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Madhya Pradesh High Court · body

2007 DIGILAW 200 (MP)

RAMESH KUMAR v. LATA DEVI

2007-02-20

ARUN MISHRA

body2007
( 1 ) THESE two appeals have been filed against an order dated 8-11-2005 passed in Civil Suit No. 26a/2005 by Second Additional district Judge, Khandwa. M. A. No. 3544/2005 has been filed as against rejection of the application under Order 39, rules 1 and 2 whereas M. A. No. 3757/2005 has been filed as against rejection of the prayer to appoint the receiver. ( 2 ) PLAINTIFF/appellant has filed a suit before the Court below for rendition of accounts and permanent injunction restraining the defendants from carrying on the business in the name and style of M/s. Antique Stores, Bombay Bazar, Khandwa. Plaintiff has come with the case that on 1-9-1971 a partnership firm was constituted, it was duly registered under the provisions of the the Partnership Act, 1932 (hereinafter referred to as the Act ). Initially the partnership was entered between Shivalal, father of the plaintiff and Rishi Kumar, Rishi kumar was elder brother of the plaintiff ramesh Kumar. Shivalal died on 14-5-1979. Firm was continued a deed of partnership was executed on 15-5-1979, got registered on 20-6-1979 with the Registrar, Firm and societies. Atul Kumar, son of Rishi Kumar subsequently desired to become a partner, consequently he was inducted and a fresh partnership deed was executed on 1 -4-1989. Rishi Kumar died on 22-12-2001. On his death his widow Smt. Leela Devi was inducted as partner. Firms financial year commenced on 1st April and ended on 31st march of subsequent year. Plaintiff served a notice dated 20-9-2005 by registered post. The profit for the year 2004-05 was not distributed, share of the plaintiff was not given. As the partnership was at will, he dissolved it by serving the said notice. Newspaper publication was also made in Dainik bhaskar dated 20-10-2005, however, account of partnership was not rendered, consequently plaintiff has filed the suit. ( 3 ) THE stand of the defendants /respondents is that partnership can be dissolved by mutual agreement of the partners. One of the partners has no right to dissolve the partnership. Defendants made newspaper publication dated 23-9-2005. As per deed plaintiff had an option of retiring from the partnership business as he was not willing to continue but not to dissolve partnership business, thereafter business is carried out by the subsisting partners. By showing unwillingness to continue, he has retired from business. Defendants made newspaper publication dated 23-9-2005. As per deed plaintiff had an option of retiring from the partnership business as he was not willing to continue but not to dissolve partnership business, thereafter business is carried out by the subsisting partners. By showing unwillingness to continue, he has retired from business. Plaintiff is not entitled for an injunction in view of the terms and condition of the partnership deed. Subsisting partners have the right to continue the business of partnership. ( 4 ) AN application IA No. III under Order 39, Rules 1 and 2 and. A. No. IV under order 40, were filed by the plaintiff. Applications have been rejected as per impugned order dated 8-11-2005. The Trial Court has found that balance of convenience was not in favour of plaintiff and irreparable injury was not going to be caused in case injunction was not granted to the plaintiff. While deciding the. A. No. IV the Court has directed maintenance of the accounts and quarterly audited report to be filed. There has to be monthly maintenance of the accounts of the firm. ( 5 ) IT was submitted by Shri A. D. Deoras, learned Sr. Counsel appearing with Shri R. Jaiswal for appellant that in view of Clause 8 of the agreement partnership was at will and notice has been served by the plaintiff, thus partnership came to an end, it stood dissolved on the date the notice was served. Section 53 of the Act comes into play it confers an unfettered discretion on every partner or his representative in the absence of contract to the contrary to restrain any other partner or his representative from carrying on his similar business in the firm's name or from using any of the property of the firm for his own benefit, thus the defendants ought to have been restrained from using firm's name and using the assets of the firm for their own benefit during pendency of the suit. As partnership stood dissolved, mandatory consequence of Section 53 of the Act has been ignored by the Trial Court while declining an injunction. As partnership stood dissolved, mandatory consequence of Section 53 of the Act has been ignored by the Trial Court while declining an injunction. He has further submitted that provision of Order 39, Rules 1 and 2, CPC is not attracted in view of independent provision of Section 53 of the Act, questions of balance of convenience and irreparable injury, are not germane once partnership has been dissolved in view of the section 53 of the Act. He has further submitted that in view of the conflict between the different clauses of the partnership deed, earlier clause has to prevail. In Clause 8 of the deed the word used 'and' has to be interpreted as 'or'. Clause 8 should be interpreted by this Court that partnership was at will or could be dissolved by mutual agreement, thus impugned order passed by the trial Court with respect of injunction be set aside. He has submitted that an outcome of the appeal about injunction would decide the fate of the application filed for the purpose of appointment of receiver. ( 6 ) SHRI Imtiyaaz Hussain, learned counsel with Shri Rohtash babu Patel, for respondents has submitted that in view of section 7 and Section 40 of the Partnership act and clear provision in the agreement that partnership can be dissolved 'by mutual agreement of the partners', clause 11 of the agreement provides that even on death of partner, there is no cessation of the partnership. Legal representative of the deceased partner has to be inducted, thus it cannot be said to be a partnership at will. There is no mutual agreement reached for dissolution of the partners. He has also referred to an earlier partnership deeds and the partnership deed in question dated 1-4-1992 in which the term of words 'mutual agreement' has been added, there has to be dissolution by mutual agreement. It was not so mentioned in the earlier partnership deeds (R2a) dated 2-9-1971, (R-2b) dated 6-6-1979 and (R-2c) dated 1-4-1989. He has also referred to the various decisions to be referred later. ( 7 ) PIVOTAL question for consideration for deciding the application under Order 39, rules 1 and 2 is that whether the partnership was at will and has been dissolved by the plaintiff by serving a notice dated 17-9-2005. He has also referred to the various decisions to be referred later. ( 7 ) PIVOTAL question for consideration for deciding the application under Order 39, rules 1 and 2 is that whether the partnership was at will and has been dissolved by the plaintiff by serving a notice dated 17-9-2005. ( 8 ) SECTION 7 of the Act provides where no provision is made by the contract entered into between partners as to the duration their partnership or for determination of their partnership is 'partnership at Will'. In case parties have fixed the duration or mode of determination of their partnership, partnership cannot be said to be at Will, intention of the partners has to be gathered from the various clauses of the partnership deed. However, there is no provision made for duration or for mode of determination of partnership, partnership is at Will. Section 40 of the Act provides dissolution by agreement, firm may be dissolved with the consent of all the partners or in accordance with a contract between the partners. In the absence of contract between the partners, consent of all the partners is necessary for dissolution as provided in Section 40. When the dissolution of partnership takes place, is called 'dissolution of the firm', Section 41 provides for compulsory dissolution in the exigency where one of the partners have been declared insolvent by the happening of any event which makes it unlawful for the business of the firm to be carried on or for the partners to carry it on in partnership, however where more than one separate adventure is carried on by the firm the illegality of one or more shall not cause the dissolution of the firm in respect of its lawful adventures. Section 42 provides for dissolution on the happening of certain contingencies, however, these contingencies are subject to contract between the partners a firm is dissolved if constituted for a fixed term, by the expiry of that term, if constituted to carry out one or more adventures' or undertakings by the completion thereof, by the death of a partner and by the adjudication of a partner as an insolvent. ( 9 ) THE Apex Court in Karumuthu thiagrajan Chettiar and another v. E. M. Muthappa Chettiar AIR 1961 SC 1225 has considered the provision of section 7 and laid down that partnership Will not be at will if the duration can be implied from entire reading of the deed, intention of the partners has to be considered whether it was to have partnership of some duration, though duration was not expressly fixed in the agreement. The term in the contract that either partner might withdraw from the partnership by relinquishing his right of management to the other partner did not make the partnership a partnership at Will, for the essence of a partnership at Will is that it is open to either partner to dissolve the partnership by giving notice. The partnership could not therefore be determined by the appellant Thiagarajan by giving notice to the respondent. The decision Karumuthu Thiagrajan chettiar and another v. E. M. Muthappa chettiar (supra) has been followed in Iqbalnath premnath Anand v. Rameshwarnath premnath Anand and another AIR 1976 bombay 405. ( 10 ) IN M. O. H. Uduman and others v. M. O. H. Aslum AIR 1991 SC 1020 the Apex court has considered the provision of partnership. There were more than two partners, it was held not to be partnership at Will, the partner has no right to dissolve it at his Will. The Apex Court considering the clause that the partnership shall continue between the remaining partners unless all the partners 'mutually agree' to determine the relationship, held that partner had no right to dissolve the partnership except to seek accounting for the period in dispute or his right to withdraw or retire from partnership and to take the value of his share in the partnership either by mutual agreement or at law in terms of the partnership deeds. ( 11 ) IN Suresh Kumar Sanghi v. Amrit kumar Sanghi and others AIR 1982 Delhi 131 there was clause in the partnership deed providing that partnership not to be dissolved, under terms of contract, on the death or retirement of partner but to be continued with other partners and nominees or legal heirs of deceased or retiring partner, it was held by the Apex Court that partnership was not at Will. ( 12 ) WHEN we consider the clauses in the partnership deed dated 1-4-1992 under which parties have carried on the business till service of the notice for dissolution, clauses 8, 10, and 11 are quoted below :- (8) DURATION :-- THAT the partnership shall be 'at Will' of the partners and may be dissolved by the mutual agreement of the partners. (10) RETIREMENT :- THAT the partner who intend to retire from the firm, will have to give sixty days notice of his intention of retiring from the firm to other partners. (11) DEATH OR RETIREMENT :- THAT the death or retirement of a partner will not dissolve the partnership and the same will be carried on by the surviving partners or by taking the successors of the deceased partner as partner as per mutual agreement. ( 13 ) SECTIONS 7 and 40 of the Indian Partnership Act are quoted below :- 7. Partnership at Will.- Where no provision is made by contract between the partners for the duration of their partnership or for the determination of their partnership, the partnership is 'partnership at Will'. 40. Dissolution by agreement - A firm may be dissolved with the consent of all the partners or in accordance with a contract between the partners. ( 14 ) WHEN we consider Sections 7, 40 of the Act and Clauses 8 and 11 of the partnership deed dated 1 -4-1992, it is clear that prima facie parties have contracted for dissolution by mutual agreement, that is reinforced by provision made in clause 11 that death or retirement of partner will not dissolve the partnership and same will be carried on by the surviving partners or by taking the successors of the deceased partner, as partner as per mutual agreement. Thus submission of Shri A. D. Deoras, learned Sr. Counsel that partnership to be at Will and mutual consent of the partners for dissolution is not necessary, cannot be accepted, full effect has to be given to the intention of the parties to be gathered from conjoint reading of clauses of deed in particular clauses 8 and 11, the partnership deed manifest the intention of the parties not to determine it, even in the case of death or retirement of partner, partnership has to continue by surviving partners so long as it is possible. The condition in clause 8 of dissolution by 'mutual agreement' has to be given meaning and is of significance. An option is available to the partner to seek retirement if he does not want to continue as partner. As per partnership deed prima facie dissolution appears to be permissible with the 'mutual agreement' of the partners. It is not in dispute that there is no mutual agreement between the partners in the instant case for dissolution of the firm. Two of the partners are carrying on the business in the partnership. ( 15 ) THE outcome of submission raised by Shri Deoras that Section 53 gives unfettered discretion to the appellant/plaintiff to restrain the remaining partners of dissolved firm to carry on the business in the name of the firm and with the help of the assets of the firm depends upon the material aspect whether partnership was at Will and firm has been dissolved. Prima facie it cannot be said that firm has been dissolved in view of clauses 8 and 11 of the partnership deed. As per Section 53 of the Act, it is only after dissolution, until and unless there is contract to the contrary, every partner or his representative may choose to restrain other partner or his representative from carrying on the similar business in the name of firm or from using any of the property of the firm for his own benefit. Section 53 of the act is quoted below :- 53. Right to restrain from use of firm name or firm property.- After a firm is dissolved, every partner or his representative may, in the absence of a contract between the partners to the contrary, restrain any other partner or his representative from carrying on a similar business in the firm name or from using any of the property of the firm for his own benefit, until the affairs of the firm have been completely wound up. So as to exercise an option under Section 53, it is necessary to establish that firm has been dissolved and after dissolution of the firm contract has to be seen. In the absence of contract to the contrary there is option available to restrain any other partner or his representative from carrying on the business in the firm name or using any of the property of the firm. In the absence of contract to the contrary there is option available to restrain any other partner or his representative from carrying on the business in the firm name or using any of the property of the firm. What appears to be intended by Section 53 of the Act is that after dissolution firm name should not be used, though it is open to do similar business but not in the name of firm, or injunction can also be sought from using any of the property of the firm till the affairs of the firm have been completely wound up. Proviso to section 53 makes it clear that where any partner or his representative has bought the goodwill of the firm, nothing in this section shall affect his right to use the firm name. ( 16 ) PLAINTIFF has yet to prove his case before Trial Court that firm has been dissolved. For deciding prima facie case relating to interlocutory application of an injunction, finding is against the plaintiff in view of Clauses 8 and 11, thus submission raised by Shri Deoras based on section 53, cannot be accepted. ( 17 ) IT may be noticed that a Division bench in Smt. Kusum Gupta and others v. Smt. Sarla Devi and others, AIR 1988 allahabad 154 has laid down that temporary injunction if prayed under Order 39, rules 1 and 2 in the context of Section 53 of the Act, the Court has to consider prima facie case, balance of convenience and question of irreparable Injury, as at this stage it cannot be said finally that there is dissolution of the firm and the prima facie finding is against the plaintiff. Under Order 39. Rules 1 and 2, CPC the existence of three ingredients necessary for grant of temporary injunction. e. prima facie case, balance of convenience and irreparable injury comes into play. In the instant case later two aspects have not been found to be in favour of plaintiff by the Court below. Even on the first ingredient of prima facie case, there is serious doubt whether partnership was at Will and has been dissolved. e. prima facie case, balance of convenience and irreparable injury comes into play. In the instant case later two aspects have not been found to be in favour of plaintiff by the Court below. Even on the first ingredient of prima facie case, there is serious doubt whether partnership was at Will and has been dissolved. Though it is permissible for the Court to issue injunction during pendency of the suit for use of the erstwhile firm's property as held in Rajendra kumar Sharma v. Brijendra Kumar Sharma and another AIR 1994 Allahabad 62 but such power has to be exercised duly considering the aforesaid three aspects essential for grant of temporary injunction under order 39, Rules 1 and 2 during pendency of the suit. Thus, I find that plaintiff/appellants are not entitled for grant of injunction and the Trial Court has rightly found it that balance of convenience is not in favour of plaintiff and irreparable injury is not going to be caused in case injunction is withheld. ( 18 ) WITH respect to prayer for an appointment of receiver, counsel has rightly submitted that much depends on the decision of application under Order 39, Rules 1 and 2, even otherwise no case for appointment of receiver is made out. ( 19 ) RESULTANTLY, I find appeals to be meritless, consequently appeals are hereby dismissed. However, I leave the parties to bear their own costs as incurred. .