A partner of a partnership at Will can retire from the firm with the consent of all the other partners under Section 32(1)(a) of the Indian Partnership Act, 1932.

Headnote:
PARTNERSHIP - RETIREMENT - CONSENT OF ALL PARTNERS - SECTION 32(1)(A) OF THE INDIAN PARTNERSHIP ACT, 1932 - INTERPRETATION - PARTNERSHIP AT WILL - METHOD OF RETIREMENT - SECTION 32(1)(C) OF THE ACT - APPLICABILITY - DISTINCTION - ADMISSION OF RETIREMENT BY OTHER PARTNERS - ESTOPPEL - ACCOUNTS OF THE FIRM - PRODUCTION - FAILURE - ADVERSE INFERENCE - INTEREST - CLAIM - WAIVER - COURT-FEES ACT, SECTION 52(3).
Fact of the Case:

Plaintiffs 2 to 6 were partners in the 1st defendant firm, a wholesale cloth business. On 7-5-1979, T.R. Arthanari Mudaliar, one of the partners, died and the firm was reconstituted with defendants 2 to 6 as its partners. Plaintiffs 2 to 6 claimed to have retired from the firm with effect from 13-4-1979 and sought a decree directing the defendants to pay them the share of their profits and capital. The defendants denied the retirement and contended that plaintiffs 2 to 6 could retire only by giving notice in writing to all the other partners under Section 32(1)(c) of the Indian Partnership Act, 1932.
Finding of the Court:

The Court held that plaintiffs 2 to 6 had retired from the 1st defendant firm with the consent of all the other partners under Section 32(1)(a) of the Act. The Court rejected the defendants' contention that Section 32(1)(c) of the Act alone applied to a partnership at Will and that plaintiffs 2 to 6 could retire only by giving written notice to all the other partners. The Court held that such an interpretation would render Section 32(1)(a) of the Act otiose and would prevent partners from retiring even with the consent of all the other partners. The Court also held that the defendants were estopped from denying the retirement of plaintiffs 2 to 6 since they had admitted the retirement in their written statement, reply statement, and caveats filed in Court.
Issues: 1. Whether plaintiffs 2 to 6 had retired from the 1st defendant firm with effect from 13-4-1979? 2. Whether plaintiffs 2 to 6 are entitled to the amounts prayed for in the plaint? 3. Whether, the plaintiffs are entitled to interest and if so, for what period and at what rate?
Ratio Decidendi: 1. Section 32(1)(a) of the Indian Partnership Act, 1932 applies to partnerships at Will and allows partners to retire with the consent of all the other partners. 2. Section 32(1)(c) of the Act applies only when a partner of a partnership at Will wishes to retire without the consent of all the other partners. 3. A partner cannot be prevented from retiring from a partnership at Will even with the consent of all the other partners. 4. A partner who retires from a partnership at Will with the consent of all the other partners is entitled to the share of his profits and capital as agreed upon by the partners.
Final Decision: The Court allowed the appeal, set aside the judgment and decree of the Court below, and decreed the suit as prayed for, save interest for the period from 12-4-1982 to 31-8-1984.

Judgment :-

A.R. LAKSHMANAN, J.

The unsuccessful plaintiffs are the appellants in this appeal. The 1st plaintiff is a firm carrying on a rice mill business at Avanashi. Plaintiffs 2 to 6 are the partners of the said firm, being the sons and grandsons of one V.S. Vijyapuri Mudaliar. The 1st defendant is a firm carrying on a wholesale cloth business at Erode. The same was started during 1968. The partners of the said firm were composed of the family members of V.S. Viyapuri Mudaliar and T.R. Arthanari Mudaliar. On 7-5-1979, T.R. Arthanari Mudaliar's widow the 5th defendant and his last son the 6th defendant have been taken as partners. The 1st defendant firm was managed by T.R. Arthanari Mudaliar and A. Balasundaram till the former's death on 7-5-1979 and thereafter by defendants 2 to 6.

2. According to the plaintiffs, the profits and other sums due by the 1st defendant firm to plaintiffs 2 to 6 used to be credited from time to time in the 1st defendant's firm's accounts in the firm name of M/s. Vaiyapuri Mudaliar and Sons, the 1st plaintiff, since plaintiffs 2 to 6 have been carrying on business in partnership in the said firm name instead of in the individual names. The same procedure and practice was also adopted in the books of the 1st plaintiff's firm for the sake of convenience and pursuant to the understanding between the parties. It is the case of the plaintiffs that plaintiffs 2 to 6 retired from the 1st defendant firm with effect from 13-4-1979 and a sum of Rs. 3,06,973.40 was found owing by the 1st defendant firm to plaintiffs 2 to 6 towards the share of their profits together with interest on the same, besides a sum of Rs. 52,627.30 towards their share capital. The said two sums were also shown as outstanding in the 1st plaintiffs accounts as bring due by the 1st defendant firm. T.R. Arthanari Mudaliar who was in the management of the firm, undertook to pay the said sum together with interest at 15% on the same and also the share capital of Rs. 52,627.30 to plaintiffs 2 to 6 as early as possible. Unfortunately, he died on 7-5-1979 and the 1st defendant firm was reconstituted with defendants: 2 to 6 as its partners, who also agreed to discharge the suit liabilities.

3. It is the further case of the plaintiffs, that pursuant to the undertaking, the 1st defendant has been remitting into the accounts of the 1st plaintiff firm, for and on behalf of plaintiffs 2 to 6 amounts from time to time by means of cash, cheques and drafts in liquidation of their liability. Further, the defendants have also got to pay a sum of Rs. 52,627.30 towards refund of share capital to plaintiffs 2 to 6 together with interest at 15% per annum. In spite of repeated requests, the defendants did not pay the amounts outstanding: The plaintiffs issued a registered lawyer's notice dated 15-12-1981 to defendants 2 to 6 calling upon them to pay the aforesaid sums. The 2nd defendant alone sent a reply dated 5-2-1982. The plaintiffs prayed for a decree directing the defendants to pay plaintiffs 2 to 6 the suit claim of rupees 2,85,610.14 together with interest at 15% per annum on the sum of Rs. 2,85,610.14 from the date of suit till date of payment together with costs.

4. Defendants 1 and 3 to 6 filed a common written statement. According to them, plaintiffs 2 to 6 did not retire from the 1st defendant firm. The 1st defendant firm is a partnership at Will. Section 32 of the Indian Partnership Act, 1932 (hereinafter referred to as the Act) inter alia interdicts that any partner of a firm at Will can retire from the firm giving notice in writing to all the other partners of the firm of his intention to retire. No such notice was ever given nor even claimed to have been given by plaintiffs 2 to 6. There is no legal, factual or valid retirement of plaintiffs 2 to 6 from the 1st defendant firm.

The death of T.R. Arthanari Mudaliar also did not dissolve the firm in law, nor plaintiffs 2 to 6 ceased to be the partners of the 1st defendant firm. Plaintiffs 2 to 6 wer

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1995 Supreme(Mad) 407

High Court of Judicature at MadrasTHE HONOURABLE MR. JUSTICE ABDUL HADI AND THE HONOURABLE MR. JUSTICE A. R. LAKSHMANANM/s. Vaiyapuri Mudaliar and Sons, Avanashi and Others - AppellantVersusM/s. Sri Arunodhaya Textiles, Erode and Others - RespondentsAppeal No. 219 of 1985Decided On : 06 April 1995

A partner of a partnership at Will can retire from the firm with the consent of all the other partners under Section 32(1)(a) of the Indian Partnership Act, 1932.