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Partial Rejection of Claims is not Permissible --- A plaint must either proceed as a Whole or be dismissed if it lacks any Valid Cause of Action --- Supreme Court of Pakistan

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Partial Rejection of Claims is not Permissible --- A plaint must either proceed as a Whole or be dismissed if it lacks any Valid Cause of Action --- Supreme Court of Pakistan

Islamabad 08-11-2024: In a significant ruling on partnership law, the Supreme Court of Pakistan has dismissed a Civil Petition challenging the Sindh High Court’s decision to remand a dispute between business partners for trial. The case, Mst. Rehmat Begum Vs. Mehfooz Ahmed and others, centered on a conflict over the sale of a 50% partnership share in Haji Motors, a registered partnership firm based in Hyderabad. The Court’s judgment provides clarity on the jurisdictional limits of the Companies Act, 2017, while underscoring the equitable principles of the Specific Relief Act, 1877.

The dispute originated when Mehfooz Ahmed, the respondent, filed a Civil Suit seeking specific performance of an agreement to purchase Rehmat Begum’s 50% share in Haji Motors. Ahmed alleged that he had already paid part of the agreed consideration and sought legal enforcement of the contract after the petitioner failed to complete the sale. Rehmat Begum, however, argued that the civil Courts lacked jurisdiction under Section 5 of the Companies Act, 2017, asserting that only the High Court could adjudicate matters involving share transfers.

In its ruling, the Supreme Court of Pakistan clarified that partnership firms like Haji Motors do not fall under the Companies Act, 2017. Instead, they are governed by the Partnership Act, 1932. The Court emphasized that Section 5 of the Companies Act applies only to corporate entities, distinguishing partnerships from corporations in legal treatment. This decision affirms that disputes involving partnership agreements are within the jurisdiction of Civil Courts, not subject to exclusive High Court oversight.

Additionally, the Court discussed the requirements for rejecting a plaint under Order VII Rule 11 of the Code of Civil Procedure (CPC), stating that partial rejection of claims is not permissible. A plaint must either proceed as a whole or be dismissed if it lacks any valid cause of action. In this case, the Court found that the respondent’s suit for specific performance contained legitimate claims, warranting a full trial.

The judgment also addressed the discretionary nature of specific performance under the Specific Relief Act, 1877. The Supreme Court of Pakistan noted that specific performance is an equitable remedy that should be granted based on the unique circumstances of each case, including the behavior of the parties and the feasibility of enforcing the agreement.

The Supreme Court of Pakistan decision to dismiss the petition affirms the High Court’s ruling to remand the case for trial. This judgment reinforces that Civil Courts have the jurisdiction to hear partnership disputes and underscores the need for a comprehensive examination of contractual and factual matters in suits seeking equitable relief. Legal experts view this as a key ruling that strengthens procedural fairness and clarifies jurisdictional boundaries between partnership and corporate law in Pakistan.