AIR 1955 Ori 24
(Implied Agreement, Partnership by status)
The defendants entered into two contracts with the plaintiff firm, which was unregistered, regarding the supply of mustard oil. The defendants, (when the plaintiffs had fulfilled their end of the contract) failed to supply the oil on the pretext that export of mustard oil outside the United Provinces was banned. Upon the enquiry of the plaintiffs, it was found that there was indeed no ban on the export of mustard oil. Thereafter, when the plaintiffs approached the defendants for the delivery of oil the defendants refused on the basis that the contract was cancelled because of ban. The plaintiffs sued claiming damages up to Rs 15000.
- Whether the plaintiff’s case is dismissed due to the firm not being registered?
- Considering the fact that the law does not recognize a Mohammadan joint family as a legal entity as in the sense of a Hindu joint family, whether the plaintiffs constituted a partnership firm and thus sue or be sued?
Defendant: The suit is hit by the provisions of Section 69, Partnership Act as the plaintiffs constituted an unregistered firm.
- The contracts were complete even before the delivery of the goods was to be made.
- The refusal on the part of the defendants’ firm to deliver the goods when the plaintiff with their lawyer approached them was a wilful breach of the contracts and the cancellation of the contracts was wrongful.
- Plaintiffs’ suit is hit by the mischief of the provisions of Section 69, Partnership Act.
High (MOHAPATRA, J.)
- (w.r.t 2nd issue) The plaintiffs, in the present case cannot be said to carry on the business by virtue of their status because the law does not recognize a Mohammadan joint family as a legal entity as in the sense of a Hindu joint family who can sue and be sued against as a legal entity as represented by the Karta. When Mohammadans who live and mess together trace their origin to a common ancestor, carry on business jointly and make acquisitions, their rights are to be determined with reference to contract, either express or implied. There is enough evidence that pliantiffs were sharing the profits of the business and acting as mutual agent which shows that there must be an implied agreement of partnership between the parties to constitute a partnership.
- (w.r.t 1st issue and defendant’s contention)The provisions of Section 69 apply to partnerships even where the partnership agreement is implied. Plaintiffs’ suit is hit by the mischief of the provisions of Section 69, Partnership Act and thus bound to fail.
- According to Section 69(2) of the Partnership Act, a firm may not sue anyone unless it is registered and is visible in the Register of Firms. Furthermore, Section 5 of the Act makes it clear that a partnership arises from a contract and not from status.
- “An agreement of partnership need not be express. It can arise out of a mutual, understanding evidenced by a consistent course of conduct, and indeed, by the express admission of the parties concerned.”