1945 (10) TMI 14 - DSC - Companies Law

Summary

Issues Involved:

1. Maintainability of the suit under Section 69 of the Partnership Act.
2. Existence of a partnership between the parties.
3. Entitlement of the plaintiff to recover the deposited amount.

Issue-Wise Detailed Analysis:

1. Maintainability of the Suit under Section 69 of the Partnership Act:

The trial court framed the issue of whether the suit was maintainable in view of Section 69 of the Partnership Act, which precludes a partner from enforcing a right arising from a contract unless the firm is registered. The trial court held against the plaintiff, stating that the parties were partners in a business firm for the electric supply to the Unao Municipality, which was not registered as required under Chapter 7 of the Partnership Act. Consequently, the plaintiff was precluded from recovering any money arising from the partnership contract, except for claiming dissolution or accounting. Therefore, the suit was dismissed.

2. Existence of a Partnership Between the Parties:

The defendants argued that the plaintiff was their partner in the enterprise and that the deposited money was partnership money. The trial court agreed, holding that there was a complete partnership between the parties. However, the District Judge, on appeal, found that the plaintiff was not a partner but a promoter of a company that never came into existence. The plaintiff's role was limited to being a partner in the managing agency of the proposed Unao Electric Supply Company, which was never formed. Therefore, there was no partnership business in existence, and the agreement to share profits from a non-existent business did not constitute a partnership under Section 4 of the Partnership Act.

3. Entitlement of the Plaintiff to Recover the Deposited Amount:

The District Judge accepted the plaintiff's plea that he was entitled to the return of the Rs. 2,500 deposited with the Municipal Board, Unao, since the company was never formed, and thus, no managing agency business came into existence. The appellate court concluded that the relationship between the parties was that of promoters of a company, not partners in a business. The defendants had agreed to take the plaintiff as a partner in the managing agency of the proposed company, not in any other business. Therefore, the plaintiff was entitled to recover the deposited amount as the partnership never materialized.

Conclusion:

The appellate court held that the learned District Judge correctly concluded that the plaintiff was not a partner but a promoter of a company that never came into existence. The appeal was dismissed with costs, and the stay order was vacated. The plaintiff was entitled to the return of the deposited amount, as there was no partnership business in existence, and the suit was maintainable outside the purview of Section 69 of the Partnership Act.