Unregistered association formed for acquisition of gain is illegal; remedy lies by winding up rather than by ordinary suit.
An unregistered association of more than twenty persons conducting recurring contributions, distributions and business transactions qualifies as an unregistered company formed for acquisition of gain and is illegal under the Companies Act prohibition; where pleaded particulars put plaintiffs on notice, civil courts are not competent to entertain suits concerning rights arising from such an association. The correct remedy is procedural relief under company law (winding up) rather than an ordinary civil suit, and therefore a lower-court finding permitting the suit is set aside and revision is allowed in favour of the petitioner.
Issues: Whether the matters in issue in the suit could be agitated by way of a civil suit in the Munsiff's court (i.e., whether the suit was maintainable) or only by way of an application for winding up under the Indian Companies Act.
Analysis: The defendant pleaded that the association of parties constituted an unregistered company within the meaning of the Indian Companies Act and that the relevant remedy was winding up; the court examined the statutory provisions on unregistered companies and the bar in section 4(2) concerning associations of more than twenty persons formed for the purpose of carrying on business for acquisition of gain. The facts showed an association of 73 members operating multiple funds with recurring transactions, contributions and distributions, which satisfy the elements of an association carrying on business for acquisition of gain. The pleaded averments and memorandum of particulars put the plaintiffs on notice of this defence, so they were not taken by surprise. Precedent and principle establish that an association formed in contravention of section 4(2) is illegal and that courts should not entertain suits brought in relation to such an association; thus the civil forum is not competent to adjudicate the claimed reliefs where the association is an unregistered company within the statutory prohibition.
Conclusion: The suit was not maintainable in the civil court because the association falls within section 4(2) as an unregistered association formed for acquisition of gain; the Munsiff's finding to the contrary is set aside and the revision petition is allowed in favour of the petitioner.
Ratio Decidendi: An association of more than twenty persons which carries on a business for the acquisition of gain and is unregistered within the meaning of the Indian Companies Act is illegal under section 4(2), and civil courts will not entertain suits in respect of rights arising from such an unregistered association; the appropriate remedy lies in proceedings under the Companies Act (winding up) rather than by ordinary suit.
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