PETITIONER:
SHARAD VASANT KOTAK & ORS.
Vs.
RESPONDENT:
RAMNIKLAL MOHANLAL CHAWDA & ANR.
DATE OF JUDGMENT: 17/12/1997
BENCH:
S.C. SEN, K. VENKATASWAMI
ACT:
HEADNOTE:
JUDGMENT:
THE 17TH DAY OF DECEMBER, 1997
Present:
Hon'ble Mr, Justice Suhas C.Sen
Hon'ble Mr, Justice K. Venkataswami
R.F.Nariman, Sr.Adv., P.H.Parekh, Sameer Parekh and Ms.
Sunita Sharma, Advs. with him for the appellants.
Sole J.Sorabjee, Sr.Adv., Ramesh Singh, Parimal K.Shroff.,
Ms. Bina Gupta, Ms.Rakhi Ray and Pritesh Kapur, Advs. with
him for the Respondents.
J U D G M E N T
The following Judgment of the Court was delivered:
K. Venkataswami.J.
Leave granted.
This appeal by special leave has arisen under the
following circumstances:-
The appellants are the partners of a suit firm called
'M/s. Paramount Builders' . The partnership was entered into
on 29.11.1976 with the following individuals as partners:
S.NO. Name of Partners Share
1. Shri Sharad Vasant Kotak 15%
2. Shri Dilip Vasant Kotak 15%
3. Shri Anil Dhirendra Kotak 15%
4. Smt. Hemkuver Vasant Kotak 15%
5. Smt. Lilavati Dhirendra Kotak 15%
6. Shri. Mohanlal Hinji Chawda 12 1/2%
7. Shri Ramniklal Mohanlal Chawda 12 1/2%
The said partnership firm was registered on 15.12.1980
under Registration no, 158675 with the Registrar of Firm. On
6.5.1986, Shri Mohanlal Hinji Chawda, a partner of the firm
(Sr. No. 6 above) died and in his place, his widow Smt.
Jijiben Mohanlal Chawda was admitted as a partner in the
fir. After the admission of the said Smt. Jijiben Mohanlal
Chawda, another deed on partnership was made consisting of
the old six partner and the newly admitted partner Smt.
Jijiben Mohanlal Chawda. As a matter of fact,. the induction
of the new partner was not brought to the notice of the
registrar of Firms by forwarding the required particulars.
It is on record that still latter on 3.11.1992 another
partnership deed was brought into existence consisting of
the same partners. It is also on record that yet another
partner Smt. Hemkuver B. Kotak (S.NO.4 above) died in
September, 1994. The fact of death of this partner also was
not intimated to the Registrar of Firms. While, so the 1st
respondent gave a notice of dissolution of the firm to the
appellants and also filed a suit for the dissolution of the
partnership firm bearing Suit no., 5016/94 on 15.12.94 in
the High Court of Judicature at Bombay on the original side.
Initially in the plant, the constitutional validity of
Section 69(2A) of the Indian Partnership Act (hereinafter
called the "Act"), as amended by Maharashtra Act, was not
raised. The 1st respondent moved a Chamber Summons No,
301/97 seeking permission of the Court to carry out certain
amendments to the plaint. Briefly, the amendments sought
were that subsequent changes and/or modifications in the
partnership deed of M/s. Paramount Builders under the deed
of partnership dated 20.10.1986 and also in the deed of
partnership dated 3.11.1992 are merely in the nature of
changes and/or modifications which do not affect
registration of the said firm of M/s. Paramount Builders, as
required under the Act , for entitling a partner to
institute a suit for reliefs against the partners on
dissolution of firms and alternatively, the other amendment
sought was to challenges the vires of section 69 (2A) of the
Act as in force in State of Maharashtra.
The amendment sought was seriously opposed by the
appellants inter alia, contending that the suit as filed was
not maintainable, and, therefore, the amendment cannot be
allowed, In other words, according to the appellants on and
from 20.10.1986 when a new partnership deed was made, the
registration already given to the firm ceased to have
validity and the partnership as at present must be deemed to
be an unregistered one and, therefore, the suit was hit by
Section 69 (2A) of the Act creates a bar on the threshold of
the filing of the suit for the relief covered in the suit
and the very suit filed by the plaintiff was incompetent.
That being the position, the application for amendment could
not be permitted. Consequently, the application was
rejected.
Aggrieved by the rejection of the amendment
application, the first respondent preferred an appeal to the
Division Bench of the High Court in Appeal No. 509/97.
The appellate court was of the view that the
registration of the firm continues to be in force
notwithstanding any reconstitution of the firm and even whin
dissolution takes place, the registration of the firm
continues. The Division Bench further held that Section
69(2A) requires the registration of a firm and it does not
require a fresh registration each time a reconstitution or
dissolution of the continuing firm takes place. After
finding that the suit filed by the first respondent was not
hit by Section 69(2A), the Division Bench held as follows:-
"The proposed amendment consists of
two parts. The first part is only
a factual aspect which has been
sought to be introduced in order to
demonstrate that the bar under
Section 69(2A) is not attracted.
There is no reason as to why such
an amendment should not be granted.
The second part of the amendment
pertains to the constitutional
challenge of the validity of
Section 69(2A). As we have already
taken a view that Section 69(2A) is
not attracted, the question of
challenge does not survive and,
therefore, it is not necessary to
grant the amendment containing
constitutional challenge."
Ultimately the appellate court allowed the appeal and
permitted the amendment only regarding the factual portions
and not regarding the constitutional validity of Section
69(2A).
Aggrieved by the judgment of the Division Bench, the
appellants have preferred this appeal by special leave.
In this appeal, the following substantial question of
law arises for our consideration:-
"Whether on the facts of this case
the suit for a dissolution and
account of partnership is hit by
Sec.69(2A) of the Act as amended in
the State of Maharashtra?
For answering the question, it is necessary to set out
the relevant provisions of the Act as amended in the State
of Maharashtra, which are given below:-
"4. Definition of
"partnership". "Partnership" is the
relation between persons who have
agreed to share the profits of a
business carried on by all or any
of them acting for all.
"Partner" "Firm" and "firm-names"
Persons who have entered into
partnership with one another are
called individually, "partners" and
collectively "a firm", and the name
under which their business is
carried on is called the "firm-
name".
17. Rights and duties of partners
after a change in the firm,.
Subject to contract between the
partners-
(a) Where a change occurs in
the constitution of a firm, the
mutual rights and duties of the
partners in the reconstituted firm
remain the same as they were
immediately before the change, as
far as may be;
(b)................................
..........
(c)................................
.........
CHAPTER v
Incoming and outgoing partners
31. Introduction of a partner, (1)
Subject to contract between the
partners and to the provisions of
section 30, no person shall be
introduced as a partner into a firm
without the consent of all the
existing partners.
(2) Subject to the provisions of
section 80, a person who is
introduced as a partner into a firm
does not there by become liable for
any act of the firm dome before he
became a partner.
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CHAPTER VI
Dissolution of a firm
36. Dissolution of a firm. The
dissolution of a partnership
between all the partners of a firm
is called "dissolution of the
firm".
CHAPTER VII
Registration of Firms
58. Application for registration.
(1) (Subject to the provisions of
sub-section (A), the registration
of a firm) effected by sending by
post or delivering to the Registrar
of the area in which any place of
business of the firm is situated or
proposed to be situated, a
statement in the prescribed form
and accompanied by the prescribed
fee (and a true copy of the deed of
partnership) stating:-
(a) the firm-name,
[ (aa) the nature of business of
the firm;) 9) the place or
principal place or business of the
firm,(1) the place or principal
place of business of the firm, (i)
the names of any other places where
the firm carries on business, (d)
the date when each partner joined
the firm, (e) the named in full and
permanent address of the partners,
and (f) the duration of the firm.
The statement shall be signed
by all the partners, or by their
agents specially authorised in this
behalf.
[(1A) The statement under sub-
section (1) shall be sent or
delivered to the Registrar within a
period of one year from the date of
constitution of the firm:
Provided that in the case of
any firm carrying on business on or
before the date of commencement of
the Indian Partnership (Maharashtra
Amendment) Act, 1984, such
statement shall be sent or
delivered to the Registrar within a
period of one year from such
date)_.
(2) Each person signing the
statement shall also verify it in
the manner prescribed.
(3)................................
........................
(4)................................
.......................
59. Registration (1) When the
Registrar is satisfied that the
provisions of section 58 have been
duly complied with, he shall record
an entry of the statement in a
register called the Register of
Firms, and shall file the
statement, (On the date such entry
is recorded and such statement is
filed, the firm shall be deemed to
registered.)
62) The firm, which is registered,
shall use the brackets and word
"(Registered)" immediately after
its name.)
63. Recording of changes in and
dissolution of a firm. (1) When a
change occurs in the constitution
of a registered firm, (every)
incoming, continuing or outgoing
partner, and when a registered firm
is dissolved, (every) incoming
continuing or outgoing partner, and
when a registered firm is
dissolved, (every) person who was a
partner immediately before the
dissolution, or the agent of
(every) such partner or person
specially authorised in this
[shall, within a period of 90 days
from the date of such change or
dissolution, give notice to the
Registrar of such change or
dissolution, specifying the date
thereof;) and the Registrar shall)
make a record of the notice in the
entry relating to the firm in the
Registrar of
Firms and shall file the notice
along with statement relating to
the firm in the Registrar of Firms
and shall file the notice along
with statement relating to the firm
filled under section 59.
(1A) Where a change occurs in the
constitution of a registered firm,
all person, who after such change
are partners of the firm, shall
jointly send an intimation of such
change duly signed by them, to the
Registrar, within a period of 90
days from the date of occurrence of
such change and the Registrar shall
deal with it in the manner provided
by section 61.)
(2)................................
.....................
69. Effect of non-registration, (1)
No suit to enforce a right arising
from a contract or conferred by
this Act shall be instituted in any
Court by or on a behalf of any
person suing a partner in a firm
against the firm on any person
alleged to be or to have been a
partner in the firm unless the firm
is registered and the person suing
is or has been shown in the
Register of Firms as a partner in
the firm :
(Provided that the requirement of
registration of firm under this
sub-section shall not apply to the
suits or proceedings instituted by
the heirs or legal representatives
of the deceased [partner of firm
for accounts of the firm or to
realise the property of the firm.)
(2) No suit to enforce a right
arising from a contract shall be
instituted in any court by or on
behalf of a firm against any third
party unless the firm is registered
and the persons suing are or have
been shown in the Register of Firms
a s partners in the firm.
(2A) No suit to enforce any right
for the dissolution of a firm or
for accounts of a dissolved firm or
any right or power to realise the
property of a dissolved firm shall
be instituted in any Court by or on
behalf of any person suing as a
partner in a firm against the firm
or any person alleged to be or have
been a partner in the firm, unless
the firm is registered and the
person suing is or has been shown
in the Register of Firms as a
partner in the firm:
Provided that the requirement of
registration of firm under this
sub-section shall not apply to the
suits or proceedings instituted by
the heirs or legal representatives
of the deceased partner of a firm
for accounts of a dissolved firm,
or to realise the property of a
dissolved firm.)
(3)................................
..........
...................................
..........
(69A. Penalty of contravention of
section 60, 61.62 or 63. If any
statement, intimation or notice
under sections 60.61.62 or 63 in
respect of any registered firm is
not sent or given to the Registrar,
within the period specified in that
section, the registrar, may, after
given notice to the partners of the
firm and after given them a
reasonable opportunity of being
heard, refuse to make the suitable
amendment s n the records relating
to the fir, until the partners of
the firm pay such penalty, not
exceeding ten rupees per day, as
the Registrar may determine in
respect of the period between the
date of expiry of the period
specified kin section 60.61.62. or
as the case may be, 63 and the date
of making the amendments in the
entires relating to the firm.)
Rule 3. Forms of Statements. The
Statements required to be sent or
delivered to the Registrar under
section 58 and 60 of the Act
shall, respectively, be in Forms
"A" and "B" and be verified in the
manner as laid down in the
footnotes to the respective forms.
Rule 4. Forms of intimation and
notice, Intimations and notices
which are required to be given
under sections 61.62. and 63 of
the Act shall, respectively, be
given in Forms "C", "D", "E" and
"f" and be verified in the
manner setforth in the footnotes to
the respective Forms.
Rules 6. Form of Register., The
Register shall be maintained kin
Marathi in Form "G" and a separate
page shall be devoted to each
firm., The pages, after the entires
are made, shall be bound in proper
permanent registers in the order of
the consecutive number allotted to
each firm on registration, Every
entry in Register shall be signed
by the Registrar.
Rule 17 . Certificate or
Registration, -- Where a firm si
registered under section 59 of the
Act, the Registrar shall issue a
certificate in Form, "H"
Form "A"
Application for Registration of
Firms
(See Rule 3)
We, the undersigned, being
partners, hereby apply for
registration as a firm and for that
purpose supply the following
particulars pursuant to section 58
of the Indian Partnership Act,
1932:--
(a) Firm Name
(b) Nature of business of the firm
Place
(c) Principal place of business of
the firm
Taluka
District
(d) Names of any other places where
the firm carries on business in the
above name.
(e) Names ion fully and permanent
address (residential) of all the
partners.
(f) Date on which each partner
joined the firm.
(g) Duration of the firm, In case
there is any provision made by
contract form the duration of the
partnership or for the
determination of the partnership,
please state the provisions
briefly, please state the
provisions briefly. If no such
provision is made, words "AT WILL"
may be stated.
Note 1. For the registration of
each Firm a separate application is
necessary. Accordingly the
applicants should apply in this
application only particulars of the
Firm in respect of which the
application is made. This applies
to the case of the same persons
carrying on business in partnership
under different Firm names.
Note 2.-- Against item (c) and (d),
the exact location of the place
should be given.
Note. 3.-- This application much be
signed by all partners of their
agents specially authorized in this
behalf on solemn affirmation before
a Magistrate or other officer duly
empowered to administer Oaths.
Note 4-- Making a false, untrue, or
incomplete statement is punishable
under section 70 of the Indian
Partnership Act, 1932.
(h) In case there are any minors
admitted to the benefits of
partnerships:--
------------------------------------------------------------
Name & Address Name & Address Date of Date when he/
of Minor of Guardian Addmis- she will
sion to attain
benefits majority
(1) (2) (3) (4)
------------------------------------------------------------
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We are sending the prescribed registration fee by
cash/money order. We the abovenamed, solemnly affirm that
what is stated in paragraphs is true to our own knowledge
and that what is stated in the remaining paragraphs is
stated on information and belief, and I/We believe the same
to be true.
We also declared on solemn affirmation that up to the
date of submission of this application there has not been
any change whatever in any of the particulars aforesaid.
Solemnly affirmed at
Date this ........................ day
of..................
(1)
(2)
(3)
(4)
(5)
Name and Signatures
Certified that the persons who have signed the
application have signed in my presence and have solemnly
affirmed that the particulars furnished therein are true.
Name of Attesting Witness
Designation
And Seal, if available
Before me
( Price Re. 1)
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Form 'E'
INDIAN PARTNERSHIP ACT, 1932
Notice of change of Constitution or Dissolution of Firm
(See rule 4)
FIRM REGN. NO and DATE
Firm Name........................................
Registered Address..............................
Partners in the above named firm
We, being agents of a partner in the abovementioned
firm persons specially authorised by a partner in the above
mentioned firm to give notice in this behalf hereby give
notice that
(a) the constitution of the firm has changed as follows:-
(1) Mr. /Messrs ............... of .......................
has/have joined the firm as new /partner/partners on
(2) Mr./Messrs ............... of .......................
has/have retired as partner/partners of the firm with effect
from.............................................
(b) the said firm has been dissolved on...........
I/We ................... the
abovenamed....................
solemnly affirm that what is stated in paragraphs...........
is true to my/our own knowledge, and that what is stated in
the remaining paragraphs ............ is stated on
information and belief, and I/We believe the same to be
true.
I/We declare on solemn affirmation that up to the date
of submission of this application there has not been any
change in any of the particulars previously intimated save
and except the change notified above.
Solemnly affirmed at:
Dated this..............day of...........19.....
Name and Signatures-
(1)
(2)
(3)
Certified that the person who has signed this notice
has signed it in my presence and he has solemnly affirmed
that the particulars furnished there in are true.
In the case of person not conversant with the English
Language, the contents of the above particulars have been
explained to him in a language familiar to him and he has
affirmed the truth thereof.
Signature.
Note 1. -- Please strike out item (a) or (b) whichever is
not applicable.
Note 2.-- Please give dates according to the English
calendar.
Note 3.-- In case there is only one person left then the
firm should be considered as dissolved and the form should
be filled in accordingly.
Note 4.-- This notice must be signed by every partner or his
agent specially authorised in this behalf on solemn
affirmation before a Magistrate or other officer duly
empowered to administer oaths.
(Price Re.1)
------
Form 'G'
(See rule 6)
Register of firms
Firm No........
------------------------------------------------------------
Name.
------------------------------------------------------------
Business:
------------------------------------------------------------
Number of Entry Date of Entry Nature of Remarks
Entry
------------------------------------------------------------
------------------------------------------------------------
------------------------------------------------------------
------------------------------------------------------------
------------------------------------------------------------
------------------------------------------------------------
------------------------------------------------------------
------------------------------------------------------------
------------------------------------------------------------
------------------------------------------------------------
------------------------------------------------------------
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FORM 'H'
(See rule 17 )
Certificate of Registration
(National Emblem)
The Indian Partnership Act, 1932
(Act No IX pf 1932)
Registration No...................
It is certified that a firm by name....................
with its head office at ................... has this day
been duly registered under the Indian Partnership Act, 1932
(Act No.IX of 1932).
Given under my hand this
day of ......19....
Registrar/Assistant Registrar of Firms
Bombay, Pune, Nagpur, Aurangabad.
---------
Before proceeding further, we remind ourselves that we
are concerned with a suit filed by a partner for dissolution
and accounts. No third party rights or liabilities are
involved in the present suit filed by respondent no. 1.
Undoubtedly counsel on both sides addressed arguments
covering larger question. But we propose to confine
ourselves strictly to the facts of the case and decide the
controversy without touching up[on the larger issues or
connected issues arising out of the pleadings because the
maintainability of the suit is the sole issue based on
Section 69(2A) of the Act.
Section 62(2A) (extracted above) requires two conditions
before a partner can sue for dissolution of a firm and for
accounts :-
1. The firm must be registered.
2. The person suing is or has been shown in the register
of firm as partner in the firm.
It is not in dispute that the partnership as entered
into under a deed dated 28.11.1979 was duly registered and a
certificate of registration was granted. It is also an
admitted fact that the plaintiff, first respondent herein,
was one of the founder partner under the deed dated
28.11.1979 and his name did find a place in the register of
firm as a partner and there is nothing to show that at any
point to time, his name has removed from the register of
firms. We have seen that on the death of one of the
partners, his widow was inducted into the partnership and a
deed was entered into on 20.10.1986, repeating almost all
the clauses in the partnership deed dated 28.11.1979 except
for consequential changes necessitated by the induction of
new partner in the place of deceased partner.
It is the contention of learned senior counsel, Mr.
Nariman, that when the new partner was inducted under the
partnership deed dated 20.1.01986 in the place of the
deceased partner, the firm registered under the partnership
deed dated 28.11.1979 ceases to be on the records of
register of firms and, therefore, the registration already
given will not ensure to the benefit of the partnership
entered on 20.10.1986. If that be so, according to Mr.
Nariman, learned senior counsel, the conditions imposed by
Section 69(2A) are not satisfied and, therefore, the suit as
filed was not maintainable.
In support of his argument, he placed strong reliance
on the expression 'partnership' as defined in Section 4 of
the Act, It is the contention of M r, Nariman that bearing
in mind the definition in Section 4 of the Act, the partners
including second respondent will collectively be a firm and
that firm is not registered inasmuch as the name of the
second respondent does not find a place in the Register of
Registrar of Firms. Therefore, the learned Single Judge was
right in holding that the suit was not maintainable at the
threshold. According to the learned senior counsel, the mere
fact that the plaintiff's name find a place in the Register
of Registrar of Firms is not sufficient to maintain the suit
when admittedly one of the partners's name (second
respondent's name) was not shown in the Register of
Registrar of Firms. He also contended that a comparison of
language employed in Sections 31 and 32 of the Act. Will
show that whenever a partner is inducted into an existing
firm, the old firm ceases to exist and an altogether new
firm comes into existence from the date of induction of the
new partner and that new firm must ger fresh registration.
In support of this proposition, he placed reliance on Madho
Prasad and Others vs. Gouri Dutt Ganesh Lal (AIR 1939 Patna
323) ; Meenakshi Achi and Another vs. P.S.M. Subramanian
Chettiar and Others (AIR 1957 Madras 8) and Gouri Sankar
Sheroff and others vs. Central Hindusthan Bank Ltd. and
others (Air 1959 Calcutta 262). He also submitted that the
partners entered into another deed on 3.11.1992 and they
have expressly treated that the firm as reconstituted one,
In other words, according to the learned senior counsel,.
the deed dated 20.10.86 in the absense of such expression
(reconstituted firm) the understanding was the old firm,
ceases to be in existence and a new firm was brought into
existence. For this, he also placed reliance on clauses 4
and 5 others (Air 1959 Calcutta 262). He also submitted that
the partners entered into another deed on 3.11.1992 and they
have expressly treated that the firm as reconstituted one,
In other words, according to the learned senior counsel,.
the deed dated 20.10.86 in the absense of such expression
(reconstituted firm) the understanding was the old firm,
ceases to be in existence and a new firm was brought into
existence. For this, he also placed reliance on clauses 4
and 5 regarding 'Commencement' and 'Accounting Year' . He
also placed reliance on a passage from Lindley on the Law of
Partnership. 15th Edition, page 374:-
" Each partner is, it is true, the
agent of the firm: but as before
pointed out, the firm is knot
distinguishable from the persons
from time to time composing it: and
when a new member is admitted he
becomes one of the firm for the
future. but not as from the past,
and this present connection with
the firm is no evidence that he
ever expressly or impliedly
authorised what may have been done
prior to his admission. This is
wholly consistent with the fact
that after the admission of a new
member, a new partnership is
constituted, and thus special
circumstances are required to be
shown special circumstances are
required to be shown before the
debts and liabilities of the old
partnership are treated as having
been undertaken by the new
partnership."
Contending contrary and supporting the judgment of the
Division Bench. Mr,. Sole. J. Sorabjee, learned Senior
Counsel, submitted that there is a well-recognised
distinction between the legal concept of dissolution and
reconstitution of a firm. In the case of an incoming or an
outgoing partner in a existing firm, there is only a
reconstitution of the firm and in all other respects, the
existing firm continues with old and new partners. A look at
chapter V of the Act. according to him, will fortify the
above contention. In other words, chapter V deals with
"Income and Outgoing partners" while Chapter VI separately
deals with "Dissolution of a Firm". The two are totally
different concepts and cannot in law be equated with each
other, According to the learned Senior Counsel, the rules
framed by Maharashtra Government in 1989 and the forms
prescribed under the rules in particular Forms E. G. and H
clearly support the said contention. It is also his
contention that even when there is a dissolution of a firm.
It does not cease to be registered firm but for the purposes
of Partnership Act it continues to be registered. In other
words, according to the learned Senior Counsel. the
registration of a firm is valid till it is cancelled in a
manner know to law. Non-compliance of Sections 61,62 and 63.
as amended in Maharashtra, if at all, will attract the
penalties prescribed under Section 69A and nothing more and
it is incorrect to contend that non-compliance of the said
provisions will result in deregistration is a drastic one,
it is impermissible to hold that non-compliance with
Sections 63(1) and 63(1A) would lead to deregistration of a
firm in the absence of express and clear legislative
provisions to that effect. He further contended that merely
because another partnership deed was made on 20.1.01986, it
cannot be said that there was a dissolution of the old firm
and consequential formation of a new firm under the latter
dead. According to the l earned Senior Counsel, it is the
substance of the matter that is relevant to be looked into
and not the phraseology employed by the parties. IN others
words, the test is whether after the execution of the deed
dated 20.10.1986, for all intents and purposes,. the firm as
reconstituted was a different unit or remained the same unit
in spite of change in its constitution. Looked at from this
angle, the unit remained the same as it originally was in
spite of change in its constitution and the contention to
the contrary, according to the learned Senior Counsel, was
not correct. To support this, he pointed out the
similarities between the two deeds. The alleged
dissimilarities as found in Clauses 4 and 5 of the Document
dated 20.1.1986 are really not dissimilarities but
consequential and incidental changes.
In support of his contentions, he placed reliance on
the following judgments of this Court and other High
Courts:-
Commissioner of Income-Tax. West Bengal vs. A.W.Figgies &
Co. and Others (1954 (5) SCR 171); M/s Wazid Ali Abid Ali
Vs. C.I.T., Lucknow ( 1988 (Supp) SCC 193); Tyresoles
(India) Calcutta vs. Commissioner of Income-Tax, Coimbatore
(1963 Vol. 49 ITR 515); Firm Girdhar Mal Kapur Chand vs.
Firm Dev Raj Madan Gopal (1964) 1 SCR 995); Pratapchand
Ramchand & Co. vsw. Jehangirji Bomanji Chinoy (AIR 1940
Bombay 257) : Tapendra Chunder Goopta vs. Jogendra Chunder
Goopta and Others (AIR (29) 1942 Calcutta 76); Messrs,
Durga Das Janak Raj vss. M/s. Mohatta Brothers a Firm (AIR
1969 Gujarat 178); and Kesrimal and Another vs. Dalichand
and others (AIR 1956 Rajasthan 140).
In reply to the contention of Mr, Nariman that the
purpose for which Section 69(2A) was introduced by
Maharashtra legislature will be the last if the view
projected by him is not accepted, Mr. Sorabjee submitted
that failure to comply with the mandatory provisions in
Section 61.62 or 63 may attract the penalties provided under
Section 69 A of the Act but not the deregistration of the
firm. In support of this, he placed reliance on a judgment
of the Andhra Pradesh High Court in Maddi Sudarsanam and
Others vs. Borogu Viswanadham Brothers (AIR 1955 Andhra 12).
At the outset, we would like to deal with the substance
of the Partnership deeds in this case. As noticed earlier,
the first Deed of Partnership was entered into on 29.11.79
and that partnership firm was requested on 15.12.80 . One of
the partners (Shri Mohanlal Hinji Chawda) died mon 6.5.86
and in his place, his widow was indicted. The second Deed of
Partnership was drawn on 20.1.86. By reason of the second
Deed of Partnership, can it be said that the existing firm
dissolved or ceased. It is relevant here to note that in
both the deeds it was expressly made that the death,
insolvency or retirement of any partner shall not dissolve
the partnership firm. On the other hand, the partner shall
be entitled to carry on the partnership business on the
terms and conditions mutually agreed upon bu the said
partners (vide Clause 11) . Therefore, it cannot be
contended by the appellants that by reason of death of one
of the partners, the existing firm stands dissolved. Cam it
then be said that by reason of inducting the widow of the
deceased partner the existing registered firm ceased and
totally a new partnership firm came into existence.
According to the appellants, by reason of Clauses 4 and 5 in
the second Deed of Partnership. It must be deemed that the
old partnership ceased and entirely a new partnership firm
was found under the second Deed. We are unable to agree with
the contention of the learned senior counsel for the
appellants on this aspect. Clauses 4 and 5 relate to
commencement of the partnership and accounting year. There
are minimal changes introduced in the second Deed of
Partnership by reason of the introduction of a new partner
in place of Clauses 4 and 5 in the first Partnership Deep
and in other respects, namely, the name of the partnership
firm, the address and location of the firm, the business
carried on and shares allotted among the partners and
duration of the partnership, are identical. Moreover a
careful reading of clauses 5 and 6 of the second partnership
deed will give an impression that the partners have agreed
to continue the existing firm. The profits or losses for the
period prior to and up to the death of deceased partner is
dealt with and provided. There is no indication that the old
firm was dissolved. Likewise, reliance placed on the
recitals in the third Deed of Partnership drawn on 3.11.92
will not come to the help of the appellants. Learned counsel
for the appellants placed reliance on the term used in the
third Partnership Deep reconstituted in the Preamble
portion. We are of the opinion that this does not make any
substantial difference when we look into the substance of
the three deeds. In this connection, the learned counsel for
the respondents has rightly placed reliance on the following
observation made in Tyresoles (India). Calcutta (supra):
"In our opinion, the test of the
pudding is in the eating and the
true scope of the instrument can
readily be ascertained from what
actually happened instead of merely
depending upon expressions which
the parties might have under some
mistaken notion loosely used."
Likewise. this Court in A.W. Figgies & Co. And Ors,
(supra) at page 177 observed on a construction of two
documents of partnership as follows :-
"To all intents and purposes the
firm as reconstituted was not a
different unit but it remained the
same unit in spite of the change in
its constitutions."
We are, therefore, of the view that the existing firm
continued.
The contention of the learned counsel for the
appellants that the induction of the new partner will result
in dissolution of the firm is not also acceptable. Reliance
placed on the language of Sections 31 and 32 of the Act to
support the said contention will be of no avail if we look
into Section 17 of the Act. Section 17(a) of the Act
(extracted above) suggests only reconstitution of the firm
where a change occurs in the constitution of the firm.
Otherwise, the old firm remind the same, Here we can
usefully quote the passages from the judgments of this Court
and other High Courts.
In Tyresoles (India). Calcutta (Supra) a Division Bench
of the Madras High Court observed thus:-
" The dissolution and
reconstitution of a partnership are
two different legal concepts. The
dissolution puts an end to the
partnership. but reconstitution
keeps it subsisting, though in
another form . A dissolution
followed by some of the erstwhile
partners taking over the assets and
liabilities of the dissolved
partnership and forming themselves
into a partnership is not
reconstitution of the original
partnership. The partnership formed
after the dissolution is a new
partnership and not a continuation
of a firm of partnership
necessarily implies that the firm
never became extinct., What it
denoted is a structural alteration
of the membership of the firm, by
addition or reduction of members,
and an incidental redistribution of
the shares of the partners."
To the same effect, this Court in Commissioner of
Income-tax, West Bengal-III Vs. M/S Pigot Champan & Co. -
(AIR 1982, SC 1085) observed as follows:-
"The principle is well settled that
it is on examination of relevant
documents and relevant facts and
circumstances that the Court has to
be satisfied in each case as to
whether there has been a succession
or a mere change in the
constitution of the partnership. It
cannot be disputed that
'dissolution' and 'reconstitution'
are two distinct legal concepts,
for, a dissolution brings the
partnership to an end while a
reconstitution means the
continuation of the partnership
under altered circumstances but in
our view in law there would be no
difficulty in a dissolution of a
firm being followed by the
constitution of a new firm buy some
of the erstwhile partners who may
take over the assets and
liabilities of the dissolved firm."
The next question is whether the registration given to
the firm under the first Partnership Deed ceases when a new
partner was introduced into the firm. For this, we refer to
Sections 58,59 and 63, the relevant portions have already
been extracted. Rules 3, 4,6 and 17 have also been
extracted. The forms prescribed in this connection have also
been extracted. A close perusal of these provisions with
Forms "A", "E", "G" and "H" will show that there is a
definite distinction between the Certificate of Registration
given to the firm and any alterations to be entered in the
Register of Firms. This will suggest in no uncertain terms
that the changes in the constitution of the firm will not
affect the registration once made. In other words, it is not
required that every time a new partner is inducted fresh
registration has to be applied and obtained. However,
information about changes have to be given. Failure to
comply attracts penalties under Section 69A of the Act. In
this contend, the judgment in Maddi Sudarsanam (supra) can
be usefully cited. It was held that:-
"The second condition laid
down in Section 69(2) is also
satisfied. The persons now suing
i.e. the present partners are shown
in the Register of Firms as
partners of the firm. though the
same Register shows two other
partners., own of whom died and the
other retired. It may be that the
fact of retirement of one of the
partners and the death of another
should have been notified to the
Registrar under Section 63(1) as
the said events effected a change
in the constitution of the firm.
But the default made by the firm in
considering the question of the
maintainability of the suit under
Section 69(2). There is the
essential distinction between the
constitution of a firm and its
dissolution. Non-compliance with
the provisions of S. 63(1) may have
only other consequences, but under
S. 69(2) only two conditions should
be complied with by a firm to
enforce a right arising from a
contract and those two conditions
are complied with in the present
case.
The above view is supported by the decisions of this
Court and various other High Courts. In Firm Girdhar Mal
kapur Chand (Supra), this court held that once there was
registration under the Indian Partnership Act that
registration, in our opinion, continues to operate as
registration under that Act and continues to be effective-
in other words, valid registration in the eye of law as
administered in India so long as the registration is not
cancelled in accordance with law."
In Pratapchand Ramchand & Co. (supra), The Bombay High
Court observed as follows:-
"Dealing in particular with
S.63(1), that subsection among
other things provides that when a
registered firm is dissolved any
person who was a partner
immediately before the dissolution,
or the agent of any such partner or
person specially authorized in this
behalf, may give notice to the
Registrar of such change or
dissolution, specifying the date
therefore, and the Registrar shall
make a record of the notice in the
entry relating to the firm in the
Register of Firms, and shall file
the notice a along with the
statement relating to the firm
filed under S.59. Pausing there,
that Section evidently contemplates
in the case of a dissolution of a
firm by death that notwithstanding
the death h the firm should still
be treated for the purpose of the
Act as still registered., Mr, Davar
has argued that by reason of the
death and the dissolution of the
firm the firm ceased to be
registered, and in his argument he
went so far as to say that the firm
ought to have been g registered
again No s doubt it would have been
logical having regard to S.42 if
the Act had so provided., But in
fact it has not, The Act does
contemplate notwithstanding
dissolution by death that o far as
registration is concerned the firm
is to be deemed still to be
registered, and it expowers any
person who was a partner
immediately before the dissolution
to give motive of the change and
required the Registrar to record
that motive in the entry relating
to the registration of the firm and
to file it along with the original
statement which had been filed. The
next Section requiring notice is
S.69(2). That is in these terms:
No suit to enforce a right arising
from a contract shall be
instituted in any Court by or on
behalf of a firm against any third
party unless the firm is registered
and the person suing are or have
been shown in the register of firms
as partners in the firm.
Applying that sub-section to the
present case the firm was
registered and in my opinion
continued to be registered at the
date of the institution of this
suit on 26th October 1939. There is
no time limit fixed in any of the
S.60 to 63 as to when notice of
alterations or changes should be
given, Mr, Davar argued that the
word "when with which each of those
Sections begins involves an
obligation upon the person
proposing to give notice of the
change to give it immediately upon
the change occurring. The Sections
do not say so. The position
therefore is this: the firm was
registered at the time of the
institution of the suit. The firm
then consisted of Chhogamal
Dhanaji and Chhunilal Idanji, two
of the original partners whose
names were shown on the register at
the date of registration and were
shown on the register at the date
of the institution of the suit. The
fact that the firm was registered
at the date of the institution of
the suit and that the names of the
persons suing (The firm being a
compendious name for the persons
suing) were shown in the register
at The date of the institution of
the suit appears to me to be a
compliance with s.
69(2) of the Act.
It would seem that the Legislature
introduced the words with which
that subsection concludes., Viz.
and the persons suing are or have
been shown in the register of firms
as partners in the firm advisedly.
If additional partners had come
into the firm as partners since the
date of registration and their
names had not been entered on the
register in accordance with notice
of a change kin the constitution of
the firm given to the Registrar. it
may well be that the firm as then
constituted could not sue, because
although it was a registered firm
some of the persons then suing
would not be shown in the register
of firms as partners in the firm at
the date of the suit. That is not
this case. The partners who are
suing were shown in the register
originally and are still show., and
the firm according to may my
construction of the Act remained
registered notwithstanding the
death of one of the original
partners."
The above view of the Bombay High Court was followed
and applied by the Calcutta High Court in Jogendra Chunder
Goopta (supra), Punjab High Court in M/s Durga Das Janak
Raj (Supra) and the Rajasthan High Court in Kesrimal & Anr.
(supra).
In our opinion, the view taken by the Bombay High Court
and followed by the other High Court is the right view.
Learned counsel for the appellants places strong
reliance on the objects and reasons for the amendments
introduced in the Maharashtra Act. According to the learned
counsel, if his contention is not accepted, the object with
which Section 69(2A) was introduced will be lost. We do not
think so. In this context, we wish top point out that
Section 69(3)(a) of the Central Act enables the partners of
both registered and unregistered firms to file a suit for
dissolution and /or accounts. That being the position by
introducing sub-section (2A) in Section 69, the Maharashtra
Legislature has placed certain restrictions to the extent
that even the suit for dissolution of a firm or for
accounts, the suit can be filed only if the firm is
registered and the 'person' suing as a partner is shown in
the Register of Firms as a partner in the firm. In other
words, a person, who is not shown in the Register of Firms
by induction after registration even though the firms is
registered, cannot file a suit for dissolution or accounts.
This does not in any way mean that the registration given to
the firm earlier will cease. In this case, the firm was
registered and there was only reconstitution of the firm and
the first respondent, the plaintiff in this case, is a
person whose name is shown in the
Register of Firms also with the names of the appellants and,
therefore, there is compliance of Section 69(2A). The
contention to the contrary by the learned counsel for the
appellants cannot be accepted.
The decisions cited by the learned counsel for the
appellants are distinguishable. In Madho Prasad and others
vs. Gouri Dutt Ganesh Lal (supra), the principal question
that arose for consideration was whether an incoming partner
can be made liable for debts contracted b y a firm before he
joined it. In Gouri Sankar Sheroff and others vs. Central
Hindusthan Bank Ltd and others (supra), again a creditor's
right to proceed against assets of partnership firm and not
a suit by partners for accounts. In Meenakshi Achi and
Another vs. P.S.M.Subramanian Chettiar and Others (Supra),
again it was a case concerning the liability of partner for
obligations incurred before his introduction. M/s Nandlal
Sohanlal. Jullundur vs. The Commissioner of Income-Tax.
Patiala (AIR 1977 Punjab & Haryana 320) also is not helpful
to the appellants.
We are also not impressed by the arguments of the
learned counsel for the appellants that if the definition of
Section 4 is applied to Section 69(2A) then unless the names
of all partners find a place in the Register of Firms , the
suit filed by the Plaintiff cannot be sustained. The fact
that the firm was registered and Plaintiff's name finds a
place in the Register of Firms are not in dispute., The name
of the newly introduced partner, or cours, does not find a
place in the Register of Firms. That means the person whose
name does not find a place in the Register of Firms many
incur certain disabilities and that will not disable the
plaintiff to press the suit against the firm, which was
registered against the persons whose names find a place in
the Register of Firms. We are not called upon to decide what
are the disabilities of the person, whose name does not find
a place in the Register of firms. For the purpose of Section
69(2A), the partnership firm will mean the firm as found in
the certificate of registration and the partners as found in
the register of firms maintained as per rule in Form 'G'.
The present suit being one for dissolution and accounts by
one of the partners, whose name admittedly finds place in
the Register of Firms alongwith the names of all the
appellants, the requirements of Section 69(2A) are
satisfied. Section 4 of the is also complied with for this
limited purpose.
Our conclusion is that on the induction of the second
respondent, the existing firm was only reconstituted on the
facts of this case and, therefore, there is no necessity to
get a fresh registration. If by virtue of non-compliance of
certain mandatory provisions in not informing the firm,
certain penalties provided in the Act alone are attracted
and that will not lead to the conclusion that the
registration of the firm ceased. This conclusion is based on
a conjoint reading of Sections 58_63 and the form prescribed
thereunder. Further, this conclusion does not in any way
militate the object of the Maharashtra Amendment introduced
by Act 29 of 84.
In the result, we hold that the suit in question is not
hit by section 69(2A) of the Act and, therefore, the
Division Bench is right in allowing the Appeal.
Consequently, the Appeal is dismissed. However, there will
be no order as to costs.
