M. HUSSAIN ADIL KHATRI, J.. The facts disclosed in the plaint and the documents filed therewith insofar as they are relevant for the purpose of disposal of CMA No.2150/93, filed by the defendants, for rejection of the plaint under Order VII Rule 11, CPC, are as under:- Plaintiff No. 2 Haji Abdul Karim and defendant No.2 Malik Fayyaz Ahmad had entered into an oral partnership in the name and style of M/s Karim Development Corporation (hereinafter referred to as the said Firm). The partnership business to be done was construction of multi-storeyed buildings containing flats, shops and godowns, etc and purchase and sale of the plots of land including flats, shops and godowns. The said Firm through its above partners entered into an agreement of sale with defendant No.1, M/s Razi Construction Company Ltd, incorporated under the Companies Act, 1913. Under the said agreement, defendant No.1 agreed to sell, transfer, convey and assign to the Firm all rights, title and interest in the plot of land, bearing No. PL-1, Block 1, situated in Gulshan-e-Iqbal, KDA Scheme No.24, Karachi, for a lumpsum consideration of Rs. 15,00,000/-. This, agreement was executed on 17.9.1979. In part performance of the contract, plaintiff No.2 and defendant No.2 jointly paid a sum of Rs3,00,000/- to defendant No.1 by way of earnest money and the balance amount was agreed to be paid after the transfer of the plot in favour of the purchasers. Defendant No.1 in part performance of the above agreement, handed over the vacant possession of the said plot to the aforesaid purchasers and further undertook to register a general power of attorney in favour of the nominees of the said purchasers. Such power of attorney was executed and registered in favour of two persons, namely, Haji Wali Muhammad Abbas and Muhammad Farooque on 27.9.1979.
Defendant No. 2 is also Managing Director of defendant No.1 M/s Razi Construction Company Limited.. On 2.2.1981, plaintiff No. 2 paid a sum of Rs.4,00,000/- to defendant No.1 through defendant No.2 under a receipt.
Plaintiff No. 2 and defendant No.2, who acted as partners of the unregistered firm, are described in the plaint as Vendees, the plaint states that in part performance of the contract, defendant No.1 had handed over the documents relating to the above property. The Vendees on the baas of the general power of attorney got the plans for construction of a multi-storeyed building on the said plot approved by the Karachi Building Control Authority under its letter dated 10.4.1980. The Vendees also obtained no objection certificate on 5.10.1980 for sale of flats of the building to be constructed on the said plot under the name of Shumaila Luxury Apartments. The said certificate was issued on 4.10.1980. No objection certificate was also obtained for publishing advertisement for sale of the flats and advertisement was published on 5.11.1980.
Defendant No. 2 with the prior consent of plaintiff No. 2. Completed structure of the multi-storeyed building on the front portion of the said flat site. The plaint then discloses differences between plaintiff No.2 and defendant No.2 which led to filing of the present suit for specific performance of the agreement dated 17.9.1979 executed between defendant No.1 on the one and M/s Karim Development Corporation, the unregistered firm represented by plaintiff No. 2 and defendant No.2 on the other hand.
The cause of action is shown to have accrued on 17.9.1979, when the .Agreement was executed and in part performance whereof the possession was handed over to the purchasers and thereafter on 2.2.1981, when defendant No.1 I received part of consideration from plaintiff No.2 through defendant No.2 and again in the months of November and December, 1981, when defendant No.2 promised to render accounts, etc.
2. Plaintiff No.1 M/s Karim Development Corporation is a registered partnership firm. The registration certificate filed with the plaint shows that it was constituted on 21.12.1981 and registered on 19.1.1982 and that plaintiff No.2 and Haji Wali Muhammad Abbas are its partners.
3. The learned advocate for the defendants has filed the above application for rejection of the plaint of the following grounds:- i. There is no privity of contract between plaintiff No.1 and the defendants. ii. The property was purchased by M/s Karim Development Corporation, the unregistered firm and as such the suit filed by partner of the unregistered firm is barred under section 69 of the Partnership Act.
I have heard the learned counsel Mr. Muhammad Sharif for the defendants & Mr. J.H. Rahimtoola for the plaintiff.
4. As noted above, plaintiff No.1 is the registered firm. Its name is the same as that of the unregistered firm. Although nothing has been stated about the capacity in which the plaintiffs have used but it appears that plaintiff No. 1 has sued as a partnership firm constituted by defendant No.1 and its another partner Wali Muhammad, projecting it as purchaser of the suit property. Plaintiff No.2 has joined himself either in his capacity as partner of plaintiff No.1 or that of unregistered firm.
The plaint does not pronounce that plaintiff No. 1 was reconstituted with the consent of defendant No. 2 Who was partner of the unregistered firm alongwith plaintiff No. 2 Therefore, it is to be inferred that it was constituted without such consent. It is settled law that old partnership can be continued after joinder of incoming partner only with the consent of outgoing, existing and incoming partner.
In the above view of the matter, plaintiff No.1 which is the registered firm, is not the old partnership, that is, the unregistered firm but is altogether a separate entity and cannot be treated as continuation of the unregistered firm, having been constituted without the consent of defendant No. 2 in violation of the mandate of section 31 of the Partnership Act.
It may further be observed that according to the plaint, plaintiff No.1 was constituted on 21.12.1981 and registered on 19.1.1982. According to the plaint, the cause of action had accrued to the plaintiffs before the formation of plaintiff No.1 that is to say it was not in existence when the agreement was executed between the unregistered firm and defendant No. 1, payments were made to defendant No. 1 and the dispute had arisen.
Plaintiff No.1, therefore, has no locus standi to enforce the contract, there being no privity of contract between plaintiff No.1 and defendant No.1, as it is not party to the said agreement has and, therefore, it cannot be said that any cause of action has accrued to the said plaintiff to seek specific performance of the contract or any other relief against the defendants. If plaintiff No. 2 has joined as partner of plaintiff No. 1, the observations made as above will apply to him as well.
5. Plaintiff No. 2 was partner with defendant No.. 2 in the unregistered firm. Section 69(1) of the Partnership Act (IX of 1932) lays down that no suit to enforce a right arising from a contract or conferred by the said Act shall be instituted in any Court by or on behalf of any person suing as a partner in a firm against the firm or any person alleged to be or to have been a partner in the firm unless the firm is registered and the person suing is or has been shown in the Register of Firms as a partner in the firm. In view of the-above specific provisions of the Partnership Act, plaintiff No. 2 being a partner of unregistered firm cannot sue for enforcement of the said agreement.
6. Sub-section (2) of the said section further prescribes that no suit to enforce a right arising from a contract shall be instituted in any Court by or on behalf of a firm against any third party unless the firm is registered and the person suing has been shown in the Register of Firms as partners in the firm. If plaintiff No. 2 is to be construed to have filed the suit on behalf of the unregistered partnership firm, against defendant No. 1, i.e. The third party, the suit is again not maintainable in view of the bar contained in sub-section (2) above.
Justice Saleem Akhtar (as he then was, now Judge of the Supreme Court), while interpreting the above section in OVERSEAS CONTAINERS LTD' & ANOTHER Vs. MUHAMMAD IQBAL & ANOTHER (1988 CLC 461), has held that partners of unregistered firm could not file suit under a contract in their own name as such suit would be barred.
While interpreting section 69 in USMAN Vs. OMAR & OTHERS (PLD 1966 SC 323), their Lordships in the Supreme Court have laid down that the said section bars a suit for enforcing a right arising out of a contract against either the firm or any past or present member of it or against any third party.
It also makes a note of the fact that non-registration of the firm under the said section does not affect the validity of the partnership or prevents any of the partners from suing for the dissolution of the firm or for account or the realisation of the property of a dissolved form.
It may lastly be pointed out in the above context that the suit is not saved by any of the exceptions provided for in sub-section (3) of the said section. Thus the suit as framed is not maintainable and is liable to be rejected on the above counts.
If by force of any argument it be construed that plaintiff No.1 is the continuation of the unregistered firm, even then the suit would not be maintainable as the third parties, defendant No.1 in this case, cannot be bound by the reconstituted partnership as held in R. HANUMAN THAPPA & SONS Vs. COMMISSIONER OF INCOME TAX (AIR 1995 Mad 297), relying on a passage in Lindley on the Law of Partnership.
7. It may be noted that partnership is not a legal person or entity. The above conception has been elaborately dealt with by a Division Bench of this Court in the case of BASHIR AHMED AND 9 OTHERS Vs. FEDERAL LAND COMMISSION. ISLAMABAD (PLD 1985 Karachi 83). For the purpose of present suit suffice to state that though a firm may possess some attributes of a personality, it is only a collective name of its members and is not a legal person or entity distinct and separate from partners and that the members of partnership do not form collective whole distinct from the individuals composing it, nor are they collectively enrolled with any capacity of acquiring rights or incurring obligations. The rights and liabilities of a partnership are the rights and liabilities of partners and are enforceable by or against them individually. Similarly in an earlier judgment reported as MOTAL RAI Vs. ABDUL AZIZ & OTHERS (PLD 1968 Kar. 635) after referring to the case law and on construction of section 4 of the Partnership Act it was concluded that a partnership firm is only a collective name of its members and it is not a legal person or entity distinct and separate from partners.
The above nature of a partnership firm brings in lime light the distinction between a partnership firm and a corporate body.
Section 23 of the Specific Relief Act provides, as to who may obtain specific performance of a contract.It provides that when a public company has entered into a contract and subsequently becomes amalgamated with another public company, the new company, which arises out of the amalgamation can seek, enforcement of contract. It further lays down that when the promotors of a public company have, before its incorporation, entered into a contract for the purposes of the company and such contract is warranted by the terms of incorporation, such company may obtain the specific performance of the contract. Partnership firms have been kept out from the purview of the said section. The most that can be said is that any party to the contract can file a suit as provided in clause (af of the said section and, therefore, the partners of a firm may file a suit for Specific performance thereof. In such situation insofar as the present suit is concerned, section 69 of the Partnership Act comes into play under the scheme whereof only a registered partnership or its partners may sue.
8. The other consequences, which flow from the above definition of the partnership, is that the rights created under the agreement executed between the partners of the unregistered firm and defendant No.1 is an actionable ilam. Under section 130 of the Transfer of Property Act, actionable claim is transferable but it can be affected only by execution of an instrument in writing signed by the transferor or his duly authorised agent.
The above proposition finds support from ABDUL HAKEEM Vs. ABDUL MAJEED & ANOTHER (PLD 1957 Kar. 379), which lays down that the interest of a partner in a partnership concern is property and can only be assigned under section 130 of Transfer of Property Act by the execution of an instrument in writing. Signed by the transferor or his duly authorised agent and is complete and effectual upon the execution of such instrument. Where there was only an agreement to transfer and no assignment deed was executed, there was no transfer of the partner's share. Where statute requires a deed of transfer, title cannot pass merely by admission or relinquishment. In the instant case there being no assignment whatsoever of the rights arising from the agreement in favour of plaintiffs or either of them, they cannot maintain the suit, as no cause of action can be said to have arisen to them individually or collectively.
9. To sum up the above submissions, plaintiff No. 1 cannot maintain the suit as it is not privy to the contract executed between the partners of the unregistered firm, as the rights acquired by the unregistered firm, have not been transferred to plaintiff No.1 under any instrument and that plaintiff No. 1 as described in the plaint, is not the continuation of the unregistered partnership firm and, therefore, cannot step into the shoes of the said unregistered partnership and claim specific performance of the contract executed between the partners of the unregistered firm on the one and defendant No. 1 on the other hand. Plaintiff No. 1, therefore, has no locus standi to maintain the suit on the averments made in the plaint and no cause of action can be said to have accrued to it.
Insofar as plaintiff No. 2 is concerned, he being the partner of an unregistered firm, cannot maintain the suit under section 69 of the Partnership Act.
10. However, Mr. J.H. Rahimtoola, learned counsel for the plaintiff referring to STERIOS THOMPULOS & ANOTHER Vs JOHN MANDILAS (LR 1940 AC 12) and J.E. UAVID Vs S.P. A. DE SILVA (LR 1934 AC 106) contended that there can be no bar on institution of the suit by a firm or a partner against another partner or third party. In the first report the suit was filed for declaration that the respondents and the appellants were partners in the firm, dissolution of the partnership and accounts of the firm's profits and of the respondent's share therein and payment of such share. It was not a suit against the third parties or a suit for specific performance of the contract. It was a suit for accounts. Such suit falls within the exception of clause (a) of sub-section (3) of section 69 of the Partnership Act, which reads as under :- "Section 69.(1).......
(2)........
(3)(a) The provisions of sub-sections (1) and (2) shall apply also to a claim or set-of or other proceeding to enforce a right arising from a contract, but shall not affect (the enforcement of any right to sue for the dissolution of a firm or for accounts of dissolved firm, or any right or power to realise the property of a dissolved firm or...."
Insofar as the second case is concerned, it pertains to the interpretation of Registration of Business Names, Ordinance VI of 1918 and does not in any manner advance and case of the plaintiffs.
It was next contended by him that defendant No.2 was not joined in his capacity as a partner of the unregistered firm. The suit has been filed by the plaintiffs to enforce the agreement -against both the defendants as vendors of the suit property, defendant No.2 being managing director of defendant No.2 The above submission is not supported by the contents of the plaint, even, then be it presumed that defendant No.2 does not make any difference. The question is that of maintainability elf the suit filed by plaintiff No. 1 who, on the reading of the plaint, is not the purchaser of the property and, therefore, there cannot be any privity of contract between plaintiff No. 1 and the defendants. As already noted above, plaintiff No. 2 has arrayed himself as plaintiff, being purchaser of the property under the agreement of sale in his capacity as a partner of the unregistered firm. It has been already noted above that the suit filed by a partner of an unregistered firm against third party cannot: be maintained under the law.
11. It was next urged by him that the plaint cannot be rejected on the above premisses until the Court has determined the existence of partnership between plaintiff No.2 and defendant No.2 and under section 6 of the Partnership Act this can be done only by recording evidence. The submission is without any substance. While deciding application under Order VII Rule 11, CPC, the Court has to take the contents of the plaint to be true and correct and has to proceed on such assumption. It is averred in para 1 of the plaint that plaintiff No. 2 and defendant No. 2 had entered into an oral partnership as noted above, it then states the nature of the business to be done. In para 3 of the plaint, it is stated that plaintiff No. 2 and defendant No. 2. As partners of the firm, executed agreement at Karachi with defendant No. 1. The agreement of sale dated 17.9.1979. For performance whereof suit has been filed is between defendant No. 1 and Karim Development Corporation, the unregistered partnership firm, represented by plaintiff No.2 and defendant No. 2. The existence of partnership having been affirmed in the plaint, it does not require determination by the Court. It is obvious on the bare reading of the plaint that plaintiff No. 2 and defendant No. 2 had purchased the property as partners of the unregistered firm and in no other capacity. In support of his submission, he relied on the case of ESSA E, A. JAFFER Vs. NI SHAT LTD (PLD 1962 Kar 603). The above authority is not relevant in the present context. In the said suit one party asserted existence of partnership and the other party denied the same. Accordingly an issue was framed whether the document relied upon between the parties was a deed of partnership.
On analysis of the so called partnership agreement the Court found that it was not a partnership agreement.
12. It was urged by the learned counsel for the plaintiff that Order VII - Rule 11, CPC is not attracted in the present case. In this regard he relied on certain authorities which are dealt with hereunder.
(i) BAGHAU Vs. MIRZA MAHMOOD BAIG & OTHERS (1987 CLC 1746). In the said authority a learned Single Judge of this Court (as he then was) has observed that Order VII Rule 11, Civil Procedure Code could be invoked if there was no room for any other possible approach to the case and no triable issue was made in the case, or suit was clearly hit by any mandatory provision of law justifying rejection of the plaint. In this case it has been already found that plaintiff No. 1 is not the continuation of the unregistered partnership and that under the law plaintiff No. 2, who is a partner of the unregistered firm, cannot maintain the suit. This has been said on the basis of the mandatory provisions contemplated insection 69 of the Partnership Act.
Court, was dismissed on September 29,1994. This revision petition is filed to challenge the aforesaid order.
3. Mr. M.Y. Arvi, the learned Counsel for the petitioner has raised the following points:-
(i) That the learned trial Judge illegally held the application for restoration of the suit as time- barred. It was emphasised that the limitation prescribed for filing a restoration application for a in default, is 90 days and not 30 days as determined by the trial Court. The learned Counsel also placed on record a photo copy of the amendment incorporated in the Limitation Act;
(ii) that after passing the judgment by the High Court, the plaintiff- petitioner filed a petition for leave to appeal which was allowed and finally the appeal was accepted by the Supreme Court During this period, the file was transmitted to the trial Court and the suit was dismissed for non- prosecution. The learned Counsel also argued that the plaintiff-petitioner and his Counsel were under the impression that due to the revision petition before the High Court and thereafter appeal before the Supreme Court, the proceedings automatically had been stayed;
(iii) that the plaintiff-petitioner produced the evidence in support of sufficient cause justifying his inability for non-appearance. The defendant-respondents did not bring on record any evidence in rebuttal of evidence placed on record by the plaintiff-petitioner. It was argued that the learned trial Judge failed to appreciate the above evidence and held the same not a sufficient cause for non- appearance of the plaintiff; and
(iv) that none of the parties, either the plaintiff or the defendants, was aware of the fact of transmission of file to the trial Court and the dismissal proceedings taken by it, as such, the cause shown by the plaintiff-petitioner for being unaware of the above fact, was sufficient.
4. On the other hand, Raja Muhammad Siddique Khan, the learned Counsel representing the respondents opposed the petition on the grounds:-
(i) That the amendment referred to above by the Counsel for the petitioner, incorporated in Article 163 of the Limitation Act, is not applicable to the case in hand. It was argued that the amending Act was passed on June 24,1992 but the same was published in the- Govemment Gazette on August 10,1992, therefore, the law is not applicable to the cause arisen in the case through an order passed by the trial Court on August 3, 1992. It was emphasised that the law comes into operation after its publication in the. Official gazette and further argued that the law already haring the field before the amendment shall be . Applicable to the above case, as such, it was argued, the application for restoration of the suit, was time-barred;
(ii) that all the orders passed by the trial Court before the passing of dismissal order, were recorded in presence of the Counsel for the plaintiff-petitioner, as such, the plea of unawareness of the proceedings is not available to the petitioner; and
(iii) that the evidence brought on record by the plaintiff-petitioner in support of sufficient cause for non-appearance was appreciated by the trial Court keeping in view the principle of appreciation of evidence, warranting no interference by this Court, particularly in exercise of its revisional jurisdiction.
5. I have heard the learned Counsel for the parties and also gone through the record, with care. It may be mentioned that the judgment in the revision petition filed before the High Court was passed on May 18, 1992 and a petition for leave to appeal against the aforesaid order was reported to have been filed on May 26,1992, wherein leave was granted on June 27,1992 while the final judgment was passed on November 28,1992 by the Supreme Court. A perusal of the record shows that the parties were not directed to appear on a particular date before the trial Court by the High Court and a notice to this effect also does not appear to have been issued to the parties by the Additional Sub-Judge. However, the presence of both the Counsel is marked by the trial Court on the date of hearing after the receipt of the file. It may also be stated that the matter of dismissal was not brought to the notice of the Supreme Court at the stage of leave or appeal. The learned Judges in the Supreme Court also recorded the order in the case under the impression of the same being pending in the trial Court. It appears that none of the parties was aware of the fact of dismissal of the suit.
6. Before dealing with the point of "sufficient cause", in the given circumstances, it seems appropriate to advert to the point of limitation first. To set aside the dismissal under Rule 4 of Order 9, or under Rule 9 of Order 9, C.P.C., the limitation provided under Article 163 of the Limitation Act is 90 days and not 30 days as held by the subordinate Court. Before the amendment incorporated in the Limitation Act, the limitation prescribed under Article 163 of the Act was 30 days which stands amended by Amendment Act enforced on June 24,1992. It may be clarified that a Bill passed by the Assembly or a joint sitting, shall be presented to the President for his assent and the President shall assent to a Bill within seven days after it has been presented to him for assent and if the President fails to do so, he shall be deemed to have assented to the Bill at the expiration of the said period.
When the President has assented or is deemed to have assented to a Bill, it shall become law and be called an Act of the Assembly under Section 36 of the Azad Jammu and Kashmir Interim Constitution Act, 1974. The instant amendment Act was assented by the President on June 24,1992 when (he same became law after coming into force at once. The reliance in this regard may abo be placed on the verdict of the Supreme Court of Azad Jammu and Kashmir, recorded In the case titled 'Azad Government Vs. Muhammad Yunus Tahir and others" (1994 S.C.M.R. 341). In the light of the aforesaid relevant provision, the argument advanced by the learned Counsel for the respondents is of no avail and merits no consideration. Consequently, the observation made by the trial Judge describing the application to set aside the dismissal of the suit as time barred, also runs counter to the law applicable to the case which escaped his attention. Therefore, it is safely concluded that the application was moved well within the limitation.
7. So far as the question of 'sufficient cause' for non-appearance of the plaintiff-petitioner is concerned, it may be stated that the term "sufficient cause" is not susceptible of a exact definition and no hard and fast rule can be laid down to cover all possible cases. Each case is to judged upon its peculiar circumstances. The "sufficient cause" is a question of facts depending upon the facts of each case and the Court in restoring a suit, acts in exercise of its judicial discretion which should be exercised in a judicious manner having regard to all the facts and circumstances. It may be mentioned that the instant case was dismissed after the file was sent to the trial Court by the High Court. The petition for leave to appeal had already been filed by petitioner and a leave was also granted by the Supreme Court. The plaintiff-petitioner, in support of sufficient cause for his non- appearance, has produced the evidence wherein it is stated that due to above proceedings pending in the Supreme Court, he presumed the proceedings pending in a way. The defendant- respondents did not bring any evidence on record in rebuttal of above evidence. Therefore, in the light of the evidence produced by the plaintiff-petitioner and the supporting circumstances, such as filing of petition for leave to appeal, grant of leave to appeal much earlier than the dismissal order and not bringing the fact of dismissal to the notice of Honourable Judges in the Supreme Court till the final order was passed, it is satisfied that the existence of "sufficient cause" for non- appearance was there. The objection taken by the learned Counsel for the respondents with regard to the presence of the petitioner's Counsel, marked by the trial Court before the dismissal of he suit, carries no weight, particularly in the circumstances when the fact of dismissal did not appear to be in the knowledge of Counsel for the defendant-respondents who was also marked present by. That Court which can be gathered from the order passed by the Supreme Court for directing the parties to appear before the trial Court unaware of the fact of dismissal of the suit.
8. Where the non-appearance is not intentional and the Counsel or his client has made genuine efforts or taken reasonable precautions to be present at the hearing, a very strict view is not to be taken as the Courts lean in favour of adjudication on merits, rather than stifling the proceedings on technicalities.
9. In the light of the above discussion, the revision petition succeeds. Setting aside the impugned order, the suit is restored and the trial Court W proceed with the case from the stage it was dismissed for non-prosecution, in accordance with law.