Lecture-45

Law of Contracts-II
(Law of Partnership)
Effect of Non-Registration (S. 69)
• (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.
• P Ananda Rao v G Raja Rao AIR 1976 AP 256. [In a case before the Andhra
Pradesh High Court, on the death of a partner, his interest devolved upon his
sons who became partners. But this change was not registered with the
Registrar and therefore for purposes of suits the firm became an unregistered
firm. The sons found that the other partner sold his interest to an outsider.
This was a breach of the partnership agreement, which provided for sale only
to the other partners. The sons attempted to enforce the partnership
agreement but the suit was not allowed. This contention that they should be
permitted to sue as the co-owners of the property was also not accepted.
Thus, the only chance was dissolution and then to realise the assets of a
dissolved firm.]
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• (2) No suit to enforce a right a rising 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 partners in
the firm.
 Raptakos Brett Co Ltd v Ganesh Property AIR 1988 SC 3085.
 Haldiram Bhujiawala v Anand Kumar Deepak Kumar AIR 2000 SC
1287. [In this case, the emphasis was on the words “right arising from
a contract” in section 69(2) of the Partnership Act, 1932. After looking
into the report of the Special Committee which preceded the
Partnership Act, 1932, the Apex Court rules that the contract by the
unregistered firm referred to in section 69(2) must only be one
entered into by the plaintiff firm in the course of business dealings of
the plaintiff firm with such third party defendant. Thus, the Legislature
when it used the words arising out of contract in section 69(2).]

Date: 04/07/2012 Slide-1

 Lecture-45
Law of Contracts-II
(Law of Partnership)
• (3) The provisions of sub-sections (1) and (2) shall apply
also to a claim of set-off or other proceeding to enforce
a right arising from a contract.
Jagdish Chandra Gupta v Kajaria Traders (India) Ltd
AIR 1964 1882. [The Supreme Court ended this controversy and held
that the words “other proceedings to enforce a right arising from a
contract” include arbitration proceedings because the right to refer to
arbitration depends on the contract between parties. Where a dispute
between an unregistered firm and the other party was referred to arbitration
at the instance of the other party and the arbitrator having submitted his
award which went in favour of the firm, the question arose whether the
firm had the right to get the award converted into a court decree and then
enforce it.]

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• Mandatory character of S. 69.
• Court can return suit suo motu
• Defect is not curable by consent
• Non-registration can be raised at any stage
• Effect of subsequent registration
CIT v Jayalakshmi Rice and Oil Mills AIR 1971 SC
1015.

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 Lecture-45
Law of Contracts-II
(Law of Partnership)
Exceptions
1. Action for dissolution and accounts: The enforcement of any
right to sue 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. S. 69 (3) (a).
 S Ahmed Khan v Turup Mohd Hayat AIR 1953 Mys 4. “ [A and
B purchased a taxi to ply it in partnership. They had done business for
about a year when A, without the consent of B, disposed of the taxi. B
brought an action to recover his share in the sale proceeds. A’s only
defense was that the firm was not registered. The court held that the
business having being closed on the sale of the taxi, the action was for
the realisation of the assets of a dissolved firm and, therefore
maintainable.]

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2. Recovery of insolvent’s share: Official assignee, receiver or
court acting for an insolvent partner may bring an action for
the realisation of insolvent's share. S. 69 (3) (b).
3. To firms or to partners in firms which have no place of
business in the territories to which this Act extends, or
whose places of business in the said territories, are situated
in areas to which, by notification under section 56, this
Chapter does not apply. S. 69 (4) (a).

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 Lecture-45
Law of Contracts-II
(Law of Partnership)

4. To any suit or claim of set-off not exceeding one

hundred rupees in value. S. 69 (4) (b).
5. Statutory and non-contractual rights.
6. Criminal Proceedings.
7. Suits by third parties.
8. Non-partnership matters.

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 Lecture-45
Law of Contracts-II
(Law of Partnership)

Case-Study
Haldiram Bhujiawala v Anand Kumar Deepak
Kumar AIR 2000 SC 1287.

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 Lecture-45
Law of Contracts-II
(Law of Partnership)
Issues Raised
 Whether Section 69 (2) bars a suit by a firm not registered on
the date of suit 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?
 Whether the words ‘arising from a contract’, as used 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?
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 Lecture-45
Law of Contracts-II
(Law of Partnership)

Conclusions drawn from Haldiram Case

 A suit by unregistered firm is not barred by S. 69(2) if a statutory
right or a common law rights is being enforced. A suit for
perpetual injunction to restrain the defendant not to pass-off the
defendant's goods as those of plaintiffs by using the plaintiffs'
trade mark and for damages is an action at common law and is
not barred by S. 69(2). Likewise, if the reliefs of permanent
injunction or damages are being claimed on the basis of a
registered trade mark and its infringement, the suit is to be
treated as one based on a statutory right under the Trade Marks
Act and is not barred by S. 69 (2).

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 Lecture-45
Law of Contracts-II
(Law of Partnership)

Conclusions drawn from Haldiram Case

• The contract by the unregistered firm referred to in S. 69(2) must
not only be one entered into by the firm with the third party-
defendant but must also be one entered into by the plaintiff firm
in the course of the business dealings of the plaintiff's firm with
such third party-defendant. Thus, the legislature when it used
the words "arising out of a contract" in S. 69 (2), it is referring to
a contract entered into in course of business transactions by the
unregistered plaintiff firm with its customers-defendants and the
idea is to protect those in commerce who deal with such a
partnership firm in business. Such third parties who deal with the
partners ought to be enabled to know what the names of the
partners of the firm are before they deal with them in business.
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 Lecture-45
Law of Contracts-II
(Law of Partnership)
Conclusions drawn from Haldiram Case
• Further, S. 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. If the
plaint referred to such a contract it could only be as a historical fact. In
fact, the Act has not prescribed that the transactions or contracts
entered into by a firm with a third party are bad in law if the firm is an
unregistered firm. On the other hand, if the firm is not registered on
date of suit and the suit is to enforce a right arising out of a contract with
the third party-defendant in the course of its business, then it will be
open to the plaintiff to seek withdrawal of the plaint with leave and file a
fresh suit after registration of the firm subject of course to the law of
limitation and subject to the provisions of the Limitation Act. This is so
even if the suit is dismissed for a formal defect. S. 14 of the Limitation
Act will be available inasmuch as the suit has failed because the defect
of non-registration falls within the words ‘other cause of like nature’ in
S. 14 of the Limitation Act, 1963.
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