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2002 Supreme(Ker) 82
Kerala High Court
S.SANKARASUBBAN,R.BHASKARAN
K.J.George - Appellant
Versus
State Bank of Travancore - Respondent
Decided On : 02/05/2002
P. K. Joseph, Meena Sreedhar, A. Smt. M.A. Felicia, for Appellant. V.R. Kesava Kaimal, C. Usha Kaimal, M. M. Madhu, for Respondents.
Headnote:
Partnership Act – S. 32 – Liability of a Retired Partner – Fourth defendant in O.S. of the Sub Court, is the appellant – The fourth defendant filed a written statement stating that the suit is barred by limitation and that he retired from the Partnership – Copy of the retirement deed was duly handed over by the fourth defendant to the plaintiff’s then Branch Manager, who had duly noted this fact in the relevant books – The fourth defendant denied that he had executed any revival letter – He also denied that lawyer’s notice was sent to him – According to him, he should be deemed to be discharged from the liability of the Firm by the conduct of the Bank as well as other partners – Held, As already stated, S. 32 of the Act is the Section dealing with the retirement of partner– S. 32(2) of the Act says that a retiring partner may be discharged from any liability to any third party for acts of the firm done before his retirement by an agreement made by him with such third party and the partners of the reconstituted firm, and such agreement may be implied by a course of dealing between such thirdparty and the reconstituted firm after he had knowledge of the retirement– S. 32(3) of the Act says that public notice has to be given for retirement– But there is a Proviso to S. 32(3) of the Act, which says that a retired partner is not liable to any third party who deals with the Firm without knowing that he was a partner– Thus, a partner, who retires from a Firm does not thereby ceases to be liable for partnership debts or obligations incurred before his retirement–The facts in our case is also similar to the facts in the Karnataka Case(Syndicate Bank v. R.S.R. Engineering Works, ILR 1994 Karnataka 1095)– The fourth defendant retired from the Partnership on 10.3.1983– The revival letters were signed in 1985-86– At that time the retirement of the fourth defendant was intimated to the Bank, but the Bank did not require the fourth defendant to sign the revival letters– Ext. A19 agreement between the partners was sent to the Bank– This shows that defendants 2 and 3 are partners and are liable to the debts of the Bank and Ext. A16 notice was not issued to the fourth defendant– These clearly show that after the Bank was intimated about the retirement of the fourth defendant and about the undertaking by defendants 2 and 3 that they will continue to be liable– This means that the Bank has accepted the agreement and that the partners of the reconstituted Firm will be liable for the debts of the old Firm–In the above view of the matter, Court hold that the fourth defendant has been discharged from plaint liability to the Bank– Hence, the decree of the Court below making the fourth defendant liable is set aside and the appeal is allowed– Appeal Allowed
SANKARASUBBAN, J. :- Fourth defendant in O.S. No. 89 of 1988 of the Sub-Court, Ernakulam is the appellant. Respondent is the plaintiff in the suit, viz., The State Bank of Travancore, Cochin Branch. The suit was filed by the plaintiff for the recovery of a sum of Rs. 90,182.05 alleged to be due from the defendants to the plaintiff with interest and costs. The first defendant in the suit is The Queens Engineering Works, which is a Partnership Firm with defendants 2 to 5 as partners.
2. The firm was granted an over-draft facility for Rs.40,000/- on 10-6-1982 and a medium term loan of Rs.50,000/- on 9-2-1983. The necessary security documents were furnished to the respondent/Bank. The defendants executed revival letters in respect of the over draft facility and medium term loan account facility. Since the amount was not paid, the suit was filed.
3. In paragraph 13 of the plaint, the plaintiff stated that the defendants executed the revival letter for the over-draft facility on 24-5-1985 and on 10-1-1986 the medium term loan was revived. Hence, the suit is not barred by limitation. It is also stated that notices were sent to all the defendants.
4. The fourth defendant filed a written statement stating that the suit is barred by limitation and that he retired from the Partnership on 10-3-1983. Copy of the retirement deed was duly handed over by the fourth defendant to the plaintiff"s then Branch Manager John, who had duly noted this fact in the relevant books. The entire liability of the first defendant was taken over and the business carried on by defendants 2, 3 and 5 on the basis of the terms and conditions of the retirement deed. The plaintiff also agreed to the same and further agreed not to connect the fourth defendant with any of the affairs of the first defendant. It is also stated that the above facts will be clear from the subsequent conduct of the plaintiff and also from the fact that in none of the documents executed subsequent to 10-3-1983, the fourth defendant was either asked by the plaintiff to be a party or made a party. The fourth defendant denied that he had executed any revival letter. He also denied that lawyer"s notice was sent to him. Separate written statement was filed by defendants 2 and 3.
5. The Court below raised relevant issues. One of the issues is whether the fourth defendant stands discharged from the plaint liability by reason of his retirement from the partnership? The Court below found this issue against the fourth defendant. The suit was decreed and the plaintiff was allowed to realise the entire debt from defendants 2 and 3 and by sale of the plaint schedule property. If the plaintiff is unable to realise the entire debt from defendants 2 and 3 and by sale of the property, the plaintiff can proceed against defendants 4 and 5. As already stated, this appeal is filed by the fourth defendant. According to him, he should be deemed to be discharged from the liability of the Firm by the conduct of the Bank as well as other partners.
6. We heard learned counsel for the appellant Sri P.K. Joseph and the learned counsel for the respondent Sri V.R.K. Kaimal.
7. Sri Joseph contended that it is true that normally a retiring partner is made liable for the debts which have been incurred by the firm while he was a partner. But under S. 32 of the Partnership Act (hereinafter referred to as "the Act"), there are certain instances where a partner may be discharged from the liability even with regard to the debts, which were incurred by the Firm at the time when he was a partner. Under S. 32(2) of the Act, discharge may be made by the agreement by the retiring partner to any third party and the partners of the re-constituted Firm and such agreement may be implied by a course of dealing between such third party and the constituted Firm, after he had knowledge of the retirement. Learned counsel points out the following circumstances to infer that his client has been impliedly discharged from the liability. First
