Delhi HC Rules S.69(2) of Partnership Act cannot Bar Unregistered Firm from Challenging CGST Demand or Enforcing Statutory Rights [Read Order]

The High Court of Delhi ruled that Section 69(2) of the Indian Partnership Act,1932 could not bar an unregistered partnership firm from challenging a Central Goods and Service Tax ( CGST ) demand or enforcing statutory rights.

Amit Kumar Basau & Anr., filed a petition under Articles 226 and 227 of the Constitution of India, challenging the order dated 20th February, 2025, passed by the Sales Tax Officer Class II/Avato Ward 113 (Special Zone), Zone 12, Delhi, which raised a tax demand of Rs.59,05,232/- and a total demand of Rs.1,09,02,348/- including interest and penalty. The petition also challenged the Show Cause Notice dated 27th November, 2024, issued for the financial year 2020-21.

Further, the petition challenged Notification No. 40/2021-Central Tax dated 29th December 2021 and Notification No. 40/2021-State Tax dated 9th June 2022. The challenge to these notifications was pending before the Court in a batch of cases led by W.P.(C) 9060/2025 titled Sarens Heavy Lift India Private Limited v. Sales Tax Officer Class II AVATO DGST Ward 201, Zone 11 & Anr.

The petitioner counsel submitted that the petitioner was a partner in Petitioner No.2, M/s Basau Construction (India), an unregistered partnership firm, and was therefore impleaded as Petitioner No.1.

The respondent counsel objected, saying that the writ petition was not maintainable for an unregistered firm. The petitioner counsel replied, relying on Haldiram Bhujiawala v. Anand Kumar Deepak Kumar (2000) 3 SCC 250, stating that an unregistered partnership firm could file a writ petition through a partner.

It was submitted that the impugned SCN was issued on 27th November, 2024, with a reminder on 13th January, 2025, but no reply had been filed due to an oversight by the Petitioner’s Chartered Accountant. As a result, the impugned order was passed without hearing the Petitioner.

The petitioner counsel also stated that the Petitioner was willing to file an appeal, subject to the outcome of Sarens (supra), where the impugned notifications were challenged.

Justice Prathiba M Singh and Justice Shail Jain heard the matter and noted that Section 69 of the Indian Partnership Act, 1932, barred unregistered firms from filing suits or proceedings to enforce any right, unless the firm was registered and the partners were listed in the Register of Firms.

However, exceptions had been recognized in judicial decisions. In Haldiram Bhujiawala & Anr. v. Anand Kumar Deepak Kumar & Anr. and Shiv Developers v. Aksharay Developers & Ors., the Courts held that Section 69(2) did not bar unregistered firms from enforcing statutory or common law rights. It was clarified that the bar applied only to contracts entered into by the firm with third parties in the course of business.

The Court observed that the present writ petition sought relief under the CGST Act, under which Petitioner No.2 was registered, despite being an unregistered partnership firm. Such a firm, which paid taxes and had grievances against the Department, could not be barred from enforcing statutory rights. Moreover, since the partner was also impleaded as Petitioner No.1, the writ petition was held maintainable.

The Court directed that the Petitioner could file an appeal by 30th November 2025 with the required pre-deposit of the tax amount. If filed by this date, the appeal would not be dismissed on grounds of limitation and would be decided on merits. Further proceedings before the Appellate Authority were to remain subject to the outcome of the decision in Sarens (supra).

The petition and any pending applications were disposed of accordingly.

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