The Supreme Court has rejected a petition filed by 'The Chennai Law Firm,' an unregistered legal entity, seeking the recovery of fees from its client.
A division bench comprising Justices Surya Kant and N Kotiswar Singh ruled that the suit filed by 'The Chennai Law Firm,' an unregistered partnership firm, was not maintainable under Section 69(2) of the Indian Partnership Act, 1932.
Therefore, the Supreme Court upheld the Madras High Court's decision on the matter.
“We see no reason to take a different view than that of the High Court, in view of Section 69 (2) of the Partnership Act, 1932. The other contention raised on behalf of the petitioner, based upon provisions of the Legal Practitioners (Fees) Act, 1988, cannot be entertain as no legal practitioner, juristic or otherwise, was the plaintiff before the Civil Court,” the top court said in its order of February 28.
Despite multiple demand notices, including one under the Insolvency and Bankruptcy Code, the company did not respond, prompting the firm to file a recovery suit before the Chennai City Civil Court. The trial court ruled in favor of the law firm, directing the company to pay the dues with interest.
However, on appeal, the Principal District Court overturned the decision, citing Section 69(2) of the Indian Partnership Act, 1932, which bars unregistered firms from enforcing contractual claims against third parties.
In the second appeal before the Madras High Court, The Chennai Law Firm contended that legal fees stemmed from professional services rather than a business transaction, making Section 69(2) inapplicable.
Justice PT Asha rejected this argument, holding that the right to claim remuneration was based on a contractual agreement. The High Court found the suit untenable as the firm was unregistered and its partners were not listed in the register of firms. Additionally, the firm’s failure to produce a registration certificate further weakened its case.
Upholding this decision, the Supreme Court ruled that the suit was not maintainable, dismissing the firm's plea.
"A reading of the Section (69(2) of the Partnership Act would clearly show that no suit can be instituted by or on behalf of an unregistered firm to enforce any right arising from a contract against the 3rd party unless a firm is registered and the persons suing are shown as partner,” the High Court said.
The firm subsequently approached the Supreme Court, which dismissed the appeal and upheld the Madras High Court's verdict.
The Chennai Law Firm was represented by advocate L. Sriram (party in person), along with advocates Shanmugaraja, Ananda Selvam, Mayilsamy K, Habib Muzaffar, and Jay Kishor Singh.
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