In a ruling that can have strong bearing on unregistered partnership firms in Maharashtra seeking dissolution of the tie, the Supreme Court has declared as ‘unconstitutional’ an amendment introduced by the Maharashtra government in the Indian Partnership Act (IPA) in 1984 that denied legal jurisdiction to entertain disputes relating to the trade pact.
Scrapping a Bombay High Court judgment that upheld the constitutionality of Section 69 (2A) of the amended IPA introduced by Maharashtra, a bench of Justices Markandey Katju and G S Singhvi explained the impact of the amendment saying, “A dishonest partner, if in control of the business, or if simply stronger, can successfully deprive the other partner of his dues from the partnership.’’
The top court said, “It could result in extreme hardship and injustice. An aggrieved partner is left without any remedy whatsoever. He can neither file a suit to compel the mischievous partner to cooperate for registration, as such a suit is not maintainable, nor can he resort to arbitration if any, because the arbitration proceedings is hit by Section 69(1) of the Act.’’
The court said Article 19(1)(g) of the Constitution stipulates all persons have the right to practice any profession or to carry on any occupation, trade or business.
However, 19 (6) of Maharashtra IPA enables the state to make any law imposing, in the interest of general public, reasonable restrictions on the exercise of the right conferred under sub-clause
(g) of Article 19(1).
“Since in our opinion sub-section 2A of Section 69 as introduced by the Maharashtra legislature clearly violates Articles 14, 19(1)(g) and 300A of the Constitution, it is in our opinion ultra vires and is hence declared unconstitutional,’’ the court held.
“Consequently the appeal is allowed and HC judgment is set aside,’’ the court added.
The aggrieved partner of a firm can now pursue his suit ignoring sub-section 2A of section 69 “which we have declared invalid’’, the court said.
The dispute on the validity of the amendment started when one V Subramaniam sought to break his partnership with one Rajesh Raguvandra Rao.
