If the firm is not registered on date of suit and the suit is to enforce a right arising out of a contract with the third party-defendant in the course of its business, then it will be open to the plaintiff to seek withdrawal of the plaint with leave and file a fresh suit after registration of the firm subject of course to the law of limitation and subject to the provisions of the Limitation Act. The aforesaid has been relied upon by the Delhi High Court in the case of M/S. Shanti Nath Enterprises v. M/S. Aa Enterprises [CM (M) 396/2021, CM APPL.18045/2021 (by the petitioner u/S 151 CPC for stay)] which was decided by a single judge bench comprising Justice Asha Menon on 15 July 2021.
The facts of the case are as follows. The respondent/plaintiff had instituted a commercial suit against the petitioner/defendant for recovery of Rs.3,84,398/-. The petitioner/defendant filed its written statement along with an application under Order VII Rule 11 of the Code of Civil Procedure, 1908 and prayed that since the suit had been filed by the respondent/plaintiff, which was an unregistered Partnership Firm, it was liable to be rejected as being barred under law.
The grievance of the petitioner/defendant is that the learned Trial Court recorded the statement of learned counsel for the respondent/plaintiff without mentioning the reason for withdrawal and yet, recorded in the order that the respondent/plaintiff had been permitted to withdraw the suit on account of ‘defect’. Neither the counsel for the respondent/plaintiff nor the court in its order described the said defect. Learned counsel for the petitioner/defendant contended that it was clear that the court had granted an unfair opportunity for withdrawing a suit, which was liable to be rejected.
The court perused the facts and arguments presented and was of the opinion that “The contention of the learned counsel for the petitioner/defendant that the defect, namely, the status of the respondent/plaintiff as an unregistered Partnership Firm at the time of filing the first suit, was an ‘incurable defect’, does not seem to be correct position. the absence of registration at the time of filing of a suit by a Partnership Firm would make such a suit defective. But this defect can be overcome, not in the same suit by way of amendment but by withdrawing the suit as having a ‘formal defect’ and seeking permission to file a fresh suit on the same cause of action. It is not possible to accept the argument of the learned counsel that if a Partnership Firm once files a suit at the time, it is not registered, then, irrespective of limitation, it would be barred forever from filing a suit on the same cause of action.” Therefore, it declared that “In the circumstances, no infirmity or perversity is found in the impugned order whereby the filing of the first suit was treated as suffering from a ‘defect’ on account of non-registration of the Partnership Firm at the time of filing of the said suit and permission was granted to the respondent/plaintiff to file a fresh suit on the same cause of action. There is no merit in the present case.”