Kuriachan Chacko vs Registrar of Finns

P.R. Ramachandra Menon, J.—Rejection of the request of the petitioners to record the amendment brought about to Clause No. 12 of Ext. P1 Partnership Deed dated 12.11.2002, whereby the specified tenure of ''5 years'' was sought to be amended as ''30 years'' with some other modifications, which was refused to be registered as per Ext. P5 communication issued by the respondent, on the ground that the tenure of the firm was already over, years back in 2007; is the subject matter of this Writ Petition. The petitioners constituted a firm in the name and style as "M/s. LIS Ernakulam", as borne by Ext. P1 Deed of Partnership executed on 12.11.2002, which was got registered on 26.11.2002 as borne by Ext. P2 Certificate of Registration. Admittedly, the tenure of the firm was stipulated as ''five years''. But according to the petitioners, as per Resolution 3 dated 30.10.2006, the members of the firm, vide Ext. P3, had amended Clause No. 12 of the partnership deed, stipulating that the duration of the firm shall be for a minimum period of ''30 (Thirty) years''; that the firm shall not stand dissolved on the death of any of the partners and shall continue the business of the firm with the legal representatives of such deceased partner''s. It is made clear in Ext. P3 that the amendment has been brought about by virtue of the enabling provision under Clause 24 of Ext. P1 Partnership Deed. The petitioners contend that, even though the resolution was taken as early as in the year 2006, it was unfortunately omitted to be brought to the notice of the respondent, for being incorporated in the Register. The lapse was noticed only in September 2013 and immediately thereupon, the first petitioner who is described as the Managing Trustee/Partner as per Ext. P1 Partnership Deed, preferred Ext. P4 representation before the respondent, also forwarding a copy of the Minutes dated 30.10.2006 and an affidavit to that effect, seeking to have the modifications incorporated in the relevant Register. After considering the request, it was rejected by the respondent as per Ext. P5 communication dated 23.09.2013 as mentioned hereinbefore, which in turn is under challenge in this Writ Petition.

The specific contention of the petitioners is that the right to extend the time limit or tenure of the firm stands vested with the partners, as per the Indian Partnership Act and the Deed of Partnership. Since a decision had already been taken by the partners to extend the tenure as per resolution No. 3, as borne by Ext. P3 extract of the Minutes of the meeting held on 30.10.2006, the respondent is duty bound to have the same registered, more so when registration of the firm itself is optional under the Partnership Act There is a further contention raised (as raised in Ground B) that the only Rule that fixed a time limit for filing such resolution before the respondent is ''Rule 4'' of the Kerala Partnership (Registration of Firms) Rules 1959, which has been struck down as illegal and ultra vires to the Partnership Act as per the decision reported in O. Balanarayanan and Others Vs. The Registrar of Firms, Trivandrum and Another, and as such the petitioner is entitled to succeed.

The respondent has filed a statement seeking to sustain Ext. P5 and pointing out that the idea and understanding of the petitioners is thoroughly wrong and misconceived. It is stated that the tenure of the firm was admittedly for a period of ''five years'' and the firm was accordingly registered, issuing Ext. P2 Certificate of Registration, stipulating that the tenure of the firm shall expire on 25.11.2007. Ext. P4 request made by the petitioners as to the modification/change by way of Ext. P3 resolution was filed after a lapse of ''six years'' from the date of expiry of the tenure of the firm. Reliance is sought to be placed on S. 42 of the Indian Partnership Act 1932, which clearly stipulates under clause (a) that, if the firm is constituted for a fixed term, it will stand dissolved at the expiry of that term. It is further pointed out in paragraph 4 of the said statement, that the decision (Balanarayanan''s case (cited supra)) sought to be relied on by the petitioners stands on a different footing, and is with reference to sub-rule (2) of R. 4 of the Partnership (Registration of Firms) Rules 1959, prescribing the time limit of 15 days from the date of occurrence of the event for every statement or notice relating to a firm under Ss. 60, 61, 62, 63(1) and 63(2) of the Partnership Act. The striking down of the said Rule as ultra vires to the ''Act'' will in no way improve the case of the petitioners, as long as the substantive provision under the Act [S. 42(a) referring to the dissolution of the firm on expiry of the tenure], prescribing automatic dissolution of the firm stands intact.

Heard the learned counsel for the petitioners as well as the learned Government Pleader, in detail.

Since there is no dispute with regard to the factual position, the point to be considered is whether Ext. P3 resolution stated as taken on 30.10.2006, amending Clause 12 of Ext. P1 Deed of Partnership, modifying the tenure of the firm from 5 years to 30 years could be directed to be incorporated in the Register, for the reason that sub-rule (2) of Rule 4 of the Partnership (Registration of Firms) Rules 1959 has been declared as illegal and ultra vires and struck off from the relevant Rules. To appreciate the position, it is highly necessary to have an idea as to the relevant Rule and the provisions of the ''Act''.

Rule 4(2) of the Partnership (Registration of Firms) Rule 1959 reads as follows:

Rule 4 (2). Every statement, intimation or notice relating to a firm, under Sections 60, 61, 62, 63(1) or 63(2) of the Act shall be sent or given to the Registrar together with the maximum fees prescribed in the Schedule to the Act, within 15 days from the date of occurrence of the event referred to in such statement, intimation or notice.

Evidently, sub-rule (2) of R. 4 of the Rules prescribes a time limit of 15 days from the occurrence of the event with reference to statement/notice in relation to the firm under Ss. 60, 61, 62, 63(1) and 63(2). S. 60 deals with recording of alteration in firm name and principal place of business. S. 61 is in respect of noting of closing and opening of branches. Coming to S. 62, it is in respect of noting of changes in names and addresses of the partners. S. 63 deals with recording of changes in and dissolution of the firm. Even a plain or casual reading is enough to hold that the situations contemplated under Ss. 60, 61 and 62 are not attracted to the situation of the case in hand. Now comes S. 63, which reads as follows:

Section 63. Recording of changes in and dissolution of a firm: (1) When a change occurs in the constitution of a registered firm any incoming, continuing or outgoing partner, and when a registered firm is dissolved any person who was outgoing partner immediately before the dissolution, or the agent of any such partner or person specifically authorised in this behalf, may give notice to the Registrar of such change or dissolution, specifying the date thereof; and the Registrar shall make change of dissolution specifying the date thereof; and the Registrar shall make a record of notice in the entry relating to the firm in the Register of Firms, and shall file the notice along with the statement relating to the firm filed u/s 59.

The necessity to bring the factual position to the notice of the Registrar in respect of the events contemplated under S. 63 is with reference to change occurring in the constitution of the registered firm, which in turn has to be read and understood with reference to the circumstances narrated therein, which involves the incoming, continuing or outgoing partners. The change in constitution of an ongoing registered firm can be brought to the notice of the Registrar by the incoming, continuing or outgoing partners and when the registered firm is dissolved, such notice is to be given by the person, who was a partner, immediately before the dissolution or the agent of any such partner or a person specially authorized in this behalf.

Coming back to the case in hand, the same partners who constituted the firm in the year 2002, as per Ext. P1 Partnership Deed which was got registered as per Ext. P2, continued to be the partners without any change in the constitution and the amendment proposed as per Ext. P3 is only in respect of the tenure of the firm. S. 59 referred to in S. 63 is the provision for registration of the firm. The procedure for effecting registration is discernible from S. 58, which reads as follows:

Section 58. Application for registration.--(1) The registration of a firm may be effected any time by sending by post or delivering to the Registrar of the area in which any place of business of the firm is situate or proposed to be situated, a statement in the prescribed form and accompanied by the prescribed fee, stating,-

(a) the firm name,

(b) the place or principal place of business of the firm,

(c) the names of any other places where the firm carries on business,

(d) the date when each partner joined the firm,

(e) the names in full and permanent addresses of the partners, and

(f) the duration of the firm.

The statement shall be signed by all the partners, or by their agents specifically authorised in this behalf.

(2) Each person signing the statement shall also verify it in the manner prescribed.

(3) A firm name shall not contain any of the following words, namely-

"Crown", "Emperor", "Empress", "Empire". "Imperial", "King", "Queen", "Royal" or words expressing or imply the sanction, approval or patronage of Government, except when the State Government signifies its consent to the use of such words as part of the firm name by order in writing.

As borne by clause (a) to (f) of sub-section (1) of S. 58, Clauses (a) and (b) are regarding the firm name and place of business, in respect of which, if any change is resulted, it is taken care of as per S. 60. Clause (c) is with regard to other places, where the firm carries on business, and if any change occurs, it is dealt with as per S. 61. Aspects covering Clauses (d) and (e) are as to the names in full and permanent address of the partners and the change, if any is taken care of as per S. 62. The stipulation as to the duration of firm under Clause (f) of S. 58(i) is nowhere dealt with, under Ss. 60, 61, 62 or 63 and as such, sub-rule (2) of Rule 4 of the Partnership (Registration of Firms) Rules 1959, which originally stipulated the period of 15 days to submit statement, intimation or notice with reference to the events in respect of constitution covered by Ss. 60 to 63 did not refer to ordeal with duration of the firm. This being the position, striking down of R. 4 from the Statute book, based on the decision rendered by this Court in Balanarayanan''s case (cited supra) is not having any significance with regard to the issue involved herein.

This Court, while passing the verdict in Balanarayanan''s case (cited supra), observed that the Kerala Partnership (Registration of Firms) Rules 1959 were formulated by the State Government invoking the Rule-making power u/s 71 of the Act. It will be beneficial to extract the said provision as well for an in-depth analysis.

Section 71. Power to make rules: (1) The State Government may by notification in the Official Gazette makes rules describing the fees which shall accompany documents sent to the Registrar of Firms, or which shall be payable for the inspection of documents in custody of the Registrar of Firms, or which shall be payable for the inspection of documents in the custody of the Registrar of Firms, or for copies from the Register of Firms:

Provided that such fees shall not excess the maximum fees specified in Schedule I.

(2) The State Government may [also] make rules-

(a) prescribing the form of statement submitted u/s 58 and of the verification thereof;

(b) requiring statements, intimations and notices under sections 60, 61, 62 and 63 to be in prescribed form, and prescribing the form thereof;

(c) prescribing the form of the Register of Firms and the mode in which entries relating to firms are to be made therein, and the mode in which such entries are to be amended or notes made therein;

(d) regulating the procedure of the Registrar when disputes arise;

(e) regulating the filing of documents received by the Registrar.

(f) prescribing conditions for the inspection of original documents

(g) regulating the grant of copies

(h) regulating the elimination of registers and documents

(i) providing for the maintenance and form of an index to the Registrar of Firms; and

(j) generally to carry out the purposes of this Chapter

(3) All rules made under this section shall be subject to the condition of previous publication

(4) Every rule made by the State Government under this section shall be laid, as soon as it is made, before the State Legislature.

With reference to the specific instances dealt with under S. 71, the Court observed that the Rule-making power of the State did not extend to stipulate any time limit, which instance is conspicuously absent in the ''Act''. A reference was made to exactly similar Rule, formulated by the State of Andhra Pradesh, which was struck down by a Division Bench of the Andhra Pradesh High Court as ultra vires to the ''Act'', and it was accordingly, that Rule 4 of the Kerala Partnership (Registration of Firms) Rules 1959 was struck down by this Court as per the decision in Balanarayanan''s case (cited supra). This does not come to the rescue of the petitioners, for the reasons stated above.

The learned counsel for the petitioners points out that the resolution was passed before the expiry of the tenure of the Partnership Firm, whereby the tenure of 5 years was sought to be modified to 30 years, as borne by Ext. P3 extract of the Minutes of the Meeting held on 30.10.2006. The contention of the learned counsel that the situation contemplated under S. 58(f) regarding the tenure of the firm, is also taken care of by S. 63, does not appear to be palatable to this Court. This is for the obvious reason that the situation contemplated under S. 63 is in respect of the affairs of the registered firms. It is true that the petitioners'' firm was registered as per Ext. P2, but the consequence, once the tenure is expired, is discernible from S. 42, which reads as follows:

Section 42. Dissolution on the happening of certain contingencies: Subject to contract between the partners a firm is dissolved--

(a) if constituted for a fixed term, by the expiry of that term;

(b) if constituted to carry out one or more adventures or undertakings, by the completion thereof.

(c) by the death of a partner; and

(d) by the adjudication of a partner as an insolvent.

By virtue of the mandate under S. 42, the dissolution of the firm on expiry of the tenure is automatic, more so, when the alleged amendment sought to be made on 30.10.2006, was admittedly not brought to the notice of the respondent to have it incorporated in the Register, even when the registered firm was in existence. By the time the first petitioner approached the respondent by submitting Ext. P4 representation to incorporate the alleged amendment; the event of dissolution had already taken place in the year 2007. There is a contention for the petitioners that the firm was continuing business and that the existence of the firm cannot be disputed, as the registration of the firm is not mandatory, but optional, by virtue of S. 17 of the ''Act''. No material other than Ext. P3 extract of the Minutes of the alleged meeting held on 30.10.2006 on a letter head of the petitioner''s establishment has been produced before this Court to substantiate the said version. As such, ''contract to the contrary'' as envisaged in S. 42 of the Act is not established on the strength of any acceptable evidence. On the date of presentation of Ext. P4 before the respondent, by virtue of the operation of the law under S. 42, the firm stood automatically dissolved on 25.11.2007 and the status of the firm, if any, was only as an ''unregistered firm''. This is not taken care of under S. 63 of the Act for the reasons stated hereinbefore.

The learned counsel for the petitioners seeks to place reliance on the decision rendered by this Court in Noble Kuries Vs. Sebastian, particularly paragraph 10 onwards, to contend that there is no provision in the Act, which stipulates that when there is reconstitution of a firm which is already registered, a further registration is required after such reconstitution and that, what is required is only intimation to the Registrar of Firms about the reconstitution/change as provided under Ss. 60 to 63. There is no dispute with regard to the above proposition, but the same is applicable only in the case of a ''registered firm". As pointed out already, by the time the petitioner submitted Ext. P4, bringing the change of tenure to the notice of the respondent, the firm stood automatically dissolved and had lost the colour and characteristics of a ''registered firm''. In the above circumstances, this Court finds that the idea and understanding of the petitioner is wrong and misconceived. The Writ Petition is devoid of any merit. Interference is declined and the Writ Petition is dismissed accordingly.