Himachal Pradesh High Court
Bhanu Sood vs Jeetendera Malhotra And Others on 1 May, 2018
Author: Chander Bhusan Barowalia
Bench: Chander Bhusan Barowalia
IN THE HIGH COURT OF HIMACHAL PRADESH AT SHIMLA RSA No. 175 of 2005 Reserved on: 17.04.2018 Decided on: 01.05.2018 ____________________________________________________________ .
Bhanu Sood .....Appellant.
Versus
Jeetendera Malhotra and others ......Respondent.
_______________________________________________________ Coram The Hon'ble Mr. Justice Chander Bhusan Barowalia, Judge.
1 Whether approved for reporting? Yes. ______________________________________________________ For the appellant: Mr. Sumeet Raj Sharma, Advocate.
For respondents No. 1 to 3: Mr. Deepak Bhasin, Advocate. For respondents No. 4 & 5: Nemo.
Chander Bhusan Barowalia, Judge.
The present regular second appeal has been maintained by the appellant, who was one of the plaintiffs before the learned Trial Court (hereinafter referred to "the plaintiff"), laying challenge to the judgment and decree, dated 29.12.2004, passed by the learned Additional District Judge, Fast Track Court, Shimla, District Shimla, H.P., in Civil Appeal No. 68-S/13 of 2004/99, whereby the appeal 1 Whether reporters of Local Papers may be allowed to see the judgment? Yes.
::: Downloaded on - 02/05/2018 23:18:00 :::HCHP -2-filed by the plaintiff against the judgment and decree, dated 10.11.1998, passed by the learned Senior sub Judge, Shimla, District Shimla, H.P., was dismissed and the .
findings of the learned Trial Court, whereby Civil Suit No. 199/1 of 1997 of 1993 was dismissed, were upheld.
2. The key facts of the case can tersely be summarized as under:
The plaintiff alongwith other plaintiffs, who are proforma respondents herein, entered into partnership business with the respondents/defendants (hereinafter referred to as "the defendants") and partnership deed, dated 02.04.1990 was executed in the name and style of M/s Kamal Enterprises and the same was formed for carrying the business of wholesale Vendee of Indian Made Foreign Liquor as L-1 licencees of H.P. and allied businesses etc.. The plaintiffs further contended that the partnership business was deemed to be effective from 01.04.1990. The business was to be carried out at Tara Devi, Shimla, and capital for the same was to be originated from the contributions made by its partners in proportion ::: Downloaded on - 02/05/2018 23:18:00 :::HCHP -3- to their share in profits and loss. All the partners, except Smt. Bhanu Sood, plaintiff No. 3 (appellant herein), contributed capital to the extent of 17% and remaining 15% .
was to be contributed by plaintiff No. 3. The partnership firm was required to maintain all the records, viz., books of account etc. Defendants No. 1 and 2 were Manager and Officer Incharge, respectively and plaintiffs No. 1 and 2 and defendant No. 3 were Co-Managers of the partnership firm.
It was further contended that the accounts of the firm was required to be audited by a Chartered Accountant, who was to be appointed with prior consent of all the partners of the firm. Since inception, the defendants started mis-
managing the affairs of the business, so the plaintiffs agitated for rendition of account of business. The defendants, yielding to persistent agitation, submitted some details on 01.04.1991 qua the balance sheet, which was alleged to be worked out upto 31.03.1991. The balance sheet, so submitted by the defendants, was not found correct and the accounts were found to be manipulated and forged. Thus, the plaintiffs openly declared themselves ::: Downloaded on - 02/05/2018 23:18:00 :::HCHP -4- disassociated with the said partnership firm on and w.e.f.
01.04.1991. Since then plaintiffs disassociated with all affairs of the partnership firm for all intents and purposes.
.
The plaintiffs further contended that as per them partnership stood dissolved on and w.e.f. 31.03.1991. The defendants, through notice dated 15.01.1993, were asked to render the account, but they failed to do so. Lastly, the plaintiffs filed a suit seeking relief for rendition of account.
3. The r defendants, by way of filing written statement, contested and resisted the suit of the plaintiffs.
They raised preliminary objections, viz., maintainability, estoppel, jurisdiction and cause of action. On merits, the defendants contended that the plaintiffs have concealed material facts with ulterior motive, as the parties to the suit were unregistered partners of unregistered firm, so the suit is not maintainable under Section 69 of The Indian Partnership Act, 1932 (hereinafter referred to as "the Act").
As per the defendants, the accounts of the firm were being managed and maintained properly by defendants No. 1 and 2 and plaintiff No. 3. The plaintiffs conduct became ::: Downloaded on - 02/05/2018 23:18:00 :::HCHP -5- untrustworthy, when the defendants asked about the irregularities. Thus, the relations between the parties became strained and despite repeated requests the .
plaintiffs did not get the accounts audited by the Chartered Accountant. The dissolution of firm by the plaintiffs was denied by the defendants and it was contended that due to continuous loss and unavailability of funds the firm could not function. Due to the mala fide acts, deeds and conduct of the plaintiffs, the partnership firm suffered huge loss. As per the defendants, true statement of accounts was submitted to them, however, they stayed away and signed the record with ulterior motive, as such they are liable to pay their share of loss. The defendants, by filing a counter claim, sought recovery of the amount of loss suffered by them form during the period 1990-91, 1991-92 and 1992- 93 to the extent of `35,000/-, `35,000/- and `75,000/-, respectively. Lastly, the defendants contended that the suit of the plaintiffs be dismissed.
4. The learned Trial Court on 05.08.1994 framed the following issues for determination and adjudication:
::: Downloaded on - 02/05/2018 23:18:00 :::HCHP -6-"1. Whether the plaintiffs are entitled to rendition of accounts? OPP
2. Whether the suit is not maintainable?
OPD
3. Whether the plaintiffs are estopped from filing the suit? OPD .
4. Whether the plaintiffs have no cause of action? OPD
5. Relief."
5. After deciding issue No. 1 in favour of the plaintiffs, issue No. 2 in favour of the defendants, issue No. 3 against the defendants, issue No. 4 was not pressed, the suit of the plaintiffs was dismissed. Subsequently, the plaintiffs preferred an appeal before the learned Lower Appellate Court, which was also dismissed, vide impugned judgment dated 29.12.2004, hence the present regular second appeal, which was admitted for hearing on the following substantial questions of law:
"1. Whether the dissociation by the partner from the partnership to the knowledge of other partners amounts to dissolution of the firm and the appellant is entitled for the rendition of accounts as per Section 69 (3) (a) of the Partnership Act?
2. Whether the demand of accounts by the partner by serving notice amounts to dissolution of the firm and consequent the right can be exercise for seeking rendition of accounts?::: Downloaded on - 02/05/2018 23:18:00 :::HCHP -7-
3. Whether the Court below has wrongly held that the finding of Ld. Sub Judge, Nalagarh in judgment and decree dt. 26.04.1999 in CS No. 246/1 of 1994 thereby holding no liability of the appellant qua the partnership liability .
has no consequence to the relief claimed in the suit?
4. Whether the Court below has wrongly disallowed the application under Order 41 Rule 27 CPC for placing on record the judgment and decree dt. 26.04.1999 in CS No. 246/1 of 1994 passed by the learned Sub Judge, Nalagarh?
5. What is effect of not deciding the application under order 7 Rule 14(3) CPC thereby not considering the additional documents sought to be placed on the record?
6. Whether filing a suit of rendition of accounts, thereby serving summons amounts to dissolution of the firm, there by entitled the partner to seek the rendition of account?"
6. I have heard the learned Counsel for the appellant and the learned Counsel for respondents No. 1 to 3.
7. The learned Counsel for the appellant has argued that the learned Courts below have failed to take into consideration the fact that there was implied notice on behalf of the appellant to resign from the partnership firm.
He has further argued that even if it is taken that there was ::: Downloaded on - 02/05/2018 23:18:00 :::HCHP -8- no resignation in writing then the legal notice issued to the other partners is definitely a notice to resign. He has argued that the learned Courts below have not properly .
considered the ambit of Sections 32, 40 and 69 of the Act.
To support his arguments he has relied upon the following judicial pronouncements:
1. Kaniram Ganpatrai vs. Commissioner of Income Tax, AIR 1953 Patna 271;
2. Navinchandra Jethabhai and another vs. Moolehand Sadaram Gindodiya, AIR 1966 Bombay 111 (V53 C16);
3. Basantlal Jalan vs. Chiranjilal r Sarawgi and others, AIR 1968 Patna 96 (V 55 C 33) &
4. Vishnu Chandra vs. Chandrika Prasad Agarwal and others, AIR 1983 Supreme Court 523;
Conversely, the learned Counsel for respondents No. 1 to 3 has argued that the appellant has no case and the findings arrived at by the learned Courts below are reasoned and after appreciating the facts, which have come on record.
He has referred to notice, Ex. PW-1/B, which was issued in the year 1993 and it was not a notice to resign. He has argued that as the appellant never resigned from the partnership firm in writing, as she was required to do in ::: Downloaded on - 02/05/2018 23:18:00 :::HCHP -9- case she intended to resign, as per the agreement, so the partnership continued. He has argued that the learned Courts below have rightly held that a partner cannot .
maintain a suit against the other partners in an unregistered firm. Lastly, he has argued that the appeal is without merits and the same be dismissed.
8. In rebuttal, the learned counsel for the appellant has argued that the appellant has resigned from the partnership firm and the suit should have been decreed by the learned Trial Court and now the appeal be allowed by setting aside the judgments and decrees of the learned Courts below.
9. In order to appreciate the rival contentions of the parties I have gone through the record carefully.
10. The controversy in the case in hand mainly depends upon the ambit of Section 69 of the Indian Partnership Act (hereinafter referred to as "the Act"). At the very outset the same is extracted hereunder:
69. Effect of non-registration.--
(1) No suit to enforce a right arising from a contract or conferred by this Act shall be instituted in any court by or on behalf of any person suing as a partner ::: Downloaded on - 02/05/2018 23:18:00 :::HCHP
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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 right 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-section (1) (2) shall apply also to a claim of set off or other proceedings 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 any right or power to realize the property of a dissolved firm, or
(b) the powers of an official assignee, receiver or court under the Presidency- r towns Insolvency act, 1909 (3 of 1909) or the property of an insolvent partner."
PW-1 Shri Rajeev Sood, who was one of the plaintiff (proforma respondent No. 5 in the present appeal) and DW-
1, Shri Jitendera Malhotra, unequivocally deposed that partnership firm was unregistered and the parties were its unregistered partners. In the wake of depositions of these two witnesses coupled with what has been provided in Section 69 of the Act (supra), no partner of an unregistered firm can maintain a suit against other partners. As there is clear statutory embargo provided in the Act, the suit was not maintainable, as unregistered partners of an ::: Downloaded on - 02/05/2018 23:18:00 :::HCHP
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unregistered firm cannot maintain a suit against other partners. Sub Section (3) of Section 69 of the Act certainly provides exception that sub Section (1) and (2) shall have .
no effect for enforcement of any right for the dissolution of a firm or for accounts of a dissolved firm or any right or power to realize the property of a dissolved firm. Now, the only point which needs determination is that whether the partnership firm stood dissolved or not.
11. PW-1, Shri Rajeev Sood (one of the plaintiff in the learned Trial Court) deposed that plaintiffs disassociated with the business of the firm on and w.e.f.
31.03.1991. As per the plaintiffs, the partnership firm stood dissolved on 31.03.1991, but as per the deposition of DW-1, Shri Jitendera Malhotra, the partnership firm was not dissolved. Partnership deed, Ex. PW-1/A, manifests that the firm came into existence on 01.04.1990 and Clause 7 of the deed further provides that partners or their survivors will remain its partners for a period of 10 years from the said date, subject to the provisions as contained in it. Under Clause 12 of the deed it is provided that if a ::: Downloaded on - 02/05/2018 23:18:00 :::HCHP
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partner intended to retire from the partnership firm he was required to give a month's notice, in writing, expressing his intention and after expiration of such notice, the .
partnership, qua that partner shall stand dissolved. Thus, it is clear that merely by disassociating business from the partnership firm, the partnership firm did not dissolve.
12. Section 40 of the Act mandates that a partner can disassociate from the partnership by giving notice of disassociation. For ready reference Section 43 of the Act is extracted hereunder:
"43. Dissolution by notice of partnership at will.-
(1) Where the partnership is at will, the firm may be dissolved by any partner giving notice in writing to all the other partners of his intention to dissolve the firm.
(2) The firm is dissolved as from the date mentioned in the notice as the date of dissolution or, if no date is so mentioned, as from the date of the communication of the notice."
Thus, in view of Section 43 of the Act, a partner can always disassociate from a firm by giving notice in writing, but in the case in hand no such notice was given by the plaintiffs expressing willingness to disassociate from the partnership ::: Downloaded on - 02/05/2018 23:18:00 :::HCHP
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firm in question. Admittedly, notice, Ex. Pw-1/B, was given by the plaintiffs to the defendants, but that was for rendition of account and not for disassociation from the .
partnership firm. Therefore, the partnership firm existed and it was not dissolved, as pleaded by the plaintiffs, so the suit, as filed by the plaintiffs for rendition of account was not maintainable under Section 69 of the Act.
13. Undisputedly, the parties to the suit were unregistered partners of an unregistered partnership firm, as the same stands fully proved through the plaint, so filed by the plaintiffs, and the depositions of PW-1, Shri Rajeev Sood and DW-1 Shri Jitendera Malhotra. Therefore, as discussed above, a partner of an unregistered firm cannot maintain a suit against other partner of that unregistered partnership firm. True it is that Section 69(3)(a) of the Act provides that a partner of an unregistered firm can file a suit for enforcement of any right for the dissolution of a firm or for accounts of a dissolved firm or any right or power to realize the property of a dissolved firm, but the same can only be done for the dissolution of firm and for ::: Downloaded on - 02/05/2018 23:18:00 :::HCHP
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accounts of dissolved firm. In the case in hand the partnership firm did not stand dissolved, as pleaded by the plaintiffs, so the suit is not maintainable for rendition of .
accounts. Moreover, a perusal of partnership deed, Ex.
PW-1/A, clearly shows that the partner, if at all wanted to disassociate/resign from the firm, he was required to give a notice, in writing, of one month, as mentioned in para 8 of the deed, but the plaintiffs did not give any such notice, so the partnership firm was still in existing and was not dissolved, as pleaded by the plaintiffs.
14. Section 40 of the Act provides as under:
"40. Dissolution by agreement.-A firm may be dissolved with the consent of all the partners or in accordance with a contract between the partners."
Thus, as per the mandate of Section 40 of the Act, the partnership can be dissolved with the consent of all the partners in accordance with a contract between the partners. Now, admittedly the plaintiffs and defendants executed partnership deed, Ex. PW-1/A, and it specifically provided terms for a partner to disassociate from the firm.
PW-1, Shri Rajeev Sood (one of the plaintiffs) deposed that partnership firm stood dissolved on and w.e.f. 31.03.1991, ::: Downloaded on - 02/05/2018 23:18:00 :::HCHP
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as the plaintiffs disassociated themselves from its affairs, however he has admitted that as per Ex. PW-1/A, the partnership firm could have been dissolved. It clearly .
demonstrates that he was aware and having knowledge that partnership firm can only be dissolved as per the procedure contained in Ex. PW-1/A and not by simply disassociating themselves from its affairs.
15. The learned Counsel for the appellant has placed reliance on a judgment of Hon'ble Patna High Court rendered in Kaniram Ganpatrai vs. Commissioner of Income Tax, AIR 19534 Patna 271, wherein in para 3 it has been held as under:
"3. On behalf of the assessee, Mr. Dutt presented the argument that upon the facts found the Income tax Appellate Tribunal should have held that there was succession to the assessee firm within the meaning of Sec. 25 (4) , Income-tax Act. Learned counsel referred to the important finding of the Appellate Tribunal that the stock in trade and most of the debts and liabilities of the assessee firm were transferred to the new firm Kaniram Jankidas. In their order dated 13-4- 1951 the Appellate Tribunal states that the new firm took over the assets and liabilities of the old firm and continued the business without cessation. The Tribunal has observed:"in this state of affairs, on ::: Downloaded on - 02/05/2018 23:18:00 :::HCHP
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28-10-1943 Ramniranjan Kejriwal was admitted to the partnership on Kartik Sudi 1, S. Y. 200, and the business was carried on as heretofore with the change in the firm name from Kaniram Ganpatrai to Kaniram .
Jankidas. . . . . and business went humming as before without break".
The facts suggest that the whole business of the assessee firm had devolved upon the successor firm Kaniram Jankidas, The identity and continuity of the business has also been substantially preserved for the successor firm Kaniram Jankidas took over the same lines of business from the assessee firm and carried on business at Daltonganj and its various branches. But the question at issue is whether the successor firm of Kaniram Jankidas is a 'different person' within the meaning of Sec. 25 (4) , Income tax Act. On this point the Appellate Tribunal has said that there was no succession"as Inderchand continued to be a partner of the old as well as new partnership and Sec. 25 (4) contemplated a complete change of personnel and not a mere change of the ownership of the business. "in my opinion the Appellate Tribunal has proceeded on a misconception of law in holding that there was no succession to the firm of Kaniram Ganpatrai. It is true that Inderchand Kejriwal was a partner of the old firm and was also a partner of the new firm. But that is not a material consideration in deciding whether there was succession within the meaning of Sec. 25 (4). In the present case, there are circumstances which suggest that the old firm of Kaniram Ganpatrai had been dissolved with effect from 27-10-
1943. The Appellate Assistant
Commissioner has stated that
Mahadeo Lal Jwalaprasad retired ::: Downloaded on - 02/05/2018 23:18:00 :::HCHP
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from partnership on this date and the whole business came into the hands of Inderchand. The Appellate Tribunal has affirmed this finding and further stated that most of the assets and liabilities were transferred .
to the new firm of Kaniram Jankidas who carried on tile business of grain, cloth and lac as before without a break. 'these facts suggest the inference that the old partnership of Kaniram Ganpatrai had been dissolved by agreement. Under Sec. 40, Partnership Act, a partnership may be dissolved by the agreement of the partners. It is not necessary in every case that the fact of dissolution should be evidenced by a document but the dissolution of the partnership may be inferred from the circumstances of the case and the conduct of the parties (See Joopoody Sarayya v. Lakshmanaswamy', 36 Mad 185 (A)). According to the finding of the Appellate Tribunal the new firm of Kaniram Jankidas was formed on 28-10-1943 with Inderchand Kejriwal having 12 annas share and Kamniranjan Kejriwal having four annas share. The new firm was registered on 21-9-1946 but the deed of partnership recites that the new firm had carried on the business with effect from 23-10-1943.
The Appellate Tribunal has held that there was no succession of the assessee firm"since Inderchand continued to be a partner of the old as well as the new partnership, and Sec. 25 (4) contemplates a complete change of personnel and not a mere change in the ownership of the business. "in my opinion, the Appellate Tribunal has proceeded on a mistaken view of the law. It is true enough to state that a partnership is not in English law or in Indian law a single juristic per-son and a firm as ::: Downloaded on - 02/05/2018 23:18:00 :::HCHP
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such has no legal personality or existence. But for the purpose of the Income tax Act, a firm is regarded as having a separate existence apart from the partners who carry on the business. The question has recently .
been discussed by a Bench' of this Court in -'jittanram Nirmalram v. Commissioner of Income-tax', AIR 1953 Pat 257 (B) , where the authorities on the point have been reviewed. It was held in that case that a new partnership of three persons was different legal entity from an old partnership of four persons, though three of the partners were common. The same principle is laid down in -'income-Tax Commissioners v. Gibbs', (1942) A. C. 402 (C) , in which the question arose whether a partnership of four stock brokers who took in a fifth partner ceased to carry on business and was succeeded by the partnership of five within the meaning of Sub-rule 1 of Rule 9, Schedule D to the Income Tax Act, 1918, which provided that if a person charged under Schedule D ceased within the year of assessment to carry on the trade in respect of which the assessment was made and was succeeded by another person, the commissioner shall adjust the assessment as directed. It was held by the House of Lords reversing the decision of the Court of Appeal that though in the English law a partnership was not a single juristic person, the scheme of the Income-tax legislation treated the partnership as a legal entity for the purpose of assessing revenue and there was succession to the business within the meaning of Rule 9, Sub-rules 1 and 2. Applying the principle of these authorities, it is clear that in the present case there has been a succession to the partnership within ::: Downloaded on - 02/05/2018 23:18:00 :::HCHP
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the meaning of Sec. 25 (4) , Income- tax Act and that the finding of the Appellate Tribunal on this point is erroneous and should be overruled."
.
However, the judgment (supra) is with respect to Income Tax Act and the Hon'ble High Court of Patna has held that the regular second appeal is maintainable, though on substantial question of law only. The Income Tax Act is a special Act and the facts of the present case are totally different, so the judgment (supra) is not applicable.
16. The learned Counsel for the appellant has also relied upon on a judgment of Hon'ble Bombay High Court rendered in Navinchandra Jethabhai and another vs. Moolehand Sadaram Gindodiya, AIR 1966 Bombay 111 (V 53 C16), wherein in para 18 it has been held as under:
"18. The next question is whether the suit is barred by reason of S. 69 of the India partnership Act. It is an admitted position that the partnership between the plaintiff and the defendants was not registered under the Partnership Act and therefore, S. 69 of the Act must govern the cases. The section is divided into four sub - sections. Sub - section (10 prevents a persons from suing as partner is a firm either the firm or a person who is alleged in the to be a partners in the firm, in respect to any rights arising out of ::: Downloaded on - 02/05/2018 23:18:00 :::HCHP
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the contract of the partnership or any other rights conferred by the Act, unless the firm if registered. Sub - section (2) prevents of the similar suit against a third party in respect of any contract by the firm unless it is .
registered and it shown that the persons suing on the behalf of the firm are partners that the in the firm. Sub - section (3) provided that sub - section (1) and (2) would also apply to a claim of set - off fro the proceedings to enforce a rights arising fro ma contract, but is proceeds to case out -
(a) the enforcement's of any rights to sue for the dissolution of the firm or for accounts of a dissolved relished the property of a dissolved firm, and
(b) the powers or courts under the two Insolvency of the act for relations of the property of an insolvent of partner. The exceptions, to the section created by sub -section (4) have no application to the present case, and we need not consider them. Clauses (a) and (b) of the sub - section (3) which provide exceptions clearly enable to asset of the accounts of the dissolution of the firm of the for accounts oft dissolved firm or for realization of the property of the dissolved firm. An arguments was made of the last portion of clauses (a) applied only to a suit against a third person. But then it is extremely defeat to hold that the provisions which is made as an exception to both the sub = section (1) and (2) should be split up in such a way that one portion of it should up in such a to sub = section (1) and the other potion of sub = section (2) , with out even addition the words "respectively"
by the legislature. To do so would appears to the be adding the word are not to be found in found in the clauses or re - drafting the statute. If the legislature really intended to ::: Downloaded on - 02/05/2018 23:18:00 :::HCHP
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create an exception in this limited from, then to each of the sub =section a proviso could have been added - making an exception only to that sub
- section. Giving a natural meaning to the provisions of clauses case in the .
our view, a suit for the accounts of the dissolved firm or for relations of the property of dissolved firm for m any proviso, whether he be a partner or not can be filed. This view was taken in the case of Sheo Dutt v.
Pushi Ram, AIR 1947 All 229, and it was subsequently followed in the case of Daitari Mohapatra v. Brundaban Matia, AIR 1959 Orissa 110. Mr. Abhyankar relied on the observations of Sir John Beaumeont of the case of Appayya Nijlinagappa v. Subrao Babaji reported in 39 Bom LR 1214, (AIR 1938 Bom 108) where the learned chief Justice appeared to be of the view that the first sentence of sub - clauses (a) should be read as creating exception from sub - section (1) , the exceptions being enforcement of the right of the sue for dissolution of accounts of the dissolved firm, and the last sentence of that sub = clauses should be read as creating an exception to sub =section (2) in respect of suit to enforce any right to the realize of suit of the enforce any right to realize property of a dissolved firm. The question arose in a suit be the plaintiff who were partners of the defendants for the recovery of an amounts due to the partnership by the defendants after the partnership by the defendants after the partnership was dissolved. Now , if was really the learned chide justice has laid down the rules purposed to the have been formulated b him, the suit old have been dismissed. In that case, the trial court had dismissal in the suit of the decreed the plaintiffs claim. The ::: Downloaded on - 02/05/2018 23:18:00 :::HCHP
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learned Chief Justice held that the suit in question fell within the exception and therefore setting aside the decree it is obvious from the reasoning of the learned chief justice that the did not limited the exception .
to suits against third parties only , and if this is so with respect, it would seem it does not matter whether the exception is to there fore is really not against the conclusion at which we have arrived."
After carefully considering the judgment (supra) in detail, it is found that the judgment relates to a firm, which stood dissolved. In the case in hand, there is nothing on record to demonstrate that the firm was dissolved. The case of the appellant is that by her conduct the firm was dissolved, but there is specific provision in the agreement that the firm will remain for ten years and any partner can only disassociate from it by giving a month's notice. So, the facts of the present case are totally different from the judgment (supra), hence the judgment is not applicable to the facts of the present case.
17. The learned Counsel for the appellant has also placed reliance on another judgment of Hon'ble High Court of Patna rendered in Basantlal Jalan vs. Chiranjilal ::: Downloaded on - 02/05/2018 23:18:00 :::HCHP
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Sarawgi and others, AIR 1968 Patna 96 (V 55 C 33), wherein in para 9 it has been held as under:
"9. Learned Counsel for the appellant .
next submitted that the suit is barred under Section 69 (1) of the Partnership Act, inasmuch as the partnership was not registered. Developing his argument, the learned Counsel further submitted that the suit being a suit for specific sum of money, it was not saved under Section 69(3)(a) of the Partnership Act. There does not appear to be any substance in this submission of the learned Counsel either. The argument clearly overlooks Sub-clause (a) of Clause (3) of Section 69 of the Partnership Act. Clauses (1) and (2) of r Section 69, no doubt, bar a suit by or on behalf of an unregistered partnership. Clause (1) bars a right of a person suing as a partner in a firm to enforce certain rights arising against the firm or against any person alleged to be or to have been a partner in the firm. Clause (2) of the said section bars the enforcing of a claim by a firm against a third party. Clause (3) of Section 69 provides certain exceptions to the bars created by the earlier two clauses of this Section. Sub-clause (a) of Clause (3), which is relevant in the instant case, is quoted below:--
(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 dissolved firm, or any right or power to realise the property of a dissolved firm."
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Reading the aforesaid clause, it is apparent that apart from suing for dissolution of a firm or for accounts of a dissolved firm, an exception has been made also in case of any right or power to realise the property of a .
dissolved firm. Mr. Chatterjee, however, next contended that the latter portion of the aforesaid Sub- clause (a) of Clause (3) of Section 69 was an exception to Clause (2) of Section 69 and would only apply if the suit was filed against a third party. Mr. Lal Narayan Sinha.
appearing for the respondent, in reply, has submitted that this argument clearly overlooks the opening lines of Clause (3), which clearly provides that the exception is applicable to both Clauses (1) and (2) of Section 69 and there is no scope r for making any artificial division of the said exception between Clauses (1) and (2). Mr. Sinha also relied upon a Bench decision of the Allahabad High Court in the case of Sheo Dutt v.
Pushi Ram, AIR 1947 All 229, that, "any right or power to realise the property of a dissolved firm under Section 69 (3) (a) includes the right to recover from third party as well as from one of the partners." In my view, the submission made by Mr. Sinha is well-founded and must be accepted. I would accordingly hold that, in any view of the matter, the suit is not barred under Section 69 (1) of the Partnership Act."
As there is nothing on record to show that the partnership firm stood dissolved, the judgment (supra) is also not applicable to the facts of the present case.
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18. Lastly, the learned Counsel for the appellant has placed reliance on a judgment of Hon'ble Supreme Court rendered in Vishynu Chandra vs. Chandrika Prasad .
Agarwal and others, AIR 1983 Supreme Court 523, the Hon'ble Supreme Court in para 5 has held as under:
"5. The second contention is whether the plaintiff is entitled to retire from the partnership. To begin with it would be advantageous to refer to clause 18 of the instrument of partnership. It reads as under :-
"18. That if any partner wants to dissociate from the partnership business then he r can dissociate after serving one month notice to remaining partners, but in that event the partnership business will not come to an end. If the majority of the partners do not agree to work with other partner then in that event the majority partners will have the right to seek explanation from that partner and, if think fit and justifiable, may expell him from the partnership business."
Before proceeding further it is also advantageous to note that in the concluding portion of para 20 of the instrument of partnership it was provided that no partner will separate from the partnership business till one year from the beginning of the business, and if he will dissociate then his capital will not be given till the end of one year. These two clauses leave no room for doubt that a partner can dissociate from the firm. Section 32 (1) provides, inter alia, that a partner may retire ... (b) in accordance with an express agreement by the partners. A ::: Downloaded on - 02/05/2018 23:18:00 :::HCHP
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partnership business is run in accordance with the terms of the contract of partnership. The terms, inter alia, envisage a situation that a partner can retire from partnership. The expression used in clause 18 that .
a partner may dissociate from the partnership envisages a situation where a partner wants to retire from business. The contract of partnership also envisages a situation where a partner may be expelled from the partnership. But that situation need not he examined. The only point on which the parties are at variance is whether a partner can retire from the partnership and the expression, 'that if any partner wants to dissociate from the partnership business,' comprehends a situation where a partner wants to retire from the partnership. Therefore, it does appear that the contract of partnership permits a partner to retire from the partnership.
Unfortunately the High Court examined the contention from an angle impermissible in that while examining the second contention the High Court proceeded to appreciate the contention put forward on behalf of the plaintiff appellant whether there was a breach of the contract of partnership. Nowhere while examining the contention whether it is open to the partner to retire from partnership, the absolute right to dissociate from business as conferred by clause 18 has been gone into by the High Court. The High Court negatived the contention observing that non-payment of Rs. 250/- p.m. to the plaintiff and non-supply of 1/4 production to him could not be an adequate ground for dissolution of partnership under Section 44 of the Indian Partnership Act 1932 ('Act' for short). Maybe, the High Court may be ::: Downloaded on - 02/05/2018 23:18:00 :::HCHP
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right in that if dissolution is sought under Section 44 of the Act alleging that there has been a breach of the contract of partnership. That is not the plaintiff's contention when he prayed for a decree on the ground .
that he may be permitted to retire from the partnership. The High Court fell into error in not examining the contention whether the plaintiff appellant is entitled to retire from the partnership without dissolving the firm. Clause 18 of the contract of partnership clearly comprehends a situation where a partner may retire from an ongoing partnership after giving one month's notice. That is what is clearly intended by the expression that in the event of retirement of a partner the partnership business will not come to an end. Clause 18 provides for two independent contingencies. The first part of it confers a right on the partner to retire from partnership as envisaged by Section 32 (1) (b) of the Act. The second part of clause 18 provides for the consequence of such retirement by providing that even on such retirement the partnership will neither be dissolved nor the business will come to an end. In other words, without dissolving the firm and continuing the ongoing business, a partner may retire from the partnership, a situation clearly comprehended by Section 32 and incorporated as a term of contract of the partnership between the parties to the contract. With great respect, the High Court did not examine the matter from this angle and fell into an error in believing that the plaintiff sought dissolution on two grounds : (i) that the partnership is a partnership at will; and (ii) that dissolution is sought under Section 44. The implication of Section 32 of the Act ::: Downloaded on - 02/05/2018 23:18:00 :::HCHP
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completely escaped the notice of the High Court and that is why we are constrained to interefere in this matter."
.
In the judgment (supra) the Hon'ble Supreme Court has held that one of the partners may disassociate from the partnership when he wants to retire from the business. In the case in hand, there is specific agreement that a partner may disassociate from the partnership subject to the conditions otherwise mentioned in the agreement alongwith that there should be one month's notice in advance, which in the present case is missing, so the judgment (supra) is also not applicable to the facts of the present case.
19. In view of what has been discussed hereinabove, this Court finds that the findings arrived at by the learned Courts below are reasoned, after appreciating the evidence, which has come on record, to its true and correct perspective and the documentary evidence has also been correctly interpreted. So the substantial question of law No. 1 is answered holding that there is no proof of disassociation of the plaintiffs from the partnership firm as per the partnership deed, Ex. PW-1/A, so it cannot be said ::: Downloaded on - 02/05/2018 23:18:00 :::HCHP
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that there is dissolution of the firm. Thus the suit is not maintainable.
20. Similarly, the suit is not maintainable without .
the firm is dissolved. The learned Court below has rightly and in accordance with law has disallowed the application under Order 41, Rule 27 CPC, so there is no illegality.
Thus, substantial questions of law No. 2 and 3 answered accordingly.
21. As r the additional documents were neither necessary nor required by the learned Court below for adjudication of the case, so non-consideration of the additional documents call for no interference, as the judgment of the learned Courts below is on the basis of the record. So, substantial questions of law No. 4 and 5 are answered accordingly.
22. As discussed hereinabove partnership deed, Ex.
PW-1/A, specifically contained that any partner can only disassociate from the firm by giving notice of one month in writing, thus the summonses served upon the defendants in the suit filed by the plaintiffs for rendition of accounts ::: Downloaded on - 02/05/2018 23:18:00 :::HCHP
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has nothing to do with dissolution of the firm. Therefore, the substantial question of law No. 6 is answered accordingly.
.
23. The net result of the above discussion is that the appeal, which sans merits, deserves dismissal and is accordingly dismissed. However, taking into consideration the facts and circumstances of the case, the parties are left to bear their own costs.
24. r In view of the disposal of the appeal, pending application(s), if any, shall also stand(s) disposed of.
(Chander Bhusan Barowalia) Judge 1st May, 2018 (virender) ::: Downloaded on - 02/05/2018 23:18:00 :::HCHP