Whether the retirement of one partner amounts to the dissolution of the partnership firm if it consists of only two partners?

There is a clear distinction between ‘retirement of a partner’ and

‘dissolution of a partnership firm’. On retirement of the partner, the

reconstituted firm continues and the retiring partner is to be paid

his dues in terms of Section 37 of the Partnership Act. In case of

dissolution, accounts have to be settled and distributed as per the

mode prescribed in Section 48 of the Partnership Act. When the

partners agree to dissolve a partnership, it is a case of dissolution

and not retirement [See – Pamuru Vishnu Vinodh Reddy v.

Chillakuru Chandrasekhara Reddy and Others, (2003) 3 SCC

445]. In the present case, there being only two partners, the

partnership firm could not have continued to carry on business as

the firm. A partnership firm must have at least two partners. When

there are only two partners and one has agreed to retire, then the

retirement amounts to dissolution of the firm [See – Erach F.D.

Mehta v. Minoo F.D. Mehta, (1970) 2 SCC 724].

NON-REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NOS. 6659-6660 OF 2010

GURU NANAK INDUSTRIES, FARIDABAD Vs AMAR SINGH

SANJIV KHANNA, J.

Dated:MAY 26, 2020.

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What is distinction between termination of partnership in case of partnership at will and specified partnership?

 In the instant case, the principal contention of the plaintiff is that the partnership was a partnership at will, which was dissolved by notice of dissolution under Section 43 of the partnership Act. Whereas the defendants have claimed that, the partnership was dissolved on the death of Dijendra Mitra, one of the partners of the partnership firm. It may be noted that Section 43 of the Partnership Act provides a mode of dissolution of partnership at will. This Section stipulates that a Partnership at will can be dissolved by any partner by giving notice in writing to all the other partners of his intentions to dissolve the firm. Section 7 of the Partnership Act defines 'partnership at will' as: "Where no provision is made by contract between the partners for the duration of their partnership, or for the determination of their partnership, the partnership is 'partnership at will'". Thus a partnership can be regarded as a partnership at will only when (1) there is no provision in the contract between the partners for the duration of their partnership and (2) there is no provision in the contract for the determination of that partnership. If either of these two conditions exists, the partnership would not be a partnership at will.

 The partnership Deed which contains a provision for duration of the partnership or for the determination of the partnership cannot be a partnership at will. As a corollary thereof, the partnership that is not a partnership at will cannot be legally terminated by a notice under section 43 of the Partnership Act. Consequently, sending of notice dated 7.2.2011 seeking dissolution of partnership is of no consequence.

23. From the terms of the Partnership Deeds, it is evident that the partnership was a specific partnership under Section 8 of the Partnership Act. In fact, contingencies under which such firm is dissolved are stipulated in Section 42 of the Partnership Act, which reads thus:

"42. Dissolution on the happening of certain contingencies-Subject to contract between the partners a firm is dissolved-

(a) if constituted for a fixed term, by the expiry of that term;

(b) if constituted to carry out one or more adventures or undertakings, by the completion thereof;

(c) by the death of a partner;

(d) by the adjudication of a partner as an insolvent."

IN THE HIGH COURT OF BOMBAY

Suit No. 220 of 2013

Decided On: 21.08.2019

Manohar Daulatram Ghansharamani  Vs.  Janardhan Prasad Chaturvedi and Ors.

Hon'ble Judges/Coram:

Anuja Prabhudessai, J.

Citation: AIR 2019 Bom 283,2020(1) MHLJ 458

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Whether arbitrator has jurisdiction to dissolve partnership firm?

 In paragraph 12 of the said judgment, the Supreme Court held that insofar the power of the arbitrator to dissolve the partnership is concerned, the law is clear where there is a clause in the articles of partnership or the agreement or the order referring all the matters in difference between the partners to arbitration, the arbitrator has power to decide whether or not the partnership shall be dissolved and to award its dissolution. The Supreme Court adverted to the judgment of the Chancellery Division in case of Phoenix vs. Pope (supra). It is held by the Supreme Court that the power of the arbitrator will primarily depend upon the arbitration clause and the reference made by the Court to it. If under the terms of the reference all the disputes and differences arising between the parties have been referred to arbitration, the arbitrator will, in general, be able to deal with all the matters, including dissolution. There is no principle of law or any provision which bars an arbitrator to examine such a question. 

57. In my view, the Supreme Court has not accepted the submission of the petitioner that the arbitrator has no power to dissolve the partnership firm specially on the ground that such dissolution is based on a ground or any other ground which renders it just and equitable to dissolve and with his power of the Court.
IN THE HIGH COURT OF BOMBAY

Arbitration Petition No. 8 of 2018 and Notice of Motion No. 43 of 2018 in Arbitration Petition No. 8 of 2018

Decided On: 13.06.2018

Yogendra N. Thakkar  Vs.  Vinay Balse and Ors.

Hon'ble Judges/Coram:

R.D. Dhanuka, J.

Citation: AIR 2018(NOC) 919 Bom

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