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The Administrator-general of Madras and anr. Vs. the Official Assignee of Madras and anr. - Court Judgment

LegalCrystal Citation
SubjectCivil
CourtChennai
Decided On
Judge
Reported in3Ind.Cas.163
AppellantThe Administrator-general of Madras and anr.
RespondentThe Official Assignee of Madras and anr.
Cases ReferredFrarer v. Karshan
Excerpt:
insolvency act, (st. 11 & 12 vic. c. 40), section 7 - death of a partner--insolvency application by surviving partner, effect of--right of official assignee to wind up the business so as to bind the representatives of the deceased partner. - - 214. lord lindley says if there is only one partner living in this country his co-partners being either dead or abroad, and he becomes bankrupt, the trustee in that case winds up the, affairs of the partnership as well as the private affairs of the bankrupt. 7. as it seems to me the decision might well have proceeded on the short ground that the surviving partners' right to sell is for the purpose of winding up the partnership and not for the purpose of satisfying the separate debt of the surviving partner......263). mr. napier on behalf of the appellant did not contend that sir george arbuthnot, as the surviving partner, had not the right to realise the property of the partnership and discharge its liabilities. i may omit mr. young's name since it is not disputed that sir george arbuthnot and mr. macfadyean were alone interested in the partnership's assets, mr. young being what is known as a salaried partner'. mr. napier's argument was that this being a personal right based on the natural confidence between the partners (see lindley on partnership, 7th edition page 648), it did not pass to the official assignee and that for the purpose of realizing the estate the only course open to the official assignee (there being no provision in the indian insolvency act, which corresponds to section.....
Judgment:

Arnold White, C.J.

1. The point raised in this case is by no means free from difficulty.

2. The effect of the death of Mr. Macfadyean was to dissolve the partnership, Indian Contract Act section, 253 (10). After the dissolution the rights and obligations of the partners continued in all things necessary for winding up the business of the partnership (section 263). Mr. Napier on behalf of the appellant did not contend that Sir George Arbuthnot, as the surviving partner, had not the right to realise the property of the partnership and discharge its liabilities. I may omit Mr. Young's name since it is not disputed that Sir George Arbuthnot and Mr. Macfadyean were alone interested in the partnership's assets, Mr. Young being what is known as a salaried partner'. Mr. Napier's argument was that this being a personal right based on the natural confidence between the partners (see Lindley on Partnership, 7th Edition page 648), it did not pass to the Official Assignee and that for the purpose of realizing the estate the only course open to the Official Assignee (there being no provision in the Indian Insolvency Act, which corresponds to Section 125 of the English Bankruptcy Act, 1883) was to bring a suit against the Administrator for the winding up of the partnership.

3. I do not think it can be disputed that on the death of Mr. Macfadyean, it became the duty of Sir George Arbuthnot to wind up the partnership. Vaughan Williams L. T., in Re Bondne (1906) 2 Ch : 430, puts the law thus 'The real truth, of, the matter is that, leaving out all questions of legal estate, there is, as between the surviving, partner and the representatives of the deceased partner, an overriding duty to wind up the partnership assets and to do such acts as are necessary for that purpose and if it is necessary for that winding up either to continue the business or borrow money or to sell assets, whether these assets are real or personal, the right and duty are co-extensive.'

4. I take it that if Sir. George Arbuthnot instead of filing his insolvency petition had, as surviving partner, entered into a private arrangement with the Firm's creditors for the purpose of winding up the business, he could have done so without bringing a suit for winding up and that Mr. Macfaydean's representative would have been bound thereby. Does it make any difference if the business is wound up in insolvency proceedings instituted by a surviving partner? It would appear from the judgment of the House of Lords in Lovell v. Beauchamp (1894) A.C. 607 that the rule, that when, a receiving order is made against a Firm of which one partner is a minor, an adult partner has the right to insist that the partnership assets shall be applied in payment of the liabilities of the partnership, and that until these are provided for no part of them shall be received by the infant partner, can be made available for the benefit of the creditors in bankruptcy proceedings. I think the right and obligation of Sir George Arbuthnot as surviving partner can be made available for the benefit of the Firm in the insolvency proceedings under the vesting order made against the Firm. In Seton on Judgments and Orders, Vol. III page 2190, the law is thus stated. Where all the surviving partners or a sole surviving partner become bankrupt, the proper forum for the decision of all questions relating to the estate is the Court of Bankruptcy; and an action on the part of persons claiming under the deceased partner will be restrained by injunction; secus where the survivors or any of them remains solvent; ex parta 8 Ch 555; Gorden Morley v. White 8 Ch. 214. Lord Lindley says If there is only one partner living in this country his co-partners being either dead or abroad, and he becomes bankrupt, the trustee in that case winds up the, affairs of the partnership as well as the private affairs of the bankrupt.' Lindley on Partnership, 7th Edition page 740. The estate which vested in the Official Assignee was as it seems to me Sir George Arbuthnot's interests in the partnership assets but this interest was subject to the obligation to realize the property of the partnership and to discharge its liabilities. If Sir George Arbuthnot's right was a personal right and nothing more. Mr. Napiers' argument would have been more difficult to answer. But the right was subject to the correlative obligation and it seems to me the Official Assignee took the estate subject to this obligation. Assuming Mr. Macfadyeans' interest in the partnership assets became Vested in his administrator on his death that interest was subject to the obligation on the surviving partner to sell the partnership property to pay the partnerships' debts. It seems to me this obligation devolved upon the Official Assignee as an incident of the estate which vested in him under Section 7 of the Insolvency Act.

5. I think the case of Frarer v. Karshan 2 K.J. 496 in which Mr. Napier relied is distinguishable. In that case an injunction was granted to the Assignee in Bankruptcy of an insolvent partner restraining a judgment-creditor of a solvent partner who had purchased the interest of the solvent partner in the partnership goods to a purchaser under a sale which the judgment creditor professed to have made.

6. All that that case decided was that the power of a solvent partner upon the bankruptcy of his co-partner to sell the partnership property cannot be transferred.

7. As it seems to me the decision might well have proceeded on the short ground that the surviving partners' right to sell is for the purpose of winding up the partnership and not for the purpose of satisfying the separate debt of the surviving partner. I think the principle of this decision does not apply when the estate of an insolvent surviving partner vests in the Official Assignee. It vests subject to the obligation surviving partner was under, viz., an obligation to wind up the partnership business.

8. I do not wish to be taken to dissent from the ground on which Wallis, J., based his judgment, but I prefer to rest my judgment on the ground which I have stated.

9. I think this suit was rightly dismissed by Wallis, J., and I would dismiss this appeal with costs. I certify for two counsel.

Sankaran Nair, J.

10. I am not prepared to differ.


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