2009 (3) TMI 1032

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....ived assent of the President of India) was unconstitutional being violative of Articles 14 and 19 (1)(g) of the Constitution of India. Hence the Bombay City Civil Court by order dated 16.8.1999 made a reference to the High Court under Section 113 of C.P.C. 4. The High Court, however, in the impugned judgment has held that the said sub-section 2A of Section 69 of the Act is not unconstitutional. Hence this appeal before us. 5. Section 69(1) & (2) of the Partnership Act originally read as follows : "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 behalf of any person 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:  (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 as p....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....as made in India in 1932 as it was considered that this step would be too drastic and would introduce several difficulties. Hence registration was made optional at the discretion of the partners, but following the English precedent, any firm which was not registered by virtue of sub-sections (1)& (2) of Section 69 disabled a partner or the firm (as the case may be ) from enforcing certain claims against the firm or third parties (as the case may be) in a Civil Court. 12. An exception to this disability with regard to an unregistered firm was made in sub-section (3)(a) to Section 69, and this clause enabled the partners in an unregistered firm to sue for the dissolution of the firm or for accounts or for realizing the property of the dissolved firm. 13. This exception in clause (a) of Section 69(3) was made on the principle that while registration of a firm is designed primarily to protect third parties, the absence of registration does not mean that the partners of an unregistered firm lose all rights in the said firm or its property and hence cannot sue for accounts or for its dissolution or for realizing their property in the firm. 14. It may be mentioned that a partners....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....1 SC 41 or `confiscation' vide this Court's decision in Ananda Behera vs. State of Orissa AIR 1956 SC 17, or revocation of a proprietary right granted by a `private proprietor' vide this Court's decision in Virendra Singh vs. State of U.P. AIR 1954 SC 447, `seizure of goods' vide this Court's decision in Wazir Chand vs. State of H.P. AIR 1954 SC 415 or `immovable property' vide this Court's decision in Virendra Singh vs. State of U.P. (supra) from the possession of an `individual' vide this Court's decision in Wazir Chand vs. State of H.P. (supra) or `assumption of control of a business' vide this Court's decision in Virendra Singh vs. State of U.P. (supra) in exercise of the `police power' of a State. Thus, there is a `deprivation' where a municipal authority, under statutory power, pulls down `dangerous premises' vide decision in Nathubhai Dhulaji vs. Municipal Corporation AIR 1959 Bom. 332 or an insolvent is divested of his `property' vide decision in Vajrapuri Naidu, N. vs. New Theatres, Carnatic Talkies Ltd. 1959(2) MLJ 469. 22. The appellant challenges the Amendment as violative of Articles 14 and 19(1)(g) of ....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

.... Patanjali Ssastri, C.J. in State of Madras vs. V.G. Row AIR 1952 SC 196 :     "It is important in this context to bear in mind that the test of reasonableness, wherever prescribed, should be applied to each individual statute impugned, and no abstract standard, or general pattern of reasonableness can be laid down as applicable to all cases. The nature of the right alleged to have been infringed, the underlying purpose of the restrictions imposed, the extent and urgency of the evil sought to be remedied thereby the disproportion of the imposition, the prevailing conditions at the time, should all enter into the judicial verdict." 26. The primary object of registration of a firm is protection of third parties who were subjected to hardship and difficulties in the matter of proving as to who were the partners. Under the earlier law, a third party obtaining a decree was often put to expenses and delay in proving that a particular person was a partner of that firm. The registration of a firm provides protection to the third parties against false denials of partnership and the evasion of liability. Once a firm is registered under the Act the statements record....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....ce the restrictions cannot be regarded as reasonable. 28. In the Constitution bench decision of this Court in Maneka Gandhi vs. Union of India and another (supra) it has been held that arbitrariness and unreasonableness violates Articles 14 and 19(1)(g) of the Constitution. The said provision is clearly unreasonable and arbitrary since by prohibiting suits for dissolution of an unregistered firm, for accounts and for realization of the properties of the firm, it creates a situation where businessmen will be very reluctant to enter into an unregistered partnership out of fear that they will not be able to recover the money they have invested in the firm or to get out of the firm if they wish to do so. As already stated above there is no legal requirement, unlike in England, which makes registration of a firm compulsory, rather in India it is voluntary. Both registered and unregistered are legal though of course registration and non registration have different legal consequences as stated above. 29. The High Court was of the view that the object of the Maharashtra Amendment was to induce partners to register and it was intended to protect third party members of the public. We c....