Case: Additional Tahsildar, Raipur, and Others Vs. Gendalal

2. In or about 1947, the respondent entered into a partnership with one Chandratan Sadani and one Lalji Ghelabhai to carry on the business of manufacturing and selling utensils ande in the name and style of Bharat Metal Industries, Raipur, hereinafter referred to as "the said firm". The said firm was duly registered as a dealer under the Central Provinces and Berar Sales Tax Act, 1947 (hereinafter referred to as the "Act"). In May, 1954, the Sales Tax Officer, Raipur, started proceedings for assessment of the said firm for the years1 and. However, discovering that he had no jurisdiction to assess the said firm, he transferred the cases to the Assistant Commissioner of Sales Tax who made the orders of assessment dated May 31, 1956, May 6, 1957 and August 9, 1957. Since the said firm did not pay the taxes, the revenue recovery certificates were sent to the Additional Tahsildar, Raipur, appellant No. 1, who issued to the respondent three notices of demand dated March 15, 1963. On April 8, 1963, the respondent moved the High Court of Madhya Pradesh under Article 226 of the Constitution for quashing the aforesaid assessment orders. Two grounds were pressed by the respondent in support of the petition : (i) that there was dissolution of partnership on September 13, 1952, and when the firm had ceased to exist, it could no longer be assessed and the impugned orders of assessment were therefore void, (ii) in each case, the proceedings for assessment were initiated long after the expiry of the prescribed period of limitation. The High Court took the view that there was no substance in the first ground but the second ground relating to limitation wasd and the proceedings for assessment were barred by limitation because they were initiated long after the expiry of 3 years from the relevant quarters in the two assessment years. The High Court accordingly allowed the petition of the respondent and quashed the three assessment orders and also directed the appellants not to enforce the notices of demand dated March 15, 1963.

Reasoning: It is not necessary, in this appeal, to decide this question because we are of opinion that the respondent is entitled to succeed on the ground that the orders of assessment were void because there was a dissolution of the partnership on September 13, 1952, and the partnership had ceased to exist long before the assessment orders were made. On this point the High Court expressed the view that the liability of a partnership firm to assessment of sales tax in respect of sales made by it did not cease upon its dissolutionIn the present case, however, the principle of res judicata is not applicable, because the previous judgment was against Lalji who was one of the partners of the said firm. The partnership was dissolved in the present case on September 13, 1952, and after the dissolution of the partnership there is no question of agency as between the partners and the decision in the previous writ petition against Lalji cannot be binding as regards the other partner, Gendalal. The principle of the doctrine of res judicata is that judgments and decrees bind only parties and privies. To make a person a privy he must have acquired an interest in ther of action by inheritance, succession or purchase subsequent to the action or he must hold the property subordinately, i.e., as a. In the present case, Gendalal does not claim his interest in the partnership through Lalji and it follows therefore that the principle of res judicata cannot be invoked in this case.