Vipul Ganda is an Independent Litigation Counsel with over 14 years of experience and a proven track record in Litigation and Dispute Resolution.
GURU NANAK INDUSTRIES, FARIDABAD AND ANOTHER Versus AMAR SINGH (DEAD) THROUGH LRS
Court / Forum : Supreme Court of India Citation : Civil Appeal Nos. 6659-6660 of 2010 Coram : Justice Sanjiv Khanna and Justice Krishna Murari Subject : Partnership Act, 1932 Date of Decision : 2020-05-26
Four persons, including two brothers, Swaran Singh and Amar Singh, both of whom have since died and are represented by their legal representatives, had constituted a partnership firm Guru Nanak Industries, on May 2, 1978.
On March 29, 1989, Guru Nanak Industries and Swaran Singh filed a civil suit against Amar Singh claiming that the latter had retired from partnership with effect from August 24, 1988 and had voluntarily accepted payment of his share capital.
Amar Singh contested the suit and on April 29, 1989, filed a suit for dissolution of partnership and rendition of accounts and contented that he had never resigned from the partnership. The trial court dismissed the suit filed by Amar Singh and partly decreed the suit filed by Guru Nanak Industries and Swaran Singh on grounds of discrepancy in the version of the story provided by Amar Singh in the Suits.
Two appeals were then preferred by Amar Singh against the orders passed by the trial court. Amar Singh was held to be entitled to the prayer for partition of movable and immovable property wherein 40% belonged to Amar Singh and 60% belonged to Swaran Singh.
Swaran Singh, who had died when the civil suits were pending before the trial court and represented by his widow, filed two appeals before the Punjab and Haryana High Court which have been dismissed by the impugned judgment dated May 18, 2009.
Hence the present Appeal.
Whether upon retirement of a partner from a partnership firm consisting of two partners will amount to dissolution of the firm?
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.
The Court, relying on “Pamuru Vishnu Vinodh Reddy v. Chillakuru Chandrasekhara Reddy and Others”, (2003) 3 SCC 445, held that when a firm has only two partners, and one of them agrees to retire, it amounts to dissolution of the firm, as a partnership firm must have at least two partners. Therefore, in this case, accounts would have to be settled as per Section 48 of the Partnership Act.
Vipul Ganda is a Delhi based Advocate practicing largely at the Delhi High Court. His practice focus is Dispute Resolution and Litigation and his practice areas include Arbitration, Commercial, Civil, Constitutional, Corporate and Criminal Litigation.