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Andhra Pradesh High Court
Judges : CHANDRASEKHARA SASTRI, M.SESHACHALAPATI
Thummala Rama Rao - Appellant
Versus
Chodagam Venkateswara Rao - Respondent
Decided On : 07-14-61
PARTNERSHIP - LIABILITY OF RETIRING PARTNERS - PUBLIC NOTICE OF RETIREMENT - SECTION 32(3) AND 72 OF THE INDIAN PARTNERSHIP ACT, 1932 - SCOPE AND APPLICABILITY - KNOWLEDGE OF RETIREMENT BY THIRD PARTIES - EFFECT ON LIABILITY - ESTOPPEL.
Fact of the Case:
The appellants, defendants 6, 7, 8, and 10, appealed against a decree holding them jointly and severally liable for a debt incurred by the 11th defendant firm, Gokul Krishna Film Distributing Company. The plaintiffs, respondents 1 to 3, had filed a suit to recover the amount due on three promissory notes executed by the 1st and 5th defendants on behalf of the firm. The appellants contended that they had retired from the partnership before the promissory notes were executed and that public notice of their retirement had been given as required by law, thus absolving them from liability.
Finding of the Court:
The court held that the appellants could not be held liable for the suit claim as the promissory notes were not executed on behalf of the firm and there was no intention to bind the firm. The court also found that the debts were not incurred for the business of the firm but for the separate business of the 1st defendant. Furthermore, the court held that the appellants' retirement from the partnership had been duly published as required by law, and that the plaintiffs were aware of their retirement before the promissory notes were executed. Therefore, the appellants could not be held liable under Section 32(3) of the Indian Partnership Act, 1932, which provides for the continued liability of retiring partners until public notice of their retirement is given.
Issues: 1. Whether the appellants were liable for the suit claim despite their retirement from the partnership. 2. Whether the promissory notes were executed on behalf of the firm and whether there was an intention to bind the firm. 3. Whether the debts were incurred for the business of the firm or for the separate business of the 1st defendant. 4. Whether the appellants' retirement from the partnership had been duly published as required by law and whether the plaintiffs were aware of their retirement before the promissory notes were executed.
Ratio Decidendi: 1. The court interpreted Section 32(3) of the Indian Partnership Act, 1932, and held that a retiring partner continues to be liable for acts done by other partners that would have bound the firm before the retirement, until public notice of the retirement is given as prescribed by Section 72 of the Act. 2. The court found that the promissory notes were not executed on behalf of the firm and there was no intention to bind the firm, as evidenced by the fact that they were signed by the 1st and 5th defendants in their individual capacities and not as partners of the firm. 3. The court also found that the debts were not incurred for the business of the firm but for the separate business of the 1st defendant, as evidenced by the recitals in the promissory notes and the testimony of witnesses.
Final Decision: The appeal was allowed, and the suit was dismissed against the appellants with costs. The decree passed by the lower court against the other defendants, who did not appeal, was upheld.
( 1 ) THIS is an appeal by the defendants 6, 7, 8 and 10 against the decree in O. S. No. 28 of 1955 on the file of the Subordinate Judges Court, Guntur. The suit was filed by the three plaintiffs, who are the respondents in this appeal to recover a sum of Rs. 18,173-12-2 being the amount of principal and interest due on three promissory notes for Rs. 10,000. 00 each. There are 11 defendants in this suit. The 11th defendant is Gokul Krishna Film Distributing Company, Vijayawada. It is alleged in the plaint that the defendants 1 to 10 are the partners of the 11th defendant firm. One promissory note was executed by the 5th defendant in favour of the 1st plaintiff for Rs. 10,000. 00 on 17-12-1951. Another promissory note was executed by the 1st defendant in favour of the 2nd plaintiff for another sum of Rs. 10,000. 00 on 9-9-1951. The third promissory note was executed also by the 1st defendant for another sum of Rs. 10,000. 00 in favour of the third plaintiff on 9-9-1951. The three promissory notes are marked as Exs. A-1 to A-3 in the suit. According to the allegations in the plaint, the 1st defendant has been the managing partner of the 11th defendant-firm and the 5th defendant was assisting him in the management. Subsequently, an arrangement was entered into between the plaintiffs and the defendants whereunder the distribution rights of a film "perantalu" which the defendants had at the time were transferred to the plaintiffs and under which the plaintiffs were given the right to credit 85% of the collections towards the suit promissory notes till the amounts due under them were discharged. As per this arrangement, a document, Ex. A-4 was executed on 30-5-1952 by the 1st defendant, who was the managing partner. After deducting the amounts which the plaintiffs received in pursuance of this arrangement the suit was held for thee Balance due viz. , Rs. 18,173-12-2. It is stated in the plaint that as the original borrowing was for the purpose of the partnership, all tile defendants are jointly and severally liable to discharge the suit debts. Defendants 1 to 4 and 11 were absent during the trial of the suit though they filed written statements. The 5th defendant filed a written statement admitting his executing the promissory note dated 17-12-1951 in favour of the 1st plaintiff on behalf of the 11th defendant-firm. But, he contended that he ceased to be a partner of the firm on 4-6-1952 and therefore he was not liable for the suit debt. The further plea taken by him was that the arrangement entered into on 30-5-1952 operates as Novatio and that the suit is not maintainable on the suit promissory notes. The maintainability of one suit by all the three plaintiffs was also objected to.
( 2 ) THE 6th defendant contended that he ceased to be a partner of the 11th defendant-firm on and from 6-6-1951 having sold away his Rs. 0-2-6 share to defendants 1 to 5 and that his retirement from the partnership was duly published in the newspapers in September, 1951 and was also communicated to the Registrar of Firms and that the plaintiffs were aware of his retirement prior to 9-9-1951 i. e. , even before the execution of the suit promissory notes and the borrowings thereunder. Therefore, he is not liable for the suit claim. He also denied the truth of the suit debts and execution of the promissory notes and their binding nature on the partnership and their alleged acknowledgement under Ex. A. 4.
( 3 ) DEFENDANTS 7, 8 and 10 filed a written statement contending that they ceased to be the partners of the firm from 6-6-1951 and that an agreement dated 14-9-1951 was executed between them and the remaining partners, defendants 1 to 5, that due publication was made regarding their retirement both in the newspapers and by giving notice to the Registrar of Firms. They also denied the truth, validity and binding nature of the suit debts on the firm or its partners. According to them, the suit promissory notes were not executed and the suit debt
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