1 IN THE HIGH COURT OF JUDICATURE AT BOMBAY O. O. C. J. Chamber Summons No.1705 of 2008 IN Suit No.3382 of 2007 M/s.Hari Shree Enterprises .. .. Plaintiff v/s. M/s. Vikas Housing Ltd. & ors. .. .. Defendants Mr.Rohit Kapadia,Sr.Adv. with Mr.Nitin Shukla for Plaintiff. Mr.D.D . Madon, Sr.Adv. with Mr.Birendra Saraf with Ms.Shashikala Sharma i/by Yogesh Adhia for Deft.Nos.1 & 3. Mr.N.J . Devashrayee for Deft.No.2 . ----- CORAM : SMT.ROSHAN DALVI, J. Dated : 19 th March 2009 ORAL ORDER: 1. The Plaintiff in the Suit is the Partnership Firm which has sued third parties for recovery of possession of the suit lands, payment of amounts by way of compensation for delay as well as by way of mesne profits. The Suit has been filed by one Jitendra Chandarana shown as the Constituted Attorney of the Plaintiff-Firm. The Power of Attorney annexed to the Plaint has been executed by one K.V.Mohan shown as one of the partners of the Firm and as the authorised signatory of two other partners of the Firm V. Rajagopal and Mr.Rajiv Sinha, one of whom, V. Rajagopal, 2 has been adjudged insolvent. The Plaintiff-Firm stood dissolved prior to the filing of the Suit upon the said partner having been adjudged insolvent. The Plaintiff-Firm, therefore, could not sue as shown in the Plaint. 2. The Plaintiff itself has taken out the above Chamber Summons for amendment to the Plaint, including the title of the Suit. The Plaintiff now desires to sue through one of its partners as the partner of the Plaintiff-Firm, since dissolved. The said K.V.Mohan has not sought the sue as a partner of the firm on behalf of the dissolved firm. The partner of the firm seeking to sue is a Limited Company. The Limited Company is sought to be represented by its Managing Director, the same K.V. Mohan. The Plaintiff has sought to join the other two partners Rajiv Sinha and the Official Assignee on behalf of the insolvent partner V. Rajagopal as Defendants. Mr.Kapadia on behalf of the Plaintiff argued that the Official Assignee should not be joined as party Plaintiff and hence is sought to be joined as Defendant. The consent of the Official Assignee to sue on behalf of the dissolved Firm for recovery of possession and monies from third party is not obtained. However it may be taken that the Official Assignee is brought on record only as a necessary and proper party, representing the insolvent partner of the dissolved Firm. Rajiv Sinha is stated to be residing in Bihar and is hence to be brought on record as a Defendant. 3 3. The Plaintiff has essentially relied upon a judgment in the case of Purushottam Umedbhai & Co. vs. M/s.Manilal & Sons, AIR 1961 SC 325 to show that the introduction of Order XXX of the Code of Civil Procedure (C.P.C.) is only an enabling provision and when the Firm, which cannot sue, has sued, it is in effect misdescribing the Firm which is compendious form for its partners and shows the defective description of the parties who could have otherwise sued. Consequently, it is held that by way of an amendment either under Section 153 of the Code of Civil Procedure or under Order VI Rule 17 of the C.P.C. an amendment to the Plaint to enable a proper description of the Plaintiff could be allowed. Upholding the decision of Chief Justice Beaumont in the case of Amulakchand Mewaram vs. Babulal Kanalal, AIR 1933 Bombay 304 , it was held that incorrectly suing in the name of the Firm rather than by the partners suing as such on behalf of the Firm would be only a case of misdescription of the existing persons. In paragraph 8 of that judgment, it is held that the Firm or a Firm name is merely a compendious description of all partners collectively. Consequently, it is held that when a Suit is filed in the name of a Firm, it is still a Suit by all the partners of the Firm unless it is proved that all the partners had not authorised 4 the Suit. It is observed that when the Suit is filed in the name of a Firm it is in reality of a Suit by all the partners of the Firm, the defect being they were described as a Firm. Hence it is held that to clarify matters the Court would permit an amendment by striking out the name of the Firm and replacing it with the name of the persons forming the partnership. It is further observed that that would not be a case of adding parties or substituting parties. Consequently, it is observed in paragraph 11 of that judgment that a Suit filed by a Firm, which could not sue, is not a nullity. It was only a Suit instituted in the Firm name. Consequently, the law, as laid down in this case, is that if a Firm cannot sue by virtue of the legal disability, it having been dissolved pursuant to the adjudication of one of its partners as an insolvent, the Suit could be maintained by the partners suing on behalf of the Firm. If one or some of them are not available to sign the plaint, they could be joined as Defendants. 3. There are 3 partners of the Firm: a Company called Four Season Farms Ltd., V. Rajagopal (the undischarged insolvent) and Rajiv Sinha. 4. This application is taken out by the Partnership Firm itself and not by the partners or even by one of the partners as the Applicant seeking to be a party Plaintiff in the place 5 and stead of the Firm, since dissolved. However it may be taken that the application is indeed being made by the partner of the Firm seeking to be the Plaintiff. That partner is the Company, Four Season Farms Ltd. It is sought to be epresented by its Managing Director K.V. Mohan. 5.The authority of K.V. Mohan as Managing Director is also challenged. K.V. Mohan has not shown how he was appointed Managing Director of the said Company. Section 2 (26) of the Companies Act defines the Managing Director thus:- “(26) “managing director” means a director who, by virtue of an agreement with the company or of a resolution passed by the company in general meeting or by its Board of directors or, by virtue of its memorandum or articles of association, is entrusted with substantial powers of the management which would not otherwise be exercisable by him, and includes a director occupying the position of a managing director, by whatever name called : Provided further that a managing director of a company shall exercise his power subject to the superintendence, control and direction of its Board of directors.” The Managing Director K.V. Mohan must, therefore, show how he was entrusted with substantial powers of management and 6 whether such powers include the power to sue. That has not been shown. Since which date he was appointed as Managing Director has also not been shown. His contract of employment with the Company as such Managing Director is not produced. The resolution under which he was appointed Managing Director is also not shown. K.V . Mohan in his Affidavit- in- rejoinder has relied upon the Minutes of the meeting of the Board of Directors dated 8.9.2000 in which he is referred as the CEO and MD empowering him to execute the documents to represent the Company before SEBI and other places. That resolution merely shows that he was a Managing Director earlier appointed as such but his appointment has not been shown. Hence by virtue of which resolution or agreement with the Company he came to be entrusted with the powers of the Managing Director is not shown. He, therefore, cannot be taken to be a Managing Director as claimed by him. 6. In the case of H.P.Horticultural produce Marketing & Processing Corp. Ltd. A 2000 HP 11 it was held that the onus is on the person suing on behalf of the company as M.D. to show the powers of management held by him either by virtue of an Agreement, or a resolution of the company or under the Memorandum and Articles of the Company, in the absence of which the suit was held not filed by an authorised person on behalf of the company and was dismissed. 7 Similarly in the case of M. Lakshman Vs. Shanmuga Priya Textiles Pvt Ltd. 2001 CC 121 (Mad) was held that a Criminal complaint u/s 138 of the Negotiable Instruments Act could not be filed by a person claiming to be a MD or a CA of a MD, if he was not apparently authorised by a Resolution of the company and consequently the complaint was held liable to be quashed. 7. It is argued by Mr.Kapadia that since he is the Managing Director, he is entrusted with substantial powers of management and those powers of management include the power to sue on behalf of the Company. The management of the Company would mean and include the day to day affairs of the Company. A Company is not required to sue as a part of its day to day affairs. The action in law is required to be filed only upon the cause of action accruing in favour of the Company. It cannot, therefore, be said that the power to sue is one of the substantial powers of “management”. The power to sue must, therefore, be separately given by the Company. Such power can be given only under the Articles and Associations of the Company. No such power is shown. If Articles empower the Managing Director to file suits on behalf of the company, the position would have been different. See All India Reporter Ltd. Vs. Ramchandra Dhondu Datar, A 1961 Bom 292 in which case upon such 8 Articles of Association, the Managing Director was held entitled to sue or execute an authority to another to sue on behalf of the company. That power may be given by the Company to any officer including a Director, Managing Director, Secretary, etc. A Company acts only through its resolution. Hence power of the Company can be given only by the Company resolving to sue. That resolution may be passed by the Directors in the Board meeting or by the Company itself in its General Meetings. No resolution of the Company to sue is shown. The contention of Mr.Kapadia that because K.V. Mohan is the Managing Director he does not need a resolution of the Company to sue cannot be accepted aside from the fact that in this case K.V. Mohan, who has sought to sue on behalf of the Company as its Managing Director, is not shown to be appointed as such also. 8. K.V. Mohan has relied upon a copy of the Resolution dated 11.7.2001 of the Board of Directors of Four Season Farms Ltd. resolving that the Managing Director of the Company is authorised and allowed to sign papers and documents in connection with acts and deeds of the Partnership Firm on behalf of the Company in which the Company is a partner. Mr.Kapadia contends that signing of the papers in the Suit is included in that authority. The Resolution is dated 11th July 9 2001. A reading of the resolution does not show that the Company at all contemplated in 2001 that its Managing Director could sue in 2007 (the year in which this Suit was filed). The Managing Director may have changed at such length of time. The Resolution cannot empower any Managing Director at the relevant time to sue if the then Managing Director K.V. Mohan was given the authority to sign the papers and documents in connection with acts and deeds of the Partnership Firm. Hence even through that resolution, the resolution of the Company to sue is not shown. 9. In the case of Leela Capital and Finance Ltd., Mumbai vs. Modiluft Limited, Mumbai, 2003 (1) Maharashtra Law Journal 551 relied upon by Mr.Madon, the Director, who was not specifically authorised by the Company to sue under any resolution of the Company was held not so entitled. Relying upon the case of M/s.Nibro Limited vs. National Insurance Company Ltd., 1991 Company Cases page 388 , it was held that the Director suing on behalf of the Firm is required to be authorised by the Board Resolution to file a Suit. That judgment observes that the question of authority to institute the Suit on behalf of the Company was not a technical matter. It has far reaching effects. It would affect the policy and events of the Company. Unless the power to 10 sue is conferred upon a particular Director, he would have no authority to sue and such a power could be conferred only by the Board of Directors by passing a resolution in that regard. 10. In the case of Nibro Limited vs. National Insurance Co. Ltd., AIR 1991 Delhi 25 , it has been held, upon considering the scope of Section 291 of the Companies Act, that unless a power to institute the Suit is specifically conferred on a particular Director, he has no authority to institute the Suit on behalf the Company. 11. The essential requirement of this provision is that the Company which is a juristic person must itself decide to sue. Once that is done, it would authorise one of its Directors who is the agent of the Company or its principal officers the Secretary of the Company or the Managing Director to file the Suit. The suing in each case is a separate act. The Company acts only through its meetings. Hence the Board of Directors in the day to day management of the company must decide and resolve to sue or not to sue. A blanket authority cannot be given to a particular Managing Director or Director to sign the papers and documents, including the power to sue. The power to sue requires application of mind upon the particular cause of action. It requires the Company 11 to pay the requisite Court fee. It requires the Company to be represented by a legal officer being an Advocate of the Court. It is an act which, therefore, is not a part of the day to day management of the Company. A Company would decide in a given case upon legal advice or otherwise whether or not it would sue upon a given cause of action. Such exercise is imperatively required to be performed if the intention of the Company, which is only a juristic person, is to be deciphered. That act, of course, may be undertaken even after the filing of the Suit and ratified by the Board as all other acts of management. However, the seminal requirement is to see the act of the Company though its Board or members (dependent upon whether the resolution is passed in the Board meeting or a general meeting) or is given by the Company itself (under its Articles of Association). 12. The authority given to an individual as a Managing Director 6 years before filing of the Suit cannot be taken to be the authority given by the Company to file a particular action in law. It is, therefore, seen that K.V. Mohan, who has sought to represent the Company Four Season Farms Ltd. as a partner of the Plaintiff-Firm and who has taken out this application under his Affidavit dated 18 th November 2008 has had no authority of the Company to sue as such. 12 13. In any event if K.V.Mohan is himself the partner of the firm who, on behalf of the other partners, executed the power of attorney in favour of Jitendra Chandarana to sue as CA of the firm, it is not understood, why he has not sought to sue as a partner on behalf of the firm himself. 14. Mr.Madon has tendered a further affidavit showing that neither K.V. Mohan nor the Four Season Farms Ltd is a partner of the Plaintiff firm. Since the affidavit is sought to be filed after the arguments are over and the order is dictated it is not considered. The Defendants may take separate appropriate proceedings, if required. 15. The Chamber Summons, as filed, is not tenable. The Chamber Summons is, therefore, dismissed. No order as to costs. (SMT.ROSHAN DALVI, J.)