Sandhya Anthraper & Anr vs. Manju Kathuria & Ors AIR 2014 Karnataka 21
Appellants who are plaintiffs/partners of an unregistered firm of M/s. Windsor Wings Developers, filed a suit against the defendants , for the relief of declaration that the registered Sale deed dated 26.04.2003 executed by defendant No. 1 is invalid, illegal and not binding on the plaintiffs, for cancellation of the sale deed and for permanent injunction restraining the defendants 2 to 5 from selling, leasing, mortgaging or otherwise alienating and interfering with their peaceful possession of the property. It is the case of the plaintiffs that the suit property was purchased in the name of the Firm. The plaintiffs suspected the conduct of the 1st defendant and they made enquiries about the suit property in the Office of the Sub-Registrar and discovered that the 1st defendant, who had no authority to sell the immovable property belonging to the Firm, without their consent had executed a sale deed dated 26-04-2003 on behalf of the Firm, in favour of the 2nd defendant for a consideration of Rs. 16,66,620/- though the property was worth more than Rs. 30,00,000/-. It is contended that the sale deed is invalid, void, fraudulent and the same is executed clandestinely with an intention of cheating the plaintiffs.
The defendants contented that the Suit is barred u/s. 69(2) of the Partnership Act. The trial Court, after hearing on the preliminary issue, answered the same in the affirmative in favour of the defendants and dismissed the Suit as not maintainable u/s. 69(2) of the Act.
Sum and substance of s/s. (1) of section 69 of the Act is that no suit to enforce a right arising from a contract or conferred by this Act shall be instituted in any Court and the 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.
The defendants have not pleaded that the suit is barred under s/s. (1) of section 69, but it is contended that the suit is not maintainable both under s/s. (1) and (2) of Section 69 of the Act.
The Hon’ble Court observed that the plaintiffs who are partners of the unregistered firm are neither enforcing their right arising from a contract nor the right conferred by the Act. The plaintiffs are enforcing their right under the contract of partnership deed dated 29-12-1995 and specifically Clause 25(d) which says that no partner of the firm shall, without the consent in writing of the other partners, be entitled to transfer immovable property belonging to the Firm, but the defendant No.1, as a partner of the partnership firm, has sold the suit land in favour of defendants 2 to 5. Though it is stated in sub-Clause (d) of Clause 25 of the partnership deed that no partner of the firm shall without the consent in writing of the other partner, be entitled to transfer immovable property belonging to the firm, the appellants/ plaintiffs seek to enforce their right conferred upon them under the Transfer of Property Act. It is well settled principle that a ‘partnership firm’ has ‘no separate legal entity’. It is always understood that ‘firm’ means ‘partners’, ‘partners’ means collectively a ‘firm’. Thus the property belonging to a partnership firm is the property of the partners of the firm.
In view of the above, under the Transfer of Property Act, each of the partner is entitled to claim his right to the immovable property of the firm, as co-owner. Under such circumstances, the contention that the suit filed by the plaintiffs enforcing their right under the contract of partnership deed, holds no water
As regards to s/s. (2) of section 69 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 the partners in the firm. In the instant case, there is no contract between the plaintiffs on one side and defendants 2 to 5 on the other and thus, there is no question of plaintiffs enforcing a right arising from a contract and thus the Suit is not hit under s/s. (2) of section 69 of the Act.
As per section 69(1) of the Act, an unregistered partnership firm or partners are prohibited from enforcing a right arising from a contract or the right conferred by the Partnership Act, 1932, but the provision does not take away the right of the partners of an unregistered firm to enforce their right under other enactments. According to Article 300-A of the Constitution of India, no person shall be deprived of his property save by authority of law. The property of the partnership firm, was purchased under three registered Sale deeds dated 20-01-1996 by the partnership firm, viz., M/s.Windsor Wings Developers, out of the funds of the firm. Thus, the property becomes the property of the partners and they are co-owners. Therefore, the plaintiffs are entitled for the relief sought for. Defendant No.1 has committed breach of trust, which is an offence under the Indian Penal Code. The plaintiffs are enforcing their right as co-owners of the suit property conferred under the Transfer of Property Act and the Partnership Act does not bar the partners of an unregistered firm from enforcing their right conferred under the other enactments. In other words, at the cost of repetition, it must be mentioned that what is prohibited u/s. 69 of the Act is enforcement of contract of partnership, provisions of the Partnership Act, 1932 and enforcement of right arising from a contract (between the firm and third party) and not the rights conferred under the other enactments. Therefore, the trial Court erred in dismissing the suit as barred by s/s. (2) of section 69 of the Partnership Act, 1932.
