Once a Partnership Firm is Registered, Its Legal Rights Cannot Be Denied: Calcutta High Court Restores Plaintiff’s Money Claim

Bar Under Section 69(2) of the Partnership Act Applies Only at the Time of Filing the Suit, Not at the Time of Transactions –  Calcutta High Court has ruled that a partnership firm cannot be denied its right to sue for contractual dues merely because it was unregistered at the time of the transactions if it had secured registration before initiating legal proceedings. Setting aside a trial court’s dismissal of a money suit, the High Court has reaffirmed that Section 69(2) of the Indian Partnership Act, 1932, only bars an unregistered firm from filing a suit—not from carrying on business.

Delivering the judgment in M/s. Trade Centre v. Magebe Bridge Products Private Limited, Justice Sabyasachi Bhattacharyya declared, "The relevant date for determining the applicability of Section 69(2) is the date on which the suit is instituted, not the date of the underlying business transactions. Since the plaintiff-firm was registered before filing the suit, the bar under Section 69(2) does not apply."

The High Court has thus reinstated the plaintiff’s claim for outstanding dues, ensuring that technical errors in interpreting partnership law do not defeat legitimate business claims.

The dispute arose when M/s. Trade Centre sought to recover ₹24,36,105 from Magebe Bridge Products Private Limited for goods supplied under various invoices. Despite repeated demands, the payments were never made. When the plaintiff-firm filed a money suit for recovery, the defendant opposed it, arguing that the firm was unregistered when the transactions took place, making the suit barred under Section 69(2) of the Partnership Act.

The trial court accepted this argument and dismissed the suit, holding that the plaintiff had failed to prove its registration as a partnership firm. The plaintiff then appealed to the High Court, producing a registration certificate issued by the Registrar of Firms, West Bengal, prior to the filing of the suit. The key question before the High Court was whether a firm that was unregistered at the time of transactions but registered before filing the suit could still enforce its claim.

"Legal Rights Are Determined at the Time of Filing the Suit, Not the Time of Transactions"
The High Court ruled that the trial court had completely misapplied Section 69(2) of the Indian Partnership Act, emphasizing that the law does not restrict an unregistered firm from conducting business—it only prevents it from initiating legal proceedings until it is registered.

Justice Bhattacharyya observed, "There is a crucial distinction between carrying on business and enforcing legal rights. The bar under Section 69(2) is procedural, not substantive. Since the plaintiff-firm had obtained registration before filing the suit, its legal rights were intact."

The Court held that the plaintiff had produced sufficient documentary evidence proving that the firm was duly registered when the suit was filed, and the trial court had erred in disregarding this fact. The registration certificate issued by the Registrar of Firms was conclusive proof of compliance with the law.

Limitation Cannot Defeat a Claim If the Cause of Action Arose Later
The High Court also rejected the defendant’s argument that the plaintiff’s claim was time-barred since the transactions occurred between 2005 and 2007, whereas the suit was filed in 2010.

Referring to documentary evidence, the Court found that the defendant had explicitly denied payment through a letter dated August 1, 2008, and observed, "The cause of action does not arise merely upon the completion of transactions, but from the point of refusal to pay. Since the denial of liability was communicated in August 2008, the suit filed in June 2010 was well within the prescribed limitation period."

A Defective Written Statement Cannot Be Used to Defend an Illegal Dismissal
The High Court also scrutinized the written statement filed by the defendant, which had been signed by a director without the company’s official seal or verification by an authorized representative, in violation of procedural law. The Court ruled that a corporate entity cannot file pleadings without due authorization, declaring, "A written statement that does not comply with procedural requirements cannot be relied upon, nor can it be used to sustain an otherwise illegal dismissal of a valid claim."

"Substantive Rights Cannot Be Defeated by Technicalities"
Setting aside the trial court’s dismissal, the High Court decreed that Magebe Bridge Products Pvt. Ltd. must pay ₹24,36,105 to the plaintiff, along with 6% interest per annum from June 5, 2010, until realization. The Court refused to grant a higher interest rate sought by the plaintiff, stating that a reasonable rate of 6% per annum would suffice.

Justice Bhattacharyya, in his concluding remarks, emphasized, "Legal technicalities should not override substantive rights. A firm that is duly registered before initiating proceedings cannot be denied its legal remedies due to an erroneous reading of statutory provisions."

The judgment in M/s. Trade Centre v. Magebe Bridge Products Private Limited has reaffirmed that:

•    The relevant date for determining a firm’s eligibility to sue is the date of filing the suit, not the date of the transactions.
•    Certified copies of registration documents are valid proof of a firm’s legal standing.
•    Corporations must file legally compliant pleadings, and a defective written statement cannot be relied upon to sustain an unjust dismissal.
With this ruling, the Calcutta High Court has provided clarity on the enforceability of commercial claims by partnership firms, ensuring that legal rights are protected against misinterpretations of procedural law.

Date of Decision: 18 March 2025