Bombay High Court
Case BriefsHigh Courts

Bombay High Court: Expressing that, a firm is not a legal entity, N.J. Jamadar, J., held that a partnership firm is only a collective or compendious name for all the partners.

The present matter was filed to recover the amount which the plaintiffs claimed to have invested in defendant 1 – firm, along with the interest at the rate of 24% p.a. on the basis of the credit notes.

The plaintiffs asserted that defendant 1 was a registered partnership firm and defendants 2 to 4 were its partner and in charge of day-to-day affairs of defendant 1 -firm and otherwise responsible for the conduct of the affairs and business of defendant 1—firm.

Plaintiffs’ case was that upon the representation of defendants 2 to 4 that the plaintiffs would get a handsome return on the investment made with the defendants, the plaintiffs had invested a sum of Rs 1 crore, over a period of time. The said amount was to be repaid on demand along with interest.

Further, the defendant committed default in repayment, hence the suit was filed.

Analysis and Decision

Defendant 1—firm has 8 partners and the names of the partners are reflected in the record maintained by the Registrar of Firms. Hence, it was incumbent upon the plaintiffs to implead all the partners of defendant 1 – firm.

The Bench stated that, there is no qualm over the claim of the plaintiffs that defendant 1 is a registered partnership firm and defendants 2 to 4 are its partners.

Section 25 of the Partnership Act, 1932, provides that every partner is liable, jointly with all the other partners and also severally for all acts of the firm done while he is a partner. 

High Court stated that, a partnership firm does not have any existence apart from its partners. Therefore, a decree in favour of or against the firm in the name of the firm has the same effect like a decree in favour of or against the partners.

Hence, when a firm incurs a liability, it can be assumed that all the partners have incurred that liability and so the partners remain liable jointly and severally for all the acts of the firm.

In view of the above, Court concluded by stating that the plaintiffs are not enjoined to implead all the partners of the firm.

Impleadment of the rest of the partners is not necessary. [Aziz Amirali Ghensani v. Ibrahim Currim & Sons, Interim Application (L) No. 1897 of 2022, decided on 8-4-2022]


Advocates before the Court:

Mr. Rashmin Knandekar, a/w Ms. Karishni Khanna, i/b Amit Tungare, Ms. Jill Rodricks, Mr. Vineet Jain and Mr. Deep Dighe,for the Plaintiffs.

Mr. Siddha Pamesha, a/w Declan Fernandez, i/b Purazar Fouzdar, for Defendant no.4/Applicant in IA.

Mr. Jamsheed Master, i/b Natasha Bhot, for Defendant no.3. Mr. Zain Mookhi, a/w Ms. Janhavi Doshi, i/b Manir  Srivastava Associates, for Defendant no.2.

Case BriefsHigh Courts

Delhi High Court: Amit Bansal, J., expressed that an LLP or any other business entity can carry out business in different parts of the country, but that would not mean that a suit with regard to disputes between the partners, could be filed in any place where the business of the firm/LLP is carried out.

A petition was filed under Article 227 of the Constitution of India which impugned the order passed by the District Judge whereby the application was filed on behalf of the petitioners/defendants under Order VII Rule 10 and 11(d) of the Code of Civil Procedure, 1908 had been dismissed.

The plaint from which instant petition arose was filed by the respondent/plaintiff, being one of the partners of the petitioner 3/defendant 3 which was a Limited Liability Partnership (LLP) and against the respondents 1 and 2/defendants 1 and 2 who were the remaining partners of the said LLP.

Petitioners/Defendants counsel submitted that the registered office of the LLP was in Hyderabad, hence the Courts in Delhi did not have any jurisdiction.

Respondent/Plaintiff submitted that the business of the LLP was duly being carried out in Delhi through the respondent/plaintiff and therefore, the cause of action would arise in Delhi. Hence, the Courts in Delhi would be competent to try and entertain the present suit.

Grievance in the Matter

Respondent/plaintiff was aggrieved that he had been denied access to the business accounts of the respondent 3/defendant 3.

Analysis and Discussion

In the plaint it was nowhere submitted that the business accounts, in respect of which access has been sought were kept in Delhi, in fact, the plaint is conspicuously silent on the aspect of the cause of action for filing of the suit.

The entire basis of the respondent/plaintiff for filing the suit in Delhi was on account of the fact that the LLP carried out business in Delhi and that the products of the LLP were regularly sold in Delhi by means of online sales as well as through physical stores such as Nature’s Soul, which is in Delhi.

High Court opined that the fact that business of the LLP was being carried out in Delhi would not vest the Courts of Delhi with jurisdiction to try and entertain the present suit.

Additionally, the Bench stated that Section 13 of the LLP Act provides that every LLP shall have a registered office, where all communications and notices may be addressed and shall be received. In terms of Section 34(1) of the LLP Act, the books of account in respect of an LLP shall be maintained at the registered office.

Further, in view of the facts and circumstances of the case, Court decided that the jurisdiction to entertain the present suit shall vest with the Courts in Hyderabad.

Since there was no principal or subordinate office of the LLP in Delhi and neither the books of accounts were kept in Delhi, therefore, there was no cause of action in respect of the present suit which was arising within the territorial limits of the Courts in Delhi.

Parties by agreement cannot give jurisdiction to a Court which otherwise does not have such jurisdiction. 

Maintainability in Civil Court

Bench elaborated that, merely because the definition of the “body corporate” under Section 2(1)(d) of the LLP Act includes an LLP, it is not automatically implied that the NCLT would be the competent forum for deciding all disputes inter se the partners of an LLP. Unlike Section 430 of the Companies Act, 2013, there is no bar on the jurisdiction of the Civil Courts under the provisions of the LLP Act. Therefore, in terms of Section 9 of the CPC, the suit shall be maintainable in a Civil Court.

Decision

Courts in Delhi lack the territorial jurisdiction to try and entertain the present suit.

In view of the above discussion, the present suit stood allowed. [Aanchal Mittal v. Ankur Shukla, 2022 SCC OnLine Del 633, decided on 25-2-2022]


Advocates before the Court:

For the Petitioners: K.C. Mittal with Yugansh Mittal and Sanjay Kumar, Advocates

For the Respondent: Vishal Singh, Advocates

Uttarakhand High Court
Case BriefsHigh Courts

Uttaranchal High Court: Emphasizing on the purpose and object of Section 9 of the Arbitration and Conciliation Act, 1996, Division bench of Raghvendra Singh Chauhan, CJ and Alok Kumar Verma, J., held that,

A person not a party to an arbitration agreement cannot invoke jurisdiction of the Court for interim relief under Section 9 of the Act, 1996.

Instant appeal was filed under Section 37 of the Arbitration and Conciliation Act, 1996 against the decision of Additional District Judge, whereby the application under Section 9 of the Act, 1996 filed by the appellants was dismissed on the ground that the appellants neither made out a prima facie case nor was the balance of convenience in their favour nor they would suffer any irreparable loss in the event of being denied injunction because the appellants were not “partners” in the light of the arbitration clause.

Question for Consideration:

Whether the appellants have a right to claim the said reliefs under Section 9 of the Act, 1996?

Analysis, Law and Decision

High Court expressed that a partnership business is run in accordance with the terms of the contract of partners.

Whether a retired partner has right to affect the business of the partnership?

The relation between the partners is quasi fiduciary and is expressed in the maxim in societatis contractibus fides exuberet. The relation of the partners is based on mutual confidence, and it is the duty of the partners to one another and carry on the business of the firm to the greatest common advantage, to be just and faithful to each other and to render true accounts and full information of all things affecting the firm to any partner or his legal representative. Therefore, a retired partner has no right to affect the business of the partnership.

Further, the Bench did not accept the appellant’s contention that the “Partnership Deed-Retirement cum Admission Deed” is a void document and the said void document causes harm to the appellants, therefore, the appellants wanted to refer the matter, as a party to the said Deed, to the arbitration and for the interim measure, the appellants had filed the application under Section 9 of the Act, 1996.

Court gave the reasoning for the above that on one hand the said Deed was being called void by the appellants and on the other hand Clause 22 of the same Deed was being relied upon by them.

In Clause 22 of the said Deed, there was no provision to the effect that the retiring partners can invoke the said provision for the purpose of arbitration and, secondly, Section 31 of the Specific Relief Act, 1963 provides that only “court” has jurisdiction to cancel any void or voidable document.

Section 9 of the Act

Adding to the above analysis Court expressed that Section 9 of the Act, 1996 enables the parties to arbitral proceedings to obtain interim relief from a Court.

Section 9 entitles ‘any party’ to obtain interim relief from the court at three stages i.e.

(i) before the commencement of arbitral proceedings,

(ii) during the course of the arbitral proceedings, and

(iii) after the arbitral award is made but prior to its enforcement.

Further, the Court added that Section 9 of the Act, 1996 was enacted with the intention of preserving and protecting the subject matter of the arbitral proceedings, hence for invoking the jurisdiction of the Court under Section 9 of the Act, 1996 the person should be a party to an arbitration agreement.

Therefore, a person not a party to arbitration agreement cannot invoke jurisdiction of the Court for interim relief under Section 9 of the Act, 1996.

In the matter at present appellants were not “Partners” under the “Partnership Deed-Retirement cum Admission Deed”.

Hence the appellants were not parties to the arbitration agreement to invoke the arbitration clause leading to no prima facie case.

In view of the above, present appeal was dismissed. [Mohd Yusuf v. Ashish Aggarwal, 2021 SCC OnLine Utt 1274, decided on 10-11-2021]


Advocates before the Court:

For the Appellants:

Mr Arvind Vashisth, Senior Advocate assisted by Mr Kartikey Hari Gupta, learned counsel.

For respondent 1:

Mr Rakesh Thapliyal, Senior Advocate assisted by Mr Rajat Mittal, learned counsel.