1990 (11) TMI 425 - SC - Indian Laws

Summary

Issues Involved:
1. Maintainability of the Suit for Dissolution of Partnership
2. Applicability of French Law vs. Indian Partnership Act
3. Nature of the Partnership: At Will or Not
4. Rights and Liabilities of Partners upon Withdrawal or Death

Summary:

1. Maintainability of the Suit for Dissolution of Partnership:
The respondent laid the suit for dissolution of the partnership and for accounting, claiming the partnership was at will and stood dissolved upon notice. The appellants contended that the partnership was not at will under French Law and that the respondent must relinquish his share without dissolving the firm. The Trial Court and a learned Single Judge dismissed the suit, holding it was not maintainable. However, the Division Bench reversed this, holding the partnership was at will and the suit was maintainable.

2. Applicability of French Law vs. Indian Partnership Act:
The primary contention was whether the partnership was governed by French Law or the Indian Partnership Act, 1932. The Division Bench held that the Indian Partnership Act applied, as Pondicherry (Laws Regulation 7 of 1963) extended the Act to Pondicherry from October 1, 1963. Despite the partnership deed being made under the French Civil Code, the cause of action arose in 1978, by which time the Act was in operation.

3. Nature of the Partnership: At Will or Not:
The key issue was whether the partnership was at will. The appellants argued that the partnership was not at will, citing provisions of the French Civil Code and specific clauses in the partnership deeds (Ex. B1 and B2). The respondent argued that the partnership was at will, as per Clause IV of the partnership deed. The Supreme Court held that the partnership was not at will, as the contract specified that the partnership would continue as long as there were at least two partners, and partners could only withdraw or retire, not dissolve the partnership at will.

4. Rights and Liabilities of Partners upon Withdrawal or Death:
The Court examined the clauses of the partnership deed, which provided that the partnership would continue despite the withdrawal or death of a partner, with the remaining partners paying the value of the outgoing or deceased partner's share. The Court concluded that the partnership would continue till there were at least two partners, and the respondent could not dissolve the partnership but could seek accounting or retire from the partnership and take the value of his share.

Conclusion:
The Supreme Court allowed the appeal, holding that the partnership was not at will and the respondent could not dissolve it but could seek accounting or retire from the partnership. The respondent was given the option to amend the plaint to seek appropriate reliefs, and the appellants were allowed to amend their written statement, except for raising the issue of limitation. The suit would be disposed of expeditiously if the respondent chose to amend the plaint; otherwise, it would be dismissed. Each party was directed to bear their own costs.