V SUBRAMANIAM versus RAJESH RAGHUVANDRA RAO

Citation: [2009] 4 S.C.R. 942 · Decided: 20-03-2009 · Supreme Court of India · Bench: MARKANDEY KATJU · Disposal: Appeal(s) allowed

Judgment (excerpt)

[2Ju.J; l S C.R. 942 
A 
V SU3R.AMANIAl'v1 
v 
RAJESH RAGHUVANDRA RAO 
Civil Appeal No.7438 of 2000 
B 
MARCH 20, 2009 
(MARKANDEY KAT JU AND G.S. SINGHVI, JJ.) 
Indian Partnership Act, 1932 -s 69(2A) as introduced by 
• 
~ 
Maharashtra Amendment of 1984 (Maharashtra Act No.29 of 
c 
1984 )- Constitutional validity of - Held: It is not valid - The 
provision violates Arts. 14. 19(1 )(g) and 300A of the 
Constitution - It deprives a partner in an unregistered firm from 
recovery of his share in property of the firm or from seeking 
dissolution of the firm - Restrictions placed by s.69(2A) are 
arbitrary and of excessive nature and go beyond what is in the 
+ 
D public interest - Constitution of India, 1950 -Arts. 14, 19(1 )(g) 
and 300A. 
In a suit filed before the Bombay City Civil Court for 
dissolution of an unregistered partnership firm, the 
defendant took the stand that the suit was not 
E maintainable in view of sub-section (2A) of Section 69 of 
the Indian Partnership Act, 1932. The said sub-section (2A) 
.:i. -
was introduced to s.69 of the Act, by the Maharashtra 
Amendment of 1984 (Maharashtra Act No. 29 of 1984). 
F 
Till the Maharashtra Amendment of 1984 came into 
force on 1-1-1985, a partner in a firm could file a suit for 
dissolution of an unregistered partnership firm or for 
accounts of the dissolved firm or to recover the properties 
of the dissolved firm. However, in view of sub-section (2A) 
of Section 69, w.e.f. 1-1-1985 a partner in an unregistered 
.! 
G partnership firm in the State of Maharashtra cannot file a 
suit for dissolution or for accounts of a dissolved firm or 
realize properties of a dissolved firm, unless the duration 
of the firm was only six months or it's capital is upto 
Rs.2000/-. 
H 
942 
V SUBRAMANIAM V RAJESH RAGHUV/\NDRA RAO 
943 
i 
-~ 
The question raised in the instant appeal was: A 
-) 
whether sub-section (2A) of Section 69 inserted by the 
Maharashtra Amendment is constitutionally valid. 
Allowing the appeal, the Court 
HELD:1.1. There is no legal requirement, unm<e in B 
England, which makes registration of a firm compulsory, 
rather in India it is voluntary. Both registered and 
unregistered are legal though of course registration and 
non registration have different legal consequences. The 
primary object of registration of a firm is protection of third c 
parties who were subjected to hardship and difficulties 
in the matter of proving as to who were the partners. Under 
the earlier law, a third party obtaining a decree was often 
put to expenses and delay in proving that a particular 
person was a partner of that firm. The registration of a D 
firm provides protection to the third parties against false 
denials of partnership and the evasion of liability. Once a 
firm is registered under the Indian Partnership Act, 1932 
the statements recorded in the Register regarding the 
constitution of the firm are conclusive proof of the fact E 
contained therein as against the partner. A partner whose 
name appears on the Register cannot deny that he is a 
partner except under the circumstances provided. Even 
then registration of a partnership firm is not made 
compulsory under the Act. A partnership firm can come 
into existence and function without being registered. F 
[Paras 26 & 28] [952-G-H; 954-D-E; 953-A-C] 
1.2. The Maharashtra Amendment to s.69 of the Indian 
Partnership Act, 1932, whereby sub-section (2A) was 
introduced, effects such stringent disabilities on an G 
unregistered firm which are crippling in nature. It lays 
down that an unregistered firm cannot enforce its claims 
against third parties. Similarly, a partner who is not 
registered is unable to enforce his claims against third 
parties or against his fellow partners. An exception to this H 
944 
SUPREME COURT REPORTS 
[2009] 4 S.C.R. 
A disability with regard to an unregistered firm was made in 
I • 
sub-section (3)(a) to Section 69, and this clause enabled 
the partners in an unregistered firm to sue for the 
dissolution of the firm or for accounts or for realizing the 
property of the dissolved firm. Thus a partnership firm 
B could come into existence, function as long as there is 
no problem, and disappear from existence without being 
registered. This changed by the 1984 Amendment 
extending the bar of the proceedings to a suit for 
• 
I. ... 
dissolution or recovery of property as well. The effect of 
c the Amendment is that a partnership firm is allowed to 
come into existence and functio

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