Right to sue for the accounts of a dissolved firm under Partnership Act, 1932

Ashutosh Rajput | Hidayatullah National Law University | 15th May 2020

Prem Lata v. Ishar Dass Chaman Lal [1995] INSC 30

Facts: 

M/s Ishar Dass Chaman Lal was a partnership firm consisting of Ishar Dass, Chaman Lal, and Om Prakash. The firm was not registered under section 69 of Partnership Act, 1932. The eldest son Chaman Lal died on 6.3.1978 due to which the partnership stood dissolved. The widow and the son of deceased Chaman Lal was called upon the respondents to render accounts of the firm. The respondent did not do so. Therefore, they were called to arbitration by invoking clause 16 of the partnership deed and, subsequently, the respondent refused to refer the dispute to arbitrator hence, the appellant invoked the jurisdiction of the ‘civil court’ under section 20 of the partnership deed. The respondent contended that since the partnership firm was unregistered therefore, the application under section 20 would not lie. The trial court navigated the contention of the respondent but on appeal the High Court held that the suit is non-maintainable due to its non-registration. Hence, the appellant filed the appeal before Hon’ble Supreme Court.

Issue: 

Whether the suit filed under section 20 of the partnership deed is maintainable with respect to section 69 of the partnership act?

Arguments:

By the appellant:

1. They are contending to seek enforcement of the right of parties after the dissolution of the partnership firm.
2. Section 69(3)(a) does not prohibit the appellant to file a suit with respect to infringement of the rights.

By the respondent:

1. Since the partnership firm is unregistered hence, the enforcement of their rights under section 20 of deed is not maintainable.

Judgment: 

Section 69(3) enshrines that (1)(2) shall also apply to a claim of set-off or other proceeding to enforce a right arising from a contract and the word ‘other proceeding’ will include wide aspect of proceedings in its ambit. Therefore, there is no embargo for filing a suit under section 20 of the deed. Hence, the suit under section 69 is maintainable. The appeal is allowed.