High Court
Legal Reasoning
1 21-WP-8671-05.odtIN THE HIGH COURT OF JUDICATURE AT BOMBAYBENCH AT AURANGABADWRIT PETITION NO. 8671 OF 2005Ramchandra Namdeo Chonde,Age 45 years, Occu. Business,R/o. Kallamb, Taluka Kallamb,District Osmanabad..Petitioner(Original Appellant)Versus1.The State of MaharashtraThrough its Secretary,Excise Department, Mantralaya,Mumbai2.The Commissioner of Prohibitionand Excise Maharashtra State,Mumbai3.The Collector, Prohibition and Excise,Osmanabad, District Osmanabad4.The Superintendent,Prohibition and Excise Department,Osmanabad, Taluka and District Osmanabad5.Vijay Kashinath Shinde,Age 30 years, Occu. Agri.,R/o. 3667, Mallappa DhanshettiRoad, Barshi, Taluka Barshi,District Solapur..Respondents...WITH CIVIL APPLICATION NO. 2102 OF 2007 IN WP/8671/2005WITH CIVIL APPLICATION NO. 3820 OF 2008 IN WP/8671/2005...Mr. N. L. Jadhav, Advocate holding for Mr. S. A. Nagarsoge,Advocate for Petitioner;Mrs. M. L. Sangit, A.G.P. for Respondents No.1 to 4;Mr. Gopal C. Navandar, Advocate for Respondent No.5 2 21-WP-8671-05.odtCORAM :S. G. MEHARE, J.DATE:12-02-2024ORAL JUDGMENT :-1.Heard the learned counsel for the petitioner, the learnedA.G.P. for respondents No.1 to 4 and the learned counsel forrespondent No.5.2.It is a case of partnership liquor license. The father of thepetitioner and grandfather of respondent No.5 had obtained a jointretail country liquor permit on 21.07.1984. They had a writtenpartnership. During the lifetime of Nivrutti, one of his sons,Kashinath, had applied to the authority to admit him as a partnerin place of his father Nivrutti. The application remained undecided.In the meantime, Nivrutti died. The father of the petitioner had noknowledge about the application of Kashinath. He was not thepartner as per the partnership deed. The said application remainedpending, and it was allowed on 25.09.1990. Then, the petitioner'sfather/Namdeo renewed the permit in his name. Namdeo had fileda suit against the legal heirs of Nivrutti including Kashinath.However, he withdrew the suit. Thereafter, the legal heirs ofNamdeo had filed Regular Civil Suit No.59 of 1992. The said suitwas decreed. The first appellate Court recorded the findings that itwas proved that the partnership dissolved automatically after thedeath of Nivrutti Shinde. Finally, the first appellate Court allowed 3 21-WP-8671-05.odtthe appeal by setting aside the judgment and decree of the Courtof first instance. Against the judgment of the first Appellate Court,the legal heirs of Namdeo had preferred a second appeal, whichwas dismissed in limine. Against the order of dismissal of thesecond appeal, they preferred Special Leave to Appeal (Civil)No.24873-24874/2004 before the Honourable Supreme Court. Itwas also dismissed by order dated 13.12.2004. 3.Thereafter, a second round of litigation was opened. By orderdated 30.03.2005, respondent No.4, the Superintendent,Prohibition and Excise Department, Osmanabad, intimated to thelegal heirs of Namdeo that there was a dispute about thepartnership. Hence, the permit will not be renewed until the nextorder is passed. The legal heirs of Namdeo assailed that order inan appeal before respondent No.2, the Commissioner of Prohibitionand Excise Maharashtra State, Mumbai. It was registered asAppeal No.129 of 2005. The appellate authority observed that "inthis case, a civil matter had been admitted in the Supreme Court,and the outcome would be binding on both parties. Therefore, theappeal is allowed, and the Collector is directed to renew the permittill the final decision of the Hon'ble Supreme Court, which willapply to all contesting parties. The legal heirs of Namdeo assailedthat order before the Hon'ble Minister. The Hon'ble Ministerinterfering with the findings of the civil suit has quashed and setaside the orders of Superintendent, Prohibition and Excise 4 21-WP-8671-05.odtDepartment, Osmanabad, dated 30.03.2005 and the first appellateauthority dated 15.04.2005 and directed to issue the permit in thename of legal heirs of deceased Nivrutti Bapurao Shinde andNamdeo Raibhan Chonde, subject to the decision of the Hon'bleSupreme Court. 4.The learned counsel for the petitioner has raised a simpleissue: soon after the death of one of the partners, the partnershipis dissolved in view of Section 42(c) of the Partnership Act, 1932.He argued that the effect would be the same, whatever theclauses are in the partnership deed. A partnership is a creation ofa contract. No one could be forced to admit a third person as apartner. After the death of Nivrutti, the permit was issued in thename of Namdeo, and after his death, his legal heirs inherited theright to get the permit in the name of any of his legal heirs byconsent.5.To bolster his arguments, he relied on the case of Mohd.Laiquiddin and Another Versus Kamala Devi Mishra (Dead)by Lrs. And Others, 2010(2) All.M.R. 490. Further, he relied onthe case of Commissioner of Income Tax, Madhya Pradesh,Nagpur and Bandara Versus Seth Govindram Sugar Mills,1966 AIR (SC) 24. He also relied on the case of KhtahemaFibres Ltd. Versus N.K. Paper Tube Industries and Another,2011 DGLS (Del.) 4833. 5 21-WP-8671-05.odt6.He has vehemently argued that the first Appellate Court longback recorded the findings that soon after the death of thepartners, a partnership firm automatically dissolved. The Hon'bleSupreme Court also upheld the judgment of the first AppellateCourt. None of the legal heirs of deceased partner Nivrutti has theright to claim inheritance. The rule of inheritance does not apply tothe firm. He prayed to allow the petition.7.Per contra, the learned counsel for the respondent hasvehemently argued that it was a clause in the partnership deedthat another partner would not object if one of the partnersintroduced a third party. During the life of Namdeo, his son hadapplied to the authority to admit him as a partner in the firm of hisfather and the father of the petitioner. Namdeo never objected toit; therefore, by conduct, Namdeo accepted Kashinath as a partnerin the firm. He has emphasized the terms of the partnership deedand submitted the terms of the partnership deed bind the parties.Therefore, the Hon'ble Minister has passed the order subject to thedecision of the SLP pending before the Hon'ble Supreme Court.The SLP has been dismissed. Hence, the rights of the legal heirs ofNivrutti are restored. He prayed that the legal heirs of Nivruttiwere entitled to hold the permit under the partnership. To bolsterhis arguments, he relied on a Government circular dated 6.7.1989.He prayed to dismiss the petition.
Legal Reasoning
6 21-WP-8671-05.odt8.The question that arises for consideration is, “What is theeffect of the death of a partner where only two partners hadconstituted a partnership firm?”.9.The partnership deed between Nivrutti and Namdeo wasunregistered. It is admitted that two persons had constituted apartnership firm. There is also no quarrel that Nivrutti predeceasedNamdeo. After Nivrutti's death, the permit was renewed in thename of Namdeo. It is also not in dispute that Nivrutti's legal heirnever impugned the renewal of the permit in the name of Namdeo.The order of the authority dated 05.01.1989 allowing theapplication of son of Nivrutti adding him as a partner created amess. The legal heirs of Namdeo had filed a civil suit. It waswithdrawn. The Nivrutti’s legal heir filed another suit. It wasdecreed. However, the first Appellate Court reversed thejudgment, recording findings that the death of one of the partnersin the partnership firm of two partners only is deemed to bedissolved. The Supreme Court also maintained the said judgment.10.The learned counsel for the respondent tried to point outthat there was a term in the partnership deed that neither partnerwould raise the objection if the third person was admitted as apartner. Therefore, the partnership would not be dissolved on thedeath of either partner. He also argued that Section 42 of thePartnership Act opens with a clause that, subject to the contract 7 21-WP-8671-05.odtbetween the partners of the firm, gives the partners a right tocontinue with the firm on the death of either partner. Therefore,the firm could not be dissolved only on the death of either partner.The terms of the firm bind the partners. In his lifetime, thedeceased Nivrutti explicitly expressed his intention to add his sonKashinath as a partner. In the facts and circumstances and theGovernment Circular which has resolved the disputes ofpartnership in the business of liquor the rights of the respondentshave been correctly protected by the impugned order. 11.Before adverting to the rights arising out of the terms of thepartnership deed, it would be better to comment on the documentof partnership deed which was not registered. 12.Section 69(1) of the Indian Partnership Act, 1932 provides,"(1)No suit to enforce a right arising from acontract or conferred by this Act shall be instituted inany court by or on behalf of any person suing as apartner in a firm against the firm or any person allegedto be or to have been a partner in the firm unless thefirm is registered and the person suing is or has beenshown in the Register of Firms as a partner in the firm".13.The above section explicitly bars a partner to sue where thepartnership deed is unregistered. He cannot enforce rights ofobligations against each other or the firm in case of any dispute. Inview of the legal position, the respondent cannot claim that in view 8 21-WP-8671-05.odtof the terms of partnership deed, legal heirs of any partners couldbe a partner of the firm. 14.As against this legal provision, the learned counsel for thecontesting respondent pressed in to service a circular of theMaharashtra Government, dated 06.07.1989. The said circularprovides that where the partner dies, his legal heirs should beadmitted. He is correct that under this circular, the Governmenthas directed admitting the legal heirs of the deceased partner onthe permit. However, the circular does not speak of theenforceable rights of the partners in terms of the deed. Thepartnership is the creation of a contract. Its terms bind thepartners. It does not speak of the number of the partners, rulesand the effect on the firm on the death of the partner. Therefore,such circulars would not prevail over the provisions of law.15.The Hon'ble Supreme Court, in paragraph No.26 of the caseof Mohd. Laiquiddin (supra), has observed thus;“In the light of aforementioned case, it is clear that whenthere are only two partners constituting the partnershipfirm, on the death of one of them, the firm is deemed tobe dissolved despite the existence of a clause whichsays otherwise. A partnership is a contract between thepartners. There cannot be any contract unilaterallywithout the acceptance by the other partner. TheAppellants, the legal representatives of original plaintiff(since deceased) was not at all interested in continuing 9 21-WP-8671-05.odtthe firm or constitute a fresh firm and they cannot beasked to continue the partnership, as there is no legalobligation upon them to do so as partnership is not amatter of heritable status but purely one of contract,which is also clear from the definition of partnershipunder Section 4. Therefore, the trial court was justified inholding that the firm dissolved by virtue of death of oneof the partners and the first appellate Court as well asthe High Court have taken the correct view in upholdingthe same.”16.It is clear in the aforementioned case that when only twopartners constitute a partnership firm, on the death of one ofthem, the firm is deemed to be dissolved despite having theclause to section 42(c) of the Partnership Act saying subject to thecontract between the partners, on the death of either partner, thefirm is deemed to be dissolved. There cannot be any unilateralcontract without the acceptance of the other partner. The partnerhas a right to choose a partner. It is a matter of consent. No onecould force a person to be his partner or admit him as a partner. 17.In the case at hand, Namdeo never admitted Nivrutti's sonas partner during his lifetime. The suit by the legal heirs ofNivrutti was with a tune that they should be admitted as partners.The Court of first instance has decreed the suit. However, the firstAppellate Court has correctly recorded the findings that on thedeath of the partners of the firm constituted by two partners, the 10 21-WP-8671-05.odtfirm is deemed to be dissolved in view of Section 42(d) of thePartnership Act.18.Deceased Namdeo or his legal heirs were never ready tocreate a new partnership deed with the legal heirs of Nivrutti.Therefore, the pronouncement of the Hon'ble Supreme Court in thecase of Mohd. Laiquiddin (supra) squarely applies to thepresent case. The clause of adding partner and no right to objectfor adding any partners by another partner in the deed, wasunenforceable under section 69 of the Partnership Act. 19.The Hon’ble Minister did not pay heed to the law on thepartnership. Hence, erred in passing the impugned order.20.In view of the facts of the case and law laid down by theHon'ble Court, the Court is of the view that the order of theHon'ble Minister for State, Excise Department, MantralayaMumbai, in Case No. RVN.1105/RA-56/EXC-3, dated 22.11.2005,the order of the appellate authority passed in Appeal No.129 of2005, dated 15.04.2005 is unsustainable in the eyes of law. Hence,liable to quashed and set aside. Consequently, the order on theapplication of Kashinath s/o. Nivrutti admitting him as a partner,dated 05.10.1989, by the Superintendent of Excise, Osmanabadalso becomes ineffective.21.The writ petition is allowed.
Decision
11 21-WP-8671-05.odt22. Pending civil applications, if any, stand disposed of.23.Rule made absolute in above terms with no order as to thecosts.24.Needless to say, the findings of this Court do not bind theExcise Authority to exercise his powers under the concerned lawon the subject. ( S. G. MEHARE ) JUDGE rrd