CHEQUE, CONTRACT, OR STATUTE? RESOLVING THE CONFLICT BETWEEN SECTION 69(2) OF THE PARTNERSHIP ACT AND SECTIONS 30/37 OF THE NEGOTIABLE INSTRUMENTS ACT

Section 69(2) of the Indian Partnership Act, 1932, bars unregistered partnership firms from enforcing rights arising from contracts. However, its application to suits for recovery on dishonoured cheques remains doctrinally unsettled, particularly where Sections 30 and 37 of the Negotiable Instruments Act, 1881, independently impose liability upon the drawer. This article examines the conflicting judicial approaches to determining whether such claims arise from contractual obligations or statutory rights. It identifies three interpretative approaches—the source test, pleading test, and remedy test—and analyses their application through judicial precedents. Particular emphasis is placed on the competing statutory attribute and continuity of obligation models. While the former treats statutory regulation of negotiable instruments as sufficient to establish an independent cause of action, the latter examines whether the enforceable right survives independently of the underlying contractual relationship. The article argues that extending the statutory independence of negotiable instruments to disputes between original contracting parties conflates negotiability with substantive independence and potentially undermines the legislative purpose of Section 69(2). By examining the rationale underlying negotiability and the registration requirement, it proposes a reformulated test distinguishing genuinely independent statutory rights from contractual claims merely pursued through statutorily regulated instruments. The proposed approach preserves protections afforded to subsequent holders while preventing circumvention of the statutory bar through the mode of payment. Ultimately, the article highlights the unresolved doctrinal conflict and the necessity of judicial clarification regarding the application of the continuity of obligation approach to dishonoured cheque recovery suits involving unregistered partnership firms under Section 69(2).