Summary
An unregistered construction firm sought declaration and injunction against a sale allegedly procured through fraud and misrepresentation. The Court held that Section 69(2) of the Partnership Act did not bar this suit: the independent sale of the firm’s property share was outside its construction business, and the pleaded relief enforced common law and statutory rights. The High Court’s rejection of the plaint was reversed and the suit restored for trial.
Issues
- Whether Section 69(2) barred the unregistered firm’s suit challenging the sale of its property share on the pleaded grounds.
Provisions considered
- Section 69(2), Indian Partnership Act, 1932The bar concerns enforcement of contractual rights arising from the firm’s business dealings with the third-party defendant, and does not bar enforcement of statutory or common law rights. (¶¶ 14-17, 19-21)
- Order VII Rule 11(d), Code of Civil Procedure, 1908The plaint did not disclose the asserted statutory bar; the order refusing rejection was restored for trial. (¶ 19.1-22)
Held
- Section 69(2) does not disable an unregistered firm from bringing every suit involving a contract. The relevant contract must have been made by the firm with the third-party defendant in the course of the firm’s business dealings. Statutory and common law rights remain enforceable. (¶ 14-17)
- Both courts had recognised that the disputed sale did not arise from the plaintiff’s construction business. The independent transaction concerning its property share therefore did not attract the bar merely because the firm was a party to the sale deed. (¶ 19-20)
- The plaint sought avoidance for fraud and misrepresentation together with statutory declaration and injunction. Its frame and prayers did not amount to enforcement of a business contract within Section 69(2). This ruling did not decide the truth of the fraud allegations or the merits of either side’s property claim. (¶ 19.1-20)
- The authorities concerning arbitral proceedings or enforcement of a restriction in a partnership deed involved different questions. The High Court judgment was set aside, the trial court’s refusal to reject the plaint restored, and trial was to proceed according to law. (¶¶ 18, 21-22)
Result
Appeal allowed; High Court judgment set aside and trial court order refusing rejection of the plaint restored. Suit to proceed to trial.