Holding

Section 69(2) of the Partnership Act, 1932 does not bar a suit by an unregistered partnership when the claim is founded on statutory trademark rights or a common‑law passing‑off action, as such rights do not arise from a contract with the defendant.

Summary

The plaintiffs, an unregistered partnership firm, sued the defendants for permanent injunction and damages alleging infringement of their registered trademark. The defendants moved to dismiss the suit under Order 7 Rule 11, arguing that Section 69(2) of the Partnership Act, 1932 barred any action by an unregistered firm because the suit purportedly arose from a contract (the dissolution deed). The High Court rejected this objection, and the appellants appealed. The Supreme Court held that Section 69(2) only bars enforcement of rights that arise out of contracts entered into by the firm with third‑party defendants in the course of its business, and does not apply to statutory trademark rights or common‑law passing‑off actions. Consequently, the suit for injunction and damages was not barred, and the appellants' application was dismissed. The appeal was therefore dismissed.

Issues considered

Whether Section 69(2) of the Partnership Act, 1932 bars a suit by an unregistered partnership when the relief sought is based on statutory trademark rights or a common‑law passing‑off action.
Whether the phrase "arising from a contract" in Section 69(2) includes contracts unrelated to the defendant, such as a dissolution deed, used merely as a historical reference.

Legislation cited

Code of Civil Procedure, 1908s. Order 7 Rule 11
Indian Partnership Act, 1932s. 69(2)
Limitation Act, 1963s. 14
Trade and Merchandise Marks Act, 1958

Subjects

Trademark infringementPassing offPartnership ActSection 69(2)Unregistered partnershipStatutory rightCommon law rightInjunctionStatutory interpretation

Judgment

HALDIRAM BHUJIAWALA AND ANR. A
v.
ANAND KUMAR DEEPAK KUMAR AND ANR.

FEBRUARY 28, 2000

[M. JAGANNADHA RAO AND AP. MISRA, JJ.) B

Partnership Act, 1932: Section 59(2).

Suit by u11registered fimi-Maintai11ability of-U11registered finn filed a
suit for pem1a11ent i11ju11ctio11 restrai11ing the defe11dants from infri11ging its C
trademark-The suit was based 011 commo11 law and co11tractual rights of
the plai11tiff-Defe11dants filed applicatio11 for rejectio11 of the plai11t under 0. 7
R.11CPC011 the grou11d that the suit was barred by S.69(2)---Held: where the
suit is based 011 commo11 law rights it is 11ot barred by S.69(2)---He11ce, High
Court rightly dismissed the application-Code of Civil Procedure, 1908, 0. 7
R.11-Trade and Mercha11dise Marks, Ac~ 1958. D
''Arisi11g from a co11tract''-Mea11i11g of-Held : The words refer to a
co11tract e11tered i11to by an unregistered finn with third-party defendants i11
the course of its busi11ess dealings with such third-party defe11da11ts-The
words do 11ot apply to a contract referred to i11 the plai11t only as a historical
~ E
Suit by unregistered finn-Fili11g of-Bar u11der S.69(2)-Remedy
agai11st-Held : Plaintiff can withdraw the plai11t with leave and file fresh suit
after registration of jinn subject to law of limitation-This is so eve11 if the
suit is dismissed for a Jonna/ defect in view of S.14 of the Limitation Act, F
1963-Limitation Act, 1963, S.14.

Trademark-Passi11g-off action-Filing of suit against-By unregistered
finn-Held : Passing-off action is a common law action based on
ton---Hence, suit can be filed by unregistered fimi a11d is not barred by S. 69(2)
of Part11ership Act. G
fllterpretatio11 of Statutes.

E.xtemal Aids-Report of Special Committees-Use of--111 i11terpreti11g
provisio11s of a11 Act-f'emzissibility-Held: Pennissible--Especially whe11 the
provisio11s are ambiguous. H
1247
1248 SUPREME COURT REPORTS [2000] 1 S.C.R.
A Words and Phrases :

"Arising from a contract"-Meaning of-In the context of S.69(2) of the
Pa1tnership Act, 1932. "Other cause of like nature''-Meaning orln the
context of S.14 of the Limitation Act, 1963.

B The respondent-plaintiffs constituted an unregistered partnership
firm with the appellant-defendants and its trademark was registered with
the Register of Trademarks. Subsequently, the partnership firm was dis-
solved and under the terms of the dissolution deed the trademark fell
exclusively the share of the respondents-plaintiffs for the whole country
C except one State, whereas the ownership of the trademark rights for that
were given to the appellants-defendants. The said registered trademark
was in the usual course renewed for seven years. The respondents also
acquired a right on the said trademark on account of prior adoption and
long user.

D The respondents-plaintiffs came to know that the appellant-defen-
dants commenced business using the said trademark in a place outside
that State. The respondents, therefore, filed a suit in the High Court
seeking permanent injunction restraining the appellants from infringing
the said trademark and from using the same. The cause of action for the
suit was that the defendants had acted "in violation of common law and
E
contractual rights of the plaintiffs". The appellants-defendants filed an
application under Order 7 Rule 11 of the Code of Civil Procedure, 1908
for rejection of the plaint on the ground that the partnership firm of the
respondents-plaintiffs was unregistered and that Section 69(2) of the
Partnership Act, 1932 was a bar to the maintainability of the suit. The High
F Court dismissed the said application. Hence this appeal.

On behalf of the appellants it was contended that the suit sought to
enforce a right "arising from a contract", namely, the dissolution deed and
since the firm was unregistered the suit was barred by Section 69(2) of the
Act.
G
On behalf of the respondents it was contended that the suit was based
on the Common Law rights available in a passing-off action; that the •
dissolution deed was merely a reference to a historical fact; that the suit
was not based on any contract between the appellants and the respondent
H and, therefore, Section 69(2) of the Act did not apply since the right sought
HALDIRAM BHUJIAWALA v. ANAND KUMAR 1249

to be enforce did not arise out of a contract between the appellants and the A
respondents.

Dismissing the appeal, this Court

HELD : 1.1. A suit is not barred by Section 69(2) of the Partnership
Act, 1932 if a statutory right or a common law right is being enforced. B
[1256-C]
Raptokas Brett Co. Ltd. v. Ganesh Property, [1988] 7 SCC 184, relied
on.

1.2. The next question is as to the nature of the right that is being
enforced in this suit. It is well settled that a passing-off action is a common C
law action based on tort. Therefore, a suit for perpetual injunction to
restrain the defendant not to pass-off of the defendant's goods as those of
plaintiffs by using the plaintiffs' trademark and for damages is an action
at common law and is not barred by Section 69(2) of the Act. [1256-D-E]
D
Bengal Waterproof Ltd. v. Bombay Waterpoof Ma11ufacturing Company,
[1997] 1 sec 99, relied on.

Virendra Dresses, Delhi v. Varinder Gannents, AIR (1982) Del 482 and
Bestochem Fonnulation v. Di11esh Ayurvedic Agencies, RFA (OS) 17/99 dt.
12.7.1999 (Del) (DB), approved. E
SLP No. 18418 of 1999 (decidedon 28.1.2000), referred to.

Ruby General I11sura11ce Co. Ltd. v. Pearey Lal Kumar, [1952] SCR 501,
held inapplicable.

1.3. Likewise, if the reliefs of permanent injunction or damages are
F
being claimed on the basis of a registered trademark and its infringements,
the suit is to be treated as one based on a statutory right under the Trade
and Merchandise Marks Act, 1958 and is not barred by Section 69(2) of the
Act. Therefore, the unregistered partnership in the instant case cannot be
said to be enforcing any right "arising from a contract". [1256-H; 1259-A-B] G

.. 2.1. It will be useful to refer to the Report of the Special Committee
(1930--31) in order to determine as to what the legislature meant when it
used the words 'arising from a contract' in Section 69(2). [1257-F]

2.2. In a number of judgments, this Court has referred to the Reports H
1250 SUPREME COURT REPORTS [2000) 1 S.C.R.
A of similar Committees or Commissions. Moreover, there is considerable
ambiguity in Section 69(2) (unlike the English Statutes of 1916 and 1985)
as to what is meant by the words 'arising out of a contract' inasmuch as the
provision does not say whether the contract in Section 69(2) is one entered
into by the firm \lith the defendant or with somebody else who is not a
defendant, nor to whether it is a contract entered into with the defendant
B in business or unconnected with business. Hence, it is permissible to look
into the Report even for purpose of construing Section 69(2). (1258-C-D]

R.S. Nayak v. A.R. Antulay, (1984) 2 SCC 183 and Hyderabad In-
dustries Ltd. v. U11io11 of /11dia, (1995) 5 SCC 15, followed.
c P. V. Narasimharao v. State, (1998) 4 SCC 626, relied on.

CIT v. Jayalakshmi Rice and Oil Mills Co11tractor Co., [1971) 1 SCC
280, no longer good law.

D Pepperv.Ha1t, (1993) 1 All ER42 (HL) and G.P. Singh: "Interpretation
of Statutes" 7th Edn. (1999) pp. 196-97, referred to.

3. It was on the basis of the Report of the Spi;cial Committee that the
Partnership Act, 1932 was later passed by the Legislature. The said Report
and provisions of the English Act, viz., Registration to Business Names Act,
E 1916 and the Business Names Act, 1985 make it clear that the purpose
behind Section 69(2) was to impose a disability on the unregistered firm or
its partners to enforce rights arising out of contracts entered into by the
plaintiff Jinn with third pa1ty-defendant in the course of the fimi's business
transactions. [1258-E; 1260-C-E]

F Raptokas Brett Co. Ltd. v. Ganesh Property, [1998) 7 SCC 184, relied
on.

Mulla : Pa1tnership Act, 1st Edn. (1934) pp. 176-177 and Halsbwy:
Statutes 4th Edn. Vol. 48 p.101, refe1Ted to.
G 4.1. The further and additional but equally important aspect is that
- the contract by the unregistered firm referred to in Section 69(2) must
not only be one entered into by the firm with the third party-defendant but
-r'
..
must also be one entered into by the plaintiff firm in the course of the
business dealings of the plaintilPs firm with such third party-defendant.
H [1260-H; 1261-A-R]
HALDIRAM BHUJIAWALA v. ANAND KUMAR 1251

4.2. The present defendants who are sued by the plaintiff-firm are A
"third parties" to the 1st plaintiff firm. Section 2(d) of the Act defines 'third
parties' as persons who are not partners of the· firm. The defendants in
the present case are also third parties to the contract to dissolution. Their
mother was no doubt a party to the contract of dissolution. The defendants
are only claiming a right said to have accrued to their mother under the B
said contract and then to the defendants. In fact, the said contract of
dissolution is not a contact to which even the present 1st plaintiff firm or
its partners or the 2nd plaintiff were parties. Their father was a party and
his right to the trademark devolved in the plaintiffs. The real crux of the
question is that the legislature when it used the words "arising from a
contract" in Section 69(2), it is referring to a contract entered into in C
course of business transactions by the unregistered plaintiff firm with its
customers-defendants and the idea is to protect those in commerce who
deal with such a partnership firm in business. Such third parties that deal
with the partners ought to be enabled to know what the names of the
partners of the firm are before they deal with them in business. [1261-B-E] D

5.1. Further, Section 69(2) is not attracted to any and every contract
referred to in the plaint as the source of title to an asset owned by the firm. If
the plaint referred to such a contract it could only be as a historical fact.
[1261-F]
5.2. In fact, the Act has not prescribed that the transactions or con- E
tracts entered into by a firm with a third party are bad in law ifthe firm is an
unregistered firm. On the other hand, if the firm is not registered on the date
of suit and the suit is to enforce a right arising out ofa contract with the third
party-defendant in the course of its business, then it ~ill be open to the
plaintiff to seek withdrawal of the plaint with leave and file a fresh suit after
F
registration of the firm subject of course to the law of limitation and subject
to the provisions of the Limitation Act, 1963. This is so even if the suit is
dismissed for a formal defect. Section 14 of the Limitation Act will be avail-
able inasmuch as the suit has failed because the defect of non-registration
falls ~ithin the words "other cause oflike nature" in Section 1 of the Limita-
tion Act, 1963. [1262-B-D] G
,. Surajmal Dagduramji Shop v. Slikishan Ram Kish an, AIR (1973) Born.
313, referred to.

6. Thus is it clear that the suit is based on infringement of statutory
rights under the Trade and Merchandise Marks Act, 1958. It is also based H
1252 SUPREME COURT REPORTS [2000] 1 S.C.R.

A upon the common law principles of tort applicable to passing-off actions.
The suit is not for enforcement of any right arising out of a contact entered
. ..
into by or on behalf of the unregistered firm with third parties in the course
of the firm's business transactions. The suit is, therefore, not barred by
Section 69(2). [1262-E]

B CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1786 of
2000.

From the Judgment and Order dated 30.11.99 of the Delhi High
Court in F.A.O. No. 365 of 1999.

C Ashok H. Desai, R.F. Nariman, R.K. Jain, D. Jain, R.K. Aggarwal
and Tarun Johri for the Appellants.

Gopal Subramanium, Lala Ram Gupta, M. Rana, Mrs. Sumita Muk-
herjee and Rana Mukherjee for the Respondents.

D The Judgment of the Court was delivered by

M. JAGANNADHA RAO, J. Leave granted.

This appeal has been preferred by the two defendants, M/s. Hal-
diram Bhujiawala and Sri Ashok Kumar against the judgment of the Delhi
E High Court in PAO 365 of 1999 dated 30.11.1999. By that order the High
Court summarily dismissed the appellants' appeal against the order of the
learned Single Judge dated 2.11.1999 in IA 5996/99 in Suit No. 635/92. The
IA was filed under Order 7 Rule 11 CPC by the appellants for rejection
of the plaint filed by two plaintiffs, Anand Kumar Deepak Kumar trading
F as Haldiram Bhujiawala and Shiv Kishan Agarwal, - on the ground that the
1st plaintiff was a partnership not registered with the Registrar of Firms
on the date of suit i.e. on 10.12.91 and that the subsequent registration of
the firm on 29.5.92 would not cure the initial defect.

The suit was filed by the plaintiff (1) for permanent i11j1111ctio11
G restraining the defendants · appellants, their partners, servants etc. from
infringing the trade-mark No. 285062 and from using the trademark/name
'HALDIRAM BHUJIA WALA' or any identical name/mark deceptively
similar thereto (2) for damages in a sum of Rs. 6 lakhs and (3) for
destruction of the material etc.

H As we are dealing with a matter arising under Order 7 Rule 11 CPC,
HALDIRAM BHUJIAWALA v. ANAND KUMAR [M. JAGANNADHA RAO, J.] 1253

it will be necessary to refer to the plaint allegations. One Ganga Ram alias A
Haldiram, carried on business in the name Haldiram Bhujia Wala, since
1941. In 1965, he constituted a partnership with his two sons Moolchand,
Shiv Kishan and his daughter-in-law Kamla Devi, (wife of another son R.L.
Aggarwal) to carry on business under the same name. In December 1972,
the said firm applied for registration before the Registrar of Trade Marks
for registration of the name Haldiram Bhujia Wala - Chand Mal - Ganga
B
Bishan Bhujiawala, Bikaner. The Registrar of Trade Marks granted
registration with the No. 285062. On 16.11.1974, the partnership was
dissolved and under the terms of the dissolution deed the above trade
mark fell exclusively to the share of Moo! Chand, son of Ganga Bishan
and father of plaintiffs, for the whole country (except West Bengal). Thus C
Sri Mool Chand became sole proprietor of the trade-mark in the said area
while Smt. Kamla Devi was given ownership of the trade-mark rights for
West Bengal. It is stated that Sri Lala Ganga Bishan Haldi Ram executed
his last will dated 3.4.1979 and also reiterated the rights conferred by the
dissolution deed on the respective parties. Ganga Bishan died in 1980. His D
will was later acted upon. Later, the testator's son, Sri Moolchand too died
in 1985 leaving being his four sons, Shiv Kishan, Shiv Ratan, Manohar Lal
and Madhusoodan. All of them got their names recorded as subsequent -
joint proprietors. The latter three formed a partnership in 1983 and were
running a shop in Chandni Chowk, New Delhi selling various goods under
the abovesaid trade mark of Haldiram Bhujia Wala. In the meantime, on E
10.10.77, Moo! Chand's brother Sri R.L. Aggarwal (husband of Karola
Devi) and his son Prabhu Shankar, Calcutta applied for registration in this
very name at Calcutta claiming to be full owners of the said trade mark
without disclosing the dissolution deed dated 16.11.74. When the Registrar
objected on 14.4.78, they replied on 18.7.78 that they alone were trading F
in this name in Calcutta. The defendants have no right to use the said trade
beyond Calcutta. The plaintiffs registered trade mark was, in the usual
course, renewed on 29.12.86 till 28.12.93. The plaintiffs have also acquired
a right on account of prior adoption and long user. The 1st plaintiff firm,
consisting of three sons of Moolchand and the 2nd plaintiff (the fourth son
of Moolchand) are joint owners of the trade mark (except in West Bengal). G
The Ist defendant firm is a namely constituted firm intending to start its
. business and has been formed by Ashok Kumar, son of Karnla Devi. The
2nd defendant is Ashok Kumar himself in his individual capacity. They
have no right to use this trade mark outside West Bengal. The plaintiffs
came to know of the violation of trade mark by defendants 1 and 2 in H
1254 SUPREME COURT REPORTS [2000] 1 S.C.R.
A December 1991 when defendants opened a shop at Arya Samaj Road,
Karol Bagh, New Delhi. The cause of action for the suit is the fact that -
defendant acted :

"in violation of the com111011 law and co11tracfl!,al rights of the ~
plaintiff".
B
On these grounds, defendants are to be restrained by permanent injunction
from using the trade mark and a sum of Rs. 6 lakhs is payable as damages.

The defendants, as already stated, have filed the application under
Order 7, Rule 11, CPC pleading Section 69(2) of the Partnership Act, 1932
c as a bar to maintainability of the suit. The learned Single Judge dismissed
the application after referring to Mis. Virendra Dressers Delhi v. Mis.
Varinder Ganne11ts, AIR (1982) Delhi 482 and to Mis. Bestocl1em For-
malities v. Mis. Dinesh Aywvedic Agencies a11d Ors., RFA (OS) 17199 dated
12.7.99 rendered by the Division Bench of the Delhi High Court on the
D ground that the right to injunct the defendants in respect of the plaintiffs'
Trade Mark was based on principles applicable to a passing off action and
the said right was a common law right and did not arise under any contract.
The learned Judge also relied upon a judgment to this Court in Mis.
Raptakos Brett & Co. Ltd. v. Ganesh Property, [1998] 7 SCC 184. The
application under Order 7, Rule 11, CPC was dismissed by an order dated
E 2.11.99. This order was confirmed by a Division Bench of the Delhi High
Court on 30.11.99, as already stated.

In this appeal, learned senior counsel for appellants, Sri Ashok Desai
and Sri R.F. Nariman contended that the 1st plaintiff firm was not
registered with the Registrar of Firms on the date of suit, that the plaint
F repeatedly referred to the proprietary right of la<e Moolchand as having
arisen out the dissolution deed dated 16.11.1974 and that without reference
to the said document - which was a contact - the plaintiffs could not prove
their right to the trade mark through Moolchand and the suit was barred
since Section 69(2) referred to a right "arising from a contract'. The
G plaintifPs right was based on the contract dated 16.11.74. The words
'arising from a contract' were akin to the words 'arising out of a contract'
used in Ruby General Insurance Co. Ltd. v. Pearey Lal Kumar and Anr.,
(1952] SCR 501 wherein while construing those words in relation to an ,.
arbitration clause, this Court held that the said words held to be construed
widely. The learned counsel contended that, on the facts of this case and
H as stated in the plaint at several places, the !st plaintiff was compelled to
HALDIRAM BHUJIAWALA v. ANAND KUMAR [M. JAGANNADHA RAO. J.] 1255

rely on the contract of dissolution dated 16.11.74 to prove title to the trade A
mark and thereby for an injunction and hence it was not a right claimed
under Common Law or under any statute, like the Trade Marks Act.

On the other hand, learned senior counsel for the respondents -
plaintiffs, Sri Gopal Subramanium supported the view of the High Court
by contending that the suit for injunction was based upon two rights, one B
being statutory under the Trade Marks Act arising out of prior registration
of trade mark and alternatively, the suit was also based on Common Law
right available in a passing-off action. The suit was not based on any
contract between plaintiffs and defendants. The provision in Section 69(2)
did not apply if the right sought to be enforced did not arise out of a C
contract between the plaintiffs' firm and the defendants. The reference in
the plaint to the dissolution deed dated 16.11.74 was merely a reference to
a historical fact that that was the source of the right of Moolchand and on
his death, the said right to the trade mark devolved on his sons. - three of
whom are joined in a firm (i.e. 1st plaintiff) and the fourth son is the second
plaintiff. The plaintiffs were not parties to the deed of dissolution. The D
defendants too were not parties to the dissolution deed though their
mother was. Hence, the bar under Section 69(2) did not apply.

The points that arise for consideration are :
E
(i) whether Section 69(2) bars a suit by a firm not registered on the
date of suit where permanent injunction and damages are claimed in
respect of a trade marks as a statutory right or by invoking Common Law
principles applicable to a passing-off action?

(ii) whether the words 'arising from a contract' in Section 69(2) refer F
only to a situati;in where an unregistered firm is enforcing a right arising
from a contract entered into by the firm with the defendant during the
course of its business or whether the bar under Section 69(2) can be
extended to any contract referred to in the plaint unconnected with the
defendant, as the source of title to the suit property?
G
Point 1:

The question whether Section 69(2) is a bar to a suit filed by an
unregistered firm even if a statutory right is being enforced or even if only
a Common Law right is being enforce came up directly for consideration H
1256 SUPREME COURT REPORTS [2000] 1 S.C.R.
A in this Court in M/s. Raptokas Brett Co. Ltd. v. Ganesh Propertj\ [1998] 7
SCC 184. In that case, Majmudar, J. speaking for the Bench clearly
expressed the view that Section 69(2) cannot bar the enforcement by way
of suit by an unregistered firm in respect of a statutory right or a common
law right. On the facts of that case, it was held that the right to evict a
tenant upon expiry of the lease was not a right 'arising from a contract' but
B was a common law right or a statutory right under the Transfer of Property
Act. The fact that the plaint in that case referred to a lease and to its expiry,
made no difference. Hence, the said suit was held not barred. It appears
to us that in that case the reference to the lease in the plaint was obviously
treated as a historical fact. That case is therefore directly in point. Follow-
c ing the said judgment, it must be held in the present case too that a suit is
not barred by Section 69(2) if a statutory right or a common law right is
being enforced.

The next question is as to the nature of the right that is being
D enforced in this suit. It is well settled that a passing off action is a common
law action based on tort (vide) Bengal Waterproof Ltd. v. Bombay
Waterproof Manufacturing Company and Anr., [1997] 1 SCC99. Therefore,
in our opinion, a suit for perpetual injunction to restrain the defendant not
to pass-off the defendant's goods as those of plaints by using the plaintiffs'
trade mark and for damages is an action at common law and is not barred
E by Section 69(2). The decision in M/s. Virendra Dresses Delhi v. M/s.
Varinder Gamients, AIR (1983) Delhi 482 and the decision of the Division
Bench of the Delhi High Court in M/s. Bestochem Fonnulation v. Mis.
Dinesh Aywvedic Agencies and Ors., RFA (OS) 17/99 dt. 12.7.99) state that
Section 69(2) does not apply to a passing-off action as the suit is based on
F tort and not on contract. In our opinion, the above decisions were correctly
decided. (The special leave petition No. 18418 of 1999 against the.latter
was in fact dismissed by this Court on 28.1.2000.) The learned senior
counsel for the appellants no doubt relied upon Ruby General Insurance
Co. Ltd. v. Pearey Lal Kumar and Anr., [1952] SCR 501. That was an
arbitration case in which the words "arising out of a contract" were widely
G interpreted but that decision, in our view, has no relevance in interpreting
the words "arising from a contract" in section 69(2) of the Partnership Act.

Likewise, if the reliefs of permanent injunction or damages are being
claimed on the basis of a registered trade mark and its infiingement, the
H suit is to be treated as one based on a statutory right under the Trade
HALDIRAM BHUJIAWALA v. ANAND KUMAR [M. JAGANNADHA RAO, J.] 1257

Marks Act and is, in our view, not barred by Section 69(2). A
~
For 'the aforesaid reasons. In both these situations, the unregistered
partnership in the case before us cannot be said to be enforcing any right
"a_!'ising from a contract". Point 1 is therefore decided in favour of the
plaintiffs-respondents.
B
Point 2 :

Question however arises as to what is the scope of the words 'enforc-
ing a right arising under the contract' used in Section 69(2)? Learned
senior counsel for the appellants repeatedly drew our attention to· the
allegation in the plaint at various places that it was only under the deed of
c
dissolution dated 16.11.1974 that Moolchand, - the father of the partners
of the 1st plaintiff firm and the 2nd plaintiff - became proprietor of the
trade mark for the whole of India (except West Bengal). That right develop
on the plaintiffs on the death of Moolchand. Therefore, it was contended
that the Ist plaintiff firm was definitely seeking to enforce a right "arising D
from a contract", namely, the contract of dissolution dated 16.11.74. It was
argued that the Ist plaintiff could not claim any injunction or damages
unless reliance was placed on the said contract and hence the suit was
barred by Section 69(2).
E
For the purpose of deciding this point, it is necessary to go into the
question as to what the legislature meant when it used the words 'arising
from a contract' in Section 69(2).

In our view, it will be useful in this context to refer to the Report of
F
the Special Committee (1930 -3i) which examined the draft Bill and made
recommendations to the legislature.

Before going into the above Report of the Special Committee which
preceded the Partnership Act, 1932, it will be necessary to refer to the case
in Commissloner of Income Tax, AP v. Jayalakshmi Rice and Oil Mills G
Contractor Co., [1971] 1 SCC 280, where this Court refused to refer to this
4'
very Report for construing Section 59 of the Partnership Act. But, in our
view, that decision is no longer good law as it was clearly dissented on this
aspect in the judgment of the Constitution Bench in R.S. Nayak v. A.R.
Antulay, [1984) 2 SCC 183. In number of later judgments, this Court has H
1258 SUPREME COURT REPORTS· [2000] 1 S.C.R.

A referred to the Reports of similar Committees or Commissions (vide G.P .
Singh's Interpretation of Statute, 7th Ed, pp. 196-197). In the latest case in
Hyderabad Industries Ltd. v. Union of India, [1995] 5 SCC 15 para 15, notes
••
on clauses were relied upon by th~ Constitution Bench for understanding
the legislative intent. The English Law has changed completely after Pepper
B v. Hart, (1993) 1 All ER 42 (HL) in favour of admissibility of such material.
A restricted view was no doubt expressed in P. V. Narasimharao v. State,
in [1998] 4 SCC 626 (at. 691-692) that such Reports can be looked into for
the purpose of knowing the historical basis or mischief sought to be
remedied, but not for construing the provision unless there is ambiguity.
Even going by this restricted view, we find that there is considerable
c ambiguity in Section 69(2) (unlike the English Statute of 1916 and 1985) as
to what is meant by the words 'arising out of a contract' inasmuch as the
provision does not say whether the contract in Section 69(2) is one entered
into by the firm with the defendant or with somebody else who is not a
defendant, nor to whether it is a contract entered into with the defendant
D in business or unconnected with business. Hence, in our view, it is permis-
sible to look into the Report even for purpose of construing Section 69(2).

We may state that it was on the basis of the Report of the Special
Committee that the Partnership Act, 1932 was later passed by the Legisla-
E ture. The Committee consisted of Sir Brojendra Lal Mitter, Sir Dinshah F.
Mulla, Sir Alladi Krishnaswamy Iyer and Mr. Arthur Eggar. Para 16 of the
Report states that the 'Bill seeks to overcome this class of difficulty by
making registration optional, and by creating inducements to register which
will only bear upon firms in a substantial and fairly permanent way of
business. Paras 17, 18 and 19 of the Report are important. (See Mulla,
F Partnership Act, lst Ed. 1934, p. 167 at PP.176-177). Para 17 reads:

"17. The outlines of the scheme are briefly as follows. The
English precedent, in so far as it makes registration compulsory and
imposes a penalty for non-registration has not been followed, as it
G is considered that this step would be too drastic for a beginning
in India, and would introduce all the difficulties connected with
small or ephemeral undertakings. Instead, it is proposed that
registration should lie entirely within the discretion of the firm or
partner concerned; but, following the English precedent, any firm
H which is not registered will be unable to enforce its claim against
HALDIRAM BHUJIAWALA v. ANAND KUMAR [M. JAGANNADHARAO, J.] 1259

third parties in the civil Court; and by partner who is not registered A
will be unable to enforce his claims either against third parties .or
against fellow partners".

It will be noticed that the above extract refers to the English precedent
which is partly not followed and which is partly followed. We shall be
referring to the said English precedent shortly but before we do so, we B
have also to refer to paras 18 and 19 of the said Report.

The Report states in para 18, 19 and follows :

"18. Once registrat_ion has been effected the statement recorded C
in the register regarding the constitution of the firm will be con-
clusive proof of the facts therein contallied against the partners
making them and no partner whose name is on the register will be
permitted to deny that he is a partner - with certain natural and
proper exceptions which will be indicated later. This should afford
a strong protection to persons dealing with films against false D
denials of partnership and the evasion of liability by the substantial
members of a firm".

19............... On the other hand, a third party who deals with a firm
and knows that a new partner has been introduced can either make E
registration of the new partner a condition for further dealings, or
content himself with the certain security of the other partners and
the chance of proving by other evidence, the partnership of the
new but unregistered partner. A third party who deals with a Jinn
without knowing of the addition of a new partner courts on the
credit of the old partners only and will not be prejudiced by the F
failure of the new partners to register".

Similarly, para 23 also refers to those who deal with the firm.

The English precedent referred to in para 17, which has been not
follo:.ved in part but followed in part in drafting Section 69(2) is the one G
contained by the Registration of Business Names Act, 1916. Section 7 of
that Act refers to penalties for default in registration. As stated in the
Report, the penalty part of that Act has not been introduced in India but
the provisions of Section 8 creating disabilities in the way of the firm in
default is adopted. Section 8 of the above English Act is relevant and it H
1260 SUPREME COURT REPORTS [2000] 1S.t.R.
A speaks of:
"the rights of that defaulter under or arising out of any contract
made or entered into by or on behalf of such defaulter in relation
to the business in respect lo the carrying on of which particulars
were required to be furnished" (See Halsbury Statutes, 3rd Ed.
B Vol.37, p.867).
'
The above provision clearly signifies that the right that is sought to be
enforced by the unregistered firm and which is barred must be a right
arising out of a contract with a third party - defendant in respect of the
firm's business transactions.
c
Business Names Act, 1985 has replaced the above Act of 1916 and
Section 4 of the new Act refers to the "Civil Remedies for breach of Section
4''. It provides for dismissal of the action "to enforce a right arising out of
a contract made in the course of a business" if the firm is not registered.
D {see Halsbury, Statutes, 4th Ed, Vol. 48 at p.101).

The above Report and provisions of the English Acts, in our view,
make it clear that the purpose behind Section 69(2) was to impose a
disability on the unregistered firm or its partners to enforce rights arising
out of contracts entered into by the plaintiff finn with. third party - defendant
E in the course of the finn's business transactions.

In Raptokas Brett and Co., (1998) 7 SCC 184 it was clarified that the
contractual rights which are sought to be enforced by plaintiff firm and
which are barred under section 69(2) are "rights arising out of the contract"
and that it must be a contract entered into by the firm with the third party
F defendants. Majmudar, J. stated (at p.191) as follows :

"A mere look at the aforesaid provision shows that the suit filed
by an unregistered firm against a third party for enforcement of
any right wising from a contract with such a third party would be
G barred ........ "

From the above passage it is firstly clear that contract must be a
-
contract by the plaintiff firm not with anybody else but with the third party -
defendant.

H The further and additional but equally important aspect which has
f

HALDIRAMBHUJIAWALAv.ANANDKUMAR[M.JAGANNADHARAO,J.] 1261

to be made clear is that - the contract by the unregistered firm referred to A

- in section 69(2) must not only be one entered into by the firm with the
third party - defendant but must also be one entered into by the plaintiff
firm in the course of the business dealing of the plaintiffs firm with such
third party - defendant.

B
It will also be seen that the present defendants who are sued by the
plaintiff - firm are third parties to the 1st plaintiff firm. Section 2(d) of the
Act defines 'third parties' as persons who are not partners of the firm. The
defendants in the present case are also third parties to the contract of
dissolution dated 16.11.74. Their mother, Kamla Devi was no doubt a party
to the contract of dissolution. The defendants are only claiming a right said c
to have accrued to their mother under the said contract dated 16.11.74 and
then to the defendants. In fact, the said contract of dissolution is not a
contract to which even the present 1st plaintiff firm or its partners or the
2nd plaintiff were parties. Their father Moolchand was a party and his right
to the trade mark devolved in plaintiffs. The real crux of the question is D
that the legislature when it used the word "arising out of a contract" in
Section 69(2), it is referring to a contract entered into.in course of business
transaction by the unregistered plaintiff firm with its customers - defen-
dants and the idea is to protect those in commerce who deal with such a
partnership firm in business. Such third parties who deal with the partners
ought to be enabled to know what the names of the firm are before they E
deal with them in business.

Further Section 69(2) is not attracted to any and every contract
referred to in the plaint as the source of title to an asset owned by the firm.
,. If the plaint referred to such a contract it could only be as a historical fact. F
For example, if the plaint filed by the unregistered firm refers to the source
of the firm's title to a motor car and states that the plaintiff has purchased
and received a Motor Car from a foreign buyer under a contract and that
the defendant has unauthorisedly removed it from the plaintiff firm's
possession, - it is clear that the relief for possession against defendant in G
the suit does not arise from any contract with defendant entered into in
...
--
the course of plaintiff firm's business with defendants but is based on the
alleged unauthorised removal of the vehicle from the plaintiff firm's cus-
tody by the defendant. In such a situation, the fact that the unregistered
firm has purchased the vehicle from somebody else under a contract has H
'
..
1262 SUPREME COURT REPORTS [2000] 1 S.C.R.
A absolutely no bearing on the right of the firm to sue the defendan! for
possession of the vehicle. Such a suit would be maintainable and Section
69(2) would not be a bar, even if the firm is unregistered on the date of
suit. The position in the present case is not different.

I11 fact, the Act has not prescribed that the transactions or contracts
B entered into by a firm with a third' party are bad in law if the firm is an
unregistered firm. On the other hand, if the firm is not registered on date
of suit and the suit is to enforce a right arising out of a contract with the
third party- defendant in the course of its business, then it will be open to
the plaintiff to seek withdrawal of the plaint with leave and file a fresh suit
c after registration of the firm subject of course to the law of limitation and
subject to the provisions of the Limitation Act. This is so even if the suit
is dismissed for a formal defect. Section 14 of the Limitation Act Will be
available inasmuch as the suit has failed because the defect of non-registra-
tion falls within the words "other cause of like nature" in section 14 of the
D Limitation Act, 1963. See Surajmal Dagduramji Shop v. Mis. S1ikishan Ram -
Kishan, AIR (1973) Born. 313.

For all the reasons given above, it is clear that the suit is based on
infringement of statutory rights under the Trade Marks Act. It is also based
upon the common law principle of tort applicable to passing-off actions.
E The suit is not for enforcement of any right arising out of a contract entered
into by or on behalf of the unregistered firm with third parties in the course
of the firm's business transactions. The suit is therefore not barred by
section 69(2).

For the aforesaid reasons, the appeal fails and is dismissed without
F costs. We should not be understood as having said anything on the merits
of the case for we have confined ourselves to the allegations in the plaint
as we are here only dealing with an application filed by the appellants
under Order 7 Rule 11 CPC.

v.s.s. Appeal dismissed.

..
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