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2021 DIGILAW 910 (ALL)

Sri Maa Chemist v. State of U. P.

2021-08-17

JAYANT BANERJI, MANOJ MISRA

body2021
JUDGMENT : 1. Heard Shri Madhusudan Dixit, learned counsel for the petitioner; the learned Standing Counsel for the respondent nos.1 and 2; and have perused the record. 2. The petitioner is a firm whose partners were Mannu Lal Manjhi; Anil Kumar; Reeta Singh and Anshu Gambhir. The said firm was granted a drug licence in Form-20 of the Drugs and Cosmetics Rules, 1945. Condition no. 5 of the licence is as follows: "The licensee shall inform the Licensing Authority in writing in the event of any change in the constitution of the firm operating under the licence. Where any change in the constitution of the firm takes place, the current licence shall be deemed to be valid for a maximum period of three months from the date on which the change takes place unless, in the meantime, a fresh licence has been taken from the Licensing Authority in the name of the firm with the changed constitution" 3. Mannu Lal Manjhi, one of the partners of the firm, expired on 09.09.2020. An application giving information of death of Mannu Lal Manjhi was submitted to the Licensing Authority on 01.07.2021. The Licensing Authority, by the order impugned dated 03.07.2021, declared the licence cancelled under the Rules. 4. The order impugned dated 03.07.2021 has been challenged by the licencee-firm on ground that paragraph 12 of the partnership deed between partners of the firm specifically provided that in the event of death of any partner, the partnership shall not dissolve but shall continue among the surviving partners and the legal heirs/representatives of the deceased partner, if they so desired. It has been urged that since the partnership did not automatically dissolve on death of any one of the partners, condition no. 5 of the licence, on the basis of which the Licensing Authority has taken a decision that licence automatically lapsed, would not apply as the firm continued with the remaining partners. 5. In addition to above, the learned counsel for the petitioner submitted that under Rule 66 of the Drugs and Cosmetics Rules, 1945, the licence could only be cancelled after giving opportunity of hearing to the licencee but since no such opportunity was provided, the order impugned is liable to be quashed. 6. Insofar as the first contention of the learned counsel for the petitioner that there was no change in the constitution of the firm, therefore, condition no. 6. Insofar as the first contention of the learned counsel for the petitioner that there was no change in the constitution of the firm, therefore, condition no. 5 was not applicable, is concerned, we are of the view that there is a difference between a firm and a body corporate. A body corporate is distinct legal entity separate from its shareholders, whereas an ordinary partnership firm is not a distinct legal entity. It is only a compendium of its partners. Even the registration of a firm does not mean that it becomes a distinct legal entity like a company. Hence, the partners of a firm are co-owners of the property of the firm, unlike shareholders who are not co-owners of the property of the company, (Vide V. Subramaniam v. Rajesh Raghuvandra Rao, (2009) 5 SCC 608 ). On death of any of the partners of the firm, the constituents of the firm change though, by an enabling clause in the partnership agreement, the firm may not automatically dissolve on death of any one of the partners. Nevertheless, on death of one of the partners, the constitution of the firm would definitely change. Therefore, the contention of the learned counsel for the petitioner that on mere death of any one of the partners, the constitution of the firm would not change, is liable to be rejected and is, accordingly, rejected. 7. Insofar as the second contention of the learned counsel for the petitioner that licence cancellation stood vitiated as no opportunity of hearing was given to the petitioner before passing the order impugned is concerned, suffice it to say that the order impugned is not punitive but declaratory in nature as it merely declares about the automatic consequence of condition no. 5 in the licence. Importantly, condition no. 5 of the licence has not been challenged. Otherwise also, condition no. 5 is an enabling provision whereunder a firm even after losing a partner could continue its business under the licence for three months. It thus, gives a time window to the licencee firm to obtain a fresh licence with the changed constitution of the firm. 8. 5 of the licence has not been challenged. Otherwise also, condition no. 5 is an enabling provision whereunder a firm even after losing a partner could continue its business under the licence for three months. It thus, gives a time window to the licencee firm to obtain a fresh licence with the changed constitution of the firm. 8. In the instant case, as no fresh licence was obtained within that window period and by the time the petitioner gave information regarding death of one of its partners, already three months had passed, the licence stood automatically lapsed in terms of the aforesaid condition no. 5. Thus, in our view, the impugned order being more of an information about automatic lapse of licence, no opportunity of hearing was required to be provided before its issuance. 9. In view of above, we find no merit in this petition. The prayer of the petitioner to quash the impugned order dated 03.07.2021 is, accordingly, rejected. 10. However, since the order impugned is not based on any misconduct on the part of the firm or any of its partners, we deem it appropriate to dispose of this petition by giving liberty to the petitioner to apply for a fresh licence for the firm by giving its new constitution. It is expected that if any such application is submitted after completing all the necessary formalities, the same shall be addressed in accordance with law and appropriate orders shall be passed thereon, preferably, within a period of one month from the date of filing of such application alongwith a copy of this order. 11. With the aforesaid observations and directions, the writ petition is disposed of.