1. This is a defendant's second appeal in a suit for dissolution of partnership and for accounts. The plaintiff Roop Kishore alleged in his plaint that he had been a partner with the defendants Banwari Lal (appellant) and Bhola Nath in a registered firm going by the name of Ram Sarup Roop Kishore. He alleged that the partnership was a partnership at will, that his own share was eight annas and that the two partners Bhola Nath and Banwari Lal had shares of four annas each. In his plaint he stated that 2f years earlier, that is to say, in about February 1937, the defendant Banwari Lal, who had worked in the firm and maintained accounts, stopped working in the firm saying that he did not wish to be a partner in the firm. Shortly before this date, Banwari Lal had made an application under the Encumbered Estates Act and had made no mention of his being a partner in the firm in that application. The application became Suit No. 93 of 1936 of the Court of the Special Judge, second grade, Mainpuri, and the plaintiff had filed a claim before the Special Judge to which the defendant-appellant Banwari Lal replied by stating that he was still a partner in the firm and that the firm was not entitled to get a decree against him in those proceedings under the Encumbered Estates Act. In effect, what the defendant contended in those proceedings was that there was not up to that date a debt in existence. This objection was upheld-by the Special Judge who rejected the claim of the present plaintiff in those proceedings. Thereafter the plaintiff issued notices in writing on 6th November 1939 as required by Section 43 (1), Partnership Act, and on 15th November 1939 he filed the present suit.
2. The defendant, despite the pleadings on which he had relied in the proceedings under the Encumbered Estates Act, contended that he had dissolved the partnership and left the firm on 9th February 1937. In para. 21 of his written statement he referred to the proceedings under the Encumbered Estates Act and he said that as no claim was put forward by any creditor up to 30th November 1939 or before the decisions under Section 14 of the Special Judge, therefore if any amount was found due by the partners of the firm to any creditor, the claim for the same has become extinct as against the contesting defendant and it cannot be realised. The contesting defendant is free from the liability of such an amount, i.e., if after the sale according to law, of all the assets of the said firm, and paying off the creditors, any creditor is left to be paid, he is not entitled to get any amount from the contesting defendant. Prima facie this was not a denial of liability to the other partners of the firm but a denial of liability to any creditor of the firm. A number of issues were framed. Among these were, issue 3 : 'How far is defendant 1 liable in the firm on 'Magh Badi' 13, Sambat 1993 (9th February 1937)' and issue 4 : 'Whether the suit is not maintainable'. The learned Munsif dealt with issue 3 along with issues 1 and 2 and held that the defendant Banwari Lal had not retired from the firm in February 1937 because he had failed to give notice in writing to the other partners of his intention to retire in accordance with the provisions of Section 32 (1). That section provides as follows:
A partner may retire, (a) with the consent of all the other partners, (b) in accordance with an express agreement by the partners, or (c) where the partnership is at will, by giving notice in writing to all the other partners of his intention to retire.
3. He took the view that the partnership had been dissolved by the plaintiff giving a notice on 6th November 1939. Such a notice complied with the provisions of Section 43(1) which provides that
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.
4. The second argument, based apparently on the pleadings in para. 21 of the written statement, put before the trial Court was that the creditors of the firm should have filed their claims in the proceedings under the Encumbered Estates Act and, as they did not do so, their claims must be deemed to have been discharged. The learned Munsif took the view that there was no force in this argument for two reasons, first, that the creditors of the firm were unable to file their claims in the Court of the Special Judge because Banwari Lal had not mentioned, their names as creditors and, secondly, because it was not the firm which had made the application but only Banwari Lal and others-persons not connected with the firm. As regards the claim of the firm against Banwari Lal as a partner in the firm, he took the view that the defendant could not blow hot and cold. He could not be allowed to say in the Encumbered Estates Act Court that there was no debt in existence at that date and, later on, in a regular suit to say that there had been a debt in respect of which a claim should have been made. The case was taken in appeal to the District Judge of Mainpuri who upheld the decision of the Munsif. The learned District Judge pointed out that the case which Banwari Lal had set up in the trial Court was that he retired from the partnership with the consent of the remaining partners and that at that time the partnership debts against him amounted to nearly as much as his share in the assets of the firm and that he was allowed to retire free from any liability in respect of the debts of the firm. He went on to remark that this defence had not been pressed before him and on the evidence it was quite clear that it was entirely false and there could have been no retirement such as could absolve him from all liabilities.
5. The second point argued before the learned District Judge was based directly on the pleas contained' in para. 21 of the written statement and it was contended that, as the creditors of the firm had not filed claims against Banwari Lal in respect of his share of the liabilities of the firm to them at the date of the application under Section 4, the liability of Banwari Lal to those creditors was extinguished, and any payments made on his behalf by the remaining partners were voluntary payments made by them after the debts had been discharged and that liability therefore could not be taken into consideration in working out the accounts of the firm. Reliance was placed before the learned District Judge on proviso 1 to Section 9 (5) (d), Encumbered Estates Act, but it appears to us that this reference was entirely irrelevant. inasmuch as the case was not one to which the substantive provision contained in Section 9 (5) (d) had any application. The learned District Judge remarked that in his opinion the creditors of the firm could not now sue Banwari Lal personally in respect of the liabilities of the firm but they could sue the remaining partners and the remaining partners had still a remedy against Banwari Lal for any sums found due against him on taking accounts.
6. In the grounds of the present appeal, three points have been taken. Point 3 is that 'the finding on the question of the time of retirement of the appellant from the partnership is bad in law.' It appears to us that this is not a question of law but a question of fact and the finding is one which cannot be assailed in second appeal. In point 2 it is contended that
the lower Court has erred in holding that a partner in a partnership at will cannot retire except by giving a notice in writing under Section 32 (1) (c), Partnership Act.
In face of the provisions of Section 32, Partnership Act, this contention is entirely without force. The only ground of objection which has been seriously pressed before us is ground 1 in which it is said that the liability, if any, for the debts outstanding against the firm stood discharged for all purposes, (as a result of the proceedings under the Encumbered Estates Act) and the other partners also could not make any claim against the appellant in respect of such debts, It appears to us that there is no force in this contention. This is not a claim by creditors of the firm against the appellant, who has been discharged from liability for his personal debts existing at the date of his application in 1936 by virtue of the simple money decrees passed by the Special Judge or by the fact that his creditors, have made no claim. The potential debt which may arise as a result of the present suit is not a debt which existed at the time of the proceedings under the Encumbered Estates Act. That was the contention which the defendant himself put forward in that Court and which was rightly accepted there. So far as there may have been claims of the creditors against the firm at the date when the application was made under the Encumbered Estates Act, it does not appear to us that they were debts in respect of which claims could or should have been made in those proceedings. It is true that the Encumbered Estates Act is a very peculiar Act which cuts across the ordinary law of contract, but we think the position suggested in this line of argument is one which would lead to intolerable confusion and injustice. The defendant himself insisted in those proceedings that the partnership still continued. This was a business of 'Sarrafi' and the business was going on from day to day. It is a necessary characteristic of such a business that the persons conducting it are from day to day debtors at one time and creditors at another of the persons with whom they have business dealings. It would be quite impossible to take the date of the application under the Encumbered Estates Act as a fixed point and treat the debts outstanding against the firm on that date as debts, in respect of the whole or one-fourth of which claims?should have been made in the Encumbered Estates Act proceedings, and it would not be feasible in the accounting, which will result from the plaintiff's success in the present suit, to treat the state of affairs on the date of the application under the Encumbered Estates Act on a different footing from the transactions which preceded and followed that date. It appears to us, therefore, that we are not really concerned and the commissioner who prepares the account will not really be concerned, with the proceedings under the Encumbered Estates Act. The present claim is a claim by one member of the partnership against the other members and the accounting will be done in the same way as it is done in cases where there has been no application under the Encumbered Estates Act. In our judgment, the defendants' appeal was rightly dismissed by the learned District Judge. This appeal fails and is dismissed with costs.