Court has to dismiss suit if it is barred by limitation even if plea of limitation is not set up as a defence, reaffirms Top Court
Justices B.R. Gavai & Sandeep Mehta [16-05-2024]

Read Order: SHIVRAJ REDDY(DIED) THR HIS LRS. AND ANOTHER v. S. RAGHURAJ REDDY AND OTHERS  [SC- CIVIL APPEAL NO(S). 6459 OF 2024]

Tulip Kanth

New Delhi, May 28, 2024: The Supreme Court has recently clarified that partnership would stand dissolved automatically on the death of a partner as per Section 42(c) of the Partnership Act, 1932.

The factual background of this case was such that respondent No. 1-plaintiff, along with defendant Nos. 2, 3, 4 and deceased M. Balraj Reddy (Died in 1984) had constituted a partnership firm- defendant No. 1 namely M/s Shivraj Reddy & Brothers (firm) in the year 1978 with its primary business being the construction of buildings on a contract basis with respect to the works of the Government and Municipalities.

Respondent No. 1-plaintiff instituted a suit seeking relief of dissolution of the firm and rendition of accounts. The Trial Court allowed the original suit filed by respondent No. 1-plaintiff and passed a decree declaring the firm-defendant No. 1 to be dissolved. Being aggrieved, the firm-defendant No. 1 and defendant No. 2 preferred an appeal before the Andhra Pradesh High Court. The Single Judge opined that since the original suit was filed in 1996, it was barred by limitation. Aggrieved by the decision of the Single Judge, respondent No. 1-plaintiff preferred LPA before the Division Bench which was allowed.  Being aggrieved, the appellants preferred the appeal by special leave before the Top court.

 

The Division Bench of Justice B.R. Gavai & Justice Sandeep Mehta noticed that the reasoning given by the Division Bench while dismissing LPA that the Single Judge ought not to have considered the question of limitation as the defendants did not choose to raise the plea of limitation in the trial Court was ex- facie erroneous. Referring to the judgment in V.M. Salgaocar and Bros. v. Board of Trustees of Port of Mormugao and Another [LQ/SC/2005/420] , the Bench said, “Thus, it is a settled law that even if the plea of limitation is not set up as a defence, the Court has to dismiss the suit if it is barred by limitation.

Noting the fact that the firm-defendant No.1 Reddy & Brothers, was a partnership at will and one of the partners of the firm, namely, Shri M. Balraj Reddy expired in the year 1984, the Bench held that the partnership would stand dissolved automatically on the death of the partner as per Section 42(c) of the Act.  As per the Bench, the business activities even if carried on by the remaining partners of the firm after the death of M. Balraj Reddy, would be deemed to be carried in their individual capacity in the circumstances. 

“The period of limitation for filing a suit for rendition of account is three years from the date of dissolution. In the present case, the firm dissolved in year 1984 by virtue of death of Shri M. Balraj Reddy and thus, the suit could only have been instituted within a period of three years from that event. Indisputably, the suit came to be filed in the year 1996 and was clearly time-barred, therefore, learned Single Judge was justified in accepting the C.C.C. Appeal No. 35 of 1999 and rejecting the suit as being hopelessly barred by limitation”, it held.

Another appeal by special leave was preferred against the judgment of the Division Bench of Andhra Pradesh High Court whereby the Division Bench dismissed LPA preferred by defendant No. 1 and the firm-defendant No. 9 while allowing LPA preferred by respondent No. 1-plaintiff.

Respondent No. 1-plaintiff preferred suit for dissolution of the firm-defendant No.9 and for a direction to defendant Nos. 1 to 5 to render accounts of the said firm and for payment of his share of profits and assets.  The Bench considered  the fact that ex facie, the appellants could not satisfy the Court regarding the infirmity in the impugned judgment whereby the firm-defendant No. 9 namely M/s Shiva Reddy & brothers, B. Arjun Reddy & Co was directed to be dissolved and defendant Nos. 1 to 5 were directed to tender accounts of the firm. Three Courts of the competent jurisdiction had recorded the concurrent findings on facts in decreeing the suit in favour of respondent No. 1- plaintiff. 

Hence, finding this case to not be a fit one warranting interference by exercising the extraordinary jurisdiction of the Court under Article 136 of the Constitution of India, the Bench dismissed the appeal.