P L D 1960 (W (PLP)

Dates of hearing : 9th, 16th, and 18th May 1960. SAJJAD AHMED, JAN, J.‑

This is an appeal under section 39 \(1) sub‑clause (iv) of the Arbitration Act against the order of Mr. Abdul Qadir I. Qazi, Sub‑Judge 1st Class, Hyderabad, dated the 27th of January 1958, rejecting the appellants' application under section 20 of the Arbitration Act for filing certain arbitration agreements in Court, which were executed by the respondent, Ahmad Khan, in favour of the appellants containing an arbitra tion clause to the effect that all disputes arising between the parties pertaining to these agreements shall be referred to arbitration.

2. The appellants, Messrs United Cotton Factory, Hyderabad Sindh, were registered as a firm under section 59 of the Partnership Act, vide certificate of registration (Exh. 34) dated the 1st of May 1950. The application for registration of the firm under section 58, while giving various particulars of the firm, stated in requirement of clause (f) of section 58 about the duration of the firm that it was for three years. This means that the firm was to stand dissolved after three' years of its creation, The expiry date with reference to the date of the registration was, therefore the 1st of May 1953, unless the dissolution could be avoided by the proof of any contract to the contrary as contemplated by section 42 of the Partnership Act, which reads as follows : "Subject to contract between the parties, a firm is dissolved if constituted for a fixed term by the expiry of that term."

3. The agreements, which were desired to be filed in Court by the appellants for reference to arbitration, were six in number executed on different dates between the 5th of June 1953 and the 3rd of July 1953, whereby the respondent, Ahmad Khan, agreed to sell cotton pods to the appellants. According to the appellants' case, the respondent had secured a sum of Rs. 12,225 by way of advances, but had supplied only 122 maunds 24 seers 4 Chatanks of cotton pods worth Rs. 2,854‑8‑

9. The appellant claimed the refund of the excess amount paid to the respondent and also claimed damages for breach of contract, which the respondent was refusing to pay, leading to a dispute between the parties which had to be referred to arbitration under the agreements.

4. Several objections were taken by the respondent to the maintainability of the appellants' application. The learned Court below has rejected it on the legal ground that the application could not proceed in view of section 69 of the Partnership Act, which bars ‑proceedings for enforcing rights under a contract on the part of a firm which is not registered. The ratio of the learned lower Court's judgment is that the duration of the appellants' firm was for three years as specifically mentioned in the registration documents and that with the termination of that period‑ the partnership stood dissolved, entailing the lapse of registration of the firm asp originally made. If the partners choose to continue their business by reviving the old partnership after its termination, they have to obtain a fresh registration under the Partnership Act, in the absence of which prosecution of any suit or proceedings in Court is barred under section 69 of the Partnership Act.

5. The learned counsel for the appellants, Mr. Noorul Arfin, has addressed a twofold argument before me, firstly that although the registration certificate in this case mentions the durations of the partnership to be for three years, there was an implied contract between the partners for its continuous existence even after the stipulated duration and this is clearly proved from the fact that without any change in the personnel, the firm continued its business as before. Therefore, according to the learned counsel, the initial registration of the firm holds good. No new partnership having been created no fresh registra tion is necessary. The second argument relates to the interpretation of the words "other proceeding" in the context of section 69 of subsection (3) of the Partnership Act. Briefly, the argument is that the words "other proceeding" will have to be read ejusdem generis to the particular words "Claim of set off", which immediately precede these words in subsection (3) of section

69. On this interpretation, "other proceeding" cannot be extended to the "filing of arbitration agreements which are not the same thing as a suit contemplated by section 69 of the Partnership Act, nor a claim to a set‑off or other proceeding to enforce a right arising out of a contract in the course of the same suit.

6. Before deciding these questions, let me dispose of another small point arising in the case, which incidentally emphasizes the importance and the imperative nature of the provisions in the Partnership Act relating to the registration of firms. It has been brought to my notice that the appellant firm did obtain a fresh registration on the 14th of June 1957, vide letter of Registrar of Firm, Khairpur Division (Exh. 35). This was obviously long after the appellant filed their present appli cation under section 20 of the Arbitration Act and when proceedings therein had reached an advanced stage. This is of no use whatsoever to the appellants for purposes of their application under dispute in this appeal. The provisions of section 69 of the Partnership Act are mandatory and there is. no power of condonation vested in the Courts to grant to the defaulting firm in this respect any relief against the disability imposed by this section. The prohibition contained in the, on is against the institution of the suit or the proceed ings of the nature mentioned therein and its effect, there fore, has to be determined at the time of the institution of the suit or the proceedings. The section entails a disability on the part of a Court to take cognizance of the suit or proceedings from their very inception in the same way as it would not take the cognizance of a suit barred by limitation or of a suit suffering from a defect of jurisdiction in the form in which it is instituted. The view, which now firmly holds the field, is that the regis tration of a firm is a condition precedent to its right to institute a suit of the nature mentioned in section 69 (2) of the Partnership Act and that a registration after the institution of the suit cannot cure the defect of non‑registration existing at the date of the institution of the suit.

7. To revert now to the arguments advanced by Mr. Noorul Arfin. He has taken his stand mainly on section 42 already reproduced above in its relevant portion, and section 17 (b) of the Partnership Act, which may also be quoted :‑

17. Subject to contract between the partners‑ (b) where a firm constituted for a fixed term continues to carry an business after the expiry of that term, the mutual rights and duties of the partners remain the same as they were before the expiry so far as they may be consistent with the incidents of partnership at will." To my mind, this latter provision has no bearing on the question of registration of the firm and the consequences of non‑registration as contained in section

69. The disability created by section 691 against an unregistered firm is with regard to its right to institute a suit or to enforce a right by a set off or other proceeding and not with regard to its right to enter into a contract, nor does it affect the mutual rights and duties of the partners inter se, which under section 17 (b) would remain the same as before if they continue to carry on the business notwith standing the dissolution. Subsection (2) of section 69 in particular seems to have been enacted in the interest of strangers dealing with the partners representing a firm to ensure the responsibility of the firm as a legal entity and for that purpose not only the registration of the firm is made compulsory but it is further required that the persons suing on behalf of the firm should be shown in the "Register of the Firm" as partners in the firm. I am unable to agree with Mr. Noor‑ul‑Arfin that section 17 (b), while providing a statutory protection for the mutual rights and duties of the partners inter se when they decide to continue their business after the expiry of the stipulated term, also keeps alive the initial registration of the firm after its' death as a legal entity. &. Under section 42 of the Partnership Act, a firm con stituted for a fixed term stands automatically dissolved by the efflux of time subject to a contract between the partners. The Courts will not readily infer a contrary agreement within the meaning of this section unless there is satisfactory evidence to r prove the intention of the parties. It would not be enough if ‑in a particular case the partners after the dissolution, adventitiously choose to continue in their business in-spite of their original intention to the contrary. The importance of the provisions relating to the registration of the firms lies in the relationship of the firm to the strangers dealing with them and it is necessary for that purpose that the names of the partners and the particulars of a firm should be recorded in the register of, the Registrar of the area maintained for this purpose. When the firm has been constituted for a particular period and that particular period is noted in the register, to all intents and purposes, partnership and the registration covering it will lapse at the end of that period. Sections 60 to 63 of the Partnership Act relate to the recording of alterations that may take place in the firm's name, structure and other incidental matters during the subsistence of the partnership, but it is significant to note that none of them deals with the question of the extension of the duration of the partnership leading to the conclusion, in my humble judgment, that change in the duration of a partnership and its extension were not contemplated as a mere matters of amendment of alteration in the registration records. The validity of the registration of a firm is co‑extensive with the period of its duration as noted in the registration records. If by their subsequent conduct the partners continue to do their business and keep alive their mutual rights and obligations, it does not in my view keep alive the original registration which ended with the dissolution of the original firm. In such circumstances, the old firm technically meets its death and if it is intended to give it a fresh life the partners must in order to avoid legal disabilities under section 69 seek the cover of afresh registration as provided by law. The position may be different if the partnership agreement itself provides for the continuance of the firm on the lapse of the stipulated period at the choice of the partners, and the latter exercise that choice before the dissolution takes place, thus preserving the continuity of the firm and also saving the registration that covers it. In such a case, a simple intimation to the Registrar of the decision of the partners in terms of the original agreement should put every body concerned in the picture about the continuing partnership and no question of any fresh registration would arise. In the present case, no proof is available either of the initial agreement between the partners in this behalf to continue the partnership even after the lapse of the stipulated duration nor of its actual continuity at the end of that period. The appellants did not produce the account books, income‑tax returns or the minute book, which could have effectively proved their contention. It is difficult to build their case on a bare verbal allegation that inspite of the limited duration of the firm as expressly provided in the original contract their firm did not break up after that period. Unless) the contrary is proved, a firm set up for a limited period must be presumed to dissolve itself at the end of that period.

9. Mr. Noor‑ul‑Arfin has relied on certain authorities in support of his contentions, which may be considered. The first is a Bombay case reported as Partapchand‑Ramchand & Company v. Jehangirji Bomanji Chinoy (A I R 1940 Bom. 257). This was a case of a firm which was registered on the 13th of November 1933, under the name of Pratapchand‑Ramchand & Company. The registration documents gave all the particulars required by section 58 (1) of the Partnership Act including the names of the three partners. One of the partners, Pratapchand‑Ramchand died before the institution of the suit, but the fact was‑‑not communicated to the Registrar for noting the change in the constitution of the partner ship. In defence against the suit, it was alleged by the defendants that the death of a partner has resulted in the dissolution of the firm resulting further in the termination of its registration and, therefore, the suit was bad by reason of section 69 (2) of the Partnership Act. Dealing with the point, Blackwell, J. laid down as follows :‑ "By sections 60 to 63 the Act contemplates notwithstanding a change in respect of the matters which have to be set out in the original statement accompanying registration that the firm should be deemed to be continued to be registered although by reason of the alteration the original statement as filed had become inaccurate. Section 63 evidently contemplates in the case of a dissolution of a firm by death that notwithstanding the death the firm should still be treated for the purpose of the Act as registered." A reference to section 63 of the Partnership Act would show that when a change occurs in the constitution of a registered firm or when a registered firm is dissolved, a notice may be given to the Registrar by the persons mentioned in the section of such change or dissolution. Now a notice of changes in the constitution of a firm or dissolution of the firm may be given under this section when a change or dissolution takes place by some event not already brought to the notice of the Registrar and the Registrar has then, on receiving the notice, to make a record of it in the entry relating to the Register of firms. This is necessary in a case where dissolution takes place on account of the death or retirement of a partner or on account of some event not already known to the registering authorities. But where a firm dies its own death by the expiration of the period of its duration, I do not see any necessity for any further notice to the Registrar of a dissolution taking place under such) circumstance, or for the Registrar to make any further note about it in his register. The fact that the partnership is to last for the period of its stipulated duration, which is the essence of the matter, is already borne on the registration record.

10. The second case relied on by Mr. Noor‑ul‑Arfin is reported as Tapendra Chunder Goopta v. Jogendra Chunder Goopta and others (A I R 1942 Cal. 76) wherein Mr. Justice Panckridge dealing with the matter made the following observations :‑ The retirement of a partner occasions the dissolution of the firm but so far as registration is concerned the firm must be deemed to be still registered and so long as the partners suing are shown in the register as partners, the firm, notwithstanding the retirement of one of the original partners, remains a registered firm and can sue." This judgment followed the principle laid down in the previous noted case Partapchand and Ramchand & Company v. Jehangirji Bomanji Chinoy, to which a particular reference was made in the body of the Judgment. The retirement of the partner in this case did not affect the question of registration of the firm, which continued to exist despite the death of one of the partners and the partners suing were shown in the relevant register of the firm as partners of the registered firm. In both these cases, there were clear indications of the continuity of the firm and thus of the "contract to the contrary" in spite of the dissolution of partnership by the death of the partner in the first case and the retirement of a partner in the other, which kept alive the registrations as well. But where on the contrary, as in this case, a relevant entry in the register shows the extinction of the partnership as a result of the lapse of the duration for which it was created, none of the partners, whose names were registered originally, can be deemed to remain on the rolls of the partner ship. The registration ends in such case with the extinction of the partnership itself. My reading of the relevant provisions and the basic requirements of registration under the Partnership Act leads me to the conclusion that a partnership created for a specific period ceases to exist on the expiry of that period and its subsequent revival or resuscitation by the partners by choosing to continue the business does not revive its original registration made under sections 58 and 59 of the Partnership Act, which must needs be effected once again to' save the firm from the disabilities of section 69 of the Partnership Act. I have not been shown any provision of law nor am I aware of any legal fiction by which the revival of a dissolved firm in consequence of a subsequent agreement between the partners after the dissolution, will automatically bring back to life its dead and spent up registration. Registration of firms intended by the Partnership Act is a matter of substance and not of a mere form as a ceremonial trapping.

11. I would now advert to Mr. Noor‑ul‑Arfin's argument on the second aspect of the case, on which he appears to on a sound footing. Section 69 of the Partnership Act is a technical and a penal provision interfering with the ordinary rights of the individuals to form a business association as a legal entity to sue or be sued without any further legal formalities. It should, therefore, be construed strictly in the sense that the words employed in it must be given their true literal import in the context in which they are used, all doubts being resolved in favour of the persons affected thereby. It may be convenient here to reproduce this section, which is as follows :‑ "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. (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 partners in the firm. (3) The provisions of subsections (1) and (2) shall apply also to a claim of set‑off or other proceeding to enforce a right arising from a contract but shall not affect‑ (a) 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, or (b) the powers of an official assignee, Receiver or Court under the Presidency Towns Insolvency Act, 1909, or the Provincial Insolvency Act, 1920, to realise the property of In insolvent partner. (4) This section shall not apply‑ (a) to firms or to partners in firm 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, or (b) to any suit or claim of set‑off not exceeding one hundred rupees in value which in the Presidency Towns, is not of a kind specified in section 19 of the Presidency. Small Cause Courts Act, 1882, or outside the Presidency Towns is not of a kind specified in the Second Schedule to the Provincial Small Cause Courts Act, 1887, or to any proceedings in execution or other proceeding incidental to or arising from any such suit or claim." Both subsections (1) and (2) mention the word "suit" which although not defined in any statute has got a well understood forensic connotation including its main indicia of the presentation of a plaint. Subsection (3) of section 69 contains the words "set‑off or other proceeding" and it is contended by Mr. Noor ul‑Arfin that their meaning has to be limited in the context in which they are used in relation to suits mentioned in sub sections (1) and (2) of the same section. "Other proceeding", according to his contention, means any other proceeding in the nature of a claim of set‑off which may have the effect of defeating a suit or destroying it by a counter claim against the plaintiff. According to this interpretation, "other proceeding" used in this subsection means other proceedings in the suit itself taken by the defendants to off‑set the claim of the plaintiff, J There is a great force in this contention. I am of the opinion that if the legislature had by this provision intended to cover all sorts of proceedings to be hit by section 69, the proper place for the words "other proceedings" should have been in juxta position to the word "suit" in subsections (1) and (2) of section 69 and not as they appear in subsection (3) closely allied to the words "claim of set‑off". It is a well known principle of the construction of statutes that where general words follows parti cular words, the latter, i.e. the particular words, shall govern the general ones, defining and restricting their meaning to the same context in which the particular words are used. In other words, general words, in such a situation, are to be read in suf generis with the particular words. I am supported in this view by a judgment of Bishan Narain, J. of the East Punjab High Court reported as Ram Lai Harnam Dass v. Bal Krishen and others (A I R 1957 Pb 159). This was a case of an application under the Displaced Persons (Debts Adjustment) Act, for recovery of certain amount due to the plaintiffs and not by way of a suit. Dealing with the point, his Lordship observed as follows :‑ "The words "or other proceeding" in section 69 (3) relate to the proceedings of the nature of set‑off and nothing else. And as section 69 (3) does not relate to other proceedings as distinct from a suit, the proceedings taken under the Displaced Persons (Debts Adjustment) Act are not barred." The learned Sub‑Judge has referred to an authority to cited as Babulal Dhandhania v. Messrs Gauttam & Company (A I R 1950 Cal. 391) seeking support from it for the proposition that "a reference to arbitrators constitutes a proceeding to enforce a right arising from a contract under section 69 (3) of the Partnership Act." According to this ruling, as understood by the learned Sub‑Judge, "the effect of subsections (1), (2) and (3) of section 69 properly read is that no suit or proceeding to enforce a right arising from a contract shall be instituted in any Court or before any arbitrator by a firm unless that firm is registered under the Partnership Act." I regret to say that the learned Sub‑Judge has misconstrued and misunderstood this ruling. In fact, it lays down exactly the opposite of what the learned trial Judge has thought about it. The decision in A I R 1950 Cal. 391 states very clearly that the "proceeding" in section 69 (3) means a thing in the nature of a suit not covering a reference to arbitration allunde to the Court. Explaining the point, his Lordship Mr. Justice Chatterjee in this judgment observed as follows :‑ "A word like "proceeding" may have several or different meanings and its exact meaning can be determined by its association with other words. The language used is not very clearly and in case of any doubt or obscurity the right of a person under a valid and binding contract to resort to a private forum for the determination of his disputes should not be taken away and a new obligation or penalty ought not to be imposed on him so as to bar the exercise of his right in the absence of explicit language in the statute compelling the Court to decide against such, reference to arbitration." The learned counsel for the respondent, Mr. Zaffar Mirza, who has very strenuously argued his case, contended that the very fact that the terms "proceeding and suit" are mentioned separately and independently of each other in separate sub sections of section 69 would show that the legislature intended the proceedings of subsection (3) to be independent of a suit. This argument can be reversed against Mr. Zaffar Mirza. As already stated above if the legislature had intended to ban all types of proceedings in Courts by unregistered firms under section 69, the proper place for the words "other proceeding" was along side "suit" in subsections (1) and (2) and not as we find them appearing in juxta position to "a claim of set‑off" in subsection (3) of section

69. A further argument addressed by Mr. Zaffar on the point is that an application for filing an agreement for arbitration has to be registered as a suit and must, therefore, be deemed as a suit and would for that reason be included in the word "suit" as used in subsections (1) and (2) of section 69. . I must repel this argument for clearly "a proceeding to be deemed as a suit" is entirely different from being a "suit" itself. A thing; which is deemed to be other than what it is, cannot be any logic be considered to be identically the same as the other.

12. In this view of the matter, which I have adopted, I consider that as the appellant's application under section 20 of the Arbitration Act for filing the agreements in Court does not fall within the ambit of section 69 of the Partnership Act and it T does not suffer from incompetency because it is filed by a firm which was not registered under the Partnership Act at the time of the institution of the application. I, would, therefore, accept this appeal and remand the case to the learned Sub‑Judge to proceed with it according to law. K. M. A. Appeal accepted.