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1985 Supreme(All) 263

IN THE HIGH COURT OF ALLAHABAD
R. P. SAXENA
M.C.SHARMA - Appellant
Versus
B.C.SHARMA - Respondents
F. A. F. O. 562 Of 1985
Decided On : 08/28/1985

Advocates Appeared:
P.N.Saxena

Sections 37 and 53 of the Partnership Act provide for the rights of outgoing partners and the right to restrain from the use of the firm name or firm property, respectively. These provisions were interpreted and applied by the court in this case to determine the rights of the parties after the dissolution of the partnership firm.

Headnote:

PARTNERSHIP ACT - SECTIONS 37, 42 (C), 43, 53 - DISSOLUTION OF FIRM - RIGHT OF OUTGOING PARTNER TO SHARE SUBSEQUENT PROFITS - RIGHT TO RESTRAIN FROM USE OF FIRM NAME OR FIRM PROPERTY - INTERPRETATION AND APPLICATION.

Fact of the Case:

A partnership firm was dissolved by a notice served by one of the partners. The appellant, another partner, filed a suit for a permanent injunction restraining the respondents from creating obstacles in the partnership business. The respondents filed a counterclaim for a permanent injunction restraining the appellant from carrying on his own business in the disputed premises. The trial court granted the injunction in favor of the respondents.

Finding of the Court:

The court held that Section 37 of the Partnership Act, which provides for the right of an outgoing partner to share subsequent profits, does not apply in this case because the firm was dissolved by a notice and not by death or otherwise ceasing to be a partner. The court also held that Section 53 of the Partnership Act, which provides for the right to restrain from the use of the firm name or firm property, applies in this case and the respondents are entitled to restrain the appellant from carrying on a similar business in the firm's name or using any of the firm's property for his own benefit.

Issues: 1. Whether Section 37 of the Partnership Act applies to a case where a firm is dissolved by a notice served by one of the partners? 2. Whether Section 53 of the Partnership Act applies to a case where a partner is carrying on a similar business in the firm's name or using any of the firm's property for his own benefit after the firm is dissolved?

Ratio Decidendi: 1. Section 37 of the Partnership Act applies only in two contingencies: (a) where any member of a firm has died or otherwise ceased to be a partner; and (b) the surviving or continuing partners carry on the business of the firm with the property of the firm without any final settlement of accounts as between them and the outgoing partner or his estate. 2. Section 53 of the Partnership Act provides for a total blanket on the carrying on of a similar business in the firm's name or using of the property of the firm for his own benefit by a partner, except subject to a contract to the contrary.

Final Decision: The appeal was dismissed and the injunction granted by the trial court in favor of the respondents was upheld.

R. P. SAXENA, J.


( 1 ) HEARD the learned counsel for the parties, perused the affidavits exchanged and the Annexures thereto.

( 2 ) THE parties were carrying on a partnership business in the name and style of M/s. Amber Guest Business House. On 1-4-1985 the appellant filed Suit No. 89 of 1985 on behalf of the firm against respondents Nos. 1 and 2. The appellant prayed for permanent injunction restraining the respondents from creating obstacles in the partnership business. An ad interim stay order was granted. On 19th April, 1985 the respondent No. 1 served a notice dissolving the firm. The interim injunction granted earlier was vacated. The respondents 1 and 2 moved an application for temporary injunction restraining the appellant from carrying on his own business in the disputed premises. The application was allowed on 13th May, 1985. The appellant filed an appeal against the aforesaid order which was dismissed by this Court on 21st May, 1985. Earlier the appellant had filed Suit No. 120 of 1985 for a declaration that he is the owner of the disputed premises which he purchased Benami in the name of respondents Nos. 1 and 2. He also prayed for a permanent injunction restraining respondents from interfering with the user of the premises for the business of the appellant. The application for temporary injunction was rejected on 13-5-1985. The appellant filed an appeal against the order. The appeal was admitted on 24-5-1985. The respondents Nos. 1 and 2 have been restrained from interfering with the possession of the appellant as a partner. 2a. The respondents Nos. 1 and 2 filed Suit No. 184 of 1985 against the appellant and respondent No. 3 for a permanent injunction restraining them from carrying on any business in the disputed premises. The injunction application has been allowed and in the present appeal the said order has been challenged.

( 3 ) LEARNED counsel for the appellant submitted that in view of the offer made by him in para 19 (iv) of the counter affidavit filed by him to the affidavit in support of the application for temporary injunction before the trial Court and also in view of the provisions of S. 37 of the Partnership Act, the trial Court should have considered his offer and should have permitted him to carry on the business on such terms as it deemed fit and proper. He further submitted that whereas the appellant will suffer irreparable injury as he will be deprived of his livelihood if he is not permitted to carry on his business, while respondents Nos. 1 and 2 will not suffer any loss which can not be compensated in terms of money. He also referred to S. 53 of the Partnership Act and submitted that he does not want to do business for his own benefit and the trial Court has rejected his offer to share the profits.

( 4 ) LEARNED counsel for respondents Nos. 1 and 2 submitted that S. 37 of the Partnership Act has no application to the facts of the case. As far as S. 53 of the Act is concerned, he contended that a partner can carry on business for his own benefit only subject to a contract to the contrary and this Court cannot permit him to do so.

( 5 ) SECTION 37 of the Partnership Act provides as below :- "right of outgoing partner in certain cases to share subsequent profits.- Where any member of a firm has died or otherwise ceased to be a partner, and the surviving or continuing partners carry on the business of the firm with the property of the firm without any final settlement of accounts as between them and the outgoing partner or his estate, then in the absence of a contract to the contrary, the outgoing partner or his estate is entitled to the option of himself or his representative to such share of the profits made since he ceased to be a partner as may be attributable to the use of his share of the property of the firm or to interest at the rate of six per cent per annum on the amount of his share in the property of the firm :

( 6 ) SECTION 53 of the Partnership Act provides as below :-"right to restra
















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