Writ Petition under Article 227 challenging dismissal of Notice of Motion rejecting plaint by unregistered partnership firm under Section 69(2) IPA.

Headnote:

Petitioner, an unregistered partnership firm, entered into a Leave and Licence Agreement with Defendant No.1 for operating hospitality business at Eskay Resorts, Borivali. Parties later agreed to jointly carry on the business and share income/expenses. Defendant terminated the agreement, prompting Plaintiff to file a Commercial Suit seeking specific performance and/or refund of Rs. 7.71 crore spent in performance of the agreement. Defendant filed Notice of Motion to reject plaint under Section 69(2) of the Indian Partnership Act, 1932. City Civil Court dismissed the motion. High Court allowed the Writ Petition, quashing the order, holding the suit arose from a contract entered by an unregistered partnership firm in course of business with a third party, thus barred under Section 69(2). Plaint rejected.

Background:

1. Respondent – Plaintiff, a partnership firm, entered into a Leave and Licence Agreement with Petitioner No.1 Company on 21 June 2022 to run hospitality business at Eskay Resorts, Borivali.
2. Parties agreed on joint operation and sharing of income and expenses in a meeting on 11 October 2022.
3. Defendant No.1 terminated the agreement on 15 February 2023, prompting Plaintiff to file Commercial Suit No. 1115 of 2024 for specific performance and/or refund of Rs. 7.71 crore.
4. Defendant filed Notice of Motion for rejection of plaint under Section 69(2) of the Indian Partnership Act, 1932, claiming unregistered firm cannot enforce contractual rights.

Legal Issues:

1. Applicability of Section 69(2) of Indian Partnership Act, 1932 on an unregistered partnership firm.
2. Distinction between enforcement of statutory/common law rights and contractual rights.
3. Maintainability of suit by unregistered firm against third party arising from contract related to firm’s business.

Decision / Judgment:

1. Writ Petition allowed.
2. Impugned order in Notice of Motion No. 1158 of 2025 quashed.
3. Notice of Motion allowed.
4. Plaint in Commercial Suit No. 1115 of 2024 rejected.
5. Court held: the suit arose from a contract entered by unregistered partnership firm in the course of its business with a third party, attracting the bar under Section 69(2) of the Indian Partnership Act, 1932.
6. No costs awarded.

Legal Provisions Concerned:

1. Section 69(2) IPA bars unregistered partnership firm from suing third parties to enforce rights arising from contracts entered in course of business.
2. Contracts outside the firm’s business or statutory/common law rights not barred by Section 69(2).
3. Even partial claims dependent on the contract cannot be separated; if core claim barred, plaint is rejectable under Order VII Rule 11 CPC.

Case Citation: 2025:BHC-AS:43773 / WP 10482 of 2025

Court: High Court of Judicature at Bombay, Civil Appellate Jurisdiction

Coram: Hon'ble Justice N.J. Jamadar