India: Section 69 (2) Of Indian Partnership Act, 1932 Does Not Bar Filing Of A Suit Based On Dishonour Of A Cheque

Last Updated: 28 February 2019
Article by S.S. Rana & Co. Advocates

The Delhi High Court in the case of M/S. Hindustan Infrastructure Construction Corporation Limited & Anr. V. M/s. R.S. Wood International, ruled that when the suit was purely based on the liability created under the Negotiable Instruments Act, 1881, and was not based on the statutory rights created under the contract between the parties, then suit cannot be considered as barred under Section 69 (2) of the Indian Partnership Act,1932.

Brief Facts:

A civil suit No.613734/16 titled as M/s. R.S. Wood International vs. M/s. Bhayana Builders Hindustan Infrastructure JV Pvt. Ltd. & Ors, was filed by M/s. R.S. Woods International & Ors (hereinafter referred to as 'the Respondents') in West District, Tis Hazari Courts, Delhi, against M/s. Hindustan Infrastructure Construction Corporation Limited (hereinafter referred to as 'the Petitioners') for recovery of the amount on account of dishonor of cheques. In the said suit, an application under Order VII Rule 11 of the Code of Civil Procedure, 1908 (hereinafter referred to as the 'CPC') was preferred by the Petitioners for rejection of the plaint on the ground that the suit was barred under Section 69 (2) of the Indian Partnership Act, 1932 ('the Act'). The Learned Additional District Judge (hereinafter referred to as the 'ADJ') dismissed the said application. Aggrieved thereby, the revision petition was preferred by the Petitioners against the order dated October 09, 2017, passed by the Learned ADJ before the Delhi High Court.

Issues Raised:

  • Whether the Learned ADJ was correct in dismissing the application of the Petitioners under Order VII Rule 11 of the CPC in the Civil Suit No.613734/16 titled as M/s. R.S. Wood International vs. M/s. Bhayana Builders Hindustan Infrastructure JV Pvt. Ltd. & Ors.

Petitioners Contentions:

The Petitioners had filed an application before the Learned ADJ under Order VII Rule 11 CPC for rejection of the plaint on the ground that the suit was barred under Section 69 (2) of the Indian Partnership Act, 1932.

Respondents Contentions:

The Respondents contended that the Petitioners are liable under Section 30 and 37 of the Negotiable Instruments Act, 1881, as the cause of action for the plaint was based solely on the dishonor of cheques and on the basis of contract between the parties.

Court's Decision:

The Court relied on the judgment passed by the Kerala High Court in the case of Afsal Baker v. Maya Printers, 2016 SCC Online Ker 29914, whereby the Court held that "in the instant case, as noticed above, by virtue of Section 30 and 37 of the Negotiable Instruments Act, on the dishonor of a cheque, the statute creates a liability on the drawer, apart from the general law of contracts. The right to sue on the contract is available and open to the party. However, apart from that, the statute creates a liability as against the drawer of the instrument. If the suit is on the original cause of action based on the original contract between the parties, there is no doubt, the suit would be hit by Section 69 (2) of the Indian Partnership Act. But, in the instant case, what is sought to be enforced is the liability created under the Negotiable Instruments Act. It is not a case where suit is filed on the original cause of action by producing the cheques as a piece of evidence to prove the liability under the original contract. Here, the suit itself is laid on the instrument. A reading of the plaint leaves no room for doubt regarding that. The bar under Section 69(2)of the Indian Partnership Act would apply only where the suit is sought to be laid on a contract and not in a case where statutory right/liability is sought to be enforced. In the instant case, the suit being purely based on the liability under Section 30 and 37 of the Negotiable Instruments Act, it is a suit based on statutory liability dehors the contract between the parties. The suit cannot be held to be barred under Section 69(2) of the Indian Partnership Act."

The Court observed that since the suit was not based on any contract between the parties, the bar under Section 69 (2) of the Partnership Act would not apply. The suit between the parties were purely based on the liability created under the Act. Resultantly, the Revision Petition was dismissed, and the order passed by the Learned ADJ was upheld.

For further information please contact at S.S Rana & Co. email: info@ssrana.in or call at (+91- 11 4012 3000). Our website can be accessed at www.ssrana.in

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