How suits by or against firms and persons carrying on business in names other than their own may be instituted?

Question: How suits by or against firms and persons carrying on business in names other than their own may be instituted?

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Answer

Rule 1 of Order XXX provides for the procedure to instate a suit for legal action either by the firm or against the firm. According to the provision, if the partners of the firm are aggrieved by the action of certain persons or if certain persons are aggrieved by the actions of the partners, the partners can sue or be sued in the name of the firm. It means that the suit shall be titled in the name of the firm but the partners shall be the ones liable for the execution of any order of the court.

In Purushottam Umedbhai & Co. v. Manial & Sons, the apex court observed that Order XXX of the code does not apply to firms carried on the name of the owner himself such as a sole proprietorship firm. It applies to situations where firms are carried on the names of other persons such as partnerships.

The rule requires that at the time when the action led to the rise of a cause of action, the persons should be the partners of the firm or claim to be the partners of the firm to sue or be sued. It means that a partner who has retired from the firm cannot sue or be sued in the name of the firm.

Further, Rule 1 allows the aggrieved party to request the court for the issue of names, addresses, and other details of the partners of the firm who were associated with the firm at the time when the cause of action had arisen.

Moreover, when the partners of a partnership are the plaintiff and sue the third party, the defendant in such a case can also apply before the court for the details of the partners of the firm at the time when the cause is claimed to have arisen by the partners. This is provided under Rule 2 of the Order.

Further, if the firm files a suit and discloses names of certain persons as partners who are not mentioned in the register of partners, this shall amount to fraud on the court and the suit shall be dismissed with no cost to the plaintiff partners.

Issue and Service of Processes

Since this is a civil suit, there are no warrants. The processes issued by the court include court summons. Rule 3 deals with the process and manner of issue and service of summons to the partnership firm. The rule recognizes the following four manners of service of summons depending on the situation and need:

Service on the Partner: The plaintiff may opt to serve the summons issued by the court upon one or more of the partners of the firm at their place of residence respectively. If the summon is duly received by even one partner with acknowledgment, it will be deemed to be served upon the firm and all the partners thereof. If the partner refuses to receive the summon, the court at its discretion may deem it to be served.

Service at the Place of Business: The plaintiff may serve the summon upon the firm by sending it to the place of business from where the firm carries on its business and serving it upon the person in the management of the firm at that time. The plaintiff should serve the summon upon the place of business at the time stipulated by the court itself.

Service to Third Person: In R.D. Khan v. Bombay Iron Syndicate, The Bombay High Court held that in the above two situations when the to summon is served to the partners or upon the firm manager and the partners are out of India at the time of receipt, the receipt of the summon by the third person shall be deemed to be complete service as it shall be the duty of the third party to inform the partners of the firm.

Service in Case of Dissolution: When the firm has dissolved, i.e. ceased to carry on business and it is within the knowledge of the plaintiff, then the plaintiff shall serve the summons on the individual partners of the dissolved firm who were associated with it at the time when the cause of action arose.

The plaintiff shall decide which partners were liable or whom he seeks to make liable and serve the summons upon them. In P. Sen (Engineering) Pvt. Ltd. v. Delite Builders, the court held that service of such summon shall be complete even if it is received by someone acting on behalf of the partners.

Appearance before the Court

According to Rule 5 of the Order, the plaintiff must serve notice right after the summons is served. The object of the notice is to let the partners of the firm know the capacity in which they have been sued.

According to Rule 7 of the Order, the partners are required to be present in the court at the time of hearing provided they are sued in their capacity as partners.

It means that if the partners are sued in the capacity of a manager, they are not required to appear before the court mandatorily but as a partner, it is mandatory to appear. However, the suit shall proceed in the name of the firm itself but the firm shall be represented by the partners throughout the proceedings of the court.

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