Madhya Pradesh High Court
Deen Mohammad vs Paradise Garh Nirman Shahkari Samiti on 5 March, 2026
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IN THE HIGH COURT OF MADHYA PRADESH
AT JABALPUR
BEFORE
HON'BLE SHRI JUSTICE DEEPAK KHOT
ON THE 5 th OF MARCH, 2026
FIRST APPEAL No. 1458 of 2025
DEEN MOHAMMAD
Versus
PARADISE GARH NIRMAN SHAHKARI SAMITI AND OTHERS
Appearance:
Shri Avinash Zargar with Shri Kedar Prasad Kuswaha - Advocate and Shri
Gouransh Bhurrak and Shri Arvind Soni - Advocate for the appellant.
Shri Ashok Kumar Gupta - Advocate for the respondent No.1.
Shri Anshuman Singh, with Shri Anuj Shrivastava - Advocate for the
respondents No.2, 4 and 5.
Shri Fuzail Usmani, learned counsel for the respondent No.3.
ORDER
The present appeal has been filed under section 96 of the CPC
assailing the impugned order dated 9.5.2025 passed by 18th District Judge,
Jabalpur, in R.C.S.A.No.15063/2024, whereby the suit filed by the
appellant/plaintiff has been rejected under Order 7 Rule 11 CPC.
2. It is the case of the appellant/plaintiff that the appellant/plaintiff has
filed a suit seeking declaration that he is co-owner of the suit property and
also claimed permanent injunction to restrain the respondents from creating
third party interest and alienating the suit property. It is averred in the plaint
that plaintiff, defendant no.3 and one Farog Ahmed Ansari, who were
partners, entered into an agreement dated 5.5.2016 with defendant no.1,
which is a registered co-operative society, to purchase the lands mentioned in
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para 1 of the plaint. It is further averred that the aforesaid agreement to sell
was made for sale consideration of Rs.1,35,00,000/- per acre, total
amounting to Rs.15,18,75,000/-. All the partners have paid their respective
shares in advance. It is averred that one partnership deed dated 18.7.2016
was also executed between plaintiff, defendant no.3 and Ahmad Ansari. It is
further averred that since defendants are trying to sell the suit property in
parts, therefore, plaintiff made paper publication on 13.1.2024 and has also
sent a notice dated 18.9.2024 to the defendants, however, the defendants are
continuously changing the nature of suit property, hence present suit seeking
relief of permanent injunction has been filed.
3. Defendants no.2, 4 and 5 filed an application under Order VII Rule
11 CPC on the ground that the plaintiff was not party to the agreement dated
5.5.2016, hence the suit is liable to be dismissed. Secondly, the suit is barred
under the provisions of Section 2(c)(vii)(xi) & (xv) of the Commercial
Courts Act, 2015. Further, it is stated that the suit is hit by section 69 of the
Indian Partnership Act because the partnership firm is an unregistered firm
and the agreement to sell dated 5.5.2016 is also an unregistered document. It
is further stated that defendant no.1 is a registered co-operative society and
any disputed between the plaintiff and the defendant no.1 will lie before the
Registrar, Co-operative Society as per the provisions of section 64(1)(c) and
64(2)(iv) of the M.P. Co-operative Societies Act.
4. The learned court below held that the plaintiff along with defendant
no.3 and one Farog Ahmed Ansari have executed a partnership deed on
18.7.2016 and thereafter on expiry of Farog Ahmed Ansari, another
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partnership deed has been executed on 14.3.2018 showing one Santosh
Usrethe to be the partner of the said firm. The learned court below while
considering the application of the defendants under Order 7 Rule 11 CPC,
found that the abovesaid partnership firm is an unregistered partnership firm
and, therefore, as per the provisions of section 69(2) of the Indian
Partnership Act, 1932, a suit arising from a contract by or on behalf of any
person suing as a partner in a firm against any firm or person is not
maintainable unless the said partnership firm is a registered firm and,
accordingly, rejected the suit of the plaintiff. Thereafter, the plaintiff has
preferred a review under Order XLVII Rule 1 CPC, which was also
dismissed vide order dated 16.7.2025.
5. Learned counsel for the appellant submitted that the plaintiff has
filed the suit for enforcement of legal rights and they were not arising out of
the partnership deed. It is submitted that the plaintiff has invested huge
amount in the suit property hence, he has incurred right in the same and is
entitled for the relief of declaration in his favour. Secondly, it is contended
that question with regard to the suit being barred by section 69 of the Indian
Partnership Act, 1932, could not be decided without adducing evidence. It is
further submitted that the partnership firm in question alleged to have been
constituted on 18.7.2016 and 14.3.2018 is not a party to the suit, hence, the
question of the suit being hit by section 69 of the Indian Partnership Act,
1932 does not arise. It is further submitted that even assuming that the
plaintiff has failed to establish formation of partnership firm, then also the
plaintiff share over the suit property could not vanish as the plaintiff has
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made payment of portion of sale consideration. It is further submitted that
the court below has committed grave error of law in rejecting the suit under
Order 7 Rule 11 CPC without affording an opportunity to lead evidence to
prove the case. To buttress his contention, reliance has been placed upon the
judgment of Apex Court in the case of Kumari Geeta Vs. Nanjundaswamy &
others, (2024) 14 SCC 390, Sania Patel & Others Vs. Rav Himavatsing &
Ors., 2021 SCC Online MP 3995, Mayor (H.K.) Ltd. & Ors. Vs. Owners &
Parties Vessel MV Fortune & Ors., (2006)3 SCC 100, Dahiben Vs.
Arvindbhai Kalyanji Bhanusali, (2020) 7 SCC 366, Shri Mukund Bhavan
Trust Vs. Shrimant Chhatrapati, (2024)15 SCC 675 and Mansukhlal Dhanraj
jain & Others Vs. Eknath Vitthal, (1995) 2 SCC 665 and a judgment of
Madras High Court in the case of S.Sri Sagana Vs. K.Padmavathi, passed on
18.2.2022 in CRP.PD.No.1304/2019 & CMP No.8523/2019.
6. Per contra, learned counsel for the respondents submitted that even
if it is assumed that an agreement has been entered into with the defendant
no.1 and the plaintiff has paid the sale consideration, he cannot claim himself
to be owner of the property in absence of execution of registered sale-deed.
Therefore, the suit seeking relief of declaration of co-owner of the suit
property and permanent injunction itself is bad in law and is not
maintainable. At the most, the plaintiff could have filed a suit for specific
performance of contract if the defendant no.1 has refused the execute the
sale-deed, or in case of refusal by the defendants to execute the sale-deed he
could have claimed his share of consideration by way of a suit seeking
refund of money and damages. But, the present suit seeking declaration as a
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co-owner of the property which is not yet sold to the plaintiff cannot stand in
the eyes of law. Moreover, the plaintiff has filed the suit on the basis of
agreement dated 5.5.2016 in which he himself was not a party. Moreover,
the partnership deed dated 18.7.2016 on the basis of which the plaintiff is
claiming ownership over the suit property is an unregistered partnership
deed, thus the suit is hit by section 69 of the Indian Partnership Act. Thus, it
is contended that the court below has rightly passed the impugned order
rejecting the plaint under Order VII Rule 11 CPC, which does not call for
any interference. To bolster his contention, counsel for the respondents have
relied upon a judgment of Hon’ble Apex court in the case of Haldiram
Bhujiawala v. Anand Kumar Deepak Kumar, (2000) 3 SCC 250 and
judgment of a coordinate Bench this Court dated 23.07.2024 in the case
o f Ashoka Group Vs. Shri Hariram Buddhraja and others, passed in
F.A.No.302/2013.
7. Heard learned counsel for the parties and perused the record.
8. From perusal of the application filed under Order 7 Rule 11 CPC by
defendants no.2, 4 and 5, it is found that the application has been filed on
various factual and legal grounds. However, the court below has decided the
application only on the ground that the suit has been found to be not
maintainable under section 69(2) of the Indian Partnership Act.
9. It is trite law that for consideration of rejection of plaint, only the
plaint averments are germane. The Hon’ble Apex court in the case of Nusli
Neville Wadia v. Ivory Properties, (2020) 6 SCC 557 , has held that the
pleadings of the plaint are germane to decide the application under Order 7
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Rule 11 of CPC. No other documents of defence is required to be seen at the
time of deciding the application under Order 7 Rule 11, that is to be seen at
the time of final hearing if those documents are brought by the other side in
accordance with law. The Hon’ble Apex Court has held as under :-
“69. In Hareendran v. Sukumaran [Hareendran v. Sukumaran,
(2018) 14 SCC 187 : (2018) 4 SCC (Civ) 510] , this Court has laid
down that question of limitation in the case being mixed question
of law and facts, could not have been decided as preliminary issue.
The provision under which a plaint can be rejected is provided in
Order 7 Rule 11( d ). The language used in Order 7 Rule 11 is
where averments made in plaint does not disclose a cause of
action; relief claimed is undervalued, and the plaint is not
corrected in spite of the direction of the Court; plaint is
insufficiently stamped, and in spite of the Court’s order the
plaintiff has failed to supply the requisite stamp duty; where the
suit appears from the statement in the plaint to be barred by any
law; where it is not filed in duplicate; and where the plaintiff fails
to comply with the provisions of Rule 9. What is of significance
under Order 7 Rule 11 is that from the averments of the plaint
itself the suit is barred by any law and it would include limitation
also including bar created by any other law for the time being in
force. For the rejection of plaint, averments made by the defendant
in the written statement or otherwise cannot be seen, only the
averments of the plaint are material and can be taken into
consideration and no other evidence”.
(emphasis supplied)
10. The Hon’ble Apex Court in the case of Dahi Ben Vs. Arvind Bhai,
(2020) 7 SCC 366, has held that even the documents filed along with the
plaint when they are referred to in the plaint, forms the basis of the plaint, it
should be treated to be a part of the plaint. In exercise of the power under
Order 7 Rule 11 CPC, the court would determine if the assertions made in
the plaint are contrary to the statutory law or judicial dicta or for deciding
whether case for rejecting the plaint at the threshold is made out. The
Hon’ble Apex Court has held as under :-
“23.2. The remedy under Order 7 Rule 11 is an independent and
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special remedy, wherein the court is empowered to summarily
dismiss a suit at the threshold, without proceeding to record
evidence, and conducting a trial, on the basis of the evidence
adduced, if it is satisfied that the action should be terminated on
any of the grounds contained in this provision.
23.3. The underlying object of Order 7 Rule 11( a) is that if in a
suit, no cause of action is disclosed, or the suit is barred by
limitation under Rule 11( d ), the court would not permit the
plaintiff to unnecessarily protract the proceedings in the suit. In
such a case, it would be necessary to put an end to the sham
litigation, so that further judicial time is not wasted.
***
23.6. Under Order 7 Rule 11, a duty is cast on the court to
determine whether the plaint discloses a cause of action by
scrutinising the averments in the plaint [Liverpool & London S.P.
& I Assn. Ltd. v. M.V. Sea Success I , (2004) 9 SCC 512] , read in
conjunction with the documents relied upon, or whether the suit is
barred by any law.
***
23.9. In exercise of power under this provision, the court would
determine if the assertions made in the plaint are contrary to
statutory law, or judicial dicta, for deciding whether a case for
rejecting the plaint at the threshold is made out.
23.10. At this stage, the pleas taken by the defendant in the
written statement and application for rejection of the plaint on the
merits, would be irrelevant, and cannot be adverted to, or taken
into consideration. [Sopan Sukhdeo Sable v. Charity Commr. ,
(2004) 3 SCC 137]
***
23.13. If on a meaningful reading of the plaint, it is found that the
suit is manifestly vexatious and without any merit, and does not
disclose a right to sue, the court would be justified in exercising
the power under Order 7 Rule 11 CPC.
23.14. The power under Order 7 Rule 11 CPC may be exercised
by the court at any stage of the suit, either before registering the
plaint, or after issuing summons to the defendant, or before
conclusion of the trial, as held by this Court in the judgment
of Saleem Bhai v. State of Maharashtra [Saleem Bhai v. State of
Maharashtra, (2003) 1 SCC 557] . The plea that once issues are
framed, the matter must necessarily go to trial was repelled by this
Court in Azhar Hussain case [Azhar Hussain v. Rajiv Gandhi,
1986 Supp SCC 315. Followed in Manvendrasinhji Ranjitsinhji
Jadeja v. Vijaykunverba, 1998 SCC OnLine Guj 281 : (1998) 2
GLH 823].
11. The Hon’ble Apex court in the case of Liverpool & London S.P. &
I Assn. Ltd. v. M.V. Sea Success I, (2004) 9 SCC 512 has held that the test
for exercising the power under Order 7 Rule 11 CPC is that if the averments
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made in the plaint are taken in entirety, in conjunction with the documents
relied upon, would the same result in a decree being passed. The Hon’ble
Apex court has further held as under :-
139. Whether a plaint discloses a cause of action or not is
essentially a question of fact. But whether it does or does not must
be found out from reading the plaint itself. For the said purpose
the averments made in the plaint in their entirety must be held to
be correct. The test is as to whether if the averments made in the
plaint are taken to be correct in their entirety, a decree would be
passed.
12. It is further held by the Hon’ble Apex court that it is not
permissible to cull out a sentence or a passage, and to read it in isolation. It is
the substance, and not merely the form which has to be looked into. The
plaint has to be construed as it stands without addition or substraction of
words. If the allegations in the plaint prima facie show a cause of action, the
court cannot embark upon an enquiry whether the allegations are true in
fact. (See D.Ramchandran Vs. R.V. Jankiraman, (1999) 3 SCC 267.)
13. The Hon’ble Apex court in the case of Dahi Ben (supra) has
delineated the meaning of cause of action which means every fact which
would be necessary for the plaintiff to prove, if traversed in order to support
his right to judgment. It consists of bundle of material facts which are
necessarily for the plaintiff to prove in order to entitle him to the reliefs
claimed in the suit.
14. The Hon’ble Apex court in the case of Swamy Atmananda v. Sri
Ramakrishna Tapovanam, (2005) 10 SCC 51, has held as under :-
24. A cause of action, thus, means every fact, which, if traversed,
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it would be necessary for the plaintiff to prove in order to support
his right to a judgment of the court. In other words, it is a bundle
of facts which taken with the law applicable to them gives the
plaintiff a right to relief against the defendant. It must include
some act done by the defendant since in the absence of such an act
no cause of action can possibly accrue. It is not limited to the
actual infringement of the right sued on but includes all the
material facts on which it is founded.
15. From perusal of the plaint, it is found that though the plaintiff has
submitted that there was some monetary transaction with defendants, for
which details have been mentioned in para 3 of the plaint; but, from other
pleadings it is found that the appellant has pleaded that such amount has been
used for payment of consideration of land of Rs.15,18,75,000/- in which the
plaintiff has also paid his share along with defendant no.3 and one Farog
Ahmed Ansari. It is also submitted that the land has been agreed to be
purchased under the partnership by way of agreement dated 5.5.2016, in
which name of one of the defendants has been mentioned as representative
of the firm. Thereafter, one another partnership deed dated 14.3.2018 has
been executed in which another partner has been included and defendant
no.3 has been made consent giver. It is the case of the plaintiff that by use of
that money, of which details have been mentioned in the plaint, the
defendant no.3 has been made Vice President of defendant no.1 Society and
defendant no.2 has been appointed as President. It is nowhere mentioned
that how the defendant no.1 has become owner of the land, which is a co-
operative society.
16. Moreover, from perusal of the partnership deed dated 18.7.2016, it
is found that there is a mention that an agreement to purchase land from the
said society has been executed. The deed has also got some recitals of other
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agreement executed with defendant Sarvesh Mishra, who has been appointed
as Vice President of the society. Thereafter, one another deed with name and
style ‘Partnership deed’ has been sought to be executed on 14.3.2018, which
has also been filed along with the plaint.
17. In the said deed, there is a recital that one of the Investor/partner
Farooq Ahmed has expired and in his place one new partner has been
inducted. When the entire deed is read, it is found that it contains all the
recitals of the partnership deed. The appellant is claiming his rights through
the said partnership deed and on the basis of payment which has been made
pursuant to the said deed. Section 69 of the Indian Partnership Act reads as
under :-
“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 behalf 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.
(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 as partners in the firm.
(3) The provisions of sub-sections (1) and (2) shall apply also to a
claim of set-off or other proceeding to enforce a right arising from
a contract, but 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 a ay right or power to realise the property of a
dissolved firm, or
(b) the powers of an official assignee, receiver or Court
under the Presidency-towns Insolvency Act, 1909 (2 of
1909), or the Provincial Insolvency Act, 1920 (5 of
1920), to realise the property of an insolvent partner.
(4) This section shall not apply–
(a) to firms or to partners in firms which have no place
of business in 1 [the territories to which this Act
extends], or whose places of business in 2 [the said
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under 3 [section 56], this Chapter does not apply, or
(b) to any suit or claim of set-off not exceeding one
hundred rupees in value which, in the Presidency-
towns, is not of a kind specified in section 19 of the
Presidency Small Cause Courts Act, 1882 (15 of 1882),
or, outside the Presidency-towns, is not of a kind
specified in the Second Schedule to the Provincial
Small Cause Courts Act, 1887 (9 of 1887), or to any
proceeding in execution or other proceeding incidental
to or arising from any such suit or claim.
18. The Hon’ble Apex court in the case of Haldiram Bhujiawala
(supra) has held as under :-
22. In Raptakos Brett and Co. [(1998) 7 SCC 184] it was clarified
that the contractual rights which are sought to be enforced by the
plaintiff firm and which are barred under Section 69(2) are “rights
arising out of the contract” and that it must be a contract entered
into by the firm with the third-party defendants. Majmudar, J.
stated as follows: (SCC p. 191, para 9)
“A mere look at the aforesaid provision shows that the
suit filed by an unregistered firm against a third party
for enforcement of any right arising from a contract
with such a third party would be barred….”
(emphasis supplied)
19. A coordinate Bench of this court in the case of Ashoka Group
(supra) has held as under :-
“20.Hon’ble Apex Court in Purushottam and another Vs. Shivraj
Fine Arts Litho works and others, (2007) 15 SCC 58, dealing with
present issue, has held as under:-
“21. It would thus appear that registration of a firm was
conceived as a protection to third parties dealing with a
partnership firm. Registration ensured the certainty of
existence of the firm and its membership, so that later
an unsuspecting third party contracting with the firm
may not run the risk of being defeated on discovery that
neither the partnership firm nor its partners existed in
fact. On the other hand, an unregistered firm could not
bring a suit for enforcing its right arising from a
contract.
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22. In Raptakos Brett & Co. Ltd. [(1998) 7 SCC 184]
this Court after noticing Section 69 of the Act observed:
(SCC p. 191, para 9)
“A mere look at the aforesaid provision shows that the
suit filed by an unregistered firm against a third party
for enforcement of any right arising from a contract
with such a third party would be barred at its very
inception. To attract the aforesaid bar to the suit, the
following conditions must be satisfied:
(i) That the plaintiff partnership firm on the date of the
suit must not be registered under the provisions of the
Partnership Act and consequently or even otherwise, the
persons suing are not shown in the Register of Firms as
partners of the firm, on the date of the suit.
(ii) Such unregistered firm or the partners mentioned in
the sub-section must be suing the defendant third party.
(iii) Such a suit must be for enforcement of a right
arising from a contract of the firm with such a third
party.”
23. Relying upon the aforesaid analysis this Court in
Haldiram Bhujiawala [(2000) 3 SCC 250] held that the
contract contemplated by Section 69 of the Act is the
contract entered into by the firm with the third-party
defendant. The contract by the unregistered firm
referred to in Section 69(2) must not only be one
entered into by the firm with a third-party defendant,
but must also be one entered into by the plaintiff firm in
the course of the business dealings of the plaintiff firm
with such third-party defendant.
24. With respect, we find ourselves in complete
agreement with the principles enunciated in Haldiram
Bhujiawala [(2000) 3 SCC 250]. Having regard to the
purpose Section 69(2) seeks to achieve and the interest
sought to be protected, the bar must apply to a suit for
enforcement of right arising from a contract entered into
by the unregistered firm with a third party in the course
of business dealings with such third party. If the right
sought to be enforced does not arise from a contract to
which the unregistered firm is a party, or is not entered
into in connection with the business of the unregistered
firm with a third party, the bar of Section 69(2) will not
apply.”
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21. Hon’ble Apex Court in Shiv Developers (supra) also, after
referring and relying upon Haldiram Bhujiwala (supra) , has held
as under:-
“15. In our view, the questions arising in this matter
could be directly answered with reference to the
principles enunciated by this Court in Raptakos Brett &
Co. Ltd. v. Ganesh Property [Raptakos Brett & Co. Ltd.
v. Ganesh Property, (1998) 7 SCC 184] , which have
further been explained and applied by this Court in
Haldiram Bhujiawala [Haldiram Bhujiawala v. Anand
Kumar Deepak Kumar, (2000) 3 SCC 250] and
Purushottam [Purushottam v. Shivraj Fine Arts Litho
Works, (2007) 15 SCC 58] . We may take note of the
principles vividly exposited in Haldiram Bhujiawala
[Haldiram Bhujiawala v. Anand Kumar Deepak Kumar,
(2000) 3 SCC 250] that to attract the bar of Section
69(2) of the 1932 Act, the contract in question must be
the one entered into by firm with the third-party
defendant and must also be the one entered into by the
plaintiff firm in the course of its business dealings; and
that Section 69(2) of the 1932 Act is not a bar to a suit
filed by an unregistered firm, if the same is for
enforcement of a statutory right or a common law right.
16. …………………………..
“8. The points that arise for consideration are:
(i) Whether Section 69(2) bars a suit by a firm not
registered on the date of suit where permanent
injunction and damages are claimed in respect of a trade
mark as a statutory right or by invoking common law
principles applicable to a passing-off action?
(ii) Whether the words “arising from a contract” in
Section 69(2) refer only to a situation where an
unregistered firm is enforcing a right arising from a
contract entered into by the firm with the defendant
during the course of its business or whether the bar
under Section 69(2) can be extended to any contract
referred to in the plaint unconnected with the defendant,
as the source of title to the suit property?”
16.1. Answering the first question in the negative, this
Court referred to the previous decision in Raptakos
Brett [Raptakos Brett & Co. Ltd. v. Ganesh Property,
(1998) 7 SCC 184] and held as follows :
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“9. The question whether Section 69(2) is a bar to a suit
filed by an unregistered firm even if a statutory right is
being enforced or even if only a common law right is
being enforced came up directly for consideration in
this Court in Raptakos Brett & Co. Ltd. v. Ganesh
Property [Raptakos Brett & Co. Ltd. v. Ganesh
Property, (1998) 7 SCC 184] . In that case, Majmudar,
J. speaking for the Bench clearly expressed the view
that Section 69(2) cannot bar the enforcement by way of
a suit by an unregistered firm in respect of a statutory
right or a common law right. On the facts of that case, it
was held that the right to evict a tenant upon expiry of
the lease was not a right “arising from a contract” but
was a common law right or a statutory right under the
Transfer of Property Act. The fact that the plaint in that
case referred to a lease and to its expiry, made no
difference. Hence, the said suit was held not barred. It
appears to us that in that case the reference to the lease
in the plaint was obviously treated as a historical fact.
That case is therefore directly in point. Following the
said judgment, it must be held in the present case too
that a suit is not barred by Section 69(2) if a statutory
right or a common law right is being enforced.
xxx x xxxx xxxx xxxx
11. Likewise, if the reliefs of permanent injunction or
damages are being claimed on the basis of a registered
trade mark and its infringement, the suit is to be treated
as one based on a statutory right under the Trade Marks
Act and is, in our view, not barred by Section 69(2).
12. For the aforesaid reasons, in both these situations,
the unregistered partnership in the case before us cannot
be said to be enforcing any right “arising from a
contract”. Point 1 is therefore decided in favour of the
respondent-plaintiffs.”
16.2 This Court further exposited on the scope of the
words “enforcing a right arising under the contract”, as
used in Section 69(2) of the 1932 Act; and after a
detailed survey of the reports and precedents which led
to the frame of the said provision as also after reference
to various authorities on the point, this Court explained
the rationale and object of the provision that the same
was intended to protect those in commerce who deal
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with a partnership firm in business, inasmuch as they
ought to be enabled to know the names of the partners
of the firm before they deal with them in business; and
the bar of Section 69(2) is not attracted to any and every
contract referred to in the plaint as a source of title to an
asset owned by the firm. This Court held and explained
as under:-
“23. The further and additional but equally important
aspect which has to be made clear is that the contract by
the unregistered firm referred to in Section 69(2) must
not only be one entered into by the firm with the third-
party defendant but must also be one entered into by the
plaintiff firm in the course of the business dealings of
the plaintiff firm with such third-party defendant.
24. … The real crux of the question is that the
legislature, when it used the words “arising out of a
contract” in Section 69(2), it is referring to a contract
entered into in course of business transactions by the
unregistered plaintiff firm with its defendant customers
and the idea is to protect those in commerce who deal
with such a partnership firm in business. Such third
parties who deal with the partners ought to be enabled
to know what the names of the partners of the firm are
before they deal with them in business.
25. Further, Section 69(2) is not attracted to any and
every contract referred to in the plaint as the source of
title to an asset owned by the firm. If the plaint referred
to such a contract it could only be as a historical fact.
For example, if the plaint filed by the unregistered firm
refers to the source of the firm’s title to a motor car and
states that the plaintiff has purchased and received a
motor car from a foreign buyer under a contract and that
the defendant has unauthorisedly removed it from the
plaintiff firm’s possession, it is clear that the relief for
possession against the defendant in the suit does not
arise from any contract which the defendant entered
into in the course of the plaintiff firm’s business with
the defendant but is based on the alleged unauthorised
removal of the vehicle from the plaintiff firm’s custody
by the defendant. In such a situation, the fact that the
unregistered firm has purchased the vehicle from
somebody else under a contract has absolutely noSignature Not Verified
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bearing on the right of the firm to sue the defendant for
possession of the vehicle. Such a suit would be
maintainable and Section 69(2) would not be a bar,
even if the firm is unregistered on the date of suit. The
position in the present case is not different.”
17. The aforesaid decision in Haldiram Bhujiawala
(supra) was further considered and applied by this Court
i n Purushottam [Purushottam (supra) while holding as
under:- “24. With respect, we find ourselves in
complete agreement with the principles enunciated in
Haldiram Bhujiawala [Haldiram Bhujiawala v. Anand
Kumar Deepak Kumar, (2000) 3 SCC 250] . Having
regard to the purpose Section 69(2) seeks to achieve
and the interest sought to be protected, the bar must
apply to a suit for enforcement of right arising from a
contract entered into by the unregistered firm with a
third party in the course of business dealings with such
third party. If the right sought to be enforced does not
arise from a contract to which the unregistered firm is a
party, or is not entered into in connection with the
business of the unregistered firm with a third party, the
bar of Section 69(2) will not apply.”
22. From plaint averments as well as documents referred and
quoted in preceding paras, it is evident that present suit has been
filed on behalf of the Ashoka Group for specific performance of
contract that was executed by one of its partner, on behalf of
Ashoka Group, after having been authorized by Ashoka Group.
Thus, present suit has been filed for enforcement of a right arising
from a contract of firm with third party. Thus, if facts of the
present case, as quoted and referred in preceding paras, along with
partnership deed/resolution, are examined in the light of legal
provision contained in Section 69(2) of the Indian Partnership Act
1932 as well as principles laid down by Hon’ble Apex Court in
Haldiram Bhujiawala (supra) Purshottam (supra) and Shiv
Developers (supra), then, it is evident that present suit filed by the
appellant/plaintiff is clearly barred by Section 69(2) of Indian
Partnership Act, 1932.”
20. Applying the aforesaid principles of law laid down by Hon’ble
Apex Court and in view of the factual analysis of the present case, bearing in
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mind the averments made in the plaint, it is found by this Court that the
present suit is not barred by section 69(2) of the Indian Partnership Act. It
has been clarified by the Hon’ble Apex court in the case of Haldiram
Bhujiawala (supra) that the contractual rights which are sought to be
enforced by the plaintiff firm and which are barred under section 69(2) are
“rights arising out of the contract” and it must be a contract entered into by
the firm with the third party defendants. Same principle has been reiterated
by the Hon’ble Apex Court in Purushottam and another Vs. Shivraj fine Arts
Litho Works and others, (2007) 15 SCC 58, Shiv Developers through its
Partner Sunilbhai Somabhai Ajmeri Vs. Aksharay Developers, AIR 2022 SC
772, Shakti Bhog Food Industries Ltd. Vs. Central Bank of India, AIR 2020
SC 2721 and by this Court in Ashoka Group (supra).
21. When pleadings of the plaint have been examined, it is found that
the plaintiff is not claiming any rights arising out of a contract with a third
party being the partner of the firm nor it is a case that a partnership firm has
entered into a contract with a third party in which the appellant being a
partner having rights. In fact, it is a case of the appellant that the appellant
has invested money with defendants, who are said to be partners in the
partnership firm to purchase land. However, the defendant became the office
bearer of the society from which it is to be purchased, therefore, it is not a
case of the firm against the third party. It is the case of the appellant/plaintiff
for declaration of his rights in the land. However, the relief which has been
sought by the appellant is ex-facie not tenable in the eyes of law in absence
of any transfer in favour of the appellant and other persons who have
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invested with the appellant to purchase the land as there is no transfer deed
available on record.
22. The object behind section 69(2) of the Act is that a third party
should not be defrauded by a firm which is not registered, against whom no
contractual obligation can be enforced. But, as a matter of fact, the learned
court below has not decided the application on the ground of not having
cause of action or rights of the appellant, which can be declared under
section 34 of the Specific Relief Act. Thus, in the considered opinion of this
court, rejection of the plaint under Order 7 Rule 11 CPC is not in accordance
with law. Accordingly, the impugned order dated 9.5.2025 passed by 18th
District Judge, Jabalpur, in R.C.S.A.No.15063/2024 is hereby quashed. The
matter is remanded back to the trial court to re-examine the application on
the available grounds by giving opportunity to all the parties to plead and
submit their arguments.
23. With the aforesaid, the appeal stands disposed of.
(DEEPAK KHOT)
JUDGE
HS
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