TMI Blog1966 (8) TMI 78X X X X Extracts X X X X X X X X Extracts X X X X ..... the amount of capital invested by him until all the construction works undertaken by the firm were completed. The partners were divided into three groups; the first group consisting of the plaintiffs and defendant No. 8 the second group consisting of defendants Nos. 2 and 3 and the third group consisting of defendants Nos. 4 to 7 and under Clause 5 of the partnership deed the management of the partnership business was entrusted to three Managing partners, one drawn from each group. Clauses 6 and 7 of the partnership deed which are material Clauses for the determination of this appeal were in the following terms as translated in English:- 6. The duration of this partnership is not fixed and it will, therefore, be a partnership at will. 7. Each partner will be entitled to a share in the goodwill of the firm according to his share in the partnership. If any partner wishes to retire from the firm, he can do so by giving notice in writing to the other partners of his intention to retire after completion of the pending construction works and the retirement shall take effect after the pending construction works are completed, accounts in respect thereof are taken and the amount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce the venture, namely, the construction of the road undertaken by the firm was not complete, the suit for dissolution of the partnership was not maintainable. In this stand defendants Nos. 5 to 7 were supported by defendant No. 4 who belonged to their group. The other defendants, however, agreed with the plaintiff that the partnership was a partnership at will and was, therefore, dissolved by the notice dated 15th December, 1956. The main dispute, so far as the issues for determination in a preliminary decree are concerned, therefore, was as to what was the date of dissolution of the partnership. The trial Court on a consideration of the provisions of the partnership deed held that the partnership was a partnership at will and must, therefore, beheld to be dissolved from 18th December, 1956, being the date of receipt of the notice dated 15th December 1956 by the defendants. The trial Court accordingly passed a preliminary decree on the basis that the partnership was dissolved from 18th December 1956. Defendants Nos. 5 to 7 were aggrieved by this determination of the trial Court and hence they preferred the present appeal in this Court. (2) The notice dated 15th December, 1956 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contract and the nature of the business Vide Thiagarjan v. Muthappa Chettiar, AIR 1961 SC 1225. What we have, therefore, to see is whether there is in the present case in the contract of partnership any express or implied provision as to the duration of the partnership or as to when the partnership will determine. It was conceded on behalf of defendants Nos. 5 to 7 that there was no provision in the contract of partnership express or implied in regard to the duration of the partnership and this concession was inevitable in view of Clause 6 of the partnership deed; but the contention of defendants Nos. 5 to 7 was that Clause 7 of the partnership deed contained an express provision for the determination of the partnership within the meaning of Section 7 and the partnership was, therefore, not a partnership at will. Now Clause 7 on the face of it dealt with the subject of retirement of a partner and not dissolution of the partnership and the contention of defendants Nos. 5 to 7, therefore, appeared to be unsustainable, but defendants Nos. 5 to 7 sought to equate retirement with dissolution and contended that requirement of a partner operated to disrupt jural relationship of partners ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... artners; the only alteration of jural relationship which takes place is that the jural relation of the retiring partner with the other partners is served but the jural relation of partnership subsisting between the other partners remains unaffected. Out of several strands of jural relations which go to make up the juridical concept of partnership between certain specified individuals, those connecting the retiring partner with the continuing partners are snapped inter se remain intact and the partnership continues as between the continuing partners. There is this a clear and well recognised distinction between retirement of a partner from a firm and dissolution of a firm. These terms are not synonymous either in their judicial content or their legal implications and consequences. They are treated separately by the law of partnership: one is dealt with in Section 32 while the other is dealt with in Chapter VI commencing with Section 39. If as alleged by defendants Nos. 5 to 7 retirement of a partner from a firm has the effect of bringing about dissolution of the partnership between all the partners it is difficult to imagine what should have induced the Legislature to treat retireme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he theory that in the law of partnership in India a firm is not recognised as a legal entity but is merely a compendious name for the persons who constitute the partnership and it ignores the scheme of the Act and some of its basic provisions. It is undoubtedly true that under the law of partnership in India, as in England, a firm has no legal existence apart from the partners composing it and it is merely a compendious name to describe the partners collectively and, therefore, according to the strict view of the law, on any change amongst the partners comprising a firm, there would in fact be a be firm but the law has, in conformity with mercantile usage which recognizes a firm as a distinct person or quasi-corporation, departed form the strict legal view and extended a limited personality to a firm so that a firm continues to exist despite changes in its constitution brought about by introduction, retirement, expulsion, death or insolvency of a partner. Chapter V contains provisions relating to introduction, retirement, expulsion, death or insolvency of a partner without dissolution of the firm. Where a person is introduced as a partner in a firm under Section 31 or a partner ret ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n Chapter V therefore clearly extend a limited personality to a firm despite internal changes in the constitution of the firm such as introduction, retirement, explusion, death or insolvency of partner. In this respect the law of partnership in India represents a compromise between the strict view of the English law which refuses to accord a legal personality to a firm and regards it merely as a compendious name for the partners and the mercantile usage which recognises a firm as a distinct entity or quasi-corporation. This view is clearly supported by the following observations of Mahajan, J. In I. T Commissioner v. A. W. Figgis and Co., AIR 1953 SC 455 at p. 456:- It is true that under the law of partnership a firm has no legal existence apart from its partners and it is merely a compendious name to describe its partners but it is also equally true that under that law there is no dissolution of the firm by the mere incoming or outgoing of partners. The reconstituted firm can carry on its business in the same firm's name till dissolution. The law with respect to retiring partners as enacted in the Partnership Act is to a certain extent a compromise between the strict doc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... place on Section 7 was a reasonably possible meaning. Now whatever may be the ambiguity in the expression dissolution of partnership about which we do not wish to express any opinion, it must be remembered that the expression which has been used by the Legislature in Section 7 is not dissolution of partnership is, in the context in which it stands, wholly unambiguous and capable of bearing only one meaning, namely, determination of partnership inter se between all the partners. On a plain grammatical meaning of the words therefore the construction contended for on behalf of defendants Nos. 5 to 7 cannot be accepted. But apart from the fact that the suggested construction is opposed to the language of the enactment, we find that it is also contrary to the scheme of the Act, and, if accepted is likely to lead to rather extraordinary consequences. On the suggested construction even a provision in the partnership deed for expulsion of a partner would be liable to be regarded as a provision for determination of their partnership within the meaning of Section 7 and would take the partnership out of the category of partnership at will. In such a case though there may be no provisio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the partnership should not be determined until the pending construction work were completed. But this contention is also like the preceding contentions, ill founded. In the first place Clause 6 of the partnership deed expressly declares that the partnership shall be a partnership at will and in view of the clear and explicit declaration contained in this clause there is no room or scope for making a contrary implication; such an implication is clearly excluded by the plain unambiguous and deliberate expression of intention of the parties manifested in this clause. Secondly, the implication seems to be altogether without any basis. The circumstances which were strongly relied upon on behalf of defendants Nos. 5 to 7 for making the implication were: (1) Clause 2 of the partnership deed provided that no partners shall be entitled to withdraw the moneys brought by him until the construction works undertaken by the firm were completed; (2) Clause 7 of the partnership deed prevented a partner from retiring before completion of the pending construction works; and (3) the object for which the partnership was founded was to take up heavy construction works such as roads, bridges etc. A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpletion of the pending contracts, the mutual rights and obligations of the partners continue as if there was no dissolution, the provision in Clause 7 of the partnership deed cannot, therefore, be read as suggestive of an intention on the part of the partners that the partnership should not be dissolved until the pending contracts are completed. So far as the nature of the business of the partnership is concerned, that also, in our view does not support the inference contended for on behalf of defendants Nos. 5 to 7. The object of the partnership was to take up contracts for heavy construction work in various parts of India and before any contracts pending at a particular point of time were completed the partnership could very well take up other contracts and it is difficult to see how it could be said that the partnership was not intended to be dissolved until completion of the pending contracts. The expression 'pending contracts would have meaning only in reference to a given point of time and it would make no sense to speak of an implied agreement between the partners that the partnership should not be dissolved until the pending contracts are completed. We are therefore, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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