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2024 Supreme(Mad) 1061
IN THE HIGH COURT OF JUDICATURE AT MADRAS
THE HONOURABLE MS. JUSTICE P.T. ASHA
The Chennai Law Firm – Appellant
Versus
Reyvish Associates (P) Ltd - Respondent
S.A.No.139 of 2024
Decided on : 04-03-2024
Advocate Appeared:
For the Appellant : Mr.L.Sriram
IMPORTANT POINT
An unregistered partnership firm cannot enforce a contract against a third party under Section 69(2) of the Indian Partnership Act, which requires registration for such enforcement.
Headnote:
SARFAESI ACT - Recovery of Fees - Section 14 of SARFAESI Act, Section 69(2) of Indian Partnership Act, 1932 - The court discussed the implications of Section 69(2) of the Indian Partnership Act, which prohibits an unregistered firm from enforcing a contract against a third party. The court interpreted this provision to mean that the plaintiff, being an unregistered partnership firm, could not maintain a suit for recovery of fees against the defendant. The court also referenced the nature of the contract and the enforceability of debts owed to legal professionals, ultimately concluding that the lower appellate court's decision to dismiss the suit was correct.
Fact of the Case:
The plaintiff partnership firm filed a suit for recovery of Rs.6,57,056.20 for legal services rendered to the defendant, who failed to make timely payments. The defendant contested the suit, claiming it was not maintainable as the plaintiff was an unregistered firm. The trial court ruled in favor of the plaintiff, but the lower appellate court reversed this decision, citing the plaintiff's lack of registration under the Indian Partnership Act.
Finding of the Court:
The court found that the plaintiff, as an unregistered partnership firm, could not maintain a suit for recovery of fees under Section 69(2) of the Indian Partnership Act. The court emphasized that the right to enforce a contract is contingent upon the registration of the firm and the inclusion of partners in the register.
Issues: Whether an unregistered partnership firm can maintain a suit for recovery of fees against a third party under the Indian Partnership Act.
Ratio Decidendi: The court held that Section 69(2) of the Indian Partnership Act prohibits an unregistered firm from enforcing a right arising from a contract against a third party, thereby rendering the plaintiff's suit non-maintainable.
Final Decision: The second appeal was dismissed, affirming the lower appellate court's decision that the suit was not maintainable due to the plaintiff's unregistered status.
JUDGMENT :
THE HONOURABLE MS. JUSTICE P.T. ASHA
PRAYER: Second Appeal filed under Section 100 of C.P.C. to set aside the judgment and decree dated 12.07.2023 in A.S.No.32 of 2023 on the file of the Principal District Judge, City Civil Court, Chennai, reversing the judgment and decree dated 10.02.2022 in O.S.No.4365 of 2021 on the file of the XIX Assistant City Civil Court, Chennai.
The plaintiff partnership firm challenges the judgment and decree passed by the learned Principal Judge, City Civil Court, Chennai, in A.S.No.32 of 2023, in and by which, the learned Judge has reversed the judgment and decree of the learned XIX Assistant Judge, City Civil Court, Chennai, in O.S.No.4365 of 2021.
2. The facts are briefly set out herein below and the parties are referred to in the same ranking as before the Trial Court.
FACTS OF THE CASE:
2.1. The plaintiff firm had filed a suit in O.S.No.4365 of 2021 on the file of the XIX Assistant Court, City Civil Court, Chennai, for recovery of sum of Rs.6,57,056.20/- together with interest at 18% per annum from the date of the suit till the date of realisation. The plaintiff would submit that it is a legal firm providing legal services. The defendant had approached them for professional help, which was to file petitions under Section 14 of the SARFAESI Act. The plaintiff would submit that the defendant had agreed to pay the plaintiff 50% of the fees at the time of filing of the petition and the balance on the completion of the assignment.
2.2. The plaintiff would submit that the defendant was not regular in releasing the payment in time and in a joint meeting held on 23.06.2019, it was agreed that the amount payable to the defendant was a sum of Rs.4,76,250/- as on 23.06.2019. The defendant agreed to release a sum of Rs.53,000/- and the same was also released immediately. Since the agreement was entered into, the plaintiff continued to do work for the defendant. However, the defendant had not made payment towards fees and there was an outstanding of Rs.6,57,056.20/-.
2.3. The plaintiff had issued a demand notice dated 02.09.2020 under the Insolvency and Bankruptcy Code, 2016, with an intention to file a petition before National Company Law Tribunal, which went unanswered. Meanwhile Covid-19 pandemic had set in. The plaintiff had also sent notice to the defendant's company on 05.04.2021 which remained unanswered. Therefore, the plaintiff had come forward with the under chapter suit for recovery of above sum.
2.4. The defendant, on entering appearance, took out an application seeking leave of the Court to defend the suit in I.A.No.2 of 2021. The contentions raised by the defendant were as follows:
(a) The suit for recovery of money due for providing legal services was not maintainable under Order XXXVII Rule 1(2);
(b) The plaintiff was not a registered partnership firm and therefore, the suit was not maintainable; and
(c) The partners are also not shown in the plaint.
2.5. The plaintiff had deliberately kept away the communication between the parties which would clearly show that there was no concluded contract and the summons, as contemplated under Order 37 of CPC, has not been issued.
TRIAL COURT:
3. The learned XIX Assistant Judge, City Civil Court, Chennai, had rejected the leave to defend petition and had directed the defendant to pay a sum of Rs.6,57,056.20/- together with interest at 12% per annum from the date of filing of the suit till the date of judgment and thereafter, at the rate of 6% per annum till the date of realisation.
LOWER APPELLATE COURT:
4. Challenging the said judgment, the defendant had filed an appeal in A.S.No.32 of 2023 before the learned Principal Judge, City Civil Court, Chennai. The learned Judge took note of the fact that the suit was filed by an unregistered firm against a 3rd party for recovery of money and observed that the suit was not maintainable under Section 69(2) of the Indian Partnership Act, 1932.
5. The Lower Appellate Court had taken note of the fact that the plaintiff h
