Petitioner to Avail Statutory Rights of Injunction in Case of Fraud and Misrepresentation for the Sale of Firm's Share: SC

Petitioner to Avail Statutory Rights of Injunction in Case of Fraud and Misrepresentation for the Sale of Firm's Share: SC Supreme Court Directs the Petitioner to Avail the Statutory Rights of Injunction under SRA and TPA, in Case of Fraud and Misrepresentation for the Sale of Firm's Share in the Suit Property

Issue

Whether the subject suit, filed by an unregistered partnership firm, is covered by the bar created by Section 69(2) of the Act of 1932? 

Facts

• The appellant herein is an unregistered partnership firm by the name “Shiv Developers”. It is stated that this firm is engaged in the business of construction of buildings and is comprising of two equal partners.
• The plaintiff-appellant has averred that on 26.11.2013, the appellant and the respondent Nos. 2 and 3 purchased a property.
•  According to the appellant, its share in the suit property was 60% and the respective shares of respondent Nos. 2 and 3 were 20% each. 
• It has further been averred that on 22.04.2014, a new partnership by the firm name “Aksharay Developers” was formed with four partners, in which  respondent Nos. 2, 3 and 4 were the partner with one other person.
• On  the very next day of constituting the respondent No. 1 firm, i.e., on 24.02.2015, the respondent Nos. 2 and 3 got executed a sale deed, whereby 60% share of the appellant in the suit property was purchased by this firm Aksharay Developers from Sunilbhai Somabhai Ajmeri, acting on behalf of the appellant firm Shiv Developers. 

Findings

To put it differently, the relevant principles, when applied to the facts of the present case, leave nothing to doubt that the transaction in question was not the one entered into by the plaintiff firm during the course of its business (i.e., of building construction); and it had been an independent transaction of sale, of the firm’s share in the suit property, to the contesting defendants. The bar of Section 69(2) is not attracted in relation to the said sale transaction. Moreover, the subject suit cannot be said to be the one for enforcement of right arising from a contract; rather the subject suit is clearly the one where the plaintiff seeks common law remedies with the allegations of fraud and misrepresentation as also of the statutory rights of injunction and declaration in terms of the provisions of the Specific Relief Act, 1963 as also the Transfer of Property Act, 1882 (while alleging want of the sale consideration). Therefore, the bar of Section 69(2) of the Act of 1932 does not apply to the present case. 

Judgment

Supreme Court held that the Trial Court had rightly appreciated the facts of the case and had rightly rejected the baseless application moved by the contesting respondents. The impugned order of the High Court, being not in conformity with the applicable legal principles, is set aside and the order dated 07.04.2017 as passed by the 9th Additional Senior Civil Judge, Vadodara in Special Civil Suit No. 333 of 2015 is restored. The Trial Court shall now be expected to proceed with trial of the suit in accordance with law. To Read Judgement Download PDF Given Below: