Maddi Sudarsanam And Ors. vs Borogu Viswanadham Brothers And … on 17 September, 1954

Andhra High Court
Maddi Sudarsanam And Ors. vs Borogu Viswanadham Brothers And … on 17 September, 1954
Equivalent citations: AIR 1955 AP 12
Bench: S Rao


(1) The question in this Second Appeal is whether S. 69 (2), Partnership Act, 1932 is a bar to the maintainability of the suit.

(2) The facts giving rise to the said question of law may be stated: A firm known as “Burugu Viswanadhan Bros.” consisting of five persons viz., Burugu Mahadevudu, his brother Burugu veerayya, Parripati Venkatarathnam, and his two brother Subrahmanyam and Venkata Subba Rao as partners was formed in 1925. They executed a registered agreement on 8-6-1925 setting out the terms and conditions of the partnership. The Partnership Act (hereinafter referred to as the Act) came into force in 1932. The firm of Burugu Viswanadham Bros. consisting of those partnerss was registered under the Act in 1933. The names of the said five partners are shown in the Register of Firms as partners of the firm. Burugu Veerayya died on 17-7-39.Parripati Venkatarathnam and his two brothers became divided on 11-11-1939. Under the partition the interests of the three brothers in the assets and liabilities of the firm was taken over by Venkatarathnam and his brother Subramanyam. The third brother Venkata Subba Rao retired from the partnership.

On 24-6-1940 Mahadevudu, Venkatarathnam and Subrahmanyam executed a fresh agreement of partnership Ex. B.1. No notice either of the death of Veerayya or of the retirement of Venkatasubba ao had been given to the Registrar. The suit dealings with the defendant firm, the Bala Tripura Sundari Groundnut Mill & Company, Inkole, Bapatia, were commenced after 1940. The suit was filed by the plaintiff firm for recovery of a sum of Rs.3951-4-0 from the defendants in respect of the dealings they had with them.

(3) The defendants, inter alia, contended taht time plaintff firm was different from that constituted in the in the year 1925, that it was not registered under the Parnership Act, and that S. 69 (2) of the Act was a bar to the maintainability of the suit.

(4) The first Court accepted the contention of the defendant and dismissed the suit. The appellate Court held that the plaintiff firm was the same firm as that formed in 1925, and registered under the Act, and that the suit was, thereforce, maintainable. The defendants have preferred the above Appeal.

(5) The learned Counsel for the appellants raised before me two points (i) by the death of Burugu Veerayya, one of the partners. on 17-7-1939, and by the retirmenet of Venkatasubba Rao, another partners from the partnership on 11-11-1939, the partnership formed in the year 1925 was automatically and legally dissolved and the plaintiff firm was a new firm constituted under Ex. B-1, and (ii) B-1 expressly disolved the old firm and constituted a new firm in its stead.

(6) The relevant provision of the Act is S. 69 (2). It reads:

“No suit to enforce a right arising from a contract shallbe instituted in any Court by or on behalf of a firm against any third party unless the firs is registered and the persons suing are or have been shown in the Registrar of firms as partners of the firm.”

Under this Section, a firm is disabled to file a suit against a third party unless two conditions are complied with (i) the firm is registered and (ii) the persons suing are shown in the Register of firms as partners of the firm. The first question, therefore, is whether the suit frim “Burugu Viswanadham Brothers” was registered under the Act.

(7) The firm was orignally constituted under the partnership agreement Ex. A-15 dated 8-6-1925. Admittedly, that was registered under the Partnership Act and the names of the five partners were shown in the Register. But, it is contended that the death of one of the partners and the retirement of another had the effect of dissolving that firm. This leads on to the consideration of the two subsidiary questions, viz., (1) what is the effect of the retirement of a partner on the constitution of the firm, and (ii) what is the effect of the death of a parnter on its constitution?

(8) Before the enactment of the Partnership Act in the year 1932, the rights of the lpartners were governed by the Contract Act. Section 253 prescribed the rules determining the partner’ mutual relations where there is no contract to the contrary. Section 253, C. (7) says:

“If from any cause whatsoever, any member of a partnership ceases to be so, the partnership is dissolved as between all the other members.”

(9) A Full Bench of the Madras High Court in — ‘Commr. of Income-tax, Madras, v. Muthukaruppan Chettiar,’ AIR 1934 Mad 633 (A), on the basis of that section held that, upon the retirement of a partner from the Partnership, the partnership was dissolved as between all the other membrs. This view certainly is unexceptionable as the provisions of S. 253 (7) are clear. But after the enactmentof the Partnership Act, the rules governing the dissolution of the partnership are laid in ss. 39 to 44 tha Act. In the Contract Act the circumstances under which the dissolution of a partnership takes place, and its consequences are not exhaustively and separately laid down. But in the Partnership Act, a separate chapter has been allotted and definite rules are prescribed for dissolution and its consequences. Pollock and Mulla in their book on the Indian Partnership Act summarise the relevant sections at page 113 as follows:

“We have now rules, mainly following those laid down in the English Act, for dissolution by consent (Section 40 by operation of Law (Section 41) automatically (Section 42) optionally (Section 43) and judicially (Section 44) and the consequent winding up of the firm affairs and settlement of accounts.”

There is no corresponding provision to S. 253 (7) Contract Act providing for the dissolution of the partnership on any member of the partnership ceasing to be a parner.

(10) The learned Counsel for the appellants contended that the Legislature omitted the rule as the principle embodied in s. 253(7), Contract Act was well-settled and self-evidence andits separate enactment was unnecessary. What is more settled than the impact of the death of a partner on the constitution of a partnership? But yet the Partnership Act provides for it. When an express provision in the Contract Actis omitted in compilling a separate Code for partnership, it is obvious that the omission is designed but not acidental. It follows that the retirement of Venkatasubba Rao from the partnership on 11-11-1939 had not the legal effect of dissolving it.

(11) The next question is whether the death of Burugu Veerayya on 17-7-1939 had such an effect. Section 42, Partnership Act governs the situatioin. It reads:

“Subject to contract between the partners a firm is dissolved……………………………(c) by the death of a partner.”

Under this section, a firm is dissolved by the death of a partner, unless there is a contract to the contrary. Whether there is a contract to the contrary falls to be considered on the construction of the Articles of the Partnership agreement Ex. A-15, dated 8-6-1925. The relevant Article reads:

“Now these presents witness that the said Burugu Mahadevudu and Burugu Veerayya of the first part hereinafter jointly called the principal partners, which expression, unless it is repugnant to the subject or contract shall mean and include not only the said Burugu Mahadevudu and Veeraya, but also their survivors, heirs, executors and administrators, and the said Parripati Venkatarathnam, Venkata Subba Rao andsubrahmanyam of the second part hereinafter referred to as working partners, have agreed to continue the said business at Guntur, subject to the terms and stipulations hereunder set forth.”

It will be seen from the aforesaid recitals that, the partnership is composed of two categories of partners (i) principal partners and (ii) working partners. A clear distinction is maintained between the two classes of partners. In the case of the former, the principal partners include not only the contracting partners, but also their heris, executors and administrators, whereas in the case of the latter, the partners do not include their heirs. It is obvious from the distinction that, under theterms of the partnership, it was not intended that the death of any principal partners would dissolve the partnership. I would, therefore, hold that there is a contract to the contrary in Ex. A-15 Excluding the operation of S. 42(c), Partnership Act. It follows that the death of Burugu Veerayya on 17-7-1939 did not put an end to the partnership, and that the partnership constituted and carried on in the name and style of Burugu Viswanadham and Brothers was not dissolved. The suit now filed is by the same firm, which was duly registered under the Act.

(12) The second condition laid down in S. 69 (2) is also satisfied. The persons now suing i.e., the present parents are shown in the Register of firms as partners of the firm, thoiugh the same Register shows two other partners, one of whom died and the other retired. It may be that the fact of retirement of one of the partners and the deathof another should have been notified to the Registrar under S. 63(1) as the said events effects a change in the constitution of the firm. But the default made by the firm is not, in not so notifying, of any relevance in considering the question of the maintainability of the suit under S. 69(2). There is the essential distinction between the constituion of a firm and its dissolution. Non-compliance with the provisions of S. 63 (1) may have other consequences, but under S. 69 (2) only two conditions should be complied with by a firm to enforce a right arising from a contract and those two conditions are complied with in the present case.

(13) It is then contended that, under Ex. B-1, the old firm was expressly dissolved and a new firm was formed thereunder. Exhibit B-1 is the partnership agreement, dated 24-6-1940. The agreement is between Burugu Mahadevudu of the one part Parripati Venkatarathnam and Subrahmanyam of the other part. The document in the preamble mentions, that change in the constituion of the partnership have taken place, that Barugu Veerayya died, that the joint Hindu family of Parripati brothers was divided, and that venkatasubba Rao, one of the partners retired and that the remaining partners wished to continue the business in partnership for their benenefit. In the operative portion, it is expressly stated that the business of the firm still continues to be carried on under the name and style of Burugu Viswanadham Brothers. The same banking business is agreed to be carried on, but the scope of thebusiness is extended by including the tobacco business. Thereis some variation in the shares.

(14) The larned Counsel for the appellant relying upon the recital “Whereas it is therefore expedient and necessary that the terms of this new partnership and constitution should be specified” and also the fact that tobacco business was also started by the firm, argued that Ex. B-1 constituted expressly as well as in fact a new partnership. I cannot hold that the mere use of the words in the document. “this new partnership” makes it a new firm, if it is not in fact a new business. Those words are loosely used to convey the idea of a change in the constitution of the firm. Under Ex. B-1, the business is agreed to be carried on by the remaining partners, notwithstanding the change in the constituion of the firm under the same name viz., Burugu Viswanatham and Bros.

The document only records the changing in the constitution and provides for continuing the existing business. It does not either express of by unnecessary implication dissolve the earlier partnership and form a new firm. There is nothing on record to show that the earlier accounts were looked into and the rights and liabilities of the partners were settled. The mere fact that the scope of the business has been enlarged is not decisive on the question whether the firm was dissolved for an existing firm can always extend the scope of the business by a separate agreement. After going through the aforesaid recitals in Ex. B-1, I have no hesitation in deciding that under the said document, a new partnership was not formed, but the old partnership was continued with certain changes, in the constitution. If so, it follows that S. 69(2) is not a bar to the maintaibility of the present suit.

(15) In the result, the appeal fails and is dismissed with costs. No leave.

(16) Appeal dismissed.

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