SHIV DEVELOPERS THROUGH ITS PARTNER SUNILBHAI SOMABHAI AJMERI versus AKSHARAY DEVELOPERS & ORS. on 31 January 2022

SHIV DEVELOPERS THROUGH ITS PARTNER SUNILBHAISOMABHAI AJMERI

v.

AKSHARAY DEVELOPERS & ORS.

(Civil Appeal No. 785 of 2022)

JANUARY 31, 2022

[DINESH MAHESHWARI AND VIKRAM NATH, JJ.]

Partnership Act, 1932 – s.69(2) – Bar under – When notattracted – Held: To attract the bar of s.69(2), the contract inquestion must be the one entered into by firm with the third-partydefendant and must also be the one entered into by the plaintifffirm in the course of its business dealings – s.69(2) is not a bar to asuit filed by an unregistered firm, if the same is for enforcement of astatutory right or a common law right – In the present case, thetransaction in question was not the one entered into by the appellant-plaintiff, an unregistered partnership firm during the course of itsbusiness (i.e., of building construction), and it was an independenttransaction of sale, of the firm’s share in the suit property, to thecontesting defendants – Thus, the bar of s.69(2) is not attracted inrelation to the said sale transaction – Moreover, the subject suitcannot be said to be the one for enforcement of right arising from acontract, rather the subject suit is clearly the one where the plaintiffseeks common law remedies with the allegations of fraud andmisrepresentation as also of the statutory rights of injunction anddeclaration in terms of the provisions of the Specific Relief Act,1963 as also the Transfer of Property Act, 1882 (while allegingwant of the sale consideration) – Therefore, the bar of s.69(2) doesnot apply to the present case – Trial Court rightly appreciated thefacts of the case and rejected the baseless application moved by thecontesting respondents – Impugned order of High Court set aside –Trial Court to proceed with trial of the suit in accordance with law –Specific Relief Act, 1963 – Transfer of Property Act, 1882.

Umesh Goel v. Himachal Pradesh Co-operative GroupHousing Society Ltd: (2016) 11 SCC 313 : [2016] 6SCR 703; Farooq v. Sandhya Anthraper Kurishingaland Ors. (2018) 12 SCC 580 – held inapplicable.

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AHaldiram Bhujiawala and Anr. v. Anand Kumar DeepakKumar and Anr: (2000) 3 SCC 250 : [2000] 1 SCR1247; Raptakos Brett & Co. Ltd. v. GaneshProperty (1998) 7 SCC 184 : [1998] 1 Suppl. SCR 485;Purushottam and Anr. v. Shivraj Fine Art Litho Worksand Ors. (2007) 15 SCC 58 : [2006] 8 Suppl. SCR 524B– relied on.

Case Law Reference

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 785 ofD2022.

From the Judgment and Order dated 15.02.2018 of the High Courtof Gujarat at Ahmedabad in Civil Revision Application No. 241 of 2017.

Ms. Shreya Jain, Gaurav Tanwar, Sachin Mittal, Advs. for theAppellant.E

Kruthin Joshi, Rajesh Mahale, Purvish Jitendra Malkan, JitendraMalkan, Ms. Dharita P. Malkan, Ms. Deepa Gorasia, Alok Kumar, Ms.Nandini Chhabra, Ms. Bhavna Sarkar, Advs. for the Respondents.

The Judgment of the Court was delivered by FDINESH MAHESHWARI, J.

The relevant factual matrix and background.....................................2*

The application seeking rejection of plaint: divergent views of theTrial Court and the High Court.........................................................6*

Rival Submissions...........................................................................12*Section 69 of the Act of 1932 and the relevant principles...................15*Application of the relevant principles to the subject suit....................21*Conclusion....................................................................................23*

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H* Ed. Note: Pagination is as per the original judgment.

Leave granted.

2. This appeal, by the plaintiff of a suit for declaration andinjunction, is directed against the judgment and order dated 15.02.2018,as passed by the High Court of Gujarat[1], in Civil Revision ApplicationNo. 241 of 2017, whereby the High Court has allowed the revisionapplication filed by the contesting defendants (respondent Nos. 1 to 3herein) and has reversed the order dated 07.04.2017, as passed by theCourt of 9[th] Additional Senior Civil Judge, Vadodara[2] in Special Civil SuitNo. 333 of 2015.

2.1. By the said order dated 07.04.2017, the Trial Court hadrejected the application moved by the contesting defendants under OrderVII Rule 11(d), Order XXX Rules 1 and 2 and Section 151 of the Codeof Civil Procedure, 1908[3] read with Section 69 of the Indian PartnershipAct, 1932[4] for rejection of plaint on the ground that the suit filed by andon behalf of an unregistered partnership firm was barred by law. TheTrial Court essentially held that, on its subject-matter relating to the validityof the sale deed in question, the bar of Section 69(2) was not operatingagainst this suit. However, the High Court has taken a contrary view ofthe matter and has held that the plaintiff, being an unregistered firm,would be barred to enforce a right arising out of the contract in terms ofSection 69(2) of the Act of 1932.

3. We may take note of the factual matrix and the backgroundaspects of the matter, so far relevant for the question calling fordetermination in this matter, i.e., as to whether the subject suit, filed byan unregistered partnership firm, is covered by the bar created by Section69(2) of the Act of 1932?

The relevant factual matrix and background

4. For a proper comprehension of the subject-matter, worthwhileit would be to take note of the status of respective parties before dilatingon the pleadings and submissions.

4.1. The appellant herein is an unregistered partnership firm bythe name “Shiv Developers”. It is stated that this firm is engaged in thebusiness of construction of buildings and is comprising of two equalpartners, namely, Mr. Sunilbhai Somabhai Ajmeri and Mr. Jignesh 1 For short, ‘the High Court’.

2 For short, ‘the Trial Court’.

3 For short ‘the Code’.

4 For short, ‘the Act of 1932’.

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AKanubhai Desai. The said Mr. Sunilbhai Somabhai Ajmeri is also referredto as ‘the administrator’ of this firm and has filed the suit on behalf ofthe firm.

4.2. In the suit so filed by the plaintiff-appellant, a partnershipfirm in the name “Aksharay Developers” has been arrayed as defendantBNo. 1 (respondent No.1 herein) whereas the defendant Nos. 2 to 4namely, Dineshbhai Bhailal Bhai Patel, Arjunsinh Narayansinh Rajput,and Ranjitsinh Narayansinh Rajput (respondent Nos.2 to 4 herein) havebeen joined in their capacity as the partners of the defendant No. 1 firm.As shall be noticed hereafter, the composition of this firm, in the name“Aksharay Developers” with the said persons as partners, is itself aCmatter of contention in the suit so filed by the plaintiff-appellant. TheMunicipal Commissioner and the Town Development Officer ofVadodara Municipal Corporation have also been joined as defendantNos. 5 and 6 in the suit but they are not the contesting parties in relationto the subject-matter of this appeal.D5. Now, we may briefly refer to the relevant aspects of the caseof appellant, as emerging from the plaint averments.

5.1. The plaintiff-appellant has averred that on 26.11.2013, theappellant and the respondent Nos. 2 and 3 purchased a property (openland)[5] bearing Tika No. 5/3, City Survey No. 104, 105, 132, 106/A in CityESurvey Vibhag- B, situated on Kalal Pitha Road, Hujaratpaga, Sub-District Vadodara, admeasuring 232.81 square metres, through aregistered sale deed. According to the appellant, its share in the suitproperty was 60% and the respective shares of respondent Nos. 2 and3 were 20% each.F5.2. It has further been averred that on 22.04.2014, a newpartnership by the firm name “Aksharay Developers” was formed withfour partners, namely, Sunilbhai Somabhai Ajmeri (also the partner andadministrator of the appellant firm) and the respondent Nos. 2, 3 and 4.According to the plaint averments, the said partnership was formedGexclusively for the purpose of the project related with the suit propertyand the tenure of the partnership was confined to the completion of thesaid project. A Memorandum of Understanding[6] was signed by thepartners on the date of incorporation of the firm, i.e., 22.04.2014; and it 5 Hereinafter referred to as ‘the suit property’.H6 For short, ‘MOU’.

was agreed in the MOU that from the income which may accrue fromthe project, a fixed sum of Rs 1,00,00,000 (Rs. One Crore) would bepaid to Sunilbhai Somabhai Ajmeri along with 5-10% on the profit accruingupon the completion of project. According to the appellant, the said MOUclearly acknowledged the fact that all the parties to the MOU were thepartners of the firm “Aksharay Developers” and the MOU was beingentered by virtue of the same.

5.3. The grievance of the appellant has been stated in the mannerthat in new turn of events, on 23.02.2015, the respondent Nos. 2 and 3constituted another firm under the same name and style as “AksharayDevelopers” but without including Sunilbhai Somabhai Ajmeri andrespondent No. 4 as partners. This firm, as constituted on 23.02.2015, isthe respondent No. 1 herein and it is alleged that the same has beenconstituted and got registered by the respondent Nos. 2 and 3 clandestinelyand fraudulently. It is further alleged that on the very next day ofconstituting the respondent No. 1 firm, i.e., on 24.02.2015, the respondentNos. 2 and 3 got executed a sale deed, whereby 60% share of theappellant in the suit property was purchased by this firm AksharayDevelopers from Sunilbhai Somabhai Ajmeri, acting on behalf of theappellant firm Shiv Developers. It has yet further been alleged that thecheques issued in favour the appellants towards sale consideration weredishonoured.

5.4. As per the appellant, Sunilbhai Somabhai Ajmeri (acting onbehalf of the appellant firm) was oblivious to the fact that on 23.02.2015,the respondent Nos. 2 and 3 got registered a partnership firm under thename “Aksharay Developers” without any mention of himself and therespondent No. 4; and that Sunilbhai Somabhai Ajmeri was throughoutunder the bona fide belief that the suit property of appellant firm wasbeing sold to that firm wherein he was also a partner as per the partnershipdeed and MOU dated 22.04.2014.

5.5. With the aforesaid assertions, the appellant has alleged thatthe respondent Nos. 2 and 3 have obtained the suit property through awell- hatched conspiracy and without even discharging the saleconsideration; and as per the terms agreed upon in the sale deed dated24.02.2015, if the cheques issued towards sale consideration were nothonoured, the sale deed shall be deemed to be null and void. Accordingly,the appellant has instituted the subject suit seeking perpetual injunctionand declaration of the sale deed dated 24.02.2015 as null and void.

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AThe application seeking rejection of plaint: divergent viewsof the Trial Court and the High Court

6. In the suit so filed by the appellant, the respondent Nos. 1 to 3appeared in response to the summonses and moved an application forrejection of plaint with reference to the provisions of the Act of 1932.

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6.1. The contesting respondents submitted in the said applicationthat the plaintiff-appellant had neither produced any documentary evidenceto show that the suitor firm was a registered partnership firm nor anyaverment was taken in that regard in the plaint. It was further submittedthat the sale deed in question (marked 4/4) was a registered documentCand the same was executed by Sunilbhai Somabhai Ajmeri asadministrator-partner of the firm Shiv Developers. The respondents thuscontended that the suit for declaration against the registered saledocument, when the plaintiff had not shown to be a registered firm, wasbarred by Section 69 of the Act of 1932. In other words, contention ofthe respondents had been that as per the mandate of Section 69 of theDAct of 1932, the plaintiff, being an unregistered partnership firm, wasbarred to file a suit regarding the rights arising from any agreement/contract. It was also submitted that as per Order XXX CPC, a suit couldbe filed on behalf of the firm by any person who is a partner of the firmbut the person filing the plaint had not produced any evidence to showEthat he was a partner in the said firm.

6.2. The application so moved for rejection of plaint was opposedby the plaintiff-appellant with the submissions, inter alia, that Section69 of the Act of 1932 was not applicable in the case of fraud. It wasfurther submitted that the plaintiff has been a partner of the firmFAksharay Developers and there was no evidence to show that the saidpartnership firm Aksharay Developers had been dissolved. It was alsosubmitted that the subject-matter of the suit was to get the sale documentquashed on account of fraud and cheating; and the suit of this naturewas not barred by Section 69 of the Act of 1932. Thus, the primarycontention on behalf of the plaintiff-appellant had been that the bar ofGSection 69 of the Act of 1932 was not attracted because the subject suitwas not for enforcement of any right arising from the contract pertainingto the business of the firm but was for enforcement of statutory rights ofthe plaintiff. It was also submitted that there was no bar of Order XXXCPC to the present suit inasmuch as there was no dispute by theHdefendants as regards the partnership firm and they had also not prayed for declaring the names of the partners. It has also been the contentionon behalf of the plaintiff- appellant that the necessary evidence wasrequired to be led in relation to the pleas sought to be raised by thedefendants and, as such, the application was not maintainable at thegiven stage.

7. In its order dated 07.04.2017, the Trial Court took note of therival submissions and examined the provisions contained in Section 69 ofthe Act of 1932 as also the decisions cited on behalf of the parties. Aftertaking note of the principles of law enunciated by this Court and thefactual aspects of the case at hand, the Trial Court rejected thecontentions urged on behalf of the respondents, inter alia, for the reasonthat it was not prima facie borne out that the sale document (marked 4/4) was pertaining to an agreement/contract relating to the business ofthe partnership by the name “Shiv Developers”. The Trial Court furthernoticed the case of the plaintiff that the amount of sale considerationhad not been received and opined that the suit would not be barred bythe provisions of Section 69 of the Act of 1932 because of non-receiptof amount of sale consideration by the partners of the firm which hadsold the property by a registered document and had the legal right ofreceiving the amount of sale consideration. The Trial Court furtherobserved that dismissal of the suit was not envisaged by the provisionscontained in Order XXX CPC. Therefore, the application as moved bythe respondents was rejected by the Trial Court.

8. The contesting defendants (respondent Nos. 1 to 3 herein)challenged the orders so passed by the Trial Court by way of a revisionapplication before the High Court. This revision application has beenallowed by the High Court by the impugned judgment and order dated15.02.2018.

8.1. It was contended on behalf of the contesting defendants/revisionists before the High Court that the appellant firm being anunregistered partnership firm, the subject suit by this firm for enforcementof a right arising out of the contract of sale was squarely within theambit of Section 69 of the Act of 1932 and the Trial Court had erred indisallowing the application for rejection of the plaint while proceedingcontrary to the applicable provisions of law as also the settled principlesenunciated in the binding decisions.

8.2. Per contra, it was argued on behalf of the plaintiff-appellantthat specific fraud has been alleged in the present case; that Sunilbhai A

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ASomabhai Ajmeri and the defendant Nos. 2 and 3 entered into the contractin independent capacity, which later on, as a part of design of the saiddefendants, was converted into a registered sale deed. It was contendedthat the issues raised in the plaint need to be adjudicated after trial andthe plaint cannot be rejected under Order VII Rule 11(d) CPC.

B9. Having taken note of rival submissions, the High Courtsummarised the findings of the Trial Court, including its conclusion basedupon the sale document, that the transaction in question was anindependent one and the claim made in the suit was not arising out ofany business transaction of the firm or the contract relating to or arisingout of business transactions. The High Court also took note of the prayersCin the plaint for declaring the sale deed as being fraudulent, illegal andvoid and the respondents having no right to float any scheme on the suitland.

9.1. The High Court thereafter referred to the submissions of therespondents with reference to Order XXX Rules 1 and 2 CPC read withDSection 69 of the Act of 1932 and, before reproducing the said Section69, recorded its endorsement of one of the relevant findings of the TrialCourt in the following terms: - “23……On a bare reading of this provision it appears that thelearned trial judge has rightly observed that the transaction inEquestion is not arising out of the business of plaintiff firm norclaim is generated from the plaintiff firm……”

9.2. Thereafter, The High Court, in the context of Section 69(2),held that the transaction under challenge was a sale document dated24.02.2015, entered into by the plaintiff, an unregistered firm, with theFrespondents who were third-parties; and held that, by the effect of non-registration of the firm, the suit appeared to be not maintainable. Thesaid findings read as follows: - “ 24....The relevant provisions which is to be construed on thecase on hand is Sub Section 2 of Section 69 which indicates thatGno suit to enforce a right arising from a contract shall be institutedin any court by or on behalf of a firm against any third partyunless the firm is registered and the persons suing are or havebeen shown in the Register of Firms as partners in the firm. Hereis the case in which the transaction which is under challenge is asale dated 24.02.2015 is a document entered in to by the plaintiffH

firm against the defendants who are third party and undisputedlythe plaintiff firm is an unregistered firm, and therefore, by effectof non- registration, the suit appears to be not maintainable ”

9.3. The High Court, thereafter, referred to various decisions citedat the Bar including that in the case of Purushottam and Anr. v. ShivrajFine Art Litho Works and Ors., as reported in (2007) 2 G.L.H. 406[=(2007) 15 SCC 58] and in that regard, observed as under[7] : - “33. Another decision which has been pressed into service adecision in the case of Purushottam (supra) and by referring tothis a contention is raised that the bar of Section 69(2) will notapply in the background of this fact. However, again if the fact isto be seen of that decision even the head note of the said decisionitself makes it clear that if the right sought to be enforced doesnot arise from a contract to which unregistered firm is a party oris not entered into in connection with the business of theunregistered firm, the bar under Section 69(2) will not apply. Assuch, on the contrary, this decision helps the petitioners tosubstantiate the contention here as seen in the proceeding on handthat there is a transaction entered into by and on behalf of plaintifffirm which is undisputedly unregistered firm and the claim andrelief sought is arising out of that contract which has been enteredinto to which plaintiff unregistered is a very much party.

Hence, this judgment, on the contrary will not come, in assistanceto the respondent as in that particular case, the contract was neitherentered into by unregistered firm nor it was entered into byunregistered firm in the course of its business, and therefore, suitwas held to be maintainable.”

9.4. Ultimately, after an analysis of various decisions, the HighCourt allowed the revision application and set aside the order dated07.04.2017 of the Trial Court with the consequential effect of rejectionof plaint in the following words: - “36. The overall analysis of the aforesaid decisions which arepressed into service and the undisputed background of thecircumstances of this case has clearly spelt-out that the suit 7 We are not dilating on various other decisions referred by the High Court but havereproduced the aforementioned paragraph 33 for its implication, as shall appear in thediscussion hereafter later.

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Aproceedings which are hit by Section 69(2) of the Act read withOrder 30 of the C.P.C., there is no reason why such non-maintainable proceedings be allowed against the object of Order7 Rule 11(d). Hence, by giving full effect to the statutory provisions,the Court is of the considered opinion that serious error jurisdictionis committed by the Court, and as such present Revision ApplicationBdeserves to be allowed, and the impugned order dated 07.04.2017passed below Exh. 11 in Special Civil Suit No. 333 of 2015 by thelearned 9[th] Additional Senior Civil Judge, Vadodara is quashedand set aside with a consequential effect of rejection of plaint. “

10. The aforesaid judgment and order dated 15.02.2018 as passedCby the High Court has been challenged in this appeal by the plaintiff-appellant.

Rival Submissions

11. Learned counsel for the appellant has submitted that the HighDCourt has failed to appreciate that Section 69(2) of the Act of 1932 doesnot bar all suits by an unregistered partnership firm against third parties.In the factual matrix of the present case, suit is not hit by Section 69(2)because the contract is not in the regular business dealings of the firm;and the words “enforcing a right arising under the contract” used inSection 69(2) of the Act of 1932 signify the rights arising out of contractsEin respect of the firm’s business transactions only. Learned counsel hasrelied upon the decisions in Haldiram Bhujiawala and Anr. v. AnandKumar Deepak Kumar and Anr: (2000) 3 SCC 250 and Purushottam(supra).

11.1. Learned counsel has supplemented his arguments withFreference to the concurrent findings of the Trial Court and the HighCourt on the fact that the contract under consideration, on which the suitis premised, was not in connection with the business of the unregisteredfirm. Therefore, as per the law laid down by this Court, suit of the appellantis not barred under the provisions of Section 69(2) of the Act of 1932.GLearned counsel has further argued that the High Court has committedan error in bringing all suits by an unregistered firm against the thirdparty within the ambit of Section 69(2) of the Act of 1932.

11.2. In addition to the above, learned counsel has also emphasisedthat Section 69(2) of the Act does not bar a suit by an unregisteredpartnership firm for enforcement of a statutory right or a common lawH

right, as held by this Court in Haldiram Bhujiawala (supra). In thisregard, the learned counsel has also referred to the findings of the TrialCourt that since the contract of sale has been affected through aregistered sale document, non-payment of the consideration against thesaid sale gives right to the appellant firm to enforce the terms of the saledocument; and such a right is acquired by law, under the Transfer ofProperty Act, 1882.

12. Per contra, learned counsel appearing for the contestingrespondents has strenuously argued that the sale document dated23.02.2015 was executed by the administrator-partner of the unregisteredfirm and not in his individual capacity. Consequently, the sale documentwas related to the business of the firm. Thus, the learned counsel hassupported the High Court’s conclusion that the suit was hit by the barunder Section 69(2) of the Act of 1932.

12.1. Learned counsel for the contesting respondents has referredto the cases of Umesh Goel v. Himachal Pradesh Co-operative GroupHousing Society Ltd: (2016) 11 SCC 313 and Farooq v. SandhyaAnthraper Kurishingal and Ors.: (2018) 12 SCC 580, for thesubmission that any suit filed by an unregistered partnership firm is hitby Section 69 of the Act of 1932; and if the said suit is filed forenforcement of rights arising out of a contract to which the saidunregistered partnership firm is a party, it would be rendered non-maintainable.

12.2. Thus, learned counsel for the contesting respondents wouldargue that the High Court has rightly allowed the revision applicationand has rightly rejected the plaint filed by the appellant firm.

13. Having given anxious consideration to the rival submissionsand having examined the record with reference to the law applicable,we are clearly of the view that the impugned judgment and order dated15.02.2018, as passed by the High Court, cannot be sustained and thebar of Section 69(2) of the Act of 1932 is not attracted to the suit filed bythe appellant.

Section 69 of the Act of 1932 and the relevant principles

14. For dealing with the questions raised in this matter, we maytake note of the provisions contained in Section 69 of the Act of 1932 asfollows: - AB

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SUPREME COURT REPORTS

“69. Effect of non-registration.- (1) No suit to enforce a rightarising from a contract or conferred by this Act shall be institutedin any Court by or on behalf of any person suing as a partner in afirm against the firm or any person alleged to be or to have beena partner in the firm unless the firm is registered and the personsuing is or has been shown in the Register of Firms as a partner inthe firm.

(2) No suits to enforce a right arising from a contract shall beinstituted in any Court by or on behalf of a firm against any thirdparty unless the firm is registered and the persons suing are orhave been shown in the Register of Firms as partners in the firm.

(3) The provisions of sub-sections (1) and (2) shall apply also to aclaim of set-off or other proceeding to enforce a right arisingfrom a contract, but shall not affect,—

(a) the enforcement of any right to sue for the dissolution of afirm or for accounts of a dissolved firm, or any right or power torealise the property of a dissolved firm, or (b) the powers of an official assignee, receiver or Court under thePresidency-towns Insolvency Act, 1909 (3 of 1909) or theProvincial Insolvency Act, 1920 (5 of 1920) to realise the propertyof an insolvent partner.

(4) This section shall not apply,—

(a) to firms or to partners in firms which have no place of businessin the territories to which this Act extends, or whose places ofbusiness in the said territories are situated in areas to which, bynotification under Section 56, this Chapter does not apply, or (b) to any suit or claim of set-off not exceeding one hundred rupeesin value which, in the Presidency-towns, is not of a kind specifiedin Section 19 of the Presidency Small Cause Courts Act, 1882 (5of 1882), or, to outside the Presidency-towns, is not of a kindspecified in the Second Schedule to the Provincial Small CauseCourts Act, 1887 (9 of 1887), or to any proceeding in execution orother proceeding incidental to or arising from any such suit orclaim.”

15. In our view, the questions arising in this matter could be directlyanswered with reference to the principles enunciated by this Court inthe case of Raptakos Brett & Co. Ltd. v. Ganesh Property: (1998) 7SCC 184, which have further been explained and applied by this Courtin the cases of Haldiram Bhujiawala and Purushottam (supra). Wemay take note of the principles vividly exposited in the case of HaldiramBhujiawala (supra) that to attract the bar of Section 69(2) of the Act of1932, the contract in question must be the one entered into by firm withthe third-party defendant and must also be the one entered into by theplaintiff firm in the course of its business dealings; and that Section 69(2)of the Act of 1932 is not a bar to a suit filed by an unregistered firm, ifthe same is for enforcement of a statutory right or a common law right.

16. Briefly put, the relevant factual aspects in the case ofHaldiram Bhujiawala (supra) had been as follows: The suit in thatcase was filed by the plaintiffs seeking perpetual injunction to restrainthe defendants from infringing the trademark and from using thetrademark/name ‘Haldiram Bhujiawala’. There were two plaintiffs, thefirst being a partnership firm comprising of three sons of Moolchandwhereas the second plaintiff was his fourth son. The historical factswere that the business in the name of “Haldiram Bhujiawala” was beingcarried on by one Ganga Bishan alias Haldiram since the year 1941. Inthe year 1965, he constituted a partnership with his two sons Moolchand,Shiv Kishan and his daughter-in-law Kamla Devi (wife of another sonR.L. Aggarwal) to carry on business under the same name. The saidfirm was granted registration of the said trade name. However, on16.11.1974, the said partnership was dissolved and in terms of thedissolution deed, the above trademark fell exclusively to the share ofMoolchand for whole of the country except the State of West Bengalwhereas the said Smt. Kamla Devi was given ownership of thetrademark rights for the State of West Bengal. The four sons of Moolchandgot their names recorded as subsequent joint proprietors of the trademark.Three of them formed a partnership (the plaintiff No. 1 in the subjectsuit) in the year 1983 and were running a shop at Chandni Chowk, Delhi.In the meantime, on 10.10.1977, the said R.L. Aggarwal and his sonapplied in Calcutta for registration of the same trademark while claimingthemselves to be the full owners thereof without disclosing the dissolutiondeed dated 16.11.1974. One Ashok Kumar, son of Smt. Kamla Devi,constituted a new firm and opened a shop at Arya Samaj Road, KarolBagh, New Delhi. In the given circumstances, the plaintiffs of the subject AB

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Asuit claimed the reliefs of injunction, damages, and for destruction ofmaterial etc., while claiming their rights of using the said trademark. Thedefendants sought rejection of the plaint for the reason that the plaintiffNo. 1 was not a registered partnership firm on the date of filing of thesuit. The application was dismissed by the Trial Court as also by theHigh Court. Hence, the matter was in appeal before this Court. TheBpoints arising for determination in the said matter were formulated bythis Court in the following terms: - “8. The points that arise for consideration are:

(i) Whether Section 69(2) bars a suit by a firm not registeredCon the date of suit where permanent injunction and damages areclaimed in respect of a trademark as a statutory right or by invokingcommon law principles applicable to a passing-off action?

(ii) Whether the words “arising from a contract” in Section69(2) refer only to a situation where an unregistered firm isDenforcing a right arising from a contract entered into by the firmwith the defendant during the course of its business or whetherthe bar under Section 69(2) can be extended to any contractreferred to in the plaint unconnected with the defendant, as thesource of title to the suit property?

E16.1. Answering the first question in the negative, this Courtreferred to the previous decision in Raptakos Brett & Co. Ltd. (supra)and held as follows: - “9. The question whether Section 69(2) is a bar to a suit filed byan unregistered firm even if a statutory right is being enforced orFeven if only a common law right is being enforced came up directlyfor consideration in this Court in Raptakas Brett Co. Ltd. v.Ganesh Property [(1998) 7 SCC 184]. In that case, Majmudar,J. speaking for the Bench clearly expressed the view thatSection 69(2) cannot bar the enforcement by way of a suitby an unregistered firm in respect of a statutory right or aGcommon law right. On the facts of that case, it was held that theright 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 statutoryright under the Transfer of Property Act. The fact that the plaintin that case referred to a lease and to its expiry, made nodifference. Hence, the said suit was held not barred. It appears to H

us that in that case the reference to the lease in the plaint wasobviously treated as a historical fact. That case is therefore directlyin point. Following the said judgment, it must be held in thepresent case too that a suit is not barred by Section 69(2) ifa statutory right or a common law right is being enforced.

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11. Likewise, if the reliefs of permanent injunction or damagesare being claimed on the basis of a registered trademark and itsinfringement, the suit is to be treated as one based on astatutory right under the Trade Marks Act and is, in our view,not barred by Section 69(2).

12. For the aforesaid reasons, in both these situations, theunregistered partnership in the case before us cannot be said tobe enforcing any right “arising from a contract”. Point 1 istherefore decided in favour of the respondent-plaintiffs.”

(emphasis supplied)

16.2. This Court further exposited on the scope of the words“enforcing a right arising under the contract”, as used in Section 69(2)of the Act of 1932; and after a detailed survey of the reports andprecedents which led to the frame of the said provision as also afterreference to various authorities on the point, this Court explained therationale and object of the provision that the same was intended to protectthose in commerce who deal with a partnership firm in business, inasmuchas they ought to be enabled to know the names of the partners of thefirm before they deal with them in business; and the bar of Section 69(2)is not attracted to any and every contract referred to in the plaint as asource of title to an asset owned by the firm. This Court held and explainedas under: - “23 The further and additional but equally important aspect whichhas to be made clear is that the contract by the unregistered firmreferred to in Section 69(2) must not only be one entered into bythe firm with the third-party defendant but must also be oneentered into by the plaintiff firm in the course of thebusiness dealings of the plaintiff firm with such third-partydefendant.

24... The real crux of the question is that the legislature, A

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Awhen it used the words “arising out of a contract” in Section69(2), it is referring to a contract entered into in course ofbusiness transactions by the unregistered plaintiff firm withits defendant customers and the idea is to protect those incommerce who deal with such a partnership firm inbusiness. Such third parties who deal with the partners ought toBbe enabled to know what the names of the partners of the firmare before they deal with them in business.

25 Further, Section 69(2) is not attracted to any and everycontract referred to in the plaint as the source of title to anasset owned by the firm. If the plaint referred to such a contractCit could only be as a historical fact. For example, if the plaint filedby the unregistered firm refers to the source of the firm’s title toa motor car and states that the plaintiff has purchased and receiveda motor car from a foreign buyer under a contract and that thedefendant has unauthorisedly removed it from the plaintiff firm’sDpossession, — it is clear that the relief for possession against thedefendant in the suit does not arise from any contract which thedefendant entered into in the course of the plaintiff firm’s businesswith the defendant but is based on the alleged unauthorised removalof the vehicle from the plaintiff firm’s custody by the defendant.In such a situation, the fact that the unregistered firm has purchasedEthe vehicle from somebody else under a contract has absolutelyno bearing on the right of the firm to sue the defendant forpossession of the vehicle. Such a suit would be maintainable andSection 69(2) would not be a bar, even if the firm is unregisteredon the date of suit. The position in the present case is not different.”

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(emphasis supplied)

17. The aforesaid decision in Haldiram Bhujiawala (supra) wasfurther considered and applied by this Court in the case of Purushottam(supra) while holding as under: - G“24. With respect, we find ourselves in complete agreement withthe principles enunciated in Haldiram Bhujiawala. Having regardto the purpose Section 69(2) seeks to achieve and the interestsought to be protected, the bar must apply to a suit for enforcementof right arising from a contract entered into by the unregisteredfirm with a third party in the course of business dealings withHsuch 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 notentered into in connection with the business of the unregisteredfirm with a third party, the bar of Section 69(2) will not apply.”

18. Nothing contrary to the foregoing discussion is to be found inthe decisions cited on behalf of the contesting respondents. The case ofUmesh Goel (supra) essentially related to the operation of the provisioncontained in Section 69(3) of the Act of 1932 and interpretation of theexpression “other proceedings” in the wake of the question as to whetherarbitral proceedings and the award passed therein could be read into theexpression “other proceedings”. The said decision has no relevance tothe questions at hand. In the case of Farooq (supra), this Court found,after a wholesome reading of the plaint, that the suit was based on clause25(d) of the partnership deed which specifically stated that ‘no partnersof the firm shall without the consent in writing of the other partnersbeing entitled to transfer immovable property belonging to the firm’.In that case, two partners of an unregistered firm had sued forcancellation of a sale made by the defendant partner without the consentof all the partners. This Court found that the suit was only to enforce aright arising from the terms of said partnership deed and hence, it attractedthe bar of Section 69(2) of the Act of 1932. The said decision, for anentirely different fact situation and different claim, has no application tothe facts of the present case.

Application of the relevant principles to the subject suit

19. Taking up the facts of the present case, one of the significantfeatures herein is that the transaction in question, i.e., sale of its shareby the plaintiff firm to the contesting defendants has not been the onearising out of the business of the plaintiff firm. This factual aspect isapparent from the basic plaint averments and is fortified by the concurrentfindings of the Trial Court as also of the High Court. Though the HighCourt endorsed the finding that the transaction in question was not arisingout of the business of the plaintiff firm but, it appears that the implicationof this crucial finding has not acquired the requisite attention of the HighCourt. The decision of this Court in the case of Purushottam (supra)was cited before the High Court but, while referring to the same inparagraph 33 of the impugned judgment, the High Court probably lookedonly at the editor’s headnote and in any case, missed out the ratio andprinciples therein, as reiterated with reference to the previous decisions.The decision in Haldiram Bhujiawala (supra) seems to have not gone ABC

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Ainto consideration of the High Court although this decision formed thesheet anchor of the order of the Trial Court.

19.1. As noticed, the crucial and key factor in the present caseremains that the sale transaction in question is not arising out of thebusiness of the appellant firm. Equally significant fact is that the subjectBsuit is for enforcing a right of avoidance of a document on the ground offraud and misrepresentation as also the statutory rights of seekingdeclaration and injunction. Significantly, the composition of defendantfirm “Aksharay Developers” (defendant No. 1) has itself been questionedby the plaintiff- appellant while alleging that on 22.04.2014, this firm wasconstituted with four partners but later on, the defendant Nos. 2 and 3C(respondent Nos. 2 and 3 herein), constituted another firm in the samename with themselves as partners while leaving aside the other two.

19.2. We are not commenting on the merits of the case of eitherof the parties but this much is apparent from a look at the frame andcontents of the plaint as also the prayers therein that the present oneDcannot be said to be such a suit by the unregistered firm which wouldattract the bar of Section 69(2) of the Act of 1932.

20. To put it differently, the relevant principles, when applied tothe facts of the present case, leave nothing to doubt that the transactionin question was not the one entered into by the plaintiff firm during theEcourse of its business (i.e., of building construction); and it had been anindependent transaction of sale, of the firm’s share in the suit property,to the contesting defendants. The bar of Section 69(2) is not attracted inrelation to the said sale transaction. Moreover, the subject suit cannot besaid to be the one for enforcement of right arising from a contract;Frather the subject suit is clearly the one where the plaintiff seeks commonlaw remedies with the allegations of fraud and misrepresentation as alsoof the statutory rights of injunction and declaration in terms of theprovisions of the Specific Relief Act, 1963 as also the Transfer of PropertyAct, 1882 (while alleging want of the sale consideration). Therefore, thebar of Section 69(2) of the Act of 1932 does not apply to the presentGcase.

Conclusion

21. The upshot of the foregoing discussion is that, for the purposeof Section 69 of the Act of 1932, the present case is governed by theprinciples laid down in Raptakos Brett & Co. Ltd. (supra), as furtherH

exposited in Haldiram Bhujiawala (supra). Hence, the bar of Section69(2) is not attracted to the suit filed by the appellant. The Trial Courthad rightly appreciated the facts of the case and had rightly rejected thebaseless application moved by the contesting respondents. The impugnedorder of the High Court, being not in conformity with the applicable legalprinciples, is required to be set aside.

22. Accordingly, this appeal is allowed; the impugned judgmentand order dated 15.02.2018, as passed by the High Court of Gujarat inCivil Revision Application No. 241 of 2017 is set aside; and the orderdated 07.04.2017 as passed by the 9[th] Additional Senior Civil Judge,Vadodara in Special Civil Suit No. 333 of 2015 is restored. The TrialCourt shall now be expected to proceed with trial of the suit in accordancewith law.

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Divya Pandey(Assisted by : Roopanshi Virang, LCRA)

Appeal allowed.

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