(2015) 407 KLW 861 

IN THE HIGH COURT OF KERALA AT ERNAKULAM

K.T.SANKARAN & P.D.RAJAN, JJ.

A.S.No.690 of 2000

Dated this the 16th day of September, 2014

AGAINST THE JUDGMENT & DECREE IN OS 444/1998 DATED 07-04-2000 OF ADDL.SUB COURT, NORTH PARAVUR 

APPELLANT(S): DEFENDANT

ABDUL RAUF

BY ADV. SRI.K.ANILKUMAR 

RESPONDENT(S): PLAINTIFF

MOHAMMED HASSAN

JUDGMENT 

K.T.Sankaran, J. 

The respondent filed the suit for realisation of a sum of ₹2,73,000/- from the appellant/defendant. According to the plaintiff, he and the defendant were partners in an unregistered firm doing business like real estate, fishing boats, construction of building etc. Difference of opinion arose between them. At the intervention of mediators, the firm was dissolved and accounts were settled. During the course of the settlement talk, the defendant issued a cheque for ₹50,000/- dated 30.8.1998 to the plaintiff. Later, Exhibit X1 agreement dated 15.9.1998 was entered into between the parties by which the defendant agreed to pay a sum of ₹2,73,000/- to the plaintiff. The cheque was subsequently dishonoured. The defendant failed to pay the amount of ₹2,73,000/-. Hence the suit was filed.

2. The defendant contended that there was no partnership business between him and the plaintiff. When the plaintiff was engaged as a Mesthiri for managing the construction activities undertaken by the defendant, the defendant sustained loss due to the acts of the plaintiff. The defendant was constrained to terminate the service of the plaintiff. A sum of ₹23,000/- was due to the plaintiff towards labour charges etc. The plaintiff wanted more money. That dispute was amicably settled for a sum of ₹50,000/-. Since the plaintiff insisted security for that amount, a cheque for ₹50,000/- was issued. The amount of ₹50,000/- was agreed to be paid to the plaintiff after the final settlement of the bills by N.S.S.Paravur Taluk Union for whom a building was constructed by the defendant. The plaintiff is not entitled to get any amount from the defendant. The defendant also contended that the suit is barred by limitation and hit by Section 69 of the Partnership Act.

3. The trial court held that the suit having been filed on 2.12.1998 in respect of the agreement dated 15.9.1998, it is not barred by limitation. The defendant contended that even according to the plaintiff, the partnership business was commenced in August 1995 and therefore, the suit filed after three years from that date is barred by limitation. The court below rightly held that the suit was filed on the basis of the agreement and the cheque executed in 1998 and the suit having been filed in 1998 itself, it is not barred by limitation.

4. On the basis of the evidence on record, the court below held that the cheque was not issued as security as contended by the defendant. It was noticed that the mediators were examined as PWs 2 and 3. On a consideration of the evidence of PWs 1 to 3 and that of the defendant as DW1, the court below held that the cheque was issued under the circumstances as contended by the plaintiff and not as a security as contended by the defendant. On going through the evidence, we concur with this finding of the trial court.

5. As stated earlier, the mediators were examined as PWs 2 and 3. They gave evidence about the circumstances under which the mediation took place and Exhibit X1 agreement was executed for payment of ₹2,73,000/- by the defendant to the plaintiff. The original agreement was with PW2, one of the mediators, who produced the same before court. PWs 1 to 3 stated in evidence that the defendant executed Exhibit X1 agreement. The court below accepted their evidence. The court below also compared the signature in Exhibit X1 agreement with the admitted signature of the defendant and held that the agreement was executed by the defendant. A contention was put forward by the defendant that he did not sign Exhibit X1 agreement. The court below noticed that no such contention was raised by the defendant in the written statement. On going through the pleadings and documentary and oral evidence, we do not find any ground to interfere with the well considered finding of the trial court.

6. The defendant raised a contention that the partnership being not a registered partnership, the suit is not maintainable under 

Section 69 of the Partnership Act

For the sake of convenience, sub-sections (1) to (3) of Section 69 of the Partnership Act are extracted below : 

7. An unregistered firm is not illegal under the Partnership Act. There is no provision in the Act that a partnership firm must be compulsorily registered. However, there are certain disabilities if the partnership firm is not registered. No partner of an unregistered firm would be entitled to enforce his rights as partner against the firm or present or past partner. Sub-section (2) contains a bar against the unregistered partnership firm suing a third party on the basis of a right arising from a contract. A third party is entitled to file a suit against even an unregistered firm. Clauses (a) and (b) of sub-section (3) are exceptions to sub-sections (1) and (2) and the main part of sub-section (3). A partner of an unregistered firm is entitled to sue for the dissolution of a firm or for accounts of a dissolved firm or for enforcement of any right or power to realise the property of a dissolved firm as provided under clause (a) of sub-section (3) of Section 69. The intention of the legislature was to inflict disability for non-registration only during the subsistence of the partnership. Clause (a) of sub-section (3) of Section 69 excludes the embargo put on the filing of the suits by an unregistered firm or by any partner of an unregistered firm. The right of a partner of an unregistered firm to demand dissolution of the firm is saved by the exception contained in clause (a) of sub-section (3) of Section 69. In the case of a dissolved firm, the disability under sub-sections (1), (2) and (3) by the non-registration of a firm would not apply. So also the right to file a suit for dissolution of partnership is available even though the partnership is an unregistered one.

8. In 

Bhartesh Chandra Jain v. Shoiab Ullah and others : (2004) 13 SCC 358

the Supreme Court held thus : 

9. In the present case, the suit is filed for realisation of the amount due to the plaintiff under Exhibit X1 agreement signed by the plaintiff and the defendant as partners of an unregistered firm. Exhibit X1 specifically refers to the partnership between the plaintiff and the defendant. It shows about the settlement talks made by the parties to the suit in the presence of PWs 2 and 3. Exhibit X1 contains a stipulation that on settlement of accounts, the defendant was liable to pay ₹2,73,000/- to the plaintiff. The partnership between the plaintiff and the defendant was dissolved and the accounts were settled. The suit is not hit by sub-section (1) of Section 69 of the Partnership Act, but it is saved by the exception contained in clause (a) of sub-section (3) of Section 69. The finding of the court below in this regard is correct. 

For the aforesaid reasons, we do not find any ground to interfere with the judgment and decree of the court below. The appeal fails and it is accordingly dismissed, however, without costs. 

K.T.SANKARAN JUDGE 

P.D.RAJAN JUDGE 

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