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V.V.P. Thangaraju Vs. K.V. Perumal Chettiar and ors. - Court Judgment

LegalCrystal Citation
SubjectCivil
CourtChennai High Court
Decided On
Reported in(1979)2MLJ469
AppellantV.V.P. Thangaraju
RespondentK.V. Perumal Chettiar and ors.
Cases ReferredFazal Bhai Dhaia v. The Custodian Evacuee Property
Excerpt:
- .....is about the precise date when the partnership, in the case of either firm, become dissolved. the date of dissolution becomes highly important for the purpose of determining questions relating to accounting between the parties. according to the appellant, the partnership were dissolved on 6th june. 1964. the courts below rejected this contention. they held that the firms got dissolved on 5th july, 1965. the appellant's endeavour in these second appeals is to get the date of dissolution placed at 6th june, 1964.3. exactly when a partnership gets dissolved might be thought to be a question which is predominantly, if not wholly, a question of fact. in this case, however, the question has to be dealt with and determined as one of law, involving, as it does, an application of section 43 of.....
Judgment:

V. Balasubrahmanyan, J.

1. These second appeals, three in number, raise a, common point. They arise out of suits for dissolution of partnership filed by a partner against his other partners. Two firms are sought to be dissolved in the two actions.

2. The controversy between the parties in these second appeals is extremely limited in scope. It is about the precise date when the partnership, in the case of either firm, become dissolved. The date of dissolution becomes highly important for the purpose of determining questions relating to accounting between the parties. According to the appellant, the partnership were dissolved on 6th June. 1964. The Courts below rejected this contention. They held that the firms got dissolved on 5th July, 1965. The appellant's endeavour in these second appeals is to get the date of dissolution placed at 6th June, 1964.

3. Exactly when a partnership gets dissolved might be thought to be a question which is predominantly, if not wholly, a question of fact. In this case, however, the question has to be dealt with and determined as one of law, involving, as it does, an application of Section 43 of the Indian Partnership Act, 1932 and the construction of certain notices purporting to bring about the dissolution.

4. The two firms in question in these proceedings were constituted under regular deeds of partnership. It is common ground that the deeds did not contain any article or Clause fixing the duration of the partnership. The result was that they were merely partnerahips-at-will. The deeds do not also provide for any particular mode of dissolution or taking accounts. This meant that the matters relating to their dissolution were to be governed wholly by the relevant provisions of the Indian partnership Act, 1932.

5. Section 43 of the Act provides for a special mode of bringing about dissolution of partnerships-at-will. The section is in the following terms:

Where the patnership 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.

6. In the Counts below the appellant relied on two sets of notices issued by him to the other partners as constituting notices of dissolution in terms of Section 43. The first was a set of lawyer's notices dated 5th July, 1965 identically worded in the case of the two firms. The appellant relied on the following words used by the lawyer in those notices:

Our clients and you were running art silk business till it was stopped on 6th Tune 1964.

The reference to the stoppage of the partnership businesses on 6th June, 1964 was sought to be relied on by appellant as amounting to giving to the other partners notice of dissolution effective from that date. Both the Courts below however, rejected this construction of the legal notices. I agree with their view. In the law of partnership, stoppage of the partnership business is one thing; dissolution of partnership is quite another. Carrying on business is, no doubt, the purpose of partnership, and discontinuance of business ordinarily puts an end to the main partnership activity; but it does not, by itself, under the legal relationship between the partners. Indeed, there are cases where, even after dissolution the business may be carried on, if only for the purpose of the more beneficial winding up of the affairs of the partnership. In the event, the lawyer's notices dated 5th July, 1965, on their terms, cannot be regarded as notices of dissolution at all, much less notices dissolving the firms as on 6th June, 1964.

7. The appellant then relied on a set of two telegrams which he had issued in this regard to his other partners. Both were sent by teleprinter on 29th December, 1965. The telegraphic language was identical in both cases. The appellant underlines the following words as words which brought about the dissolution of the firms on 6th June, 1964:

INTIMATING THE DISSOLUTION OF PARTNERSHIP....AS ON 6TH JUNE. 1964. PURSUANT TO EARLIER NOTICE.

8. Mr. R. Krishnamoorthy learned Counsel for the respondents, however, said that on a plain reading, the telegrams merely referred to the earlier lawyer's notices dated 5th July, l965. His argument was that when those earlier notices did not, in terms talk about dissolution at all, the subsequent telegrams cannot hope to achieve dissolution by inviting a bare reference to the earlier notices, which only related to cessation of business and nothing else.

9. While I agree that a mere reference to the earlier notices can only be taken as reiteration of the appllant's assertion as to the discontinuance of business, I do not accept the implication in the argument that the telegrams stop short with a repetition of the gist of the earlier notices. For unlike as in the lawyer's notices, we find the telegrams speaking about 'dissolution' of the firm, in express terms. As a matter of reasonable construction of their language, I am inclined to regard these telegrams as constituting notices of dissolution. Brevity, must be remembered, in the soul of telegrams, and because this is so, Courts, in my view, must construe them liberally supplying requisite words of their own even, to make sense. That is the way any addressee of the telegram would interpret the words, and that is the way the sender also intends and expects his words to be understood by one and all. To construe the telegrams in these cases in the way learned Counsel for the respondents asks me to do would be to blind my-self to the and words, 'INTIMATING THE DISSOLUTION' which were words which the appellant paid for and which he got the telegraphic authorities to send over the wires to his partners. Construing the words in the manner appropriate to telegraphic English, I am satisfied that by these telegrams the appellant unmistakably purported to notify to his other partners the dissolution of the two firms.

10. Mr. Sethuratnam, learned Counsel for the appellant, pursued this line of construction further and urged that I must accept the terms of the telegrams on their face value and proceed to hold therefrom that the firms stood dissolved on 6th June, 1964, as declared in the telegrams. I am prepared to go a little way along with learned Counsel and accept that the language of the telegrams is capable of being understood as notifying the dissolution of the firms as on 6th June, 1964. But saying this as a matter of construction does not mark the end of our inquiry in this case. For the question has been raised and, therefore, requires to be answered, as to whether the telegrams dated 29th December, 1965, can, in law, bring about a dissolution of the firms as from anterior date, namely, 6th June, 1964. For an answer to this question, one has to turn to the text of Section 43 of the Partnership Act.

11. Advancing arguments on the terms of Section 43 of our Act, Mr. Sethuratnam said that it was quite clear that while the Legislature provided for the dissolution of partnerships-at-will by the simple expedient of a unilateral notice of dissolution by one of the partners to the rest, the Legislature also declared in the same section as to what the effective date of dissolution would be under such a notice. Learned Counsel said that in the matter of dissolution by notice, the partner may either make mention of a particular date or make no mention of any date whatever for the firm's dissolution. Sub-section (2) provided for both the contingencies. If no date is mentioned in the notice, then, according to the section, the actual date of communication of the notice must be deemed to be the effective date of dissolution. But in all other cases, that is to say, in cases where the notice specifies a given date for the purpose of dissolution, then that would, in law, mark the effective date-line for dissolution of the partnership. In such cases, learned Counsel said, neither the date of issue nor the date of communication of the notice would be pertinent. They would be matters of indifference. He further urged that where the notice mentions a given date of dissolution, it would not be open to a Court to ignore it and substitute the date of communication of the notice as the effective date of dissolution. To do so, he said, would be to go against the grain of Section 43. He said that this would be the position whether the date of dissolution notified by the partner is anterior to, or subsequent to, the date of the notice itself.

12. Mr. Krishnamoorthy argued, on the other hand, that however the words of Section 43 (2) might read on the surface, the statute does not and cannot countenance a partner possessing the right or the ability to terminate his partnership, with retrospective effect, by merely mentioning an anterior date in his notice of dissolution.

13. I agree with Mr. Krishnamoorthy's contention. Retrospectivity and retroactivity, as modes of laying down legal rights and obligations ex post facto are privileges peculiarly given to the Legislature and, within a limited field, to statutory instrumentalities, to exercise as law-givers. Parties to an agreement are not in the position of law-givers, and hence they cannot, strictly, alter their past by contractual terms. They can only agree upon things to be done, or to be forborne, in the here and in the hereafter. This is why it is said, very accurately, that persons who become partners cannot start their partnership with retrospective effect, that is to say, from a time before they brought themselves together in agreement This principle must apply with equal, if not greater force to dissolutions by unilateral notice under Section 43. Partnership, it need hardly be said, is a creature of contract between persons, and till that relationship effectively is put an end to, it subsists. In the case of partnership for a term certain, the agreement itself clearly envisages that the firm should get dissolved with the expiry of the period. In the case of partnerships-at-will, however, the firm continues indefinitely, which is only another way of saying that it will last as long as the consensus between the partners lasts, to carry on the partnership together. When once there is a dent or dissonance in that consensus, the basic requisite for its continuance goes. This is why the statute, in Section 43, provides for dissolution as a certain consequence of even a mere unilateral notice by a single partner. But this necessarily implies that till that eventuality occurs the continuance of the partnership relationship is not only a verifiable fact, but is unquestionable in law. If the law were not so, and if a partner-at-will were regarded as having the power to dissolve the partnership as from an anterior date by issuing a retrospectively notice, what prevents him from effecting dissolution of the firm as from the very next day after the commencement of the partnership setting at naught the entire factual duration of the firm thereafter?

The intention of Section 43 is not to give the partner-at-will a right to obliterate his past relationship with his other partners to the littlest extent; the section only provides for an easy-free mode of bringing about an end to the partnership-at-will, presumably on the principle that nothing, in its nature, is intended or meant to be everlasting and even good things must have an ending.

14. Having regard to the scheme underlying partnership law as codified, and having particular concern for the nature and incidents of partnerships-at-will I am satisfied that the provision in Section 43 (2) of the Partnership Act cannot be read as entitling a partner to undo a partnership with retrospective effect. A partner-at-will can, under the section, undoubtedly name a date as from which the firm would stand dissolved, but that date can, in no case, be prior to the date of issue of his notice. It would be proper to construe the provision only as entitling the partner to notify the dissolution in futuro. This way of reading the section would, no doubt, tend to give the partner-at-will a means of postponing the dissolution to a later date by unilateral declaration. But even if he does so, he would not thereby be rendering the position of his co-partners any the worse for it. which hardly would be the case if he were given the power to put an end to the partnership with retrospective effect.

15. There is not much case-law on this particular topic of dissolution of partnership-at-will Lindley, 13th Edition (1971), writing on the comparable provisions of Section 32 (c) of the English Partnership Act, 1809 says that the notice of dissolution may have to be prospective.

16. Mr. Sethuratnam brought to my notice a decision rendered by the Supreme Court which was supposedly in his favour: Fazal Bhai Dhaia v. The Custodian Evacuee Property, New Delhi : [1962]1SCR456 He relied on the headnote which the A.I.R. carried in its report:

Date on which deed of dissolution is executed is date of dissolution notwithstanding that a future date is mentioned as date of dissolution.

17. Plainly, this headnote does not help the appellant, for it does not say that a partnership-at-will can be dissolved with retrospective effect. But there is more to be said about this headnote. As I shall presently show, the headnote has got the Supreme Court's decision all wrong with the result that it completely misled learned Counsel during argument. What is more, the error in the headnote had also got into the post-1961 edition of a well-known text-book on the subject. What the headnote had put down as a statement of the law contained in the judgment is the very antithesis of what the Supreme Court had written. The Supreme Court was concerned with a firm's dissolution which was brought about by a regular deed of dissolution. In that deed, the dissolution was purported to be effected as from an anterior date. The Supreme Court held that this result cannot be brought about, and the dissolution took effect only from the date of the deed. The relevant passage at paragraph 10 of the Supreme Court's judgment reads as under:

The next contention raised in the appeal is... that in view of Section 43 of the Indian Partnership Act the partnership stood dissolved from 2nd November, 1948 . The deed of dissolution was dated 12th August, 1949.... The mention of the date 2nd November, 1948, as the date of dissolution cannot, therefore, be accepted. The firm must, however, be held to have been dissolved on 12th August, 1949 on which date the deed of dissolution was executed.

If even in a consensual dissolution by a deed. signed by all partners, the firm cannot be dissolved with retrospective effect, there is an a fortiori justification for the view that a unilateral notice by a partner in a partnership-at-will cannot effectuate the firm's dissolution as from an anterior date.

18. I had earlier held that the appellant's telegrams dated 29th December, 1965 to his co-partners constitute notices of dissolution. The only part of the notices which the law cannot give effect to is the antecedent date set down therein as the date of dissolution. Sans this dale, the notices must, in my opinion, be treated as notices which do not fix any particular date as the date of dissolution. For this construction to be adopted we have the example of the Supreme Court's decision in the case I have cited. It follows, therefore, that the appellant's telegrams in this case must be regarded as effectuating the dissolution of the two firms as from the date of delivery of the the telegrams. The receipt of the telegrams by other partners is not disputed. If would therefore, be proper to mark the date of dissolution of the two firms as 20th December, 1965.

19. The Courts below, however, had quite a different assessment of the legal position emerging from the appellant's notices. According to them the appellant's notices resulted in placing the dissolution date as 5th July, 1965. The Courts below had plumped for this date, apparently because this was the day on which the initial legal notices were issued by the appellant to his other partners. But, an I had earlier explained, the lawyer's communications of 9th July, 1965, contained no notice of termination on the partnerships. All they did was to reclaim that the businesses were stopped from 6th June, 1954. If then, the lawyer's notices were not notices of dissolution, the date of their issue or even the actual date of their communication to the other partners can have no validity or significance as notices of dissolution under Section 43.

20. I have no doubt in my mind that in this case the dissolution of the two firms was brought about only by the appellant's telegrams dated 17th December, 1965, and the dissolution took effect from the dates of their communication to the partners, on which there seems to be no dispute, which is 20th December, 1965

21. So while rejecting the appellant's contention that the firms must be held to have been dissolved as on 6th June, 1964, I must modify the finding of the Courts below and hold that the dissolution took effect on 20th December, 1965. Subject to this modification of the decree of the Courts below, the appeals are dismissed. There will, however, be no order as to costs.


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