A partnership continues despite a partner's death if the partnership deed facilitates it; statutory authorities must act equitably and cannot arbitrarily disrupt business continuity.

JUDGMENT :

PANKAJ MITHAL, J.

1. Heard Smt. Madhavi Goradia Divan, learned senior counsel for the Petitioner, Shri Yashraj Singh Deora, learned senior counsel for the Respondent Nos. 1 to 3 and Smt. Pallavi Pratap, learned counsel for the Respondent Nos.7 and 8.

2. It is a classic case where instead of acting in a just, fair and equitable manner, the statutory corporation, a state instrumentality, has acted in a high-handed manner while exercising arbitrary powers with no sense of fairness in a matter of commercial interest.

3. The Indian Oil Corporation Limited¹[In short ‘IOCL’] after having lost before the Single Judge and the Division Bench of the High Court of Calcutta in successfully defending its above action has preferred this Special Leave Petition, probably in order to cover its illegal action.

4. The Special Leave Petition is directed against the judgment and order dated 04.07.2018 passed by the Division Bench of the High Court upholding the mandamus issued by the Single Judge on 03.07.2012 in a writ petition directing the IOCL to maintain the supply of kerosene to the respondent No.1 till it is reconstituted or its dealership agreement is terminated.

5. The brief facts giving rise to the present dispute and to this Special Leave Petition are that Respondent No.1 – M/s Shree Niwas Ramgopal herein was a proprietorship firm of one Kanhaiyalal Sonthalia. The said Kanhaiyalal Sonthalia reconstituted the firm on 24.11.1989 and included his two sons, Ramesh Sonthalia and Gobinda Sonthalia along with himself as partners in the said firm. The firm was reconstituted as a partnership firm with Kanhaiyalal Sonthalia having 55% share, Ramesh Sonthalia having 35% share and Gobinda Sonthalia holding 10% share in the said partnership business.

6. The partnership was to work as an agency/distributor of kerosene oil for the IOCL. The said partnership firm entered into a kerosene dealership agreement with the IOCL on 11.05.1990 which inter alia specifically provided that in the event of death of any of the partners of the partnership firm, the dealer shall immediately inform the corporation and provide details of the heirs and legal representatives of the deceased partner. It further provided that IOCL shall have an option:-

i) to continue with the dealership with the existing firm; or

ii) to have fresh agreement of dealership with the reconstituted firm; or

iii) to terminate the dealership agreement. The decision of the IOCL in this behalf shall be final and binding upon all parties.

7. One of the partners of the aforesaid partnership firm Kanhaiyalal Sonthalia, having 55% shares in the firm, died on 29.11.2009 leaving behind his wife, seven sons and four daughters as his heirs and legal representatives which included Ramesh Sonthalia and Gobinda Sonthalia, the two sons who were already working as partners in the firm.

8. On the death of aforesaid Kanhaiyalal Sonthalia, as usually happens in all business families, disputes cropped up amongst his heirs with regard to the stake of 55% shareholding of the deceased in the partnership firm.

9. One of his legal heirs Ananda Sonthalia addressed a letter dated 19.01.2010 to the existing partners staking claim in the partnership and that he be inducted as one of the partners. An undated letter was written by another heir Jagdish Prasad Sonthalia stating he has a bitter experience about the firm’s business and he does not know about the assets and liabilities of his deceased father, therefore, the remaining partners be directed to furni