1 Judgment in Appeal No. 555 of 2005 IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION APPEAL NO. 555 OF 2005 IN NOTICE OF MOTION NO. 373 OF 2005 ALONG WITH COURT RECEIVER'S REPORT NO. 127 OF 2009 AND NOTICE OF MOTION NO. 1047 OF 2009 IN SUIT NO.2812 OF 2001 APPELLANT: Jayesh H.Pandya, Ori.Pliff. of Mumbai, Indian Inhabitant a M/s Hetali Construction Company, a registered partnership firm having his office at Dhwani Dhruv, 67, Presidency CHS Limited, N.S.Road No.6, J.V.P.D. Scheme Vile Parle (W), Mumbai 56. ..VERSUS... RESPONDENTS:1. Sukanya Holdings Private Limited,' Ori.defts. a company incorporated under the Companies Act, 1956 having its registered office at 18, Surti Chambers, 2nd Dhobi Talao Lane, Mumbai 400 002, a partner of Hetali Construction Company. 2. Deepak H.Pandya, of Mumbai Indian habitant, also a partner of Hetali Construction Co. residing at 401-B, High Land Park, Oshivara, Lokhandwala Complex, Andheri (West), Mumbai – 400 058. 3. Laxman Commercial Finance Ltd. Also a company incorporated and registered under the Companies Act, 2 Judgment in Appeal No. 555 of 2005 1956 having its office at 18, Surti Chambers, 2nd Dhobi, Talao Lane, Mumbai 400 002. 4. Maheshkumar Banwarilal Gupta of Mumbai, Indian inhabitant, residing at Gurukripa, Dixit Road, Vile Parle (East) Mumbai 400 057. 5. Krishnakumar Vishnukumar Desai of Mumbai, Indian Inhabitant, residing at 3, Crystal, 16th Road, Khar (West) Mumbai- 400 032. 6. Himank Krishna Kumar Desai of Mumbai, Indian Inhabitant, residing at 3, Crystal, 16th Road, Khar (West), Mumbai – 400 052. 7. Ashok Banwarilal Gupta of Mumbai, Indian Inhabitant, residing at Guru Kripa, Dixit Road, Vile Parle (East), Mumbai 400 057. 8. Milan Mohanlal Zaveri of Mumbai, Indian Inhabitant, residing at 804, Coste Building Perry Cross Road, Bandra (West), Mumbai. 9. Mahendra Popatlal Zaveri, of Mumbai, Indian Inhabitant, residing at Manisha Court, 187, 16th Road, Khar, Mumbai 400 052. 10. Shivkumar Banwarilal Gupta, of Mumbai, Indian Inhabitant, residing at Gurukripa,Dixit Road, Vile Parle (East), Mumbai 400 057. Defendant Nos.4 to 10 all trustees of the Westend Gymkhana, a registered public charitable trust. 3 Judgment in Appeal No. 555 of 2005 11. Mahesh Gupta HUF through its Karta Maheshkumar Banwarilal Gupta of Mumbai, Indian Inhabitant, residing at Gurukripa, Dixit Road, Vile Parloe (East), Mumbai 400 057. 12. Shiv Gupta HUF through its Karta Shivkumar Banwarilal Gupta of Mumbai, Indian Inhabitant, residing at Gurukripa,Dixit Road, Vile Parle (East), Mumbai 400 057. 13. Vinay Poddar, of Mumbai, Indian Inhabitant, having its office at 18, Surti Chambers, 2nd Dhobi, Talao Lane, Mumbai 400 002. 14. Ganesh Devi Sharan, of Mumbai, Indian Inhabitant, residing at 2nd Floor, Flat No.7, Singapore Arcade, 3rd Road, Mumbai 400 052. 15. Mukesh Shah of Mumbai, Indian Inhabitant, residing at Salmon Ville, 4th Floor, North Aveneue Road, Santacruz (West), Mumbai – 400 054. 16. Animesh Gupta of Mumbai, Indian Inhabitant residing at Gurukripa, Dixit Road, Vile Parle (East), Mumbai 400 057. 17. Sushanku Builders Pvt. Ltd. A private Limited Company, having its office at 18, Surti Chambers, 2nd Dhobi,Talao Lane, Mumbai 400 002. 18. Forjet Leasing Ltd. A company incorporated under thereafter 4 Judgment in Appeal No. 555 of 2005 companies Act, 1956 and having its registered office at 18, Surti Chambers, 2nd Dhobi, Talao Lane, Mumbai 400 002. 19. Subhtex (India) Pvt. Ltd. A company incorporated under the Companies Act,1956 and having its registered office at 18, Surti Chambers, 2nd Dhobi, Talao Lane, Mumbai 400 002. 20. Mahanagar Trading Co.Pvt. Ltd. A company incorporated under the Companies Act,1956 and having its registered office at 18, Surti Chambers, 2nd Dhobi, Talao Lane, Mumbai 400 002. 21. Urmila Gupta wife of Shiv Gupta, Defendant No.10 abovenamed carrying on business in the name and style of Amber Industries, residing at Guru Kripa Dixit Road, Vile Parle (E), Mumbai – 400 057. 22. Ani Anu Developers Pvt. Ltd. A company incorporated under the Companies Act, 1956 and having its registered office at 18, Surti Chambers, 2nd Dhobi, Talao Lane, Mumbai 400 002. 23. Ashok Gupta (HUF), though its Karta Ashok Gupta carrying on business in the name and style of Swati Enterprises having its office at Minal Apartment, Shraddhanand Road, Vile Parle (East, Mumbai 400 057.) 24. Web Work India Consultants Pvt. Ltd. A company incorporated under the Companies Act, 1956 and having its registered office at 21, Delta Apartments M.M.Chotani Marg, Mahim (West), Mumbai – 400 016. 5 Judgment in Appeal No. 555 of 2005 25. Prerna Audio Works Pvt. Ltd., a company incorporated under the Company Act, 1956 and having its registered office at 401, Fernvel, Sarat Chandra Chatterjee Road, Santacruz (West), Mumbai – 400 054. 26. Hathway Cable Datacom Pvt.Ltd. A company incorporated under the Companies Act, 1956 and having its registered office at Rahejas, 4th V.P.Road, Santacruz (West), Mumbai 400 054. 27. Pushpakant C.Datta. 28. Bhavna Pushpakant Datta, Both of Mumbai Indian Inhabitant having their place of business at 56A, Pali Hill Road, Bandra (W), Mumbai 400 050. ------------------------- Mr. R.M.Kadam, learned Advocate General with Mr. J.P.Sen i/by. Ms.Jacinta D'silva, Adv. for the appellant. Mr. J.A.Udaipuri i/by Ms. Swati Sawant, Advocate for Respondent No.1 Mr. Rahul Naricharia, Advocate for Respondent No.2. Mr. G.S.Godbole i/by Ms. Jyoti Chawan, Adv. for Respondents No.9,14 & 15 Mr. N.C.Parekh i/by. Mansukhlal & Hiralal, Adv. for Respondent Nos.27 & 28. Mr. Yashodhan Divekar, Adv. For respondent No.10 Respondent no.5 in-person present. Mr. K.L.Vyas, Court Receiver with Ms. V.S.Avasare-IInd Asstt. to Court Receiver. --------------------- CORAM : J.N.PATEL, ACTING C.J. & Smt.R.P. SONDURBALDOTA, J. 6 Judgment in Appeal No. 555 of 2005 JUDGMENT RES. : 15/09/2009 JUDGMENT PRON : 25/01/2010. JUDGMENT (Per Smt. R.P.SondurBaldota, J.) 1. All the counsel agree that the appeal be disposed off finally at the stage of admission. Hence, we have heard the submissions in final hearing. 2. This appeal is preferred against the order dated 6th May, 2005 passed by the learned Single Judge dismissing the suit filed by the appellant by upholding preliminary objections as regards its maintainability. The two preliminary issues decided by the impugned order are as follows :- (i) Whether the suit is maintainable in view of Section 69 of the Indian Partnership Act, 1932 ? (ii) Whether the suit is maintainable in as much as the plaintiff has filed the present suit No. 2812 of 2001 without withdrawing his earlier Suit No. 1991 of 2000 for the same cause of action. 3] The pleadings in which the above issues arise, stated in the necessary details are as under : Vide partnership agreement dated 30th April, 1992, the suit firm i.e. Hetali Construction Company was constituted, its partners being 7 Judgment in Appeal No. 555 of 2005 the appellant, Deepak Pandya-Respondent No.2, Sukanya Holdings Pvt. Ltd., respondent No.1 and one Ms. Jaikirti Mehta. Respondent Nos.4, 5 & 7 i.e. Gupta Brothers own, control and manage Sukanya Holdings Pvt. Ltd. The firm applied for its registration by submitting an application form to the Registrar of Firms on 11th May, 1992. At that time, the share in the profit and loss of the partnership firm of the appellant and his brother-respondent No.2 was of 25% each, that of the company was 40% and of Jaikriti Mehta was 10%. Ms.Jaikirti Mehta, retired from the partnership firm on 11th March, 1993 and her 10% share came to be distributed between the remaining parties, increasing the share of appellant and respondent no.2 to 27.5% each and that of the company to 45%. The business of the firm was to develop a plot of land situated at Santacruz(West), Bombay by constructing thereon building consisting of ground plus seven floors. There are serious disputes between the partners as regards the project of building construction and sale of flats therein. However, in our opinion it is not necessary to dilate over these disputes considering the limited scope of the present appeal. When disputes arose between the partners as regards the business of the partnership firm, the appellant filed Suit No. 1991 of 2000 (hereinafter referred to as “first suit”) in this court for dissolution of the firm and accounts. 8 Judgment in Appeal No. 555 of 2005 4] By the ad-interim order dated 11th May, 2000, the Court Receiver, High Court, Bombay was appointed as a Receiver of all the assets and properties of the suit firm, including the books of accounts. But after filing of the suit, it was realised by the appellant that although an application had been made in the year 1992 to the Registrar of Firms for registration of the suit firm, the same had not been registered on account of some formal requirements. He, therefore, pursued the application for registration of the firm and the firm came to be registered by the Registrar of Firms on 30th May, 2000. Thereafter, on 14th August, 2001, the appellant filed the suit herein i.e. Suit No. 2812 of 2001 (hereinafter referred to as “second suit”) for the same reliefs as in the first suit. On 23rd August, 2001, he applied for ad-interim order of appointing the Court Receiver, High Court, Bombay as receiver of all the assets and properties of the suit firm after giving due notice to the respondents. By the order passed on that date, the Court Receiver, High Court, Bombay was once again appointed as receiver of all the assets and properties of the suit firm. On the same date, the appellant withdrew the first suit. 5] Respondents No. 10 and 20, who are not concerned with the partnership business and who claim to be tenants in respect of the flats 9 Judgment in Appeal No. 555 of 2005 in the building constructed by the firm filed Notice of Motion No.373 of 2005 and the Notice of Motion No. 853 of 2004, respectively, raising preliminary objections to the suit and for its dismissal under Order VII Rule 11 of Civil Procedure Code. They alleged that the suit is barred by Section 69(2) of the Partnership Act since registration of the suit firm was obtained by the appellant fraudulently after dissolution of the firm. According to them, the suit firm was dissolved either on 11th March, 1993, when Ms. Jaikirti Mehta retired from it or on 9th May, 2000, when the first suit was filed. Therefore, registration of the firm being registration of a dissolved firm was non-est. They further alleged that the application form for registration of the firm in Form -A submitted by the appellant to the Registrar of Firms on 6th November, 1995 contained signature of only three partners. Ms. Jaikirti Mehta did not sign that Form-A. Consequently, the Registrar of Firms had returned all the papers on 12th December, 1995 pointing out that the name of Ms. Jaikirti Mehta was missing therefrom and the address of the firm shown was different from the original Form -A on the record. On such a form the appellant could not have got the firm registered. The second preliminary objection was that the second suit was not maintainable having been filed before withdrawing the first suit, filed on the same cause of action. 10 Judgment in Appeal No. 555 of 2005 6] It appears that during the course of submissions on the preliminary issues framed on the basis of the Notices of Motion, the respondents set up one more possible date of dissolution of the firm and that is the date of service of the plaint upon the respondents. The other addition to the submissions made was based on Section 58 of the Partnership Act, as applicable to the State of Maharashtra. Section 58 provides for application of registration of partnership firms. By Maharashtra Act No.29 of 1984, Sub-section 1-A has been added to Section 58. This provision requires that the statement in Form-A under sub-section 1 is sent within one year from the date of constitution of the firm. It was contended that the application form dated 6th November, 1995 being beyond the period of one year from the date of constitution of the suit firm, the firm could not have been registered. The third addition to the submissions was that since the plaint in the second suit does not mention that liberty was obtained to file the suit, it is barred by Section 12 Civil Procedure Code. 7. The reply of the appellant to save the suit was that once the firm is registered, the bar under Section 69(2) of the Partnership Act gets removed and the defendants of the suit cannot contend that the suit is not maintainable on the basis of alleged invalidity of the registration. Their only remedy is to challenge the registration by filing appropriate 11 Judgment in Appeal No. 555 of 2005 proceedings before appropriate forum. Besides, Section 69 does not prohibit an action to recover the property of the firm from third parties even if a firm is unregistered. The reliefs sought in the plaint against respondents No.3 to 28 are for recovery of the property of the firm in their hands. Hence, the suit would be unaffected by Section 69. As regards the other partners of the firm i.e. respondents No.1 & 2, it was pointed out that respondent No.1 is estopped from challenging the maintainability of the suit on the ground of alleged want of registration, having itself filed arbitration petition No. 500 of 2001 seeking reference of the disputes in the suit to arbitration. The application was rejected and the Special Leave Petition filed therefrom was also dismissed. In any case respondent no.1 did not raise any preliminary objection as regards maintainability of the suit. Respondent No.2 supports the appellant. 8] In his submissions before the learned Single Judge, the appellant denied that the suit firm got dissolved on occurrence of any of the three events as alleged i.e. on retirement of Ms. Jaikirti Mehta, on filing of the second suit or on service of plaint in the second suit upon the respondents. It was submitted on his behalf that neither mere filing of the suit nor service of writ of summons or plaint upon the defendants, results into dissolution of the firm as has been held by the Hon'ble Supreme Court in its decision in Banarasi Das and another ..vs.. 12 Judgment in Appeal No. 555 of 2005 Kanshi Ram and others , reported in A.I.R. 1963 Supreme Court 1165. It was also contended that there was no element of impropriety whatsoever in the registration of the firm, as the application for registration had been filed in May, 1992, i.e. within a month of execution of the Partnership Deed. This application was apparently was not acted upon at that stage by the Registrar of Firms. After the retirement of Ms. Jaikirti Mehta, an application was filed on 6th November, 1995, which was withdrawn due to some technical objections. The Registrar of Firms, however, finally acted upon the original application of the year 1992 to register the firm. As regards the second preliminary objection, it was submitted on behalf of the appellant that leave under Order XXIII of Civil Procedure Code is required only for institution of a fresh suit after withdrawal of the first suit. Where a second suit has already been instituted and the first suit is withdrawn thereafter, no leave is required. It was also contended that there is no bar in Civil Procedure Code for filing or proceeding with the second suit and in such cases, Section 12 Civil Procedure Code. has no application. The appellant also contended that the two suits cannot be said to be identical. Though there is some commonality in the subject matter, the second suit is wider in its scope and includes several reliefs that do not find place in the first suit. 13 Judgment in Appeal No. 555 of 2005 9. The learned Single Judge in the impugned judgment accepted the contentions of respondents no.10 and 20 that the suit firm stood dissolved by filing of the first suit by the appellant for dissolution and on service of the plaint therein upon the respondents. He held that as soon as the service was complete the suit firm stood dissolved and admittedly, a dissolved firm cannot be registered. Further fault was found with the appellant in (i) suppressing the fact of dissolution of the firm from the Registrar of Firms ; (ii) not complying with the mandatory provision of Section 58 of the Partnership (Maharashtra Amendments) Act ; (iii) not filing the Partnership Deed ; (iv) not applying within one year ; (v) not obtaining consent of other partners, against whom the suit was filed ; and (vi) not filing fresh Partnership Deed with the Registrar of Firms. The learned Single Judge was of the opinion that the Court could not disregard such attending circumstances, conduct of the parties and the representations made by them to the registering authority. In any case, according to him, by service of the plaint in first suit upon the respondents, the firm had stood dissolved and its registration, therefore, is non-est. With these observations, it was held that the suit is not maintainable in view of Section 69 of the Partnership Act. As regards the second preliminary objection, it was held that filing of the second suit without drawing the first suit and without obtaining liberty of the Court 14 Judgment in Appeal No. 555 of 2005 to file the fresh suit, is barred under Order XXIII of C.P.C. 10. The appellant assails the impugned judgment and order submitting that the finding of the learned Single Judge that the suit firm stood dissolved when the first suit was filed, is contrary to the law laid down by the Hon'ble Supreme Court in its judgment in Banarasi Das’s case (supra), which is a direct decision on the question. A grievance is made that though the decision was cited before the learned Single Judge, the same was not at all considered by him. The impugned judgment and order makes a most cursory reference to the decision by merely mentioning it at paras 16 and 21. It is contended that the learned Judge ought to have held that the bar under Section 69 of the Partnership Act was not attracted as the suit firm was registered and the name of the appellant was shown as a partner in the Register maintained by the Registrar of Firms. The appellant had produced on record Registration Certificate issued by the Registrar of Firms, the genuineness and authenticity of the same was not disputed. According to the appellant, the learned Single Judge could not have entertained a challenge to the validity of the Registration Certificate in the suit and then held that the registration being invalid, the suit was not maintainable in view of the bar contained in Section 69. As regards Section 58 of the Partnership Act as applicable to the State of Maharashtra, according to the appellant, the 15 Judgment in Appeal No. 555 of 2005 same is prospective in nature and did not apply to the partnership firm that had been constituted prior to coming to force the amended provisions. In any case, the application dated 11th May, 1992 submitted to the Registrar of Firms was well within the period of one year from the date of constitution of the firm on 30th April, 1992. 11. About the second preliminary issue, the appellant contends that there is no provision in law prohibiting filing of the second suit while the first suit is pending. Hence the learned Single Judge was not right in holding that the second suit could not have been filed prior to withdrawal of the first suit. The learned Single Judge also failed to appreciate the differences in the two suits. 12. It is evident from the pleadings that undisputedly on the date of filing of the suit, the firm was registered and the appellant shown in the Register of Firms as a partner in the firm. On the face of these facts, no bar under Section 69 of the Partnership Act can get attracted to the suit. Once the registration has been effected, the statements recorded in the Register of Firms regarding the constitution of the firm is conclusive proof of the facts contained therein. But respondents no.10 & 20 who are third parties to the firm, propose to attack the registration so as to bring the suit under the bar of Section 69 (2) of the Partnership Act. The first question arising therefore is whether such a course of action is 16 Judgment in Appeal No. 555 of 2005 permissible. Does Civil Court have jurisdiction to enquire into validity of the certificate of Registration issued by the Registrar of Firms appointed specifically for the purpose under the Partnership Act and decide upon it's validity ? 13. Before embarking upon the task of answering the above question it will be necessary to take note of the relevant provisions under the Partnership Act. Section 57 of the Act (as amended by Mah.29 of l1984) provides for appointment Registrar of Firms by the State Government by notification in official Gazette to exercise, perform and discharge the powers, functions and duties of the Registrar under the Act throughout the State of Maharashtra. Section 59 authorises the Registrar, on being satisfied that provisions of Section 58 for application for registration have been duly complied with, to record an entry of the statement in the Register of Firms. On such record of the entry by the Registrar the firm is deemed to be registered. Any delay in filing applications or furnishing information can be condoned by the Registrar on payment of penalty at his discretion. He has powers to add, alter or delete entries in the Register of Firms. Lastly Section 68 which provides Rules of evidence reads as follows - 17 Judgment in Appeal No. 555 of 2005 68. Rules of Evidence. (1) Any statement, intimation or notice recorded or noted in the Register of Firms shall, as against any person by whom or on whose behalf such statement, intimation or notice was signed, be conclusive proof of any fact therein stated. (2) A certified copy of an entry relating to a firm in the Register of Firms may be produced in proof of the fact of the registration of such firm, and of the contents of any statement, intimation or notice recorded or noted therein. It is thus seen that the complete machinery for registration of the partnership firms and everything related thereto has been provided under the Partnership Act on the backdrop of which the question raised above is required to be considered. 14. As already seen above, the attack of respondents no.10 & 20 on the registration is two fold. Firstly that, it is non-est, it is no registration in the eyes of law as suit firm was not in existence for registration, it having been dissolved prior to date of registration. Secondly that, the manner in which the application for registration was made was improper and not in accordance with the prescribed procedure. The learned Single Judge without directly addressing the above question expressed his opinion by way of a passing reference that 18 Judgment in Appeal No. 555 of 2005 the court cannot be expected to shut its eyes to the conduct of the parties, the representations made to the registering authority and the attending circumstances, to mechanically accept the fact of registration. We would only partly agree with the opinion of the learned Single Judge. In our opinion, if it is self evident from the facts of the case that registration of the firm could not have been done at all, which would render the registration non-est, the Civil Court while hearing the suit filed by an unregistered partnership firm or by a partner in it, can consider the aspect for deciding the bar under Section 69 of the Partnership Act. This is because consideration of the bar under Section 69 of the Partnership Act, is not a mere formality to be taken care off. It vitally affects rights of the parties. But we must hasten to add that this consideration is