No Bar To Unregistered Partnership Firm Filing Suit For Dishonour Of Cheque : Delhi HC [Read Judgment]

The Delhi High Court held that Section 69(2) of the Indian Partnership Act,1932 does not bar an unregistered partnership firm filing a suit on a cause of action based on dishonour of cheque.

The Court held so while dismissing a revision petition against refusal of the trial court to reject the plain under Order VII, Rule 11 of the Code of Civil Procedure.

The suit was instituted by an unregistered partnership firm for recovery of money on account of dishonour of cheques issued to it by the defendants.

The defendants filed application for rejection of plaint on the ground that suit was barred under Section 69(2) of the Partnership Act, as the plaintiff-firm was unregistered. The application was dismissed by the trial court on the ground that Section 69(2) does not bar suits based on dishonour of cheques under the Negotiable Instruments Act.

Upholding the order of the trial court, Justice Vinod Goel of the High Court explained that Section 69(2) barred only suits based on contracts. Suits based on negotiable instruments stood on a different footing.

"...the respondent is seeking enforcement of the liability of the petitioners created under Section 30 and 37 of the Negotiable Instruments Act, 1881 as the cause of action for the plaint is based on the dishonour of the said cheques. Since, the suit is not based on any contract between the parties, the bar under Section 69 (2) of the Act would not apply", held the Court.

The Delhi HC referred to the judgment of Kerala High Court in Afsal Baker v Maya Printers, which held that "by virtue of Section 30 and 37 of the Negotiable Instruments Act,on the dishonour of a cheque, the statute creates a liability on the drawer, apart from the general law of contracts". When the suit is based on the instrument, and not on the original cause of action, the bar will not apply.

"The bar under Section 69(2)of the Indian Partnership Act would apply only where the suit is sought to be laid on a contract and not in a case where statutory right/liability is sought to be enforced. In the instant case, the suit being purely based on the liability under Section 30 and 37 of the Negotiable Instruments Act, it is a suit based on statutory liability dehors the contract between the parties", the Kerala HC judgment had held.

Following it, the revision petition was dismissed.

Recently, the Himachal Pradesh High Court had held that criminal complaint under Section 138 of NI Act is not barred by Section 69(2) of the Partnership Act.