Supreme Court

Shiv Developers vs. Aksharay Developers and Ors.

MANU/SC/0111/2022

31.01.2022

Commercial

Section 69(2) of Partnership Act, 1932 is not a bar to a suit filed by unregistered firm, if the same is for enforcement of statutory right

Present appeal, by the Plaintiff of a suit for declaration and injunction, is directed against the judgment, as passed by the High Court, whereby the High Court has allowed the revision application filed by the contesting Defendants (Respondent Nos. 1 to 3 herein) and has reversed the order, as passed by the Court of Additional Senior Civil Judge. The High Court held that, the Plaintiff, being an unregistered firm, would be barred to enforce a right arising out of the contract in terms of Section 69(2) of the Indian Partnership Act, 1932.

In the case of Haldiram Bhujiawala and Anr. v. Anand Kumar Deepak Kumar and Anr it is held that, to attract the bar of Section 69(2) of the Act of 1932, the contract in question must be the one entered into by firm with the third-party Defendant and must also be the one entered into by the Plaintiff 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, if the same is for enforcement of a statutory right or a common law right.

The sale transaction in question is not arising out of the business of the Appellant firm. Equally, significant fact is that the subject suit is for enforcing a right of avoidance of a document on the ground of fraud and misrepresentation as also the statutory rights of seeking declaration and injunction.

The transaction in question was not the one entered into by the Plaintiff firm during the course of its business (i.e., of building construction); and it had been an independent 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 in relation to the said sale transaction. Moreover, the subject suit cannot be said to be the one for enforcement of right arising from a contract; rather the subject suit is clearly the one where the Plaintiff seeks common law remedies with the allegations of fraud and misrepresentation as also of the statutory rights of injunction. Therefore, the bar of Section 69(2) of the Act of 1932 does not apply to the present case.

For the purpose of Section 69 of the Act of 1932, the present case is governed by the principles laid down in Raptakos Brett And Co. Ltd vs Ganesh Property, as further exposited in Haldiram Bhujiawala and Anr. v. Anand Kumar Deepak Kumar and Anr. Hence, the bar of Section 69(2) is not attracted to the suit filed by the Appellant. The Trial Court had rightly appreciated the facts of the case and had rightly rejected the baseless application moved by the contesting Respondents. The impugned order of the High Court, being not in conformity with the applicable legal principles, is required to be set aside. Appeal allowed.

Tags : Injunction Provision Applicability

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