Partnership agreement

2024 PLD 1108 SUPREME-COURT Judicial Precedent

Ss. 12 & 54Civil Procedure Code (V of 1908), O. VII, R. 11Companies Act (XIX of 2017), Ss. 2(9), 2(17) & 5Partnership Act (IX of 1932), Ss. 4, 32, 39 & 40Suit for specific performance of agreement, recovery and permanent injunctionRejection of plaintScopePartnership agreementAgreement for transfer of shares between partnersJurisdiction of Civil Court

In the present case the business entity was being operated through a registered partnership firm between the two partners i.e. the petitioner (defendant) and respondent No. 1 (plaintiff)

Said business was neither a corporate entity nor was it incorporated under the provisions of the Companies Ordinance, 1984, or the Companies Act, 2017 therefore, the assertion of the petitioner that the suit was barred by the provisions of Section 5 of the Companies Act, 2017 was misconceived and fallacious

As a matter of fact, Section 5 had no applicability or nexus in the matter

Therefore, it had nothing to do with the pending suit between the parties

Substratum of the plaint did not highlight any dispute with regards to the business of the partnership firm, nor did anybody approached the Court for dissolution of the partnership firm or rendition of accounts; but for all practical purposes, the respondent No.1 only entered into an agreement for buying out 50% share of the petitioner in the partnership firm against a valuable consideration, and due to the alleged breach and non-fulfillment of terms and conditions of the agreement, respondent No.1 filed the suit for specific performance of contract with some other ancillary reliefs

All the prayers mentioned by the respondent No.1 were not considered (by the Trial and Appellate Court) which had independent status and were not dependent upon the alleged right of execution of sale deed or transfer of 50% share of the partnership firm in favour of respondent No.1 against a valuable consideration

According to respondent No.1, the partnership business was a going concern and he wanted to buy out 50% share of another partner

The effect of the agreement in question was also to be decided by the Trial Court on whether the arrangement in question could be construed as an agreement for relinquishment of share or retirement from the firm

On the alleged consensus ad idem, the contract was signed, and on the alleged breach, respondent No.1 filed the suit

Court cannot force someone to file a suit for dissolution of partnership or rendition of accounts, but it has to see whether specific performance of contract is possible or not, and in this case, unless the parties were provided equal opportunity to lead the evidence, it was not possible to decide the matter summarily on the basis of an application under Order VII, Rule 11, C.P.C.

At present stage, the Trial Court could not presume or anticipate the outcome that if the case was made out on merits and the Court granted a decree of specific performance, what the plaintiff would do with the partnership business, and whether he would induct any other partner, continue as proprietor, or convert it into a corporate entity of business

That was not the issue before the Court right now

At present, the lis only related to the alleged sale agreement of 50% share of another partner against some valuable consideration

This was the core issue and dispute between the parties which needed to be adjudicated by the Trial Court

High Court had rightly set-aside the orders of Trial Court and First Appellate Court, whereby the plaint was rejected, and remanded the matter to Trial Court with directions to decide the suit on merits

Petition was dismissed and leave was refused.

2024 CLD 1254 SUPREME-COURT Judicial Precedent

Ss. 2(9), 2(17) & 5Partnership Act (IX of 1932), Ss. 4, 32, 39 & 40Specific Relief Act (I of 1877), Ss. 12 & 54Civil Procedure Code (V of 1908), O. VII, R. 11Suit for specific performance of agreement, recovery and permanent injunctionRejection of plaintScopePartnership agreementAgreement for transfer of shares between partnersJurisdiction of Civil Court

In the present case the business entity was being operated through a registered partnership firm between the two partners i.e. the petitioner (defendant) and respondent No. 1 (plaintiff)

Said business was neither a corporate entity nor was it incorporated under the provisions of the Companies Ordinance, 1984, or the Companies Act, 2017 therefore, the assertion of the petitioner that the suit was barred by the provisions of Section 5 of the Companies Act, 2017 was misconceived and fallacious

As a matter of fact, Section 5 had no applicability or nexus in the matter

Therefore, it had nothing to do with the pending suit between the parties

Substratum of the plaint did not highlight any dispute with regards to the business of the partnership firm, nor did anybody approached the Court for dissolution of the partnership firm or rendition of accounts; but for all practical purposes, the respondent No.1 only entered into an agreement for buying out 50% share of the petitioner in the partnership firm against a valuable consideration, and due to the alleged breach and non-fulfillment of terms and conditions of the agreement, respondent No.1 filed the suit for specific performance of contract with some other ancillary reliefs

All the prayers mentioned by the respondent No.1 were not considered (by the Trial and Appellate Court) which had independent status and were not dependent upon the alleged right of execution of sale deed or transfer of 50% share of the partnership firm in favour of respondent No.1 against a valuable consideration

According to respondent No.1, the partnership business was a going concern and he wanted to buy out 50% share of another partner

Effect of the agreement in question was also to be decided by the Trial Court on whether the arrangement in question could be construed as an agreement for relinquishment of share or retirement from the firm

On the alleged consensus ad idem, the contract was signed, and on the alleged breach, respondent No.1 filed the suit

Court cannot force someone to file a suit for dissolution of partnership or rendition of accounts, but it has to see whether specific performance of contract is possible or not, and in this case, unless the parties were provided equal opportunity to lead the evidence, it was not possible to decide the matter summarily on the basis of an application under Order VII, Rule 11, C.P.C.

At present stage, the Trial Court could not presume or anticipate the outcome that if the case was made out on merits and the Court granted a decree of specific performance, what the plaintiff would do with the partnership business, and whether he would induct any other partner, continue as proprietor, or convert it into a corporate entity of business

That was not the issue before the Court right now

At present, the lis only related to the alleged sale agreement of 50% share of another partner against some valuable consideration

This was the core issue and dispute between the parties which needed to be adjudicated by the Trial Court

High Court had rightly set-aside the orders of Trial Court and First Appellate Court, whereby the plaint was rejected, and remanded the matter to Trial Court with directions to decide the suit on merits

Petition was dismissed and leave was refused.

2018 CLC 82 PESHAWAR-HIGH-COURT Judicial Precedent

S. 69Civil Procedure Code (V of 1908), O. VII, R. 11 & O. VI, R.17Partnership agreementNon-registration of partnership deedEffectBar to file a suitScopeAncillary mattersWords 'any Court' contained in S.69 of Partnership Act, 1932ScopePlaint, rejection of

Petition for rejection of plaint was dismissed on the ground that no relief had been claimed in the suit with regard to contract entered into between the parties

Validity

Partnership deed had not been got registered by the parties

Partnership agreement being a public document was required to be registered

Un-registered firm could not file a suit under S.69 of Partnership Act, 1932

Provision of S.69 of Partnership Act, 1932 would only bar a suit for enforcing a right arising out of a contract against either the firm or any past or present member of it or against any third party

Ancillary matters contained in the prayer clause of plaint were beyond terms and conditions settled in the partnership deed

Bar in introducing a suit would be only to the extent of terms and conditions of partnership deed

No bar in presentation of suit existed with regard to ancillary cause of action

Plaintiff had agreed that he would present an amended plaint ousting all the paras wherever there was reference of agreement of partnership

If plaintiff felt difficulty in drafting amended plaint, he could submit an application before the Trial Court for withdrawal of suit with the permission to file fresh suit under same cause of action without reference to partnership agreement

If plaintiff was not ready to amend the plaint as per prayers other than partnership agreement or if no application for withdrawal of suit was moved, it would be deemed that present plaint had been rejected

Constitutional petition was disposed of accordingly.

2017 CLD 1602 PESHAWAR-HIGH-COURT Judicial Precedent

S. 69Civil Procedure Code (V of 1908), O. VII, R. 11 & O. VI, R. 17Partnership agreementNon-registration of partnershipEffectBar to file a suitScopeAncillary mattersWords 'any Court' contained in S. 69 of Partnership Act, 1932ScopePlaint, rejection of

Petition for rejection of plaint was dismissed on the ground that no relief had been claimed in the suit with regard to contract entered into between the parties

Validity

Partnership deed had not been got registered by the parties

Partnership agreement being a public document was required to be registered

Un-registered firm could not file a suit under S. 69 of Partnership Act, 1932

Provision of S. 69 of Partnership Act, 1932 would only bar a suit for enforcing a right arising out of a contract against either the firm or any past or present member of it or against any third party

Ancillary matters contained in the prayer clause of plaint were beyond terms and conditions settled in the partnership deed

Bar in introducing a suit would be only to the extent of terms and conditions of partnership deed

No bar in presentation of suit existed with regard to ancillary cause of action

Plaintiff had agreed that he would present an amended plaint ousting all the paras wherever there was reference of agreement of partnership

If plaintiff felt difficulty in drafting amended plaint, he could submit an application before the Trial Court for withdrawal of suit with the permission to file fresh suit under same cause of action without reference to partnership agreement

If plaintiff was not ready to amend the plaint as per prayers other than partnership agreement or if no application for withdrawal of suit was moved, it would be deemed that present plaint had been rejected

Constitutional petition was disposed of accordingly.