The Supreme Court dismissed ‘The Chennai Law Firm’s’ plea to recover fees, citing Section 69(2) of the Indian Partnership Act. The ruling upheld the Madras High Court’s verdict, stating unregistered firms cannot enforce contracts in court.
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NEW DELHI: The Supreme Court rejected a request from an unregistered law firm called ‘The Chennai Law Firm‘ to recover fees from its client.
A bench of Justices Surya Kant and N Kotiswar Singh decided that the case filed by this unregistered partnership firm was not valid under Section 69(2) of the Indian Partnership Act, 1932.
Because of this, the Supreme Court supported the decision of the Madras High Court.
“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 entertained as no legal practitioner, juristic or otherwise, was the plaintiff before the Civil Court,”
-the Supreme Court stated in its judgment on February 28.
The dispute started because of a professional agreement between ‘The Chennai Law Firm‘ and Reyvish Associates (P) Ltd. The law firm was hired to file petitions under the SARFAESI Act.
As per the law firm, the company had agreed to pay 50% of the fees when filing the petition and the remaining amount after the work was completed. However, the company allegedly failed to make the payments on time, leading to an outstanding balance of Rs 6.57 lakh.
The law firm sent several demand notices, including one under the Insolvency and Bankruptcy Code, but did not receive any response. Because of this, the firm decided to file a case in the Chennai City Civil Court to recover the pending amount.
The trial court ruled in favor of the law firm and ordered the company to pay the outstanding amount along with interest.
However, the company challenged this verdict in the Principal District Court (appellate court), which overturned the trial court’s decision.
The appellate court stated that since the law firm was not registered, the case was not valid under Section 69(2) of the Indian Partnership Act. This section clearly says that an unregistered firm cannot enforce contractual rights against another party.
The law firm then filed a second appeal before the Madras High Court. It argued that Section 69(2) of the Partnership Act should not apply in this case because legal fees were not part of a business transaction but rather payment for professional services.
However, Justice PT Asha dismissed this argument and stressed that the right to claim payment came from a contractual agreement between both parties.
Since the law firm was not registered and its partners were not listed in the official register of firms, the High Court ruled that the case was not legally valid.
It also observed that the firm could not provide a registration certificate, which further weakened its case.
“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 stated.
The law firm then took the matter to the Supreme Court, which dismissed the appeal and upheld the Madras High Court’s decision.
‘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.
CASE TITLE:
The Chennai Law Firm Vs Reyvish Associates Pvt Ltd.
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