A partnership firm can withdraw a suit filed when unregistered and refile after registration as this constitutes a formal defect, which is not incurable.

JUDGMENT :

"a) Set aside the order dated 08.02.2021 passed by the Hon'ble Court of Sh. Gurdeep Singh Saini, District Judge (Commercial Court)-02, Tis Hazari Court, New Delhi in CS(Comm.) No. 278/2019 titled M/S A.A. Enterprises Versus M/S Shanti Nath Enterprises

b) To remand back the case to the Hon'ble Court of Sh. Gurdeep Singh, District Judge (Commercial Court), Tis Hazari Court, New Delhi to decide afresh on the statement recorded by the counsel for respondent plaintiff on dated 08.02.2021 or to decide the application filed by the petitioner under Order 7 Rule 11;

c) Pass such orders as may deem fit and proper and in favor of the Petitioner."

2. The facts as are relevant for the disposal of the present petition can be briefly stated. The respondent/plaintiff had instituted a commercial suit against the petitioner/defendant for recovery of Rs.3,84,398/-. The petitioner/defendant filed its written statement along with an application under Order VII Rule 11 of the Code of Civil Procedure, 1908 (for short, "CPC") and prayed that since the suit had been filed by the respondent/plaintiff, which was an unregistered Partnership Firm, it was liable to be rejected as being barred under law. At the time of filing of the suit i.e., on 24th July, 2019, the respondent/plaintiff Firm was not registered and therefore, the suit was barred under Section 69 (2) of the PARTNERSHIP ACT , 1932 (for short, "the Act").

3. According to the learned counsel for the petitioner/defendant, Mr. Anuj Jain, the matter was repeatedly adjourned for the reply of the respondent/plaintiff and finally, on 23rd January, 2021, the reply was filed along with an application under Section 151 CPC to take on record additional documents. The additional documents so filed included documents to show that the respondent/plaintiff had got the Partnership Firm registered on 28th July, 2020 i.e., subsequent to the filing of the suit.

4. Learned counsel for the petitioner/defendant submitted that on 8th February, 2021, the case was listed for arguments on the application under Order VII Rule 11 CPC and it was at that stage that the respondent/plaintiff, through counsel, informed the court that they wished to withdraw the suit, with liberty to file a fresh suit.

5. The grievance of the petitioner/defendant is that the learned Trial Court recorded the statement of learned counsel for the respondent/plaintiff without mentioning the reason for withdrawal and yet, recorded in the order that the respondent/plaintiff had been permitted to withdraw the suit on account of `defect'. Neither the counsel for the respondent/plaintiff nor the court in its order described the said defect. Learned counsel for the petitioner/defendant contended that it was clear that the court had granted an unfair opportunity for withdrawing a suit, which was liable to be rejected.

6. Relying on the judgment in Shreeram Finance Corporation v. Yasin Khan and Ors., (1989) 3 SCC 476, learned counsel for the petitioner/defendant further submitted that the defect in the suit was a material defect inasmuch as the court had held that even an amendment would not cure the initial defect when a suit had been filed by an unregistered Partnership Firm. Therefore, the learned Trial Court had erred in granting permission to the respondent/plaintiff to file the second suit on the same cause of action.

7. Incidentally, such a suit has been filed by the respondent/plaintiff on 8th April, 2021 and summons have been issued to the petitioner/defendant and proceedings are pending before the learned Trial Court, as informed by the learned counsel for the petitioner/defendant.

8. It appears that the present petition has been filed on account of the receipt of summons in the subsequent suit. The petitioner/defendant does not seem to have been aggrieved by the order dated 8th February, 2021, till the suit was filed, as no steps were taken by it to either seek a review of the impugned order or to approach this court