PETITIONER: SHIVAGOUDA RAVJI PATIL AND OTHERS Vs. RESPONDENT: CHANDRAKANT NEELKANTH SEDALGE AND OTHERS DATE OF JUDGMENT: 08/05/1964 BENCH: SUBBARAO, K. BENCH: SUBBARAO, K. AYYANGAR, N. RAJAGOPALA MUDHOLKAR, J.R. CITATION: 1965 AIR 212 1964 SCR (8) 233 ACT: Indian Partnership Act-A minor admitted to the benefits of a partnership-Partnership dissolved-Thereafter the minor attains majority He did not exercise his option not to become a partner-He cannot he adjudicated insolvent for the acts of insolvency of other partners Indian Partnership Act, 1932 (IX of 1932), s. 30(5). 234 HEADNOTE: The respondent No. 1 while he was a minor was admitted to the benefits of a partnership constituted of respondents 2 and 3. The partnership owed a certain amount to the appellants. The partnership was dissolved and subsequently respondent No. 1 became a major but he did not exercise the option not to become a partner under s. 30(5) of the Indian Partnership Act, 1932. Respondents 2 and 3 committed acts of insolvency and the appellants filed an application for adjudicating the three respondents as insolvents. The first respondent resisted the application without success but on second appeal the High Court held that he was not a partner of the firm and hence he could not be adjudicated an insolvent for the debts of the firm. The present appeal was filed on a certificate granted by the High Court. The appellant contended before this Court that the 1st respondent had become a partner of the firm by reason of the fact that he had not elected to become a partner under a. 30(5) of the Partnership Act and therefore he was liable to be adjudicated an insolvent. Held:(i) A person under the age of majority cannot become a partner by contract and he cannot be one of that group of persons called a firm. It therefore follows that if during minority of the 1st respondent the partners of the firm committed an act of insolvency, the minor could not have been adjudicated insolvent on the basis of the said act of insolvency for the simple reason that he was not a partner of the firm. Sanyasi Charan Mandal v. Krishnadhan Banerji, (1922) I.L.R. 49 Cal. 560, relied on. (ii)It is implicit in the terms of sub-s. (5) of s. 30 of the Partnership Act that the partnership is in existence,. A minor, after attaining majority, cannot elect to become a partner of a firm which ceased to exist. The entire scheme of s. 30 of the Partnership Act posits the existence of a firm and negatives any theory of its application to a stage when the firms ceased to exist. (iii)Since the 1st respondent became a major after the partnersship was dissolved s. 30 of the Partnership Act does not apply to him. He is not a partner of the firm and therefore he cannot be adjudicated insolvent for the acts of insolvency committed by respondents 2 and 3, the partners of the firm. JUDGMENT:
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 244 of 1964.
Appeal from the judgment and order dated September 21, 1962
of the Mysore High Court in Civil Revision Petition No. 929
of 1958.
G. S. Pathak and R. Gopalakrishnan, for the appellants.
S. G. Patwardhan, V. Kumar and Naunit Lal, for the
respondent No. 1.
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May, 8, 1964. The Judgment of the Court was delivered by
SUBBA RAO, J.This appeal by certificate raies the question
whether a minor who was admitted to the benefits of a
partnership can be adjudicated insolvent on the basis of
debt or debts of the firm after the partnership was dis-
solved, on the ground that he attained majority subsequent
to the said dissolution, but did not exercise his option to
become a partner or cease to be one of the said firm.
The facts are not in dispute and may be briefly stated.
Mallappa Mahalingappa Sadalge and Appasaheb Mahalingappa
Sadalge, respondents 2 and 3 in the appeal, were carrying on
the business of commission agents and manufacturing and
selling partnership under the names of two firms “M. B.
Sadalge” and “C. N. Sadalge”. The partnership deed between
them was executed on October 25, 1946. At that time
Chandrakant Nilakanth Sadalge, respondent 1 herein, was a
minor and he was admitted to the benefits of the
partnership. The partnership had dealings with the
appellants and it had become indebted to them to the extent
of Rs. 1,72,484. The partnership was dissolved on April 18,
1951. The first respondent became a major subsequently and
he did not exercise the option not to become a partner of
the firm under s. 30(5) of the Indian Partnership Act. When
the appellants demanded their dues, the respondents 2 and 3
informed them that they were unable to pay their dues and
that they had suspended payment of the debts. On August 2,
1954, the appellants filed an application in the Court of
the Civil Judge, Senior Division, Belgam, for adjudicating
the three respondents as insolvents on the basis of the said
debts. The 1st respondent opposed the application. The
learned Civil Judge found that respondents 2 and 3 committed
acts of insolvency and that the 1st respondent had also
become partner as he did not exercise his option under s.
30(5) of the Partnership Act and, therefore, he was also
liable to be adjudicated along with them. The first
respondent preferred an appeal to the District Judge, but
the appeal was dismissed. On second appeal, the High Court
held that the 1st respondent was not a partner of the
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firm and, therefore, he could not be adjudicated insolvent
for the debts of the firm. The creditors have preferred the
present appeal against the said decision of the High Court.
Learned counsel for the appellants, Mr. Pathak, contends
that the 1st respondent had become a partner of the firm by
reason of the fact that he had not elected not to become a
partner of the firm under s. 30(5) of the Patnership Act
and, therefore, he was liable to be adjudicated insolvent
along with his other partners.
The question turns upon the relevant provisions of the,
Provincial Insolvency Act, 1920 (5 of 1920) and the Indian
Partnership Act. Under the provisions of the Provincial
Insolvency Act, a person can only be adjudicated insolvent
if he is a debtor and has committed an act of insolvency as
defined in the Act: see ss. 6 and 9. In the instant case
respondents 2 and 3 were partners of the firm and they be-
came indebted to the appellants and they committed an act of
insolvency by declaring their inability to pay the
debts .and they were, therefore, rightly adjudicated
insolvents
But the question is whether the first respondent could also
be adjudicated insolvent on the basis of thE said acts of
insolvency committed by respondents 2 and 3. He could be, if
he had become a partner of the firm. It is contended that
he had become a partner of the firm, because lie did not
exercise his option not to become a partner thereof under s.
30(5) of the Partnership Act. Under s. 30(1) of the
Partnership Act a minor cannot become a partner of a firm
but he may be admitted to the benefits of a partnership.
Under sub-ss. (2) and (3) thereof he will be entitled only
to have a right to such share of the properties and of the
profits of the firm as may be agreed upon, but he has no
personal liability for any acts of the firm, though his
share is liable for the same. The legal position of a minor
who is admitted to a partnership has been succinctly stated
by the Privy Council in Sanyasi Charan Mandal v. Krishnadhan
Banerji(1) after considering the material provisions of the
Contract Act,
(1)[1922] I.L.R. 49 Cal. 560, 570.
237
which at that time contained the provisions relevant to the
law of partnership, thus :
“A person under the age of majority cannot
become a partner by
contract…………………. and so
according to the definition he cannot be one
of that group of persons called a firm. It
would seem, therefore, that the share of which
s. 247 speaks is no more than a right to
participate in the property of the firm after
its obligations have been satisfied.”
It follows that if during minority of the 1st respondent the
partners of the firm committed an act of insolvency, the
minor could not have been adjudicated insolvent on the basis
of the said act of insolvency for the simple reason that he
was not a partner of the firm. But it is said that sub-s.
(5) of s. 30 of the Partnership Act made all the difference
in the case. Under that sub-section the quondam minor at
any time within six months of his attaining majority, or of
his obtaining knowledge that he had been admitted to the
benefits of partnership, whichever date is later, may give
public notice that he has elected to become or that he has
elected not to become a partner in the firm and such notice
shall determine his position as regards the firm. If he
failed to give such a notice, he would become a partner in
the said firm after the expiry of the said period of six
months. Under sub-s. (7) thereof where such person becomes
a partner, his rights and liabilities as a minor continue up
to the date on which he becomes a partner, but he also
becomes personally liable to third parties for all acts of
the firm done since he was admitted to the benefits of
partnership and his share in the property and profits of the
firm shall be the share to which he was entitled as a minor.
Under the said two sub-sections, if during the continuance
of the partnership a person, who was admitted at the time
when he was a minor to the benefits of the partnership, did
not within six months of his attaining majority elect not to
become a partner, he would become a partner after the expiry
of the said period and thereafter his rights and liabilities
would be the same as those of the other partners as from the
date he was admitted to the partnership.
238
It would follow from this that the said minor would there-
after be liable to the debts of the firm and could be
adjudicated insolvent for the acts of insolvency committed
by the partners. But in the present case the partnership
was dissolved before the first respondent became a major;
from the date of the dissolution of the partnership, the
firm ceased to exist, though under s. 45 of the Act, the
partners continued to be liable as such to third parties for
the acts done by any of them which would have been the acts
of the firm if done before the dissolution until public
notice was given of the dissolution. Section 45 proprio
vigore applies only to partners of the firm. When the
partnership itself was dissolved before the first respondent
became a major, it is legally impossible to hold that he had
become a partner of the dissolved firm by reason of his
inaction after he became a major within the time prescribed
under s. 30(5) of the Partnership Act. Section 30 of the
said Act presupposes the existence of a partnership. Sub-
ss. (1), (2) and (3) thereof describe the rights and
liabilities of a minor admitted to the benefits of
partnership in respect of acts committed by the partners;
sub-s. (4) thereof imposes a disability on the minor to sue
the partners for an account or payment of his share of the
property or profits of the firm, save when severing his
connection with the firm. This sub-section also assumes the
existence of a firm from which the minor seeks to sever his
connection by filing a suit. It is implicit in the terms of
sub-s. (5) of s. 30 of the Partnership Act that the
partnership is in existence. A minor after attaining
majority cannot elect to become a partner of a firm which
ceased to exist. The notice issued by him also determines
his position as regards the firm. Sub-s. (7) which
describes the rights and liabilities of a person who
exercises his option under sub-s. (5) to become a partner
also indicates that he is inducted from that date as a
partner of an existing firm with co-equal rights and
liabilities along with other partners. The entire scheme of
s. 30 of the Partnership Act posits the existence of a firm
and negatives any theory of its application to a stage when
the firm ceased to exist. One cannot become or remain a
partner of a firm that does not exist.
It is common case that the first respondent became a major
only after the firm was dissolved. Section 30 of the
239
Partnership Act, therefore, does not apply to him. He is
not a partner of the firm and, therefore, he cannot be
adjudicated insolvent for the acts of insolvency committed
by respondents 2 and 3, the partners of the firm. The order
of the High Court is correct.
In the result, the appeal fails and is dismissed with costs.
Appeal dismissed.