ABSTRACT

 In practical situations it is more often than observed that the various liabilities emanate from latent sources rather than the apparent ones. The Civil Procedure Code being a subservient statute does not create an impediment on account of this technicality. Order XXX deliberates upon the procedural aspects of Suits by or against firms or persons carrying on business in names other than their own. The researcher herein has attempted to present a brief discussion on the subject.

Introduction

It is very common to observe issues arise out of civil transactions. Business transactions often result out of business relationships, these relationships are often established between two entities owing to a business structure which facilitated such establishment in the first place. As such situations present themselves in abundance, certain issues arise out such relationships and it becomes impracticable to litigate against an individual entity. Hence, it is imperative to have a proper and comprehensive code to govern these litigations which pertain to such transactions. 

Business actions are not attributable to a single individual every time, moreover, certain remedies tend to have a very limited scope if they are exercised against an individual instead of a corporation or a business partnership. Further in cases where an entire business setup or a partnership has been affected due to a certain individual’s actions, there should be a proper channel to follow to enforce the laws in the own name of the business entity or partnership.

Order 30 of the Code of Civil Procedure deals with such transactions which involve suing or being sued in the name of a firm or an association of people who carry on a business in a name other than one’s own.[1] The order runs through 10 rules which discuss the various essentials of such litigations, ranging from service, notice, appearance etc. The following analysis will provide a brief synopsis of Order 30 and proceed to analyze the order in light of judicial pronouncements and basic jurisprudence. 

An Analytical Synopsis Of The Order

Rule 1 of the order gives a basic idea of the nature of the procedural law that Order 30 seeks to establish the nature of the entire order. It provides for two or more persons who are either liable to be partners or are partners to sue or be sued in the name of the firm which they were a part of when the cause of action arose.[2] This facilitates the process of litigation by providing both the partners and the individuals seeking relief against the partners by making the litigation about the entire partnership firm i.e. every partner rather than a single individual.[3]

The aggrieved are further provided under Rule 1 with an option to apply to the court for a list of the partners of a firm to ascertain the concerned people at the time when the cause of action arose. 

The order further provides that were the partners sue in the name of the firm, the defendants may demand in writing that the names of all partners of the firm be declared.[4]4The rule provides that the proceeding shall proceed in the name of the firm but the decree shall mention the names of all partners. In addition to that, the rule provides that the proceedings may be stayed by the court in case the firm or the partners fail to comply with the requisition. The suit may not be dismissed if the names of all of the partners is not disclosed and the implication of such an action shall merely be that the litigation shall be deemed to be against only the declared names. However, if the list of the declared names contains certain names which are not present in the register of the firms, the suit is not maintainable.[5]

Rule 3 deals with the manner of service of summons on partners of a firm, and provides for the service to be made either on i) one or more of the partners or ii) at the principal place of business of the firm upon the person who is in charge of the management of such place at the time as directed by the court. Such service may be made whether or not any of the partners are in India at the time.[6]

However, if the plaintiff was aware of the fact that, the partnership was dissolved, service of summons should be made on any of the persons who are in India at the time and who are sought to be made liable.[7]Service will further be deemed proper even if the person accepting it is doing so through someone else.[8]

It is provided under Rule 5 that, where a summons is served, the person so served must certainly be given a notice with regards to the capacity in which he is being sued, i.e. whether as a partner or as a person in charge of the partnership business or both.[9]However, it is only mandatory for a partner to appear before the court and not the person who is in charge of the partnership business.[10]

Further, despite the proceedings being conducted in the name of the firm, each partner is required to attend and appear at the proceedings individually.[11]

Rule 4 discusses the consequences upon the death of a partner. It provides that when a partner dies, before the institution of the suit or during its pendency, it shall not be essential to join the legal representatives in the suit,[12] however, the legal representatives may exercise their right to be impleaded.[13]

A person who has been served summons under Rule 3 may appear in protest stating that he was not a partner of the firm when the issue arose and contest it before the court.[14] Such person’s liability as a partner is not absolved unless the court decides so. 

Rule 9 provides that the suits instituted by one or more partners against the firm or between firms having certain common partners. In such case, execution may be issued only with the leave of the court to safeguard the interest of all the partners.[15] Thereafter, the court may even direct accounts and inquiries to be made at the time of the execution.

The liability under a decree (other than a decree with respect to a property) passed against the firm will only be attributable to the partners who were served summons to appear.  

Rule 10 extends the applicability of Order 30 to cases where an HUF is carrying on business in any name or any person is carrying on business in any other name or style other than his own, and also to a proprietary concern, as the nature of such case permits.[16]

Concluding Comments

The essence of the ten rules of Order 30 lays down the various nuances of a civil suit concerning an entity at a non-individual level. The Order was introduced as an enabling provision to facilitate institution of suits against firms, as the same is bound to yield a just compensation in case someone is wronged. 

Suits by or against firms or persons carrying on business in names other than their own are in can be very well said to be analogous to the Company Law doctrine of distinct legal personality and the concept of piercing of the corporate veil.  The provision for the same in the CPC retraces back the liability to the firm which established the relationship responsible for the liability and while doing so, ensures that the principles of natural justice are followed. 

The Order is worded cautiously to give it the desired meaning and nothing more, something which often lacks in the procedural laws pan India.


This article has been authored by Anurag Shankar Prasad.

[1] Purushottam Umedbhai and Co. v. Manilal and Sons, AIR 1961 SC 325. 

[2] Bharat Sarvoday Mills Co. Limited v. Mohatta Brothers. AIR 1969 SC Guj 178.

[3] Shanker Hoursing Corporation v. Mohan Devi, AIR 1978 Del 255 (D.B).

[4] Rule 2, Order XXX, Code of Civil Procedure, 1908.

[5] Alwar Iron v. Union of India, AIR 1970, Raj 86.

[6] Rehmankhan Dawood Khan v. Bombay Iron Syndicate, AIR 1953 Bom 23.

[7] Karkishandas Lallubhai v. Rana Gulabdas Kalyandas, AIR 1956 Bom 513.

[8] P. Sen Pvt Ltd. v. Delite Builders

[9]  Srinath Bros v. Century Mill

[10] Rule 7, Order XXX, Code of Civil Procedure, 1908.

[11] Rule 6, Order XXX, Code of Civil Procedure, 1908.

[12] Krishna Chandra Agarwalla v. Shanti Prasad, AIR 1981 Cal 199.

[13] Upper India Cable Company v. Bal Kishan, AIR 1981 SC 1381.

[14] Rule 8, Order XXX., Code of Civil Procedure, 1908.

[15] Lakshmanan Chetty v. Nagappa Chetty, AIR 1918 Mad 167.

[16] Ashok Transport Agency v. Awdesh Kuma, AIR 1999 SC 1484