Thursday 30 May 2013

Partnership at will does not require intervention of the court for its dissolution

Haris Vs. Chathu, (2013) 303 KLR 329 : 2013 (2) KLT 594

Dated this the 9th day of April, 2013.
Head Note:-
Partnership Act, 1932 - Section 43 & 53 - A partnership at will does not require intervention of the court for its dissolution and that even a notice of dissolution or a suit for rendition of accounts will amount to dissolution of the partnership at will.
J U D G M E N T
Ext.P4, order dated 07.03.2013 on I.A. No. 478 of 2013 in O.S. No. 80 of 2011 of the Sub Court, Vatakara is under challenge.

2. Petitioner and the respondent were running a saw mill in partnership under the name and style, "Unique Wood Industries" at Valliappilly. It is not very much in dispute that the partnership was at will. Difference of opinion arose between the parties as to the running of the partnership business, accounting, etc. Petitioner issued notice to the respondent who was acting as Managing Partner, on 23.12.2010 demanding dissolution of partnership and rendition of accounts. Respondent, by letter dated 12.01.2011 refusing to dissolve the partnership. Petitioner filed O.S. No. 80 of 2011 for a direction to the respondent to execute deed of dissolution of partnership and for other reliefs.
3. Respondent approached this Court with W.P.(C) No. 4054 of 2013, his grievance being that period of licence of the saw mill is expiring and hence he may be permitted to renew the licence. This Court passed Ext.P3, judgment allowing the respondent to move appropriate application in O.S. No. 80 of 2011. Accordingly, respondent filed I.A. No. 478 of 2013 requesting that he may be allowed to renew licence in the name of the partnership. That application, though resisted by petitioner was allowed as per Ext.P4, order.
4. Learned counsel for petitioner contends that learned Sub Judge failed to note from Ext.P1 that the partnership is at will and hence by notice dated 23.12.2010 and at any rate by, institution of the suit, that partnership stood dissolved and what remains is only rendition of accounts. Learned counsel has invited my attention to Sections 43 and 53 of the Indian Partnership Act, 1932 (for short "the Act"). It is argued that in the above circumstances, learned Sub Judge was clearly in error in allowing the respondent to renew the licence in the name of partnership firm making petitioner also liable for the debt incurred by the respondent pursuant to the renewal of the licence or for any other act of his.
5. Learned counsel for respondent contends that respondent is the major shareholder (75%) and in the circumstances, he is most suitable to get the licence renewed. It is argued that once the period of licence expired, and if it is not renewed in accordance with the law, a fresh grant of licence may even be impossible. In the circumstances, learned Sub Judge was correct in allowing the licence to be renewed.
6. Having heard learned counsel on both sides, I am inclined to think that it is not necessary to allow the period of licence to expire without its renewal if otherwise any of the parties is entitled for as such renewal as per the law in force. Having regard to the fact that respondent is the major shareholder (76%), I accept contention of learned counsel for the respondent that respondent is the most suitable person to have the licence renewed (if otherwise he is entitled to that course as per the law in force). Therefore, there is no reason to interfere with the order of learned Sub Judge allowing renewal of licence in favour of respondent.
7. But, having heard learned counsel on both sides and having regard to the nature of the partnership as evident from Ext.P1 and also the relevant provisions pointed out by the learned counsel for petitioner as aforesaid, I am inclined to think that learned Sub Judge was in error in allowing the licence to be renewed in the name of the partnership firm. In this connection, I must notice that a partnership at will does not require intervention of the court for its dissolution and that even a notice of dissolution or a suit for rendition of accounts will amount to dissolution of the partnership at will. Hence, respondent cannot have the licence renewed in the name of the partnership firm.
8. Learned counsel for respondent submitted that respondent is prepared to take renewal of licence in his own name. That suggestion is accepted. Hence, renewal of licence has to be in the name of respondent and has to be subject to appropriate conditions to protect interest of petitioner as well. Resultantly, this Original Petition is allowed in part as under:
1. While no interference is required with that part of Ext.P4, order dated 07.03.2013 on I.A. No. 478 of 2013 in O.S. No. 80 of 2011 of Sub Court, Vadakara allowing the respondent to renew licence (of course subject to the laws and regulations in force), permission granted to the respondent to renew licence in the name of the partnership firm is set aside.
2. It is open to the respondent to apply for and obtain renewal licence in his own name subject to the following conditions:
a) That until there is a final rendition of accounts (in case the suit is decreed), respondent shall maintain separate account for running of the saw mill as per licence renewed in his name and submit copy of such accounts in the Sub Court, Vadakara once in three months beginning from the date on which licence is renewed in the name of respondent.
b) It is made clear that petitioner shall not in any way be held responsible or liable for the business conducted by the respondent based on the renewal of licence.
c) If petitioner has a contention that the land and building where the saw mill is functioning belong to him and the court ultimately finds so and that petitioner has to be compensated for the respondents using the said land or building, it is within the power of the court to award such compensation to be released from the respondent and his estates. d)Petitioner shall not, while respondent is running the saw mill as per licence renewed in his name, cause any obstruction to the respondent running the saw mill.
sd/-
THOMAS P. JOSEPH, JUDGE.

 

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