Yashwant Singh Chhawra vs The State Transport-Appellate Tribunal Gwalior and Others

R. C. Lahoti, J.

The petitioner is aggrieved by an order of the State Transport Appellate Tribunal holding his appeal to be partly maintainable and partly not.

A partnership firm. M/s Gumcharan Singh Baldevsingh, engaged in transport activity, held a stage-carriage permit No. 474/75 on the route Iklera to Narsinghgarh. As evidenced by the deed of partnership dated 4-4-85 Sarvshri Gurucharan Singh, Basantsingh and Mst. Manpreet Kaur were the partners, the duration of the partnership being at will. The permit was valid upto 18-2-89. An application seeking renewal of the permit u/s 58 (2), Proviso (a) of the Motor Vehicles Act, 1939 (hereinafter referred to as the old Act) was filed on 1-10-88 i. e.120 days before the date of expiry of permit. The Regional Transport Authority, Bhopal published the said application in M. P. Government Gazette dated 23-6-89. On 1-8-89 came into force the Motor Vehicles Act, 1988 (hereinafter referred to as the New Act). On 10-8-90, the Regional Transport Authority, Bhopal allowed the renewal.

On 30-12-88 the petitioner had moved an application for grant of a permit in lieu of renewal. On 18-5-90 he had moved yet another application having withdrawn the earlier one. The R. T. A. vide order dated 10-3-90 rejected the application of the petitioner, and as noticed earlier, granted renewal in favour of the respondent No. I.

There, is yet another event which too has to be noticed as having been the core of controversy. The deed of partnership dated 1-4-89 relating to firm M/s. Gurucharan Singh Baldev Singh, executed in suspersession of the earlier one indicates that at present the partners of the firm w. e. f. 1-4-89 are Sardar Basant Singh, Mst. Manpreet Kaur and Srnt. Baljeet Kaur. Sardar Gurucharan Singh is stated to have voluntarily retired from the said partnership while Baljeet Kaur has been newly inducted in his place. According to the petitioner this amounts to a dissolution of the old firm and constitution of the new one w. e. f. 31-3-89/1-4-89. According to the respondent No. 1, the firm has not dissolved, nor a new firm constituted, but there has been merely a change in the constitution of the firm. Sardar Gurucharan Singh having gone out and Smt. Baljeet Kaur having newly entered in.

The learned counsel for the petitioner has submitted that the old firm having dissolved and a new firm having been constituted, the permit with the old firm would be deemed to have been extinguished with no right of renewal, because else it would constitute transfer of a permit prohibited by law except with the permission of the R.T. A. u/s 59 of the old Act.

Next it is submitted that an application for renewal would not survive after 1-7-89, the date of coming into force of the new Act and hence on and after 1-7-89 there was no application for renewal pending in the eyes of law before the R. T. A, and as such the order of renewal passed on 10-8-90 acting on the nonexistent application dated 11-10-88 was without jurisdiction. Implicit reliance is placed on a Division Bench decision of the Court in Shivchand Amolakchand Bus Operator, Shivpuri Vs. State Transport Appellate Tribunal, Gwalior and Others, in support of this contention.

Aggrieved by the order of the R. T. A. dated 10-8-90 the petitioner had filed an appeal before the S. T. A. T., Gwalior and pressed for stay of the order of R. T, A. The S. T. A. T, formed an opinion that a comparative reading of 89 (1) (e) of the new Act with Section 58 of the old Act showed that there was no right of appeal available now against an order of renewal and hence the appeal filed by the petitioner would be competent only to the extent of throwing a challenge to the rejection of his own application for grant of perm it, but the appeal would be incompetent in so far as a challenge to renewal of permit of the respondent M/s. Gurucharan Singh Baldev Singh was concerned The petitioner has rushed up to this Court submitting that in so far as he is concerned, his fate has been sealed and he is now left with no other remedy except of approaching this Court

The first question which arises for consideration is whether the partnership as evidenced by the deed dated 1-4-89 (Annexure P/2) is a new partnership or simply an old partnership with a change in the constitution of the firm.

A distinction has to be borne in mind between a change in the constitution of the firm caused by an incoming or an outgoing of a partner or partners and a dissolution of a firm. The scheme of the Indian partnership Act, 1932 shows that two phenomena are different, distinct and well defined. Incoming and outgoing of partners is dealt in Chapter V while dissolution of a firm has been dealt in Chapter VI. Each has its own legal implications. It will be useful to extract from Notes of the Special Committee on Chapter V which has been newly added to the Act:

"As mentioned in our Report, it contains no material change in the law of partnership, but it collects together and sets out in a convenient for all rules relating to the coming in of a partner, and rules relating to the going out of a partner in so far as these rules do not relate to the disputation of the firm or to the consequence of dissolution. As a result of the limitation on the selection of these provisions, they relate chiefly to what is referred to in various places in the Bill as a ''change in the firm'' ; that is, change in the constitution of the firm which has not resulted in the dissolution of the firm."

A mere introduction or retirement or a partner does not cause the dissolution of the firm; both these events have to that place with the consent of other partners unless otherwise provided by the contract of partnership. Voluntary retirement, expulsion, insolvency are the events entailing exit of a partner from the partnership firm without causing dissolution of the firm; the only exception being a firm consisting of only two partners when departure of even one necessarily entails dissolution of the firm. Dissolution of a firm is occasioned by an agreement, contemplated by Section 40; by compulsion u/s 41; on happening of certain contingencies u/s 42; by notice, if partnership beat will, u/s 43; or by orders of the Court, u/s 44, On retirement of a partner the firm continues to exist but the connection of the retiring partner is severed with the firm and its business. An incoming or outgoing of a partner does not cause a break in the continuity of the firm. Dissolution brings about a complete breakdown of the partnership relationship between all the partners.

Their Lordships held in Commissioner of Income Tax, West Bengal Vs. A.W. Figgies and Co. and Others,

"It is true that under the law of partnership a firm has no legal existence apart from its partners and it is merely a compendious name to describe its partners but it is also equally true that under that law there is no dissolution of the firm by the mere incoming or outgoing of partners. A partner can retire with the consent of the other partners and a person can be introduced in the partnership by the consent of the other partners. The reconstituted firm can carry on its business in the same firm''s Dime till dissolution. The Law with respect to retiring partners as enacted in the partnership Act is to a certain extent a compromise between the strict doctrine of English Common Law which refuses to sec anything in the firm but a collective name for individuals carrying on business in partnership and the mercantile usage which recognizes the firm as a distinct person or quasi corporation."

In Commissioner of Income Tax, West Bengal-III Vs. Pigot Champan and Company, their Lordships referring to the decision in M/s. A. W. Figgis & Co.''s case supra said :

"It cannot be disputed that dissolution and reconstitution are two distinct legal concepts, for a dissolution brings a partnership to an end while a reconstitution means continuation of the partnership in altered circumstances"

Their Lordships observed on the question of test for determining what had actually taken place:

"The question whether there has been a dissolution of the firm and upon such dissolution a new firm has succeeded to the business of the old firm is a question which depends upon the intention of the partners to be gathered from the document or documents, if any, executed by and between the partners and other facts any surrounding circumstances of the case."

M/s Pigot Champan & CO.''S case though cited by the learned counsel for the petitioner does not help him on the facts because their Lordship in the facts and circumstances of that case found that a dissolution of partnership had taken place because initially partnership between the partners was for a fixed terms of 6 years emailing automatic dissolution on expiry of the term and further the document specifically stated that the firm had been dissolved by mutual consent. There were other relevant factors also pointing out to the dissolution of the firm having taken place,

M/s A. W. Fggis & Co.''s case was followed by a Division Bench of Gujrat High Court in Keshavlal Lallubhai Narnadas and Others Vs. Patel Bhailal Narandas and Others, The Division Bench held :-

"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 theiretiring partner and the continuing partners, leaving the partnership amongst the continuing partners uneffected and the firm continues within the changed constitution comprising the continuing partners."

A Division Bench of Madras High Court in Kaithari Lungi Stores Vs. Commissioner of Income Tax, summed up the law as under:

"A change in the constitution of a firm any arise by admission, retirement, expulsion, insolvency or death of one or more partners subjected to the conditions referred to in Sections 31 to 35 of the Partnership Act In the case of death of a partner, there should be a contract express or implied between the partners that the firm should not be dissolved by the death of a partner. Under the ordinary law, every change in the constitution of a firm amounts to a dissolution of the old firm and bringing into existence of a new firm. Inlaw the firm also has no legal existence apart from its members and it is merely a compendious name to describe a collection of persons who are partners. But the mercantile usage recognises the firm as a distinct person. The partnership Act struck a mental note as between these to extreme propositions and recognised the continued existence of the firm in spite of change in its constitution. The income tax Act went a little further and recognised the firm for the purpose of assessment as a unit independent of the partners constituting it.

A change in the constitution of the firm is different from the dissolution of the firm."

As already noticed, the petitioners have relied on several recitals in the deed dated 1-4-1989 (Annexure P/2) to submit that the earlier partner-ship firm had dissolved. During the course of hearing, the respondent No. 3 plated on record the earlier deed of partnership dated 4-4-1985, the veracity whereof has been sworn on affidavit. The deed shows that there were three partners, namely, Gurucharan S/o Basantsingh, Basantsingh S/o Bhansingh and Manpreet Kaur D/o Gurucharan Singh. They carried on the business or plying passenger-buses in the name and style of'' Gurucharansing Baldev Singh". The duration of partnership was at will None of the partners had given a notice for dissolution of the firm or of his intention to dissolve the firm within the meaning of Section 48 of the partnership Act. 31-3-89 Sardar Gurucharan Singh voluntarily retired from the partnership and Baljeet Kaur wife of Gurucharan Singh entered into the partnership with the consent of the remaining partners. The relevant part of the deed relied on by the learned counsel for the petitioner is extracted hereunder :

"WHEREAS, the above named first party. Second party along with Sardar Gurucharan Singh were carrying on the business of plying of passenger buses in the business name and style of M/s GURUCHARAN SINGH BALDEV SINGH'' from 01-04-85 under the agreement of partnership executed on 04-04-85, and

WHEREAS, Sardar Gurucharan Sing voluntarily retired from the said partnership as a partner from the closing day of 31-03-89, and

WHEREAS, the remaining first and second parties admitted Smt. Baljeet Kaur, the third party as a partner, reconstituting the above said partnership, for onward continuance and carrying on its business from 01-04-1989 in the status of partnership firm retaining the same business name, good will and nature of business and upon the terms and conditions as are contained in this agreement of partnership hereafter."

(3) That ali the properly goods, route permits, licences, buses, outstanding and other assets and liabilities of the old firm have been transferred to and are taken over by this firm, from 01-04-1989 The parties upto this agreement are also satisfied with their valuation."

The learned counsel submits that one of the partners had retired, a new one had entered in and the very fact that the partners declared the assets and liabilities of the old firm to have been ''transferred'' to and taken over by the new firm positively suggests that the old firm had dissolved and a new firm come into existence notwithstanding the name and business of the partnership remaining the same. The argument loses sight or the principle that it is not the language used but intention of the parties as called out from all the events and speaking circumstances which alone shall have to be kept in view, the parties to the deed may choose to use the term ''dissolution'' in their draft, but the circumstances eloquent and the entire document/s read together may go to show that the partnership had in fact not dissolved. On the contrary, the parties to the deed may skillfully abstain from using the term -dissolution'' deserbing the events, yet the change in relationship may go to show that the partnership had in fact dissolved.

As already noticed, the earlier partnership being a partnership at will, was not dissolved by any one or more partners giving notice or their intention to dissolve the firm. It does not appear that the accounts were settled and/or the business wound up. There is nothing to infer that there has been a break down of relationship between all the partners. Merely because the partners have chosen to use the words -"assets and liabilities of the old firm have been transferred and are taken over by this firm" in the deed dated 1-4-89 (Annexure P/2) would not be enough for deciding that the old firm had dissolved. In the earlier part they have stated that inspite of one partner having gone out and a new one having entered they were reconstituting the abovesaid partnership linn, for onward continuously carrying on its business. The old business continued with all assets and liabilities as before, with the consent of all the partners the existing, the new one and the out-going-in the same name and style. Merely because one of the three partners had retired and the remaining two chose to induct a third one, it would be a simple case of incoming and outgoing of partners causing a change merely in the constitution of the firm, but without dissolving it.

The Division Bench decision of this Court in A Mitiouut Commissioner, Income Tax M. P. r. Ramchand 1982 JLJ 76, relied on by the learned counsel for the petitioner is clearly distinguishable. The facts noticed in para 3 go to show that the firm had dissolved by executing a deed of dissolution and two of the partners had constituted a new firm by taking a new person as a partner. Such is not the case here.

The first contention of learned counsel for the petitioner, therefore, fails.

As to the second contention, as already noticed, the learned counsel for the petitioner had placed implicit reliance on a Division Bench decision of this Court in :M/s. Schidanand Amolakchami (supra). The learned counsel submits that the new Motor Vehicles Act came into force with effect from 1-7-1989 repealing the old Act. Section 217 of the said Act having repealed the earlier Act, many a things done under the old Act and not inconsistent with the provisions of the new Act, are saved but not a mere application either for permit or for renewal-pending on the date of coming into force of the new Act. All such applications would be extinct and rendered nonexistent in the eye of law, submits the counsel, leaving the only course open for such applicants to move such applications afresh if permitted by the new Act.

That is why, the learned counsel proceeds a head to state that, out of the two applications respectively dated 30-12 1988 and 18-5-1990 for grant of permit in lieu of renewal, he had withdrawn the application dated 30-12-198 ; which was rendered extinct even otherwise and pressed the application dated 18-5-1990 which only would have been legally considered, as evidenced by the order of R. T. A., Bhopal, dated 10-8-1990 (Annexure P/3). Forcefully, the learned counsel maintains that the application dated 11-10-88 (Annexure P/1 filed by the respondent No. 3 seeking renewal ceased to be an application in eye of law with effect from 1-7-1989 and hence there had remained nothing which could have been disposed of by the R. T. A. Bhopal on 10-8-90, in view of the supervening event of the new Act having been brought into force on 1-7-89. The learned counsel for the respondent No. 3 has tried to meet the contention by submitting that M/s Shivchand Amolakehand''s cases (supra) is not applicable to the case of an application for renewal of permit but has limited application to the application for grant of permit u/s 46 of the old Act alone.

It will be useful to extract and reproduce the following passage from the case of M/s Shivchand Amolak chand :

"In this connection, we have to observe that none of Cls.(a) to (f) of S. 217 (2) makes any saving explicitly in regard to any application for permit under the Old Act pending disposal on the date of enforcement of the New Act CI. (a) of S. 217 (2) speaks only of "any notification, rule, regulation, order of notice issued or any appointment or declaration made or exemption granted" and by no stretch of imagination, any of expressions used advisedly by the Legislature in that manner can be construed to include; an "application" also. If the Legislature had the intention to do so, it would have explicitly referred also to an "application" because that is the expression used in S. 46 or even in S. 47 of the Old Act under which the procedure for dealing with application for stage carriage permit is laid down. The Legislature, according to us, has made its intention clear to limit saving in regard only to any "action under the repealed enactment" and it has said so in that regard using those words explicitly,"

In that case, the order of the Tribunal impugned before the High Court was one upholding the order of R. T. A. by which petitioner''s prayer for renewal of permit was rejected. There were several applications for renewal made by the petitioners dated 19-10-74, 30-10-77 and 12-3-1985 all of which faced wholesale rejection on 29-10-86 by R. T. A. which order was upheld by S. T. A. on 13-1-1989. The Tribunal had also rejected the prayer of the petitioners to keep the original application for grant of permit to be treated as pending. The Division Bench noticed the effect of coming into force or the New Act on 1-7-1989 on the several prayers made by the petitioners. The Division Bench refused to accept any of the prayers made by the petitioners, either for the renewal or for keeping the application for grant of permit alive, applying the singular reasoning that applications were not saved either u/S 217 (2) of the New Act or by reference to Section 6 of the General Clauses Act. We do not feel impressed by the distinction sought to be drawn by the learned counsel for the respondent No. 3 that the subject-matter of controversy before the Division Bench was merely an application for fresh grant. Even otherwise, on the reasonino adopted and the conclusion drawn by the Division Bench that the pending applications did not survive after the coming into force of the New Act, we would not be justified in drawing an artificial distinction between an application for grant of permit and an application for renewal and to hold that the Division Bench decision in V."s. Shivchand Amolakchand (supra) has applicability to cases of applications for grant of permit only and not to be applications for renewal or permits. The learned counsel for the petitioner has rightly pointed out that by virtue of the provisions contained in S. 58 (2) of the Old Act an application for renewal has to be treated as an application for grant of permit: in substance there being no distinction between the two.

The learned counsel for the respondent No. 3 has cited D. Nataraja Mudaliar Vs. The State Transport Authority, Madras, In para 8 thereof, the Apex Court has observed that a permit holder has an ordinary right of renewal This does not land any strength to the distinction sought to be drawn with the Division Bench decision in M/s. Shivchand Amolakchand (supra). In The Cheran Transport Co. Ltd. Vs. Kanan Lorry Service and Another, the Apex Court has held renewal is a legal process and not the final act. In Ram Chandra Palai and Others Vs. The State of Orissa and Others, Para 7, the Supreme Court has ovserved with reference to permits under the Motor Vehicles Act, 1939 that renewal was not a matter of right. The learned counsel for the petitioner has placed forceful reliance on the several observations made by a Division Bench of Andhra Pradesh High Court in T. N. Raghunath Reddy v. Government of Andhra Pradesh AIR 1979 AP 93 para 26.

"A reading of S.58 of the Motor Vehicles Act itself makes it clear that a renewal of a permit is neither a matter of course nor of right. It lays down that an application for renewal has to be disposed of as if it were an application for the grant of permit and only other conditions being equal, an applicant for renewal shall be given preference over new applicants for permits. Thus irrespective of whether there is an inter-State agreement or not, the existing operator holding a stage-carriage permit has not vested right to a renewal of his permit. He has to apply for renewal and take his chance along with the other applicants for permit; only when other conditions are equal, he is entitled to preference and not otherwise. The so-called right to a renewal is liable to be defeated by the superior claims of a new applicant. This clearly shows that there is a no vested right to a renewal of a permit."

The weight of the authorities is that right to seek renewal of a permit under the Motor Vehicles Act, is not a vested right, it is merely a right to initiate a process. At the best, it can be called an inchoate right which ripens into a right only on being granted.

The argument of the learned counsel for the respondent No. 3 that right to renewal is a vested right and hence an application seeking renewa of permit under the Old Act survives the repeal, and right to prosecute that application cannot be deemed to have been lost unless expressly taken away, has to be discharded, specially in view of the Division Bench decision of this Court in M/s Shivchand Amolakchand (supra). Simply because the application was also ordered to be published u/S 57 (3) of the Old Act, as stated in the return would not make any material difference. It follows that the application for renewal of permit dated 11-10-88 (Annexure P/1) filed by the respondent No. 1 had ceased to exist in the eye of law on 1-7-89 with the coming into force of the New Act and hence there was nothing which could have been granted on that application on 10-8-90, when the application came to be disposed of by the Regional Transport Authority.

It is to be noted that petitioner''s application for grant of permit was rejected by R. T. A. Bhopal vide its order dated 10-8-90. That order is the subject-matter of appeal before the S. T. A. T., Gwalior. The petitioner''s appeal has been held to be maintainable by S. T. A.T. Gwalior vide its order dated 26-10-90 (Annexure P/6). That appeal is yet to be heard and disposed of.

For the foregoing reasons, the petition is partly allowed. The application dated 11-10-90 (Annexure P/1) filed by the respondent No. 3 and the order of R. T. A. Bhopal dated 10-8-90 (Annexure P/3) to the extent to which it grants the application for renewal (Annexure P/1) are directed to be quashed. The appeal filed by the petitioner before the S. T. A. T., Gwalior now survives only to the extent of considering the legality Mid/or propriety of the rejection by R. T. A. Bhopal of the petitioner''s application for grant of permit. The appeal shall now be expeditiously heard and disposed of by S. T. A. T., Gwalior. In the facts and circumstances of the case, the parties are left to bear their costs as incurred.