Mahendra Uttamrao Kadam and others vs M/s. Kacchi Properties, Satara

R.M. Borde, J.—Heard.Rule.By consent of the parties, petitions are taken up for final disposal at the admission stage.

The facts involved in all these petitions are common, the issue involved is identical, so all the petitions can be disposed of by this common judgment. However, for the sake of clarity the facts are taken from Writ Petition No. 1870/2011.

The petitioners/original defendants are taking exception to the order passed below Exh.51 in Special Civil Suit No. 74/2010 by Second Joint Civil Judge, Satara decided on 12th January, 2011. On consideration of application tendered by the plaintiff seeking withdrawal of the suit with a liberty to file fresh suit, the trial Court granted permission in favour of the plaintiff.

The respondent/original plaintiff presented suit on behalf of the partnership firm claiming specific performance of the agreement dated 31st December, 2009. An application seeking interim injunction at Exh.5 was presented by the plaintiff which came to be rejected by the trial Court on 14th May, 2010. The plaintiff filed an appeal raising exception to the order passed by the trial Court below Exh.5 by filing Appeal from Order No. 543/2010 to the High Court, however, appeal also came to be dismissed on 3rd August, 2010. The plaintiff, thereafter, preferred SLP challenging the order passed by this Court before the Apex Court, however, SLP also came to be rejected by the Apex Court on 1st October, 2010.

The petitioners herein/original defendants presented an application u/s 9A of Code of Civil Procedure, 1908 ("C.P.C." for short) requesting the Court to dismiss the suit presented by the plaintiff on the ground that the suit is presented by the plaintiff which is an unregistered firm and in view of section 69 of the Partnership Act the suit is not maintainable. It is stated that application u/s 9A presented by the defendants was duly argued before learned trial Judge and was prescribed for orders. However, during intervening period, the original plaintiff tendered an application as contemplated by Order 23, Rule 1 of CPC requesting the Court to permit the plaintiff to withdraw the suit with liberty to file fresh suit on the same cause of action. The said application was opposed by the defendants by filing their say. However, learned trial Judge, on consideration of contentions raised by respective parties, was pleased to allow the application. Hence the instant writ petitions.

I have heard the arguments advanced by learned counsel for the respective parties. Shri Karnik, learned counsel appearing for the petitioner contended that section 69 of the Partnership Act contemplates presentation of the suit by a registered partnership firm. In the instant matters, the suit is presented by the plaintiff, which was an unregistered partnership firm, on the date of presentation of the suit. It is the contention of the petitioners/ original defendants that learned trial Judge has committed serious error in according permission to the plaintiff to institute fresh suit on the same cause of action. There was no difficulty in permitting the plaintiff to withdraw suit unconditionally, however, it was not open for the trial Judge to grant liberty to the plaintiff as the plaintiff does not fulfill the requirement of sub-rules (3) and (4) of Rule 1 of Order 23 of Civil Procedure Code. According to the petitioners/ original defendants, the defect pointed out by them in respect of presentation of the suit by unregistered partnership firm is not a defect of formal character and, as such, it was not open for the trial Court to accord permission to the plaintiff to withdraw suit with liberty to file fresh suit.

The learned counsel appearing for the respondent/original plaintiff, however, support the impugned order passed by the trial Court.

Sub-rules (3) and (4) of Rule 1 of Order 23 of CPC provides thus :

Order XXIII WITHDRAWAL AND ADJUSTMENT OF SUITS

Withdrawal of suit or abandonment of part of claim. --

(1)...............

(2)...............

(3) Where the Court is satisfied, --

(a) that a suit must fail by reason of some formal defect, or

(b) that there are sufficient grounds for allowing the plaintiff to institute a fresh suit for the subject-matter of a suit or part of a claim,

it may, on such terms as it thinks fit, grant the plaintiff permission to withdraw from such suit or such part of the claim with liberty to institute a fresh suit in respect of the subject-matter of such suit or such part of the claim.

(4) Where the plaintiff --

(a) abandons any suit or part of claim under sub-rule (1), or

(b) withdraws from a suit or part of a claim without the permission referred to in sub-rule (3),

he shall be liable for such costs as the Court may award and shall be precluded from instituting any fresh suit in respect of such subject-matter or such part of the claim.

Reference is necessary to the judgment of the Apex Court in the case of M/s. Haldiram Bhujiawala and Another Vs. M/s. Anand Kumar Deepak Kumar and Another, . In the reported judgment, the suit was filed by the plaintiff/ respondent before the Apex Court claiming decree of permanent injunction restraining the defendants therein, their partners, servants etc. from infringement of trademark No. 285062 and using the trademark/name viz. "HALDIRAM BHUJIAWALA" or any identical name/ mark deceptively similar thereto and for the damages in the sum of Rs. 6 lakhs and for destruction of the material etc. While considering the issue raised before the Supreme Court, in paragraph-9 it is observed thus :

The question whether section 69(2) is a bar to a suit filed by an unregistered firm even if a statutory right is being enforced or even if only a Common Law right is being enforced came up directly for consideration in this Court in M/s. Raptakos Brett and Co. Ltd. Vs. Ganesh Property, . In that case, Majmudar, J. speaking for the Bench clearly expressed the view that section 69(2) cannot bar the enforcement by way of suit by an unregistered firm in respect of a statutory right or a common law right. On the facts of that case, it was held the right to evict a tenant upon expiry of the lease was not a right ''arising from a contract'' but was a common law right or a statutory right under the Transfer of Property Act. The fact that the plaint in that case referred to a lease and to its expiry, made no difference. Hence, the said suit was held not barred. It appears to us that in that case the reference to the lease in the plaint was obviously treated as a historical fact. That case is therefore directly in point. Following the said judgment, it must be held in the present case too that a suit is not barred by section 69(2) if a statutory right or a common law right is being enforced.

On considering the contentions raised before me Apex Court, it is observed in paragraph-26 of the judgment thus :

In fact, the Act has not prescribed that the transaction or contracts entered into by a firm with the third party are bad in law if the firm is an unregistered firm. On the other hand, if the firm is not registered on date of suit and the suit is to enforce a right arising out of a contract with the third party-defendant in the course of its business, then it will be open to the plaintiff to seek withdrawal of the plaint with leave and file a fresh suit after registration of the firm subject of course to the law of limitation and subject to the provisions of the Limitation Act. This is so even if the suit is dismissed for a formal defect. Section 14 of the Limitation Act will be available inasmuch as the suit has failed because the defect of non-registration falls within the words "other cause of like nature" in section 14 of the Limitation Act, 1963. (See Surajmal Dagduamji, Shop Vs. Shrikisan Ramkisan, . (emphasis supplied)

It is the contention of the petitioners that observations appearing in paragraph-26 of the judgment are merely obitor and unconnected with the controversy involved in the matter. The contention raised by the petitioners cannot be accepted for the reason that obitor in the judgment of the Apex Court has binding character. It has been clearly observed by the Apex Court in paragraph-26 of the judgment that it is open for the plaintiff to seek withdrawal of the plaint with leave to file fresh suit after registration of the firm subject, however, to law of limitation. Reference is made to section 14 of the Limitation Act and, more particularly, the words "other cause of a like nature" appearing in the said section.

So far as instant matter is concerned, the civil Court is invested with power to permit withdrawal of suit with liberty to file fresh suit in case where (a) the suit must fail by reason of mere formal defect and (b) there are sufficient grounds for allowing the plaintiff to institute fresh suit for the subject-matter of the suit or part of the claim. Thus, the trial Court can accord permission for withdrawal of the suit with liberty to file fresh suit in two contingencies, namely, where there appears formal defect or where there are sufficient grounds for allowing the plaintiff to institute a fresh suit. A parallel can be drawn between the phraseology "there are sufficient grounds for allowing the plaintiff used in section 23 Rule 1(3)(b) with the phraseology "other cause of a like nature" appearing in section 14 of the Limitation Act to which reference is made by the Apex Court in paragraph-26 of the judgment in the case of M/s Haldiram Bhujiawala (supra). So, it is not necessary that in every case plaintiff should point out formal defect but, if the plaintiff is able to satisfy the Court that there are sufficient grounds for allowing the plaintiff to institute a fresh suit for the subject-matter of the suit or part of the claim, the civil Court can grant permission for withdrawal of the suit with liberty to file fresh suit as contemplated by Order 23, Rule 1 of Civil Procedure Code.

Counsel appearing for the petitioners vehemently contends that the defect stated by the plaintiff/ respondent herein in the application is not a formal defect. Reliance is placed on the judgment of Division Bench of this Court in the case of M. L. Chaturvedi vs. M/s Sanjay Finance Corporation, 1998 (1) BCR 782. Reference can be made to paragraphs-6 and 7 of the judgment which read thus :

In AIR 1977 SC 330, Loonkaran Sethia vs. Ivan E. John, interpreting the provisions of section 69, the Supreme Court made the following observations :--

A bare glance at the section is enough to show that it is mandatory in character and its effect is to render a suit by a plaintiff in respect of a right vested in him or acquired by him under a contract which he entered into as a partner of an unregistered firm, whether existing or dissolved, void. In other words, a partner of an erstwhile unregistered partnership firm cannot bring a suit to enforce a right arising out of a contract falling within the ambit of section 69 of the Partnership Act.

The Supreme Court reiterated this position in 1989 Bank. J. 572 (S.C.) : 1989 Mh.L.J. 849, Shreeram Finance Corporation vs. Yasin Khan and others, it was held that since the persons suing namely, the current partners as on the date of suit were not shown as partners in the Register of Firms. The suit was not maintainable in view of the provisions of section 69(2) of the Partnership Act. Although the plaint was amended on a later date that could not save the suit. In the light of the principle laid down in the aforesaid decisions, it appears that the law is well settled that a firm not registered u/s 59 suffers from the legal disability of enforcing a right arising from a contract by instituting a suit against a third party by operation of section 69(2) of the Act, Non-registration of the firm, therefore, is not a formal defect, but a defect affecting the merits of the suit, in other words, the very root of the plaintiff''s suit. It is therefore, clear that such a defect in the suit is not a formal defect. The learned Judge was clearly in error in permitting the plaintiff to withdraw the suit with liberty to file a fresh one. The view which we are taking is supported by decisions of various other High Courts. See in this connection Khatuna and Another Vs. Ramsewak Kashinath, a partnership firm and Another, , Wardman Finance Corporation vs. Ghulam Ahmad Lone, AIR 1982 (J&K) 142 and T. Savariraj Pillai Vs. M/s. R.S.S. vastrad and Company, .

Mr. Shah drew our attention to the decision of the Nagpur High Court in AIR 1937 Nagpur 146, Firm Sonlal Hansraj vs. Sadashiv Dasras Koshli, wherein it was laid down that when a suit is dismissed on the ground that the firm was not registered and subsequently the firm is registered, a second suit filed by the firm is not barred. He also drew our attention to the decision of the Madras High Court in Buhari Trading Co. Vs. Star Metal Co., ., holding that the dismissal of a suit which was sought to be withdrawn on the ground that the plaintiff therein was an unregistered firm does not bar the filing of a fresh suit on the same cause of action after the firm gets itself registered and for doing so no permission is needed. In our view, these decisions are not in any way helpful to Mr. Shah. There cannot be any quarrel about the proposition laid down in the aforesaid decision that a second suit brought by an unregistered firm after it gets itself registered cannot be barred under law. However, such a suit cannot be permitted to be withdrawn under Order XXIII, Rule 1(3)(a) with liberty to file a fresh suit as the defect is not of form but of substance.

Relying on the judgment of the Division Bench of this Court cited supra, it is contended that the defect pointed out by the plaintiff is not a formal defect and, as such, it is not permissible for the plaintiff to seek withdrawal of the suit with liberty to File fresh suit. The judgment cited supra is considered by the learned single Judge of this Court in the case of Vilas Shriram Mahalle and Another Vs. Rajdhaniprasad Rahinprasad Tiwari and Another, . Learned single Judge has observed in the judgment that the ratio laid down by the Division Bench in the case of M.L. Chaturvedi (supra) is contrary to the view taken by the Apex Court in M/s Haldiram Bhujiawala (supra) and, as such, the decision of the Division Bench stands impliedly overruled. In paragraph-9 of the judgment it is observed thus :

The Supreme Court has expressly held that even if the suit is barred u/s 69 of the Act, it will be open to a plaintiff to seek withdrawal of the plaint with leave to file a fresh suit after registration of the firm. The ratio of the judgment of this Court in M.L. Chaturvedi vs. Sanjay Finance Corporation (supra) is therefore contrary to the judgment of the Supreme Court. The observations at the very leas constitute obiter dicta of the Supreme Court and are therefore binding on the High Court. They cannot be brushed aside as merely casual observations. Mr. Agrawal was unable to distinguish the judgment of the Supreme Court from the facts of this case.

It is contended by the counsel for the petitioners that the counsel appearing in the matter before learned single Judge in Vilas Shriram Mahalle (supra) was unable to distinguish the judgment of the Apex Court from the facts of the reported matter. He further urges that there are distinguishable features in the judgment of the Apex Court in the case of M/s Haldiram Bhujiawala (supra) and the instant case, as such, according to him, learned single Judge in Vilas Shriram Mahalle does not form a binding precedent. In view of reasons recorded above, I do not find any distinguishable features compelling this Court to adopt a view that the observation made by the Apex Court in paragraph-26 of the M/s Haldiram Bhujiawala case (supra) would not constitute a binding precedent.

As noted above, the trial Court can permit withdrawal of the suit with liberty to file fresh suit in two contingencies firstly, where there appears any formal defect and secondly, where there exist sufficient grounds for allowing the plaintiff to institute a fresh suit for the subject-matter of the suit or part of the claim. In the instant matter, the plaintiff is successful in convincing the trial Court that there exist sufficient grounds for allowing him to institute a fresh suit for the subject-matter of the suit.

In view of the reasons set out above, I am of the view that no interference is called for in the impugned order passed by the trial Court permitting the plaintiff to withdraw suit with liberty to institute a fresh suit founded on the same cause of action. The writ petition, therefore, stands dismissed. In the facts and circumstances of the case, there shall be no order as to costs