Jammu & Kashmir High Court – Srinagar Bench
Farooq Ahmad Tramboo & Ors vs Abdul Rashid Mir on 30 May, 2025
Author: Sanjay Dhar
Bench: Sanjay Dhar
IN THE HIGH COURT OF JAMMU & KASHMIR AND
LADAKH AT SRINAGAR
Reserved on: 15.05.2025
Pronounced on: 30.05.2025
RFA No.26/2022
FAROOQ AHMAD TRAMBOO & ORS. ... APPELLANT(S)
Through: - Mr. G. A. Lone, Advocate, with
Mr. Mujeeb Andrabi, Advocate.
Vs.
ABDUL RASHID MIR ...RESPONDENT(S)
Through:- Mr. N. A. Beigh, Sr. Advocate, with
Mr. Irfan Rasool & Murshid Rashid, Advocates.
CORAM: HON'BLE MR. JUSTICE SANJAY DHAR, JUDGE
JUDGMENT
1) The appellants have challenged judgment and decree
dated 19.05.2022 passed by the learned Principal District
Judge, Anantnag, in a suit filed by respondent against
them under Order 37 of the Code of Civil Procedure
seeking recovery of an amount of Rs.22,70,896/ along
with interest.
2) It appears that the respondent/plaintiff filed a suit
under Order 37 of the CPC against appellant No.1 and his
father, Shri Abdul Gani Tramboo, who happens to be the
predecessor-in-interest of the appellants, seeking recovery
of a sum of ₹22,70,896 along with interest. It was pleaded by
the respondent/plaintiff that he entered into a partnership
with Shri Abdul Ganai Tramboo, who happened to be
RFA No.26/2022 Page 1 of 21
defendant No.2 in the suit, in terms of partnership deed
dated 21.12.2006. As per the terms of the partnership
deed, the parties had agreed to invest capital in the
business of execution of construction work of RCC
foundations required for erection of mobile towers etc. and
had agreed to invest capital and share profits in equal
proportions.
3) In the plaint it was further averred that defendant
No.2, who was an elderly person, in order to execute the
works allotted to him, entered into a further partnership
with his son, defendant No.1 (appellant No.1 herein), and
the two agreed to share profits/losses of the partnership
business in the ratio of 95% to defendant No.1 and 5% to
defendant No.2. The defendant No.2 was empowered to
operate the bank account under his own signatures and
they had a joint account in J&K Bank, Branch Qazigund.
It has been pleaded that defendant No.2 executed a Power
of Attorney in favour of the plaintiff whereby he was
empowered to do all acts and deeds for execution of the
contract allotted in favour of defendant No.2, who was a
registered contractor. It was further pleaded that during
the course of execution of the contract, the plaintiff and
defendants executed works worth crores of rupees and
after settlement of accounts in presence of several
RFA No.26/2022 Page 2 of 21
persons, the plaintiff was held entitled to an amount of
₹22,70,896. It was also pleaded that defendant No.1, who
was holding joint account in the bank, issued a cheque for
the aforesaid amount in favour of the plaintiff but the
same, on its presentation for encashment, was
dishonoured. It has been further pleaded that when the
defendants were informed about dishonour of the cheque
and a request was made by the plaintiff for payment of
the cheque amount, they did not take any action, as a
consequence whereof, the plaintiff had to serve a legal
notice of demand dated 05.01.2012 upon the defendants.
This resulted in filing of a complaint under Section 138 of
Negotiable Instruments Act before the Chief Judicial
Magistrate, Anantnag, by the plaintiff against defendant
No.1. The plaintiff also filed the suit against the defendants
seeking recovery of the cheque amount.
4) It seems that pursuant to the service of summons in
the prescribed proforma upon the defendants, they filed
an application seeking leave to defend the suit before the
learned trial court. In their application, the defendants
took a stand that the partnership firm between plaintiff
and defendant No.2 has not been dissolved and that there
has never been a settlement of accounts between the
parties. It was further pleaded that in case the defendants
RFA No.26/2022 Page 3 of 21
are granted leave to defend the suit, they would be filing a
counter claim in the suit for seeking dissolution of
partnership firm and settlement of accounts. The
defendants further pleaded that the cheque, on the basis
of which the suit has been filed by the plaintiff, does not
bear the signatures of defendant No.1 and that the same
have been forged. It was further pleaded by the defendants
that because the plaintiff is alleging a partnership with
defendant No.2 only, as such, he has no concern with the
firm of defendants No.1 and 2 inter se.
5) It was further pleaded that in the complaint under
Section 138 of Negotiable Instruments Act, the plaintiff
had set up a case that defendant No.2 had to pay
enforceable debt to him but in the present suit, the
plaintiff is taking a stand that both the defendants owe
money to him. Thus, according to the defendants,
defendant No.1 has a good defence to the claim of the
plaintiff.
6) The learned trial court, after hearing the parties and
after analysing the material on record, passed order dated
18.02.2020, whereby conditional leave to defend was
granted to the defendants. The learned trial court observed
that the application filed by the defendants seeking leave
to defend the suit deserves to be disallowed, still then the
RFA No.26/2022 Page 4 of 21
defendants can be granted leave to defend subject to
protection of rights of the plaintiff. Accordingly, the
defendants were directed to deposit cash security of
Rs.22.70 lacs, out of which they were asked to furnish
bank guarantee to the extent of Rs.12.70 lacs and non-
banking guarantee to the extent of Rs.10.00 lacs in the
name of the court or a demand draft.
7) It appears that defendant No.1 filed a review against
the aforesaid order before the learned trial court pleading
therein that during the pendency of the suit, defendant
No.2, Abdul Gani Tramboo, had died, as such, the order
passed against him is a nullity. It was also pleaded that no
reasons were assigned for deposition of the bank
guarantee and non-banking guarantee. Defendant No.1
also contended that the firm between the plaintiff and
defendant No.2 had not been legally dissolved and there
was never any settlement of accounts. It was urged that
the partnership in between the plaintiff and defendant
No.2 was unregistered but the effect of this on the
maintainability of the suit itself has not been taken into
account by the court while deciding the application for
leave to defend. The said application for review was
dismissed by the trial court vide order dated 22.04.2022.
RFA No.26/2022 Page 5 of 21
8) It appears that in the meanwhile, legal heirs of
defendant No.2, appellants No.2 to 4 herein, were brought
on record of the suit. It also appears that the appellants
filed a petition bearing CM(M) No.78/2022 under Section
227 of the Constitution of India challenging the order
whereby they were granted conditional leave to defend by
seeking modification of condition with regard to furnishing
of security. While the aforesaid petition was pending before
this Court, the learned trial court, on account of the
default on the part of the defendants in furnishing the
requisite security in terms order dated 18.02.2020, passed
the impugned judgment and decree dated 19.05.2022,
thereby decreeing the suit of the plaintiff.
9) The petition bearing CM(M) No.78/2022 was
disposed of by this Court in terms of order dated
03.06.2022 on the ground that the same had become
infructuous because of passing of the judgment and
decree dated 19.05.2022
10) The appellants have challenged the impugned
judgment and decree passed by the learned trial court on
the grounds that the partnership firm between the plaintiff
and defendant No.2 was not dissolved nor the settlement
of accounts had taken place between the partners,
therefore, due to non-registration of the partnership firm,
RFA No.26/2022 Page 6 of 21
the suit is hit by Section 69 of the Partnership Act and, as
such, the same is not maintainable. It has been contended
that this aspect of the matter has not been adverted to by
the learned trial court while granting conditional leave to
defend to the defendants. It has been further contended
that the cheque, on the basis of which the suit has been
filed by the plaintiff, is forged and the defendants had
specifically pleaded in their application for leave to defend
that defendant No.1 has not signed the said cheque but
the learned trial court, relying upon the statement of the
Bank Manager recorded in different proceedings,
concluded that the cheque in question bears the
signatures of defendant No.1, which is not legally
permissible. It has been further contended that propriety
demanded that the learned trial court should have waited
for the decision of the petition filed by the appellants under
Article 227 of the Constitution of India whereby challenge
was thrown to order dated 18.02.2020, but instead of
doing so the trial court proceeded to pass the impugned
judgment and decree. According to the appellants the fact
that the learned trial court has exhibited hot haste in
passing the impugned judgment and decree without
waiting for the decision of CM(M) No.78/2022, forms a
RFA No.26/2022 Page 7 of 21
good enough ground to set aside the impugned judgment
and decree.
11) The respondent/plaintiff, on the other hand, has
contended that the appeal filed by the appellants is not
maintainable as they have not availed the remedy that was
available to them under Order 37 Rule 4 of the CPC by
filing an application for setting aside of the impugned
judgment and decree before the trial court. It has been
further contended that without throwing challenge to
order dated 18.02.2020, the appellants cannot succeed in
the present appeal because there was no option for the
learned trial court but to pass the judgment and decree
under challenge once the appellants failed to fulfil the
conditions upon which they were granted leave to defend
the suit. It has been contended that the defence set up by
the appellants before the trial court is sham and illusory,
inasmuch as, admittedly, the cheque in question was
handed over by defendant No.1 to the plaintiff and in the
proceedings in respect of complaint under Section 138 of
Negotiable Instruments Act, the Bank Manager had proved
that the same was signed by defendant No.1. Therefore, it
cannot be stated that the cheque in question is forged. It
has also been contended that the parties had settled the
accounts of the partnership firm and only thereafter the
RFA No.26/2022 Page 8 of 21
cheque in question was issued by defendant No.1 in favour
of the plaintiff. Thus, there is no defence, much less a
substantial defence, available with the defendants against
the claim of the plaintiff.
12) I have heard learned counsel for the parties, perused
the impugned judgment, order dated 18.02.2020 read with
order dated 22.04.2022, the grounds of appeal and record
of the trial court.
13) In the first instance let us deal with the preliminary
objection raised by learned Senior Counsel appearing for
the respondent with regard to maintainability of the
appeal. According to him, in terms of Order 37 Rule 4 of
the CPC, the appellants had the remedy of filing an
application for setting aside the impugned judgment and
decree before the learned trial court but instead of doing
so, they have filed the present appeal, as such, the same
is not maintainable.
14) In order to test the merits of the contention raised by
learned Senior Counsel appearing for the respondent, it
would be necessary to have a look at the provisions
contained in Order 37 Rule 4 of CPC, which read as under:
4. Power to set aside decree.–After
decree the Court may, under special
circumstances set aside the decree, and if
necessary stay or set aside execution, and
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may give leave to the defendant to appear
to the summons and to defend the suit, if
it seems reasonable to the Court so to do,
and on such terms as the Court thinks fit.
15) From a perusal of the aforesaid provision, it is
manifest that the court which passes a decree in terms of
Rule 3 of Order 37 of CPC has power to set aside the same
under special circumstances. It further provides that while
doing so, the court has power to stay or set aside the
execution and it can also give leave to the defendants to
appears to the summons and to defend the suit if it seems
reasonable to the court to do so. Thus, the trial court,
while exercising jurisdiction under Order 37 Rule 4 of
CPC, has power not only to set aside the decree but it has
also the power to grant leave to defend to the defendants
in appropriate cases.
16) The aforesaid provision would not cover a situation
where leave to defend the suit is refused on merits and a
decree is passed thereafter and it would also not include a
situation where the decree has been passed on account of
non-adherence to the conditions attached to an order of
leave to defend passed on merits. If Order 37 Rule 4 of CPC
is interpreted in a manner so as to include even the
aforesaid two situations, then it would amount to
permitting the trial court to sit in appeal over its own order
RFA No.26/2022 Page 10 of 21
of refusing the leave to defend the suit passed on merits.
This could never have been the intent of the legislature as
the same is impermissible in law. The correct
interpretation of the provisions contained in Order 37 Rule
4 of CPC is that the trial court is empowered to set aside a
decree passed in a case where there has been default on
the part of the defendants in either putting in appearance
before the trial court in accordance with sub-rule (1) of
Rule 3 of Order 37 of CPC or there is a default in applying
for leave to defend within the time prescribed under sub-
rule (5) of Rule 3 of Order 37 CPC. It is only if there has
been any default on the part of defendants in adhering to
the provisions contained in Rule 3 of Order 37 of CPC that
jurisdiction of the trial court under Order 37 Ruel 4 of the
CPC can be invoked for setting aside the decree and not in
a case where leave to defend has been refused by the trial
court on merits after considering the application of the
defendants for leave to defend.
17) In my aforesaid view, I am supported by the Division
Bench judgment of Calcutta High Court in the case of
Hiralal Deb Gupta vs Salil Kumar Paul and another, AIR
1973 Cal. 320. In the said case, the High Court of Calcutta
has held that mere fact that the provision has been made
in Rule 4 of Order 37 of the Code to enable a defendant to
RFA No.26/2022 Page 11 of 21
apply for setting aside a decree does not and cannot
deprive him of the right of appeal from the decree.
18) Apart from the above, Section 96 of the CPC
specifically lays down that except otherwise expressly
provided in the body of the Code or by any other law for
the time being in force, an appeal would lie from every
decree passed by the court exercising original jurisdiction.
Neither any other provision of the CPC nor any provision
incorporated in Order 37 of CPC puts any express or
implied bar on filing of an appeal against a decree passed
in terms of Order 37 Rule 3 of CPC. Therefore, by no
stretch of reasoning, it can be stated that Order 37 Rule 4
of CPC debars an aggrieved defendant from filing an appeal
against the decree passed in terms of Order 37 CPC.
19) Rule 4 of Order 37 of CPC is akin to Order 9 Rule 13
of the CPC, inasmuch as it provides remedy to a defendant
against whom a decree has been passed in exparte with
only difference being that while invoking remedy under
Order 37 Rule 4 CPC, the defendant has to not only satisfy
the court as to why there has been default on his part
in adhering to the provisions contained in Rule 3 of
Order 37 of CPC but he has also to carve out a special
case. Order 37 Rule 4 CPC cannot be invoked in a case
RFA No.26/2022 Page 12 of 21
where leave to defend the suit has been refused on merits.
For all the aforesaid reasons I do not find any merit in the
contention raised by learned Senior Counsel appearing for
the respondent.
20) That takes us to the second objection relating to
maintainability of the appeal on account of omission on
the part of the appellants to challenge order dated
18.02.2020 read with order dated 22.04.2022. In this
regard, it is to be noted that the said order has led to the
passing of impugned judgment and decree because the
appellants did not fulfil the conditions laid down in order
dated 18.02.2020, as a result whereof the impugned
judgment and decree came to be passed. Thus, the
impugned judgment and decree passed by the learned trial
court is dependent upon the fate of order dated
18.02.2020 read with order dated 22.04.2022, which have
been specifically assailed by the appellants by raising
several grounds in the memo of appeal.
21) Section 105(1) of CPC provides that when a decree is
appealed from, any error, defect or irregularity in any
order, affecting the decision of the case, can be set forth
as a ground of objection in the memorandum of appeal,
meaning thereby that an order, which has become basis of
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a decree which is under challenge, the defect or
irregularity in the said order can be set forth as a ground
of objection in the memorandum of appeal. This is what
has been done by the appellants in the present case. They
have projected that conditions could not have been
imposed upon them while granting leave to defend the suit
as the suit filed by the respondent itself was not
maintainable on several counts.
22) The Supreme Court in the case of Ajay Bansal v.
Anoop Mehta and others, (2007) 2 SCC 275, has
observed that a defendant can, in an appeal against the
decree, be permitted to challenge the order refusing leave
to defend in terms of Section 105(1) of CPC. Similarly, in
Satyadhyan Ghosal And Others vs Sm. Deorajin Debi
And Another, AIR 1960 SC 941, the Supreme Court has
held that an interlocutory order, which had not been
appealed from either because no appeal lay or even though
an appeal lay an appeal was not taken, could be
challenged in an appeal from the final decree or order.
23) In the face of aforesaid consistent legal position on
the issue, it is always open to the appellants to set up
defects/illegalities in order dated 18.02.2020 read with
order dated 22.04.2022 as a ground to assail impugned
RFA No.26/2022 Page 14 of 21
judgment and decree. The contention of the respondent is,
therefore, misconceived.
24) That takes us to merits of the appeal. The main
ground that has been urged by the appellants for assailing
the impugned judgment and decree of the trial court is
that the suit filed by the respondent against appellant No.1
and his deceased father is not maintainable as the same
is hit by the provisions contained in Section 69 of the
Partnership Act. In order to test the merits of this
contention, the provisions contained in Section 69 are
required to be noticed, which read as under:
69. Effect of non-registration.–(1) No suit to enforce
a right arising from a contract or conferred by this Act
shall be institutes in any Court by or on behalf of any
person suing as a partner in a firm against the firm or
any person alleged to be or to have been a partner in
the firm unless the firm is registered and the person
suing is or has been shown in the Register of Firms as
a partner in the firm.
(2) No suit to enforce a tight arising from a contract
shall be instituted in any Court by or on behalf of a firm
against any third party unless the firm is registered
and the persons suing are or have been shown in the
Register of Firms as partners in the firm.
(3) The provisions of sub-sections (1) and (2) shall
apply also to a claim of set-off or other proceeding to
enforce a right arising from a contract, but shall not
affect–
(a) the enforcement of any right to sue for the
dissolution of a firm or for accounts of a dissolved
firm, or a any right or power to realise the property of a
dissolved firm, or
(b) the powers of an official assignee, receiver or Court
under the Presidency-towns Insolvency Act, 1909 (2
RFA No.26/2022 Page 15 of 21
of 1909), or the Provincial Insolvency Act, 1920 (5 of
1920), to realise the property of an insolvent partner.
(4) This section shall not apply–
(a) to firms or to partners in firms which have no
place of business in the territories to which this Act
extends, or whose places of business in the said
territories are situated in areas to which, by
notification under section 56, this Chapter does not
apply, or
(b) to any suit or claim of set-off not exceeding
one hundred rupees in value which, in the Presidency-
towns, is not of a kind specified in section 19 of the
Presidency Small Cause Courts Act, 1882 (15 of
1882), or, outside the Presidency-towns, is not of a
kind specified in the Second Schedule to the
Provincial Small Cause Courts Act, 1887 (9 of 1887),
or to any proceeding in execution or other proceeding
incidental to or arising from any such suit or claim.
25) From a perusal of sub-section (1) quoted above, it is
clear that a suit to enforce a right arising from a contract
or conferred by the Partnership Act cannot be instituted in
any court by the partner of a firm against the firm or
against any other partner of the firm unless the firm is
registered and the person suing is shown in the Register
of Firms as a partner in the firm. The provision is
mandatory in character and its effect is that a suit filed by
a plaintiff in respect of a right acquired by him under a
contract in his capacity as partner of an unregistered firm
is rendered void. Thus, a partner of an unregistered firm
cannot bring a suit to enforce a right arising out of a
contract falling within the ambit of Section 69 of the
Partnership Act.
RFA No.26/2022 Page 16 of 21
26) Coming to the facts of the present case. It is an
admitted case of the parties that the partnership firm
entered into between the plaintiff and defendant No.2 was
not registered in accordance with the provisions of
Partnership Act. The plaintiff claims that he and defendant
No.2 had entered into a partnership firm and after
settlement of accounts, it was found that the plaintiff is
entitled to recover an amount of ₹22,70,896, regarding which
defendant No.1, on behalf of defendant No.2, issued a
cheque in his favour. The plaintiff has nowhere pleaded in
the plaint that the partnership between him and defendant
No.2 had been dissolved. As per the terms of the
partnership deed between plaintiff and defendant No.2,
partners of the firm had the option of retiring from the
partnership business after giving six months prior notice
to the other partner, whereafter the liabilities of the firm
had to be borne equally. It is not pleaded by the plaintiff
in his plaint that any notice of dissolution of partnership
firm had been served by either of the parties. On the other
hand, defendants in their application for leave to defend
have specifically pleaded that there was no settlement of
accounts of the partnership firm and that the said firm has
not been dissolved. In fact, the defendants in their
application for leave to defend have pleaded that they
RFA No.26/2022 Page 17 of 21
would be seeking dissolution of the partnership firm and
settlement of accounts by filing a counter claim in case
they are permitted to defend the suit on merits.
27) The plaintiff by seeking recovery of the amount from
the defendants/appellants seeks to enforce a right arising
out of the partnership business and the partnership firm,
admittedly, is not registered under the Partnership Act.
Therefore, prima facie, it appears that the suit filed by the
plaintiff against the defendants in the form it has been
filed may not be maintainable being hit by the provisions
contained in Section 69(1) of the Partnership Act.
28) The Supreme Court in the case of Sunkari Tirumala
Rao vs Penki Aruna Kumari (SLP No.30442/2019
decided on 17th January, 2025) has, while dealing with a
somewhat similar fact situation, observed as under:
15. It is a clear as a noon day that the present suit
had not been instituted by or on behalf of the firm
against any third persons so as to fall under the
ambit of Section 69(2). The petitioners have also not
filed the instant suit for enforcing any statutory right
conferred under any other law or a common law
right so as to exempt the application of Section 69.
Hence, the rigours of Section 69(1) would apply on
such a suit and the partnership firm being
unregistered would prevent the petitioners from
filing a bare suit for recovery of money from the
respondent.
16. It would have instead been appropriate for the
petitioner to have preferred a suit for dissolution of
the partnership firm and rendition of accounts,
especially considering that the factum of non-
RFA No.26/2022 Page 18 of 21
registration of the partnership firm would not have
acted as bar in a suit for dissolution in light of the
exception carved out under Section 69(3). The
defence that the partnership business had not yet
commenced and thus, such a suit for dissolution
could not have been preferred, would not be of any
avail to the petitioners, particularly for overcoming
the jurisdictional bar under Section 69(1). The High
Court is right in taking the view that a suit of such
nature could not be said to be maintainable in the
absence of the registration of the partnership firm.
29) In view of the foregoing legal position, it appears that
the defendants had raised a substantial defence to the
claim made by the plaintiff, as such, they were entitled to
defend the suit unconditionally.
30) The other ground on which the appellants have laid
emphasis is the doubt about authenticity of the cheque on
the basis of which the suit has been filed by the plaintiff.
It is true that the Manager of the Bank while making his
statement in the proceedings under Section 138 of the
Negotiable Instruments Act had deposed that the cheque
in question was bearing signatures of defendant No.1 and
it is also a fact that as per the memo of dishonour, the
cheque was dishonoured on account of insufficiency of
fund but while filing the review petition before the learned
trial court, the appellants had filed certified true copy of
the account opening form and the certified true copy of the
cheque. A comparison of the specimen signatures
appearing in the account opening form and those
RFA No.26/2022 Page 19 of 21
appearing on the cheque show a marked dissimilarity
which is apparent to the naked eye. The learned trial court
neither at the time of passing order dated 18.02.2020 nor
at the time of passing order dated 22.04.2022 has
adverted to these aspects of the matter.
31) Thus, despite the appellants/defendants having
raised a good defence to the suit of the plaintiff, the learned
trial court has proceeded to grant conditional leave to
defend the suit to the defendants by imposing onerous
condition relating to deposit of amount in the form of bank
guarantee and demand draft, which, in the circumstances
of the case, was not warranted under law. The Supreme
Court in the case of IDBI Trusteeship Services Limited
v. Hub Town Limited, (2017) 1 SCC 568, has clearly held
that where the defendant satisfies the court that he has a
substantial defence and that his defence is likely to
succeed, the plaintiff would not be entitled to leave to sign
the judgment and that the defendant is entitled to
unconditional leave to defend the suit.
32) In the present case, as already indicated, the defence
set up by the appellants/defendants before the trial court
appears to be holding prima facie merit, as such, they are
entitled to unconditional leave to defend the suit. The
learned trial court by granting conditional leave to defend
RFA No.26/2022 Page 20 of 21
to the defendants/appellants has landed itself into a grave
error. Hence, the order granting conditional leave to
defend the suit to the appellants is not sustainable in law.
Once it is found that the order which has formed the basis
of passing of the impugned judgment and decree is legally
not sustainable, the impugned judgment and decree also
cannot be sustained.
33) For the aforesaid reasons, the appeal is allowed and
the impugned judgment and decree passed by the learned
trial court is set aside. The appellants/defendants are
granted unconditional leave to defend the suit. They are
permitted to file their written statement before the trial
court within the period as provided under Order 8 Rule 1
of the CPC, which shall begin to run from the date of this
judgment.
34) Trial court record along with a copy of this judgment
be sent back.
(Sanjay Dhar)
Judge
Srinagar,
30.05.2025
“Bhat Altaf-Secretary”
Whether the order is reportable: YES
Mohammad Altaf Bhat
I attest to the accuracy and
authenticity of this document RFA No.26/2022 Page 21 of 21
30.05.2025 03:49