Gujarat High Court
Gujarat Water Supply & Sewage Board vs Evergreen Trading & Construction … on 20 April, 2026
NEUTRAL CITATION
C/FA/4979/2001 CAV JUDGMENT DATED: 20/04/2026
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Reserved On : 15/04/2026
Pronounced On : 20/04/2026
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/FIRST APPEAL NO. 4979 of 2001
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GUJARAT WATER SUPPLY & SEWAGE BOARD & ANR.
Versus
EVERGREEN TRADING & CONSTRUCTION COMPANY
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Appearance:
MR.VISHRUT R. JANI FOR MR RC JANI(357) for the Appellant(s) No. 1,2
MR KG SUKHWANI(871) for the Defendant(s) No. 1
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CORAM:HONOURABLE MR. JUSTICE J. C. DOSHI
CAV JUDGMENT
1. By way of the present First Appeal under Section
96 of the Code of Civil Procedure, 1908 (for short the “Code”),
the appellants, who are the original defendants, challenge the
judgment and decree dated 23.03.2001 passed by learned
Civil Judge (S.D.), Nadiad in Special Civil Suit No.312 of 1985,
whereby the suit filed by the plaintiff was decreed against the
defendants holding that the plaintiff is entitled to recover
Rs.5,08,422/- with 18% interest from the date of filing of the
suit till realization.
2. For the sake of brevity and convenience, the
parties are referred to their original status and position to the
learned Trial Court.
3. The brief facts borne out of the record are that the
plaintiff is a registered partnership firm and an approved
Class-A contractor with the defendants. The Executive
Engineer invited a public tender for the work of construction
of an Underground Drainage Scheme (Sewerage Collecting
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System) at Petlad. The plaintiff submitted its tender, which
was found to be competitive, and accordingly, the tender was
accepted. Consequently, an Agreement bearing No.
B/2/32/1980-81 was executed between the parties at an
estimated cost of Rs.2,22,280/-. The plaintiff’s tender amount,
however, was Rs.6,19,399.66 paisa, which was much higher
than the estimated cost. In spite of that, defendant No.1-
Gujarat Water Supply & Sewage Board, issued a work order
on 18.10.1980.
3.1 As per the terms and conditions of the agreement,
the work was to be completed within 12 months from the date
of issuance of the work order, i.e. on or before 17.10.1981.
The plaintiff furnished Rs.4,660/- as a security deposit in the
form of a bank guarantee and the remaining amount of
Rs.4,660/- was deducted from the running bill. Thus, in total,
plaintiff deposited Rs.9,320/- as security for the due
performance of the contract.
3.2 The plaintiff’s case is that it could not complete the
work within the stipulated time due to full and partial
hindrances caused by the defendant No.1. It is alleged that
adequate funds were not available with the defendant No.1,
which resulted in delay, and the work was ultimately
completed in May, 1993. The plaintiff further contended that
the initial width of excavation was only 0.75 mts. which was
not workable, and there was substantial excess over the
tender quantity. Additionally, the pipes required for laying in
the excavated trenches were not made available in time,
which further delayed completion of contract.
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3.3 The plaintiff also pleaded that the excavated
trenches crossed a railway line, and the necessary
permissions from the Railway authorities were not granted
within the stipulated time, causing further delay in completion
of the work.
3.4 In view of the above circumstances, the plaintiff
contended that due to the failure of reciprocal obligations on
the part of defendant No.1, it could not complete the work
within the stipulated time and suffered various monetary
losses. Accordingly, the plaintiff raised as many as nine
claims, as stated hereunder:
Claim No.1: Amounting to Rs.85,944-74 ps. on account of work
done not paid.
Claim No.2: Amounting to Rs.40,982-64 ps. on account of
unexecuted work.
Claim No.3: Amounting to Rs.1.50,000-00 on account of extra
Item for search in chambers.
Claim No.4: Amounting to Rs.1,12,500/- on account of removing
the surplus earth.
Claim No.5: Amounting to Rs.5000/- on account of delay in
releasing the security deposit.
Claim No.6: Amounting to Rs.25,000/- on account of work carried
out in the year 1982-83.
Claim No.7: Amounting to Rs.1,41,954-50 ps. on account of rise in
material labour, petroleum etc.Claim No.8: Amounting to Rs.50,000/- on account of overhead and
over stay of capital, machineries, etc.Claim No.9: On account of interest at the rate of 18% on amount
claimed from claim no.1 to 8:
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3.5 On the basis of the aforesaid claims, plaintiff
claimed recovery of Rs.8,86,503.25 paisa along with interest
at the rate of 18% from the defendants. The defendants filed
Written Statement alongwith a counterclaim at Ex.16. It is,
inter alia, contended that the suit of the plaintiff is not
maintainable and is barred under Section 69 of the Indian
Partnership Act, 1932, on the ground that the plaintiff firm
was not duly registered in accordance with the law. It is
further contended that the plaintiff must strictly prove its
claims and cannot merely on mere surmises and conjectures.
It is also contended that the plaintiff was at fault and failed to
complete the work within the stipulated time, and therefore is
not entitled to claim damages; rather, it is liable to
compensate defendant No.1-Gujarat Water Supply & Sewage
Board. The remaining averments made by the plaintiff were
denied.
3.6 The learned Trial Court framed the issues at Ex.19
and after permitting both parties to lead evidence, partly
decreed the suit.
3.7 Being aggrieved, the original defendants have
preferred the present First Appeal before this Court, inter
alia, on the grounds raised in the appeal memo.
4. I have heard learned advocate Mr.Vishrut Jani
appearing for the appellants – original defendants and
learned advocate Mr.Paras Sukhwani for the defendant –
original plaintiff.
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5. Learned advocate Mr.Jani firstly argued that the
suit has been filed by Evergreen Trading & Construction
Company – plaintiff, claiming it to be a registered partnership
firm, without impleading its partners. He further submitted
that this defect affects the jurisdiction, as a partnership firm is
merely a compendious name of its partners and does not have
a separate legal entity. Therefore, a civil suit cannot be
maintained against the defendants for any liability arising out
of the contract executed between the parties in absence of the
partners being joined.
5.1 In support of his submissions, learned advocate
Mr.Jani referred to Order XXX of the Code of Civil Procedure,
as well as Section 69 of the Indian Partnership Act, 1932. He
also placed reliance upon the judgment of the Hon’ble
Supreme Court in the case of Dhanasingh Prabhu Vs.
Chandrasekar & Anr. reported in (2025) INSC 831.
5.2 In view of the aforesaid submissions, learned
advocate Mr.Jani, contended that the learned Trial Court has
committed a jurisdictional error in entertaining the suit filed
by the partnership firm without impleading its partners. He
therefore submitted that the present appeal deserves
consideration and is required be allowed and the judgment
and decree be quashed and set aside.
5.3 Alternatively, he took this Court through the
findings of the learned Trial Court with regard to the claims
partly allowed and submitted that such findings are based on
surmises and conjectures without any supporting evidence led
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by the plaintiff. He further submitted that loss of profit cannot
be awarded in absence of specific and cogent evidence. In
support of this submission, learned advocate Mr.Jani relied
upon the decision of the Hon’ble Supreme Court in the case of
M/s Unibros Vs. All India Radio reported in
(2023)LawSuit(SC) 1052 and submitted that, firstly, there
was a delay in completion of the contract; second, such delay
is not attributable to the claimant, thirdly, the claimant’s
status as an established contractor, handling substantial
projects and fourthly, credible evidence to substantiate the
claim of loss of profitable arises.
5.4 He submitted that, in the present case, none of
such contention has been pleaded or proved by the plaintiff,
and yet the decree has been granted in favour of the plaintiff
i.e. too on mere presumption.
5.5 On the basis of the aforesaid submissions, learned
advocate Mr.Jani submitted that the present First Appeal be
allowed.
6. Per contra, learned advocate Mr.Sukhwani referred
to the written arguments running into 46 pages filed before
the learned Trial Court. He submitted that exhaustive
arguments were canvassed by learned advocate before the
learned Trial Court, which satisfy that therefore the impugned
judgment and decree has been rightly passed by the learned
Trial Court, deserves no interference.
6.1 He further submitted that the issue of
maintainability of the suit was not raised before the learned
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Trial Court, and no such issue was framed by the learned Trial
Court. Therefore, the same cannot be entertained at this
juncture.
6.2 Learned advocate Mr.Sukhwani relied upon the
following judgments:-
(i) M/s.A.T.Brij Paul Singh & Bros. vs. State of Gujarat
reported in AIR 1984 Supreme Court 1703;
(ii) M/s. Associated Construction vs.Pawanhansh
Helicopters Pvt. Ltd. reported in AIR 2008 Supreme
Court 2911;
(iii) Vadodara Municipal Corporation & Ors. Vs. M/s.
Sona Builders passed by the Division Bench of this
Court in First Appeal No.339 of 2026 on 05.02.2026;
(iv) State of West Bengal & Ors. vs. S.K.Maji reported
in 2025 SCC OnLine Cal 3945:
(v) M/s. Hind Construction Contractors by its sole
proprietor Bhikamchan Mulchand Jain (Dead) by L.Rs.
vs. State of Maharashtra reported in AIR 1979
Supreme Court 720;
6.3 In view of the aforesaid decisions, he submitted
that in a work contract, where breach occurs due to the fault
of the promisor, the contractor is entitled to claim damages on
the basis of expected profit on the balance of work. He further
submitted that the suit is maintainable, as the plaintiff is a
registered partnership firm. Referring to the documents on
record, he submitted that the Registration Certificate is
produced at Ex.71 and therefore, in view of Section 69(1) of
the Indian Partnership Act, plaintiff is entitled to maintain the
suit against defendant No.1-Gujarat Water Supply & Sewage
Board for liability arising out of the contract.
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6.4 In view of the aforesaid submission, he prayed for
dismissal of the present First Appeal.
7. I have heard learned advocate for both sides and
perused the impugned judgment alongwith the paper book, as
well as the record and proceedings. The issue as to whether a
registered partnership firm can sue in its own name or must
sue through its partners is a jurisdictional issue and can be
raised and decided at the stage of First Appeal, even if it is
not raised or decided during the Trial. Whether the
respondent herein argued issue, can sue only on partnership
firm name or has to sue defendant through its partners, is a
jurisdictional issue, and can be raised and decided during the
proceedings of the First Appeal. Because they are pure
question of law and they go to the root of the matter. In fact,
the Courts are duty- bound to examine the jurisdiction and
maintainability of a suit at any stage. Such objections are not
barred merely because they were omitted earlier. The Hon’ble
Supreme Court, in its recent judgment in the case of
Annamalai vs. Vasanthi & Ors. reported in (2025) INSC 1267 ,
clarified that a plea regarding the maintainability of a suit can
be raised at the appellate stage, notwithstanding that it was
not raised in the written statement, as no new facts or
evidence is required to adjudicate the same.
8. Thus, argument of learned advocate Mr.Sukhwani
that since the issue is not raised during the trial, it cannot be
raised at First Appeal proceedings is negated. From the cause
title of the Special Civil Suit, it is evident that none of the
partners of Evergreen Trading & Construction Company –
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plaintiff have been impleaded and the suit has been filed in
the name of firm alone.
9. Learned advocate Mr.Paras Sukhwani submitted
that the learned Trial Court has directed the plaintiff to
produce the Registration Certificate, which was produced at
Ex.71 and therefore the suit is maintainable under Section
69(1) of the Indian Partnership Act.
10. At this stage, it would be appropriate to refer to
Sections 69(1) of the Indian Partnership Act, which read as
under:-:-
“69(1) No suit to enforce a right arising from a contract or con-
ferred by this Act shall be instituted in any court by or on be-
half of any person 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.
11. Section 69(1) of the Indian Partnership Act, stipu-
lates that even if the firm is registered, a suit to enforce a
right arising from a contract or conferred by the Partnership
Act, shall be instituted in any Court by or on behalf of any per-
son suing in a firm against the firm or any person alleged to
be or to have been partner in the firm. Thus, it is evident that
even in the case of a registered partnership firm, the suit
must be instituted by one or more partners on behalf of any
person is required to be brought on behalf of the firm.
12. It would also be relevant to refer Rule (1) & (2)
Order XXX of the Code of Civil Procedure, 1908, which reads
as under:-
Suits by or against Firms and Persons carrying on
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1. Suing of partners in name of firm. –
(1)Any two or more persons claiming or being liable as
partners and carrying on business, in India may sue or be
sued in the name of the firm (if any) of which such persons
were partners at the time of the accruing of the cause of
action, and any party to a suit may in such case apply to the
Court for a statement of the names and addresses of the
persons who were, at the time of the accruing of the cause of
action, partners in such firm, to be furnished and verified in
such manner as the Court may direct.
(2)Where persons sue or are sued partners in the name of
their firm under sub-rule (1), it shall, in the case of any
pleading or other document required by or under this Code
to be signed, verified or certified by the plaintiff or the
defendant, suffice such pleading or other document is
signed, verified or certified by any one of such persons.
2.168
2. Disclosure of partners’ names.–(1) Where a suit is
instituted by partners in the name of their firm, the plaintiffs
or their pleader shall, on demanding writing by or on behalf
of any defendant, forthwith declare in writing the names and
places of residence of all the persons constituting the firm on
whose behalf the suit is instituted.
(2) Where the plaintiffs or their pleader fail to comply with
any demand made under sub-rule (1) all proceedings in the
suit may, upon an application for that purpose, be stayed
upon such terms as the Court may direct.
(3) Where the names of the partners are declared in the
manner referred to in sub-rule (1) the suit shall proceed in
the same manner, and the same consequences in all respects
shall follow, as if they had been named as plaintiffs in the
plaint:
[Provided that all proceedings shall nevertheless continue in
the name of the firm, but the name of the partners disclosed
in the manner specified in sub-rule (1) shall be entered in
the decree.]
13. Recently, this Court in the case of Jayantilal
Hargovandas Thakkar Vs. Gram Panchayat, Ratangadh,
reported in 2026(0)AIJEL-HC253062, had occasion to
interpret the identical arguments, in paragraph Nos.11 to 17,
this Court has observed as under:-
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“11.The core dispute between the parties is whether the
partnership firm, as plaintiffs, have filed the suit are three
brothers as co-owners have filed suit? The title of the plaint
indicates that plaintiff Nos.1, 2, and 3 have filed the suit as
persons carrying on business under the name and style of
Jayantilal Hiralal & Amrutlal Company. This suggests that
the suit has been filed in terms of Order XXX of the Code of
Civil Procedure. However, the averments in the plaint do not
clearly specify whether the plaintiffs have filed the suit as
partners of a partnership firm or in the individual capacity in
the name and style of the business under the ownership. In
the absence of specific pleadings, describing the title in the
name of a firm without clarification would suggest that the
suit has been filed by a partnership firm as contemplated
under Order XXX of the CPC.
12. It is an admitted position that the plaintiffs did not
produce the registration certificate of the partnership firm
along with the plaint. The plaintiffs have also failed to plead
the date of registration of the partnership firm or disclose
the names of its partners. Plaintiff No.2 entered into the
witness box at Ex.66 as P.W.1. In cross-examination, he
admitted that, at the time of filing the suit, the partnership
firm was unregistered. Simultaneously, he did not clarify
whether the suit had been filed by the firm or by three
brothers in their individual capacity as co-owners. Such
silence assumes significance as Ratangadh Gram Panchayat
in its written statement raised this issue with specific
contention. He further admitted that he was unaware
whether the partnership firm is registered. In the cross-
examination by the learned advocate for defendant No. 2, he
admitted that the public auction took place on 16th June,
1981, and the partnership firm came into existence in 1984.
Thus, at the time of the public auction, the partnership firm
was not in existence. He further admitted that although the
firm was not in existence, there was an understanding of
partnership among the three brothers prior to the auction. It
was also admitted that such partnership was not registered
at the time of the auction and was registered subsequently.
Apt to note that the written statements filed by defendant
Nos.1 and 2 raised a specific objection that the partnership
firm was unregistered.
13. In the backdrop of the aforesaid pleadings and factual
aspects as well as evidence, reference made to Section 69(2)
of the Indian Partnership Act, which reads as under:-
“69(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 thePage 11 of 18
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firm is registered and the persons suing are or have
been shown in the Register of Firms as partners in
the firm.”
14. The plain reading of Section 69(2) of the Act stipulates
that the suit to enforce a right arising from a contract shall
not be instituted in any Court by or on behalf of a firm
against the third party unless the firm is registered and the
persons suing are or have been shown in the register of firm
as partners in the firm.
15. The Hon’ble Supreme Court, in the case of M/s Shriram
Finance Corporation (supra), in para 6, has explained the
effect of Section 69(2) of the Partnership Act, which is as
under:-
“6.In the present case the suit filed by the appellants
is clearly hit by the provisions of sub-section (2) of
section 69 of the said Partnership Act, as on the date
when the suit was filed, two of the partners shown as
partners as per the relevant entries in the Register of
Firms were not, in fact, partners, one new partner
had come in and two minors had been admitted to the
benefit of the partnership firm regard- ing which no
notice was given to the Registrar of Firms. Thus, the
persons suing, namely, the current partners as on the
date of the suit were not shown as partners in the
Register of Firms. The result is that the suit was not
maintainable in view of the provisions of sub-section
(2) of section 69 of the said Partnership Act and the
view taken by the Trial Court and confirmed by the
High Court in this connection is correct.
16. Yet in judgment in the case of Purshottam (supra),
in para 8, the Hon’ble Apex Court has held as under:-
“8. The question as to whether the subsequent
registration of the firm would cure the initial defect in
the filing of the suit arose for consideration in D.D.A.
Vs. Kochhar Construction Work and Anr. (1998) 8 SCC
559. This Court held that in view of the clear provision
of the Act it was not possible to subscribe to the view
that subsequent registration of the firm may cure the
initial defect, because the proceedings were ab initio
defective as they could not have been instituted since
the firm in whose name the proceedings were
instituted was not a registered firm on the date of the
institution of the proceedings. This Court also noticed
the difference of opinion amongst the High Courts and
concluded thus:- (SCC P.562 para 4)
“4.Counsel for the respondents, however, invited ourPage 12 of 18
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attention to two decisions which take a view that
subsequent registration of the firm can cure the initial
defect provided the registration is before the period of
limitation has run out. Our attention was drawn to
M.S.A. Subramania Mudaliar Vs. East Asiatic Co. Ltd.
and Atmuri Mahalakshmi Vs.Jagadeesh Traders.
However, the High Court of Patna in Laduram Sagarmal
Vs. Jamuna Prasad Chaudhuri and the High Court of
Madras in T. Savariraj Pillai Vs. R.S.S. Vastrad & Co.
take a contrary view and hold that the suit is
incompetent ab initio. We have considered these
decisions, but in the light of the plain language of
Section 69 of the Partnership Act read with Section 20 of
the Arbitration Act and in view of the decision of this
Court reported in Shreeram Finance Corpn. We are
clearly of the opinion that proceedings under Section 20
of the Arbitration Act were ab initio defective since the
firm was not registered and the subsequent registration
of the firm cannot cure that defect”.
The same view was also reiterated in U.P. State Sugar
Corpn. Ltd. v. Jain Construction Co.
17. In view of the aforesaid aspect, according to this
Court, the plaintiffs have miserably failed to establish their
right to file the suit for enforcement of a contractual right.
It implies that the learned Trial Court has not committed
any error in deciding the issue against the plaintiffs. The
contention of the learned advocate Ms.Acharya that the
plaintiffs were carrying on business as co-owners appears to
be an afterthought. The pleadings and evidence on record
clearly indicate that the suit has been filed by a partnership
firm which was not registered on the date of institution of
the suit. Even though the firm was subsequently registered,
such registration does not cure the defect under Section
69(2) of the Partnership Act. Accordingly, the first
contention raised by the learned advocate Ms. Acharya, is
rejected.
14. The Hon’ble Supreme Court in case of Dhanasingh
Prabhu (supra) while dealing with the related issue under
Section 141 of the Negotiable Instruments Act, 1881, made
important observations in paragraph Nos.7.2 to 7.11 which
read as under:
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“7.2 Section 4 of the Partnership Act defines a partnership,
partner, firm and firm name as follows:
“4. Definition of “partnership”,”partner”, “firm” and
“firm name”-
“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.
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”.
(underlining by us)
7.3 The definition in Section 4 of the Partnership Act is
a departure from the erstwhile definition of partnership
in Section 239 of ICA. A significant departure, inter alia,
is the insertion of “acting for all” which brings in the
concept of agency. An amendment of substantial import
carried out by the Special Committee was with the
intent to elucidate clearly the fundamental principle
that the partners when carrying on the business of the
firm are agents as well as principals.1 Pollock & Mulla
also notes the salient distinction between the meanings
of ‘partnership’ and ‘firm’. Tracing from Section 4,
Pollock & Mulla clarifies that the word “partnership” is
used throughout the Partnership Act in the defined
sense of a relationship and where the partners are
referred to 1 Chapter 2, Pollock & Mulla, The Indian
Partnership Act, 8th Edn. Lexis Nexis Butterworths.
collectively, the word “firm” is used. It is pertinent to
recall that Explanation to Section 141 of the Act
provides that for the purposes of that section, a
company includes a firm or other association of
individuals. Nevertheless, the distinction is crucial
because it lends credence to the interpretation that
reference in Section 141 is as much to the partners of
the firm as it is to directors of a company.
7.4 According to Pollock and Mulla, 8th Edition, the
definition of partnership in Section 4 of the Partnership
Act contains three elements; (i) there must be an
agreement entered into by all the persons concerned;
(ii) the agreement must be to share the profits of a
business; and (iii) the business must be carried on by all
or any of the persons concerned, acting for all. All these
elements must be present before a group of associates
can be held to be partners. These three elements may
appear to overlap, but they are nevertheless distinct.
The third element shows that the persons of the group
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who conduct the business do so as agents for all the
persons in the group and are therefore liable to account
for all. This Court while elaborating the third essential
element has held that the position of a partner in the
firm is thus not of a master and a servant or employer
and employee which concept involves an element of
subordination, but that of equality. It may be that a
partner is being paid some remuneration for any special
attention which he devotes but that would not involve
any change of status or bring him within the definition
of employee, vide Regional Director, Employees’ State
Insurance Corporation vs. Ramanuja Match Industries,
(1985) 1 SCC 218, Paras 4 and 9.
7.5 In Section 4 of the Partnership Act, it is clearly stated
that persons who have entered into partnership with one
another are individually called partners and collectively a
firm and the name under which their business is carried out
is called a firm name. Thus, while partnership is the relation
between persons who have agreed to share profits of the
business carried on by all or any of them acting for all, the
persons are collectively called a firm and the name of the
firm is the firm name which is a compendious or collective
term of partnership of the partners. The said Section also
clearly implies that a firm or partnership is not a legal entity,
separate and distinct from its partners.
7.6 As already stated above, the firm is a compendious term
not distinct of the individuals who compose the firm. In other
words, partnership is merely a convenient name to carry out
business by partners. Thus, a firm is not an entity of persons
in law but is merely an association of individuals and firm
name is only a collective name of those individuals who
constitute the firm. In other words, the firm name is merely
an expression, only a compendious mode of designating the
persons who have agreed to carry on business in
partnership.
Thus, a firm may not be a legal entity in the sense of a
corporation or a company incorporated under the Companies
Act, 1956 or 2013, but it is still an existing concern where
business is done by a number of persons in partnership.
7.7 Insofar as the statutory definition of a company is
concerned, the legislature has found it particularly
cumbersome to provide a descriptive and inclusive
definition. Perhaps this is why the Parliament in its wisdom
defined ‘company’ in Section 2(2) of the Companies Act,
2013 (‘Companies Act‘) not by enumerating the essential
features of a company but “as a company incorporated under
this Act or under any previous company law”.2 Keeping
aside the omnibus statutory definition, several jurists have
attempted to outline a definition of a company for doctrinal
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and precedential analysis. Lindley, a Jurist and Judge defined
a company in the following terms:
“A company is an association of many persons who
contribute money or monies worth to a common
stock and employed in some trade or business and
who share the profit and loss arising therefrom.
The common stock so contributed is denoted in
money and is the capital of the company. The
persons who contribute to it or to whom it pertains
are members. The proportion of capital to which
each member is entitled is his share. The shares
are always transferable although the right to
transfer is often more or less restricted.”3Section 9 of the Companies Act, 2013 provides as
follows:
“9. Effect of registration
From the date of incorporation mentioned in the
certificate of incorporation, such subscribers to the
memorandum and all other persons, as may, from
time to time, become members of the company,
shall be a body corporate by the name contained in
the memorandum, capable of exercising all the
functions of an incorporated company under this
Act and having perpetual succession with power to
acquire, hold and dispose of property, both
movable and immovable, tangible and intangible,
to contract and to sue and be sued, by the said
name”.
7.8 While modern legislations and instruments have
outlined and carved out more complex features, rights
and obligations of a ‘company’, the fundamentals of
Lindley’s definition continue to hold ground. The salient
distinctions between a company and a partnership,
including the rights and obligations flowing therefrom
which are fundamental to common law, as well as the
relevant statutes promulgated by the Parliament could
be discussed at this stage.
Separate Legal Personality:
7.9 A partnership firm, unlike a company registered
under the Companies Act, does not possess a separate
legal personality and the firm’s name is only a
compendious reference for describing its partners. This
fundamental distinction between a firm and a company
rests on the premise that the company is separate from
its shareholders. In that context, the words of LordPage 16 of 18
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Macnaghten in Salomon vs. Salomon & Co. Ltd.,
[1897] AC 22 (HL), (“Salomon”) are instructive:
“the company is at law a different person
altogether from the subscribers……; and though it
may be that after incorporation the business is
precisely the same as it was before and the same
persons are managers and the same hands receive
the proceeds, the company is not in law, the agent
of the subscribers or trustee for them. Nor are the
subscribers as members liable, in any shape or
form, except to the extent and in the manner
provided by the Act.”
7.10 This distinction does not, however, continue to
hold true for a partnership firm. In the seminal case of
Bacha F. Guzdar vs. CIT, (1954) 2 SCC 563, this Court
had an opportunity to briefly address this distinction
between a partnership firm and a company, wherein it
was observed thus:
“13. It was argued that the position of
shareholders in a company is analogous to that of
partners inter se. This analogy is wholly
inaccurate. Partnership is merely an association of
persons for carrying on the business of partnership
and in law the firm name is a compendious method
of describing the partners. Such is, however, not
the case of a company which stands as a separate
juristic entity distinct from the shareholders.”
7.11 The partnership name being only a compendious
method of describing the partners, it stands to reason
that a reference to the partners in their capacity as
partners of the firm will be sufficient to impute liability
on the partners themselves, whereas directors of a
company are made liable vicariously through the
company, upon whom falls the primary liability. Thus,
the partners and the partnership firm are one and the
same. Unlike a company, a partnership firm has no
independent corporate existence and has no distinct
legal persona independent of its partners. Similarly, the
partners of a firm are co-owners of the property of the
firm unlike shareholders in a company who are not co-
owners of the property of the company. This principle
was also explained by the Calcutta High Court in Re:
The Kondoli Tea Co. Ltd., (1886) ILR 13 Cal 43 where
the transferors of a tea estate claimed that they were
eligible to claim exemption from payment of ad valorem
duty because the transferee was a company in which
they themselves were shareholders. Negativing thisPage 17 of 18
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contention, it was held that the company was a separate
person and the transfer of the tea estate was a
conveyance and in substance, a transfer to another
person.
15. In the present case, the suit has been filed in the
name of firm alone without impleading any partner is not
maintainable. In other words, partnership firm believing to
have legal identity, has filed suit on its own name, and not
through a partners. According to this Court, the learned Trial
Court has committed a serious and manifest error in allowing
the suit. Since the suit itself is not maintainable, this being a
core jurisdictional issue that ought to have been decided in
favour of the appellant herein, this Court does not deem it
necessary to decide the merits of the case.
16. The judgments relied upon by learned advocate
Mr.Sukhwani are not helpful to the facts of the present case.
17. For the foregoing reasons, the present First Appeal
is allowed. The impugned judgment and decree dated
23.03.2001 passed by the learned Civil Judge (S.D.), Nadiad,
is hereby quashed and set aside holding that the suit is not
maintainable. R& P, if any, be sent back to the concerned
Court.
18. Civil Application, if any, does not survive and
stands disposed of accordingly.
(J. C. DOSHI,J)
MANOJ
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