1. Suit for recovery of money filed by partners of an unregistered partnership firm against another partner to enforce rights under a partnership agreement. (Para 2 , 3 , 12 , 14 )
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2025 Supreme(SC) 160
SUPREME COURT OF INDIA
J.B. PARDIWALA, R. MAHADEVAN, JJ.
Sunkari Tirumala Rao & Ors. - Appellants
Versus
Penki Aruna Kumari - Respondent
Petition(s) for Special Leave to Appeal(C) No. 30442 of 2019
Decided on : 17-01-2025
Advocates appeared:
For the Petitioner(s): Mr. F. I. Choudhury, AOR
For the Respondent(s): Ms. Manjeet Kirpal, AOR Ms. Ritu Puri, Adv.
For the Petitioner(s): Mr. F. I. Choudhury, AOR
For the Respondent(s): Ms. Manjeet Kirpal, AOR Ms. Ritu Puri, Adv.
A suit for recovery of money by partners of an unregistered firm is not maintainable under Section 69 of the Indian Partnership Act, 1932, which mandates registration for such suits.
Headnote:(A) Indian Partnership Act, 1932 - Section 69 - Maintainability of suit - Suit for recovery of money filed by partners of an unregistered firm - High Court held suit not maintainable under Section 69(1) as it prohibits suits by partners of unregistered firms - The court emphasized that the suit must be for enforcement of a right arising from a contract and that the firm must be registered for such suits to be maintainable. (Paras 3, 6, 8, 12, 16)
(B) Jurisdictional Bar - The court reiterated that a suit filed by an unregistered partnership firm is without jurisdiction under Section 69(1) and that the appropriate course would have been to file for dissolution and accounts. (Paras 8, 16)
Facts of the case:
The petitioners filed a suit for recovery of Rs.30,00,000/- against the respondent, claiming it was a partnership agreement despite the firm being unregistered. The Trial Court initially held the suit maintainable, but the High Court reversed this decision.
Findings of Court:
The High Court's ruling that the suit was not maintainable was upheld, emphasizing the mandatory nature of Section 69.
Issues: The main issue was whether a partner of an unregistered firm could maintain a suit against another partner.
Ratio Decidendi: The court ruled that Section 69(1) of the Indian Partnership Act is mandatory, rendering suits by partners of unregistered firms void. The court also noted that the appropriate action would have been to seek dissolution of the partnership.
Result: Special Leave Petition dismissed.
Judgement Key Points
Key Points: - Suit for recovery of money by partners of an unregistered firm is not maintainable under Section 69(1) of the Indian Partnership Act, 1932 (!) (!) . - Section 69(1) prohibits instituting a suit by or on behalf of partners of an unregistered firm against the firm or any person alleged to be a partner for enforcement of a right arising from a contract (!) (!) . - The mandatory nature of Section 69(1) renders suits by partners of unregistered firms void (!) (!) . - Appropriate remedy for partners of an unregistered firm is to file a suit for dissolution of the partnership firm and rendition of accounts (!) (!) . - Exception under Section 69(3) allows suits for dissolution of firm and accounts irrespective of non-registration, but does not apply to suits for recovery of money (!) (!) . - The partnership deed registered is essential for maintaining a suit against another partner (!) (!) . - Special Leave Petition dismissed as the High Court's ruling was correct and no error of law was committed (!) (!) .
What is the maintainability of a suit for recovery of money by partners of an unregistered firm under Section 69 of the Indian Partnership Act, 1932?
What does Section 69(1) of the Indian Partnership Act, 1932 prohibit regarding suits by partners of an unregistered firm?
What is the appropriate legal remedy for partners of an unregistered firm seeking to enforce rights arising from a partnership agreement?
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Table of Contents
2. Whether a suit for recovery of money by partners of an unregistered firm is maintainable if the partnership business had not yet commenced. (Para 3 , 4 , 6 )
3. Section 69 is mandatory; a suit to enforce contract rights by a partner of an unregistered firm is barred regardless of whether business commenced. (Para 8 , 9 , 15 , 16 )
4. A suit by a partner of an unregistered firm to enforce a right arising from a contract is barred under Section 69(1), Partnership Act. (Para 8 , 9 , 15 )
5. Special Leave Petition dismissed; High Court order holding the suit non-maintainable upheld. (Para 17 , 18 )
6. Is Section 69 of the Indian Partnership Act, 1932 mandatory in character?
Yes, Section 69 is mandatory. It renders void any suit instituted by a plaintiff to enforce a right vested in them by virtue of a contract entered into as a partner of an unregistered firm. (Para 8 , 9 )
7. What are the two conditions that must coexist for a suit to be barred under Section 69(1) of the Partnership Act?
The two embargoes are: first, the suit must be filed by a person suing as a partner in a firm, and second, the suit must be to enforce a right arising from a contract. (Para 10 , 11 )
8. Does the non-commencement of partnership business exempt a suit from the registration requirement under Section 69?
No. The fact that actual business did not commence is immaterial; once there is a partnership agreement, the firm must be registered to maintain a suit for enforcing rights accruing from that agreement. (Para 6 , 16 )
9. What exceptions exist to the bar on suits by unregistered firms under Section 69?
Under Section 69(3), the registration requirement does not affect the enforcement of any right to sue for the dissolution of a firm, for accounts of a dissolved firm, or to realize the property of a dissolved firm. (Para 8 , 11 , 16 )
ORDER :
1. This petition arises from the order passed by the High Court of Andhra Pradesh at Amravati dated 17-7-2019 in Civil Revision Petition No.2944/14 by which the High Court allowed the Revision filed by the respondents (original defendants) and thereby set aside the order passed by the District Judge, Vizianagaram in Original Suit No.80/12 deciding a preliminary issue as regards the maintainability of the suit instituted by the petitioners – herein (original plaintiffs) for recovery of money.
2. It appears from the materials on record that the petitioners – herein (original plaintiffs) instituted Original Suit No.80/12 praying for the following reliefs:-
VI. Therefore, the plaintiffs pray that the Honourable Court may be pleased to pass a Decree and Judgment in favour of the plaintiffs and against the defendant:-
a) For recovery of Rs.30,00,000/- (Rupees Thirty Lakhs only) from the defendant;
b) Costs of the suit; and) For such relief or other reliefs as the Honourable court deems fit and proper in the circumstances of the case, in the interests of justice.”
3. In the suit proceedings, the issue as regards the maintainability of the suit was raised on the ground that a partner of an unregistered partnership firm could not have filed the Suit for recovery of money, being hit by Section 69 of the Indian Partnership Act, 1932 (hereinafter, the “Act”).
4. The aforesaid issue was decided as a preliminary issue and the Trial Court held that the suit is maintainable. The Trial Court took the view that although there is a partnership deed on record yet as the partnership business had not commenced, the suit could be said to be maintainable.
5. The defendants being dissatisfied with the order passed by the Trial Court deciding the preliminary issue as stated above challenged the same by filing a Civil Revision Application before the High Court.
6. The High Court took the view that the suit is not maintainable, being hit by Section 69 of the Partnership Act. The High Court in its impugned order while allowing the revision application, observed as under:-
“3. The counsel for petitioner submits that the suit is not maintainable for the reason that it is hit by Section 69(1) of the Indian Partnership Act, 1932 (for short, the Act). The issue involved is whether a partner of an unregistered firm can maintain a suit against the other partner. For the sake of convenience, Section 69(1) of the Act is extracted hereunder:
Section 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 persons suing as a partner in a firm against the firm or 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 a firm for accounts of the firm or to realise the property of the firm.
4. The counsel for the respondents-plaintiffs submits that the partnership business has not yet commenced, and in the written statement filed by the petitioner-defendant in the suit, it is categorically mentioned that the business was stopped in the year 2009. The counsel for the petitioner, in answer to the said submission, draws the attention of this Court to the partnership agreement, wherein it is clearly mentioned that the plaintiff was offering partnership to the respondents as she was not able to carry on the business. The reason for closure of the business is immaterial since it is clearly mentioned in the agreement itself that the petitioner-defendant was not in a position to continue the Crusher and hence, she is offering partnership to the respondents. Hence, it has to be understood from the agreement that knowing fully well that the Crusher was n
