Applicability of bar of suit u/s 69(1) and (2) to cases of dissolved partnership.

The plaintiffs whose suit failed in the Courts below prefer this second appeal. The plaintiffs and the defendants were doing business in partnership from 7th February, 1944 to 21st January, 1949. The main business transacted by the partnership was procurement and distribution of paddy under the Control Orders which were in force during the major part of that period. The partnership was dissolved in 1949 and accounts of the dissolved partnership were taken. The plaintiffs received their share of the capital and profits and retired from the partnership. The defendants are continuing the business. The firm was never registered.

During the period of the partnership, the Government directed the firm to pay a sum of Rs. 8,323-6-8 as surcharge on the stocks of paddy held by the partnership. The money was paid. Subsequently, businessmen in the position of the plaintiffs and defendants complained to the Government challenging the legality of the Government’s order levying a surcharge. As a result of further consideration, the Government directed a refund of a portion of the surcharge which had been collected from merchants of that class. In pursuance of that direction, the defendants were paid Rs. 1,820-12-0 on 23rd October, 1951. That was nearly three years after the dissolution of the partnership. The plaintiffs instituted the suit which has given rise to the second appeal claiming that, since their share of the profits of the partnership was a half, they were entitled to a half of the sum of Rs. 1,820-12-0. They prayed for a decree for the sum. Both the lower Courts have held that, since the firm was not registered, the plaintiff’s suit was not maintainable under section 6g of the Partnership Act (Central Act IX of 1932).

The plaintiffs’ advocates appear to have conceded in the lower Courts that the suit was within the prohibition enacted in section 69 (1) and to have contended that the suit was saved by the exception enacted in section 69 (3). The lower Courts have held that the suit is not within the exception enacted in section 69 (3) (a).

The first point for determination in the second appeal is whether the suit is within the prohibition enacted in section 69 (1) of the Partnership Act. Section 69 (1) is in these terms:

“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” .

It may be useful to read also section 69(2) which 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 persons suing are, or have been, shown in the Register of Firms as partners in the firm” .

The object of section 69(2) is to compel a firm which is a going concern to get itself registered if it has to institute a suit or make claims in Court of law. Section 69 (1) refers to a suit instituted in any Court by or on behalf of any person suing as partner in a firm. If such a person instituted a suit against the firm or any person alleged to be or to have been a partner in the firm, the suit would be dismissed unless the firm had been registered and the person suing was or had been shown in the Register of Firms as a partner in the firm.

“Firm” is thus defined in section 4:

“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” .

That definition makes it clear that the expression “firm” cannot be applied to a partnership except where it is continuing to carry on business. Where the partnership has been dissolved, it is referred to in the Act as a dissolved firm, and