1974 (6) TMI 62 - HC - Indian Laws

Summary

Issues Involved:
1. Whether the suit by a partner of an unregistered firm for recovery of money claimed on the dishonor of a cheque endorsed in favor of the firm is maintainable.
2. Whether the cheques issued were supported by consideration.
3. Whether the plaintiff is a holder in due course.
4. Whether the plaintiff firm was registered under the Indian Partnership Act.

Issue-wise Detailed Analysis:

1. Maintainability of the Suit:
The primary issue was whether the suit by a partner of an unregistered firm for recovery of money claimed on the dishonor of a cheque endorsed in favor of the firm is maintainable. The court below dismissed the suit based on Section 69(2) of the Indian Partnership Act, which bars suits by unregistered firms. However, the High Court found that the right sought to be enforced by the plaintiff arises from statutory provisions under the Negotiable Instruments Act, not from a contract. Therefore, the bar under Section 69(2) does not apply. The court emphasized that the right of action available to an indorsee of a cheque who comes to hold the cheque in due course is based on statutory provisions, not on a contract.

2. Consideration for the Cheques:
The first defendant contended that the cheques were issued as security for the supply of pepper, which was not actually supplied. The court below found that the cheques were supported by consideration. The High Court noted that both parties had adduced very little evidence on this point. The first defendant relied on an account book (Ext. B-1), which indicated that the cheques were advances for goods to be supplied. The High Court criticized the lower court's dismissal of Ext. B-1 and stated that while the lower court's conclusion might be correct, better evidence should have been presented. The High Court allowed the first defendant an opportunity to present additional evidence, provided they comply with specific terms.

3. Holder in Due Course:
The court below found that the plaintiff was a holder in due course. The High Court did not dispute this finding but emphasized that the plaintiff's right to sue on the cheques arises from statutory provisions under the Negotiable Instruments Act, not from a contract.

4. Registration of the Plaintiff Firm:
The plaintiff claimed that the firm was registered under the Indian Partnership Act, but the first defendant refuted this. The court below found that the plaintiff firm was not registered, as no evidence, such as a certificate of registration, was produced. The High Court agreed with this finding, noting that the plaintiff failed to show actual registration. The mere production of a memorandum acknowledging receipt of documents by the Registrar of Firms was insufficient.

Conclusion:
The High Court concluded that the suit is maintainable as the right sought to be enforced arises from statutory provisions, not from a contract. The court allowed the first defendant an opportunity to present additional evidence regarding the consideration for the cheques, provided they pay the appellant's costs within a specified period. If the condition is not met, the plaintiff would be entitled to a decree in terms of the plaint.