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High Court Of Delhi
BABAR AHMED MUTAKIF - Appellant
Versus
QUTAB OASIS - Respondent
Decided On : 03/01/1996
PARTNERSHIP ACT, 1932 - SECTION 53 - DISSOLUTION OF FIRM - RESTRAINT ON PARTNERS FROM CARRYING ON SIMILAR BUSINESS - INJUNCTION GRANTED TO RESTRAIN PARTNER FROM CONTINUING BUSINESS AFTER DISSOLUTION.
Fact of the Case:
A partnership was formed between the plaintiff and defendant to run a restaurant. The partnership deed provided that the plaintiff would provide the premises and the defendant would invest the working capital. The partnership was dissolved by the plaintiff after it failed to function properly. The defendant continued to run the restaurant, claiming that he had spent a large amount of money on it and was entitled to continue the business until he recovered his investment.
Finding of the Court:
The court held that the defendant had no right to continue to run the restaurant after the dissolution of the partnership. The court noted that Section 53 of the Partnership Act, 1932 prohibits partners from carrying on a similar business in the firm name or using the firm's property for their own benefit after the dissolution of the firm.
Issues: Whether the defendant had the right to continue to run the restaurant after the dissolution of the partnership.
Ratio Decidendi: The court held that the defendant had no right to continue to run the restaurant after the dissolution of the partnership because: (1) Section 53 of the Partnership Act, 1932 prohibits partners from carrying on a similar business in the firm name or using the firm's property for their own benefit after the dissolution of the firm; (2) the defendant had no license to run the restaurant; and (3) the defendant had admitted in a statement before the Sub-Divisional Magistrate that he had no right or title to the property and that the firm was duly dissolved.
Final Decision: The court granted an injunction restraining the defendant from carrying on the business of the restaurant from the premises in question until the final decision of the suit.
( 1 ) 16th February, 1993 the plaintiff and defendant No. 2 had entered into a partnership to run a restaurant under the name and style of "the Qutab Oasis" at the premises forming part of the plot of land at Khasra No. 669/27. Aurobindo Marg, Mehrauli Road, New Delhi. The said plot of land was owned by the father of the plaintiff and had been given on license to him. Some of the terms and conditions of the partnership deed were as under: -
"1. That the partnership business shall be that of a Restaurant/dhaba, sale of raw chicken products from Arslan Farms and shall be carried on at 669/27, Aurobindo Marg, Main Mehrauli Road, New Delhi. 2. That the name and the style of the Partnership Firm shall be The Qutab Oasis. 3. (i) That the party of the first part (i. e. the plaintiff) shall provide with the open piece of land, one room, verandah on the ground floor and the hall on the first floor and the party of the second part (i. e the Defendant) shall invest the required working capital and provide know-how etc. etc. (ii) That the Partnership shall carry on the business in the said premises. (iii) That the party of the second part will have no right of title to or interest in the said premises i. e. 669/27, Sri Aurobindo Marg, New Delhi. (iv) That the party of the first part alone shall be entitled to the premises. He will remain in exclusive possession of the premises. 5. That the profit and loss of the firm shall be divided equally between both the parties. 6. That the proper books of accounts shall be maintained regularly which shall be kept at the place of business and both the parties will have the right to inspect the same. 7. (i) That no party shall create any liability or take any loan or any encumbrances, charges and lien whatsoever in respect of the partnership firm or in respect of the premises i. e. 669/27, Sri Aurobindo Marg, Mehrauli Road, New Delhi. (ii) That each partner shall attend to the work diligently. 8. That the partnership shall be at will which may be determined by the either party after giving a notice in writing to the other party. "
( 2 ) THE partnership, it appears, could not function properly and the plaintiff, therefore, by a notice dated April 6, 1995 dissolved the firm and the present suit has been filed for rendition of accounts of the business of the firm and for a declaration that the firm stood dissolved by giving of the said notice. Alongwith the suit, an application under Order 39 Rules 1 and 2 Civil Procedure Code was filed for an injunction restraining the defendant No. 2 from opening the restaurant in violation of the terms of the partnership and from transferring or alienating the property in dispute to any other person.
( 3 ) A local commissioner was also appointed by the Court to find out as to who was in possession of the premises. The local commissioner, after inspection of the premises made a report that while the keys of the main gate of the premises were with the chowkidar of the restaurant, the keys of the back gate were with the Manager. The keys of the office were with the plaintiffs brother and Manager of the restaurant and the keys of the safe in the lobby were also with the plaintiff s brother. It was also observed by the local commissioner that keys of the filing cabinet in the office were with the Manager of the restaurant.
( 4 ) THE defendant in the written statement has not denied that the plaintiff was a licencee of the plot in question and it was he who had allowed the partnership firm to carry on business thereon. The contention of the defendant, however, on merits is that the plaintiff did not have any right to terminate the partnership because the defendant had spent Rs. 65-70 lakhs in the restaurant and till such time this mount was paid back to the defendant, he has a right to continue the business. It is also stated in the written statement that the defendant had been raising construction for the restaurant when the Delhi Development Authority demolishe
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