Supreme Court of India
Sunkari Tirumala Rao vs Penki Aruna Kumari on 17 January, 2025
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REPORTABLE
2025 INSC 92 IN THE SUPREME COURT OF INDIA
EXTRAORDINARY APPELLATE JURISDICTION
Petition(s) for Special Leave to Appeal(C) No. 30442/2019
SUNKARI TIRUMALA RAO & ORS. Petitioner(s)
VERSUS
PENKI ARUNA KUMARI Respondent(s)
O R D E R
1. This petition arises from the order passed by the High Court
of Andhra Pradesh at Amravati dated 17-7-2019 in Civil Revision
Petition No.2944/14 by which the High Court allowed the Revision
filed by the respondents (original defendants) and thereby set
aside the order passed by the District Judge, Vizianagaram in
Original Suit No.80/12 deciding a preliminary issue as regards the
maintainability of the suit instituted by the petitioners – herein
(original plaintiffs) for recovery of money.
2. It appears from the materials on record that the petitioners –
herein (original plaintiffs) instituted Original Suit No.80/12
praying for the following reliefs:-
VI. Therefore, the plaintiffs pray that the Honourable
Court may be pleased to pass a Decree and Judgment in
favour of the plaintiffs and against the defendant:-
a) For recovery of Rs.30,00,000/· (Rupees Thirty Lakhs
only) from the defendant;
b) Costs of the suit; and
Signature Not Verified
c) For such relief or other reliefs as the Honourable court
Digitally signed by
VISHAL ANAND
Date: 2025.01.22
15:22:01 IST deems fit and proper in the circumsta11ces of the case, in
Reason:the interests of justice.”
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3. In the suit proceedings, the issue as regards the
maintainability of the suit was raised on the ground that a partner
of an unregistered partnership firm could not have filed the Suit
for recovery of money, being hit by Section 69 of the Indian
Partnership Act, 1932 (hereinafter, the “Act”).
4. The aforesaid issue was decided as a preliminary issue and the
Trial Court held that the suit is maintainable. The Trial Court
took the view that although there is a partnership deed on record
yet as the partnership business had not commenced, the suit could
be said to be maintainable.
5. The defendants being dissatisfied with the order passed by the
Trial Court deciding the preliminary issue as stated above
challenged the same by filing a Civil Revision Application before
the High Court.
6. The High Court took the view that the suit is not
maintainable, being hit by Section 69 of the Partnership Act. The
High Court in its impugned order while allowing the revision
application, observed as under:-
“3. The counsel for petitioner submits that the suit is
not maintainable for the reason that it is hit by Section
69(1) of the Indian Partnership Act, 1932 (for short, the
Act). The issue involved is whether a partner of an
unregistered firm can maintain a suit against the other
partner. For the sake of convenience, Section 69(1) of the
Act is extracted hereunder:
Section 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 a behalf of any persons 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:
Provided that the requirement of registration of
firm under this sub-section shall not apply to the suits
3or proceedings instituted by the heirs or legal
representatives of the deceased partner of a firm for
accounts of the firm or to realise the property of the
firm.
4. The counsel for the respondents-plaintiffs submits that
the partnership business has not yet commenced, and in the
written statement filed by the petitioner-defendant in the
suit, it is categorically mentioned that the business was
stopped in the year 2009. The counsel for the petitioner,
in answer to the said submission, draws the attention of
this Court to the partnership agreement, wherein it is
clearly mentioned that the plaintiff was offering
partnership to the respondents as she was not able to
carry on the business. The reason for closure of the
business is immaterial since it is clearly mentioned in
the agreement itself that the petitioner-defendant was not
in a position to continue the Crusher and hence, she is
offering partnership to the respondents. Hence, it has to
be understood from the agreement that knowing fully well
that the Crusher was not in a working condition on the
date of the agreement, the respondents entered into the
agreement. The judgment of the Lahore High Court in Bishen
Narain v. Swaroop Narain1 AIR 1938 Lahore 43 is to the
effect that the fact that the actual business did not
commence is immaterial, when the suit is filed by a member
of the partnership firm against another partner, and it
held that the partnership deed has to be registered in
order to maintain a suit against the other partner. This
Court is persuaded by the said judgment, since, even
looked at from the point of view of equities, the
respondents do not deserve to be given any concession on
the ground that the business of the partnership firm has
not commenced, as was done by the lower Court. Once there
is an agreement of partnership, unless it is registered,
no suit can be maintained by the partners for enforcing
any right accruing from such agreement.
5. In view of the above, this Court opines that the
impugned order cannot be sustained.
6. Accordingly, the civil revision petition is allowed,
setting aside the order dated 07.7.2014, passed in 0.S.
No.80 of 2012 on the file of the Court of District Judge,
Vizianagaram. Consequently, it is held that O.S. No.80 of
2012 on the file of the Court, of District Judge,
Vizianagaram, is not maintainable.”
7. We have heard the learned counsel appearing for the parties
and have gone through the materials on record.
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8. It is evident from a reading of sub-sections (1) and (2) of
Section 69 that it assumes a mandatory character. Section 69(1)
prohibits a suit amongst the partners of an unregistered
partnership firm, for the enforcement of a right either arising
from a contract or conferred by the Act, unless the suit amongst
the partners is in the nature of dissolution of the partnership
firm and/or rendition of accounts. Section 69(2) prohibits the
institution of a suit by an unregistered firm against third persons
for the enforcement of a right arising from a contract. As a
consequence, a suit filed by an unregistered partnership firm and
all proceedings arising thereunder, which fall within the ambit of
Section 69 would be without jurisdiction.
9. This Court in Seth Loonkaran Sethiya and Others v. Mr. Ivan E.
John and Others reported in (1977) 1 SCC 379 had categorically
held that Section 69 is mandatory in character and a suit
instituted by a plaintiff in respect of a right which was vested
in him by virtue of a contract and entered into in his capacity as
a partner of a partnership firm, would be void, if such a firm was
unregistered. The relevant observations are as under:
“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 Sugan Chand 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
5suit was clearly hit by Section 69 of the Partnership Act
and was not maintainable.”
10. In yet another decision in Mukund Balkrishna Kulkarni v.
Kulkarni Powder Metallurgical Industries and Another reported in
(2004) 13 SCC 750, this Court had the opportunity to consider the
applicability of Section 69(1) having regard to the facts of that
case. Therein, the appellant had filed a suit for declaration that
the respondent no. 1 was a partnership business in which both the
appellant and the respondent no. 2 had equal shares along with the
prayer for dissolution of the firm and rendition of accounts. It
was opined therein that the two embargoes which must co-exist for
the plaintiff to be non-suited under Section 69(1) would be that:
i. The suit should be filed by a person “suing as a partner in
a firm” and;
ii. The suit must be to enforce a right arising from a contract.
11. By applying the two embargoes to the facts of that case, it
was held that, first, the suit for declaration as regards the
existence of a partnership could neither be said to be made by a
person suing as a partner nor could be said to be a suit to
enforce a right arising from a contract. It was in fact a prayer
to be declared a partner in the firm and was therefore, not
falling within Section 69(1). Secondly, as regards the other
prayer for dissolution of the firm, the Court held that the
appellant was in fact suing “as a partner” and was also enforcing
a right under a contract. However, the same was saved due to the
operation of the exception under Section 69(3) which permits the
filing of a suit for dissolution of the firm and rendition of
accounts irrespective of the non-registration of the partnership
firm. Therefore, the suit was held to be maintainable. The
relevant observations are as under:
“9. The sub-section contains embargos which must coexist
before a plaintiff can be non-suited under that sub-
section. The two embargos relevant for this case are: (1)
6that the suit should be filed by person “suing as a
partner in a firm” and (2) that the suit must be to
enforce a right arising from a contract. The submission of
the respondents which was accepted by the High Court was
that the prayer of the appellant, namely, for a
declaration of the existence of the partnership and the
share between the parties was a suit to enforce a right
under a contract against the firm. A prayer for such
declaration could not be said to be made by person suing
as a partner. It was a prayer to be a partner and is
therefore not debarred under the provisions of Section
69(1). Furthermore, what was in fact being prayed for by
the appellant was a declaration of the existence of a
contract between the parties. That could not be said to be
a suit to enforce a right arising from a contract. The
second prayer of the appellant was not to continue as a
partner of the firm but to dissolve the firm. To that
extent the appellant was suing “as a partner”. This he was
entitled to do under Section 69(3)(a) which insofar as it
is relevant, reads as follows:
“69. (3) The provisions of sub-sections (1) … 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;”
10. The right of partner to ask the dissolution of a firm
is a right the enforcement of which is otherwise forbidden
under Section 69(1). It is because of the exception under
sub-section (3) of Section 69 that a person suing as a
partner can enforce a right under the contract for
dissolution of the firm and accounts. The claim for a half
share in the firm’s assets would be a necessary corollary
to a prayer for dissolution. Without the prayer for
specified shares in the firm’s assets and business, the
relief that may be granted in a suit for dissolution would
be ineffective. In the circumstances of the case, we allow
the appeal and set aside the decision of the High Court
and affirm the decision of the first appellate court.
There will be no order as to costs.”
12. In the case on hand, the petitioners (original plaintiffs) had
filed the suit for recovery of money in their capacity as partners
of an unregistered partnership firm, against the respondent
(original defendant) in her capacity as a partner of the same
unregistered partnership firm. The Trial Court itself had arrived
at a finding that the agreement executed between the parties was in
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fact a partnership deed and not a bond as claimed by the
petitioners.
13. The partnership deed dated 11.12.2009 reads as thus:
“II. My taluk jenny Stone Crusher Quarry in Amathi
village, Therlam Mandalam, Vizianagaram. District. I am
running the crusher quarry. I am having all rights in my
crusher quarry. Now it is difficult for me to run the
crusher quarry. I was asked to run the crusher quarry with
partnership. My well-wisher asked me to run and i agreed
to give the quarry in partnership keeping with me 25%,
No.1 of us 20%, No. 2 of us, No.3 of us 15%, no. 4 of us
15%, No.5 of us 7.5%, No.6 of us 7.5% shares allotted to
provide partnership, through shares and through this
document received Rs. 30,00,000/- (Rupees Thirty Lakhs) so
allotted the shares mentioned above through this document.
From today onwards as per the allotment of shares enjoy
the schedule properties with all easementary rights and
profits and loss. Every month distributions verify and
maintain the shares of your properties. I will never
object in any manner. Pay the crusher quarry and taxes to
the Government. I can not do any dispute believing you
persons and handing over to you people.”
14. A perusal of the partnership deed clearly reveals that the sum
of Rs. 30,00,000/- which was given to the respondent and which is
now sought to be recovered, was rendered by the petitioners as
capital for the purpose of acquiring 75% shares collectively in
the partnership firm. As per the arrangement, the respondent was
to hold the remaining 25% shares. Therefore, there is no doubt
that the suit for recovery was filed by a set of partners together
on one side, against another partner, for the purpose of enforcing
a right accruing under the agreement.
15. It is a clear as a noon day that the present suit had not been
instituted by or on behalf of the firm against any third persons
so as to fall under the ambit of Section 69(2). The petitioners
have also not filed the instant suit for enforcing any statutory
right conferred under any other law or a common law right so as to
exempt the application of Section 69. Hence, the rigours of
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Section 69(1) would apply on such a suit and the partnership firm
being unregistered would prevent the petitioners from filing a
bare suit for recovery of money from the respondent.
16. It would have instead been appropriate for the petitioner to
have preferred a suit for dissolution of the partnership firm and
rendition of accounts, especially considering that the factum of
non-registration of the partnership firm would not have acted as
bar in a suit for dissolution in light of the exception carved out
under Section 69(3). The defence that the partnership business had
not yet commenced and thus, such a suit for dissolution could not
have been preferred, would not be of any avail to the petitioners,
particularly for overcoming the jurisdictional bar under Section
69(1). The High Court is right in taking the view that a suit of
such nature could not be said to be maintainable in the absence of
the registration of the partnership firm.
17. In light of the aforesaid, we are of the view that no error not
to speak of any error of law could be said to have been committed
by the High Court in passing the impugned order.
18. In the result, the Special Leave Petition fails and is hereby
dismissed.
19. Pending applications, if any, also stand disposed of.
…………………………………………….J.
(J.B. PARDIWALA)
…………………………………………..J.
(R. MAHADEVAN)
NEW DELHI:
JANUARY 17, 2025.