SUNKARI TIRUMALA RAO & ORS.versusPENKI ARUNA KUMARI

            [2025] 1 S.C.R. 902 : 2025 INSC 92

               Sunkari Tirumala Rao & Ors.
                            v.
                  Penki Aruna Kumari
      (Special Leave Petition (Civil) No. 30442 of 2019)
                         17 January 2025
        [J.B. Pardiwala and R. Mahadevan, JJ.]


                     Issue for Consideration
Whether a suit for recovery of money filed by partners of an
unregistered partnership firm against a partner of the same firm
is maintainable.

                             Headnotes†
Partnership Act, 1932 – Section 69 – Suit for recovery of money
filed by petitioners/plaintiffs, partners of an unregistered
partnership firm, against respondent/defendant, a partner of
the same firm – Trial Court found the suit to be maintainable
as partnership business had not commenced – High Court
found suit not maintainable as per Section 69(1) – SLP
against High Court order dismissed – Partnership firm being
unregistered would prevent the petitioners from filing a bare
suit for recovery of money from the respondent:
Held: Petitioners/plaintiffs filed a suit for recovery of money in their
capacity as partners of an unregistered partnership firm, against
respondent/ defendant – Maintainability of suit challenged on
grounds of Partnership Act, Section 69 – Trial Court found the suit
to be maintainable as partnership business had not commenced –
In Civil Revision Application, High Court found the suit not to be
maintainable under Section 69(1) as agreement of partnership
was unregistered – SLP against High Court order dismissed –
Mandatory character of Section 69(1) and (2) discussed – Seth
Loonkaran Sethiya and Others v. Mr. Ivan E. John and Others relied
on – Rigours of Section 69(1) would apply and the partnership
firm being unregistered would prevent the petitioners from filing
a bare suit for recovery of money from the respondent – Would
have been more appropriate had the petitioners/plaintiffs filed a
suit of dissolution instead, in light of the exception under Section
69(3) – Mukund Balkrishna Kulkarni v. Kulkarni Powder Metallurgical
Industries and Another relied on. [Paras 15-17]
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          Sunkari Tirumala Rao & Ors. v. Penki Aruna Kumari


                               Case Law Cited
     Seth Loonkaran Sethiya and Others v. Mr. Ivan E. John and
     Others [1977] 1 SCR 853 : (1977) 1 SCC 379; Mukund Balkrishna
     Kulkarni v. Kulkarni Powder Metallurgical Industries and Another
     (2004) 13 SCC 750 – relied on.

                                 List of Acts
     Partnership Act, 1932.

                              List of Keywords
     Unregistered partnership firm; Dissolution; Recovery of money;
     Maintainability; Existence of a partnership; Enforce a right arising
     from a contract.

                              Case Arising From
     EXTRAORDINARY APPELLATE JURISDICTION: Petition for
     Special Leave to Appeal (C) No. 30442 of 2019
     From the Judgment and Order dated 17.07.2019 of the High Court
     of Andhra Pradesh at Amravati in CRP No. 2944 of 2014

                         Appearances for Parties
     F. I. Choudhury, Adv. for the Petitioners.
     Ms. Manjeet Kirpal, Ms. Ritu Puri, Advs. for the Respondent.

                Judgment / Order of the Supreme Court

                                   Order

1.   This petition arises from the order passed by the High Court of
     Andhra Pradesh at Amravati dated 17-7-2019 in Civil Revision
     Petition No.2944/14 by which the High Court allowed the Revision
     filed by the respondents (original defendants) and thereby set aside
     the order passed by the District Judge, Vizianagaram in Original Suit
     No.80/12 deciding a preliminary issue as regards the maintainability
     of the suit instituted by the petitioners – herein (original plaintiffs)
     for recovery of money.
2.   It appears from the materials on record that the petitioners – herein
     (original plaintiffs) instituted Original Suit No.80/12 praying for the
     following reliefs:-
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            VI. Therefore, the plaintiffs pray that the Honourable Court
            may be pleased to pass a Decree and Judgment in favour
            of the plaintiffs and against the defendant:-
            a) For recovery of Rs.30,00,000/• (Rupees Thirty Lakhs
            only) from the defendant;
            b) Costs of the suit; and
            c) For such relief or other reliefs as the Honourable court
            deems fit and proper in the circumsta11ces of the case,
            in the interests of justice.”
3.     In the suit proceedings, the issue as regards the maintainability of
       the suit was raised on the ground that a partner of an unregistered
       partnership firm could not have filed the Suit for recovery of money,
       being hit by Section 69 of the Indian Partnership Act, 1932 (hereinafter,
       the “Act”).
4.     The aforesaid issue was decided as a preliminary issue and the
       Trial Court held that the suit is maintainable. The Trial Court took
       the view that although there is a partnership deed on record yet as
       the partnership business had not commenced, the suit could be said
       to be maintainable.
5.     The defendants being dissatisfied with the order passed by the Trial
       Court deciding the preliminary issue as stated above challenged the
       same by filing a Civil Revision Application before the High Court.
6.     The High Court took the view that the suit is not maintainable, being hit
       by Section 69 of the Partnership Act. The High Court in its impugned
       order while allowing the revision application, observed as under:-
            “3. The counsel for petitioner submits that the suit is not
            maintainable for the reason that it is hit by Section 69(1)
            of the Indian Partnership Act, 1932 (for short, the Act).
            The issue involved is whether a partner of an unregistered
            firm can maintain a suit against the other partner. For the
            sake of convenience, Section 69(1) of the Act is extracted
            hereunder:

            Section 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
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          Sunkari Tirumala Rao & Ors. v. Penki Aruna Kumari


           or on a behalf of any persons suing as a partner in a firm
           against the firm or any person alleged to be or to have
           been a partner in the firm unless the firm is registered and
           the person suing is or has been shown in the Register of
           Firms as a partner in the firm:
           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 the firm or to
           realise the property of the firm.
           4. The counsel for the respondents-plaintiffs submits that
           the partnership business has not yet commenced, and in
           the written statement filed by the petitioner-defendant in
           the suit, it is categorically mentioned that the business was
           stopped in the year 2009. The counsel for the petitioner, in
           answer to the said submission, draws the attention of this
           Court to the partnership agreement, wherein it is clearly
           mentioned that the plaintiff was offering partnership to the
           respondents as she was not able to carry on the business.
           The reason for closure of the business is immaterial
           since it is clearly mentioned in the agreement itself that
           the petitioner-defendant was not in a position to continue
           the Crusher and hence, she is offering partnership to
           the respondents. Hence, it has to be understood from the
           agreement that knowing fully well that the Crusher was not
           in a working condition on the date of the agreement, the
           respondents entered into the agreement. The judgment of
           the Lahore High Court in Bishen Narain v. Swaroop Narain1
           AIR 1938 Lahore 43 is to the effect that the fact that the
           actual business did not commence is immaterial, when the
           suit is filed by a member of the partnership firm against
           another partner, and it held that the partnership deed has
           to be registered in order to maintain a suit against the other
           partner. This Court is persuaded by the said judgment,
           since, even looked at from the point of view of equities, the
           respondents do not deserve to be given any concession
           on the ground that the business of the partnership firm
           has not commenced, as was done by the lower Court.
           Once there is an agreement of partnership, unless it is
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            registered, no suit can be maintained by the partners for
            enforcing any right accruing from such agreement.
            5. In view of the above, this Court opines that the impugned
            order cannot be sustained.
            6. Accordingly, the civil revision petition is allowed, setting
            aside the order dated 07.7.2014, passed in 0.S. No.80 of
            2012 on the file of the Court of District Judge, Vizianagaram.
            Consequently, it is held that O.S. No.80 of 2012 on the
            file of the Court, of District Judge, Vizianagaram, is not
            maintainable.”
7.     We have heard the learned counsel appearing for the parties and
       have gone through the materials on record.
8.     It is evident from a reading of sub-sections (1) and (2) of Section
       69 that it assumes a mandatory character. Section 69(1) prohibits
       a suit amongst the partners of an unregistered partnership firm, for
       the enforcement of a right either arising from a contract or conferred
       by the Act, unless the suit amongst the partners is in the nature of
       dissolution of the partnership firm and/or rendition of accounts. Section
       69(2) prohibits the institution of a suit by an unregistered firm against
       third persons for the enforcement of a right arising from a contract.
       As a consequence, a suit filed by an unregistered partnership firm
       and all proceedings arising thereunder, which fall within the ambit
       of Section 69 would be without jurisdiction.
9.     This Court in Seth Loonkaran Sethiya and Others v. Mr. Ivan E. John
       and Others reported in (1977) 1 SCC 379 had categorically held
       that Section 69 is mandatory in character and a suit instituted by a
       plaintiff in respect of a right which was vested in him by virtue of a
       contract and entered into in his capacity as a partner of a partnership
       firm, would be void, if such a firm was unregistered. The relevant
       observations are as under:
            “21. A bare glance at the section is enough to show that
            it is mandatory in character and its effect is to render a
            suit by a plaintiff in respect of a right vested in him or
            acquired by him under a contract which he entered into
            as a partner of an unregistered firm, whether existing or
            dissolved, void. In other words, a partner of an erstwhile
            unregistered partnership firm cannot bring a suit to enforce
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           Sunkari Tirumala Rao & Ors. v. Penki Aruna Kumari


           a right arising out of a contract falling within the ambit of
           Section 69 of the Partnership Act. In the instant case, Seth
           Sugan Chand had to admit in unmistakable terms that the
           firm “Sethiya & Co.” was not registered under the Indian
           Partnership Act. It cannot also be denied that the suit out
           of which the appeals have arisen was for enforcement of
           the agreement entered into by the plaintiff as partner of
           Sethiya & Co. which was an unregistered firm. That being
           so, the suit was undoubtedly a suit for the benefit and in
           the interest of the firm and consequently a suit on behalf
           of the firm. It is also to be borne in mind that it was never
           pleaded by the plaintiff, not even in the replication, that
           he was suing to recover the outstandings of a dissolved
           firm. Thus, the suit was clearly hit by Section 69 of the
           Partnership Act and was not maintainable.”
10. In yet another decision in Mukund Balkrishna Kulkarni v. Kulkarni
    Powder Metallurgical Industries and Another reported in (2004) 13
    SCC 750, this Court had the opportunity to consider the applicability
    of Section 69(1) having regard to the facts of that case. Therein,
    the appellant had filed a suit for declaration that the respondent no.
    1 was a partnership business in which both the appellant and the
    respondent no. 2 had equal shares along with the prayer for dissolution
    of the firm and rendition of accounts. It was opined therein that the
    two embargoes which must co-exist for the plaintiff to be non-suited
    under Section 69(1) would be that:
     i.    The suit should be filed by a person “suing as a partner in a
           firm” and;
     ii.   The suit must be to enforce a right arising from a contract.
11. By applying the two embargoes to the facts of that case, it was
    held that, first, the suit for declaration as regards the existence of
    a partnership could neither be said to be made by a person suing
    as a partner nor could be said to be a suit to enforce a right arising
    from a contract. It was in fact a prayer to be declared a partner in
    the firm and was therefore, not falling within Section 69(1). Secondly,
    as regards the other prayer for dissolution of the firm, the Court held
    that the appellant was in fact suing “as a partner” and was also
    enforcing a right under a contract. However, the same was saved
    due to the operation of the exception under Section 69(3) which
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       permits the filing of a suit for dissolution of the firm and rendition
       of accounts irrespective of the non-registration of the partnership
       firm. Therefore, the suit was held to be maintainable. The relevant
       observations are as under:
            “9. The sub-section contains embargos which must coexist
            before a plaintiff can be non-suited under that sub-section.
            The two embargos relevant for this case are: (1) that the
            suit should be filed by person “suing as a partner in a
            firm” and (2) that the suit must be to enforce a right arising
            from a contract. The submission of the respondents which
            was accepted by the High Court was that the prayer of
            the appellant, namely, for a declaration of the existence
            of the partnership and the share between the parties
            was a suit to enforce a right under a contract against the
            firm. A prayer for such declaration could not be said to
            be made by person suing as a partner. It was a prayer
            to be a partner and is therefore not debarred under the
            provisions of Section 69(1). Furthermore, what was in fact
            being prayed for by the appellant was a declaration of the
            existence of a contract between the parties. That could
            not be said to be a suit to enforce a right arising from a
            contract. The second prayer of the appellant was not to
            continue as a partner of the firm but to dissolve the firm.
            To that extent the appellant was suing “as a partner”. This
            he was entitled to do under Section 69(3)(a) which insofar
            as it is relevant, reads as follows:
                 “69. (3) The provisions of sub-sections (1) … 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;”
            10. The right of partner to ask the dissolution of a firm is
            a right the enforcement of which is otherwise forbidden
            under Section 69(1). It is because of the exception under
            sub-section (3) of Section 69 that a person suing as a
            partner can enforce a right under the contract for dissolution
            of the firm and accounts. The claim for a half share in the
[2025] 1 S.C.R.                                                            909

           Sunkari Tirumala Rao & Ors. v. Penki Aruna Kumari


           firm’s assets would be a necessary corollary to a prayer
           for dissolution. Without the prayer for specified shares
           in the firm’s assets and business, the relief that may be
           granted in a suit for dissolution would be ineffective. In
           the circumstances of the case, we allow the appeal and
           set aside the decision of the High Court and affirm the
           decision of the first appellate court. There will be no order
           as to costs.”
12. In the case on hand, the petitioners (original plaintiffs) had filed the suit
    for recovery of money in their capacity as partners of an unregistered
    partnership firm, against the respondent (original defendant) in her
    capacity as a partner of the same unregistered partnership firm. The
    Trial Court itself had arrived at a finding that the agreement executed
    between the parties was in fact a partnership deed and not a bond
    as claimed by the petitioners.
13. The partnership deed dated 11.12.2009 reads as thus:
           “II. My taluk jenny Stone Crusher Quarry in Amathi village,
           Therlam Mandalam, Vizianagaram. District. I am running
           the crusher quarry. I am having all rights in my crusher
           quarry. Now it is difficult for me to run the crusher quarry.
           I was asked to run the crusher quarry with partnership.
           My well-wisher asked me to run and i agreed to give the
           quarry in partnership keeping with me 25%, No.1 of us
           20%, No. 2 of us, No.3 of us 15%, no. 4 of us 15%, No.5
           of us 7.5%, No.6 of us 7.5% shares allotted to provide
           partnership, through shares and through this document
           received Rs. 30,00,000/- (Rupees Thirty Lakhs) so allotted
           the shares mentioned above through this document.
           From today onwards as per the allotment of shares enjoy
           the schedule properties with all easementary rights and
           profits and loss. Every month distributions verify and
           maintain the shares of your properties. I will never object
           in any manner. Pay the crusher quarry and taxes to the
           Government. I can not do any dispute believing you persons
           and handing over to you people.”
14. A perusal of the partnership deed clearly reveals that the sum of
    Rs. 30,00,000/- which was given to the respondent and which is
    now sought to be recovered, was rendered by the petitioners as
    capital for the purpose of acquiring 75% shares collectively in the
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       partnership firm. As per the arrangement, the respondent was to
       hold the remaining 25% shares. Therefore, there is no doubt that
       the suit for recovery was filed by a set of partners together on one
       side, against another partner, for the purpose of enforcing a right
       accruing under the agreement.
15. It is a clear as a noon day that the present suit had not been instituted
    by or on behalf of the firm against any third persons so as to fall
    under the ambit of Section 69(2). The petitioners have also not filed
    the instant suit for enforcing any statutory right conferred under any
    other law or a common law right so as to exempt the application of
    Section 69. Hence, the rigours of Section 69(1) would apply on such
    a suit and the partnership firm being unregistered would prevent
    the petitioners from filing a bare suit for recovery of money from
    the respondent.
16. It would have instead been appropriate for the petitioner to have
    preferred a suit for dissolution of the partnership firm and rendition
    of accounts, especially considering that the factum of non-registration
    of the partnership firm would not have acted as bar in a suit for
    dissolution in light of the exception carved out under Section 69(3).
    The defence that the partnership business had not yet commenced
    and thus, such a suit for dissolution could not have been preferred,
    would not be of any avail to the petitioners, particularly for overcoming
    the jurisdictional bar under Section 69(1). The High Court is right
    in taking the view that a suit of such nature could not be said to be
    maintainable in the absence of the registration of the partnership firm.
17. In light of the aforesaid, we are of the view that no error not to speak
    of any error of law could be said to have been committed by the
    High Court in passing the impugned order.
18. In the result, the Special Leave Petition fails and is hereby dismissed.
19. Pending applications, if any, also stand disposed of.

       Result of the case: Petition dismissed.



       †
           Headnotes prepared by: Aishani Narain, Hony. Associate Editor
                                   (Verified by: Shibani Ghosh, Adv.)