KESHAVLAL LALLUBHAI PATEL Vs. PATEL BHAILAL NARANDAS

JUDGEMENT

(1.) The short question that arises for determination in this appeal is as to the date of dissolution of a partnership constituted of the plaintiffs and the defendants. By a deed of partnership dated 4th July 1954 the plaintiffs and the defendants agreed to carry on business in partnership in the firm name of National Construction Company on the terms and conditions recorded in the partnership deed. The business of the partnership was stated in Clause 1 of the partnership deed to be construction of buildings roads dams canals and other structures in various parts of India and production and transport work in connection with the same. Clause 2 of the partnership deed provided that none of the partners should withdraw 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 plaintiff 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 partner ship 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:-

(2.) The notice dated 15th December 1956 given by the plaintiff to the defendants dissolving the partnership was avowedly given under sec. 43 of the Partnership Act and under that section it could operate to dissolve the partnership from the date of its receipt by the defendants only if the partnership was a partnership at will. The controversy between the parties therefore centred round the question whether the partnership was a partnership at will. Now what is a partnership at will is defined in sec. 7 and according to that definition :

(3.) We cannot assent to the proposition that retirement of a partner has the effect of dissolving the jural relation of partnership inter se amongst all the partners. The law of partnership draws a distinction between retirement of a partner and dissolution of a firm. sec. 39 defines dissolution of a firm as dissolution of partnership between all the partners partnership is the jural relation between partners who are collectively called a firm and when this jural relation is snapped between all the partners inter se that constitutes dissolution of the firm. But there may be cases where a partner may wish to withdraw from the firm without affecting the jural relation subsisting between the other partners. He may wish to sever his jural relation as a partner with the other partners leaving the jural relation to the other partners inter se unaffected. He can do so in the cases set out in sec. 32 and when he does so he is said to retire from the firm. When a partner retires from a firm there is no dissolution of partnership between all the partners: there is no severance of the jural relation of partnership inter se between all the partners: the only alteration of jural relationship which takes place is that the jural relation of the retiring partner with the other partners is severed 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 but the others connecting the continuing partners inter se remain intact and the partnership continues as between the continuing partners. There is thus 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 juridical content or their legal implications and consequences. They are treated separately by the law of partnership: one is dealt with in sec. 32 while the other is dealt with in Chapter VI commencing with sec. 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 retirement as a separate topic under Chapter V and not regard it as one of the modes of dissolving the firm dealt with under Chapter VI. Secs. 32(1)(c) and 43 would also in that event overlap for a notice of retirement under sec. 32(1)(c) would have the effect of dissolving the partnership between all the partners that is of dissolving the firm which according to sec. 43 must needs be done by a notice of dissolution. This distinction between retirement of a partner from a firm and dissolution of a firm is also recognised by judicial decisions of which we may cite only two namely Sohanlal Pachisia & Co. v. Bilasray A.I.R. 1954 Calcutta 179 and Meenakshi Achi v. P. S. M. Subramaniam Chettiar A.I.R. 1957 Madras 8. In the former case Bose J. said:-