Skip to content


Shivagouda Ravji Patil and ors. Vs. Chandrakant Neelkanth Sedalge and ors. - Court Judgment

LegalCrystal Citation
SubjectCivil
CourtSupreme Court of India
Decided On
Judge
Reported inAIR1965SC212; (1964)2MysLJ(SC)48; [1964]8SCR233
ActsPartnership Act, 1932 - Sections 30(5)
AppellantShivagouda Ravji Patil and ors.
RespondentChandrakant Neelkanth Sedalge and ors.
Cases ReferredSanyasi Charan Mandal v. KrishnadhanBanerji I.L.R.
Excerpt:
.....- high court held respondent 1 not a partner and thus not to be adjudicated insolvent for debts of firm - appeal by certificate before supreme court - whether a minor who on becoming major did not exercise option not to become a partner and admitted to benefits of partnership can be adjudicated insolvent - first respondent attained majority after dissolution of firm thus he is not partner as section 30 (exercise of option not to become a partner) of act not applicable to him - held, respondent 1 cannot be adjudicated insolvent for acts committed by respondents 2 and 3 thus order of high court is correct - appeal failed. - [s.r. das, c.j.; jagannadhadas,; b.p. sinha,; jafer imam and; venkatarama ayyar, jj.] section 57, of the bombay police act, 1951 provides that if a person has been..........would thereafter be liableto the debts of the firm and could be adjudicated insolvent for the acts ofinsolvency committed by the partners. but in the present case the partnershipwas dissolved before the first respondent became a major; from the date of thedissolution of the partnership, the firm ceased to exist, though under s. 45 ofthe act, the partners continued to be liable as such to third parties for theacts done by any of them which would have been the acts of the firm if donebefore the dissolution until public notice was given of the dissolution.section 45 proprio vigore applies only to partners of the firm. when thepartnership itself was dissolved before the first respondent became a major, itis legally impossible to hold that he had become a partner of the dissolvedfirm by.....
Judgment:

Subba Rao, J.

1. This appeal by certificate raises the question whether a minor who wasadmitted to the benefits of a partnership can be adjudicated insolvent on thebasis of debt or debts of the firm after the partnership was dissolved, on theground that he attained majority subsequent to the said dissolution, but didnot exercise his option to become a partner or cease to be one of the saidfirm.

2. The facts are not in dispute and may be briefly stated. MallappaMahalingappa Sadalge and Appasaheb Mahalingappa Sadalge, respondents 2 and 3 inthe appeal, were carrying on the business of commission agents andmanufacturing and selling partnership under the names of two firms 'M. B.Sadalge' and 'C. N. Sadalge'. The partnership deed between themwas executed on October 25, 1946. At that time Chandrakant Nilakanth Sadalge,respondent 1 herein, was a minor and he was admitted to the benefits of thepartnership. The partnership had dealings with the appellants and it had becomeindebted to them to the extent of Rs. 1,72,484. The partnership was dissolvedon April 18, 1951. The first respondent became a major subsequently and he didnot exercise the option not to become a partner of the firm under s. 30(5) ofthe Indian Partnership Act. When the appellants demanded their dues, therespondents 2 and 3 informed them that they were unable to pay their dues andthat they had suspended payment of the debts. On August 2, 1954, the appellantsfiled an application in the Court of the Civil Judge, Senior Division, Belgaum,for adjudicating the three respondents as insolvents on the basis of the saiddebts. The 1st respondent opposed the application. The learned Civil Judgefound that respondents 2 and 3 committed acts of insolvency and that the 1strespondent had also become a partner as he did not exercise his option under s.30(5) of the Partnership Act and, therefore, he was also liable to beadjudicated along with them. The first respondent preferred an appeal to theDistrict Judge, but the appeal was dismissed. On second appeal, the High Courtheld that the 1st respondent was not a partner of the firm and, therefore, he couldnot be adjudicated insolvent for the debts of the firm. The creditors havepreferred the present appeal against the said decision of the High Court.

3. Learned counsel for the appellants, Mr. Pathak, contends that the 1strespondent had become a partner of the firm by reason of the fact that he hadnot elected not to become a partner of the firm under s. 30(5) of thePartnership Act and, therefore, he was liable to be adjudicated insolvent alongwith his other partners.

4. The question turns upon the relevant provisions of the ProvincialInsolvency Act, 1920 (5 of 1920) and the Indian Partnership Act. Under theprovisions of the Provincial Insolvency Act, a person can only be adjudicatedinsolvent if he is a debtor and has committed an act of insolvency as definedin the Act : see Sections 6 and 9. In the instant case respondents 2 and 3 werepartners of the firm and they became indebted to the appellants and theycommitted an act of insolvency by declaring their inability to pay the debtsand they were, therefore, rightly adjudicated insolvents.

5. But the question is whether the first respondent could also beadjudicated insolvent on the basis of the said acts of insolvency committed byrespondents 2 and 3. He could be, if he had become a partner of the firm. It iscontended that he had become a partner of the firm, because he did not exercisehis option not to become a partner thereof under s. 30(5) of the PartnershipAct. Under s. 30(1) of the Partnership Act a minor cannot become a partner of afirm but he may be admitted to the benefits of a partnership. Under sub-ss. (2)and (3) thereof he will be entitled only to have a right to such share of theproperties and of the profits of the firm as may be agreed upon, but he has nopersonal liability for any acts of the firm, though his share is liable for thesame. The legal position of a minor who is admitted to a partnership has beensuccinctly stated by the Privy Council in Sanyasi Charan Mandal v. KrishnadhanBanerji I.L.R. (1922) Cal. 560 after considering the materialprovisions of the Contract Act, which at that time contained the provisionsrelevant to the law of partnership, thus :

'A person under the age of majority cannot become apartner by contract...................... and so according to the definition hecannot be one of that group of persons called a firm. It would seem, therefore,that the share of which s. 247 speaks is no more than a right to participate inthe property of the firm after its obligations have been satisfied.'

6. It follows that if during minority of the 1st respondent the partners ofthe firm committed an act of insolvency, the minor could not have beenadjudicated insolvent on the basis of the said act of insolvency for the simplereason that he was not a partner of the firm. But it is said that sub-s. (5) ofs. 30 of the Partnership Act made all the difference in the case. Under thatsub-section the quondam minor at any time within six months of his attainingmajority, or of his obtaining knowledge that he had been admitted to thebenefits of partnership, whichever date is later, may give public notice thathe has elected to become or that he has elected not to become a partner in thefirm and such notice shall determine his position as regards the firm. If hefailed to give such a notice, he would become a partner in the said firm afterthe expiry of the said period of six months. Under sub-s. (7) thereof wheresuch person becomes a partner, his rights and liabilities as a minor continueup to the date on which he becomes a partner, but he also becomes personallyliable to third parties for all acts of the firm done since he was admitted tothe benefits of partnership and his share in the property and profits of thefirm shall be the share to which he was entitled as a minor. Under the said twosub-sections, if during the continuance of the partnership a person, who wasadmitted at the time when he was a minor to the benefits of the partnership,did not within six months of his attaining majority elect not to become a partner,he would become a partner after the expiry of the said period and thereafterhis rights and liabilities would be the same as those of the other partners asfrom the date he was admitted to the partnership.

7. It would follow from this that the said minor would thereafter be liableto the debts of the firm and could be adjudicated insolvent for the acts ofinsolvency committed by the partners. But in the present case the partnershipwas dissolved before the first respondent became a major; from the date of thedissolution of the partnership, the firm ceased to exist, though under s. 45 ofthe Act, the partners continued to be liable as such to third parties for theacts done by any of them which would have been the acts of the firm if donebefore the dissolution until public notice was given of the dissolution.Section 45 proprio vigore applies only to partners of the firm. When thepartnership itself was dissolved before the first respondent became a major, itis legally impossible to hold that he had become a partner of the dissolvedfirm by reason of his inaction after he became a major within the timeprescribed under s. 30(5) of the Partnership Act. Section 30 of the said Actpresupposes the existence of a partnership. Sub-ss. (1), (2) and (3) thereofdescribe the rights and liabilities of a minor admitted to the benefits ofpartnership in respect of acts committed by the partners; sub-s. (4) thereofimposes a disability on the minor to sue the partners for an account or paymentof his share of the property or profits of the firm, save when severing hisconnection with the firm. This sub-section also assumes the existence of a firmfrom which the minor seeks to sever his connection by filing a suit. It isimplicit in the terms of sub-s. (5) of s. 30 of the Partnership Act that thepartnership is in existence. A minor after attaining majority cannot elect tobecome a partner of a firm which ceased to exist. The notice issued by him alsodetermines his position as regards the firm. Sub-s. (7) which describes therights and liabilities of a person who exercises his option under sub-s. (5) tobecome a partner also indicates that he is inducted from that date as a partnerof an existing firm with co-equal rights and liabilities along with otherpartners. The entire scheme of s. 30 of the Partnership Act posits theexistence of a firm and negatives any theory of its application to a stage whenthe firm ceased to exist. One cannot become or remain a partner of a firm thatdoes not exist.

8. It is common sthat the first respondent became a major only after thefirm was dissolved. Section 30 of the Partnership Act, therefore, does notapply to him. He is not a partner of the firm and, therefore, he cannot beadjudicated insolvent for the acts of insolvency committed by respondents 2 and3, the partners of the firm. The order of the High Court is correct.

9. In the result, the appeal fails and is dismissed with costs.

10. Appeal dismissed.


Save Judgments// Add Notes // Store Search Result sets // Organizer Client Files //