J. B. MEHTA, B. G. THAKOR, J.

( 1 ) THESE two cross appeals raise an interesting question as to the interpretation of the two mandatory conditions laid down in sec. 69 (2) of the Indian Partnership Act 1932 hereinafter referred to as the Act in the context of a reconstituted firm by addition of a now partner and when the cause of action had accrued after such reconstitution. First Appeal No. 769/1960 is filed by the original defendant-company while First Appeal No. 1029/60 is filed by the original plaintifl-firm.

( 2 ) THE short facts which have given rise to these two appeals are as under :the plaintiff-firm is a partnership firm having firms namo Messrs. Mohatta Brothers which carried on the business of managing agency of the dependent-company namely Bharat Suryoday Mills Company Limited hereinafter referred to as the company. The plaintiff-firm carried on the said business of the managing agency upto 4th September 1950. Shri Chaturbhujdas had given a scheme of management Ex 168 on behalf of Messrs. Chaturbhujdas Kharawala Mohatta and Company hereinafter referred to as the new managing agents on 31st July 1950. On 1st August 1950 a notice was issued by the secretary for sanctioning the said scheme in the companys general meeting to be held on 4th September 1950. The company by the resolution of the general meeting of its shareholders approved the said scheme on 4th September 1950. Under the said scheme partners of this plaintiff-firm which worked as the old managing agents had their resignations accepted by the company and the new managing agents were appointed with effect from 4th September 1950 as the companys secretaries treasurers and agents in place of the plaintiff-firm. The matarial terms of the said scheme Ex. 168 provided as under:- under clause 5 before the scheme was sanctioned by the company the existing directors had to submit to the company and get the balance-sheet and the profit and loss accounts for the period ending 1949 passed by the company and they had also to give a pro-forma balance sheet upto 31 July 1950 duly audited by the companys auditors. It was mentioned that the said scheme was given under the belief that the machinery as per the list supplied by the old managing agents was existing at that time and also under the belief that the company had no liability or debt whatever beyond the amount of Rs. 4 77 850 due upto date to the old managing agents and their friends and relatives and of which a list was given. The next clause 6 provided that whatever amount was lying with the company to the credit of the old managing agents and their friends and relative as on 30th July 1950 and which according to the say of the old managing agents was about Rs. 4 77 850 was to be kept at the credit of the old managing agents viz. the plaintiff-firm and no interest was to be paid thereon from 1st August 1950 and that no interest was to be taken on the said amounts for a period of five years from the date of the commencement of the business of the company in pursuance of the sanction of the scheme Ex. 168 and that the said deposits were not to be withdrawn for d period of 10 years but they were to be kept in the company with interest at 6% subject to the companys option of returning the amount earlier if it so desired. The next clause 7 which is material provided that the company owed to the Punjab National Bank a sum of Rs 3 46 466 and there was an outstanding demand with the company in respect of the payment of bonus of the employees for the year 1949. It was the say of the old managing agents that both these liabilities of the company could be discharged from the amount realised by sale of the stores etc. goods lying with the company of which a list had been given to the new managing agents by the old managing agents as also from excess profit deposits and income-lax advance payment amounts If in so paying the amount to the bank and in discharging the liability of bonus this liability could not be fully discharged

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