Case: Vishnu Chandra Vs. Chandrika Prasad Agarwal and Others

firm. Section 32 (1) provides, inter alia, that a partner may retire ... (b) in accordance with an express agreement by the partners. A partnership business is run in accordance with the terms of the contract of partnership. The terms, inter alia, envisage a situation that a partner can retire from partnership. The expression used in clause 18 that a partner may dissociate from the partnership envisages a situation where a partner wants to retire from business. The contract of partnership also envisages a situation where a partner may be expelled from the partnership. But that situation need not he examined. The only point on which the parties are at variance is whether a partner can retire from the partnership and the expression, that if any partner wants to dissociate from the partnership business, comprehends a situation where a partner wants to retire from the partnership. Therefore, it does appear that the contract of partnership permits a partner to retire from the partnership. Unfortunately the High Court examined the contention from an angle impermissible in that while examining the second contention the High Court proceeded to appreciate the contention put forward on behalf of the plaintiff appellant whether there was a breach of the contract of partnership. Nowhere while examining the contention whether it is open to the partner to retire from partnership, the absolute right to dissociate from business as conferred by clause 18 has been gone into by the High Court. The High Court negatived the contention observing that non-payment of Rs. 250/- p.m. to the plaintiff and non-supply of 1/4 production to him could not be an adequate ground for dissolution of partnership under Section 44 of the Indian Partnership Act 1932 (Act for short). Maybe, the High Court may be right in that if dissolution is sought under Section 44 of the Act alleging that there has been a breach of the contract of partnership. That is not the plaintiffs contention when he prayed for a decree on the ground that he may be permitted to retire from the partnership. The High Court fell into error in not examining the contention whether the plaintiff appellant is entitled to retire from the partnership without dissolving the firm. Clause 18 of the contract of partnership clearly comprehends a situation where a partner may retire from an ongoing partnership after giving one months notice. That is what is clearly intended by the expression that in the event of retirement of a partner the partnership business will not come to an end. Clause 18 provides for two independent contingencies. The first part of it confers a right on the partner to retire from partnership as envisaged by Section 32 (1) (b) of the Act. The second part of clause 18 provides for the consequence of such retirement by providing that even on such retirement the partnership will neither be dissolved nor the business will come to an end. In other words, without dissolving the firm and continuing the ongoing business, a partner may retire from the partnership, a situation clearly comprehended by Section 32 and incorporated as a term of contract of the partnership between the parties to the contract. With great respect, the High Court did not examine the matter from this angle and fell into an error in believing that the plaintiff sought dissolution on two grounds : (i) that the partnership is a partnership at will; and (ii) that dissolution is sought under Section 44. The implication of Section 32 of the Act completely escaped the notice of the High Court and that is why we are constrained to interefere in this matter." 6. It was contended that even if a partner is entitled to retire from the partnership as per the terms incorporated in clause 18 of the contract of partnership, it has to be read along with the provision made in clause 20 which provides that no. partner will separate from the partnership business till one year from the beginning of the business and if he will dissociate then his capital will not be given till the end of one year. A mere reading of the clause shows that there was no. embargo on the right to retire from the partnership conferred by clause 18 even during the period of one year from the commencement of the business but it only provided for a consequence which will ensue on the action of the party. A combined reading of clauses 18 and 20 would unmistakably show that a partner may retire from the firm after giving one months notice, that he should not retire within a period of one year but if he does retire within a period of one year the capital invested by him will not be refundable to him till the expiry of the period of one year. This right to retire from partnership may not be exercised till a period of one year but there is not a complete embargo on the exercise of such a right conferred by clause 18. The High Court was, therefore, in error in holding that the plaintiff was not entitled to seek retirement from the firm. 7. The partnership business commenced on December 1, 1976. The period of one year would expire on November 30, 1976. Plaintiff sought dissolution effective from November 23, 1976. His request was thus under clause 20 premature by a period of seven days. At best, it the Court thinks fit the retirement may be made effective from November 30, 1976, but on this technical ground the relief cannot be denied. At best the capital would become refundable as envisaged by clause 20, after November 30, 1976. But in any view of the matter the plaintiff is entitled to a relief for a declaration that he has retired from the partnership without dissolution of the firm from the date of institution of the suit and the accounts may be made till that date and necessary preliminary decree will have to be made.

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]A mere reading of the clause shows that there was no. embargo on the right to retire from the partnership conferred by clause 18 even during the period of one year from the commencement of the business but it only provided for a consequence which will ensue on the action of the party. A combined reading of clauses 18 and 20 would unmistakably show that a partner may retire from the firm after giving one months notice, that he should not retire within a period of one year but if he does retire within a period of one year the capital invested by him will not be refundable to him till the expiry of the period of one year. This right to retire from partnership may not be exercised till a period of one year but there is not a complete embargo on the exercise of such a right conferred by clause 18. The High Court was, therefore, in error in holding that the plaintiff was not entitled to seek retirement from the firm7. The partnership business commenced on December 1, 1976. The period of one year would expire on November 30, 1976. Plaintiff sought dissolution effective from November 23, 1976. His request was thus under clause 20 premature by a period of seven days. At best, it the Court thinks fit the retirement may be made effective from November 30, 1976, but on this technical ground the relief cannot be denied. At best the capital would become refundable as envisaged by clause 20, after November 30, 1976. But in any view of the matter the plaintiff is entitled to a relief for a declaration that he has retired from the partnership without dissolution of the firm from the date of institution of the suit and the accounts may be made till that date and necessary preliminary decree will have to be made.