Vasant Kotak & Ors Vs. Ramniklal Mohanlal Chawda & ANR  INSC 940
(17 December 1997)
SEN, K. VENKATASWAMI
17TH DAY OF DECEMBER, 1997 Present:
Mr, Justice Suhas C.Sen Hon'ble Mr, Justice K. Venkataswami R.F.Nariman, Sr.Adv.,
P.H.Parekh, Sameer Parekh and Ms.
Sharma, Advs. with him for the appellants.
Sr.Adv., Ramesh Singh, Parimal K.Shroff., Ms. Bina Gupta, Ms.Rakhi Ray and Pritesh
Kapur, Advs. with him for the Respondents.
following Judgment of the Court was delivered:
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 29.11.1976 with the following individuals
Name of Partners Share
Sharad Vasant Kotak 15%
Dilip Vasant Kotak 15%
Anil Dhirendra Kotak 15%
Hemkuver Vasant Kotak 15%
Lilavati Dhirendra Kotak 15%
Mohanlal Hinji Chawda 12 1/2%
Ramniklal Mohanlal Chawda 12 1/2% The said partnership firm was registered on
15.12.1980 under Registration no, 158675 with the Registrar of Firm. 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.
Mohanlal Chawda was admitted as a partner in the fir. After the admission of
the said Smt. Jijiben Mohanlal Chawda, another deed on partnership was made
consisting of the old six partner and the newly admitted partner Smt.
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
on record that still latter 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 1st 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.
in the plant, 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 1st 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 challenges the vires of section 69 (2A) of the Act as in force in
State of Maharashtra.
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) 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
being the position, the application for amendment could not be permitted.
Consequently, the application was rejected.
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.
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 whin
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 Division Bench
held as follows:- "The proposed amendment consists of two parts. The first
part is only a factual aspect which has been sought to be introduced in order
to demonstrate that the bar under Section 69(2A) is not attracted.
is no reason as to why such an amendment should not be granted.
second part of the amendment pertains to the constitutional challenge of the
validity of Section 69(2A). As we have already taken a view that Section 69(2A)
is not attracted, the question of challenge does not survive and, therefore, it
is not necessary to grant the amendment containing constitutional
challenge." Ultimately 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).
by the judgment of the Division Bench, the appellants have preferred this
appeal by special leave.
this appeal, the following substantial question of law arises for our
consideration:- "Whether on the facts of this case the suit for a
dissolution and account of partnership is hit by Sec.69(2A) of the Act as
amended in the State of Maharashtra? For answering the question, it is
necessary to set out the relevant provisions of the Act as amended in the State
of Maharashtra, which are given below:- "4. Definition of
"partnership". "Partnership" is the relation between
persons who have agreed to share the profits of a business carried on by all or
any of them acting for all.
"Firm" and "firm-names" Persons who have entered into
partnership with one another are called individually, "partners" and
collectively "a firm", and the name under which their business is
carried on is called the "firm- name".
Rights and duties of partners after a change in the firm,.
to contract between the partners- (a) Where a change occurs in the constitution
of a firm, the mutual rights and duties of the partners in the reconstituted
firm remain the same as they were immediately before the change, as far as may
v Incoming and outgoing partners
of a partner, (1) Subject to contract between the partners and to the
provisions of section 30, no person shall be introduced as a partner into a
firm without the consent of all the existing partners.
Subject to the provisions of section 80, a person who is introduced as a
partner into a firm does not there by become liable for any act of the firm
dome before he became a partner.
CHAPTER VI Dissolution of a firm
Dissolution of a firm. The dissolution of a partnership between all the
partners of a firm is called "dissolution of the firm".
VII Registration of Firms 58. Application for registration.
(Subject to the provisions of sub-section (A), the registration of a firm)
effected by sending by post or delivering to the Registrar of the area in which
any place of business of the firm is situated or proposed to be situated, a
statement in the prescribed form and accompanied by the prescribed fee (and a
true copy of the deed of partnership) stating:- (a) the firm-name, [ (aa) the
nature of business of the firm;) 9) the place or principal place or business of
the firm,(1) the place or principal place of business of the firm, (i) the
names of any other places where the firm carries on business, (d) the date when
each partner joined the firm, (e) the named in full and permanent address of
the partners, and (f) the duration of the firm.
statement shall be signed by all the partners, or by their agents specially authorised
in this behalf.
The statement under sub- section (1) shall be sent or delivered to the
Registrar within a period of one year from the date of constitution of the
that in the case of any firm carrying on business on or before the date of
commencement of the Indian Partnership (Maharashtra Amendment) Act, 1984, such
statement shall be sent or delivered to the Registrar within a period of one
year from such date)_.
Each person signing the statement shall also verify it in the manner
Registration (1) When the Registrar is satisfied that the provisions of section
58 have been duly complied with, he shall record an entry of the statement in a
register called the Register of Firms, and shall file the statement, (On the
date such entry is recorded and such statement is filed, the firm shall be
deemed to registered.) 62) The firm, which is registered, shall use the
brackets and word "(Registered)" immediately after its name.)
Recording of changes in and dissolution of a firm. (1) When a change occurs in
the constitution of a registered firm, (every) incoming, continuing or outgoing
partner, and when a registered firm is dissolved, (every) incoming continuing
or outgoing partner, and when a registered firm is dissolved, (every) person
who was a partner immediately before the dissolution, or the agent of (every)
such partner or person specially authorised in this [shall, within a period of
90 days from the date of such change or dissolution, give notice to the
Registrar of such change or dissolution, specifying the date thereof;) and the
Registrar shall) make a record of the notice in the entry relating to the firm
in the Registrar of Firms and shall file the notice along with statement
relating to the firm in the Registrar of Firms and shall file the notice along
with statement relating to the firm filled under section 59.
Where a change occurs in the constitution of a registered firm, all person, who
after such change are partners of the firm, shall jointly send an intimation of
such change duly signed by them, to the Registrar, within a period of 90 days
from the date of occurrence of such change and the Registrar shall deal with it
in the manner provided by section 61.) (2)................................
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 person suing a partner in a firm against the firm on 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 :
that the requirement of registration of firm under this sub-section shall not
apply to the suits or proceedings instituted by the heirs or legal
representatives of the deceased [partner of firm for accounts of the firm or to
realise the property of the firm.) (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 a s partners in the firm.
No suit to enforce any right 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 shall be instituted in any Court by or on behalf of any person suing as a
partner in a firm against the firm or any person alleged to be or 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:
that the requirement of registration of firm under this sub-section shall not
apply to the suits or proceedings instituted by the heirs or legal
representatives of the deceased partner of a firm for accounts of a dissolved
firm, or to realise the property of a dissolved firm.) (3)................................
Penalty of contravention of section 60, 61.62 or 63. If any statement,
intimation or notice under sections 60.61.62 or 63 in respect of any registered
firm is not sent or given to the Registrar, within the period specified in that
section, the registrar, may, after given notice to the partners of the firm and
after given them a reasonable opportunity of being heard, refuse to make the
suitable amendment s n the records relating to the fir, until the partners of
the firm pay such penalty, not exceeding ten rupees per day, as the Registrar
may determine in respect of the period between the date of expiry of the period
specified kin section 60.61.62. or as the case may be, 63 and the date of
making the amendments in the entires relating to the firm.) Rule 3. Forms of
Statements. The Statements required to be sent or delivered to the Registrar
under section 58 and 60 of the Act shall, respectively, be in Forms
"A" and "B" and be verified in the manner as laid down in
the footnotes to the respective forms.
4. Forms of intimation and notice, Intimations and notices which are required
to be given under sections 61.62. and 63 of the Act shall, respectively, be
given in Forms "C", "D", "E" and "f"
and be verified in the manner setforth in the footnotes to the respective
6. Form of Register., The Register shall be maintained kin Marathi in Form
"G" and a separate page shall be devoted to each firm., The pages,
after the entires are made, shall be bound in proper permanent registers in the
order of the consecutive number allotted to each firm on registration, Every
entry in Register shall be signed by the Registrar.
. Certificate or Registration, -- Where a firm si registered under section 59
of the Act, the Registrar shall issue a certificate in Form, "H" Form
"A" Application for Registration of Firms (See Rule 3) We, the
undersigned, being partners, hereby apply for registration as a firm and for
that purpose supply the following particulars pursuant to section 58 of the
Indian Partnership Act, 1932:-- (a) Firm Name (b) Nature of business of the
firm Place (c) Principal place of business of the firm Taluka District (d)
Names of any other places where the firm carries on business in the above name.
Names ion fully and permanent address (residential) of all the partners.
Date on which each partner joined the firm.
Duration of the firm, In case there is any provision made by contract form the
duration of the partnership or for the determination of the partnership, please
state the provisions briefly, please state the provisions briefly. If no such
provision is made, words "AT WILL" may be stated.
1. For the registration of each Firm a separate application is necessary.
Accordingly the applicants should apply in this application only particulars of
the Firm in respect of which the application is made. This applies to the case
of the same persons carrying on business in partnership under different Firm
Against item (c) and (d), the exact location of the place should be given.
This application much be signed by all partners of their agents specially
authorized in this behalf on solemn affirmation before a Magistrate or other
officer duly empowered to administer Oaths.
4-- Making a false, untrue, or incomplete statement is punishable under section
70 of the Indian Partnership Act, 1932.
case there are any minors admitted to the benefits of partnerships:--
------------------------------------------------------------ Name & Address
Name & Address Date of Date when he/ of Minor of Guardian Addmis- she will sion
to attain benefits majority (1) (2) (3) (4)
We are sending the prescribed registration fee by cash/money order. We the abovenamed,
solemnly affirm that what is stated in paragraphs is true to our own knowledge
and that what is stated in the remaining paragraphs is stated on information
and belief, and I/We believe the same to be true.
also declared on solemn affirmation that up to the date of submission of this
application there has not been any change whatever in any of the particulars
affirmed at Date this ........................ day of..................
(2) (3) (4) (5) Name and Signatures Certified that the persons who have signed
the application have signed in my presence and have solemnly affirmed that the
particulars furnished therein are true.
of Attesting Witness Designation And Seal, if available Before me ( Price Re.
1) ----- Form 'E'
PARTNERSHIP ACT, 1932
of change of Constitution or Dissolution of Firm (See rule 4) FIRM REGN. NO and
DATE Firm Name........................................
in the above named firm We, being agents of a partner in the abovementioned
firm persons specially authorised by a partner in the above mentioned firm to
give notice in this behalf hereby give notice that (a) the constitution of the
firm has changed as follows:- (1) Mr. /Messrs ............... of
joined the firm as new /partner/partners on (2) Mr./Messrs ............... of
retired as partner/partners of the firm with effect
said firm has been dissolved on...........
................... the abovenamed....................
affirm that what is stated in paragraphs...........
true to my/our own knowledge, and that what is stated in the remaining
paragraphs ............ is stated on information and belief, and I/We believe
the same to be true.
declare on solemn affirmation that up to the date of submission of this
application there has not been any change in any of the particulars previously
intimated save and except the change notified above.
and Signatures- (1) (2) (3) Certified that the person who has signed this
notice has signed it in my presence and he has solemnly affirmed that the
particulars furnished there in are true.
case of person not conversant with the English Language, the contents of the
above particulars have been explained to him in a language familiar to him and
he has affirmed the truth thereof.
1. -- Please strike out item (a) or (b) whichever is not applicable.
Please give dates according to the English calendar.
In case there is only one person left then the firm should be considered as
dissolved and the form should be filled in accordingly.
This notice must be signed by every partner or his agent specially authorised
in this behalf on solemn affirmation before a Magistrate or other officer duly
empowered to administer oaths.
Re.1) ------ Form 'G' (See rule 6) Register of firms Firm No........
Number of Entry Date of Entry Nature of Remarks Entry
------------------------------------------------------------ --------- FORM 'H'
(See rule 17 ) Certificate of Registration (National Emblem) The Indian
Partnership Act, 1932 (Act No IX pf 1932) Registration No...................
certified that a firm by name....................
its head office at ................... has this day been duly registered under
the Indian Partnership Act, 1932 (Act No.IX of 1932).
under my hand this day of ......19....
Registrar of Firms Bombay, Pune, Nagpur, Aurangabad.
Before proceeding further, we remind ourselves that we are concerned with a
suit filed by a partner for dissolution and accounts. No third party rights or
liabilities are involved in the present suit filed by respondent no. 1.
counsel on both sides addressed arguments covering larger question. But we
propose to confine ourselves strictly to the facts of the case and decide the
controversy without touching up[on the larger issues or connected issues
arising out of the pleadings because the maintainability of the suit is the
sole issue based on Section 69(2A) of the Act.
62(2A) (extracted above) requires two conditions before a partner can sue for
dissolution of a firm and for accounts :- 1. The firm must be registered.
person suing is or has been shown in the register of firm as partner in the
not in dispute that the partnership as entered into under a deed dated
28.11.1979 was duly registered and a certificate of registration was granted.
It is also an admitted fact that the plaintiff, first respondent herein, was
one of the founder partner under the deed dated 28.11.1979 and his name did
find a place in the register of firm as a partner and there is nothing to show
that at any point to time, his name has removed from the register of firms. We
have seen that on the death of one of the partners, his widow was inducted into
the partnership and a deed was entered into on 20.10.1986, repeating almost all
the clauses in the partnership deed dated 28.11.1979 except for consequential
changes necessitated by the induction of new partner in the place of deceased
the contention of learned senior counsel, Mr. Nariman, that when the new
partner was inducted under the partnership deed dated 20.1.01986 in the place
of the deceased partner, the firm registered under the partnership deed dated
28.11.1979 ceases to be on the records of register of firms and, therefore, the
registration already given will not ensure to the benefit of the partnership
entered on 20.10.1986. If that be so, according to Mr. Nariman, learned senior
counsel, the conditions imposed by Section 69(2A) are not satisfied and,
therefore, the suit as filed was not maintainable.
support of his argument, he placed strong reliance on the expression
'partnership' as defined in Section 4 of the Act, It is the contention of M r, Nariman
that bearing in mind the definition in Section 4 of the Act, the partners
including second respondent will collectively be a firm and that firm is not
registered inasmuch as the name of the second respondent does not find a place
in the Register of Registrar of Firms. Therefore, the learned Single Judge was
right in holding that the suit was not maintainable at the threshold. According
to the learned senior counsel, the mere fact that the plaintiff's name find a
place in the Register of Registrar of Firms is not sufficient to maintain the
suit when admittedly one of the partners's name (second respondent's name) was
not shown in the Register of Registrar of Firms. He also contended that a
comparison of language employed in Sections 31 and 32 of the Act. Will show
that whenever a partner is inducted into an existing firm, the old firm ceases
to exist and an altogether new firm comes into existence from the date of
induction of the new partner and that new firm must ger fresh registration.
support of this proposition, he placed reliance on Madho Prasad and Others vs. Gouri
Dutt Ganesh Lal (AIR 1939 Patna 323) ; Meenakshi Achi and Another vs. P.S.M.
Subramanian Chettiar and Others (AIR 1957 Madras 8) and Gouri Sankar Sheroff
and others vs. Central Hindusthan Bank Ltd. and others (Air 1959 Calcutta 262).
He also submitted that the partners entered into another deed on 3.11.1992 and they
have expressly treated that the firm as reconstituted one, In other words,
according to the learned senior counsel,.
deed dated 20.10.86 in the absense of such expression (reconstituted firm) the
understanding was the old firm, ceases to be in existence and a new firm was
brought into existence. For this, he also placed reliance on clauses 4 and 5
others (Air 1959 Calcutta 262). He also submitted that the partners entered
into another deed on 3.11.1992 and they have expressly treated that the firm as
reconstituted one, In other words, according to the learned senior counsel,.
deed dated 20.10.86 in the absense of such expression (reconstituted firm) the
understanding was the old firm, ceases to be in existence and a new firm was
brought into existence. For this, he also placed reliance on clauses 4 and 5
regarding 'Commencement' and 'Accounting Year' . He also placed reliance on a
passage from Lindley on the Law of Partnership. 15th Edition, page 374:- "
Each partner is, it is true, the agent of the firm: but as before pointed out,
the firm is knot distinguishable from the persons from time to time composing
it: and when a new member is admitted he becomes one of the firm for the
future. but not as from the past, and this present connection with the firm is
no evidence that he ever expressly or impliedly authorised what may have been
done prior to his admission. This is wholly consistent with the fact that after
the admission of a new member, a new partnership is constituted, and thus
special circumstances are required to be shown special circumstances are
required to be shown before the debts and liabilities of the old partnership
are treated as having been undertaken by the new partnership." Contending
contrary and supporting the judgment of the Division Bench. Mr,. Sole. J. Sorabjee,
learned Senior Counsel, submitted that there is a well-recognised distinction
between the legal concept of dissolution and reconstitution of a firm. In the
case of an incoming or an outgoing partner in a existing firm, there is only a
reconstitution of the firm and in all other respects, the existing firm
continues with old and new partners. A look at chapter V of the Act. according
to him, will fortify the above contention. In other words, chapter V deals with
"Income and Outgoing partners" while Chapter VI separately deals with
"Dissolution of a Firm". The two are totally different concepts and
cannot in law be equated with each other, According to the learned Senior
Counsel, the rules framed by Maharashtra Government in 1989 and the forms
prescribed under the rules in particular Forms E. G. and H clearly support the
said contention. It is also his contention that even when there is a
dissolution of a firm.
does not cease to be registered firm but for the purposes of Partnership Act it
continues to be registered. In other words, according to the learned Senior
Counsel. the registration of a firm is valid till it is cancelled in a manner
know to law. Non-compliance of Sections 61,62 and 63.
amended in Maharashtra, if at all, will attract the penalties prescribed under
Section 69A and nothing more and it is incorrect to contend that non-compliance
of the said provisions will result in deregistration is a drastic one, it is
impermissible to hold that non-compliance with Sections 63(1) and 63(1A) would
lead to deregistration of a firm in the absence of express and clear
legislative provisions to that effect. He further contended that merely because
another partnership deed was made on 20.1.01986, it cannot be said that there
was a dissolution of the old firm and consequential formation of a new firm
under the latter dead. According to the l earned Senior Counsel, it is the
substance of the matter that is relevant to be looked into and not the
phraseology employed by the parties. IN others words, the test is whether after
the execution of the deed dated 20.10.1986, for all intents and purposes,. the
firm as reconstituted was a different unit or remained the same unit in spite
of change in its constitution. Looked at from this angle, the unit remained the
same as it originally was in spite of change in its constitution and the
contention to the contrary, according to the learned Senior Counsel, was not
correct. To support this, he pointed out the similarities between the two
deeds. The alleged dissimilarities as found in Clauses 4 and 5 of the Document
dated 20.1.1986 are really not dissimilarities but consequential and incidental
support of his contentions, he placed reliance on the following judgments of
this Court and other High Courts:- Commissioner of Income-Tax. West Bengal vs. A.W.Figgies & Co. and
Others (1954 (5) SCR 171); M/s Wazid Ali Abid Ali (India) Calcutta vs. Commissioner of Income-Tax, Coimbatore (1963 Vol. 49 ITR 515); Firm Girdhar
Mal Kapur Chand vs. Firm Dev Raj Madan Gopal (1964) 1 SCR 995); Pratapchand Ramchand
& Co. vsw. Jehangirji Bomanji Chinoy (AIR 1940 Bombay 257) : Tapendra Chunder
Goopta vs. Jogendra Chunder Goopta and Others (AIR (29) 1942 Calcutta 76);
Messrs, Durga Das Janak Raj vss. M/s. Mohatta Brothers a Firm (AIR 1969 Gujarat
178); and Kesrimal and Another vs. Dalichand and others (AIR 1956 Rajasthan
reply to the contention of Mr, Nariman that the purpose for which Section
69(2A) was introduced by Maharashtra legislature will be the last if the view
projected by him is not accepted, Mr. Sorabjee submitted that failure to comply
with the mandatory provisions in Section 61.62 or 63 may attract the penalties
provided under Section 69 A of the Act but not the deregistration of the firm.
In support of this, he placed reliance on a judgment of the Andhra Pradesh High
Court in Maddi Sudarsanam and Others vs. Borogu Viswanadham Brothers (AIR 1955
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 requested on 15.12.80 . One of the
partners (Shri Mohanlal Hinji Chawda) died mon 6.5.86 and in his place, his
widow was indicted. The second Deed of Partnership was drawn on 20.1.86. 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 bu 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. Cam 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.
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. There 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 Deep 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 Deep 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 deeds. In
this connection, the learned counsel for the respondents has rightly placed
reliance on the following observation made in Tyresoles (India). Calcutta (supra):
our opinion, the test of the pudding is in the eating and the true scope of the
instrument can readily be ascertained from what actually happened instead of
merely depending upon expressions which the parties might have under some
mistaken notion loosely used." Likewise. this Court in A.W. Figgies &
Co. And Ors, (supra) at page 177 observed on a construction of two documents of
partnership as follows :- "To all intents and purposes the firm as
reconstituted was not a different unit but it remained the same unit in spite
of the change in its constitutions." We are, therefore, of the view that
the existing firm continued.
contention of the learned counsel for the appellants that the induction of the
new partner will result in dissolution of the firm is not also acceptable.
Reliance placed on the language of Sections 31 and 32 of the Act to support the
said contention will be of no avail if we look into Section 17 of the Act.
Section 17(a) of the Act (extracted above) suggests only reconstitution of the
firm where a change occurs in the constitution of the firm.
the old firm remind the same, Here we can usefully quote the passages from the
judgments of this Court and other High Courts.
(India). Calcutta (Supra) a Division Bench of the Madras High Court observed
thus:- " The dissolution and reconstitution of a partnership are two
different legal concepts. The dissolution puts an end to the partnership. but
reconstitution keeps it subsisting, though in another form . A dissolution
followed by some of the erstwhile partners taking over the assets and
liabilities of the dissolved partnership and forming themselves into a
partnership is not reconstitution of the original partnership. The partnership
formed after the dissolution is a new partnership and not a continuation of a
firm of partnership necessarily implies that the firm never became extinct.,
What it denoted is a structural alteration of the membership of the firm, by
addition or reduction of members, and an incidental redistribution of the
shares of the partners." To the same effect, this Court in Commissioner of
(AIR 1982, SC 1085) observed as follows:- "The principle is well settled
that it is on examination of relevant documents and relevant facts and
circumstances that the Court has to be satisfied in each case as to whether
there has been a succession or a mere change in the constitution of the
partnership. It cannot be disputed that 'dissolution' and 'reconstitution' are
two distinct legal concepts, for, a dissolution brings the partnership to an
end while a reconstitution means the continuation of the partnership under
altered circumstances but in our view in law there would be no difficulty in a
dissolution of a firm being followed by the constitution of a new firm buy some
of the erstwhile partners who may take over the assets and liabilities of the
dissolved firm." The next question is whether the registration given to
the firm under the first Partnership Deed ceases when a new partner was
introduced into the firm. For this, we refer to Sections 58,59 and 63, the
relevant portions have already been extracted. Rules 3, 4,6 and 17 have also
been extracted. The forms prescribed in this connection have also been
extracted. A close perusal of these provisions with Forms "A",
"E", "G" and "H" will show that there is a
definite distinction between the Certificate of Registration given to the firm
and any alterations to be entered in the Register of Firms. This will suggest
in no uncertain terms that the changes in the constitution of the firm will not
affect the registration once made. In other words, it is not required that
every time a new partner is inducted fresh registration has to be applied and
obtained. However, information about changes have to be given. Failure to
comply attracts penalties under Section 69A of the Act. In this contend, the
judgment in Maddi Sudarsanam (supra) can be usefully cited. It was held that:-
"The second condition laid down in Section 69(2) is also satisfied. The
persons now suing i.e. the present partners are shown in the Register of Firms
as partners of the firm. though the same Register shows two other partners.,
own of whom died and the other retired. It may be that the fact of retirement
of one of the partners and the death of another should have been notified to
the Registrar under Section 63(1) as the said events effected a change in the
constitution of the firm.
the default made by the firm in considering the question of the maintainability
of the suit under Section 69(2). There is the essential distinction between the
constitution of a firm and its dissolution. Non-compliance with the provisions
of S. 63(1) may have only other consequences, but under S. 69(2) only two
conditions should be complied with by a firm to enforce a right arising from a
contract and those two conditions are complied with in the present case.
above view is supported by the decisions of this Court and various other High
Courts. In Firm Girdhar Mal kapur Chand (Supra), this court held that once
there was registration under the Indian Partnership Act that registration, in
our opinion, continues to operate as registration under that Act and continues
to be effective- in other words, valid registration in the eye of law as
administered in India so long as the registration is not cancelled in
accordance with law." In Pratapchand Ramchand & Co. (supra), The
Bombay High Court observed as follows:- "Dealing in particular with
S.63(1), that subsection among other things provides that when a registered
firm is dissolved any person who was a partner immediately before the
dissolution, or the agent of any such partner or person specially authorized in
this behalf, may give notice to the Registrar of such change or dissolution,
specifying the date therefore, and the Registrar shall make a record of the
notice in the entry relating to the firm in the Register of Firms, and shall
file the notice a along with the statement relating to the firm filed under
S.59. Pausing there, that Section evidently contemplates in the case of a
dissolution of a firm by death that notwithstanding the death h the firm should
still be treated for the purpose of the Act as still registered., Mr, Davar has
argued that by reason of the death and the dissolution of the firm the firm
ceased to be registered, and in his argument he went so far as to say that the
firm ought to have been g registered again No s doubt it would have been
logical having regard to S.42 if the Act had so provided., But in fact it has
not, The Act does contemplate notwithstanding dissolution by death that o far
as registration is concerned the firm is to be deemed still to be registered,
and it expowers any person who was a partner immediately before the dissolution
to give motive of the change and required the Registrar to record that motive
in the entry relating to the registration of the firm and to file it along with
the original statement which had been filed. The next Section requiring notice
is S.69(2). That is in these terms:
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 person suing are or have been shown in the register of firms
as partners in the firm.
that sub-section to the present case the firm was registered and in my opinion
continued to be registered at the date of the institution of this suit on 26th
October 1939. There is no time limit fixed in any of the S.60 to 63 as to when
notice of alterations or changes should be given, Mr, Davar argued that the
word "when with which each of those Sections begins involves an obligation
upon the person proposing to give notice of the change to give it immediately
upon the change occurring. The Sections do not say so. The position therefore
is this: the firm was registered at the time of the institution of the suit.
The firm then consisted of Chhogamal Dhanaji and Chhunilal Idanji, two of the
original partners whose names were shown on the register at the date of
registration and were shown on the register at the date of the institution of
the suit. The fact that the firm was registered at the date of the institution
of the suit and that the names of the persons suing (The firm being a
compendious name for the persons suing) were shown in the register at The date
of the institution of the suit appears to me to be a compliance with s. 69(2)
of the Act.
would seem that the Legislature introduced the words with which that subsection
concludes., Viz. and the persons suing are or have been shown in the register
of firms as partners in the firm advisedly.
additional partners had come into the firm as partners since the date of
registration and their names had not been entered on the register in accordance
with notice of a change kin the constitution of the firm given to the
Registrar. it may well be that the firm as then constituted could not sue,
because although it was a registered firm some of the persons then suing would
not be shown in the register of firms as partners in the firm at the date of
the suit. That is not this case. The partners who are suing were shown in the
register originally and are still show., and the firm according to may my
construction of the Act remained registered notwithstanding the death of one of
the original partners." The above view of the Bombay High Court was
followed and applied by the Calcutta High Court in Jogendra Chunder Goopta
(supra), Punjab High Court in M/s Durga Das Janak Raj (Supra) and the Rajasthan
High Court in Kesrimal & Anr. (supra).
opinion, the view taken by the Bombay High Court and followed by the other High
Court is the right view.
counsel for the appellants places strong reliance on the objects and reasons
for the amendments introduced in the Maharashtra Act. According to the learned
counsel, if his contention is not accepted, the object with which Section
69(2A) was introduced will be lost. We do not think so. In this context, we
wish top point out that Section 69(3)(a) of the Central Act enables the
partners of both registered and unregistered firms to file a suit for
dissolution and /or accounts. That being the position by introducing
sub-section (2A) in Section 69, the Maharashtra Legislature has placed certain
restrictions to the extent that even the suit for dissolution of a firm or for
accounts, the suit can be filed only if the firm is registered and the 'person'
suing as a partner is shown in the Register of Firms as a partner in the firm.
In other words, a person, who is not shown in the Register of Firms by
induction after registration even though the firms is registered, cannot file a
suit for dissolution or accounts.
does not in any way mean that the registration given to the firm earlier will
cease. In this case, the firm was registered and there was only reconstitution
of the firm and the first respondent, the plaintiff in this case, is a person
whose name is shown in the Register of Firms also with the names of the
appellants and, therefore, there is compliance of Section 69(2A). The
contention to the contrary by the learned counsel for the appellants cannot be
decisions cited by the learned counsel for the appellants are distinguishable.
In Madho Prasad and others vs. Gouri Dutt Ganesh Lal (supra), the principal
question that arose for consideration was whether an incoming partner can be
made liable for debts contracted b y a firm before he joined it. In Gouri Sankar
Sheroff and others vs. Central Hindusthan Bank Ltd and others (supra), again a
creditor's right to proceed against assets of partnership firm and not a suit
by partners for accounts. In Meenakshi Achi and Another vs. P.S.M.Subramanian Chettiar
and Others (Supra), again it was a case concerning the liability of partner for
obligations incurred before his introduction. M/s Nandlal Sohanlal. Jullundur
vs. The Commissioner of Income-Tax.
(AIR 1977 Punjab & Haryana 320) also is not helpful to the appellants.
also not impressed by the arguments of the learned counsel for the appellants
that if the definition of Section 4 is applied to Section 69(2A) then unless
the names of all partners find a place in the Register of Firms , the suit
filed by the Plaintiff cannot be sustained. The fact that the firm was
registered and Plaintiff's name finds a place in the Register of Firms are not
in dispute., The name of the newly introduced partner, or cours, does not find
a place in the Register of Firms. That means the person whose name does not
find a place in the Register of Firms many incur certain disabilities and that
will not disable the plaintiff to press the suit against the firm, which was
registered against the persons whose names find a place in the Register of
Firms. We are not called upon to decide what are the disabilities of the
person, whose name does not find a place in the Register of firms. For the
purpose of Section 69(2A), the partnership firm will mean the firm as found in
the certificate of registration and the partners as found in the register of
firms maintained as per rule in Form 'G'.
present suit being one for dissolution and accounts by one of the partners,
whose name admittedly finds place in the Register of Firms alongwith the names
of all the appellants, the requirements of Section 69(2A) are satisfied.
Section 4 of the is also complied with for this limited purpose.
conclusion is that on the induction of the second respondent, the existing firm
was only reconstituted on the facts of this case and, therefore, there is no
necessity to get a fresh registration. If by virtue of non-compliance of
certain mandatory provisions in not informing the firm, certain penalties
provided in the Act alone are attracted and that will not lead to the
conclusion that the registration of the firm ceased. This conclusion is based
on a conjoint reading of Sections 58_63 and the form prescribed thereunder.
Further, this conclusion does not in any way militate the object of the Maharashtra
Amendment introduced by Act 29 of 84.
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.
the Appeal is dismissed. However, there will be no order as to costs.