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1998 Supreme(Bom) 293
IN THE HIGH COURT OF BOMBAY
A.B. Palkar, J.
Vinayak Keshav Paranjape .... Appellant.
Versus
Dena Bank others ... Respondents.
First Appeal No. 642 of 1981, decided on 6-3-1998.
Advocates appeared:
G.S. Godbole, for the appellant.
J.R. Lalit, for the respondent No. 3.
K.J. Abhyankar, for respondent No. 1.
Headnote:Partnership Act, 1932
Section 32-Limitation Act 1963, Section 18-Liability of retired partner-Sec. 32(2) discharges the retiring partner from all liabilities and all those parties who knew about this, direment are bound by it, bank having knowledge of it need not be informed separately.- The principle of law which is stated in Lindley on partnership was referred to by the Division Bench and it was stated that the same was un-controvertible. It was further pointed out by the Division Bench that Section 32(3) enacts a liability on the well known principle of holding out, and this principle is also recognised in the case of dissolution under Section 45 of the Indian Partnership Act.
Thus the law prior to the enacting of the Indian Partnership Act was the same as in England. The Law in England can be state thus; (1) a creditor who had previous dealings with the firm is entitled to treat all those whom he knew to be members of it as remaining until he has actual notice to the contrary; (2) a creditor who has had no previous dealings with the firm but who knew who the partners were because of the use of their names in the note paper etc., is entitled to treat such persons as the remaining members of the firm until either he receives actual notice to the contrary, or the retirement is published in the London Gazette, (3) a creditor who has not had previous dealings with the firm or acknowledged of its constituents is not entitled to hold the retired partner liable for debts incurred by the firm subsequently to his retirement not withstanding that no notice of any sort is given. [Vide Pollock on the Law of Partnership, 15th Edn., page 96].
The purpose of Section 32(3) is more to specify how notice should be given. Its main object is to avoid the necessity of giving actual or private notice to the various persons. In other words, it specifies the mode by which the retiring partner may be relieved of the responsibility of issuing notice to the various classes of persons who might enter into transactions with the surviving partners. Public notice is intended only to serve a purpose, namely, to bring home to the persons concerned the fact of retirement. That purpose will undoubtedly be served in a better way by personal or actual notice.
In the present case, the Bank having the knowledge that defendant No.2 no more continued to be a partner of Surekh Chappal Company and in fact the partners were defendant No. 3 and his father who have acknowledged the liability in writing for the loan advanced by the Bank, the question of giving public notice does not arise.
Sections 32(2) and 45-Limitation Act, 1963, Section 18-Evidence Act, 1872, Section 115-Estoppel from allegations-Inspite of knowing that partnership of the firm was dissolved in 1976, bank cannot claim payment of dues as on date on 1.1.1978, bank is estopped from alleging the retired partner as liable for debt.
Section 32(3)-Proviso read with 45-Advancement of loan to the FIRM-Suit for recovery by bank-One of the partner retired from firm-Effect of acknowledgement of loan by continuing and new partner-Public notice to concerned the fact of retirement-Partner not bound for acknowledgement.-The proviso to Section 32(3) and the corresponding provision in Section 45 with its proviso indicate beyond doubt, that only persons who were not aware of the retirement of a particular partner could take ad vantage of Section 32(3) or Section 45.
It has also be considered on the background of the fact that defendant No.1 was a small firm and the firm was also not registered. They were carrying on business of shoes and chappals. There were only two partners. One of them having retired and partnership firm came to an end and new firm in the same name was started by defendant No.3 and his father. Intimation of this was given to the Sales Tax Officer and sales tax registration was cancelled. After this, the defendant No.3 and his father gave acknowledgement in writing when the bank, employee visited the premises and specifically defendant No.3 and his father described themselves as the partners of defendant No. 1. The bank must be deemed to have knowledge of the fact that defendant No.2 was no more partner of the said firm, and therefore, there was no question of fastening liability on defendant No.2 merely because, he had not given public notice. Therefore, the learned trial Judge was not correct in holding defendant No.2 liable because of the acknowledgment in writing given by defendant No. 3 in his capacity as a partner alongwith his father, merely because, defendant No.2 had not given public notice of dissolution. Defendant No.2 has also filed a suit for accounts of the dissolved firm which is wrongly stated as suit for dissolution because, there was already dissolution of the firm as stated in the letter to the sale tax office especially because there were only two partners. If, one of them retired, the partnership firm automatically stands dissolved.
2. In order to appreciate the controversy, the following brief summary of facts is material.
The parties are referred to as plaintiffs and defendants as in the trial Court. The suit was filed by Dena Bank against defendant Nos. 1 to 3. Defendant No. 1 being M/s. Surekh Chappal Company, a registered partnership firm dealing in manufacturing foot wears at Nasik of which defendant Nos. 2 and 3 were the partners, at the relevant time when loan was advanced by the plaintiff Bank to the defendant. The plaintiff Bank advanced a loan of Rs. 20,000/- to defendant Nos. 1 to 3, and defendant Nos. 2 and 3 being the partner of defendant No. 1 executed a promissory note and also deed of hypothecation in respect of stock in trade, machinery and other movable property of the firm. The defendants admitted the liability and acknowledged the dues of Rs. 23,708.67 on 1st January 1978 by signing balance confirmation letter. However, the defendants thereafter failed to pay the balance amount found due with interest in spite of repeated demands and the suit notice, and therefore, the Bank has filed a suit for recovery of Rs. 26,750/- with interest.
3. Defendant No. 2 (appellant) filed a separate written statement and contended that firm M/s. Surekh Chappal Company was not in existence when the suit was filed. The fact that the loan was advanced to the firm is not disputed. However, according to defendant No. 2 the business was being looked after by defendant No. 3 and so defendant No. 3 is primarily liable to repay the loan. The partnership between him and defendant No. 3 has come to an end on 31st August 1976 and he is not liable for any dealing of the firm by defendant No. 3. The document of balance confirmation letter is executed by defendant No. 3 and not by him and as such it is not binding on him, and therefore, the suit claim as against him is barred by limitation.
4. A separate written statement is filed by defendant No. 3. He admitted the claim of the plaintiff. It was admitted by him that the firm was subsisting and defendant No. 2 has even mortgaged his house for the purpose of the said loan and the loan may be recovered by putting house to sell. Defendant Nos. 2 and 3 being only the partners, they are equally liable.
5. On these pleadings Issues were settled by the learned trial Judge and after scrutinising the oral and documentary evidence and after hearing the arguments, the learned trial Judge came to a conclusion that all the defendants are liable, jointly and severally, to repay the Bank loan with interest. The learned trial Judge also came to a conclusion that partnership firm has been dissolved on 31st August 1976 as contended by defendant No. 2 and acknowledgment i.e. balance confirmation letter was not binding on defendant No. 2. However after having held that the acknowledgment in writing was not binding on defendant No. 2 the learned trial Judge held that plaintiff is entitled to a decree as against all the defendants in view of the provisions of Indian Partnership Act and as such he passed the impugned decree.
6. In this Court the factum of advancing loan and written acknowledgment signed by defendant No. 3 were not disputed and therefore, controversy at this stage is very short.
7. According to the appellant (defendant No. 2), the partnership has come to an end as held by the learned trial Judge on 31st August 1976 and the acknowledgment has been given in writing by defendant No. 3 after the said date, and therefore, he is not liable to the plaintiff-Bank. The learned trial Judge has wrongly fastened liability on him in spite of the documentary evidence on recor
