TMI Blog2009 (3) TMI 1032X X X X Extracts X X X X X X X X Extracts X X X X ..... m from his share in the property of the firm without any compensation. Also, it prohibits him from seeking dissolution of the firm although he may want it dissolved. Article 14 guarantees the right to equality and states that The State shall not deny to any person equality before the law or the equal protection of the laws within the territory of India. Equal protection means the right to equal treatment in similar circumstances. In other words there can be classification for legitimate purposes, but it is well settled that the classification must be reasonable i.e. based on intelligible differentia and having nexus between the basis for classification and the object of the legislation. Under Article 19(1)(g) of the Constitution all persons have the right to practice any profession or to carry on any occupation, trade or business. Clause (6) of that Article enables the State to make any law imposing, in the interest of general public, reasonable restrictions on the exercise of the right conferred under sub-clause (g) of Article 19(1). The primary object of registration of a firm is protection of third parties who were subjected to hardship and difficulties in the matter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation if any, because the arbitration proceedings would be hit by Section 69(1) of the Act (Jagdish Chandra Gupta vs. Kajaria Traders (India) Ltd.[ 1964 (4) TMI 109 - SUPREME COURT] . Therefore, the restrictions placed by sub-section 2A of Section 69 introduced by the Maharshtra Amendment Act, for the reasons given above, are arbitrary and of excessive nature and go beyond what is in the public interest. Hence the restrictions cannot be regarded as reasonable. The High Court was of the view that the object of the Maharashtra Amendment was to induce partners to register and it was intended to protect third party members of the public. We cannot see how sub-section 2A of Section 69 in any way protects the third party members of the public. It makes it virtually impossible for partners in an unregistered firm to dissolve the firm or recover their share in the property of the firm. Hence it is totally arbitrary. Since in our opinion sub-section 2A of Section 69 as introduced by the Maharashtra Legislature clearly violates Articles 14, 19(1)(g) and 300A of the Constitution, it is in our opinion ultra vires and is hence declared unconstitutional. Consequently this appeal is allo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of a firm or for accounts of a dissolved firm or any right or power to realize the property of a dissolved firm 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 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: Provided that the requirement of registration of firm under this sub-section shall not apply to the suits or proceedings instituted by the heirs or legal representatives of the deceased partner of a firm for accounts of a dissolved firm or to realize the property of a dissolved firm. 7. It may be mentioned that the Maharashtra Amendment of 1984 not only inserted sub-section 2A in Section 69, it also substituted the original sub-section (3)(a) to Section 69 by an altogether different sub-section (3)(a). 8. The original sub-section (3)(a) of Section 69 in the Partnership Act read as follows : (3) The provisions of sub-sections (1) and (2) shall apply also to a claim of set-off or other proceeding to enforce a right arising from a contract, but shall not affec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the partners of a firm are co-owners of the property of the firm, unlike shareholders in a company who are not co-owners of the property of the company. 15. Till the Maharashtra Amendment of 1984 came into force on 1.1.1985, a partner in a firm could file a suit for dissolution of an unregistered partnership firm or for accounts of the dissolved firm or to recover the properties of the dissolved firm. However, in view of sub- section 2A of Section 69, since 1.1.1985 a partner in an unregistered partnership firm in the State of Maharashtra cannot file a suit for dissolution or for accounts of a dissolved firm or realize properties of a dissolved firm, unless the duration of the firm was only six months or it's capital is upto ₹ 2000/-. The question before us is whether sub-section 2A of Section 69 inserted by the Maharashtra Amendment is constitutionally valid. 16. In our opinion sub-section 2A of Section 69 inserted by the Maharashtra Amendment violates Articles 14, 19(1)(g) and 300A of the Constitution of India. 17. It has already been mentioned above that a partnership firm, whether registered or unregistered, is not a distinct legal entity, and hence the prop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reatment in similar circumstances. In other words there can be classification for legitimate purposes, but it is well settled that the classification must be reasonable i.e. based on intelligible differentia and having nexus between the basis for classification and the object of the legislation. 23. Under Article 19(1)(g) of the Constitution all persons have the right to practice any profession or to carry on any occupation, trade or business. Clause (6) of that Article enables the State to make any law imposing, in the interest of general public, reasonable restrictions on the exercise of the right conferred under sub-clause (g) of Article 19(1). 24. In Chintamanrao and another vs. The State of Madhya Pradesh AIR 1951 SC 118 this Court observed : The phrase `reasonable restriction' connotes that the limitation imposed on a person in enjoyment of the right should not be arbitrary or of an excessive nature, beyond what is required in the interest of the public. The word `reasonable' implies intelligent care and deliberation, that is the choice of a course which reason dictates. Legislation which arbitrarily or excessively invades the right cannot be said to con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ory under the Act. A partnership firm can come into existence and function without being registered. However, the Maharashtra Amendment effects such stringent disabilities on a firm as in our opinion are crippling in nature. It lays down that an unregistered firm cannot enforce its claims against third parties. Similarly, a partner who is not registered is unable to enforce his claims against third parties or against his fellow partners. An exception to this disability was a suit for dissolution of a firm or a suit for accounts of a dissolved firm or a suit for recovery of property of a dissolved firm. Thus a partnership firm can come into existence, function as long as there is no problem, and disappear from existence without being registered. This is changed by the 1984 Amendment extending the bar of the proceedings to a suit for dissolution or recovery of property as well. The effect of the Amendment is that a partnership firm is allowed to come into existence and function without registration but it cannot go out of existence (with certain exceptions). This can result into a situation where in case of disputes amongst the partners the relationship of partnership cannot be put a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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