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Jani Nautamlal Venishankar, Wadhwan Vs. Vivekanand Co-operative Housing Society Ltd. and ors. - Court Judgment

LegalCrystal Citation
SubjectCommercial
CourtGujarat High Court
Decided On
Case NumberFirst Appeal No. 651 of 1977
Judge
Reported inAIR1986Guj162; (1985)2GLR1264
ActsPartnership Act, 1932 - Sections 32(3); Indian Contract Act, 1872 - Sections 229; Evidence Act, 1872 - Sections 3
AppellantJani Nautamlal Venishankar, Wadhwan
RespondentVivekanand Co-operative Housing Society Ltd. and ors.
Appellant Advocate D.U. Shah, Adv.
Respondent Advocate P.M. Raval, Adv.
Cases ReferredVeeria Perumal Pillai Padmanabha Pillai v. Avukkarummal Muhammad Pathummal
Excerpt:
commercial - dissolution of partnership - section 32 (3) of partnership act, 1932, section 229 of indian contract act, 1872 and section 3 of indian evidence act, 1872 - until public notice given of retirement retiring partner would continue to be governed for acts done by any of them purporting to be act of firm before retirement - section 32 (3) not intended to create liability where none existed before or to penalise retired partner who failed to give public notice of his retirement - no holding out if person who deals with new firm aware of retirement of particular partner - despite not giving of public notice by defendant about his retirement from partnership firm plaintiff-society had knowledge of same through intimation - defendant to be exonerated from liability to meet suit.....majmudar, j.1. the present first appeal has been filed by the original defendant no. 3 against whom special civil suit no. 27 of 1972 was filed in the court of the civil judge (senior division) at surendranagar. respondent no. 1 society was the plaintiff and respondents nos. 2, 3 and 4 were original defendants nos. 1, 2 and 4 respectively. the said suit was filed for recovering rs. 51,296.45 as principal amount and rs. 12,054.55 as interest at this rate of 12% per annum from the date of the suit till realization from the concerned defendants including the present appellant defendant no. 3. the suit came to be decreed by the learned trial judge who held respondent no. 1 society plaintiff to be entitled to rs. 57,300/with proportionate interest and. cost on rs. 51,296/- at the rate of 6%.....
Judgment:

Majmudar, J.

1. The present first appeal has been filed by the original defendant No. 3 against whom special civil suit No. 27 of 1972 was filed in the court of the Civil Judge (Senior Division) at Surendranagar. Respondent No. 1 society was the plaintiff and respondents Nos. 2, 3 and 4 were original defendants Nos. 1, 2 and 4 respectively. The said suit was filed for recovering Rs. 51,296.45 as principal amount and Rs. 12,054.55 as interest at this rate of 12% per annum from the date of the suit till realization from the concerned defendants including the present appellant defendant No. 3. The suit came to be decreed by the learned trial Judge who held respondent No. 1 society plaintiff to be entitled to Rs. 57,300/with proportionate interest and. cost on Rs. 51,296/- at the rate of 6% per annum from all the defendants jointly and severally. The present appellant original defendant No. 3 being aggrieved by the said decree has come in appeal before this Court. So far as other defendants are concerned, they, have not challenged the decree passed against them by the trial Court, though it is obvious that if the appellant can make out a common case on his behalf as well as on behalf of other contesting defendants, remaining defendants would also, be entitled to get the benefit of the decision of this Court in the present appeal as per 0. 41,R. 4 of the Civil P.C. If, however, the appellant is in a position to make out a ground which is not common to him as well as other respondents-defendants, the benefit thereof would only accrue to the appellant alone and not to the rest of the defendants-respondents herein.

Factual backups

2. In order to appreciate the grievance of the appellant, against the impugned decree, it is necessary to note a few relevant facts leading to this appeal. The Assistant Registrar-Cooperative Societies, Surendranagar appointed an administrator of the plaintiff society by his order dt. 3-10-1970 for a period of one year for managing the affairs of the plaintiff society. By a subsequent order dt. 30-10-1971, the period of appointment of administrator was extended up to 3-10-1972 and in pursuance of the said order, the administrator entered into management of the plaintiff society. Henceforth this judgment, we shall refer to the appellant as defendant No. 3 while respondent No. 1 as plaintiff and rest of defendants as defendants Nos. 1, 2 and 4 respectively, for the sake of convenience. It is the case of the plaintiff through its administrator that defendant No. 1 is a partnership firm of which defendants Nos. 2, 3 and 4 were partners at the relevant time. Defendants Nos. 2, 3 and 4 commenced business in partnership as contractors in the name of M/s. Muljibhai Bechardas and company. But subsequently, on or about 5-6-1967, they changed the name of partnership firm into Pratima Construction Company and gave intimation of the same to the plaintiff society and as such the partners continued their business in the name of Pratima, Construction Company. It is the plaintiffs' case that for construction of buildings for members of the plaintiff society, a contract was to be given and, therefore, tenders were invited for construction in area No. 4 for an estimated amount of Rs. 3,00,000/-. The said tenders were invited in the beginning of December 1966. The plaintiffs' further case is that the defendants submitted their tender to the plaintiff society on 20-12-1966. The tender of the defendants was accepted at 5% less rates than the rates tendered by them. That happened on 26-12-1966. Subsequently, the defendants executed an agreement on 19-11967 in favour of the plaintiff society. The defendants paid Rs. 3,000/-as security deposit at the time when they started construction work pursuant to the contract. The said work started in area No. 4. It is further case of the plaintiff that while the aforesaid contract was in progress, the plaintiff gave a contract for construction in area No. 4 extension on 5-7-1967 to the defendants. This contract was obtained by the defendants in the name of Pratima Construction Company. According to the terms of the contract, progress bills were to be paid to the defendants after deducting 3% as a security deposit. However, the plaintiff used to make ad hoc and advance payment of money towards running bills to the defendants now and then. As the defendants were not making satisfactory progress, their contract was terminated on 24-5-1970. According to the plaintiff, the defendants had done construction work for the value of Rs. 3,49,803-55 by the time their contract was terminated. At that time, by way of ad hoc and advance payments, total amount of Rs. 4,04,100/- came to be paid to the defendants. Thus, the plaintiff had made overpayment of Rs. 54,296-45 to the defendants in excess of the value of work done by them. According to the plaintiff, the defendants were liable to return overpayment made to them under various running bibs. Adjusting the amount of Rs. 3000/- as security deposit, against the sum of Rs. 54,296-45, the plaintiff was entitled to recover Rs. 51,296-45 from the defendants. For that purpose, the plaintiff gave notices to the defendants but in vain. It is in these circumstances that the plaintiff through its administrator filed the present suit in the trial Court for recovering overpaid amount with interest from the defendant firm and its partners defendants Nos. 2 to 4.

3. Defendants Nos. 1 and 2 remained ex parte and did not contest the suit. So far as the appellant-defendant No. 3 is concerned, he filed his written statement Ex. 25 and contended that the suit in the form in which it was filed was not maintainable, that the administrator was not legally entitled to bring the suit, that he was not legally empowered to sign and verify the plaint. By way of special defence, defendant No. 3 contended that he had retired as a partner from the defendant firm on 1-4-1969 and he ceased to be a partner of defendant No. 1 firm since that day. Writing to that effect was effected on 22-8-1969 and it was given to Kantilal Dasadia who was the Secretary of the plaintiff society and who was managing the affairs of the plaintiff society at the relevant time. It was, therefore, contended that the suit against defendant No. 3 was not maintainable and he was not liable to the plaintiff for the suit amount. It was further denied that the plaintiff was to make ad hoc and advance payment of money towards the bills to the defendant firm now and then. Suit for such payment was not maintainable against all the defendants. It was further contended that such ad hoc and advance payments were not according to the terms of the contract and the person actual receiving the payment would be liable for the same. It was next contended that no such payment was received by defendant No. 1 firm or defendant No. 3 and that the alleged payments appeared to be the result of some collusion between the plaintiff who was managing the affairs of the society at the relevant time and the person who might have acknowledged receipt of such, payment. It was further contended that the suit was time barred.

4. Defendant No. 4 by his written statement Ex. 28 contested the suit and submitted that the suit in the present form was not maintainable, that they are not liable to the plaintiff for any amount.

5. On the pleadings of the parties, the learned trial Judge framed issues at Ex. 29. So far as special defence of defendant No. 3 was concerned, issue No. 3 was framed as under : -

'Does the defendant No. 3 prove that he retired as a partner from the defendant No. 1 firm on 1-4-1969 and that since that date, he is not the partner of the said firm If yes, what is its effect?'

After recording evidence offered by the respective parties, the learned trial Judge held that the administrator of the plaintiff society was legally entitled to bring the suit. It was further held that the plaintiff' society used to make ad hoc and advance payment towards the bills to the defendant firm off and on and the plaintiff had rightly found that it had made total payment of Rs. 4,04100/-. Thus it had made over payment of Rs. 54,296-45 to the defendant firm. The plaintiff was thus able to prove its claim along with claim for interest to the, tune of Rs. 6003-55, that the suit was not time barred. So far as issue No. 3 reflecting special defence of defendant No. 3 was concerned, the learned trial Judge took the view that defendant No. 3 had proved that he had retired as a partner from defendant No. 1 firm with effect from 1-4-1969 and since that date, he was not a partner of the said firm. However, according to the learned trial Judge, the said conclusion of his had no effect on the plaintiffs suit against defendant No. 3. The learned trial Judge, ultimately, decreed the suit as aforesaid, directing the defendants to pay jointly and severally Rs. 57,300/- to the plaintiff. As noted earlier, the said decree has been challenged by defendant No. 3 in the present proceedings.

Rival contentions: - Mr. D. U. Shah for the appellant raised the following contentions in support of the appeal : -

(1)The plaintiff society had failed to establish that it had made over-payment of Rs. 54,296-45 to defendant No. 1 firm--and consequently, the suit of the plaintiff was liable to fail as a whole.

(2) It was alternatively contended by the learned advocate for the appellant that in any case, so far as defendant No. 3 present appellant is concerned, he is to be exonerated of the suit claim as the suit claim relates to the alleged overpayment made to defendant No. 1 firm through its one of the partners after defendant No. 3 had ceased to be the partner of defendant No. 1 firm. Consequently, defendant No. 3 had nothing to do with the overpayment and the suit against him in any case ought to have been dismissed.

6. Mr. P.M. Raval for plaintiff society on the other hand submitted that there was overwhelming evidence on the record of the case to show that large amounts of overpayments were made by plaintiff No. 1 society through its Secretary Kantilal Dasadia to defendant No. 1 firm and compared to the value of work put in by defendant No. 1 firm for the plaintiff society, larger amount paid to defendant No. 1 firm clearly amounted to overpayment which was required to be reimbursed to the plaintiff society from the point of view of equity and justice. He further submitted that so far as defendant No. 3 is concerned, even though he is said to have retired from defendant No. 1 partnership firm from. 1-4-1969 as alleged by him, lie would remain liable jointly and severally with other partners to make good the suit claim as no public notice of the appellants retirement was published as required by S. 32(3) of the Indian Partnership Act and consequently, the decree passed against defendant No. 3 jointly with other defendants is wholly sustainable. We may mention at this stage one development that took place at the time when this appeal earlier reached final hearing before us in the beginning of May 1983. A civil application was already moved by defendant No. 3 for leading additional evidence by way of civil application No. 2682 of 1981. By the said application, appellant-defendant No. 3 had contended that while the administrator of the plaintiff society had come to the Court with a case that appellant-defendant No. 3 and the firm of which he was a partner were debtors to the plaintiff society, in the balance sheet submitted by the plaintiff society before the Registrar of Co-operative Societies for the accounting year 1969-70, the defendant No. 1 firm had been shown as a creditor. It was, therefore, urged that the plaintiff society had not come forthwith a correct picture of accounts and hence, this document which came to the knowledge of the appellant defendant No. 3 was required to be taken on record of the case. By our order dt. 2-5-1983, we allowed the civil application under 0. 41, R. 27 of the C.P.C. and directed the trial Court to record evidence offered by defendant No. 3 by way of copy of balance sheet sought to be produced. We also granted permission to the plaintiff society to furnish additional evidence in rebuttal to meet the additional evidence permitted to be led by defendant No. 3. The appeal was kept pending as part heard before us. The record and proceedings of the case were sent to the learned trial Judge for carrying out the instructions contained in our order in civil application No. 2682 of 1981. Accordingly, the learned trial Judge recorded additional evidence offered by the respective parties and remitted the same to this Court. It is thereafter that this appeal was placed for further hearing before us. In the light of the additional evidence recorded, it was contended by Mr. D.U. Shah for the appellant that as the plaintiff society in the balance sheet for the accounting year 1969-70 showed defendant firm as a creditor of the plaintiff society, the case of the plaintiff that there was any overpayment to defendant No.1 firm fell through. On the other hand, Mr. Raval for the plaintiff-society submitted, in the light of the rebuttal evidence, produced, by the plaintiff society after our above order, that the subsequent balance sheet showed that the defendant firm was a debtor and the earlier balance sheet submitted in 1969-76 did not reflect a correct picture of accounts as duly verified by the administrator of the plaintiff society.

7. It is in the light of the aforesaid rival contentions of the learned Advocates of the respective parties that we have to decide the main points for determination which arise for our consideration,

Points for determination:

1. Whether the plaintiff society is able to prove that overpayment of Rs. 54,296-45 was made to the defendants?

2. Whether defendant No. 3 is jointly and severally liable to make good the said amount to the plaintiff society.

8. We have heard the learned Advocates of the respective parties on these points for determination which were canvassed for our decision in the present proceedings.

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9. ******************************************************************************

10. Point No. 2: The aforesaid discussion puts an end to the common contentions canvassed by Mr. D.U. Shah for defendant No.3 on behalf of the defendants. Thereafter he parted company with common defence of all the defendants and submitted a special case for appellant-defendant No. 1 on the basis that even if rest of the defendants including the defendant firm remained liable to make good the suit claim, so far as defendant No. 3 is concerned, his case stands on its own and even if other defendants are liable, defendant No. 3 is not liable to meet the suit claim. Thus, point No. 2 centres round the special defence of defendant No. 3. So far as this defence is concerned, the contention of Mr. D.U. Shah for the appellant is that as the learned trial Judge has held on issue No. 3, first part, that defendant No. 3 has retired as a partner from defendant No. 1 firm from 1-4-1969, defendant No. 3 would not be liable for any payment made by the plaintiff society to defendant No. 1 firm through its partner Karnubha, defendant No. 2 after 1-4-1969. Mr. Shah invited our attention to Schedule 'B' attached to the plaint and submitted that the payments made by the plaintiff society to defendant No. 1 firm after defendant No. 3 retired from the partnership i.e. after 1-4-1969 or in any case after the knowledge thereof was transmitted to the plaintiff society through its Secretary Mr. Dasadia on 22-8-1969, would cover the entire suit claim. He invited our attention to vouchers Nos. 31, 39, 44, 47, 50, 55, 58, 59, 94, 108, 109, 109/3, 132 and 76 which showed that various payments were made between 22-8-1969 and 9-1-1970 and the amounts covered by these vouchers projected the following picture: -

Voucher No. Date Amount

31 28-02-1969 5,000.00

39 05-09-1969 1,000.00

44 26-09-1969 1,000.00

47 04-10-1969 1,000.00

50 10-10-1969 25,000.00

55 14-10-1969 5,000.00

58 15-10-1969 5,000.00

59 21-10-1969 1,500.00

94 20-01-1970 500.00

108 29-01-1970 1,000.00

109 31-01-1970 1,500.00

109/3 01-02-1970 1,000.00

132 26-02-1970 2,000.00

76 09-01-1970 1,200.00

________

51,700.00

________

Mr.. Shah submitted that thus the aforesaid amounts of payment would squarely cover the entire suit claim. This much amount was paid by the plaintiff society through, its secretary Mr. Dasadia to Karnubha, defendant No. 2, one of the partners of the defendant firm after defendant No. 3 retired from the partnership. For this part of overpayment, defendant No. 3 cannot be held liable on account of the special defence viz. that he had ceased to be a partner of the defendant firm from 22-8-1969 in any case, as his retirement from the partnership was brought to the knowledge of the plaintiff society through its Secretary. Mr. Raval for the plaintiff society did not raise any dispute as to the fact that the aforesaid amounts covered by the vouchers from 22-8-1969 to 9-1-1970 would squarely cover the entire suit claim. But Mr. Raval's submission was that even though defendant No. 3 had retired from the partnership as held by the learned trial Judge at least from 22-8-1969 the date on which the said information is said to have been conveyed to the plaintiff society, defendant No. 3 would remain liable view of S. 32(3) of the Indian Partnership Act. Mr. Raval vehemently contended that the knowledge of the said secretary of the plaintiff society Mr. Dasadia that defendant No. 3 had retired from defendant No. 1 firm as a partner, cannot be said to be the knowledge of the plaintiff society itself which is a separate entity and a legal body, that there was no resolution passed by the plaintiff society recognizing this fact nor were there any proceedings of the plaintiff society showing acceptance of such fact or even knowledge of such fact. Mr. Shah for the appellant on the other hand contended that requirement of issuance of public notice of retirement as contemplated by S. 32(3) of the Indian Partnership Act is not a condition precedent for exonerating the retiring partner from his liability regarding transactions undertaken by the remaining partners after the retirement of outgoing partner and that if it is shown that the plaintiff society had individual notice of such fact, it cannot fasten the liability for overpayment made by the plaintiff society to defendant No. 1 firm after defendant No. 3 retired from the partnership. It was alternatively contended by Mr. Shah for the appellant that even assuming that S. 32(2) of the Indian Partnership Act would made defendant No. 3 liable despite his retirement as there was no public notice, defendant No. 3 would not be liable for unauthorized acts of Kanawha, defendant No. 2, another partner of defendant No. 1 firm, as he was not entitled to receive overpayments from any one including the plaintiff society and that was not an authorised act on his part. Consequently, defendant No. 3 would get exonerated for unauthorised act committed by a partner Karnubha, defendant No. 2 and for such unauthorised acts defendant No. 2 would personally remain liable and he cannot bind other partners including defendant No. 3 who was a retiring partner.

11. So far as the finding of the learned trial Judge on first part of issue No. 3 that defendant No. 3 proved that he retired as a partner from defendant No. 1 firm on 1-4-1969 and that since that day, he was not a partner of the said firm is concerned, it is well supported by copious evidence. The plaintiff society itself examined witness Arjunrao Ex. 92 who was the president of the plaintiff society at the relevant time and witness Ramsinh Parmar, Ex. 204 who was prior president of the plaintiff society. Both of them stated that Kantilal Dasadia was working as Secretary of the society. Their evidence suggested that Kantilal used to manage the affairs of the society that cash amount and records use A to remain with the Secretary. He was keeping records in his office. The society had no independent office. This has been brought out from the evidence of Arjunrao, Ex. 92. The said witness further stated in cross examination on behalf of defendants No. 3 that Kantilal Dasadia was working and managing the affairs of the society. He was dealing with payment of money and used to do so in his office. Witness Ramsinh Parmar also deposed before the learned trial Judge on the same lines. In cross-examination, witness Ramsinh stated that Kantilal Dasadia was the main promoter of the society. Thus, it appears that Kantilal, Secretary of the plaintiff society was the be-all and end-all of the plaintiff society and he was in sole charge of the affairs of the society and was in the driver's seat. So called president of the society appeared to be more or less a show-piece. It is in this light that we have to examine and appreciate the evidence of Kantilal, Secretary of the plaintiff society. He was examined on behalf of the plaintiff society at Ex. 237. The witness stated that he was working as Secretary in the plaintff society from 1961 to 23-5-1970. He stated that Chairman and Secretary were making payment. Vouchers used to be taken for payment and payments were made in cash or by cheque. The witness proved various vouchers and counter foils of cheques by which amounts were paid to defendant No. 1 firm by the plaintiff society through him. While cross examined on behalf of defendant No. 3, the witness clearly admitted that Ex. 201 was bearing his signature and he was informed on 22-8-1969 that the appellant had retired from the partnership of defendant No. 1 firm and, that defendants Nos. 2 and 4 had continued in, the partnership. He further admitted that accounts were cleared and sent up when defendant No. 3 retired as a partner. He wrote a letter Ex. 200 to the appellant, that what was stated mi Ex. 200 was applicable to him, that defendant No. 3 never managed defendant No. 1 firm. There was no practice till 22-8-1969 that the appellant would accept the amount or any other partner would accept the amounts from the defendant firm. Writing below Ex. 201 was of the witness. He also admitted that the last para was in his own writing. He wrote it at the say of defendants Nos. 2 and 4. The aforesaid evidence of witness Kantilal leaves no room for doubt that he had been informed by defendant No.3 that he had retired from partnership of defendant No. 1 firm. In any case, that information reached on 22-8-1969 to the Secretary of the plaintiff society. At this stage, it would be profitable to have a look at Exs. 200 and 201. Ex. 200 which has been accepted by Secretary Kantilal to have been written by him is addressed to the appellant. The witness has stated therein that the appellant has retired from the partnership of defendant No.. 1 firm on 1-4-1969 and that a. stamped document regarding his retirement on a stamp of Rs. 30/- is also executed and it has been noted. Thus, he would not be liable for any of the dealings of defendant No. 1 firm Pratima Construction Company, and he will have no right, title and interest in the said firm. Ex. 200 is dt. 22-8-1969. It is, therefore, obvious that the plaintiff firm had been informed through Kantilal who was managing affairs of the plaintiff society that defendant No. 3 had retired from the partnership on 1-4-1969 and that information reached the plaintiff society through Kantilal on 22-8-1969. Witness Kantilal has also proved writing below ex. 201 which is a deed regarding retirement of defendant No.3 from the partnership of defendant No. 1 firm. As the witness admitted, he had made the endorsement below Ex. 201 in token of having received a copy thereof. He had signed below it on 22-8-1969. Consequently, Exs. 200 and 201 in the light of the oral evidence of witnesses Arjunrao, Ex. 92, Ramsinh Parmar Ex. 204 and witness Kantilal, Ex. 237 clearly establish that defendant No. 3 had retired from defendant No. 1 firm from 1-4-1969 and that intimation thereof was received by Kantilal on behalf of the plaintiff society on 22-8-1969. The finding reached by the trial Court to that effect is well sustained from the aforesaid evidence. It is pertinent to note that the administrator of the plaintiff society had no personal knowledge about dealings between the plaintiff society on one hand and defendant No. 1 firm through its partners on the other The administrator came on the scene at a much later stage and on the basis of the entries in the account books of the plaintiff society and in the light of the latest balance sheet, he could detect that there was overpayment by the plaintiff society to defendant No. 1 firm and that is why the present suit was filed. How these payments were made, who made them on behalf of the plaintiff society and who accepted them on behalf of defendant No. 1 firm were the questions which depended upon the facts which were within the personal knowledge of, the President of the plaintiff society and the Secretary who was solely in charge of the management of the affairs of the society. Therefore, the oral evidence as aforesaid, in the light of the clinching documentary evidence in the shape of Exs. 200 and 201, clearly brings out the fact that. Kantilal had made payment on behalf of the plaintiff society to defendant No. 1 firm through its partner Karnubha, defendant No. 2 and that defendant No. 3 had retired from the partnership of defendant No. 1 firm from 1-4-1969 for which a document was also executed on 22-8-1969 as the date of Ex. 201 shows and this fact was noted by Kantilal on behalf of the plaintiff society on 22-8-1969. It is not possible to agree with the contention of Mr. Raval for the plaintiff society that there was collusion between Kantilal Dasadia, Secretary of the plaintiff society on the one hand and defendant No. 3 on the other and, therefore, he was trying to exonerate defendant No. 3 from his liability as a partner of the defendant No. 1 firm. To say the least, such an allegation does not flow even from the pleadings of the parties and much less from the nature of the evidence recorded in the case and the type of cross-examination levelled against the concerned witnesses. It is pertinent to note that witness Kantilal Dasadia was examined by the plaintiff society itself as its own witness. At no stage, any attempt was made before the trial Court requesting it to treat Kantilal as hostile to the plaintiff society. Consequently, whatever the plaintiff's own witness Kantilal has deposed about the dealings of the plaintiff society with defendant No. 1 firm and about retirement of defendant No. 3 from defendant No. 1 firm from 1-4-1969 and about his knowledge of the said fact on 22-81969, must remain binding to the plaintiff society.

12. At this stage, we may also deal with one ancillary contention of Mr. Raval for the plaintiff society. He submitted that even assuming that witness Kantilal was informed by defendant No. 3 that he had retired from def6ndant No. 1 firm from 1-4-1969 and that such information by way of individual notice reached witness Kantilal on 22-8-1969, it cannot be said that knowledge of Kantilal, said Secretary of the plaintiff society was knowledge of the society itself. Mr. Raval further contended that it is not the case of defendant No. 3 that the plaintiff society bypassing any resolution had decided to exonerate defendant No. 3 from his liability as a partner of defendant No. 1 firm on account of his retirement from 1-4-1969. Mr. Raval is right when he contends that defendant No. 3 was not expressly exonerated discharged from his obligation as a partner of defendant No. 1 firm by the plaintiff society by passing any resolution to that effect. However, a further contention which he canvassed that knowledge of witness Kantilal and intimation received by him on 22-8-1969 from defendant No. 3 that he had retired from defendant No. 1 firm cannot he foisted on the plaintiff society cannot be accepted, for more than one reason. Defendant No. 3 from the stage of his written statement had clearly put up a case by way of special defence that he would not be liable for any alleged overpayments made by the plaintiff society to defendant No. 1 firm through its partner on and from the date on which defendant No. 3 had ceased to be a partner of that firm. The appellant in the written statement, Ex. 25 had in terms stated in para 3 thereof that the third defendant was not the partner in the firm of defendant No. 1 since 1-4-1969. He retired as a partner from the defendant No. 1 firm on that date. The writing to that effect had been made on 22-8-1969 and Kantilal Dasadia who was the Secretary and was managing the affairs of the plaintiff society was 'even the said document and was informed about the retirement of defendant No. 3 as a partner from defendant No. 1 firm. The said Kantilal Dasadia had given to defendant No. 3 a copy of the document of retirement on 22-8-1969 and had signed the same. What is stated in the written statement an aforesaid by defendant No. 3 gets full support from the evidence of witness Kantilal recorded by the learned trial Judge at Ex. 237 to which we have made a detailed reference earlier. That part of the evidence has remained binding on the plaintiff society, as we have, shown earlier, Even that apart, so far as earlier preside as of the plaintiff society were concerned i.e. Arjunrao Ex. 92 and Ramsingh Parmar, Ex. 204, thus nowhere in their evidence before the trial court, even whispered that the information supplied by defendant No. 3 to Kantilal was not passed on to them and that they never knew that defendant No. 3 had retired ' from the partnership firm of defendant No. 1 as alleged by him in his written statement. When these witnesses entered the witness box, they very well knew that case of defendant No. 3 as put forward in the written statement. Still, all that they had to say was that witness Kantilal was managing the affairs of the plaintiff society and that he used to make payment of the plaintiff society from his own office and that the society had not passed any resolution discharging defendant No. 3 from his liability towards the plaintiff society. On this state of oral evidence of the concerned witnesses who were office bearers of the plaintiff society at the relevant time, it is impossible to accept the submission of Mr. Raval that the knowledge of witness Kantilal that defendant No. 3 had retired from the partnership of defendant No. 1 firm cannot be said to be knowledge of the plaintiff society. No such case was put forward by the plaintiff society through any of its witnesses examined before the trial court. On the contrary, the plaintiff-society's own witness Kantilal gave a complete go bye to any such alleged case. On the broad probabilities of the case, it is too much even to contend such apart from believing that witness Kantilal who was the Secretary of the plaintiff society and who was at the helm of affairs of the society and who was the real manager of the society and was making all payments on behalf of the society, would not have conveyed the fact which came to his knowledge on 22-8-1969 viz. that defendant No. 3 had retired from the partnership of defendant No. 1 firm and that he would no longer be liable for any act of commission or omniscient of defendant No. 1 firm from the date of his retirement. In the very nature of things, Kantilal who was real agent of the plaintiff society in his dealings with defendant No. 1 firm through its partners would obviously have passed on such vital information to the office bearers of the plaintiff society at the relevant time. No other inference is possible in. the light of the aforesaid tale-tell circumstances emerging on the record of the case. It is, therefore, not possible to agree with Mr. Raval when he submitted that knowledge of Kantilal about defendant No. 3's retirement on account of notice given to him by defendant No. 3 cannot be said to be notice given to the plaintiff society. In fact, the intimation conveyed by way of individual notice by defendant No. 3 to Kantilal who was not only de facto but de jute agent of the plaintiff society would remain a valid and binding intimation to the plaintiff society as a whole whose very heart and soul was witness Kantilal himself. We may also refer to S. 229 of the Indian Contract Act in this connection. It provides that any notice given to or information obtained by the agent provided it be given or obtained in the course of the business transacted by him for the principal, shall, as between the principal and third parties, have the same legal consequences as if it had been given to or obtained by the principal. As witness Kantilat was acting on behalf of the plaintiff society as its agent in his dealings on behalf of the plaintiff society with defendant No. 1 firm, the information received by him that defendant No. 3 had retired from defendant No. 1 firm would remain binding on the plaintiff society as principal even as per the provisions of the aforesaid section of the Indian Contract Act.

13. Once the aforesaid conclusion is reached, a short question of law arises for consideration. Defendant No. 3 was admittedly, partner of defendant No. 1 firm. He retired from the partnership with effect from 1-41969. But that came to the knowledge of the plaintiff society through Kantilal Dasadia on 22-8-1969. It is also not in dispute that no public notice was given by defendant No. 3 about his retirement. The question therefore, arises as to whether defendant. No. 3 can remain liable for the payments made, by the plaintiff society through Kantilal to defendant No. 1 through its partner Karnubha, defendant No. 2 from 22-8-1969 onwards as from 22-8-1969 to the knowledge and information of the plaintiff society, defendant No. 3 had ceased to be a partner of defendant No. 1 firm. Can it be said that merely because a public notice was not given by defendant No. 3 of his retirement, despite individual and personal notice given by defendant No. 3 to the plaintiff society about his retirement through the plaintiff society's Manager and Secretary Kantilal Dasadia, defendant No. 3 would remain liable to the plaintiff society for the payments-overpayments which are said to have been made by the plaintiff society to defendant No. 1 firm from 22-8-1969 onwards i.e. from the date on which the plaintiff society had come to know that defendant No. 3 was no longer a partner of defendant No. 1 firm?

14. Section 32 of the Indian Partnership Act, 1932 has to be noticed in this connection. It reads as under: -

'32. (1) A partner may retire -

with the consent of all the other partners,

in accordance with an express agreement by the partners, or

where the partnership is at will, by giving notice in writing to all the other partners of his intention to retire.

(2) A retiring partner may be discharged from any liability to any third party for acts of the firm done before his retirement by an agreement made by him with such third party and the partners of the reconstituted firm and such agreement may be implied by a course of dealing between such, third party and the reconstituted firm after he had knowledge of the retirement.

(3) Notwithstanding the retirement of a partner from a firm, he and the partners continue to be liable as partners to third parties for any act done by any of them, which would have been an act of the firm if done before the retirement, until public notice is given of the retirement:

Provided that a retired partner is not liable to any third party who deals with the firm without knowing that he was a partner.

(4) Notices under sub-section (3) may be given by the retired partner or by any partner of the reconstituted firm.

15. It is true that this is not a case in which defendant No. 3 was discharged from his liability to a third party i.e. the plaintiff society for the acts of the firm - defendant No.1 before his retirement by an agreement made by him with a third party i.e. the plaintiff society. However, sub-section (3) would be relevant along with its proviso for deciding the question posed for our consideration. A mere look at the aforesaid provisions shows that until a public notice is given of the retirement, the retiring partner would continue to be governed for the acts done by any of them which would have been an act of the firm if done before the retirement. However, when read in the light of the proviso, the question arises as to whether in the absence of a public notice if the circumstances indicate that the third party like the plaintiff society had knowledge that a retired partner had ceased to be a partner from a particular date, whether despite such personal knowledge, the third party can claim that the retiring partner would still remain liable as a partner to the third party for the acts done by any of their after such retirement. In our view, when the proviso is read with sub-section (3) of S. 32, the following results ensue: -

(i) Need to issue public notice would remain germane only for those third parties who might be dealing with the firm without having any knowledge that one of its partners had retired. In such an eventuality, if a public notice is issued and even though individual notices are not issued to such third parties about retirement of the concerned partner, the retiring partner can escape from his liability:

(2) But if individual notice is not given to the concerned third party about retirement of such partner and even public notice is not given, then the retiring partner cannot escape from his liability as a partner for the acts of commission or omission done by the remaining partners after his retirement provided they would have been acts of the firm if done before retirement;

(3) In a case in which in the absence of a public notice about retirement when individual notice about his retirement is given, by the retiring partner to the third party, the retiring. Partner can effectively urge that he would not remain liable for the acts of commission or omission made by the remaining partners after his retirement in their dealings with the concerned third party. In such a case, it can certainly be said that the third party deals with the remaining partners without knowledge that retiring partner is still a partner. The proviso to section 32(3) can easily encompass twin situations - (a) when third party deals with remaining partners without knowing that retiring partner was earlier a partner or (b) when third party deals 'with the remaining partners knowing that retiring partner has ceased to be a partner. In either case, it can be said that the third party deals with remaining partners without knowledge about the existing connection of the retiring partner with the firm. The aforesaid conclusion of ours in the light of the express language of S. 32(3) read with the proviso is supported by a series of judgments of different High Courts including a Division Bench of this court to the consideration of which we shall presently turn. In the case of Central United Bank v. Venkatarama : AIR1963Mad302 , a Division Bench of the Madras High Court had an occasion to consider a similar situation in the light of S. 32(3) of the Act read with proviso thereof. S. Ramachandra Iyer, C. J. speaking for the D. B. in the aforesaid decision was concerned with a fact situation in which one partnership firm of grocers was having its managing partner one Ramkrishnan Chettiar who was also the President of the Central United Bank. The partnership firm had overdraft facilities with the said bank. On 8-2-1946, Venkatarama Naidu (defendant No. 3 in the suit) retired from the partnership. The other two partners continued to carry on the business. No public notice of retirement of defendant No. 3 was given in the manner specified by S. 72 of the Partnership Act. Subsequent to the retirement of Venkatarama Naidu on 4-1-1947, the managing partner Ramakrishna Chattier, acting on behalf of the firm of which he and Ramaswami alone were partners obtained a loan of Rs. 6,000/- from the bank by executing a promissory note. The loan was renewed later, such renewal being evidenced by a fresh promissory note bearing 3-1-1950 as its date. The retiring partner, defendant No. 3, was sought to be made liable in the suit on the sole ground that he had not given a public notice of retirement even though the bank had come to know about his retirement, as the Managing Director of the firm. Ramakrishna was himself the President of the Board of Directors of the Bank. It is, therefore, obvious that the fact situation in the Madras case was almost identical with the fact situation in the present case. By a curious coincidence, defendant No. 3 there wanted to get himself exonerated of his liability on account of his retirement despite absence of the public notice. The present appellant is also defendant No. 3. The learned trial Judge in the aforesaid case took the view that the retiring partner Naidu was not liable to meet the suit claim as despite absence of the public notice, as his retirement was within the knowledge of the bank, the bank could not foist any liability on Naidu after his retirement and had to fall back upon the remaining partners only. The said decision was affirmed by the Madras High Court and the appeal of the bank was dismissed. While doing so, Ramachandra Iyer, C. J. made the following pertinent observations: -

'S. 32(l) provides for a case in which a partner may retire without disturbing the firm Sub-section (3) to S. 32 puts an end to the partnership between partners qua the retiring partner. The consequence is that rule as to the agency of each partner to the rest of the partners would cease to apply in the case of the retiring partner. A strict application of this rule would cause hardship to third parties who were having and continue to have dealings with the firm without knowing that a particular partner had retired. Its object therefore is not to impose a statutory liability on the retiring partner but to protect third parties, embodying a rule of estoppels so far as the retiring partner is concerned, for repudiating the agency of others. In Benjamin Scarf v. A. G. Jardine, (1882) 7 AC 345 at pp. 359-60, Lord Seborne observed -

'The principle of law which is stated in Lindley On Partnership is uncontrovertible, namely, that where an ostensible partner retires or where a partnership between several known partners is dissolved those who dealt with the firm before a change took place are entitled to assume, until they have notice to the contrary, that no change has occurred; and the principle of which they are entitled to assume is that of the estoppel of a person who has accredited another as his known agent for denying that agency at a subsequent time as against the person to whom he has accredited him by reason of any secret revocation of course, in partnership, there is agency - one partner is the agent of another and in the case of those who under the direction of the partners for the time being carry on business according to the ordinary course, where a man has established such an agency and has held it out to others, they have a right to assume that it continues, until they have notice to the contrary.

S. 32(3) therefore enacts a liability on the well known principle of holding out. This principle is also recognised in the case of dissolution under S. 45 of the Partnership Act. The Partnership Act is an amending enactment and is by no means a complete one. It repealed Ch. XI of the Indian Contract Act which contained provisions relating to the law of partnership. It is a well recognised rule of construction that for a due appraisement of the content of a statutory provision and to gather the intent of the legislature while enacting it, the previous law on the subject and the mischief which the statute intended to cure should be looked into. Under the law as it stood prior to the Indian Partnership Act an active partner who had retired from a firm could continue to remain liable for the debts contracted subsequently by the continuing firm unless those who had previous dealings with the firm had actual notice of the retirement. In order that the retiring partner can escape liability in regard to the future acts of the continuing partners, individual notice of retirement to the old constituent was necessary. Public notice was necessary to avoid the claim of those who only deal with the continuing firm after the retirement. In Jwaladut R. Pillani v. Bansilal Motilal, ILR 53 Born 414: (AIR 1929 PC 132) (which was a case of dissolution of partnership, the Privy Council held that in regard to persons who had previously dealt with the old firm it was necessary that they should receive actual notice of dissolution and public notice was not sufficient.

Thus the law prior to the enacting of the Indian Partnership Act was the same as in England. The law in England can be stated thus: (1) a creditor who had previous dealings with the firm is entitled to treat all those whom he knew to be members of it as remaining until he has actual notice to the contrary; (2) a creditor who has had no previous dealing with the firm but who knew. Who the partners were because of the use of their names in the note paper etc. is entitled to treat such persons as the remaining members of the firm until either he receives actual notice to the contrary, or the retirement is published in the London Gazette; (3) a creditor who has not had previous dealings with the firm or knowledge of its constituent is not entitled to hold the retired partner liable for debts incurred by the firm subsequently to his retirement notwithstanding that no notice of any sort is given (vide Pollock on the Law of Partnership, 15th Edn. page 96).

Taking the first two cases referred to above, the disadvantage of the law is that it envisages no uniform method of issuing notice of retirement to all those who have dealings with the firm before and after the retirement. What S. 32 of the Indian Partnership, Act does is to remove the distinction between public notice and private notice. It enacts that public notice would be sufficient both in the case of the old customers as well as those who dealt with the firm after the retirement of a particular partner; the third category of cases referred to above rests on a different basis. That principle would remain unaffected by S. 32(3) as before. In other words, S. 32(3) is not intended to create a liability where none existed before or to penalise a retired partner who failed to give public notice of his retirement. The true basis of the liability of a retiring partner is, as we said, on the principle of holding out. There can be no holding out if the person who deals with the new firm is aware of the retirement of a particular partner. In Ratanji Bhagwanji and Co. v. Prem Shanker : AIR1938All619 , Misra, J. recognised that a retiring partner could escape liability in respect of transactions entered into by the continuing partners after his retirement if the third party was aware that the former had ceased to be a partner of the, firm.

In our opinion, the proviso to S. 32(3) and the corresponding provision in S. 45 with its proviso indicate beyond doubt, that only persons who were not aware of the retirement of a particular partner could take advantage of S. 32(3) or S. 45. The purpose of S. 32(3) is more to specify how notice should be given. Its main object is to avoid the necessity of giving actual or private notice to the various persons. In other words, it specifies the mode by which the retiring partner may be relieved of the responsibility of issuing notice to the various classes of persons who might enter into transactions. With the surviving partners. Public notice is intended only to serve a purpose namely to bring home to the persons concerned the fact of retirement. That purpose will undoubtedly be serv6d in a better Way by personal or actual notice. To contend that actual notice cannot take the place of the public notice is to miss the substance of the matter and argue counter to the very principle on which the retiring partner's liability is based. In Jarvis v. Hemming, (1912) 1 Ch 462, a question somewhat analogous to the present one arose. Under the relevant statutory provision a landlord who was given certain rights on condition of his issuing notice by registered post addressed to his tenants, was held to have satisfied the requirements of the statute where he gave personal notice. Warrington J. observed:

'No service can be better than personal service. The object of the section is that the notice shall come to the knowledge of the person for whom it is intended and there cannot be any reason why that should be secured by service by registered post, rather than by personal service, which is a surer mode of service. I cannot imagine, therefore, that there can be any reason why it should be sent by registered post and in no other way. Therefore, on the true construction of the section, quite independent of authority, I should have thought that the service was sufficient.'

We are in complete agreement with the view expressed by the Division Bench of the Madras High Court on the interpretation of S. 32(3) of the Partnership Act. We may also note that the aforesaid Madras decision is also referred to with approval by a Division Bench of this Court consisting of D. P. Desai J. (as he then was) and N. H. Bhatt, I in the case of Natwarlal and Co. v. D. Chaturbhai, reports (1977) 18 Guj LR 127. Of course the Division Bench of this Court in the aforesaid case was concerned with the absence of public notice and its effect on the third party who had actual notice of dissolution of firm. However, the scheme of S. 45(l) read with S. 72 which is parallel to the scheme of S. 32(3) r1w S. 32 of the Partnership Act was examined by the Division Bench and while doing so, the Division Bench speaking through D. P. Desai J. made the following pertinent observations: -

'In case of dissolution of the firm the persons who ceased to be partners would not be liable to third parties for acts done by other partners subsequent to the dissolution if the third party had actual notice of dissolution when the acts were done. This would be so, notwithstanding omission to give public notice of dissolution as contemplated by S. 45(1) of the Partnership Act in-such a case.'

The aforesaid Madras decision in -the Central Bank case : AIR1963Mad302 (supra) was noted with approval in para 18 of the report. The Division Bench of this Court also referred to a decision of Rama Rao v. Venkateshwara Rao, reported in : AIR1963AP154 which had taken a similar view. We may also mention at this stage a decision of the Division Bench of the Kerala High Court in the case of Veeria Perumal Pillai Padmanabha Pillai v. Avukkarummal Muhammad Pathummal, reported in : AIR1958Ker257 which projects the same view.

16. In view of the aforesaid settled legal position, it is obvious that despite not giving of a public notice by defendant No. 3 about his retirement from the partnership firm of defendant No. 1 the knowledge which the plaintiff society had of the said fact through intimation given to its Manager and Secretary witness Kantilal Dasadia, would remain sufficient to exonerate defendant No. 3 from the liability arising out of the payments made by the plaintiff society to defendant ' No. 1 firm through its other partner Karnubha, defendant No. 2 on and dt. 22-8-1969 onwards, i.e. from the date on which information about retirement of defendant No. 3 from defendant No. 1 firm was received by the plaintiff society through its Manager. We have already shown earlier as per Schedule B of the plaint that various amounts received by defendant No. 1 firm from the plaintiff society from 22-8-1969 onwards squarely covered the entire suit claim of Rs. 51,296.45 which is the principal amount. Consequently, defendant No. 3 would not be liable to meet the suit claim of the aforesaid amount I along with interest amount claimed thereon. Thus, the special defence put forward by the appellant will have to be accepted. The plaintiff s decree against defendant No. 1 firm and the remaining partners viz. defendants Nos. 2 and 4 will of course stand untouched. But so far as defendant No. 3 is concerned, he will have to be exonerated from the liability to meet the suit claim in view of our aforesaid finding. Second part of the finding of the learned trial Judge on issue No. 3 viz. that defendant No. 3 retirement as partner from partnership firm of defendant No. 1 from 1-4-1969 will have no effect on the plaintiffs suit must, therefore, be vacated and set aside and that part of the issue will have to be answered in favour of defendant No. 3 and against the plaintiff society.

17. Before parting with this discussion, it is necessary to note one submission put forward by Mr. Raval for the plaintiff society. He submitted that prior to enactment of the Partnership Act, 1932, earlier section of the Indian Contract Act which was the forerunner of S. 32 r/w S. 45 of the Indian Partnership Act was S. 264 which read as under: -

'Persons dealing with a firm will not be affected by a dissolution of which no public notice has been given unless they themselves had a notice of such dissolution'.

Mr. Raval submitted that if S. 264 of the Indian Contract Act which then existed on the statute book is compared and contrasted with the language of S. 32(3) of the Partnership Act, a clear departure in the. Legislative intention becomes visible. In the submission of Mr. Raval, by enacting S. 32(3) the legislature has expressed a different intention and has laid down that until a public notice is given of retirement, the retiring partner's liability would continue all throughout till that eventuality occurs. That such was not the language employed by S. 264 in the predecessor Act and that none of the decisions referred to by us have noted this difference. In our view, difference in phraseology in the old S. 264 of the Contract Act and S. 32(3) of the Partnership Act would make no difference. The proviso to S. 32(3) really engrafts the same legislative intention which - was discernible in old S. 264 of the Contract Act. Mr. Raval's contention on this aspect, therefore, has to be repelled.

18. Appeal allowed.


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