IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED : 28-07-2006 CORAM THE HONOURABLE MR. JUSTICE P.K. MISRA AND THE HONOURABLE MR. JUSTICE M. JAICHANDREN O.S.A.NOs.401 OF 2002 and 128 OF 2005 O.S.A.NO.401 of 2002 D.V.D’ Monte No.21, Medavakkam Tank Road, Chennai 600 012. .. Appellant/1st Defendant Vs. 1. N. Venkatesh 2. N. Kasi Viswanathan 3. N. Ramesh No.18, 6th Cross Street, Shastri Nagar, Adyar, Chennai 600 020. 4. Anne D’ Monte 5. David D’ Monte 6. Garad D’ Monte 7. Paul D’ Monte 8. Marlene D’ Monte 9. Kay D’ Monte 10.Rose Mary D’ Monte No.21, Medavakkam Tank Road, Chennai 600 012. .. Respondents/Plaintiffs 1 to 3, Defendants 2 to 8 O.S.A.No.128 of 2005 1. N. Venkatesh 2. N. Kasi Viswanathan https://hcservices.ecourts.gov.in/hcservices/ 3. N. Ramesh No.18, 6th Cross Street, Shastri Nagar, Adyar, Chennai 600 020. .. Appellants/Plaintiffs 1 to 3 Vs. 1. D.V.D’ Monte 2. Anne D’ Monte 3. David D’ Monte 4. Garad D’ Monte 5. Paul D’ Monte 6. Marlene D’ Monte 7. Kay D’ Monte 8. Rose Mary D’ Monte No.21, Medavakkam Tank Road, Chennai 600 012. .. Respondents/Defendants 2 to 8 Appeals filed against the judgment and decree of the learned single Judge dated 25.7.2002 in C.S.No.180 of 1990. For Appellant : Mr.S. Sampath Kumar in OSA.No.401/02 & Senior Advocate for For Respondents in M/s.Sampath Kumar & OSA.No.128/2005 Associates For Respondents 1st in OSA.No.401/2002 &: Mr.R. Subramanian for Appellants in Senior Advocate for OSA.No.128/2005 Ms.S. Hemalatha R-2 No Appearance )OSA 401/2002 R3 Proof of Publication ) RR4 to 10 Given up ) COMMON JUDGMENT P.K. MISRA, J O.S.A.No.401 of 2002 has been filed by the first defendant in C.S.No.180 of 1990 against the part of the decree directing him to pay a sum of Rs.4,13,300/-. On the other hand, the plaintiffs have filed the connected O.S.A.No.128 of 2005 against the refusal of the learned single Judge in granting a decree for specific performance of the contract. Both the appeals have been heard together. For convenience, parties are referred to as they are described in C.S.No.180 of 1990. https://hcservices.ecourts.gov.in/hcservices/ 2. The plaintiffs had made the following averments:- Three plaintiffs are brothers, being the son of one A. Narayanaswami. Defendants 2 to 8 are the children of the first defendant. The first defendant entered into an agreement dated 13.5.1981 mainly with the plaintiffs and their mother and one S. Padmanabhan. First defendant’s wife and children were also shown as partners. The agreement was to sell the property situate at Nos.15, 16 & 17, Wallers Road for a consideration of Rs.13,00,000/-. First defendant received an advance of Rs.2 lakhs from the plaintiffs and his mother and handed over all the original documents as collateral security for the advance paid. First defendant had agreed to demolish the superstructure standing on such land and to deliver possession to the plaintiffs to enable them to start construction work. Major portion of the building was demolished by the Contractor, but some portion was not demolished since the same was under the lock and seal in view of order of attachment issued by Courts at the instance of one B.K. Sagar of Delhi. The plaintiffs had submitted the building Plan to the M.M.D.A and the Corporation authorities in February and March 1982 after getting the signature of the first defendant, but because of the attachment proceedings, such work had been stopped. Apart from the advance of Rs.2 lakhs, which was acknowledged in the agreement, the first defendant had received a further sum of Rs.1,44,500/- from the plaintiffs on different dates. Further the first defendant had borrowed a sum of Rs.40,000/- on different dates from one N. Balakrishnan and others by executing pro- notes on the guarantee of the first plaintiff and on the collateral security of the original documents. Since the first defendant was not in a position to repay such principal and interest, as guarantor the first plaintiff had paid principal and interest and got necessary endorsements and receipts for claiming from the first defendant. Total amount under the pro-notes with interest was Rs.1,18,336/- as on July 1987. Interest on Rs.1,18,336/- at 24% works out at Rs.70,800/- upto January 1990, which sum should be treated as further payment apart from the payment of Rs.2 lakhs and Rs.1,44,500/-. Thus the total payment of Rs.5,33,736/- had been made by the plaintiffs. Under the agreement of sale, the first defendant wanted to have 2000 sq.ft in the first floor for his own use agreeing to pay a lesser price than the prevailing market value. The balance consideration was to be paid by the plaintiffs within 18 months from the date of handing over of vacant site for construction. Under the partnership deed dated 13.5.1981, the first plaintiff was the main party, who arranged for negotiation of purchase, and the plaintiffs had paid the consideration. Their mother expired on 5.2.1983 and their father had released his interest in such estate of his wife in favour of the plaintiffs. S. Padmanabhan, who was the working engineer and Mrs.D’ Monte, wife of the first defendant, have been taken at the suggestion of the first defendant for protecting the interest of the first https://hcservices.ecourts.gov.in/hcservices/ defendant in the transaction and they are not bound to contribute any capital, but to share 50% of the loss and profit in the deal. Such S. Padamanabhan had also died. While the matter stood thus, all of a sudden, the first defendant sent a letter dated 25.6.1987, while the agreement was still alive, stating that the agreement was abandoned and for return of the original title deeds without making any whisper regarding the advance payment of Rs.2 lakhs and further payments totalling Rs.5,33,736/-. The defendants who are all the family members of the first defendant, had signed the enclosed letter dated 23.6.1987 stating that the business venture had been abandoned and they have no objection to hand over the title deeds to the first defendant. A reply dated 3.7.1987 was sent by the plaintiffs’ Advocate. In such changed circumstances, the plaintiffs alone were willing to pay the balance consideration, provided the first defendant got a clearance from the court. Under the partnership deed dated 13.5.1981, Mrs.D’Monte and her children on their retirement were entitled to share the profit and loss. In the reply dated 3.7.1987, the plaintiffs claimed Rs.2,77,368/- as loss from the defendants stating that they had paid a total sum of Rs.3,44,500/- as per the agreement towards sale consideration which will carry interest at the rate of 18% from the date of investment, which works to Rs.4,82,400/-. It was also claimed that the plaintiffs had discharged the pro-notes which comes to Rs.1,18,336/- and the total investment of the plaintiffs for the purpose of partnership as on July 1987 comes to Rs.9,45,850/-. The plaintiffs had also indicated certain amounts payable by other defendants. The first defendant had sent a rejoinder dated 20.8.1987 stating that the agreement was abandoned and indicating that only a sum of Rs.1,05,000/- had been paid, denying the payment of Rs.2 lakhs under the agreement and denying the borrowing. On the basis of such averment, the plaintiffs prayed for a direction to the defendants to specifically perform the terms of the joint venture agreement dated 13.5.1981 on payment of the balance sum of Rs.4,90,846/- or in the alternative directing the defendants to pay the plaintiffs a sum of Rs.8,09,204/- with interest at 24% from the date of plaint till realisation and for other ancillary reliefs. 3. Written statement was filed only by the first defendant. In such written statement it was indicated that the agreement was dated 13.5.1981 and the suit having been filed on 20.2.1990, was barred by limitation. It was also indicated that the suit for specific performance of the contract was liable to be dismissed as the plaintiffs had not indicated that they were ready and willing to perform their part of the contract. It was further stated that the agreement was between 13 persons, out of which three persons, namely S. Indrani, L.T.D’ Monte and S. Padmanabhan, were dead and the suit for specific performance of the contract at the instance of three plaintiffs alone was not maintainable. It was further stated that the plaintiffs were never ready and willing to perform their part of https://hcservices.ecourts.gov.in/hcservices/ the contract. It was specifically denied that a sum of Rs.2 lakhs had been received as advance at the time of the agreement. The allegation relating to other payments was also denied partially. 4. Learned single Judge framed the following issues :- “1. Whether the suit is barred by limitation? 2. Whether the suit is liable to be dismissed for want of compliance with Section 16(c) of the Specific Relief Act? 3. Whether the suit by three out of 12 purchasers for specific performance of the contract where 9 purchasers have repudiated the contract maintainable ? 4. Whether the plaintiffs were ready and willing to perform their part of the contract dated 13.5.1981 ? 5. Is it true that the plaintiffs have abandoned the contract ? 6. Is it true that the plaintiffs paid a sum of Rs.2,00,000/- as advance ? 7. Whether the payment of Rs.1,44,500/- alleged by plaintiff is true ? 8. Whether the plaintiff is entitled to adjust the sum payable under the promissory note dated 23.8.1981, 21.12.1981 and 5.1.1982 towards the sale consideration ? 9. Whether the claim for interest in the sum of Rs.70,800/- sustainable ? 10. Whether the plaintiffs have resources to purchase the suit property ? 11. Whether the plaintiffs have carried out their part of the agreement ? 12. Whether the defendants 2 to 8 are not name-lenders for the 1st defendant ? 13. Whether the profit or loss has to be carried out in the account of the first defendant? 14. To what relief is the plaintiffs entitled to ?” https://hcservices.ecourts.gov.in/hcservices/ 5. All the issues were taken up together. Learned single Judge found that the agreement dated 13.5.1981 had been executed and a sum of Rs.2 lakhs had been paid as advance on the date of agreement and in all a sum of Rs.4,13,300/- had paid on different dates under varying heads. The agreement of sale was in favour of a partnership firm, of which the plaintiffs 1 to 3 and the defendants 2 to 8 as well as three deceased persons were partners, and since such partnership had not been registered under Section 69 of the Partnership Act, 1932 the suit for specific performance of contract was hit by the bar contained under Section 69(2). It was also found that the plaintiffs have failed to prove that they were ready and willing to perform their part of the contract. On the basis of the aforesaid conclusions, the learned single Judge passed a decree for payment of Rs.4,13,300/- with interest at 18% from different dates with a stipulation that till the amount is paid the same shall be a charge on the property and with a further stipulation that on such repayment being made, the plaintiffs have to hand over all the original documents of title to the first defendant. 6. Learned Senior Counsel appearing for Defendant No.1 (Appellant in OSA.No.401 of 2002) has submitted that in view of the finding that the prayer for specific performance is hit by Section 69 of the Partnership Act, on the basis of the same reasoning, the prayer for refund of the amount should have been refused. It is further submitted that even assuming that certain amount is refundable, the conclusion of the trial court that a sum of Rs.4,13,300/- had been paid to Defendant No.1 is not sustainable and at any rate the learned single Judge should not have directed for payment of interest at the rate of 18% from the various dates indicated. 7. Learned Senior Counsel appearing for the plaintiffs (Appellants in OSA.No.128 of 2005) has contended that the learned single Judge should have passed a decree for specific performance of the contract. In the alternative, it has been submitted that, in case the decree for specific performance could not be granted, the decree directing refund of the amount along with 18% interest should be sustained. 8. On the basis of the submissions made by the learned counsels appearing for both the parties, the following questions arise for determination :- (1) Whether the learned single Judge has erroneously concluded that the relief of specific performance of contract cannot be granted in view of Section 69 of the Partnership Act ? (2) Whether the conclusion of the learned single Judge that the plaintiffs were not ready and willing to perform their part of the https://hcservices.ecourts.gov.in/hcservices/ contract is sustainable ? (3) Whether the prayer relating to refund of consideration is liable to be rejected by applying the principle laid down under Section 69 of the Partnership Act ? (4) Even assuming that prayer for refund can be entertained, whether the conclusion that a sum of Rs.4,13,300/- is to be refunded is justified on the basis of the materials on record ? (5) Whether the direction regarding payment of interest at the rate of 18% from various dates indicated is justified ? 9. The provisions contained in Section 69(2) and (3) of the Partnership Act, being relevant for deciding the first question, are extracted hereunder :- 69. Effect of non-registration.- (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 firm. (3) The provisions of sub-sections (1) and (2) shall apply also to a claim of set-off or other proceeding to enforce a right arising from a contract, but shall not affect,- (a) the enforcement of any right to sue for the dissolution of a firm or for accounts of a dissolved firm, or any right or power to realise the property of a dissolved firm, or (b) the powers of an official assignee, receiver or Court under the Presidency-towns Insolvency Act, 1909, or the Provincial Insolvency Act, 1920, to realise the property of an insolvent partner.” 10. In the present case, admittedly the agreement Ex.P-1 was executed by the first defendant in favour of the partnership firm consisting of 13 partners. It is admitted that such partnership was constituted by virtue of a written agreement, but such partnership had not been registered. Even though the defendants 2 to 8 have disclaimed any continuing interest in the partnership, the fact remains that such partnership had not been registered. The bar under Section 69(2) is squarely applicable. Even though the learned Senior Counsel appearing for the plaintiffs 1 to 3 contended that in fact such contract was entered by the plaintiffs 1 to 3 in their private https://hcservices.ecourts.gov.in/hcservices/ capacity and the partnership was created only on paper with a view to safeguard the interest of the first defendant by including his relations in the partnership, such a submission cannot be countenanced. There is a clear recital in the agreement that the agreement of sale was in favour of the partnership. Since admittedly such partnership was not registered, there is no escape from the conclusion that the suit was not maintainable. 11. A faint submission was made by the plaintiffs that such a plea was not raised initially and only in course of hearing such question was raised. The question has been discussed by the learned single Judge on the basis of the admitted case and admitted materials on record. In such view of the matter, the contention of the plaintiffs is not acceptable. The finding of the learned single Judge that the relief for specific performance of the contract cannot be granted in view of the bar under Section 69 of the Partnership Act is to be confirmed. 12. The contention relating to lack of plaintiffs’/ appellants’ readiness and willingness on their part to perform their part of the contract is not only irrelevant in view of the conclusion that the prayer for specific performance of contract is hit by the provision contained in Section 69(2) of the Partnership Act, but also untenable. The learned single Judge has referred to various materials on record on such aspect. No submission of any substance has been made to come to any different conclusion. Such finding is also therefore confirmed. The appeal filed by the plaintiffs is therefore dismissed. 13. The next question is relating to applicability of the bar under Section 69(2) of the Partnership Act vis-a-vis the direction given by the learned single Judge for refund. The main contention of the Senior Counsel appearing for Defendant No.1 is to the effect that such amount was allegedly paid by and on behalf of the partnership and since the partnership has not been registered, the suit is not maintainable in view of the provisions contained in Section 69(2) of the Partnership Act. Learned Senior Counsel appearing for the plaintiffs on the other hand has submitted that a suit for realisation of the property of a dissolved firm can be filed. 14. Learned Senior Counsel for the first defendant has relied upon a decision of the Supreme Court reported in AIR 1977 SC 336 (LOONKARAN SETHIA ETC., v. IVAN E. JOHN AND OTHERS ETC.,). In the said case, even though the plaintiff had contended that there had been dissolution of the partnership firm Sethiya & Co., such plea was discarded and the Supreme Court came to the conclusion that the dissolution of the partnership firm having not been established, it must be taken that the agreement was entered into between a https://hcservices.ecourts.gov.in/hcservices/ partnership in existence and the defendant. On the basis of the aforesaid finding, it was observed :- “21. A bare glance at the section is enough to show that it is mandatory in character and its effect is to render a suit by a plaintiff in respect of a right vested in him or acquired by him under a contract which he entered into as a partner of an unregistered firm, whether existing or dissolved, void. In other words, a partner of an erstwhile unregistered partnership firm cannot bring a suit to enforce a right arising out of a contract falling within the ambit of Section 69 of the Partnership Act. In the instant case, Seth Suganchand had to admit in unmistakable terms that the firm ‘Sethiya & Co.’ was not registered under the Indian Partnership Act. It cannot also be denied that the suit out of which the appeals have arisen was for enforcement of the agreement entered into by the plaintiff as partner of Sethiya & Co., which was an unregistered firm. That being so, the suit was undoubtedly a suit for the benefit and in the interest of the firm and consequently a suit on behalf of the firm. It is also to be borne in mind that it was never pleaded by the plaintiff, not even in the replication, that he was suing to recover the outstandings of a dissolved firm. Thus the suit was clearly hit by Section 69 of the Partnership Act and was not maintainable.” (Emphasis added) 15. It is submitted by the learned Senior Counsel appearing for the plaintiffs that the decision of the Supreme Court cannot be read to mean that a suit to recover the outstandings of a dissolved firm is hit by Section 69 of the Partnership Act. Learned Senior Counsel has rightly submitted that in fact the aforesaid decision indirectly supports the contention of the plaintiffs that a suit can be filed for realisation of the outstandings or the property of a dissolved firm. 16. Learned Senior Counsel appearing for the plaintiffs has placed reliance upon a decision of the Madras High Court reported in AIR 1948 Madras 187 (SHANMUGHA MUDALIAR v. P.V. RATHINA MUDALIAR AND ANOTHER). In that case, the Division Bench had occasion to deal with a similar question wherein the amount due and payable to an unregistered dissolved partnership firm was sought to be recovered by means of a suit, which was resisted by the defendant by relying upon the embargo contained in Section 69. In the above context, it was observed :- “(6) When a firm has been dissolved, thereafter it is impossible for registration ever to be effected. Consequently the disability of non-registration cannot be https://hcservices.ecourts.gov.in/hcservices/ overcome, as it can be during the continuance of the partnership, when the partners can, at any time, register as required by the Act and any disability existing upto that time regarding enforcement by suit of contracts and debts due to the partnership can be removed. (7) The words in sub-section (3) of Section 69 which I have quoted above are very wide. The sub-section enacts that the provisions of the two previous sub-sections shall not affect any right or power to realise the property of a dissolved firm. It is the right of all the partners, or by some arrangement as between themselves, one or more, to realise the property of their late partnership. In the course of the argument it has not been suggested that moneys due to the partnership from a third party in respect of dealings between him and the partnership do not form part of the partnership property. It seems to me that the intention of the Legislature was to inflict disability for non-registration only during the subsistence of the partnership and in doing that, at the same time there is provision that the partnership can cause the disability to be removed by registration before action is brought, although there was disability, by reason of non- registration, existing at the time the contact was made or the debt incurred. When a partnership has been dissolved the disability cannot be removed. Consequently it will be impossible, if a different view were taken of the provisions of sub-section (3), for a dissolved unregistered partnership to recover by suit its assets and property.” 17. Apart from the aforesaid decision, learned Senior Counsel for the plaintiffs has relied upon several decisions, many of which have been referred to and relied upon in AIR 1968 Patna 96 (BASANTLAL JALAN V. CHIRANJILAL SARAWGI AND OTHERS). While dealing with the question of bar under Section 69, after referring to the provisions contained in Section 69 of the Partnership Act, it was observed as follows :- “(9) ... Reading the aforesaid clause, it is apparent that apart from suing for dissolution of a firm or for accounts of a dissolved firm, an exception has been made also in case of any right or power to realise the property of a dissolved firm.” 18. Similar view has been subsequently expressed by a learned single Judge of Gujarat High Court reported in AIR 1994 Gujarat 56 (SHRI KANTILAL JETHALAL GANDHI v. GHANSHYAM RATILAL VYAS) by observing as follows :- “4. ... It is true that sub-section (2) of Section 69 https://hcservices.ecourts.gov.in/hcservices/ of the Act bars a suit to enforce a right arising from a contract by or on behalf of a firm against any third party if the firm is not registered under the Act. If this provision was alone on the statute book, the conclusion reached by the trial Court against the present appellant might have proved unassailable. There, however, exist the relevant provisions contained in sub-section (3) thereof to save the power to realise the property of a dissolved firm from the operation of sub-sections (1) and (2) thereof. It thus becomes clear that the power to realise the debt due to a dissolved firm will not be governed by sub-section (1) or sub-section (2) of Section 69 of the Act. The bar carried thereunder or either of them will not operate against a suit for recovery of a debt due and payable to an unregistered dissolved firm.” 19. The ratio of the decision of Madras High Court was also followed by a learned single Judge of Andhra Pradesh High Court in the decision reported in AIR 1968 A.P 378 (SRI BABA COMMERCIAL SYNDICATE AND ANOTHER