Sharad Vasant Kotak v.

Ramniklal Mohanlal Chawda

FACTS:

This appeal by special leave has arisen under the following circumstances :-

The appellants are the partners of a suit firm called `M/s. Paramount Builders'. The
partnership was entered into on 29.11.1979 with the following individuals as partners:

The said partnership firm was registered on 15.12.1980 under Registration No. 158675 with
the Registrar of Firms. On 6.5.1986, Shri Mohanlal Hinji Chawda, a partner of the firm (Sr.
No. 6 above) died and in his place, his widow Smt. Jijiben Mohanlal Chawda was admitted as
a partner in the firm. After the admission of the said Smt. Jijiben Mohanlal Chawda, another
deed of partnership was made consisting of the old six partners and the newly admitted
partner Smt. Jijiben Mohanlal Chawda. As a matter of fact, the induction of the new partner
was not brought to the notice of the Registrar of Firms by forwarding the required particulars.
It is on record that still later on 3.11.1992 another partnership deed was brought into
existence consisting of the same partners. It is also on record that yet another partner Smt.
Hemkuver B. Kotak (S.No. 4 above) died in September, 1994. The fact of death of this
partner also was not intimated to the Registrar of Firms. While so, the Ist Respondent gave a
notice of dissolution of the firm to the appellants and also filed a suit for the dissolution of the
partnership firm bearing Suit No. 5016/94 on 15.12.94 in the High Court of Judicature at
Bombay on the original side. Initially in the plaint, the constitutional validity of Section
69(2A) of the Indian Partnership Act (hereinafter called the "Act"), as amended by
Maharashtra Act, was not raised. The Ist respondent moved a Chamber Summons No. 301/97
seeking permission of the Court to carry out certain amendments to the plaint. Briefly, the
amendments sought were that subsequent changes and/or modifications in the partnership
deed of M/s. Paramount Builders under the deed of partnership dated 20.10.1986 and also in
the deed of partnership dated 3.11.1992 are merely in the nature of changes and/or
modifications which do not affect registration of the said firm of M/s. Paramount Builders, as
required under the Act, for entitling a partner to institute a suit for reliefs against the partners
on dissolution of firms and alternatively, the other amendment sought was to challenge the
vires of Section 69(2A) of the Act as in force in State of Maharashtra.

3. The amendment sought was seriously opposed by the appellants inter alia contending that
the suit as filed was not maintainable and, therefore, the amendment cannot be allowed. In
other words, according to the appellants on and from 20.10.1986 when a new partnership
deed was made, the registration already given to the firm ceased to have validity and the
partnership as at present must be deemed to be an unregistered one and, therefore, the suit
was hit by Section 69(2A). It was also contended that without impleading State of
Maharashtra and Union of India, the vires of Section 69(2A) in the Partnership Act cannot be
challenged. The learned trial judge accepting the objections raised by the appellants found
that Section 69(2A) of the Act creates a bar on the threshold of the filing of the suit for the
relief covered in the suit and the very suit filed by the plaintiff was incompetent. That being
the position, the application for amendment could not be permitted. Consequently, the
application was rejected.

4. Aggrieved by the rejection of the amendment application, the first respondent preferred an
appeal to the Division Bench of the High Court in Appeal No. 509/97.

5. The appellate court was of the view that the registration of the firm continues to be in force
notwithstanding any reconstitution of the firm and even when dissolution takes place, the
registration of the firm continues. The Division Bench further held that Section 69(2A)
requires the registration of a firm and it does not require a fresh registration each time a
reconstitution or dissolution of the continuing firm takes place. After finding that the suit
filed by the first respondent was not hit by Section 69(2A).

the appellate Court allowed the appeal and permitted the amendment only regarding the
factual portions and not regarding the constitutional validity of Section 69(2A).

ISSUE:

Whether on the facts of this case the suit for dissolution and account of partnership is hit by
Sec. 69(2A) of the Act as amended in the State of Maharashtra ?"

LEGAL PROVISIONS:

Section 70:

PENALTY FOR FURNISHING FALSE PARTICULARS.

Any person who signs any statement, amending statement, notice or intimation under this
Chapter containing any particulars which he knows to be false or does not believe to be true,
or containing particulars which he knows to be incomplete or does not believe to be
complete, shall, on conviction, be punished with imprisonment for a term which may extend
to one year, or with fine, or with both :

Provided that in the absence of special and adequate reasons to the contrary to be mentioned
in the judgement of the Court, the fine shall not be less than one thousand rupees.

REASONONG:

At the outset, we would like to deal with the substance of the Partnership Deeds in this case.
As noticed earlier, the first Deed of Partnership was entered into on 29.11.79 and that
partnership firm was registered on 15.12.80. One of the partners (Shri Mohanlal Hinji
Chawda) died on 6.5.86 and in his place, his widow was inducted. The second Deed of
Partnership was drawn on 20.10.86. By reason of the second Deed of Partnership, can it be
said that the existing firm dissolved or ceased. It is relevant here to note that in both the deeds
it was expressly made that the death, insolvency or retirement of any partner shall not
dissolve the partnership firm. On the other hand, the partner shall be entitled to carry on the
partnership business on the terms and conditions mutually agreed upon by the said partners
(vide Clause 11). Therefore, it cannot be contended by the appellants that by reason of death
of one of the partners, the existing firm stands dissolved. Can it then be said that by reason of
inducting the widow of the deceased partner the existing registered firm ceased and totally a
new partnership firm came into existence ? According to the appellants, by reason of Clauses
4 and 5 in the second Deed of Partnership, it must be deemed that the old partnership ceased
and entirely a new partnership firm was found under the second Deed. We are unable to agree
with the contention of the learned senior counsel for the appellants on this aspect. Clauses 4
and 5 relate to commencement of the partnership and accounting year. These are minimal
changes introduced in the second Deed of Partnership by reason of the introduction of a new
partner in place of Clauses 4 and 5 in the first Partnership Deed and in other respects, namely,
the name of the partnership firm, the address and location of the firm, the business carried on
and shares allotted among the partners and duration of the partnership, are identical.
Moreover a careful reading of clauses 5 and 6 of the second partnership deed will give an
impression that the partners have agreed to continue the existing firm. The profits or losses
for the period prior to and up to the death of deceased partner is dealt with and provided.
There is no indication that the old firm was dissolved. Likewise, reliance placed on the
recitals in the third Deed of Partnership drawn on 3.11.92 will not come to the help of the
appellants. Learned counsel for the appellants placed reliance on the term used in the third
Partnership Deed reconstituted in the Preamble portion. We are of the opinion that this does
not make any substantial difference when we look into the substance of the three deed.

JUDGEMENT:

In the result, we hold that the suit in question is not hit by Section 69(2A) of the Act and,
therefore, the Division Bench is right in allowing the Appeal. Consequently, the Appeal is
dismissed. However, there will be no order as to costs.