, but it should also be shown that "the persons suing are or have been shown in the Register of Firm as partners in the firm." This additional requirement of the sub-section cannot, for obvious reasons, be fulfilled merely by sending or delivering to the Registrar of Firms the statement required by Section 58, for it is necessary to show, with reference to the entry in the Register of Firms, that the persons suing are or have been registered as partners. It must therefore be held that the mere despatch or delivery of the statement u/s 58 cannot suffice for the purpose of saving the suit from the bar of Sub-section (2) of Section 69.

I am therefore of the view that the appellants are not entitled to succeed because the registration of the firm after the institution of the suit will not save it from the bar of Section 69(2) of the Indian Partnership Act. I am fortified in this view by the decisions in (Firm) Ram Prasad-Thakur Prasad Vs. (Firm) Kamta Prasad-Sita Prasad, and AIR 1955 Trav-Co. 155 to which I have made a reference already, and by the decisions in Firm Laduram Sagarmal Vs. Jamuna Prasad Chaudhuri and Others, , K.K.A. Ponnuchami Goundar Vs. Muthusami Goundar and Another, Abdul Karim v. Ramdas Narayandas AIR 1951 Nag 159 , Prithvisingh Devising Vs. Hasan Alli Vazirkhan, Firm Des Raj Prem Chand and Another Vs. Firm Hira Lal Kali Ram and Another, Dwijendra Nath Singh and Another Vs. Govinda Chandra and Another, . Nand Kishore v. Maheswari Mills Ltd. AIR 1953 MP 42, Jammu Cold Storage and General Mills Ltd. v. Khairati Lal and Sons AIR 1960 J&K 101, and Union of India v. Durgadutta Biswanath AIR 1961 gau 2.

I have therefore no hesitation in holding that the present suit could not be instituted by or on behalf of the plaintiff firm because it had not been registered at the time of the institution of the suit. The two courts below were quite right in deciding issue No. 1 against the plaintiff and in dismissing the suit.

Faced with such a situation, Mr. Agarwal, learned counsel for the appellant, made a request, while replying to the arguments of the learned counsel for the respondents, that the plaintiff may be allowed to withdraw the suit under Order 23, Rule 1(2) C.P.C. with liberty to institute a fresh suit on the same subject-matter. This request has been opposed by the learned counsel for the respondents on several grounds. No written application has been made by the learned counsel for the plaintiff-appellants giving the reasons why such a request was not made in the trial court or the court of first appeal even though the defendants had specifically pleaded that the plaintiff was not a registered firm and could not institute the suit. There is also nothing to show why the request for withdrawal with liberty to institute a fresh suit should be granted. It is not therefore possible to entertain the request.

No other point remains for consideration. The appeal is dismissed, but there will be no order as to the costs in the circumstances of the case.