Section 69(3) of the Partnership Act allows for the enforcement of rights arising from contracts by dissolved firms, including claims for compensation for non-delivery of goods by railway.

1. In the suit which is the subject-matter of this appeal the plaintiff claimed damages for non-delivery of a hale of cloth despatched from Ahmadabad to Muzaffarpur railway station. The bale of cloth was not delivered by the defendant in spite of several demands made by the plaintiff and in spite of notices under Section 77 of the Indian Railways Act and Section 80 of the Code of Civil Procedure. The case of the defendant was that the suit was not maintainable because the plaintiff firm was not registered and Sec. 69 (2) of the Partnership Act was a bar. The defendant also denied liability to pay compensation as the loss of consignment was due to circumstances beyond the control of the defendant.

The trial court held that notices under Section 77 of the Indian Railways Act and Section 80 of the Code of Civil Procedure were properly served. The trial court also held that the plaintiff was entitled to compensation, and since there was no disclosure on behalf of the defendant there must be an inference of negligence and misconduct on the part of the railway. The trial court held that defendant No. 3, the Western Railway, and defendant No. 1, the Union of India, would be liable to pay the compensation and there was no liability on the part of defendant No. 2, the North Eastern Railway.

The trial court, however, dismissed the suit on the ground of the bar imposed by Section 69 (2) of the Indian Partnership Act. The decree of the trial court has been upheld by the lower appellate court and it was held that the suit was not maintainable because the plaintiff firm was not registered.

2. On behalf of the plaintiff who has preferred this appeal it was contended by learned Counsel that the view of the law taken by the lower appellate court is wrong and the case is governed not by Sec. 69 (1) and (2) of the Indian Partnership Act but by Sec. 69 (3) of the Indian Partnership Act. The provisions of Sec. 69 ot the Indian Partnership Act are reproduced below:-

-

"69. (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 behalf of any person 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.

(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 as partners in the firm.

(3) The provisions of Sub-sections (1) and (2) shall apply also to a claim of set-off or other proceeding to enforce a right arising from a contract, but shall not affect - (a) the enforcement of any right to sue 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, or

(b) the powers of an official assignee, receiver or Court under the Presidency-Towns Insolvency Act. 1909, or the Provincial Insolvency Act, 1920, to realise the property of an insolvent partner.

X X X X X X"

In our opinion the argument addressed on behalf of the appellant is correct and the present case is governed by Sec. 69(3) of the Indian Partnership Act. It was pointed out by the Madras High Court in Shanmugha Mudaliar V/s. P. V. Rathina Mudaliar AIR 1948 Mad 187, that the intention of the Legislature was to impose a disability for non registration only during the subsistence of the partnership, and the words in Sec. 69 (3), particularly "or any right or power to realise the property of a dissolved firm" removed any disability which existed during the continuance of the partnership. It was held in the Madras case that where an unregistered partnership has been dissolved, money due to the partnership from a third party in respect of dealing between him and the partnership during its subsistence