S. 69 Partnership Act |Partner Of Unregistered Firm Can't File Suit For Recovery Against Other Partners : Supreme Court

The Supreme Court reaffirmed that a partner of an unregistered firm cannot enforce a contractual right against another partner. The Court reasoned that the restriction arises from the bar under Section 69 of the Partnership Act, 1932 (“Act”), which prohibits the maintainability of suits between unregistered partners of a partnership firm. The Court clarified that the bar under Section 69 of the Act applies even before the partnership firm's business commences. However, filing suits for the dissolution of the firm, rendition of accounts, or realization of the property of a dissolved firm remains permissible, even if the firm is unregistered. “It is evident from a reading of sub-sections (1) and (2) of Section 69 that it assumes a mandatory character. Section 69(1) prohibits a suit amongst the partners of an unregistered partnership firm, for the enforcement of a right either arising from a contract or conferred by the Act, unless the suit amongst the partners is in the nature of dissolution of the partnership firm and/or rendition of accounts. Section 69(2) prohibits the institution of a suit by an unregistered firm against third persons for the enforcement of a right arising from a contract. As a consequence, a suit filed by an unregistered partnership firm and all proceedings arising thereunder, which fall within the ambit of Section 69 would be without jurisdiction.”, the court observed. The bench comprising Justices JB Pardiwala and R Mahadevan was hearing the case arising out of the Andhra Pradesh High Court's decision to dismiss the Civil Revision preferred by the Petitioners against the order of the trial court dismissing the Petitioner's recovery suit against the partner of the same unregistered firm. It was the case where the petitioners (original plaintiffs) had filed the suit for recovery of money as partners of an unregistered partnership firm, against the respondent (original defendant) in her capacity as a partner of the same unregistered partnership firm. Affirming the High Court's decision, the Court observed that “the rigours of Section 69(1) would apply on such a suit and the partnership firm being unregistered would prevent the petitioners from filing a bare suit for recovery of money from the respondent.” The Court suggested that the plaintiffs should have filed a suit for the dissolution of the firm and rendition of accounts, as such actions are explicitly exempted from the bar under Section 69(3), even if the partnership business had not yet commenced. “It would have instead been appropriate for the petitioner to have preferred a suit for dissolution of the partnership firm and rendition of accounts, especially considering that the factum of non-registration of the partnership firm would not have acted as bar in a suit for dissolution in light of the exception carved out under Section 69(3). The defence that the partnership business had not yet commenced and thus, such a suit for dissolution could not have been preferred, would not be of any avail to the petitioners, particularly for overcoming the jurisdictional bar under Section 69(1). The High Court is right in taking the view that a suit of such nature could not be said to be maintainable in the absence of the registration of the partnership firm.”, the Court observed.Accordingly, the appeal was dismissed. Case Title: SUNKARI TIRUMALA RAO & ORS. VERSUS PENKI ARUNA KUMARICitation : 2025 LiveLaw (SC) 99Click here to read/download the orderAppearance: For Petitioner(s) : Mr. F. I. Choudhury, AOR For Respondent(s) : Ms. Manjeet Kirpal, AOR Ms. Ritu Puri, Adv.

S. 69 Partnership Act |Partner Of Unregistered Firm Can't File Suit For Recovery Against Other Partners : Supreme Court

Yash Mittal

The Court observed that the appropriate remedy in such a situation is to file suit for dissolution of firm and rendition of accounts.

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