"8. It is settled law that three
essential ingredients are necessary
before the relationship between
persons can be said to constitute a
partnership. There should be an
agreement between the parties, the
agreement must be to share the
profits of the business and the
business must be carried on by all
or any of them acting for all. The
third ingredient relates to the
existence of an agency between the
concerned persons inter se. While
the
first
two
establishing
ingredients, there is usually no
real difficulty, it is the
establishment of an agency that
requires careful consideration. It
is settled law that all the three
elements must be present to conclude
under:
Further observations in Para 12 are as
.
that the persons are partners."
BENCH AT AURANGABAD
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
CIVIL REVISION APPLICATION NO.165 OF 2013
1. Indian Oil Corporation Ltd.
VERSUS
Shriji Enterprises Erandol,
CORAM: A.I.S. CHEEMA, J.
DATE OF PRONOUNCING JUDGMENT: 29TH JANUARY, 2014.
Citation; 2014 (2) ALLMR 151 Bombay
"Plaintiffs") have filed special Civil Suit No.80
of 2009 before Civil Judge, Senior Division,
Jalgaon. The suit has been brought against present
Applicants (hereinafter referred as "Defendants")
for recovery of possession of property leased and
recovery of lease amount. The dispute which has
arisen between the parties is, whether Plaintiffs
who have styled themselves as "Shreeji Enterprises
Erandol" and shown themselves as partners, is a
partnership under the Indian Partnership Act, 1932
("Partnership Act" in brief).
2.
Prakash Bhatia and other three arrayed
above, have filed the suit claiming that the
property in dispute was leased out to Defendants
Indian Oil Corporation by one Sarla Bahubali
Gangwal. The Plaintiffs purchased the suit
property from Sarla Bahubali Gangwal by registered
sale deed, with right to the lease rent and as the
rent was in arrears, the lease has been terminated
and the possession has been claimed along with
lease amount due.
3.
The Defendants filed Written Statement
and interalia, contended that the Plaint
discloses that suit is filed by partnership firm
but the entire Plaint does not disclose that said
partnership firm is registered and so the suit is
bad on account of provisions of Section 69 of the
Indian Partnership Act. The trial Court has heard
the parties and passed orders below Exhibit1,
framing issue, whether the suit is maintainable,
and for reasons recorded, it has held that the
suit is maintainable, as according to the trial
Court, the Plaint and documents produced at this
juncture, are not sufficient to label "Shriji
Enterprises" as partnership firm and thus Section
69 of the Partnership Act does not apply.
Against the above order dated 7th March
5.
2013, present Revision has been filed.
4.
Learned counsel for the Defendants
(present Applicants) has referred to copy of the
sale deed (Exhibit A) and submitted that the
document mentions regarding the purchasers to be
"partners" of "Shriji Enterprises Erandol" and
then the names of four persons who have now
brought the Suit, have been mentioned. At the end
of the document also, the four persons have signed
under the caption that they were signing as
partners of "Shriji Enterprises Erandol". The
counsel then referred to a document got issued
from Directorate of Industries, dated 30th August
2013, which, according to the Defendants, is
certificate obtained for seeking exemption in
payment of stamp duty. It is argued that in this
document also, it is mentioned that Shriji
Enterprises is establishing a unit. The learned
counsel then referred to the title of the suit
where plaintiff is styled as "Shriji Enterprises
Erandol" through partners and the names of four
persons are given. It is the argument that all
this shows that the Plaintiff is a partnership and
the suit does not show that the partnership has
been registered and so under Section 69(2) of the
Partnership Act the suit to enforce rights is not
maintainable. The learned counsel relied on the
Ishwar Bhuvan
Judgment in the matter of
Refreshments Annexe vs. Rajdhani and another,
reported in 2006(5) Bom.C.R. Page 11, and the
matter of Kolhapur Ice And Cold Storage Co.
Through Partner vs. Rajput Dairy Through Brijlal
Uddip Singh, reported in 2014(1) Mh.L.J. Page 367,
in support of his contentions that the suit by
unregistered partnership is not maintainable. It
is submitted that parties have not led evidence
regarding the issue in the trial Court, is also
material aspect.
6.
Against this, learned counsel for
Plaintiffs (present Respondents) referred to the
affidavit in reply filed by the Respondents in
this Petition and has submitted that although
Prakash Bhatiya and other three persons have
brought the suit styling themselves as "Shriji
Enterprises" and partners, it is not actually a
partnership firm. It is submitted that the
nomenclature will not decide the relationship and
these persons are pursuing their rights in
individual capacity and as coowners of the
property which they have purchased. It is stated
that these persons are not doing any business and
there is no agreement to share profits and no
ingredients of partnership firm are attracted. The
Plaint has been signed and verified by all the
four persons. It is stated that the question
whether or not really there is a partnership can
be kept open and it can be seen at the time of
trial when evidence is led, whether there is a
partnership as per Partnership Act, or not.
Learned counsel places reliance on the matter of
Ujawalaben Mahindra Shah and another vs.
Kesharchand Gulabchand and others, reported in
2001 (Suppl.2) Bom.C.R. 778, to submit that the
issue whether partnership exists, is a question of
fact and law and cannot be tried as preliminary
issue. Reliance is also placed on the case of
Sanjay Kanubhai Patel vs. Chief Controlling
Revenue Authority and another, reported in 2004(6)
Bom.C.R. 94, to submit that merely because Prakash
Bhatiya and others have joined to share profits of
the lease rent and purchased property, it will not
constitute a partnership.
7.
In the matter of
Ishwar Bhuvan
Refreshments Annexe vs. Rajdhani and another
(supra) relied on by the learned counsel for
Defendants, the plaintiff in that matter had
claimed to be a registered partnership firm
running a restaurant under the name and style of
"Rajdhani" and wanted to restrain defendant
therein from using the same mark Rajdhani. In that
context, it was found that not producing
certificate of registration from Office of
Registrar of Firms was material and as plaintiff
failed to produce the certificate inspite of
opportunity, the suit was found to be not
maintainable. In the present matter, the facts are
different. Here the affidavit in reply filed by
ig
the Plaintiffs claims that Shriji Enterprises is
not a partnership firm which is carrying on any
business. It is claimed that there is no agreement
of partnership between the persons who have come
together as Plaintiffs.
8.
The other Judgment relied on by the
Defendants is in the matter of Kolhapur Ice and
Cold Storage Company
(supra). There also
undisputedly the petitioner concerned had filed
suit for recovery of amounts of goods supplied.
The issue involved in that matter was, whether
subsequent registration of the partnership deed
would cure the defect of filing of the suit in the
name of unregistered firm and whether the suit can
be deemed to have been filed on the date when the
firm has been registered. Thus, on facts the said
matter is different and not of assistance to
decide present controversy.
If Judgment in the matter of Sanjay
9.
Kanubhai Patel (supra) relied on by the Plaintiffs
is perused, it was a matter where parties had
titled the document as a joint venture agreement
and superintendent of Stamps treated the same as a
partnership deed for the purposes of stamp duty.
In that context, the Court considered the
provisions of Partnership Act.
.
For present matter also the provisions of
Partnership Act are material and they need to be
reproduced. Section 4 and 6 of the Partnership Act
read as under:
"4. Definition of "partnership",
"partner", "firm" and "firmname"
"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".
"6. Mode of determining existence of
Partnership
In determining whether a group of
persons is or is not a firm, or
whether a person is or is not a
partner in a firm, regard shall be
had to the real relation between the
parties, as shown by all relevant
facts taken together.
Explanation I. The sharing of
profits or of gross returns arising
from property by persons holding a
joint or common interest in that
property does not of itself make
such persons partners.
Explanation II.The receipt by a
person of a share of the profits of
a business, or of a payment
contingent upon the earning of
profits or varying with the profits
earned by a business, does not of
itself make him a partner with the
persons carrying on the business;
and, in particular, the receipt of
such share or payment
(a) by a lender of money to persons
engaged or about to engage in any
business
(b) by a servant or agent as
remuneration,
(c) by the widow or child of a
deceased partner, as annuity, or
13
(d) by a previous owner or part
owner of the business, as
consideration for the sale of the
goodwill or share thereof,
does not of itself make the receiver
a partner with the persons carrying
In the matter of Sanjay Kanubhai Patel
10.
on the business."
(supra), after referring to the above provisions,
it was observed in Para 8 as under:
"8. It is settled law that three
essential ingredients are necessary
before the relationship between
persons can be said to constitute a
partnership. There should be an
agreement between the parties, the
agreement must be to share the
profits of the business and the
business must be carried on by all
or any of them acting for all. The
third ingredient relates to the
existence of an agency between the
concerned persons inter se. While
the
first
two
establishing
ingredients, there is usually no
real difficulty, it is the
establishment of an agency that
requires careful consideration. It
is settled law that all the three
elements must be present to conclude
under:
Further observations in Para 12 are as
.
that the persons are partners."
"12. It is settled law that the
nomenclature given by parties to the
relationship or documents makes no
difference. Thus, for instance,
merely because Clause 27 of the
Joint Venture Agreement states that
the agreement should not be
construed as a partnership, if in
fact all the three elements
essential
to
constitute
a
partnership were present, the
relationship between the parties to
the same would be that of partners.
Such a clause would be only one of
the factors to be considered while
determining whether the persons are
partners or not. Conversely, even if
the deed was termed as a partnership
agreement, it would not necessarily
constitute a relationship of
partners between the parties thereto
if it is found that any of the
elements necessary to constitute a
partnership were absent."
In the matter of Sanjay Kanubhai Patel
11.
(supra), this Court in this regard also referred
to observations of Division Bench in the matter of
Chimanram Motilal and another vs. Jayantilal
Chhaganlal and another, reported in A.I.R. 1939
Bom. 410.
12.
What is clear from above discussion is
that there has to be an agreement and the same has
to be to share profits of a business between the
persons and an element of agency is also required
in order to constitute partnership. Section 5 of
the Partnership Act specifies that the relation of
partnership arises from contract and not from
status. Section 6 lays down the mode of
determining existence of partnership. The Section
clearly states that "regard shall be had to the
real relation between the parties, as shown by all
relevant facts taken together." Considering these
aspects, it is apparent that although Plaintiffs
have styled themselves as partners of "Shriji
Enterprises", whether or not it is really a
partnership, would be matter of facts. The trial
Court has rightly observed that the Plaint and
documents produced on record, at this juncture,
are not sufficient to label Shriji Enterprises as
a partnership firm.
13.
In the matter of Ujwalaben Mahindra
Shah(supra) relied on by learned counsel for
Plaintiffs (present Respondents), there was
dispute raised regarding partnership being
unregistered and the trial Court had rejected
application to treat issue No.1 as preliminary
issue and to decide it accordingly. This Court
referred to the case law and observed in Para 16
as under:
".... it is now well established
that once it is not in dispute that
an issue is a mixed question of law
and facts, then there is no
obligation cast upon the Court to
try the same as the preliminary
issue, much to the contrary, the
same may be tried alongwith other
issues in the suit as the Court is
bound to pronounce judgment on all
issues involved in the suit."
.
Looking to the controversy, Trial Court
can thus decide the issue treating it as a mixed
question of law and facts, along with other
issues.
14.
For reasons discussed above, I do not
find any substance in the Revision Petition. It
cannot be said that the trial Court has acted in
exercise of its jurisdiction illegally or with
material irregularity.
15.
The Revision Application is dismissed.
ig
Parties to bear their own costs.
asb/JAN14
[A.I.S. CHEEMA, J.]
. After pronouncement of the order, counsel
for Applicants seeks extension of interim stay
which was granted when Revision was pending. Suit
concerned is of 2009, held up at the stage of
preliminary issue. There is no reason to keep
further process in the Suit stayed. Request is
declined.
[A.I.S. CHEEMA, J.]
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