Ghanshyam Vijay Oil Mills and Others vs Thacker Ranchhoddas Ratanshi and Others

N.H. Bhatt, J.—This is an appeal by the original plaintiffs of the Civil Suit No. 21 of 1965 filed by them in the court of the Civil Judge (S.D.)

Kutch at Bhuj for the purpose of realising Rs. 28,250/-, which suit was dismissed by the learned trial Judge with costs on the ground that the suit

was filed by a firm, which, though required to be registered with the Registrar of Firms u/s 59 of the Indian Partnership Act, 1932, was not

registered and as per Section 69(1) of the said Act, the suit was incompetent. It is this Judgment and decree that are assailed by the original

plaintiffs by preferring the present appeal.

The suit, as filed, was filed by the plaintiff No. 1 firm Shri Ghanshyani Vijay Oil Mills and by its two partners. The suit was for recovering the

principal amount allegedly lying with the defendant-firm as the amount of deposit, which though demanded, was not returned. The reading of the

plaint shows that the cause of action had accrued to the plaintiffs somewhere in the year 1964-65 and they were entitled to the said amount on the

basis of that cause of action of the year 1964.

The suit was resisted by the defendants, who inter alia contended that the suit was not competent as it was filed by a firm, which was not

registered as required under the provisions of the Indian Partnership Act, 1932.

This matter had come up before this High Court on the earlier occasion and the issue No. 6, namely, whether the suit is barred u/s 69(1) and (2)

of the Act of whether the suit is tenable u/s 69(3) was directed to be decided first in the light of the evidence on the record. The learned trial Judge,

therefore, took up that issue and ultimately held that the suit was by a firm, which was unregistered. Though this much narration may show that the

question is very simple and it appeared to be simple at the time of the filing of the plaint and as it stands to-day, the evidence has elaborated the

spectrum, the whole of which is required to be kept before our mind, in order to reach a correct conclusion. Shri Ghanshyam Vijay Oil Mills was a

partnership firm that was running this business right from S.Y. 2017. At that time, not only the present appellants Nos. 2/1 and 2/2, namely, the

father and the son, were the partners, but there was one third person, named, Joshi Laiji Hiraji also who was its partner. When the suit transaction

had taken place, these three persons admittedly were the partners of the firm Shri Ghanshyam Vijay Oil Mills. When the suit came to be filed, it

came to be filed in the very name of the firm, but with only two partners. The plaint did not clarify this position at all, and, as we have noted, it

proceeded on the assumption that the plaintiff No. 1-firm with the plaintiffs Nos. 2/1 and 2/2 as the partners, was the firm in existence at the time

of the accrual of the cause of action and it was that firm that had filed the suit. Had the matter been that simple, there would have been no difficulty

in treating this suit as incompetent because admittedly this firm bearing this very name ""Shri Ghanshyam Vijay Oil Mills"" with its two partners was

not registered either at the time of the accrual of the cause of action or at the time of the filing of the suit. However, the plaintiffs tried to allege by

leading same evidence that the suit was filed by these plaintiffs Nos. 2/1 and 2/2 as the partners of a dissolved firm for the purpose of realising the

dues of that erstwhile firm. Had the plaintiffs succeeded in making this good, Section 69(3) of the Act would have certainly come to their rescue

and would have saved the suit from its abortive death. So, the question that falls to be determined by us is whether the suit is the one by the present

plaintiffs Nos. 2/1 and 2/2 in their capacity of the erstwhile partners of the dissolved firm or whether it is a suit by the very firm with the remaining

two partners.

Ex. 287 is the deed of partnership dated 12-1-65. It mentions there exquisitely in Clause 4 of the said deed that this partnership, whose deed

was being prepared: on that day, namely, 12-1-65, had commenced its functions in the year 1950 or thereabout-with effect, from Kartak Sud 2 of

S.Y 2017 to be exact (S.Y. 2017 Kartak Sud 2 roughly would come to October of 1950). If it be so, the firm Shri Ghanshyam Vijay Oil Mills

which has filed the suit as the plaintiff No. 1 is a firm that has its continuous existence right from that period of the year 1950 or thereabout and it is

not a new firm bearing the old name brought into being after dissolution of the earlier firm ""Shri Ghanshyam Vijay Oil Mills"" having the plaintiffs

Nos. 2/1 and 2/2 and said Joshi Lalaji Hiraji as the three partners. The plaintiffs examined said Lalaji Hiraji as the witness No. 1 at ex. 285 and he

purported to prove also the alleged deed of dissolution ex. 384 being dated 1-2-65. It was very vehemently submitted before the learned trial

Judge, and also before us, on the strength of ex. 384 that the earlier firm had come to be specifically dissolved with Joshi Lalaji Hiraji walking out,

leaving all the assets and liabilities to the remaining partners and that a new firm had come to be brought into existence as per the new partnership

deed, ex. 287. These two documents, in our view, would answer the question before us conclusively. Even a bare look at ex. 287 is sufficient to

show that the firm was treated as a continuing concern with the third partner having retired. Document, ex. 384, the alleged deed of dissolution,

was suspected by the learned trial Judge to be a subsequent forgery committed for the purpose of saving ""the present suit from being defeated. The

learned trial Judge has assigned a variety of reasons, some of which are tenable, some of them are weak, but even if we take ex. 384 at its face

value without going into those niceties, one thing is very clear that though ostensibly there is reference to the dissolution of the partnership, to all

intents and purposes, it is a document of retirement of said Joshi Lalaji Hiraji, who had taken his hands off without any accounts being settled,

without any claim laid to good-will and without taking anything. No doubt, the evidence was to the effect that the accounts were settled, but

accounts were not produced and this circumstance has invited a very bitter criticism from the learned trial Judge. Even if accounts were settled, but

if the firm as a going concern with the same name and with the continuing good will had been taken up by the remaining two partners, there would

be no difficulty in treating that Joshi Lalaji Hiraji had retired from a going concern and the same went on as before usually under the same name

with the two remaining partners. In other words, reading of ex. 384 in the light of the categorical statement contained in column 4 of the new

partnership deed so-called, ex. 287, we find that there is no escape from the fact that the parties and particularly the plaintiff Nos. 2/1 and 2/2

treated the disappearance of the said Joshi Lalaji Hiraji as the retirement of the erstwhile partner and that the same firm with the same name, with

the same type of business, with all assets and liabilities and good-will intact, was run by them as a going concern. This would mean that Joshi Lalaji

Hiraji bad retired, leaving the firm intact. In a case like this, the judgment of the Division Bench of this Court in the case of Keshavlal Lallubhai

Patel and Ors. v. Patel Bhailal Narandas and Ors. 9 G.L.R. 649 would come to our assistance. There Justice P.N. Bhagwati, as he then was, has

observed as follows:

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 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 new firm but the law has, in conformity with mercantile usage which recognises a

firm as a distinct person or quasi-corporation departed from 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. The

provisions of Chapter V clearly extend a limited personality to a firm and recognise continuity of existence of the firm despite internal changes is in

the constitution of the firm, such as introduction, retirement, expulsion, death or insolvency of a partner. Held that retirement of a partner from a

firm, does not dissolve the firm, that is, determine the partnership inter se between all the partners but merely severs the partnership between the

retiring partner and the continuing partners, leaving the partnership amongst the continuing partners, unaffected and the firm continues with the

changed constitution comprising the continuing partners.

In above view of the matter, we have no hesitation in holding that it is the suit by an earlier firm, which was not registered at the time of the

institution of the suit and which was not registered even before that. So, the provisions of Section 69(1) of the Partnership Act stand clearly

attracted and no argument cap save the suit from being lost.

The result is that the appeal fails and stands dismissed, but with no order as to costs.