Vishnu Chandra v. Chandrika Prasad Agarwal (1983)

Case Number:

Civil Appeal No. 3717 of 1982, arising out of SLP (Civil) No. 8056 of 1981

Case Citation:

(1983) 1 SCC 22 : 1983 ALJ 488 : AIR 1983 SC 523

Bench:

D.A. Desai and R.B. Misra

Decided On:

18 November 1982

Section:

Section 32(1)(b) of the Indian Partnership Act, 1932

Section 32 of the Indian Partnership Act, 1932 deals with the retirement of a partner. Section 32(1)(b) has provided for the retirement of a partner in accordance with an agreement. According to this, a partner may retire if there is an express agreement between the parties for the same.

Facts of the Case

The plaintiff-appellant had filed a suit in the Trial Court for the dissolution of the partnership firm and also for the rendition of the accounts of “Shyam Bricketing Udyog”. The firm was situated in Etah in the state of Uttar Pradesh. which was also the principal place of business of the firm. The trial court granted the relief of dissolution effective from 23 November 1976 and also passed the decision in favor of rendition of accounts. The respondents-defendants were not pleased by this and approached the High Court. The High Court allowed the suit and set aside the concurrent findings. The High Court dismissed the suit of the plaintiff along with the costs. Thus this appeal is by special leave.

The plaintiff had filed a suit for the dissolution of the firm and rendition of accounts. He alleged that the partnership was at will and that the firm had been dissolved on 23 November 1976 by notice. The respondents argued that the partnership wasn’t, in fact, a partnership at will.

Issues before the High Court

Whether the partnership was a partnership at will
Whether the respondent (now appellant) was entitled to retirement or dissolution of the firm itself.

After listening to the arguments of both sides and after a thorough discussion, the High Court held that the partnership wasn’t a partnership at will. This court shall not take up the first contention and only take up the second contention.

The present issue before the Court

Whether the appellant is entitled to retirement or the dissolution of the partnership itself.

The ratio of the Bench

The two-judge bench of the Supreme Court did a thorough reading of Clauses 18 and 20 of the instrument of Partnership. The bench also discussed Section 32(1) of the same. Upon reading Clauses 18 and 20 the court observed that a partner can in fact disassociate from the firm. In the same way, Section 32(1)(b) provides for the retirement of a partner in accordance with the terms of the partnership The bench held that the High Court made an error and did not view the plaintiff’s contention from the correct angle. The High Court went into the appreciation of the contention as a breach of contract and did not go into the absolute right to retire from a partnership conferred by Clause 18.

The court upon a combined reading of the Clauses 18 and 20 observed that there was no bar on the right to the retirement of a partner within one year of the commencement of the partnership and that there was only a consequence to such an action. The consequence is that the capital shall not be refunded until the expiry of the period of one year.

The decision of the Court

The two-judge bench of the Supreme Court decided that the plaintiff had retired from the partnership and that such retirement is effective from the day of the institution of the suit.

They held that the partnership is not dissolved and that the accounts shall be taken up to and inclusive of the day which precedes the institution of the suit.

The case analysis has been done by Om Gupta, a first-year law student pursuing BBA-LLB from the University School of Law and Legal Studies.

The case analysis has been edited by Shubham Yadav, a 4th year Law student at Banasthali Vidyapith, Jaipur.

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