High Court Allows Writ Petition by Unregistered Partnership Firm; Permits Appeal Filing with Pre-deposit

High Court Allows Writ Petition by Unregistered Partnership Firm; Permits Appeal Filing with Pre-deposit

The writ petition was moved against the challenged order dated 20 February 2025 and the show cause notice dated 27 November 2024 for the year 2020–21. The challenged order invoked a demand of tax to the tune of Rs. 59,05,232/-, whereas the aggregate demand with interest and penalty amounted to Rs. 1,09,02,348/-. The petition also challenged Notification No. 40/2021–Central Tax dated 29 December 2021 and Notification No. 40/2021–State Tax dated 9 June 2022, which are already under consideration before the Court in a connected batch where the lead matter is Sarens Heavy Lift India Private Limited v. Sales Tax Officer Class II AVATO DGST Ward 201, Zone 11 & Anr. The petitioners included one of the firm’s partners as Petitioner No.1, since the partnership firm (Petitioner No.2) was unregistered. The counsel for the Department objected to the maintainability of the petition on the ground that Section 69 of the Indian Partnership Act, 1932 prescribes a bar against unregistered firms for filing legal proceedings.

The advocate of the petitioner contended that the company was duly registered under the GST regime and paying taxes, and that the petition was under enforcement of statutory rights under the CGST Act and not enforcement of a contractual right. It was argued that the non-filing of the reply to the SCN was due to ignorance, not wilful on the part of the Chartered Accountant of the firm, and that the impugned order had been made without giving an opportunity of hearing. The petitioner invoked the judgment of the Supreme Court in Haldiram Bhujiawala v. Anand Kumar Deepak Kumar, and the judgment in Shiv Developers v. Aksharay Developers & Ors., to contend that Section 69(2) does not exclude an unregistered firm from approaching the Court where the firm is looking for enforcement of common or statutory law rights.

Issue Raised: Whether a writ petition by an unregistered partnership firm on behalf of its partner challenging GST demands and notifications is maintainable in law in light of the Section 69(2) bar in the Indian Partnership Act, 1932.

HC’s Ruling: The Court analysed the wording of Section 69(2) of the Indian Partnership Act, 1932, that prohibits unregistered firms from filing suits to enforce contractual rights and considered judicial precedents in Haldiram Bhujiawala v. Anand Kumar Deepak Kumar and Shiv Developers v. Aksharay Developers. The Court observed that the limitation in Section 69 is applicable only to rights under contract and not for enforcement of statutory or common law rights. It was held that where an un-registered firm is attempting to enforce rights under a statutory enactment, the prohibition contained in Section 69 cannot be used to preclude such enforcement. As the petitioner-firm was a GST registered person, discharging tax liabilities, and praying for reliefs under the CGST Act, it was entitled to file the writ petition through its partner. The Court also noted that just because the firm was un-registered under the Partnership Act cannot bar it from availing statutory remedies when tax rights and liabilities are involved.

The Court held that the writ petition was maintainable. It directed that the petitioner may file an appeal by 30 November 2025 along with the requisite pre-deposit on the tax amount, and that if such appeal is filed within the prescribed time, it shall not be dismissed on the ground of limitation and shall be adjudicated on merits. The proceedings before the appellate authority and subsequent remedies were ordered to remain subject to the final outcome of the pending Sarens Heavy Lift India Private Limited batch which challenges the impugned notifications. The writ petition was disposed of with these directions.

To Read Full Judgment, Download PDF Given Below