Unregistered firm can sue for statutory rights infringement; Section 69(2) Partnership Act clarified. Passing-off action allowed.

The court held that Section 69(2) of the Partnership Act does not bar an unregistered firm from filing a suit to enforce statutory or common law rights, such as in a passing-off action. The court clarified that the section applies only to contracts entered into by the firm with the defendant during business transactions. As the suit in question was based on infringement of statutory rights under the Trade Marks Act and common law principles, it was not barred by Section 69(2). The appeal was dismissed without costs.

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Issues Involved:
1. Whether Section 69(2) of the Partnership Act, 1932 bars a suit by an unregistered firm where permanent injunction and damages are claimed in respect of a trade mark as a statutory right or by invoking Common Law principles applicable to a passing-off action.
2. Whether the words 'arising from a contract' in Section 69(2) refer only to a situation where an unregistered firm is enforcing a right arising from a contract entered into by the firm with the defendant during the course of its business or whether the bar under Section 69(2) can be extended to any contract referred to in the plaint unconnected with the defendant, as the source of title to the suit property.

Issue-wise Detailed Analysis:

Point 1:
The primary question was whether Section 69(2) of the Partnership Act, 1932 bars a suit filed by an unregistered firm if a statutory right or a common law right is being enforced. The court referred to the case of *M/s. Raptokas Brett Co. Ltd. v. Ganesh Property AIR 1998 SC 3085*, where it was held that Section 69(2) does not bar the enforcement of statutory or common law rights by an unregistered firm. The court reiterated that a passing off action is a common law action based on tort, as established in *Bengal Waterproof Ltd. v. Bombay Waterproof Manufacturing Company AIR 1997 SC 1398*. Therefore, a suit for perpetual injunction to restrain the defendant from passing off the defendant's goods as those of the plaintiffs by using the plaintiffs' trade mark and for damages is an action at common law and is not barred by Section 69(2). Additionally, if the reliefs of permanent injunction or damages are claimed on the basis of a registered trade mark and its infringement, the suit is treated as one based on a statutory right under the Trade Marks Act and is not barred by Section 69(2). Thus, the court decided Point 1 in favor of the plaintiffs-respondents.

Point 2:
The second issue was the scope of the words 'enforcing a right arising under the contract' used in Section 69(2). The appellants argued that the 1st plaintiff firm was seeking to enforce a right arising from the dissolution deed dated 16-11-1974, which was a contract, and thus the suit was barred by Section 69(2). The court examined the legislative intent behind Section 69(2) by referring to the Report of the Special Committee (1930-31) and the English precedent, specifically the Registration of Business Names Act, 1916. The court found that Section 69(2) was intended to impose a disability on the unregistered firm or its partners to enforce rights arising out of contracts entered into by the plaintiff firm with third party-defendant in the course of the firm's business transactions. The court clarified that the contract referred to in Section 69(2) must be one entered into by the plaintiff firm with the third party-defendant during the course of business dealings. The court further stated that the present defendants were third parties to the 1st plaintiff firm and the contract of dissolution dated 16-11-74. The court concluded that Section 69(2) is not attracted to any and every contract referred to in the plaint as the source of title to an asset owned by the firm. Therefore, the suit in question was not barred by Section 69(2) as it was based on infringement of statutory rights under the Trade Marks Act and common law principles of tort applicable to passing-off actions.

Conclusion:
The appeal was dismissed without costs, and the court confined its judgment to the allegations in the plaint, dealing only with the application filed by the appellants under Order 7, Rule 11, C.P.C.

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