Aapka Consultant Judgment Series- In this series, we are providing case analysis of Landmark Judgments of Hon’ble Supreme Court of India.
Sharad V Kotak v. Ramniklal M Chawda
(1998) 2 SCC 171
JUDGES: S.C. Sen and K. Venkataswami
Date Decision: 17-12-1997
FACTS:-
The facts were that the appellants were the partners of a firm named M/s Paramount Builders and the partnership was entered in the year 1976. In 1986, one of the partners died and his widow has been admitted as a partner. After the admission, another deed on partnership was made consisting of six old partners and newly added partner but the induction was not brought to the notice of Registrar of Firms. Later in 1992, another partnership deed was bring into existence consisting of same partners. Meanwhile, in the year 1994, another partner died and the fact of the death of this partner also was not intimated to the Registrar. Certainly, the first respondent gave a notice of dissolution of firm and instituted a suit for the dissolution of the partnership firm.
ISSUE:-
Whether induction of a new partner in a firm amounts to reconstitution of the firm or dissolution of the firm?
JUDGMENT:-
The Hon’ble Supreme Court stated that change in the partnership due to induction of a new member, after the death of an existing member, does not affect the registration of the said firm. This induction of the new partner will only amount to reconstitution of the firm and not its dissolution. It pointed out certain differences between reconstitution and dissolution of a partnership as these are two different legal concepts. The dissolution puts an end to the partnership but reconstitution keeps the partnership subsisting, though in another form.
Also the Court held that the condition laid down in Section 69 (2) of the Indian Partnership Act is also satisfied and relying on the judgment of Firm Girdhar Mal Kapur Chand v. Firm Dev Raj Madan Gopal [(1964) 1 SCR 995] held that once there was a registration of the firm under the Indian Partnership Act then that partnership continues to operate and is valid until and unless the registration is being cancelled in accordance with law. Also the Court put reliance on Section 17 (a) of the act which suggests only reconstitution of the firm in case of change in the constitution of the firm.
Therefore, the Court held that Section 69 (2A) of the Indian Partnership Act, 1932 is constitutionally valid as it requires the registration of the firm and does not require the fresh registration and also the present suit is regarding the dissolution and accounts by one of the partners whose name admittedly finds place in the Registrar of Firms along with the name of the appellants, therefore the condition of Section 69 (2A) is satisfied.
HELD:-
The Supreme Court held that on the induction of the new partner in the firm, the existing firm is only reconstituted and there exists no necessity of a fresh registration. If any mandatory provision has not been complied with then certain penalties would be attracted but this would not cease the registration of the firm. Further, it does not in any way militate the object of Maharashtra Amendment Act introduced by Act No. 29 of 1984.
To Get Legal Opinion from Advocates/ Legal Experts, Please click here
To Get Legal Opinion from Retired Hon’ble Judges, Please click here
