In LPA No.510 of 2009-BOM HC- Partnership is not matter of heritable status but purely depends on contract: Bombay HC 
Justices A.S. Chandurkar & Urmila Joshi-Phalke [02-12-2022]

Read Order: SHRI ARUNKUMAR S/O DWARKLAL JAISWAL V. STATE OF MAHARASHTRA AND ORS 

LE Correspondent

Nagpur, December 5, 2022: The Bombay High Court has reaffirmed that the partnership agreements like any other agreement has to be construed according to the normal canon of construction, so that a Court will construe a partnership agreement in the light of object of the partnership and terms may be implied by the Court to give the agreement business efficacy.

A Division bench of Justice A.S. Chandurkar and Justice Urmila Joshi Phalkae allowed the present appeal by observing that Single Judge passed the impugned order based on the Circular dated February 25, 1994 and did not take into consideration the agreed terms of the partnership deed and thus the same  resuled  in miscarriage of justice. 

The appellant challenged the order and judgment dated October 8, 2009 passed by the learned Single Judge in Writ Petition of 2002 confirming the order passed by the first respondent. 

Factual background of the case was such that in the year 1973 the Firm namely M/s Akot Wine Mart was constituted and licence for wine shop (Country and foreign liquor) was obtained in the name of M/s Akot Wine Mart. On November 1, 1978 the firm was reconstituted and three persons namely Vijaykumar Dwarkalal Jaiswal, Arunkumar Dwarkalal Jaiswal (Appellant) and Dinkarrao Pundlikrao Gawande were the partners of the firm. 

Thereafter on September 1, 1992 a fresh deed of partnership was executed and as per Clause 10, on the death of a partner the firm was not to be dissolved. The legal heirs were disentitled from claiming any goodwill or rights of the firm. On November 21, 1994, Dinkarrao, a partner, expired. The said partnership was again reconstituted on December 23, 1994 and the remaining two partners agreed to share profits and losses equally.

It was the case of the appellant that as per the terms and conditions of the partnership Deed, on the death or retirement of any partner, rights pertaining to the licence or such other rights of the Firm were to vest in the remaining partners. As per the contention of the appellant, in view of terms and conditions of the partnership Deed, legal heirs of the deceased partner are not entitled to become a partner of the Firm.  

The partner namely Dinkarrao Gawande died on November 21, 1994 and in view of specific conditions of the Deed of partnership referred above, name of Dinkarrao Gawande came to be deleted from the licence as per the order of the Collector i.e the second . respondent  dated June 24, 1996. 

Subsequently, the third respondent  - wife of Dinkar Gawande had moved an application before the second  respondent  Collector for inclusion of her name in place of the name of her husband. The Collector had rejected the said application by passing an order on May 19, 1999  and communicated to the third  respondent that her name cannot be included in view of the terms and conditions of the Deed of Partnership.

 Respondent being aggrieved and dissatisfied with the order passed by the second respondent Collector preferred an appeal before the Commissioner of State Excise under Section 137 of the Bombay Prohibition Act, 1949. The Commissioner by passing an order rejected the appeal and confirmed the orders of the second respondent by assigning the reason that as per the clause 10 of the Deed of Partnership, the name of the legal heirs of the deceased partner cannot be included in the partnership Firm and all the rights relating to the licence are bound to vest in the remaining partners.

The order dated April 16, 2002 passed by the Minister of State, State Excise was challenged by the appellant by preferring Writ Petition No.2122 of 2002 before this Court. 

The Single Judge dismissed the Writ Petition by observing that the revisional authority had considered all the facts that were obtainable in the instant case. The point on which the right of respondent was required to be decided was on the basis of relevant Government policy. 

Being aggrieved and dissatisfied with the findings of the  Single Judge present appeal was  preferred by the appellant on the ground that the third  respondent  had suppressed the subsequent Circular dated August 20, 1996  issued by the first  respondent  therefore, question of relying on the earlier Circular by theSingle Judge does not arise at all. 

After considering the rival contentions, the Court noted that the question that was posed for consideration before this Court was whether the third respondent was entitled to include her name as a partner on the licence. In view of the same, the Court relied on Section 4 and Section 42 of the Indian Partnership Act, 1932. 

In the light of the terms and conditions of the partnership Deed especially Clause 11 clearly prohibits any legal right or any right of the legal heirs of a partner on his retirement or death in respect of licence. Thus, under the Partnership Act, 1932, the partnership deed was executed between the partners. It is a contract between the partners. All terms and conditions are agreed and accepted by the partners. Deceased Dinkar Gawande was fully aware that his legal heirs have no right after his retirement or on his death in respect of the licence but he agreed to the said terms and conditions, the Court noted. 

Thus, the deceased husband of the third respondent had agreed as a term of partnership and which is not in dispute. In view of the said partnership deed or the contract between the partners admittedly the third respondent was not entitled for inclusion of her name, the Court noted.  

“It is well settled that the partnership agreements like any other agreement has to be construed according to the normal canon of construction, so that a Court will construe a partnership agreement in the light of object of the partnership and terms may be implied by the Court to give the agreement business efficacy”, the Court further remarked. 

 In the light of above discussion, the Court was of  the considered view that the order passed by the  Single Judge based on the Circular dated February 25, 1994  did  not take into consideration the agreed terms of the partnership deed and thus resulted  in miscarriage of justice. The impugned judgment was liable to be set aside by allowing this appeal, the Court observed. 

In view of the above, the appeal was allowed.