M/S DREAM MACHINES vs THE HDFC BANK LIMITED
- Court
- Calcutta High Court
IN THE HIGH COURT AT CALCUTTA
ORdINARy ORIGINAL CIvIL JURISdICTION
Present :
THE HON’BLE JUSTICE ARINDAM MUKHERJEE
GA/2/2025
CS 211 of 2024
M/S. DREAM MACHINES
Vs.
HDFC BANK LIMITED
For the Plaintiff : Mr. Aasif Hussain, Adv.
Mr. Ovik Sengupta, Adv.
..... Advocates
Ms. Noelle Banerjee, Adv.
For the Respondents :
Mr. Joydeep Roy, Adv.
Mr. Paritosh Sinha, Adv.
. ….. Advocates
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Heard on : 12 August, 2026
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Judgment on : 28 August, 2026
Arindam Mukherjee, J:
In a suit for money claim with relief for attachment and injunction
instituted on 5th October, 2024, as an ordinary suit, the defendant has taken
out this application under the provisions of Order VII Rule 11 of the Code of
Civil Procedure, 1908 (in short CPC) seeking rejection of the plaint at the
threshold on the ground that the suit is barred under the provisions of Section
69(2) of the Indian Partnership Act, 1932.
Brief Facts:
1. On 12th March, 2020, following an online auction notification on
cardekho.com inviting tender-cum-e-auction sale of a motor vehicle being
Audi A6 having registration No. WB 4Y4545 (hereinafter referred to as
the said Car) the plaintiff prior to putting their offer inspected the said
car at one M/s S.N. Nundy garage to satisfy themselves about the
condition of the said Car successfully bid Rs. 10,76,000/- for buying the
same. The said Car was a secured asset of the defendant bank, the
possession whereof was taken by the defendant bank due to default on
the part of the borrower to whom the defendant bank had given loan to
purchase the said Car.
2. The plaintiff had given a bid for Rs.10,76,000/- which being the highest
was accepted. The plaintiff was, therefore, the successful bidder. The
Plaintiff deposited the full bid amount on 18th March, 2020. Probably as
it was on the eve of a nationwide COVID-19 lockdown and such the
delivery order was not issued to the plaintiff immediately. The delivery
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order was issued on 16 June, 2020 by the defendant bank to the
plaintiff and on the same day the plaintiff went to take delivery of the
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said car from the garage of M/s S.N Nundy when the car was found to do
in badly damaged condition. According to the plaintiff the representatives
of M/s S.N Nundy said that while the said Car remained at their garage,
it was severely damaged and left in a dilapidated condition by Cyclone
Amphan on 20th May, 2020.
3. The damaged condition of the vehicle was immediately communicated by
the plaintiff to the defendant with a request to refund the money. The
bank, however, failed to take any remedial action despite multiple
requests and even after lapse of a reasonable period of time.
4. Following the Bank's refusal to issue a refund, the plaintiff filed the
instant suit, inter alia, seeking restitution of the Rs. 10,76,000/- along
with interest.
5. The present application being G.A. 2 of 2025 has been filed by the
Defendant seeking the rejection of the suit at the threshold after
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receiving the writ of summons which served on 18 December, 2024.
Submissions on behalf of Defendant:
A. The Defendant Bank submits that from the cause title of the plaint it
appears that the plaintiff is a partnership firm, represented by its partner
Wasim Dhalech, however there is neither any averment in the plaint, nor
any document annexed to the plaint to show that the plaintiff is a
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registered Partnership Firm. In the affidavit-in-opposition the plaintiff
has not denied the fact that the plaintiff is not an unregistered
partnership firm. At the same time, there is also no assertion from the
plaintiff’s side that the plaintiff is a registered partnership firm.
Therefore, the suit is barred, as under the Section 69(2) of the Indian
Partnership Act, 1932 as an unregistered partnership firm is legally
barred from filing or maintaining a suit against a third party to enforce
rights arising from a contract. A sale by auction is on the bid being
accepted a contract. The claim of the plaintiff is for refund of money for
breach of contract and as such the bar under Section 69(2) of the 1932
Act gets attracted. Unless a firm is registered on the date of institution of
the suit, the bar operates once the suit is for enforcement of a right
arising out of the contract. No evidence is also necessary in the facts of
the instant case where there is no denial from the side of the plaintiff
that it is not a registered firm.
B. The Defendant relies on Raptakos Brett And Company Limited vs.
Ganesh Properties reported in (1998) 7 SCC 184 to argue that once the
bar of Section 69(2) of the Indian Partnership Act, 1932 is attracted the
corollary will be that the suit is incompetent at the very threshold.
Relying on Raptakos (Supra), the Defendant argues that for the bar of
Section 69(2) to apply the following three parameters must be satisfied:
i. The firm must be unregistered on the date of filing of the suit; the
persons suing are not shown in the Register of Firms.
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ii. Suit must be against a third party; and
iii. Suit must be for enforcement of right arising from a contract with
such third party.
C. According to the Defendant there is no dispute with respect to the first
two conditions above, and the only issue is whether the claim is “arising
from a contract”. The Defendant argues that transaction was a concluded
contract for sale, finalized when the plaintiff was successful in the
auction and paid the bid money of Rs. 10,76,000/ within the time frame
provided. The plaintiff's claim for refund as in the suit arises from this
transaction and not from any other statute or common law. The Bank
argues the suit is contractual in nature, making the statutory bar under
Section 69(2) of the 1932 Act fully applicable.
D. The Defendant relying on Mahinder Kumar Chaudhary & Anr v.
Balasara Hygiene Products Ltd reported in MANU/DE/1838/2001,
Eskay Hospitality Services India Pvt. Ltd and Ors vs. Sterling
Hospitality through Pranay Goyal reported in 2025 SCC Online Bom
385, Hirendra Bhola vs. Gulati Marketing Co and Anr. reported in
AIR 2007 MC 165, Chennai Law Firm v. Reyvish Associates (P) Ltd,
reported in 2024 SCC Online Mad 12330 which was affirmed by the
Supreme Court in Chennai Law Firm vs. Reyvish Associates (P) Ltd in
SLP (Civil) Diary no. 57293 of 2024 has argued that the refund sought
by the Plaintiff is a right akin to enforcement of a right arising from a
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contract and the bar under Section 69(2) of the Indian Partnership Act,
1932 will mandatorily be attracted.
E. Further, the Defendant relied on the Deed of Indemnity / Indemnity
Bond executed by the plaintiff on 16th June, 2020 to contend that under
the "as is where is" clause and the executed indemnity terms, the
Plaintiff accepted the vehicle's condition, and agreed that the Defendant
Bank would not be responsible for any deterioration, and waived the
right to claim any refund or return the assets once payment was
complete.
F. The Defendant specifically denied that the garage of M/s. S. N. Nundy
Garage is managed and controlled by the defendant bank
Submissions on behalf of Plaintiff:
I. The Plaintiff argues that after having deposited the full bid amount
of Rs. 10,76,000/- on 18th March, 2020, they sought to take
delivery of the said car on 20th June, 2020 when they found out
that the said car had been rendered completely dilapidated and
damaged while lying at the garage of M/s S.N. Nundy Garage,
which the Plaintiff alleged is managed and controlled by the
defendant bank. Upon enquiry from the representatives of M/s.
S.N. Nundy Garage, the Plaintiff learned that the garage was
flooded during the “Amphan” cyclone, which hit Kolkata on 20th
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May 2020 causing the damage to the car. Further, the said damage
was reportedly communicated to the defendant by the garage
representatives. The defendant having failed to make available the
said car for handing over in the auctioned condition, the Plaintiff
refused to take delivery of the said car.
II. The Plaintiff argues that even though they had taken part in the
auction process and fulfilled their end of the bargain by making
the due payment, the contract became incapable of performance
because the said car was severely damaged and rendered
dilapidated while in the Bank's custody prior to delivery, and as
such that contract was vitiated by law. Relying on Section 56 of the
Indian Contract Act, 1872 the Plaintiff contends that when a
contract becomes impossible to perform due to a supervening
event, such as damage caused by Cyclone Amphan while in the
garage, the said contract is rendered void in law. The Plaintiff
cannot be legally compelled to accept a deteriorated asset in place
of the vehicle auctioned.
III. Further, the Plaintiff argues that their claim is basis the
underlying transaction, i.e., the goods having been damaged before
the delivery of the same has fundamentally voided the contract.
The goods never became capable of delivery and performance could
not take place, and thus the Defendant is legally bound to restore
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the advantage under Section 65. The suit is strictly restitutionary
in nature to recover their own money, due to failure of
consideration on the part of the Defendant and not a suit to
enforce a subsisting commercial contract. Thus, the suit is not
barred by Section 69(2) of the Partnership Act, and rather falls
within the exceptions. The Plaintiff relies on Haldiram
Bhujiawala & Anr. vs. Anand Kumar Deepak Kumar & Anr.,
(2000) 3 SCC 250 and Shiv Developers through Partner
Sunilbhai Somabhai Ajmeri vs. Aksharay Developers & Ors.
(2022) 13 SCC 772 to argue that Section 69(2) of the Partnership
Act does not apply when the suit is for enforcement of a statutory
right or common law right and also that it can apply only when the
right sought to enforced is arising from a contract entered into by
the firm in the course of business.
IV. The Plaintiff further argued that since the said car was never
received by the Plaintiff or that its delivery was never completed,
and according to Section 26 of the Sale of Goods Act, 1930 the
goods remained at the seller's risk until property/ownership is
transferred to the buyer. Since the vehicle was never delivered in
the auctioned condition, ownership never passed, and the risk of
deterioration remained entirely with the Bank. The plaintiff was
therefore legally entitled to refuse delivery and demand a refund.
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V. With regards to the indemnity bond signed, the Plaintiff contends
that the Deed of Indemnity was a procedural requirement executed
on the premise that the vehicle would be delivered in the same
condition as at the time of the auction, and does not constitute
consent to accept a damaged vehicle. Further the "as is where is"
clause applies only to the condition of the asset at the time of the
auction and cannot cover subsequent destruction or material
damage occurring in the Defendant's custody before possession
was handed over.
VI. The plaintiff argues that the Car Dekho page relied on by the
Defendant to contend that the sale stood concluded, is merely a
third-party document confirming the bid and does not record the
complete bargain or auction terms, nor does it override the legal
consequences of damage before delivery.
VII. The Plaintiff has also stated that whether the partnership firm is
registered or not is a mixed question of law and fact, which cannot
be decided upon at the interlocutory stage and must be decided in
trial.
Points for consideration:
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(i) Whether the present suit filed is a suit to “enforce a right arising from
a contract” and thus barred under Section 69(2) of the Indian
Partnership Act, 1932?
(ii) Whether the plaintiff’s claim for refund of the total consideration
money with interest is an enforcement of contractual terms, or a
statutory/equitable claim for restitution under Section 65 of the
Indian Contract Act, 1872, which falls outside the ambit of the
Section 69(2) bar?
Discussion and Analysis:
a) The instant application is one under the provisions of Order VII Rule
11(d) of CPC i.e., the suit is barred by law. The Court while considering
an application for rejection of a plaint under Order VII Rule 11 CPC,
must confine its scrutiny exclusively to the averments made in the plaint
by taking them as a whole and treating them to be true and correct. In
addition thereto can look into the documents annexed to the plaint.
b) The defence raised by the Defendant, however strong or legally sound it
may appear, is wholly irrelevant at the stage of deciding a demurrer
application. Consequently, the Bank’s reliance on the “as is where is”
clause and the Deed of Indemnity constitutes a defence on the merits
requiring trial evidence, and cannot justify summary rejection.
c) The law as laid down by the Hon’ble Supreme Court in 2015(4) SCC 371
(Om Aggarwal v. Haryana Financial Corporation & Ors.) indicates a
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procedure as to how an application under Order VII Rule 11(d) of CPC
has to be considered. It is no more res integra that the provisions of
Section 69(2) of the 1932 Act is a clear bar on an unregistered
partnership firm from filing a suit for enforcement of a right arising out
of a contract. In this perspective it is to be seen on considering the
averments of the plaint as a whole with the documents annexed thereto
as to whether the suit is for enforcement of contract particularly when
the plaintiff has neither asserted to be a registered partnership firm nor
have the plaintiff produced any document to show registration on being
specifically alleged by the defendant to be an unregistered firm. The
plaintiff has in fact not denied to be an unregistered firm.
d) The issue as to a partnership firm being registered or unregistered does
not detain one to call for any detailed evidence. Either one has a license
or do not have the same. The plaintiff, if is a partnership firm has to
produce the certificate, if called for or can produce the same on having
pleaded to be a registered partnership firm at the time of trial. In the
instant case the plaintiff has not pleaded to be a registered partnership
firm. Unless pleaded it is settled law that evidence on being led cannot be
considered. Assuming without admitting that the plaintiff can lay
evidence as to their registration but they have neither produced the
certificate of registration nor denied that they are not an unregistered
partnership firm or even in affidavit-in-opposition have asserted to be a
registered firm. This issue, therefore, is not an issue involving mixed
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question of law and fact. This issue can be, therefore, decided without
setting down the same for trial as held in Om Aggarwal (supra).
e) Now, going to the transaction between the parties it is noticed that the
defendant bank had put up the said car for sale through auction wherein
the plaintiff was a successful bidder whose offer was accepted. Auction
sale is elucidated in Section 64 of the sale of Goods Act, 1930
(hereinafter referred to as the 1930 Act). Under the provision of Section
64(2) of the 1930 Act a contract comes into operation between the seller
and the successful bidder on the completion of the auction, if there is no
other stipulation as contained in the other sub-Sections of Section 64 of
1930 Act.
f) Although, the provisions of Section 64(2) of the 1930 Act does not
indicate as to when the property in the goods get transferred from the
seller to the buyer but the Hon’ble Supreme Court has in AIR 1973 SC
376 (Chowringhee Sales Bureau (P) Ltd. v. CIT, West Bengal) held in
paragraph 10 thereof -“An auction sale in view of the provisions of Section
4 read with Section 64 of the Sale of Goods Act would have to be
considered as sale for the purpose of Sale of Goods Act.” The Hon’ble
Supreme Court in its judgment reported in AIR 2011 SC 224 (State of
Uttaranchal & Ors. v. Khurana Brotheres) have further explained this
in paragraph 7 thereof which reads as follows:
“7. The essence of sale is the transfer of the property in a thing
from one person to another for a price. As per Section 4, the
contract of sale includes an agreement to sell. It is not necessary
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that contract of sale must be absolute. It may be conditional as
well. The essential feature that distinguishes the contract of sale
from an agreement to sell is that in a contract of sale the property
in the goods is transferred from the seller to the buyer
immediately whereas in an agreement to sell property is
transferred on a future date(s). An agreement to sell becomes a
sale on fulfilment of the conditions or when the time provided in
the agreement elapses.”
g) In an auction sale like the case in hand, the goods are
ascertained goods. The transfer, therefore, should have taken
place immediately. On a reading of terms of the Deed of Indemnity
annexed to the plaint, it, however, appears that certain other terms
and conditions were to be fulfilled after the auction took place
thereby effecting the transfer. It can, therefore, be construed in the
instant case that it was an agreement for sale which become a
contract for sale on fulfilment of the other conditions. If it is an
agreement for sale then the property in the goods at the highest
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stood transferred on 16 June, 2020 when the indemnity bond
was executed. The plaintiff also could not have taken delivery of
the said Car unless the delivery order was issued by the bank
permitting the plaintiff to take delivery with an instruction to M/s
S.N Nundy where the car was lying to make over the same to the
plaintiff. So the defendant bank was liable to deliver the said car
under the provision of Section 31 of the 1930 Act irrespective of
the fact that the property in the goods stood transferred on the
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completion of the auction or on fulfilment of further conditions
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that is on 16 June, 2020. Any further analysis in this regard is
not necessary at this stage as it may lead to a mini trial which is
impermissible while deciding an application under Oder VII Rule
11 of CPC.
h) On a preliminary analysis of fact it is apparent that the
defendant bank did not refuse to deliver the said car at any point
of time. In fact delivery order was issued with which the plaintiff
went to take delivery and found the said car to be totally damaged.
On the other hand the defendant says that the said car was sold in
auction on “as is where is” and “whatever there is basis”. This
leads to a situation where the condition of the said Car at the time
of inspection and at the time of delivery becomes the most crucial
issue which can be only decided at the trial. It is, however, clear up
to the stage of taking delivery there is no breach. If the property in
the goods stood transferred and delivery is refused it would give
rise to a breach of the contract. This leads to two situations – (i)
total failure of consideration giving rise to claim for damages and
(ii) claim for compensation on account of loss by damage caused to
the plaintiff.
i) At this stage one should not lose sight of the fact that the
plaintiff is into car business, however unless evidence is laid it
cannot be said as to what was the purpose of purchasing the said
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Car. In any event, the plaintiff’s allegation that it has suffered
damages, however, remains. On the other hand, the said Car was
a security against a loan and in default of repaying the loan, the
said Car was put for sale by way of auction. The banks auction is
under the provisions of the Securitisation and Reconstruction of
Financial Assets and Enforcement of Security Interest Act, 2002
(hereinafter referred to as SARFAESI Act) and Security Interest
(Enforcement) Rules 2002 (hereinafter referred to as the 2002
Rules). The bank, therefore, is permitted to take steps against the
auction purchaser under the SARFAESI Act and the 2002 Rules as
held by the Hon’ble Supreme Court in 2024 (6) SCC 641
(Authorised Officer, Central Bank of India v. Shanmugavelu)
The said judgment has also ruled out the application of Section 73
and 74 of the Indian Contract Act, 1872 in case of such a sale.
j) It is settled position of law that the bar under Section 69(2)
of the Indian Partnership Act strictly applies to suits enforcing
contractual rights when an unregistered partnership firm tries to
enforce the same against a third party. In the instant case, the
Defendant has argued that the plaintiff’s claim is one arising out of
a completed contract of sale. Relying on Section 64 of the Sale of
Goods Act, 1930 it was stated that “the sale is complete when the
auctioneer announces its completion by the fall of hammer or in
other customary manner”. And that the partnership firm being an
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unregistered firm squarely satisfies the requirement of Section
69(2) of the Indian Partnership Act.
k) The Apex Court in Raptakos (Supra), apart from
enumerating the triple test for applicability of the bar under
Section 69(2) of the Indian Partnership Act, 1932 has also held
that that when the plaintiff has based the cause of action not only
on the contract but also law of land then the bar under Section
69(2) of the Indian Partnership Act, 1932 is not attracted. In the
said matter the landlord’s suit had two parts: A claim based on the
covenants of the expired lease contract, and another based on the
law of land. The Hon’ble Supreme Court explicitly held that while
the first part based on the contractual covenants was indeed
barred by Section 69(2), there is no such bar on claim based on the
law of the land which is independent of the contract. Similarly, in
Shiv Developers (Supra) reiterated that Section 69(2) does not bar
a suit filed by an unregistered firm if the suit is for the
enforcement of a statutory right or a common law right. Further,
the Apex Court also clarified that to attract the bar under Section
69(2), the contract in question must be one entered into by the
unregistered partnership firm with a third-party defendant in the
course of its regular business dealings and that the bar is not
attracted to any and every contract referred to in the plaint as a
historical fact or as a source of title to an asset owned by the firm.
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l) In the instant case, the Plaintiff has sought return of money
paid under a contract that has become void, which is a right basis
Section 65, Indian Contract Act, 1872, i.e., a statutory right as
opposed to compelling performance or seeking damages for breach
of a subsisting agreement under the terms of the contract. As the
goods never became capable of delivery in the condition auctioned,
the agreement became void, triggering an immediate right to
restitution. Such a claim is not barred under Section 69(2) of the
Indian Partnership Act, 1932.
m) Evaluating whether this specific transaction was a completed
contract under Section 64 of the Sale of Goods Act, 1930, and the
whether property actually passed to the Plaintiff, and how that
interacts with the statutory allocation of pre-delivery risk under
Section 26 of the Sale of Goods Act are a mixed question of law and
fact. A mixed question of law and fact cannot serve as a ground for
the summary rejection of a plaint.
n) It cannot, therefore, be said at this stage that the suit is for
enforcement of rights under the contract thereby attracting the
provisions of Section 69(2) of the 1932 Act and as such not
maintainable since it is filed by an unregistered partnership firm,
although the issue of bar under Section 69(2) of the 1932 Act as
held hereinabove does not require detailed consideration but for
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the peculiar facts of this case, the issue has not remained a
simplictor one.
The application being GA/2/2025 is accordingly dismissed for the
reasons aforesaid by permitting the parties to agitate the points, if
available in law at the trial.
Urgent photostat certified copy of this judgment and order, if
applied for, be supplied to the parties on priority basis after
compliance with all necessary formalities.
(ARINDAM MUKHERJEE, J.)
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