Sec 2 A of the Mhrshtra Amndmnt Act of the Partnership void

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in the said case, the apex court struck down sec 2 A of the amended partneship act (maharashtra) wherein the partners were barred for instituting suit for distribution of assets after dissolution of unregistered partnership firm. 

 

Bench: G Singhvi

REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO.7438 OF 2000

V. Subramaniam .. Appellant (s) -versus-

Rajesh Raghuvandra Rao .. Respondent (s)

JUDGMENT

MARKANDEY KATJU, J.

1. This appeal by special leave has been filed against the impugned judgment of the Bombay High Court

dated 27.9.2000 in Civil Reference No. 19 of 1999.

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2. Heard learned counsel for the parties and perused the record.

3. This appeal arises out of a suit filed before the Bombay City Civil Court instituted by the appellant praying

inter alia for dissolution of an unregistered partnership firm between the appellant and the respondent. In that

suit a defence taken was that the suit was not maintainable in view of sub-section (2A) of Section 69 of the

Indian Partnership Act, 1932 (hereinafter referred to as `the Act'). The Bombay City Civil Court was of the

view that the said sub-section 2A, which was introduced by the Maharashtra Amendment to Section 69 of the

Act, being the Maharashtra Act no.29 of 1984 (which received assent of the President of India) was

unconstitutional being violative of Articles 14 and 19 (1)(g) of the Constitution of India. Hence the Bombay

City Civil Court by order dated 16.8.1999 made a reference to the High Court under Section 113 of C.P.C.

4. The High Court, however, in the impugned judgment has held that the said sub-section 2A of Section 69 of

the Act is not unconstitutional. Hence this appeal before us.

5. Section 69(1) & (2) of the Partnership Act originally read as follows : 3

"69. Effect of non-registration.

(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 firms."

V. Subramaniam vs Rajesh Raghuvandra Rao on 20 March, 2009

Indian Kanoon - http://indiankanoon.org/doc/1679961/ 1

 
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13. This exception in clause (a) of Section 69(3) was made on the principle that while registration of a firm is

designed primarily to protect third parties, the absence of registration does not mean that the partners of an

unregistered firm lose all rights in the said firm or its property and hence cannot sue for accounts or for its

dissolution or for realizing their property in the firm.

14. It may be mentioned that a partnership firm, unlike a company registered under the Indian Companies Act,

is not a distinct legal entity, and is only a compendium of its partners. Even the registration of a firm does not

mean that it becomes a distinct legal entity like a company. Hence the partners of a firm are co-owners of the

property of the firm, unlike shareholders in a company who are not co-owners of the property of the company.

15. Till the Maharashtra Amendment of 1984 came into force on 1.1.1985, a partner in a firm could file a suit

for dissolution of an unregistered partnership firm or for accounts of the dissolved firm or to recover the

properties of the dissolved firm. However, in view of sub- section 2A of Section 69, since 1.1.1985 a partner

in an unregistered 7

partnership firm in the State of Maharashtra cannot file a suit for dissolution or for accounts of a dissolved

firm or realize properties of a dissolved firm, unless the duration of the firm was only six months or it's capital

is upto Rs.2000/-. The question before us is whether sub-section 2A of Section 69 inserted by the Maharashtra

Amendment is constitutionally valid.

16. In our opinion sub-section 2A of Section 69 inserted by the Maharashtra Amendment violates Articles 14,

19(1)(g) and 300A of the Constitution of India.

17. It has already been mentioned above that a partnership firm, whether registered or unregistered, is not a

distinct legal entity, and hence the property of the firm really belongs to the partners of the firm. Sub-section

2A virtually deprives a partner in an unregistered firm from recovery of his share in the property of the firm or

from seeking dissolution of the firm.

18. Article 300A of the Constitution of India states : "No person shall be deprived of his property save by

authority of law."

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19. It is by now well settled that a law to be valid has to be non arbitrary vide the 7-Judge Bench decision of

this Court in Maneka Gandhi vs. Union of India and another AIR 1978 SC 597.

20. Sub-section 2A virtually deprives a partner of a firm from his share in the property of the firm without any

compensation. Also, it prohibits him from seeking dissolution of the firm although he may want it dissolved.

21. Deprivation of property may take place in various ways, such as `destruction' vide this Court's decision in

Chiranjit Lal Chowdhuri vs. Union of India AIR 1951 SC 41 or `confiscation' vide this Court's decision in

Ananda Behera vs. State of Orissa AIR 1956 SC 17, or revocation of a proprietary right granted by a `private

proprietor' vide this Court's decision in Virendra Singh vs. State of U.P. AIR 1954 SC 447, `seizure of goods'

vide this Court's decision in Wazir Chand vs. State of H.P. AIR 1954 SC 415 or `immovable property' vide

this Court's decision in Virendra Singh vs. State of U.P. (supra) from the possession of an `individual' vide

this Court's decision in Wazir Chand vs. State of H.P. (supra) or `assumption of control of a business' vide this

Court's decision in Virendra Singh vs. State of U.P. (supra) in exercise of the `police power' of a State. Thus, 9

there is a `deprivation' where a municipal authority, under statutory power, pulls down `dangerous premises'

vide decision in Nathubhai Dhulaji vs. Municipal Corporation AIR 1959 Bom. 332 or an insolvent is divested

of his `property' vide decision in Vajrapuri Naidu, N. vs. New Theatres, Carnatic Talkies Ltd. 1959(2) MLJ

469.

V. Subramaniam vs Rajesh Raghuvandra Rao on 20 March, 2009

 
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