HC: Compulsory registration of partnership deed not necessary

Shyam Prasad

Bengaluru: The High Court of Karnataka has held that compulsory registration of a partnership deed is not necessary. It set aside the order of a lower court which had deemed it necessary while deciding a dispute between two partners of a firm.

The dispute related to a business of ‘Glow Sign Boards and Labels’. Venkataraya S Nayak joined the business as a working partner with D Vijaygopal Mallya. He did not invest any money but was entitled to 30 per cent share in the profit while Mallya was entitled to 70 per cent profit.

A partnership deed was entered into between the two on December 1, 1998. Mallya approached the trial court seeking the declaration that the business Ms Vinyl Prints and Designs exclusively belonged to him. He claimed that Nayak was an employee who was being paid 30 percent of profit.

The Trial Court dismissed Mallya’s plea. He then approached the Appeals Court which held that since the partnership deed was not registered, it was not a partnership firm and Mallya was the sole owner of the enterprise. This was challenged by Nayak in the High Court in 2007. Justice Umesh M Adiga, gave his judgment on the petition on November 25, 2022.

The HC said that the facts “clearly indicate that he (Mallya) has not approached the Court with clean hands. He did not settle the partnership firm account or dissolve the partnership firm in accordance with law and thereafter continued the very same business in the very same name and style and with the goodwill of the firm. Plaintiff has washed his hands without even settlement of accounts.

Hence, he is not entitled for relief.” Upholding the order of the Trial Court and setting aside the order of the Appeals Court, the High Court said, “The prayer made in the suit is not sustainable. Plaintiff being a partner of the firm, during continuation of the business of the firm by issuing notice, dissolved the firm and immediately he continued the same business by declaration that it was a proprietary concern and prayed to restrain the defendant from interfering in the said business. The said prayer is not tenable as observed by the learned trial judge,” the HC said.