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Talakchand Kanji Vora Vs. Keshavlal Dullabajji Sheth - Court Judgment

LegalCrystal Citation
SubjectCommercial
CourtKolkata High Court
Decided On
Case NumberSuit No. 123 of 1972
Judge
Reported inAIR1973Cal279,78CWN744
ActsPartnership Act, 1932 - Sections 7 and 32
AppellantTalakchand Kanji Vora
RespondentKeshavlal Dullabajji Sheth
Appellant AdvocateP.K. Dutt, Adv.
Respondent AdvocateP.K. Das, Adv.
Cases ReferredGoodman v. Whitcomb.
Excerpt:
- .....from april 16, 1971.3. this suit was filed on march 22, 1972, that is after a year of the said notice of dissolution. after filing the suit, on march 25. 1972 this petition has been filed by kani vora. in the petition kanji vora is praying that order may be passed for injunction restraining the sheth from carrying on the business or using the firm name or partnership properties or quota certificates or quota licence or acting or giving effect to any letter of authority issued in favour of third parties or letter of credit issued under the said quota certificate or quota licence or dealing in any manner with the partnership properties, assets, funds, moneys goodwill, quota certificates and/or quota licences belonging to the said firm and/or issued in the name of the said firm. kani.....
Judgment:
ORDER

Hazra, J.

1. This is a petition by one partner Talakchand Kanji Vora (hereinafter referred to as 'Kanji Vora') against another partner Keshavlal DulIabhji Sheth (hereinafter referred to as 'Sheth') for injunction and for appointment of receiver, Kanji Vora and Sheth entered into an agreement to carry on business in co-partnership under the name and style of 'The Western Trading Corporation' or 'Western Trading Corporation' (hereinafter referred to as the said 'firm'). The business carried on by the firm was in sundry goods, inter alia, as importers at 55, Canning Street. Calcutta. The partnership deed is annexure 'A' to the present petition,

2. On March 22, 1954, the partnership agreement was modified by a Deed. Vora and Sheth carried on the said business in co-partnership and on March 17. 1971 Vora gave a written notice to Sheth under Section 43 of the Indian Partnership Act dissolving the firm with effect from April 16, 1971.

3. This suit was filed on March 22, 1972, that is after a year of the said notice of dissolution. After filing the suit, on March 25. 1972 this petition has been filed by Kani Vora. In the petition Kanji Vora is praying that order may be passed for injunction restraining the Sheth from carrying on the business or using the firm name or partnership properties or quota certificates or quota licence or acting or giving effect to any letter of authority issued in favour of third parties or letter of credit issued under the said quota certificate or quota licence or dealing in any manner with the partnership properties, assets, funds, moneys goodwill, quota certificates and/or quota licences belonging to the said firm and/or issued in the name of the said firm. Kani Vora is also praying, inter alia, for an order of injunction restraining Sheth from dealing with and/ or disposing of and/or selling and/or encumbering the partnership properties, moneys, assets, goodwill, quota certificates end quota licences. Kanji Vora is further praying that receiver may be appointed over the partnership properties, amount lying in the account of the said firm with National City Bank, Brabourne Road. Calcutta and in respect of quota certificate, licences, letters of authority letters of credit books of accounts and documents and for directions on the receiver to collect and realise partnership properties, moneys, quota certificates, quota licences etc.

4. Admittedly, the parties carried on the partnership business. Admittedly, the plaintiff Kanii Vora has 7 annas share end the defendant Sheth has 9 annas share.

5. Three clauses in the partnership agreement dated May 5. 1936 which is annexed to the petition are important for the purpose of this application. These are Clauses 5, 6 and 11 which are set out hereunder:

'Clause 5; That if a partner desires to retire from the business, he must give six months notice in writing of his intention to do so to the other partner to enable accounts of the business to be taken for ascertaining the assets and liabilities and it will be optional for the other partner to continue the business in the firm name on paying unto him the value of the dues in his share.

Clause 6: Should one of the partners the during the continuance of the partnership business then the surviving partner shall be entitled to carry on the business in the firm name entirely at his own risk from the death of the deceased partner and the heirs of the deceased partner shall get an adjustment of accounts of capital and profits of the business and shall be liable for the loss if any, in the share of the deceased partner upto the time of his death,

* * * * *

Clause 11: All business, namely, selling, buying, giving or taking credits, incurring expenses and similar operations shall be done by mutual consent of the partners.

6. Appearing for the petitioner Mr. P. K. Dutt referred to me Section 7 of the Indian Partnership Act and submitted that this is a 'partnership-at-will'. He also referred to me Section 43 of the Partnership Act and submitted that his client has dissolved the firm by giving notice in writing on March 17, 1971 of his intention to dissolve the firm. By this notice the petitioner intended that the firm shall be dissolved with effect from April 17. 1971. According to him the firm stands dissolved from that day.

7. Mr. P. K. Dutt placed before Die the letters and correspondence from April 27, 1971 and the letters written by the petitioner Vora to the Assistant Controller of Customs to explain the delay in filing this suit and this application. The petitioner Kanii Vora on August 9, 1971, sent a draft deed of dissolution to the respondent Sheth for being signed by Sheth but this was not done.

8. Mr. Dutt stated before me that this firm has no debt. There are 30 quota certificates or quota licences for import of various goods. Those quotacertificates or quota licences and valuable assets of the firm. Mr. Dutt stated that since dispute has arisen between the parties it is not unusual among the partners upon dissolution to divide such licence or quota in accordance with the respective shares of the parties in the partnership, as the shares of the parties are admitted and the quota licence could be divided between the parties. As such I thought that the matter should be settled between the parties in both the applications end the suit. The matter was adjourned for the purpose of settlement. But ultimately no settlement was arrived at. Obviously the parties were disputing as to the goodwill or name of the business. As the matter was not settled the application was heard and was very much contested by Mr. P. K. Das appearing for the defendant Sheth.

9. Mr. Das submitted that by reason of the nature of the partnership there was no dissolution. According to him, this is not a 'partnership at will' and it could not be dissolved by notice. He said that this is not a fit case where partnership should be dissolved by this Court and in any event, it is not equitable to appoint receiver. He also submitted that notice of dissolution, if any, has been waived as the petitioner Vora who participated in the business of the firm after the notice of dissolution, cannot make this application.

10. The most important question, in this case, is whether the partnership is a partnership-at-will or not. If it is a partnership-at-will, then by the notice of dissolution the partnership has been dissolved. The law on the point is stated in 'Kerr on Receiver.' 13th Edition as follows: 'The readiness of the Court to appoint a receiver depends upon whether the partnership has been dissolved at the tune when the application is made.' As to the question whether the partnership dated May 5, 1936 is a partnership-at-will or not, Section 7 of the Partnership Act has to be considered.

11. Under Section 7 of the Partnership Act, where no provision is made by the contract of partnership for (a) duration of the partnership or (b) for determination of the partnership, the partnership is a partnership-at-will. Therefore, the most important question which requires consideration is whether in the partnership agreement in this case, there is (a) any provision for duration of Partnership or (b) any provision for determination of the partnership. According to Mr. Das. Clause 5 of the Deed of Partnership is a Clause for determination of partnership.

12. Mr. Das contended that in the instant case the partnership admittedly consists of two partners. Retirement inthis case of one partner means on end of partnership business. If one partner gives notice in writing of his intention to retire under Clause 5, the partnership must end in the instant case, because, there are only two partners and obviously a single individual cannot carry on the partnership business. Therefore there is automatic dissolution. According to Mr. Das Clause 5 of the deed of partnership should be interpreted to be a Clause for determination of partnership in this case, and therefore, according to him Clause 5 is a Clause which, provides for determination of partnership, and therefore, this is not a partnership at will. Thus according to Mr. Das the partnership cannot be dissolved by a notice of dissolution under Section 43 of the Partnership Act. He also rather faintly contended that Clause 6 of the Deed of Partnership is a Clause which provides for duration of partnership.

13. Mr. Das relied upon : [1965]57ITR510(SC) . (Commr. of Income-tax. Madhva Pradesh v. Govindram Sugar Mills). The Question raised by Mr. Das requires careful consideration. In this connection It is also necessary to consider the case of the Supreme Court reported in : [1961]3SCR998 , (Karumuthu Thiagarajan Chettiar v. E. M. Muthappa Chettiar), as to the meaning and effect of Section 7 of the Indian Partnership Act which is relied upon by both the petitioner and [respondent in this case. The question is 3 poes Clause 5 of the deed of partnership which is a Clause for giving notice of retirement mean that there is a provision, as to determination of partnership, in a case where the partnership consists of two partners only

14. In Chettiar's case. : [1961]3SCR998 before the Supreme Court, there were two partners who did business jointly by securing managing agency of some wills. The agreement of partnership which was entered into was to carry out the managing agency business of two mills. The terms of the agreement of partnership will appear from the judgment. It seems that the partners entered into agreement to look after the actual management of the two mills for some period but soon after entering into the agreement dispute arose between the parties and one partner gave notice of termination of the partnership considering it to be a partnership-at-will. The Supreme Court in this case considering the terms of the partnership said at page 1229 as follows:

'As we read the terms of the agreement it seems to us clear that the intention could not be to create a partnership at will. The partners contemplated that the management would be carried on in rotation between them in four yearly periods. It was also contemplated thatthe heirs of the partners would also carry on the management in rotation. Considering this provision as well as the the nature of the business of partnership it could not be contemplated that the partnership could be brought to an end by notice by either partner. The intention obviously was to have a partnership of some duration though the duration was not expressly fixed in the agreement.'

15. The Supreme Court referred to Section 7 of the Indian Partnership Act and held:

'Section 7 contemplates two exceptions. The first exception is where there is a provision in the contract for duration and second exception is where there is a provision for determination of partnership. In either of these cases, the partnership is not a partnership at will.'

16. The Supreme Court further held:

'The duration of the partnership may be expressly provided for in the contract; but even where there is no express provision. Courts have held that the partnership will not be at will if the duration can be implied.

The general rules of partnership are well settled. Where no term is expressly limited for its duration and there is nothing in the contract to fix it, the partnership may be terminated at a moment's notice by either party ............ Withoutdoubt, in the absence of express, there may be an implied contract, as to the duration of a partnership.

The same principle applies to a case of determination. The contract may expressly contain that the partnership will determine in certain circumstances; but even if there is no such express term, an implied term as to when the partnership will determine may be found in the contract.'

17. Under the facts of the ease before the Supreme Court it was held that the partnership was not a partnership at will.

18. In the judgment of the Supreme Court an English case, namely, Abbott v. Abbott, (1936) 3 All ER 823 has been referred.

19. Mr. Das also relied upon (1936) 3 All ER 823 and submitted that in a case where there is a Clause for retirement in a partnership Court is inclined to think that it is not a partnership at will.

20. Mr. Das also in this connection relied on : [1960]39ITR308(Mad) . (M. Vedachala Mudaliar v. S. Rangaraju Naidu) and referred to head-note (e) which is as follows;

'Where there are only two partners, the appropriate term to describe the severance by one partner of his connection with the business of the partnership is dissolution and not retirement'

21. In my view, the facts and circumstances of the cases relied upon by Mr. Das are entirely different from the facts and circumstances of the instant case and the principles laid down in the aforesaid cases do not apply under the facts of this case.

22. In the Supreme Court case although there were two partners but the partners obtained managing agency of certain companies and intended to carry out managing agency business of the companies. It was really a partnership to carry out a particular venture. The partners in the case before the Supreme Court contemplated that managing agency should be carried on in rotation between them in four years period. The intention obviously was to have partnership for some duration though the duration was not expressly fixed in the agreement.

23. Under the aforesaid facts, the Supreme Court held that the partnership was not a partnership at will.

24. In Abbott's case. (1936) 3 All ER 823 there was a partnership between the father end his five sons and it was provided, inter alia, that (a) the partnership shall commence as from October 11. 1923; (b) the death or retirement of any partner shall not terminate the partnership.

25. The headnote of the Abbott's case. (1936) 3 All ER 823 runs as follows:

'By a deed of partnership between a father and his five sons it was provided, inter alia.: '2. The partnership shall commence as from October 11. 1923. The death or retirement of any partner shall not terminate the partnership ...............

10. If any partner shall ............ do orsuffer any act which would be a groundfor the dissolution of the partnership bythe Court then he shall be considered ashaving retired.' One of the sons, claiming that as no term had been fixed forthe duration of the partnership it was apartnership at will, gave notice of dissolution and brought an action for a declaration that the partnership had beendissolved, for an account end for anorder that the partnership be wound UDby the Court; Held (i) upon a properconstruction of the deed, the partnershipcould not be determined by a single partner although he could determine thepartnership as between himself and theother partners; (ii) the partnership wasnot a partnership at will, but one to continue, unless dissolved by the Court orsome other event, so long as two of thepartners were still living and had notretired.'

The learned Judge at page 826 of thatreport said:

'The next question that I have to decide is how long and until when is the partnership to continue, and is there any light thrown upon that by the document prime facie, if two partners agree that they will continue indefinitely in partnership until by agreement they alter that position, that is not a partnership at will. It is a partnership for their joint lives unless they agree to terminate the relationship. That was decided in Moss v. Elphick. (1910) 1 KB 846. Accordingly. I get this from Clause 2. The partners have agreed that the partnership shall continue, notwithstanding that one partner dies, the partnership shall continue. That does not mean that the partnership shall continue when all but one of the partners has either died or retired, because there cannot be a partnership with one partner. But the Clause seems consistent with the view that so long as there are two partners the partnership is to continue. Clause 10 seems to contemplate that there may be circumstances in which the partnership might have to be dissolved by the Court, That is quite alien from the conception of a partnership at will to which a partner can put an end of his own volition.'

26. In my view, the facts and circumstances of Abbott's case, (1936) 3 AllER 823 are entirely different from thefacts and circumstances of the instantcase.

27. The last case cited by Mr. Das Is 1970 (1) Mad LJ 512. (V. M. Nissan Ahmed v. Rahiba Bibi) and he submitted that where there is a Clause for retirement it is not a partnership at will. In the head note of Madras case, it is stated :

'It is an established rule of construction of a document that the instrument must be read as a whole to ascertain its true meaning. An attempt must be made to harmonise the several provisions of the instrument to find out the true intention of the executants.'

The principles laid down in the Madras case are not disputed. But reading the deed of partnership of the instant case I do not think that the parties intended to make any provision, (a) as to the duration of the partnership or (b) as to the determination of partnership.

28. With regard to Clause 5 which provides that any partner may retire by giving six months notice. Section 32 of the Partnership Act has to be considers ed. Section 32 provides that a partner may retire under certain circumstances and one of the circumstances under which a partner may retire is in accordance with the express agreement of the partners. In this case, the partners have made an agreement that any partner may retire, only by giving six months notice. This is the express agree-merit in the deed of partnership in the Instant case. It is not a provision for dissolution, but for retirement of a partner under certain express terms, Again. Section 32(1). Sub-section (c) dearly shows that even in a case of partnership at will, a partner may retire by giving notice in writing to all partners of his intention to retire. Thus, partnership law makes it clear that a provision for retirement is consistent in a partnership at will.

29. The fact that in the instant case there are two partners only, does not make any difference. The law cf partnership does not say that a different law will apply if there are two partners only. All that the Partnership Act provides is that there cannot be partnership Unless there are at least two partners. Thus whether there are two partners or more than two partners the Partnership Act will equally apply.

30. The Supreme Court in. : [1961]3SCR998 observed as follows:

'It is true that in this particular case there were only two partners and the partnership will come to an end as soon as one partner relinquishes his right in favour of the other. That however is a fortuitous circumstance, for if (for example) there had been four partners in this case and one of them relinquished his right in favour of the other partners, the partnership would not come to an end.'

31. The partnership deed in the instant case provides for two contingencies with regard to (a) retirement and (b) death of a partner. The deed of partnership does not make any provision for dissolution. Therefore, the argument of Mr. Das that Clauses 5 and 6 of the deed of partnership provide for duration or for determination, is not acceptable to me. Thus prima facie. I have no doubt that this is a partnership-at-will.

32. Mr. Das next argued that the plaintiff has waived his right to dissolve the partnership, inasmuch as he has given a go-by to the purported notice. It is stated that the plaintiff has carried on and had actively participated in the carrying on of the business of the said firm. It is stated that the plaintiff has drawn a number of cheques subsequent to March 17. 1971 on behalf of the firm in favour of various persons for carrying on its business. It is also stated that the plaintiff has attended Sales Tax Office to represent the firm. The plaintiff has sold goods to partners after the notice. The plaintiff has signed slips as partner after the notice.

33. The next point is the point of delay in making this application. In this connection, Mr. Das relied on (1971)75 Cal WN 173 (Richard B. T, H. Chow v. J. C. Wakin) and referred to paragraphs 11 and 13 of the judgment at pages 178 and 179, where it is stated as follows:

'In so far as this is an application for an injunction restraining the first and the second appellants from acting as Directors and from giving effect to certain Board Resolution, in an interlocutory proceeding, certain considerations must be borne in mind. One such consideration is that the appellant's case must be so clear, manifest and free from doubt as to entitle him to an injunction on an interlocutory application. In other words, an interlocutory injunction restraining a party from doing certain acts should be issued in a case where on the grounds on which the claim is based, the right to such an injunction would be beyond any doubt altogether.

One of the questions to be taken into consideration in such a case is the balance of convenience or inconvenience.'

34. Lastly, Mr. Das invited my attention to Woodroffe on Receiver at page 116, where the off quoted statement of Lord Eldom in Goodman v. Whitcomb. (1926) 37 ER 492 is quoted, namely:

'It may be a question whether the Court will not restrain a partner if he has acted improperly, from doing certain acts in future, but if what he has done does not give the other party a right to have a dissolution of the partnership, what right has the Court to appoint a receiver, and make itself the manager of every trade in the Kingdom?'

35. My attention was drawn to the letters and correspondence between the parties. There is not a single letter after the notice of dissolution which was replied to by the defendant. A deed of dissolution was sent for the signature of Sheth but that was not signed by him. Mr. Dutt says that what was done by the plaintiff was to carry on the work of beneficial winding up of business and this he submitted that the plaintiff was entitled to do under Sections 46 and 47 of the Partnership Act. My attention was also drawn to the fact that all transactions were made for payment of the liabilities and whatever cheque was drawn was for the purpose of payment of liabilities and statutory dues. There was no operation of banking accounts. There was no operation in respect of new business. The plaintiff Kanji Vora wanted to dissolve the firm mutually and only to continue the business for beneficial winding up of the partnership. In the premises I do not think that there is much substance in the points of waiver or delay raised on behalf of defendant Sheth.

36. I do not understand how this partnership can continue if one of the two partners does not want to continue business with the other partner. At this stage the question is shall I allow defendant Sheth to continue the business when plaintiff Kanji Vora the only other partner does not want the partnership firm to continue and has given a notice of dissolution? If I allow Sheth to continue the business of the firm I will be allowing one partner to continue the Partnership business alone which is expressly prohibited by the deed of Partnership. Under the deed of partnership the business can only be carried on, by mutual consent of the partners but here one of the partners does not want to carry on the business and has given notice of dissolution.

37. In the premises. I cannot allow Sheth to continue the business any further.

38. It is unfortunate that the suit could not be settled. I am prima facie satisfied that this is a partnership at will. In any event. I have prima facie no doubt that this is a fit case where the Court will dissolve the firm. Under the facts and circumstances of this case, I think I will accept the prayers of the plaintiff.

39. In the premises, there will be an order in terms of prayers (a), (b). (c), (d) and (e) of the plaint. I appoint Mr. S. N. Modak, Barrister-at-Law, as Receiver in terms of prayer (g) of the plaint, without security and on usual remuneration. The receiver is directed to collect and realise the partnership properties, moneys and assets in terms of prayer (h) of the petition.

40. Cost of the application will be cost in the cause.


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