P L D 1973 Karachi 468 (PLP)

(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) ........... (4) "

3. Section 69 is a penal provision and must be construed strictly, but this is subject to the rule that the Courts must give effect to the intention of the Legislature when it is plain. The intention of the Legislature in enacting this section is very clear. Subsection (1) deals with claims by a partner against his firm or against any person who is alleged to be or has been its partner and it bars the plaintiff front filing a suit unless the firm is registered. Subsection (2) imposes a similar prohibition with regard to claims by an unregistered firm. However, clause (a) of subsection (3) prescribes the exceptions to the rule laid down in the earlier subsections, and removes the disability attached to non‑registration once the firm has ceased to exist. The intention of the Legislature is very clear. A firm which is in existence is not allowed to sue unless it is registered. This is for the obvious reason that such a firm can register itself and enforce its rights, but once a firm has come to an end it cannot be registered after its dissolution, therefore the Legislature in its wisdom has given relief from the penal provisions contained in the first two subsections, and the plain duty of the Court is not to narrow the exceptions permitted by the Legislature. Therefore, although the trial Court could have passes a more considered order, I acre no reason to disagree with its view and I am fortified in my opinion by the judgment of Beaumount, C. J. (as he then was) in Appaya fjilgappa Hattargi and another v. Subrao Babaji Tell and another (A I R 1938 Bom. 108).

4. I would have thought that the matter was plain beyond any doubt, and that the applicant's objection was frivolous. However, Mr. Bashir Ahmed thought that section 69 totally barred a suit by a firm that had not been registered, and in support of this submission he referred me to a judgment reported in A. T. Ponnappa Chettiar and others v. Bodappa Chettiar and others (A I R 1945 Mad. 146). I have examined the judgment and I find that it supports the contention of Mr. Bashir Ahmed. However, in my humble opinion, the learned Single Judge of the Madras High Court appears to have misread section 69, and in so doing he relied on an earlier Division Bench judgment of his Court in K. K. A. Ponnounchami Goundar v. Muthuyami Goundar and another (A I R 1942 Mad. 252), I have examined that Division Bench Judgment and as it related to a suit by a firm which had not been dissolved with great respect, it seems to me that the learned Single Judge erred in thinking that he was following the view of the Division Bench. I do not, however, need to discuss this Madras case further, because, as submitted by Mr. Ghani, a later Division Bench of that High Court overruled it in Shanmugha Mudaliar v. P. V. Rathina Mudaliar and another (A I R 1948 Mad. 187). The view of the learned Judges of this Division Bench was that the bar of section 69 was not applicable to a dissolved firm, and that has been the consis tent view of the Courts. Thus, this view was taken by the Lahore High Court in Jhandu Mal and others v. Rulia Ram (A I R 1937 Lah. 633) and try, the Allahabad High Court in Lala Ram Kumar v. Kishori Lal and others (A I R 1946 All. 259). I have not been able to find a case of the Calcutta High Court before Partition, but I find that the Calcutta High Court has taken the view in Sohanlal Pachisia & Co. v. Bilasray Khemani and others (A I R 1954 Cal. 179), and in my humble opinion no other view is possible.

5. Mr. Bashir Ahmed then submitted that even if a dissolv ed firm was not hit by the bar of section 69, it could only sue for the recovery of an ascertained amount and not for accounts. Perhaps this distinction was drawn because the judgment of Beaumont, C. J. to which I have referred earlier related to a suit for the recovery of a specified amount. But a suit for accounts only means that the plaintiff's claim will be ascertained after accounts have been taken, therefore the distinction thus sought to be drawn by the learned counsel is both anomalous and arbit rary. Not only can such an intention not be attributed to the Legislature, but such an intention is, in my humble opinion, contrary to the plain language of clause (a) of subsection (3) of section

69. I have explained earlier that the object of this clause is to remove with regard to dissolved firms the disabilities imposed by subsections (1) and (2). And I cannot do better than quote a passage from the judgment of Beaumont. C. J. on this point in Appaya Nijlingappa Hartargi v. Subrao Babaji Teli (39 Bom. L R 1214): "Subsection (3), however in terms Introduces exceptions both to subsection (1) and subsection (2) and in my view the two parts of sub‑clause (a) of subsection (3) must be read as referring respectively to the first two subsections. As I have pointed out, the first subsection deals with the right to enforce a con tract by one partner against the others, and the second sub section deals with the right to enforce a contract by the firm against third parties. I think 1 must read the, first sentence of sub‑clause (a) as creating exceptions from subsection (1), the exceptions being enforcement of a right to sue for dissolution or accounts of a dissolved firm; and the last sentence of that sub‑clause is directed to subsection (2) and creates an exception in respect of a suit to enforce any right to realise property of a dissolved firm." I respectfully agree with these observations, and as the object of the second part of clause (a) in the section is to remove the disability imposed by subsection (2), the words "the property of a dissolved firm must be construed so as to cover all claims whatsoever which arise "from a contract", the more so as the word "property" is wide enough to include claims for liquidated damages based on contracts as well as claims for accounts based on contracts. Additionally, there is nothing in the Partnership Act to justify a restriction on the meaning of the words "the property of a dissolved firm," because the definition of property. In section 14 of the Act is inclusive only, and cannot therefore restrict the meaning of these words in section 69.

6. Mr. Naimuddin however referred me to authorities in which it has been held that a claim for the accounts of a firm cannot be assigned. Obviously, such a claim cannot be assigned because its transfer is governed by the Transfer of Property Act. Now section 6 of that Act prescribes that any kind of property may be transferred, but according to clause (e) of the section a mere right to sue cannot be transferred. The view of the Courts has been that a right to sue for accounts is a mere right to sue and therefore it has consistently been held that such a right cannot be transferred. I do not see how this view helps the case of the appellant. The Transfer of Property Act is intended to govern the transfer of property. It does not even contain a definition of property, and merely because it expressly prescribes that a right to sue cannot be transferred, on grounds of policy which are very obvious, I do not see how this can possibly lead to the conclusion that what may be a right to sue under this Act would not be property under another statute. To take a couple of obvious illustrations, a claim for accounts is property within the meaning of section 60 of the Civil Procedure Code, and similarly if a partner of a firm becomes insolvent his share in the firm and his right to accounts is property within the meaning of the Insolvency Acts. I therefore see no reason to restrict the meaning of the word "property" in section 69 by reference to a totally different statute. And in my humble opinion the authorities on the construction of section 6(e) of the Transfer of Property Act have no relevance to the point under consideration. I am satisfied that the claim in the suit of the respondents falls within the second part of clause (a) of subsection (3) oil section 69.

7. Mr. Bashir Ahmed then submitted that as respondent No. 1 had been dissolved, the suit should have been filed by all the partners of this dissolved firm. This submission appeared to me to be contrary to the plain language of Order XXX, C. P. C., and it is important to emphasise here that the provisions in this Order were contained for the first time In the Civil Procedure Code of 1908. However, Mr. Naimuddin who has been of great assistance to me In this case, drew my attention to a line of authorities which might, at first sight, appear to lend support to Mr. Bashlr Ahmed's submission. Thus, in Alagappa Chetti v. Vellian Chetti and another (I L R 18 Mad. 33), the learned Judges of the Madras High Court observed at page 35: "There can be no doubt that as a general rule all the members of a partnership firm ought to be joined as plaintiffs in a suit brought in respect of transactions with the partnership". Although the learned Judges have not given any reasons for the view thus taken by them, it was probab ly based on section 45 of the Contract Act, 1872, In any case, the Calcutta High Court has taken a similar view in Ram Narain v. Ram Chander (I L R 18 Cal. 86), on the basis of section

45. This section reads as follows:-- "

45. When a person has made a promise to two or more persons jointly, then, unless a contrary intention appears from the contract, the right to claim performance rests, as between him and them, with them during their joint lives, and, after the death of any of them, with the representative of such deceased person jointly with the survivor or survivors, and, after the death of the last survivor with the representatives of all jointly." As a promise to a firm is a promise to its partners, a claim by firm would be governed by this section "unless a contrary inten tion appears from the contract". Now in a commercial contract, custom and practice are relevant to the question of intention, and although a firm may not be a legal entity, it is very much reality in the world of business and commerce. It incurs obliga tions and acquires rights, and similarly it discharges its obligations E; and enforces its claims, as if it were an entity. Therefore, beginning with the judgment of Farran, J. in Motilal v. Ghellabai (I L R 17 Bom. 6), a long line of eminent Judges have taken the view that because of mercantile custom a contract with a firm, by itself, manifests a contrary intention within the meaning of section

45. I respectfully agree with this view, and I would recall lime that the Contract Act originally included a chapter about partnerships which was based on the decisions of the English Courts of Equity. But in England a partner was entitled to act on behalf of a dissolved firm and to sue and be sued on its behalf, and I may only refer here to the leading case of Ellis and an other v. Wedeson and another ((1899) 1 Q B 714). This is another consideration to support the view that the bar of section 45 would not apply to claim by a firm. I cannot do better than quote from Mulla's Contract Act, and for this purpose I would rely on the 6th Edition, which I think was the last edition to be produced by Pollock and Mulla. At page 305, the eminent authors observed: "The General rule of English law is (contrary to the present section) that joint contracts are enforceable by the survivors or survivor alone. There is an equitable exception, founded on mercantile custom, as to debts due to partners; but even in this case "though the right of the deceased partner devolves on his executor, the remedy survives to his companion, who alone must enforce the right by action, and will be liable on recovery to account to the executor or administrator for the share of the deceased" (Williams on Executors, 12th Edn., p. 518). The present section extends the mercantile rule of substantive right to all cases of joint contracts. But it does not follow that it was intended to alter the rules of procedure in cases where the mercantile rule of substance was already admitted. It seems therefore to be the better opinion that the representatives of a deceased partner are not necessary parties to a suit for the recovery of a debt which accrues due to the partnership in the lifetime of the deceased (Gobind Prasad v. Chandar Sekhar (1887) 9 All. 486; Motilal v. Ghellabhai (1892) 17 Bom. 6; Vaidyanatha Ayyar v. Chinnasami Naik (1893) 17 Mad. 18; Debi Das v. Nirpat (1898) 20 All. 365; Ugar Sen v. Lakhmichand (1910) 32 All. 638; Mulk Raj v. George Knight (1906) P R 10; Mool Chand v. Mulchand (1923) 4 Lah. 142 : 71 I C 951: A I R 1923 Lah. 197). It has been so laid down by the High Courts of Allahabad, Bombay, Madras and Lahore; but the contrary has been maintained try the Calcutta High Court (Ram Narain v. Ram Chunder (1890) 18 Cal.

86. But see Bat Kissen Das Daga v. Kanhya Lai (1913) 17 Cal. L J 648, at pp. 651, 652 : 21 1 C 509)."

8. I would now turn to the changes in the law after the Contract Act had come into force. As I have observed earlier, special provisions with regard to suits by and against a firm were introduced for the first time in the Code of Civil Procedure, 1908, Rules I and 4 of Order XXX are relevant to the sub mission of Mr. Naimuddin, and they read as under: "1. (1) Any two or more persons claiming or being liable as partners and carrying on business in (Pakistan) may sue or be sued in the name of the firm (if any) of which such persons were partners at the time of the accruing of the cause of action, and any party to a suit may in such case apply to the Court for a statement of the names and addresses of the persons who were at the time of the accruing of the cause of action, partners in such firm to be furnished and verified in such manner as the Court may direct. (2) Where persons sue or are sued as partners in the name of their firm under sub‑rule (1), it shall, in the case of any pleading or other document required by or under this Code to be signed, verified or certified by the plaintiff or the defendant, suffice if such pleading or other document is signed, verified or certified by any one of such persons. 4. (1) Notwithstanding anything contained in section 45 of the Contract Act, 1872, where two or more persons may sue or be used in the name of a firm under the foregoing provisions and any of such persons dies, whether before the institution or during the pendency of any suit, it shall not be necessary to join the legal representative of the deceased as a party to the suit. (2) Nothing in sub‑rule (1) shall limit or otherwise affect any right which the legal representative of the deceased may have‑ (a) to apply to be made a party to the suit, or (b) to enforce any claim against the survivor or survivors" I may also add here that Order XXX is, as pointed out by Mulla in his commentary, "a reproduction almost verbatim of the prin cipal rules comprised in Order XLVIII‑A of the English rules." Therefore, I agree with the view of the Bombay High Court in Devshi Harpal v. Bhikamchand and others (A I R 1927 Bom. 125), that the inten tion of the Legislature in enacting Order XXX, C. P. C. was to follow "the English practice as exemplified in Ellis v. Wadeson". And, in my humble opinion, whatever be the position before the enactment of the Code of 1908, the view of the Calcutta High Court In Ram Narain's case cannot be followed after the enact ment of this Code. Finally, the chapter in the Contract Act on partnership law was deleted and superseded by the Partnership Act of 1932, and at the same time amendments were made in the law of partner ship. As the question in the present case is of the right of a partner of a dissolved firm to recover the property of that firm, section 47 of the Partnership Act is relevant, and this section is similar but not identical to section 263 of the Contract Act which it replaced in 1932. Section 47 reads as follows: "

47. After the dissolution of a firm the authority of each partner to bind the firm, and the other mutual rights and obliga tions of the partners, continue notwithstanding the dissolution, so far as may be necessary to wind up the affairs of the firm and to complete transactions begun but unfinished at tine time of the dissolution, but not otherwise: Provided that the firm is in no case bound by the acts of a partner who has been adjudicated insolvent, but this proviso does not affect the liability of any person who has after the adjudication represented himself or knowingly permitted him self to be represented as a partner of the insolvent." I have underlined the words which were substituted for the words "the rights and obligations of the partners" in the old section 263, and the object of the Legislature in making this change was to emphasise the rights of the partner of a dissolved firm. Section 19 is also not irrelevant to the point under discussion. This section deals with the implied authority of partners, and the difference between it and the corresponding provisions in the Contract Act is that the implied authority of a partner is clarified and enlarged, so that it is now clear that a partner is entitled to sue on behalf of his firm, in the absence of any usage or custom of trade or contract to the contrary, and in view of section 47 It is immaterial whether the firm is functioning or is dissolved, G Mr. Bashir Ahmed's submission that all the partners of respondent No. I should have joined as plaintiffs in the suit i9 therefore contrary both to the provisions of the Partnership Act and of Order XXX of the C. P. Code.

10. Mr. Naimuddin however drew my attention to an old Karachi case Haji Dost Mohamed and another v. Mohandas Lalchand and another (A I R 1926 Sind 81) and submitted that the observa tions in this case supported Mr. Bashir Ahmed's argument. The observations in the case cited are very wide and Mr. Naimuddin's submission that they support the argument of Mr. Bashir Ahmed is correct. Further, even the facts in this case are some what similar to the present case. The facts were that two plaintiffs had sued the defendant for accounts on a transaction which the learned Additional Judicial Commissioner treated as a commercial transaction because he observed that "for the purposes of this case" the plaintiffs should be treated as partners or quasi-partners". I cannot understand the words "quasi‑partner", but it would appear from the meagre report of the case that the suit was really by a firm, but was not expressly brought in the name of the firm. Before it could be decided, one of the two partners of the firm died, and as the sole surviving plaintiff did not implead the legal heirs of the deceased within the statutory period, the learned Additional Judicial Commissioner held that the suit had abated. In coming to this conclusion he relied on the provisions of section 45 of the Contract Act and followed the view of the Calcutta High Court in Ram Narain's case, although his attention was drawn to the view of the Bombay High Court in Motilal's case. As Sind was then cart of the Bombay Presi dency, to say the least, it would have been better if the learned Additional Judicial Commissioner had followed the Bombay view, and not less so because, by that time, this view had been follow ed by all the other High Courts except Calcutta. Further, as I have explained, the enactment of Order XXX, C. P. C. rendered the Calcutta view obsolete and it clearly indicated the preference of the Legislature for the Bombay view. The learned Additional Judicial Commissioner was aware of this position and pointed out that Order XXX, rule 4, C. P. C. appeared to support the claim of the plaintiff that he was not required to implead the legal heirs of the deceased co‑plaintiff because they were partners. And in this connection he observed that rule 4 "refers to suits which may be filed and not to suits which are, as a matter of fact, filed in the name of the firm". Yet he held that neither the rule nor the order helped the plaintiff's case because the suit had not been instituted in the name of the firm, and in coming to this conclusion he relied on a judgment of the Calcutta High Court reported in Monmohan Panday and others v. Bidhu Bhusan Ray Chaudhry and others (A I R 1918 Cal. 160). As the question is of the construction of Order XXX, rule 4, I would repeat here that rule 1 is permissive and I may also point out that rule 3 reads "Where persons are sued as partners". Yet rule 4 applies "where two or more persons may sue or be sued". In the context of the earlier rules, the words "may sue or be sued" in rule 4 are significant and suggest that the rule is attracted to all suits in which the cause of action is against a firm or has accrued in favour of~ firm, irrespective of the technicalities of pleadings. But, with great respect if the view taken by the learned Judges of the Calcutta High Court is correct, then the words quoted would mean where two or more persons sue or are sued. Now if this had been the intention of the Legislature would it not have said so, as it did in rule 3? However, as the 1st respondent in the present case is the dissolved firm, the suit has been properly Instituted, whatever be the correct construction of this rule. Therefore, it is not necessary for me to decide whether the view taken in Manmohan Panday's case is correct, and I would only observe here that the learned Additional Judicial Commissioner erred in holding In Haji Dost Muhammad's case that suit by a firm is governed by section 45 of the Contract Act.

11. No other argument was advanced. The revision is without merit and is dismissed with costs. I thank Mr. Naimududin for his assistance. S. A. H. Petition dismissed.