Section 69(2) of Partnership Act does not bar Unregistered Firm from Filing Suit if Contract in Question was not part of Business Dealings: Supreme Court [Read Judgment]

The Supreme Court has held that the Section 69(2) of Partnership Act does not bar an unregistered firm from filing suit if Contract In Question Was not part of Business Dealings.

The appellant, Shiv Developers is an unregistered partnership firm by the name “Shiv Developers”. It is stated that this firm is engaged in the business of construction of buildings and is comprising of two equal partners, namely, Mr. Sunilbhai Somabhai Ajmeri and Mr. Jignesh Kanubhai Desai. The said Mr. Sunilbhai Somabhai Ajmeri is also referred to as ‘the administrator’ of this firm and has filed the suit on behalf of the firm.

It has further been averred thata new partnership by the firm name “Aksharay Developers” was formed with four partners, namely, Sunilbhai Somabhai Ajmeri (also the partner and administrator of the appellant firm) and the respondent Nos. 2, 3 and 4. According to the plaint averments, the said partnership was formed exclusively for the purpose of the project related with the suit property and the tenure of the partnership was confined to the completion of the said project. A Memorandum of Understanding, was signed by the partners on the date of incorporation of the firm and it was agreed in the MOU that from the income which may accrue from the project, a fixed sum of Rs 1,00,00,000 (Rs. One Crore) would be paid to Sunilbhai Somabhai Ajmeri along with 5-10% on the profit accruing upon the completion of project. According to the appellant, the said MOU clearly acknowledged the fact that all the parties to the MOU were the partners of the firm “Aksharay Developers” and the MOU was being entered by virtue of the same.

The grievance of the appellant has been stated in the manner that in new turn of events, the respondent constituted another firm under the same name and style as “Aksharay Developers” but without including Sunilbhai Somabhai Ajmeri and respondent No. 4 as partners. This firm, as constituted, is the respondent and it is alleged that the same has been constituted and got registered by the respondent Nos. 2 and 3 clandestinely and fraudulently. It is further alleged that on the very next day of constituting the respondent firm, the respondent got executed a sale deed, whereby 60% share of the appellant in the suit property was purchased by this firm Aksharay Developers from Sunilbhai Somabhai Ajmeri, acting on behalf of the appellant firm Shiv Developers. It has yet further been alleged that the cheques issued in favour the appellants towards sale consideration were dishonoured.

The division bench of Justice Dinesh Maheshwari and Justice Vikram Nath has held that for the purpose of Section 69 of the Act of 1932, the present case is governed by the principles laid down in Raptakos Brett & Co. Ltd, as further exposited in Haldiram Bhujiawala. 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.

SHIV DEVELOPERS vs AKSHARAY DEVELOPERS & ORS.

CITATION: 2022 TAXSCAN (SC) 122

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