http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 19  

PETITIONER: SHARAD VASANT KOTAK & ORS.

       Vs.

RESPONDENT: RAMNIKLAL MOHANLAL CHAWDA & ANR.

DATE OF JUDGMENT:       17/12/1997

BENCH: S.C. SEN, K. VENKATASWAMI

ACT:

HEADNOTE:

JUDGMENT:                THE 17TH DAY OF DECEMBER, 1997 Present:               Hon’ble Mr, Justice Suhas C.Sen               Hon’ble Mr, Justice K. Venkataswami R.F.Nariman, Sr.Adv.,  P.H.Parekh,  Sameer  Parekh  and  Ms. Sunita Sharma, Advs. with him for the appellants. Sole J.Sorabjee,  Sr.Adv., Ramesh  Singh, Parimal K.Shroff., Ms. Bina  Gupta, Ms.Rakhi  Ray and Pritesh Kapur, Advs. with him for the Respondents.                       J U D G M E N T The following Judgment of the Court was delivered: K. Venkataswami.J.      Leave granted.      This appeal  by special  leave  has  arisen  under  the following circumstances:-      The appellants  are the  partners of a suit firm called ’M/s. Paramount Builders’ . The partnership was entered into on 29.11.1976 with the following individuals as partners: S.NO. Name of Partners             Share 1.   Shri Sharad Vasant Kotak      15% 2.   Shri Dilip Vasant Kotak       15% 3.   Shri Anil Dhirendra Kotak     15% 4.   Smt. Hemkuver Vasant Kotak    15% 5.   Smt. Lilavati Dhirendra Kotak 15% 6.   Shri. Mohanlal Hinji Chawda   12 1/2% 7.   Shri Ramniklal Mohanlal Chawda 12 1/2%      The said  partnership firm was registered on 15.12.1980 under Registration no, 158675 with the Registrar of Firm. On 6.5.1986, Shri  Mohanlal Hinji Chawda, a partner of the firm (Sr. No.  6 above)  died and  in his  place, his  widow Smt. Jijiben Mohanlal  Chawda was  admitted as  a partner  in the fir. After  the admission  of the said Smt. Jijiben Mohanlal Chawda, another  deed on  partnership was made consisting of the old  six partner  and the  newly admitted  partner  Smt. Jijiben Mohanlal Chawda. As a matter of fact,. the induction of the  new partner  was not  brought to  the notice  of the registrar of  Firms by  forwarding the required particulars. It is  on record  that still  latter  on  3.11.1992  another partnership deed  was brought  into existence  consisting of the same  partners. It  is also  on record  that yet another

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 19  

partner Smt.  Hemkuver  B.  Kotak  (S.NO.4  above)  died  in September, 1994.  The fact of death of this partner also was not intimated  to the  Registrar of Firms. While, so the 1st respondent gave  a notice  of dissolution of the firm to the appellants and  also filed a suit for the dissolution of the partnership firm  bearing Suit  no., 5016/94  on 15.12.94 in the High Court of Judicature at Bombay on the original side. Initially in  the  plant,  the  constitutional  validity  of Section 69(2A)  of the  Indian Partnership  Act (hereinafter called the  "Act"), as  amended by  Maharashtra Act, was not raised. The  1st respondent  moved  a  Chamber  Summons  No, 301/97 seeking  permission of the Court to carry out certain amendments to  the plaint.  Briefly, the  amendments  sought were that  subsequent changes  and/or modifications  in  the partnership deed  of M/s.  Paramount Builders under the deed of partnership  dated 20.10.1986  and also  in the  deed  of partnership dated  3.11.1992 are  merely in  the  nature  of changes   and/or   modifications   which   do   not   affect registration of the said firm of M/s. Paramount Builders, as required  under  the  Act  ,  for  entitling  a  partner  to institute  a  suit  for  reliefs  against  the  partners  on dissolution of  firms and alternatively, the other amendment sought was to challenges the vires of section 69 (2A) of the Act as in force in State of Maharashtra.      The amendment  sought  was  seriously  opposed  by  the appellants inter alia, contending that the suit as filed was not maintainable,  and, therefore,  the amendment  cannot be allowed, In other words, according  to the appellants on and from 20.10.1986  when a  new partnership  deed was made, the registration already  given  to  the  firm  ceased  to  have validity and the partnership as at present must be deemed to be an  unregistered one  and, therefore, the suit was hit by Section 69 (2A) of the Act creates a bar on the threshold of the filing  of the  suit for  the relief covered in the suit and the  very suit  filed by  the plaintiff was incompetent. That being the position, the application for amendment could not  be   permitted.  Consequently,   the  application   was rejected.      Aggrieved   by   the   rejection   of   the   amendment application, the first respondent preferred an appeal to the Division Bench of the High Court in Appeal No. 509/97.      The  appellate   court  was   of  the   view  that  the registration  of   the  firm   continues  to   be  in  force notwithstanding any reconstitution of the firm and even whin dissolution  takes  place,  the  registration  of  the  firm continues. The  Division Bench  further  held  that  Section 69(2A) requires  the registration  of a firm and it does not require a  fresh registration  each time a reconstitution or dissolution  of  the  continuing  firm  takes  place.  After finding that  the suit filed by the first respondent was not hit by Section 69(2A), the Division Bench held as follows:-      "The proposed amendment consists of      two parts.   The first part is only      a factual  aspect  which  has  been      sought to be introduced in order to      demonstrate  that   the  bar  under      Section 69(2A)  is  not  attracted.      There is  no reason  as to why such      an amendment should not be granted.      The second  part of  the  amendment      pertains  to   the   constitutional      challenge  of   the   validity   of      Section 69(2A).  As we have already      taken a view that Section 69(2A) is      not  attracted,   the  question  of

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 3 of 19  

    challenge  does  not  survive  and,      therefore, it  is not  necessary to      grant  the   amendment   containing      constitutional          challenge."      Ultimately the  appellate court  allowed the appeal and permitted the  amendment only regarding the factual portions and not  regarding the  constitutional validity  of  Section 69(2A).      Aggrieved by  the judgment  of the  Division Bench, the appellants have preferred this appeal by special leave.      In this  appeal, the  following substantial question of law arises for our consideration:-      "Whether on  the facts of this case      the  suit  for  a  dissolution  and      account of  partnership is  hit  by      Sec.69(2A) of the Act as amended in      the State of Maharashtra?      For answering  the question, it is necessary to set out the relevant  provisions of the  Act as amended in the State of Maharashtra, which are given below:-           "4.          Definition     of      "partnership". "Partnership" is the      relation between  persons who  have      agreed to  share the  profits of  a      business carried  on by  all or any      of them acting for all.      "Partner" "Firm" and "firm-names"           Persons who  have entered into      partnership with  one  another  are      called individually, "partners" and      collectively "a firm", and the name      under  which   their  business   is      carried on  is  called  the  "firm-      name".      17. Rights  and duties  of partners      after  a   change  in   the  firm,.      Subject  to  contract  between  the      partners-           (a) Where  a change  occurs in      the constitution  of   a firm,  the      mutual rights  and  duties  of  the      partners in  the reconstituted firm      remain  the   same  as   they  were      immediately before  the change,  as      far as may be;      (b)................................      ..........      (c)................................      .........                CHAPTER v      Incoming and outgoing partners      31. Introduction  of a partner, (1)      Subject  to  contract  between  the      partners and  to the  provisions of      section  30,  no  person  shall  be      introduced as a partner into a firm      without  the  consent  of  all  the      existing partners.      (2) Subject  to the  provisions  of      section  80,   a  person   who   is      introduced as a partner into a firm      does not there by become liable for      any act  of the firm dome before he      became a partner.                ----------

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 4 of 19  

              CHAPTER VI          Dissolution of a firm      36.  Dissolution  of  a  firm.  The      dissolution   of    a   partnership      between all  the partners of a firm      is  called   "dissolution  of   the      firm".               CHAPTER VII          Registration of Firms      58. Application  for  registration.      (1) (Subject  to the  provisions of      sub-section (A),  the  registration      of a  firm) effected  by sending by      post or delivering to the Registrar      of the  area in  which any place of      business of the firm is situated or      proposed   to    be   situated,   a      statement in  the  prescribed  form      and accompanied  by the  prescribed      fee (and a true copy of the deed of      partnership) stating:-      (a) the firm-name,      [ (aa)  the nature  of business  of      the  firm;)   9)   the   place   or      principal place  or business of the      firm,(1)  the  place  or  principal      place of  business of the firm, (i)      the names of any other places where      the firm  carries on  business, (d)      the date  when each  partner joined      the firm, (e) the named in full and      permanent address  of the partners,      and (f) the duration  of the firm.           The statement  shall be signed      by all  the partners,  or by  their      agents specially authorised in this      behalf.           [(1A) The statement under sub-      section  (1)   shall  be   sent  or      delivered to the Registrar within a      period of one year from the date of      constitution of the firm:           Provided that  in the  case of      any firm carrying on business on or      before the  date of commencement of      the Indian Partnership (Maharashtra      Amendment)    Act,    1984,    such      statement  shall   be     sent   or      delivered to the Registrar within a      period  of   one  year   from  such      date)_.      (2)   Each   person   signing   the      statement shall  also verify  it in      the manner prescribed.      (3)................................      ........................      (4)................................      .......................      59.  Registration   (1)  When   the      Registrar  is  satisfied  that  the      provisions of  section 58 have been      duly complied with, he shall record      an entry  of  the  statement  in  a      register  called  the  Register  of      Firms,   and    shall   file    the

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 5 of 19  

    statement, (On  the date such entry      is recorded  and such  statement is      filed, the  firm shall be deemed to      registered.)      62) The  firm, which is registered,      shall use  the  brackets  and  word      "(Registered)"  immediately   after      its name.)      63. Recording  of  changes  in  and      dissolution of  a firm.  (1) When a      change occurs  in the  constitution      of  a   registered  firm,   (every)      incoming,  continuing  or  outgoing      partner, and when a registered firm      is  dissolved,   (every)   incoming      continuing or outgoing partner, and      when   a    registered   firm    is      dissolved, (every) person who was a      partner  immediately   before   the      dissolution,  or   the   agent   of      (every)  such   partner  or  person      specially   authorised    in   this      [shall, within  a period of 90 days      from the  date of  such  change  or      dissolution,  give  notice  to  the      Registrar   of   such   change   or      dissolution,  specifying  the  date      thereof;) and  the Registrar shall)      make a  record of the notice in the      entry relating  to the  firm in the      Registrar                        of      Firms and  shall  file  the  notice      along with  statement  relating  to      the firm  in the Registrar of Firms      and shall  file  the  notice  along      with statement relating to the firm      filled under section 59.      (1A) Where  a change  occurs in the      constitution of  a registered firm,      all person,  who after  such change      are partners  of  the  firm,  shall      jointly send  an intimation of such      change duly  signed by them, to the      Registrar, within  a period  of  90      days from the date of occurrence of      such change and the Registrar shall      deal with it in the manner provided      by section 61.)      (2)................................      .....................      69. Effect of non-registration, (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  a  behalf  of  any      person suing  a partner  in a  firm      against  the  firm  on  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 :      (Provided that  the requirement  of      registration  of  firm  under  this

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 6 of 19  

    sub-section shall  not apply to the      suits or  proceedings instituted by      the heirs  or legal representatives      of the  deceased [partner  of  firm      for accounts  of  the  firm  or  to      realise the property of 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      a s partners in the firm.      (2A) No  suit to  enforce any right      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 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 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:      Provided that  the  requirement  of      registration  of  firm  under  this      sub-section shall  not apply to the      suits or  proceedings instituted by      the heirs  or legal representatives      of the  deceased partner  of a firm      for accounts  of a  dissolved firm,      or to  realise the  property  of  a      dissolved firm.)      (3)................................      ..........      ...................................      ..........      (69A. Penalty  of contravention  of      section 60,  61.62 or  63.  If  any      statement,  intimation   or  notice      under sections  60.61.62 or  63  in      respect of  any registered  firm is      not sent or given to the Registrar,      within the period specified in that      section, the  registrar, may, after      given notice to the partners of the      firm  and   after  given   them   a      reasonable  opportunity   of  being      heard, refuse  to make the suitable      amendment s  n the records relating      to the  fir, until  the partners of      the  firm  pay  such  penalty,  not      exceeding ten  rupees per  day,  as      the  Registrar   may  determine  in      respect of  the period  between the      date  of   expiry  of   the  period      specified kin  section 60.61.62. or      as the case may be, 63 and the date      of making  the  amendments  in  the      entires relating to the firm.)      Rule 3.  Forms of  Statements.  The

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 7 of 19  

    Statements required  to be  sent or      delivered to  the  Registrar  under      section 58  and  60  of    the  Act      shall, respectively,  be  in  Forms      "A" and  "B" and be verified in the      manner  as   laid   down   in   the      footnotes to the respective forms.      Rule 4.  Forms  of  intimation  and      notice,  Intimations   and  notices      which  are  required  to  be  given      under sections  61.62. and   63  of      the  Act  shall,  respectively,  be      given in  Forms "C",  "D", "E"  and      "f" and  be verified        in  the      manner setforth in the footnotes to      the respective Forms.      Rules 6.  Form  of  Register.,  The      Register shall  be  maintained  kin      Marathi in  Form "G" and a separate      page  shall   be  devoted  to  each      firm., The pages, after the entires      are made,  shall be bound in proper      permanent registers in the order of      the consecutive  number allotted to      each firm  on  registration,  Every      entry in  Register shall  be signed      by the Registrar.      Rule   17    .    Certificate    or      Registration, --  Where a  firm  si      registered under  section 59 of the      Act, the  Registrar shall  issue  a      certificate in Form, "H"      Form "A"      Application  for   Registration  of      Firms               (See Rule 3)      We,    the    undersigned,    being      partners,    hereby    apply    for      registration as a firm and for that      purpose   supply    the   following      particulars pursuant  to section 58      of the  Indian   Partnership   Act,      1932:--      (a) Firm Name      (b) Nature  of business of the firm      Place      (c) Principal  place of business of      the firm      Taluka      District      (d) Names of any other places where      the firm carries on business in the      above name.      (e) Names  ion fully  and permanent      address (residential)  of  all  the      partners.      (f)  Date  on  which  each  partner      joined the firm.      (g) Duration  of the  firm, In case      there  is  any  provision  made  by      contract form  the duration  of the      partnership     or      for     the      determination of  the  partnership,      please   state    the    provisions      briefly,    please     state    the

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 8 of 19  

    provisions  briefly.   If  no  such      provision is  made, words "AT WILL"      may be stated.      Note 1.  For  the  registration  of      each Firm a separate application is      necessary.     Accordingly      the      applicants  should  apply  in  this      application only particulars of the      Firm  in   respect  of   which  the      application is  made. This  applies      to the  case of  the  same  persons      carrying on business in partnership      under different Firm names.      Note 2.-- Against item (c) and (d),      the exact  location  of  the  place      should be given.      Note. 3.-- This application much be      signed by  all  partners  of  their      agents specially authorized in this      behalf on solemn affirmation before      a Magistrate  or other officer duly      empowered to administer Oaths.      Note 4-- Making a false, untrue, or      incomplete statement  is punishable      under  section  70  of  the  Indian      Partnership Act, 1932. (h)  In   case  there   are  any  minors admitted    to     the    benefits    of partnerships:-- ------------------------------------------------------------ Name & Address Name & Address  Date of Date when he/ of Minor       of Guardian     Addmis-  she will                               sion to   attain                               benefits  majority    (1)              (2)         (3)       (4) ------------------------------------------------------------ ------------------------------------------------------------      We are  sending  the  prescribed  registration  fee  by cash/money order.  We the  abovenamed, solemnly  affirm that what is  stated in  paragraphs is  true to our own knowledge and that  what is  stated in  the  remaining  paragraphs  is stated on  information and belief, and I/We believe the same to be true.      We also  declared on  solemn affirmation that up to the date of  submission of  this application  there has not been any change whatever in any of the particulars aforesaid.      Solemnly affirmed at      Date      this       ........................       day      of..................                     (1)                     (2)                     (3)                     (4)                     (5)                               Name and Signatures      Certified  that   the  persons   who  have  signed  the application have  signed in  my presence  and have  solemnly affirmed that the particulars furnished therein are true.      Name of Attesting Witness      Designation      And Seal, if available                                    Before me                               ( Price Re. 1)                     -----                     Form ’E’

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 9 of 19  

              INDIAN PARTNERSHIP ACT, 1932      Notice of change of Constitution or Dissolution of Firm                     (See rule 4)                                     FIRM REGN. NO and DATE Firm Name........................................ Registered Address..............................      Partners in the above named firm      We, being  agents of  a partner  in the  abovementioned firm persons  specially authorised by a partner in the above mentioned firm  to give  notice in  this behalf hereby  give notice that (a) the constitution of the firm has changed as follows:- (1) Mr. /Messrs ............... of ....................... has/have joined the firm as new /partner/partners on (2) Mr./Messrs ............... of ....................... has/have retired as partner/partners of the firm with effect from............................................. (b) the said firm has been dissolved on...........      I/We              ...................               the abovenamed.................... solemnly affirm that what is stated in paragraphs........... is true  to my/our own knowledge, and that what is stated in the  remaining   paragraphs  ............   is   stated   on information and  belief, and  I/We believe  the same  to  be true.      I/We declare  on solemn affirmation that up to the date of submission  of this  application there  has not  been any change in  any of  the particulars previously intimated save and except the change notified above. Solemnly affirmed at: Dated this..............day of...........19.....                               Name and Signatures-                     (1)                     (2)                     (3)      Certified that  the person  who has  signed this notice has signed  it in  my presence  and he has solemnly affirmed that the particulars furnished there in are true.      In the  case of  person not conversant with the English Language, the  contents of  the above  particulars have been explained to  him in  a language  familiar to him and he has affirmed the truth  thereof.                                         Signature. Note 1.  -- Please  strike out  item (a) or (b) whichever is not applicable. Note  2.--  Please  give  dates  according  to  the  English calendar. Note 3.--  In case  there is  only one  person left then the firm should  be considered  as dissolved and the form should be filled in accordingly. Note 4.-- This notice must be signed by every partner or his agent  specially   authorised  in   this  behalf  on  solemn affirmation  before  a  Magistrate  or  other  officer  duly empowered to administer oaths.                     (Price Re.1)                       ------                          Form ’G’                     (See rule 6)                     Register of firms                                              Firm No........ ------------------------------------------------------------ Name. ------------------------------------------------------------ Business: ------------------------------------------------------------

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 10 of 19  

Number of Entry   Date of Entry    Nature of    Remarks                                    Entry ------------------------------------------------------------ ------------------------------------------------------------ ------------------------------------------------------------ ------------------------------------------------------------ ------------------------------------------------------------ ------------------------------------------------------------ ------------------------------------------------------------ ------------------------------------------------------------ ------------------------------------------------------------ ------------------------------------------------------------ ------------------------------------------------------------                          ---------                          FORM ’H’                     (See rule 17 )                Certificate of Registration                     (National Emblem)           The Indian Partnership Act, 1932                (Act No IX pf 1932) Registration No...................      It is certified that a firm by name.................... with its  head office  at ...................  has this  day been duly  registered under the Indian Partnership Act, 1932 (Act No.IX of 1932).                          Given under my hand this                          day of ......19....                     Registrar/Assistant Registrar of Firms                     Bombay, Pune, Nagpur, Aurangabad.                               ---------      Before proceeding  further, we remind ourselves that we are concerned with a suit filed by a partner for dissolution and accounts.  No third  party  rights  or  liabilities  are involved in the present suit filed by respondent no. 1.      Undoubtedly counsel  on both  sides addressed arguments covering  larger   question.  But   we  propose  to  confine ourselves strictly  to the  facts of the case and decide the controversy without  touching up[on  the  larger  issues  or connected issues  arising out  of the  pleadings because the maintainability of  the suit  is the  sole  issue  based  on Section 69(2A) of the Act. Section 62(2A)  (extracted above)  requires  two  conditions before a  partner can  sue for dissolution of a firm and for accounts :- 1.   The firm must be registered. 2.   The person  suing is  or has been shown in the register      of firm as partner in the firm.      It is  not in  dispute that  the partnership as entered into under a deed dated 28.11.1979 was duly registered and a certificate of  registration was  granted.  It  is  also  an admitted fact  that the  plaintiff, first respondent herein, was one  of the  founder  partner  under  the  deed    dated 28.11.1979 and  his name did find a place in the register of firm as  a partner  and there is nothing to show that at any point to  time, his   name  has removed from the register of firms. We  have seen  that  on  the  death  of  one  of  the partners, his  widow was inducted into the partnership and a deed was  entered into   on 20.10.1986, repeating almost all the clauses  in the partnership deed dated 28.11.1979 except for consequential  changes necessitated  by the induction of new partner in the place of deceased partner.      It is  the contention  of learned  senior counsel,  Mr. Nariman, that  when the  new partner  was inducted under the partnership deed  dated  20.1.01986  in  the  place  of  the deceased partner,  the firm registered under the partnership

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 11 of 19  

deed dated  28.11.1979  ceases  to  be  on  the  records  of register of  firms and,  therefore, the registration already given will  not ensure  to the  benefit of  the  partnership entered on  20.10.1986. If  that be  so,  according  to  Mr. Nariman, learned  senior counsel,  the conditions imposed by Section 69(2A) are not satisfied and, therefore, the suit as filed was not maintainable.      In support  of his  argument, he placed strong reliance on the  expression ’partnership’  as defined in Section 4 of the Act,  It is  the contention of M r, Nariman that bearing in mind the definition in Section 4 of the Act, the partners including second  respondent will collectively be a firm and that firm  is not  registered inasmuch  as the  name of  the second respondent  does not  find a place in the Register of Registrar of  Firms. Therefore, the learned Single Judge was right in  holding that  the suit was not maintainable at the threshold. According to the learned senior counsel, the mere fact that  the plaintiff’s name find a place in the Register of Registrar of Firms is not sufficient to maintain the suit when  admittedly   one  of   the  partners’s   name  (second respondent’s  name)   was  not  shown  in  the  Register  of Registrar of  Firms. He  also contended that a comparison of language employed  in Sections  31 and  32 of  the Act. Will show that  whenever a  partner is  inducted into an existing firm, the  old firm  ceases to  exist and  an altogether new firm comes  into existence from the date of induction of the new partner  and that  new firm must ger fresh registration. In support  of this proposition, he placed reliance on Madho Prasad and  Others vs. Gouri Dutt Ganesh Lal (AIR 1939 Patna 323) ;  Meenakshi Achi  and Another  vs. P.S.M.  Subramanian Chettiar and  Others (AIR  1957 Madras  8) and  Gouri Sankar Sheroff and  others vs.  Central Hindusthan  Bank  Ltd.  and others (Air  1959 Calcutta  262). He also submitted that the partners entered  into another  deed on  3.11.1992 and  they have expressly  treated that  the firm as reconstituted one, In other  words, according  to the  learned senior counsel,. the deed  dated 20.10.86  in the  absense of such expression (reconstituted firm)  the understanding  was the  old  firm, ceases to  be in  existence and  a new firm was brought into existence. For  this, he  also placed  reliance on clauses 4 and 5 others (Air 1959 Calcutta 262). He also submitted that the partners entered into another deed on 3.11.1992 and they have expressly  treated that  the firm as reconstituted one, In other  words, according  to the  learned senior counsel,. the deed  dated 20.10.86  in the  absense of such expression (reconstituted firm)  the understanding  was the  old  firm, ceases to  be in  existence and  a new firm was brought into existence. For  this, he  also placed  reliance on clauses 4 and 5  regarding ’Commencement’  and ’Accounting  Year’ . He also placed reliance on a passage from Lindley on the Law of Partnership. 15th  Edition, page 374:-      " Each  partner is, it is true, the      agent of  the firm:  but as  before      pointed  out,   the  firm  is  knot      distinguishable  from  the  persons      from time to time composing it: and      when a  new member  is admitted  he      becomes one  of the  firm  for  the      future. but  not as  from the past,      and this  present  connection  with      the firm  is no  evidence  that  he      ever   expressly    or    impliedly      authorised what  may have been done      prior to  his  admission.  This  is      wholly  consistent  with  the  fact

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 12 of 19  

    that after  the admission  of a new      member,  a   new   partnership   is      constituted,   and   thus   special      circumstances are  required  to  be      shown  special   circumstances  are      required to  be  shown  before  the      debts and  liabilities of  the  old      partnership are  treated as  having      been   undertaken    by   the   new      partnership."      Contending contrary  and supporting the judgment of the Division Bench.  Mr,.  Sole.  J.  Sorabjee,  learned  Senior Counsel,  submitted   that  there   is   a   well-recognised distinction between  the legal  concept of  dissolution  and reconstitution of  a firm.  In the case of an incoming or an outgoing partner  in  a  existing  firm,  there  is  only  a reconstitution of  the firm  and in  all other respects, the existing firm continues with old and new partners. A look at chapter V  of the  Act. according  to him,  will fortify the above contention.  In other  words,  chapter  V  deals  with "Income and  Outgoing partners"  while Chapter VI separately deals with  "Dissolution of  a Firm".  The two  are  totally different concepts  and cannot  in law  be equated with each other, According  to the  learned Senior  Counsel, the rules framed by  Maharashtra Government  in  1989  and  the  forms prescribed under  the rules  in particular Forms E. G. and H clearly support  the  said  contention.    It  is  also  his contention that  even when there is a dissolution of a firm. It does not cease to be registered firm but for the purposes of Partnership  Act it  continues to be registered. In other words,  according   to  the   learned  Senior  Counsel.  the registration of  a firm  is valid  till it is cancelled in a manner know to law. Non-compliance of Sections 61,62 and 63. as amended  in Maharashtra,  if at  all,  will  attract  the penalties prescribed  under Section 69A and nothing more and it is  incorrect to  contend that non-compliance of the said provisions will  result in  deregistration is a drastic one, it  is   impermissible  to  hold  that  non-compliance  with Sections 63(1)  and 63(1A) would lead to deregistration of a firm  in  the  absence  of  express  and  clear  legislative provisions to  that effect. He further contended that merely because another  partnership deed was made on 20.1.01986, it cannot be  said that there was a dissolution of the old firm and consequential  formation of  a new firm under the latter dead. According  to the  l earned  Senior Counsel, it is the substance of  the matter  that is relevant to be looked into and not  the phraseology  employed by the parties. IN others words, the  test is  whether after the execution of the deed dated 20.10.1986, for all intents and purposes,. the firm as reconstituted was a different unit or remained the same unit in spite  of change in its constitution. Looked at from this angle, the  unit remained  the same  as it originally was in spite of  change in  its constitution  and the contention to the contrary,  according to  the learned Senior Counsel, was not  correct.   To  support   this,  he   pointed  out   the similarities   between    the   two   deeds.   The   alleged dissimilarities as  found in Clauses 4 and 5 of the Document dated  20.1.1986   are  really   not   dissimilarities   but consequential and incidental changes.      In support  of his  contentions, he  placed reliance on the  following  judgments  of  this  Court  and  other  High Courts:- Commissioner of  Income-Tax. West  Bengal vs.  A.W.Figgies & Co. and  Others (1954  (5) SCR  171); M/s Wazid Ali Abid Ali Vs. C.I.T.,  Lucknow  (  1988  (Supp)  SCC  193);  Tyresoles

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 13 of 19  

(India) Calcutta  vs. Commissioner of Income-Tax, Coimbatore (1963 Vol.  49 ITR  515); Firm  Girdhar Mal  Kapur Chand vs. Firm Dev  Raj Madan  Gopal (1964)  1 SCR   995); Pratapchand Ramchand &  Co. vsw.  Jehangirji   Bomanji Chinoy  (AIR 1940 Bombay 257)  : Tapendra  Chunder Goopta vs. Jogendra Chunder Goopta and  Others   (AIR (29)  1942 Calcutta  76);  Messrs, Durga Das  Janak Raj  vss. M/s. Mohatta Brothers a Firm (AIR 1969 Gujarat  178); and  Kesrimal and  Another vs. Dalichand and others (AIR 1956 Rajasthan 140).      In reply  to the  contention of  Mr, Nariman  that  the purpose  for   which  Section   69(2A)  was   introduced  by Maharashtra  legislature  will  be  the  last  if  the  view projected by  him is  not accepted,  Mr. Sorabjee  submitted that failure  to comply  with the  mandatory  provisions  in Section 61.62 or 63 may attract the penalties provided under Section 69  A of  the Act  but not the deregistration of the firm. In  support of  this, he placed reliance on a judgment of the  Andhra Pradesh  High Court  in Maddi  Sudarsanam and Others vs. Borogu Viswanadham Brothers (AIR 1955 Andhra 12).      At the outset, we would like to deal with the substance of the  Partnership deeds  in this case. As noticed earlier, the first  Deed of  Partnership was entered into on 29.11.79 and that partnership firm was requested on 15.12.80 . One of the partners  (Shri Mohanlal  Hinji Chawda)  died mon 6.5.86 and in his place, his widow was indicted. The second Deed of Partnership was  drawn on  20.1.86. By  reason of the second Deed of  Partnership, can  it be said that the existing firm dissolved or  ceased. It  is relevant  here to  note that in both the  deeds  it  was  expressly  made  that  the  death, insolvency or  retirement of  any partner shall not dissolve the partnership  firm. On  the other hand, the partner shall be entitled  to carry  on the  partnership business  on  the terms and  conditions  mutually  agreed  upon  bu  the  said partners  (vide   Clause  11)  .  Therefore,  it  cannot  be contended by  the appellants  that by reason of death of one of the  partners, the existing firm stands dissolved. Cam it then be  said that  by reason  of inducting the widow of the deceased partner  the existing  registered firm  ceased  and totally  a   new  partnership   firm  came  into  existence. According to the appellants, by reason of Clauses 4 and 5 in the second  Deed of  Partnership. It must be deemed that the old partnership  ceased and  entirely a new partnership firm was found under the second Deed. We are unable to agree with the  contention  of  the  learned  senior  counsel  for  the appellants on  this  aspect.  Clauses  4  and  5  relate  to commencement of  the partnership  and accounting year. There are minimal  changes   introduced  in  the  second  Deed  of Partnership by  reason of  the introduction of a new partner in place  of Clauses  4 and  5 in the first Partnership Deep and in  other respects,  namely, the name of the partnership firm, the  address and  location of  the firm, the  business carried on  and  shares  allotted  among  the  partners  and duration of  the  partnership,  are  identical.  Moreover  a careful reading of clauses 5 and 6 of the second partnership deed will  give an  impression that the partners have agreed to continue the existing firm. The profits or losses for the period prior  to and  up to the death of deceased partner is dealt with and provided. There is no indication that the old firm  was   dissolved.  Likewise,  reliance  placed  on  the recitals in  the third  Deed of Partnership drawn on 3.11.92 will not come to the help of the appellants. Learned counsel for the  appellants placed  reliance on the term used in the third  Partnership   Deep  reconstituted   in  the  Preamble portion. We  are of  the opinion that this does not make any substantial difference  when we  look into  the substance of

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 14 of 19  

the three deeds. In this connection, the learned counsel for the respondents has rightly placed reliance on the following observation made in Tyresoles (India). Calcutta (supra):      "In our  opinion, the  test of  the      pudding is  in the  eating and  the      true scope  of the  instrument  can      readily be  ascertained  from  what      actually happened instead of merely      depending  upon  expressions  which      the parties  might have  under some      mistaken notion loosely used."      Likewise. this  Court in  A.W. Figgies  & Co.  And Ors, (supra) at  page 177  observed  on  a  construction  of  two documents of partnership as follows :-      "To all  intents and  purposes  the      firm as  reconstituted  was  not  a      different unit  but it remained the      same unit in spite of the change in      its constitutions."      We are,  therefore, of the view that the existing  firm continued.      The  contention   of  the   learned  counsel   for  the appellants that the induction of the new partner will result in dissolution  of the firm is not also acceptable. Reliance placed on  the language  of Sections 31 and 32 of the Act to support the  said contention will be  of no avail if we look into Section  17 of  the  Act.  Section  17(a)  of  the  Act (extracted above)  suggests only  reconstitution of the firm where a  change occurs  in the  constitution of  the   firm. Otherwise, the  old  firm  remind  the  same,  Here  we  can usefully quote the passages from the judgments of this Court and other High Courts.      In Tyresoles (India). Calcutta (Supra) a Division Bench of the  Madras High  Court observed thus:-      "     The      dissolution      and      reconstitution of a partnership are      two different  legal concepts.  The      dissolution  puts  an  end  to  the      partnership.   but   reconstitution      keeps  it   subsisting,  though  in      another  form   .   A   dissolution      followed by  some of  the erstwhile      partners taking over the assets and      liabilities   of    the   dissolved      partnership and  forming themselves      into   a    partnership   is    not      reconstitution  of   the   original      partnership. The partnership formed      after  the  dissolution  is  a  new      partnership and  not a continuation      of   a    firm    of    partnership      necessarily implies  that the  firm      never  became   extinct.,  What  it      denoted is  a structural alteration      of the  membership of  the firm, by      addition or  reduction of  members,      and an incidental redistribution of      the shares of the partners."      To the  same effect,  this  Court  in  Commissioner  of Income-tax, West  Bengal-III Vs.  M/S Pigot  Champan & Co. - (AIR 1982, SC 1085) observed as  follows:-      "The principle is well settled that      it is  on examination  of  relevant      documents and  relevant  facts  and      circumstances that the Court has to

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 15 of 19  

    be satisfied  in each  case  as  to      whether there has been a succession      or   a    mere   change    in   the      constitution of the partnership. It      cannot     be     disputed     that      ’dissolution’ and  ’reconstitution’      are two  distinct  legal  concepts,      for,  a   dissolution  brings   the      partnership  to   an  end  while  a      reconstitution      means       the      continuation  of   the  partnership      under altered  circumstances but in      our view  in law  there would be no      difficulty in  a dissolution  of  a      firm   being    followed   by   the      constitution of a new firm buy some      of the  erstwhile partners  who may      take   over    the    assets    and      liabilities of the dissolved firm."      The next  question is whether the registration given to the firm  under the first Partnership Deed ceases when a new partner was  introduced into the firm. For this, we refer to Sections 58,59  and 63,  the relevant  portions have already been extracted. Rules 3, 4,6 and 17 have also been extracted. The forms prescribed in this connection have also been extracted.  A close  perusal of  these provisions  with Forms "A",  "E", "G"  and "H"   will  show that  there is  a definite distinction between the Certificate of Registration given to  the firm  and any alterations to be entered in the Register of  Firms. This  will suggest in no uncertain terms that the  changes in  the constitution  of the firm will not affect the registration once made. In other words, it is not required that  every time  a new  partner is  inducted fresh registration  has  to  be  applied  and  obtained.  However, information about  changes have  to  be  given.  Failure  to comply   attracts penalties under Section 69A of the Act. In this contend,  the judgment  in Maddi Sudarsanam (supra) can be    usefully     cited.     It     was     held     that:-           "The  second   condition  laid      down  in   Section  69(2)  is  also      satisfied. The  persons  now  suing      i.e. the present partners are shown      in  the   Register  of   Firms   as      partners of  the firm.  though  the      same  Register   shows  two   other      partners., own of whom died and the      other retired.  It may  be that the      fact of  retirement of  one of  the      partners and  the death  of another      should have  been notified  to  the      Registrar under  Section  63(1)  as      the said  events effected  a change      in the  constitution of  the  firm.      But the default made by the firm in      considering  the  question  of  the      maintainability of  the suit  under      Section   69(2).   There   is   the      essential distinction  between  the      constitution  of  a  firm  and  its      dissolution.  Non-compliance   with      the provisions of S. 63(1) may have      only other  consequences, but under      S. 69(2) only two conditions should      be  complied  with  by  a  firm  to      enforce  a  right  arising  from  a

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 16 of 19  

    contract and  those two  conditions      are complied  with in  the  present      case.      The above  view is  supported by  the decisions of this Court and  various other  High Courts.  In Firm  Girdhar Mal kapur   Chand (Supra),  this court  held that once there was registration  under   the  Indian   Partnership   Act   that registration,  in  our  opinion,  continues  to  operate  as registration under  that Act  and continues to be effective- in other  words, valid  registration in  the eye  of law  as administered in  India so  long as  the registration  is not cancelled in accordance with law."      In Pratapchand  Ramchand & Co. (supra), The Bombay High Court observed as follows:-      "Dealing   in    particular    with      S.63(1),  that   subsection   among      other things  provides that  when a      registered firm  is  dissolved  any      person   who    was    a    partner      immediately before the dissolution,      or the agent of any such partner or      person specially authorized in this      behalf,  may  give  notice  to  the      Registrar   of   such   change   or      dissolution,  specifying  the  date      therefore, and  the Registrar shall      make a  record of the notice in the      entry relating  to the  firm in the      Register of  Firms, and  shall file      the  notice   a  along   with   the      statement  relating   to  the  firm      filed under  S.59.  Pausing  there,      that Section evidently contemplates      in the  case of  a dissolution of a      firm by  death that notwithstanding      the death  h the  firm should still      be treated  for the  purpose of the      Act as still registered., Mr, Davar      has argued  that by  reason of  the      death and  the dissolution  of  the      firm  the   firm   ceased   to   be      registered, and  in his argument he      went so far as to say that the firm      ought to  have  been  g  registered      again No s doubt it would have been      logical having  regard to  S.42  if      the Act  had so  provided., But  in      fact  it  has  not,  The  Act  does      contemplate         notwithstanding      dissolution by  death that o far as      registration is  concerned the firm      is  to   be  deemed   still  to  be      registered,  and  it  expowers  any      person   who    was    a    partner      immediately before  the dissolution      to give  motive of  the change  and      required   the Registrar  to record      that motive  in the  entry relating      to the registration of the firm and      to file  it along with the original      statement which had been filed. The      next Section  requiring  notice  is      S.69(2). That is in these terms:      No suit  to enforce a right arising      from      a   contract   shall   be

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 17 of 19  

    instituted in  any Court  by or  on      behalf of  a firm against any third      party unless the firm is registered      and the  person suing  are or  have      been shown in the register of firms      as partners in the firm.      Applying that  sub-section  to  the      present   case    the   firm    was      registered  and   in   my   opinion      continued to  be registered  at the      date of  the  institution  of  this      suit on 26th October 1939. There is      no time  limit fixed  in any of the      S.60 to  63 as  to when  notice  of      alterations or  changes  should  be      given, Mr,  Davar argued  that  the      word "when with which each of those      Sections   begins    involves    an      obligation    upon    the    person      proposing to  give  notice  of  the      change to  give it immediately upon      the change  occurring. The Sections      do  not   say  so.   The   position      therefore is  this:  the  firm  was      registered  at   the  time  of  the      institution of  the suit.  The firm      then  consisted   of      Chhogamal      Dhanaji and  Chhunilal  Idanji, two      of  the   original  partners  whose      names were shown on the register at      the date  of registration  and were      shown on  the register  at the date      of the institution of the suit. The      fact that  the firm  was registered      at the  date of  the institution of      the suit  and that the names of the      persons suing  (The  firm  being  a      compendious name  for  the  persons      suing) were  shown in  the register      at The  date of  the institution of      the suit  appears to  me  to  be  a      compliance with s.      69(2) of the Act.      It would  seem that the Legislature      introduced  the  words  with  which      that  subsection  concludes.,  Viz.      and   the persons suing are or have      been shown in the register of firms      as partners  in the firm advisedly.      If  additional  partners  had  come      into the firm as partners since the      date  of   registration  and  their      names had  not been  entered on the      register in  accordance with notice      of a change kin the constitution of      the firm given to the Registrar. it      may well  be that  the firm as then      constituted could  not sue, because      although it  was a  registered firm      some  of  the  persons  then  suing      would not  be shown in the register      of firms as partners in the firm at      the date  of the  suit. That is not      this case.  The  partners  who  are      suing were  shown in  the  register

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 18 of 19  

    originally and are still show., and      the  firm  according  to  may    my      construction of  the  Act  remained      registered   notwithstanding    the      death  of   one  of   the  original      partners."      The above  view of  the Bombay  High Court was followed and applied  by the  Calcutta High Court in Jogendra Chunder Goopta (supra),  Punjab High  Court in  M/s Durga  Das Janak Raj (Supra)  and the Rajasthan High Court in Kesrimal & Anr. (supra).      In our opinion, the view taken by the Bombay High Court and followed by the other High Court  is the right view.      Learned  counsel   for  the  appellants  places  strong reliance on  the objects  and  reasons  for  the  amendments introduced in  the Maharashtra Act. According to the learned counsel, if  his contention is not accepted, the object with which Section  69(2A) was introduced will be lost. We do not think so.  In this  context, we  wish  top  point  out  that Section 69(3)(a)  of the Central Act enables the partners of both registered  and unregistered  firms to  file a suit for dissolution and  /or accounts.  That being  the position  by introducing sub-section  (2A) in Section 69, the Maharashtra Legislature has  placed certain  restrictions to  the extent that even  the  suit  for  dissolution  of  a  firm  or  for accounts, the  suit  can  be  filed  only  if  the  firm  is registered and  the ’person’  suing as a partner is shown in the Register  of Firms  as a  partner in  the firm. In other words, a  person, who  is not shown in the Register of Firms by induction  after registration  even though  the firms  is registered, cannot  file a suit for dissolution or accounts. This does not in any way mean that the registration given to the firm  earlier will  cease. In  this case,  the firm  was registered and there was only reconstitution of the firm and the first  respondent, the  plaintiff in  this  case,  is  a person     whose      name     is      shown     in      the Register of Firms also with the names of the appellants and, therefore, there  is compliance  of  Section  69(2A).    The contention to  the contrary  by the  learned counsel for the appellants cannot be accepted.      The decisions  cited by  the learned  counsel  for  the appellants are  distinguishable. In  Madho Prasad and others vs. Gouri  Dutt Ganesh  Lal (supra),  the principal question that arose for consideration was whether an incoming partner can be made liable for debts contracted b y a firm before he joined it.  In Gouri  Sankar Sheroff  and others vs. Central Hindusthan Bank  Ltd and  others (supra), again a creditor’s right to  proceed against assets of partnership firm and not a suit  by partners  for accounts.  In  Meenakshi  Achi  and Another vs.  P.S.M.Subramanian Chettiar  and Others (Supra), again it  was a case concerning the liability of partner for obligations incurred  before his  introduction. M/s  Nandlal Sohanlal. Jullundur  vs.  The  Commissioner  of  Income-Tax. Patiala (AIR  1977 Punjab & Haryana 320) also is not helpful to the appellants.      We are  also not  impressed by  the  arguments  of  the learned counsel for the appellants that if the definition of Section 4 is applied to Section 69(2A) then unless the names of all  partners find a place in the Register of Firms , the suit filed  by the  Plaintiff cannot  be sustained. The fact that the  firm was  registered and  Plaintiff’s name finds a place in the Register of Firms are not in dispute., The name of the  newly introduced partner, or cours,  does not find a place in  the Register of Firms. That means the person whose name does  not find  a place  in the  Register of Firms many

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 19 of 19  

incur certain  disabilities and  that will  not disable  the plaintiff to  press the  suit against  the firm,  which  was registered against  the persons  whose names find a place in the Register of Firms. We are not called upon to decide what are the disabilities of the person, whose name does not find a place in the Register of firms. For the purpose of Section 69(2A), the  partnership firm will mean the firm as found in the certificate of registration and the partners as found in the register  of firms  maintained as  per rule in Form ’G’. The present  suit being  one for dissolution and accounts by one of  the partners,  whose name  admittedly finds place in the Register  of  Firms  alongwith  the  names  of  all  the appellants,  the   requirements  of   Section   69(2A)   are satisfied. Section  4 of  the is also complied with for this limited purpose.      Our conclusion  is that  on the induction of the second respondent, the  existing firm was only reconstituted on the facts of  this case and, therefore, there is no necessity to get a  fresh registration. If by virtue of non-compliance of certain mandatory  provisions in  not informing   the  firm, certain penalties  provided in  the Act  alone are attracted and  that   will  not   lead  to  the  conclusion  that  the registration of the firm ceased. This conclusion is based on a conjoint reading of Sections 58_63 and the form prescribed thereunder. Further,  this conclusion  does not  in any  way militate the  object of the Maharashtra Amendment introduced by Act 29 of 84.      In the result, we hold that the suit in question is not hit by  section  69(2A)  of  the  Act  and,  therefore,  the Division  Bench   is   right   in   allowing   the   Appeal. Consequently, the  Appeal is  dismissed. However, there will be no order as to costs.