' The facts disclosed in the plaint and the documents filed therewith in so far as they are relevant for the purpose of disposal of C.M. A. No,2150/93, filed by the defendants, for rejection of the plaint under Order VII, Rule 11, C.P.C., are as under:-- ' Plaintiff No,2 Haji Abdul Karim and defendant No,2 Malik Fayyaz Ahmed had entered into an oral partnership in the name and style of M/s. Karini 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 go downs, etc. And purchase and sale of the plots of land including flats, shops and go downs. 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,FL-1, Block 1', situated in Gulshan-e-Iqbal, K.D.A. Scheme No,24, Karachi, for a lump sum 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 Rs,3,00,000 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 basis 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 Shumalia 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 their 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 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 on 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 and 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 a sued 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 along with plaintiff No,2. Therefore, it is to be inferred that it was constituted without such consent. 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 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 sale agreement.
6. Subsection (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 Nol, i,e, the third party, the suit is again not maintainable in view of the bar contained in subsection (2) above.
' Justice Saleem Akhtar (as he then was, now Judge of the Supreme Court), while interpreting the above section in Overseas Containers Ltd. And another v. Muhammad Iqbal and 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 Usma n v. Omar and others (PLD 1966 SC 328), 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 accounts or the realisation of the property of a dissolved firm.
It may lastly be pointed out in the above context that the suit is not saved by any of the exceptions provided for in subsection (3) of the said section. Thus the suit as framed is not maintainable and the plaint 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 v.
Commissioner of Income-tax (AIR 1965 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 Ahmad and 9 others v.
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 Bai v. Abdul Aziz and 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 limelight 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 promoters 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 (a) of the said section and, therefore, the partners of a firm may tile a suit for specific performance thereof. In such situation, in so far 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 claim. 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 v. Abdul Majeed and 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.
In so far 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 and another v. John Mandilas (LR 1940 AC 12) and J.E0bavid v. 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 subsection (3) of section 69 of the Partnership Act, which reads as under:-- "Section 69.--(1)...
(2)
(3) (a) The provisions of subsections (1) and (2) shall apply also to a claim or set-off 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.. "
' In so far 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 the 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 has been joined as one of the Directors of defendant No,1, it does not make any difference. The question is that of maintainability of 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 premises 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, C.P.C., 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 tht 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 v. Nishat 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, C.P.C. Is not attracted in the present case. In this regard he relied on certain authorities which are dealt with hereunder:
(i) Bagh Ali v. Mirza Mahmood Baig and 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 in section 69 of the Partnership Act. Muhammad Amin v. Afzal Ahmed (1986 CLC 126). In the above authority it was held that where plaint discloses cause of action, the plaintiff has a right to have a fair trial of his case, to produce evidence and have a judicial opinion of Court on merits of his cause. Plaint can only be rejected when allegation made in plaint when accepted in mode and form does not entitle him to a relief. It was held that summary guillotining of civil proceedings can hardly be approved. The above authority is not attracted in this case in view of the fact that no cause of action exists in so far as plaintiff No,1 is concerned and plaintiff No,2 is debarred from maintaining the suit.
' Hoechst Pakistan Ltd. v. Cooperative Insurance Company (1993 MLD 2464). In this case a cooperative society was joined as a co-defendant in its capacity as a guarantor for repayment of loan. After framing the issue an application was submitted invoking Order VII, Rule 11, C.P.C. And the Court rejected the plaint for want of notice under section 70 of the Punjab Cooperative Societies Act and dismissed the plaint. The order of rejection was set aside by a Division Bench of the Lahore High Court on the conclusion that the act of being a guarantor by the Society was not relatable to the business of the Society. This authority does not in any manner advance the argument of the learned counsel for the plaintiff.
(iv) Masooda Abdul Hague v. Shan-e-Mustafa Production, Lahore and another (1985 CLC 671). In the above authority the well-settled principles with reference to Order VII, Rule 11, C.P.C. Have been recapitulated. It is observed that it is too well-settled law to be reiterated that while rejecting a plaint reference can only and only be made to the averments in the plaint and no other material, including the defence set up by the defendant, can be brought under consideration for finding whether the plaintiff has a cause of action to present. Whether the plaintiff would succeed at trial or not or be able to substantiate his allegations made in the plaint at trial, are wholly irrelevant considerations for applying provisions of Order VII, Rule 11(a), C.P.C. For rejecting the plaint on account of nondisclosure of cause of action. It further lays down that the general policy of the law is that the civil suit be decided on merits in accordance with the procedure laid down for their trial in the Civil Procedure Code after framing necessary issues and affording an opportunity to the parties to lead necessary evidence. Order VII, Rule 11(a), C.P.C. Provides an exception to the general rule and unless the case comes strictly within this rule, the plaint cannot be rejected.
A cause of action presupposes the existence of a right in the plaintiff which right has either been infringed or is threatened to the infringed. Where there is no right in existence, the question of its infringement does not arise and, therefore, in so far as plaintiff No,1 is concerned, the plaint does disclose that any right exists in its favour under the contract executed between the said unregistered firm and the first defendant and similarly no right to sue the defendants has accrued to the second plaintiff who under the law is barred from suing the third parties and only right that has arisen to him is limited by terms of section 69(3) of the Partnership Act and as such no cause of action can be said to have accrued to him for specific performance of the contract entered into with defendant No,1. The plaint is, therefore, liable to be rejected under clause (a) of Rule 11 of Order VII, C.P.C. The suit is also barred under clause (d) of the said Rule, in view of the provisions of section 69 of the Partnership Act, as noted hereinabove.
' The application is allowed and the plaint is accordingly rejected under Order VII, Rule 11(a) and (d), C.P.C.
Plaint rejected.