Supreme Court rejects plea by unregistered law firm to recover fee from client

The Supreme Court recently dismissed a plea by an unregistered law firm, known as 'The Chennai Law Firm', for recovery of fees from its client [The Chennai Law Firm Vs Reyvish Associates Pvt Ltd]..A Bench of Justices Surya Kant and N Kotiswar Singh held that the suit filed by the unregistered partnership firm was not maintainable under Section 69(2) of the Indian Partnership Act, 1932.Hence, it upheld the order of the Madras High Court in this regard.“We see no reason to take a different view than that of the High Court, in view of Section 69 (2) of the Partnership Act, 1932. The other contention raised on behalf of the petitioner, based upon provisions of the Legal Practitioners (Fees) Act, 1988, cannot be entertain as no legal practitioner, juristic or otherwise, was the plaintiff before the Civil Court,” the top court said in its order of February 28. .The dispute arose from a professional engagement between The Chennai Law Firm and Reyvish Associates (P) Ltd. The firm was engaged by the company to file petitions under the SARFAESI Act. According to the firm, the company had agreed to pay 50% of the fees at the time of filing the petition and the remaining amount upon completion of the assignment. However, the respondent allegedly failed to make timely payments, leading to an outstanding amount of ₹6.57 lakh..The firm issued multiple demand notices, including one under the Insolvency and Bankruptcy Code but received no response. Consequently, it filed a suit for recovery of the outstanding amount before the Chennai City Civil Court.The trial court ruled in favour of the law firm and directed the company to pay the claimed amount along with interest. However, the company challenged this decision before the Principal District Court (appellate court) which reversed the trial court’s judgment. The appellate court held that the suit was not maintainable as the firm was unregistered, violating Section 69(2) of the Indian Partnership Act, which prohibits unregistered firms from enforcing contractual rights against third parties..In the second appeal before the Madras High Court, the firm argued that the bar under Section 69(2) of the Partnership Act did not apply to claims arising from professional services, as legal fees were not part of a business venture but rather remuneration for services rendered. However, Justice PT Asha rejected these arguments, emphasising that the right to claim remuneration arose from a contractual agreement between the parties. Since the appellant-firm was unregistered and the partners were not listed in the register of firms, the suit was not maintainable under the law, the High Court held. It also noted that the firm had failed to produce a registration certificate, further weakening its case.."A reading of the Section (69(2) of the Partnership Act would clearly show that no suit can be instituted by or on behalf of an unregistered firm to enforce any right arising from a contract against the 3rd party unless a firm is registered and the persons suing are shown as partner,” the High Court said.The firm then appealed to the Supreme Court which dismissed the appeal and upheld the High Court verdict. .The Chennai Law Firm was represented by advocate L Sriram (party in person) with advocates Shanmugaraja, Ananda Selvam, Mayilsamy K, Habib Muzaffar and Jay Kishor Singh..[Read Judgment].Follow Bar and Bench channel on WhatsAppDownload the Bar and Bench Mobile app for instant access to the latest legal news.