IMPORTANT POINT
Dissolution of Partnership Firm – Existence of contract is a sine-qua-non for relationship of partnership – Decision based on adjustment of equities between parties will be far more beneficial than rendering a decision based on inferences drawn on contested facts and pure legalities.

JUDGMENT :

1. This appeal is directed against the final judgement and order dated 22.01.2008 passed by the High Court of Karnataka at Bangalore, whereby the High Court dismissed an appeal filed by the Appellants herein and affirmed the order of the II Additional Civil Judge (Senior Division), Bangalore Rural, Bangalore dated 16.09.2006, which had dismissed a civil suit filed by the Plaintiff/Appellants seeking dissolution of Respondent No. 4/Partnership Firm, M/s. High Clere Stud and Agricultural Farm.

2. Parties before this Court: The Appellants before this Court are the legal heirs of late Mr. Gopirathnam. Mr. Gopirathnam was one of the partners of the Respondent No. 4 Firm. The partnership firm originally comprised of Mr. P.S. Ranganathan, Mr. Lavakumar and Mr. Basanth Kumar, apart from Mr. Gopirathnam. Respondent Nos. 1.1 and 1.2 are the legal heirs of late Mr. P.S. Ranganathan. Respondent Nos. 2.1 and 2.2 are the legal heirs of Mr. Lavakumar and Respondent No. 3 is Mr. Basanth Kumar himself. Respondent Nos. 5 to 7 are subsequent purchasers of certain properties originally owned by the Firm.

3.1 Facts leading to the filing of this Appeal : The factual background of the present case has a long history, which can be traced back to 01.01.1966, when a deed of partnership was entered into between Late Mr. Gopirathnam, Late Mr. P.S. Ranganathan, Late Mr. Lavakumar and Mr. Basanth Kumar. The partners were related to each other with Gopirathnam, Lavakumar and Basanth Kumar being brothers and P.S. Ranganathan being the brotherinlaw of Gopirathnam. The partnership firm, which was named as M/s. High Clere Stud and Agricultural Farms, was a “partnership at will”. In so far as profitsharing ratio between the partners was concerned, the partnership deed provided that the share of P.S. Ranganathan would be 50%, Gopirathnam’s would be 20% and the other two partners would have a 15% share in the profits. The loss-sharing ratio was slightly different, with 50% of the losses to be borne by Ranganathan and 25% each by Gopirathnam and Lavakumar. Basanth Kumar did not have any share in the loss, because at the relevant time, he was a minor and was admitted only to the benefits of the firm.

3.2 The partnership firm was constituted with the object and purpose of breeding livestock and carrying on agricultural activities. For this purpose, the Firm purchased 39 acres of land from one Mr. P.S. Devdas. Soon after the purchase of the land, when the time came to repay Mr. Devdas, the Firm faced immense financial difficulties. In fact, the Firm came under severe pressure, with Mr. Devdas also having taken legal recourse by filing a criminal case.

3.3 On 29.03.1973, which is around the same time when the Firm was going through tough circumstances, it is alleged that Gopirathnam sent a letter to Ranganathan, expressing his desire to retire from the Firm. Ranganathan is said to have replied to this letter on 15.04.1973 and accepted the resignation of Gopirathnam. Pursuant to this retirement, Gopirathnam is alleged to have been paid Rs. 20,000 as full and final satisfaction of his share in the Firm.

3.4 Parallelly, in 1975, the Firm happened to take a loan from State Bank of India to meet the maintenance cost of race horses, sink two bore wells and clear off outstanding dues. Interestingly, the loan application mentioned Gopirathnam as a partner of the firm. Later, around 1982, when this loan was not repaid, SBI initiated legal proceedings to recover the loan and it arrayed Gopirathnam as a Respondent for being a partner of the firm and also for having executed a guarantee in favour of SBI.

4. Civil Suit by Appellant : Be that as it may, Gopirathnam passed away on 27.12.1997. Three years post his demise, in the year 2000, the legal heirs of Gopirathnam, who are also the Appellants before this Court, filed a civil suit seeking dissolution of the firm, rendition of accounts and partition of the Firm’s property, on the ground that Ranganathan was acting against the