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1 REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

Civil Appeal No.  9697 of 2013 (Arising out of SLP (C) No.20563 of 2012)

M/s AVK Traders ... Appellant

Versus

Kerala State Civil Supplies  Corporation Limited     … Respondent

J U D G M E N T

K.S. Radhakrishnan, J.

1. Leave granted.

2. OS No.39 of 2008 was a suit preferred on 1.1.2008 by  

M/s  AVK  Traders,  a  partnership  firm,  for  realization  of  an  

amount  of  Rs.53,39,648/-  against  the  Respondent  

Corporation for claims with regard to various supplies made  

to  the  Corporation  during  the  year  2004-06.   Respondent  

Corporation filed its written statement on 26.5.2008 denying  

the claim.  M/s AVK Traders was a partnership firm with only

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2 two partners, the Appellant and his father.  The partnership  

was later re-constituted. The re-constituted partnership under  

the  Partnership  Deed  dated  4.11.2002  contained  the  

following clause :-

“In the event of retirement of partner or refusal of  the legal representative of the deceased partner  to become the partner of the partnership as on the  expiry  of  the  period  given  to  them  to  become  partners or  on the expiry of the period given to  them to become partner,  the other partner shall  have the power to purchase his share by giving  notice  to  retired  partner  or  the  legal  representative of the deceased partner in writing  to  that  effect  within  three  calendar  months  or  receipt of the notice by the retained partner or the  legal  representative of the deceased partner.   If  the surviving partner fail to purchase the share of  the partnership or the legal representative fail to  express their interest within the said period, the  partnership shall dissolve as on the expiry of three  months mentioned earlier……”

During the pendency of the suit on 2.2.2009, the father of the  

Appellant, who was a partner, expired.  The Appellant and his  

sister  were the only legal  representatives of  the deceased

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3 father.   On the death of  the father,  the partnership  stood  

dissolved w.e.f. 24.5.2009 since the sister was not interested  

in becoming a partner of the firm.   

3. In view of the above-mentioned clause, though the firm  

stood  dissolved  on  24.5.2009,  the  sole  surviving  partner  

could  continue  the  business  of  the  firm  as  a  proprietary  

concern.   Consequently,  all  the interests  of  the firm stood  

devolved upon the Appellant and he filed I.A. No.817 of 2002  

in O.S. No.39 of 2008 for leave to continue to prosecute the  

suit for and on behalf of M/s AVK Traders as a proprietary  

concern.  The Appellant  also  preferred  I.A.  No.814 of  2012  

seeking necessary amendment of the plaint.  Appellant also  

filed I.A. No.815 of 2012 under Order XXIII Rule 17 read with  

Section 151 CPC praying for  recalling and examining PW1.  

The Subordinate Court by a common order dated 8.2.2012  

allowed all the aforementioned applications preferred by the  

Appellant.  With regard to the prayer for continuing the suit,  

the Subordinate Court held as follows :-

“In  the  instant  case,  out  of  two partners  in  the  plaintiff  firm,  one  partner  died  during  the

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4 pendency of the suit and as such the partnership  got  dissolved.   Therefore,  I  hold  that  the  other  partner  viz.  the  2nd petitioner  is  entitled  to  continue the suit.  Hence, necessary amendment  is  also  required  to  the  plaint.  Therefore,  for  a  proper  and  effective  adjudication  of  the  real  dispute  between  the  parties  the  proposed  amendment is also liable to be allowed……”

4. The  Respondent  Corporation  preferred  I.A.  No.809  of  

2012  under  Order  XIV  Rule  5  CPC  seeking  framing  of  

additional  issues.   The Subordinate Court vide order dated  

8.2.2012  dismissed  I.A.  No.809  of  2012  filed  by  the  

Respondent Corporation.    

5. Aggrieved  by  the  above-mentioned  orders,  the  

Respondent  Corporation  preferred  Original  Petition  (Civil)  

No.631 of 2012 before the High Court of Kerala seeking the  

following reliefs :-

“(a) To  call  for  the  records  leading  to  Ext.P11,  P11(a), P11(b) & P12 and set aside the same.

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5 (b) To declare that the respondent/plaintiff is not  

entitled to continue the suit as a Proprietary  concern.

(c) To direct the Court below to frame additional  issues as prayed for in Ext.P-4.

(d) To  issue  any  other  appropriate  order  or  direction as this Hon’ble Court may deem fit  and proper in the facts and circumstances of  the case.”

The High Court did not allow the prayer for amendment of the  

plaint moved by the surviving partner and held as follows :-

“When the above be the settled position of law,  the  application  for  amendment  moved  by  the  surviving partner to alter the cause title to convert  the suit  as  one by the proprietary  concern with  him as its ‘proprietor’, which was instituted in the  name of a firm, for the reason of the death of the  Managing Partner and also non-interestedness of  the legal heirs of that partner to come on record,  has no basis or merit at all, as the death of the  Managing  Partner  in  no  way  affects  the  continuance  of  the  suit  instituted  in  the  ‘firm  name’,  in  view of  the  protection  afforded under  Order XXX Rule 4 of the Code.”  

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6 6. The  High  Court  also  took  the  view  that  there  is  no  

question  of  altering  and  amending  the  plaintiff  firm  as  a  

proprietary  concern  as  that  would  alter  the  nature  and  

character of the suit, which cannot be permitted.  Further, it  

was also held by the Court that no further dilation over that  

aspect is called for in the case other than pointing out that  

the  indefeasible  rights  of  the  legal  heirs  of  a  deceased  

partner in a suit filed by a firm are insulated under sub-rule  

(2) of Rule 4 of Order XXX of the Code.   The High Court,  

however, did not interfere with the order of the Subordinate  

Court allowing the application for  recalling PW1 for further  

examination.  With regard to the prayers of the Respondent  

Corporation for raising additional issues, the High Court took  

the  view  that  the  same  should  have  been  allowed.  

Consequently,  the  prayer  made  by  the  Respondent  

Corporation  for  framing  additional  issues  was  allowed.  

Aggrieved  by  the  above-mentioned  order,  this  appeal  has  

been preferred by the Appellant.

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7 7. Learned counsel appearing for the Appellant submitted  

that on the death of one of the partners of a partnership firm  

consisting  of  only  two  partners,  remaining  partner  has  

become  the  sole  proprietor/owner  with  all  assets  and  

liabilities and as such he can always proceed with the suit as  

per the provisions contained under Order XXII Rule 10 CPC.  

Learned  counsel  also  submitted  that  the  reasoning  of  the  

High Court, if at all apply, could apply in a case where there  

are more than one partners after the death of a partner, in  

the event of which the firm could continue with minimum of  

two partners.  In such a situation, learned counsel suggested  

that the provision of sub-rule (2) of Rule 4 of Order XXX of the  

Code would apply.   Learned counsel placed reliance on the  

judgment of this Court in Purushottam Umedbhai & Co. v.  

Manilal & Sons [AIR 1961 SC 325], particularly para 9 of the  

said judgment in support of this contention.  Learned counsel  

also made reference to the judgment of this Court in CIT v.  

Seth Govindram Sugar Mills [AIR 1966 SC 24].

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8 8. Learned  counsel  appearing  for  the  Respondent  

Corporation,  on  the  other  hand,  submitted  that  if  the  

Appellant is allowed to continue the suit in the name of the  

firm, all the defence set up by the defendant in the written  

statement  would  be  frustrated.    Learned  counsel  also  

submitted that if the amendment sought for is allowed, that  

will alter the very nature and character of the suit and that  

the High Court has rightly rejected that prayer which calls for  

no interference by this Court.   

9. We are in this case faced with a situation of a registered  

partnership firm, consisting of only two partners, filing a suit  

when both the partners were alive and during the pendency  

of  the suit,  one of  the partners died and legal  heir  of  the  

deceased  partner  did  not  show  any  interest  either  in  the  

assets of the firm or in the liabilities and had refused to join  

as  a  partner.  The  question  is,  on  dissolution  of  the  

partnership firm on the death of the partner, could the suit  

already filed be proceeded with by the remaining so-called  

partner.  We notice, the Subordinate Court has allowed that

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9 prayer  possibly  bearing in  mind the principle  laid  down in  

Order XXII Rule 10 CPC, which deals with the procedure in  

case of assignment before the final order of the suit.  Rule 10  

refers to “devolution of any interest” during the pendency of  

the  suit.   In  such  a  case,  the  Court  can  grant  leave  to  

prosecute the suit against the person to or upon whom such  

interest  has  been  devolved.   Admittedly,  the  partner  who  

died is none other than the father of the Appellant and the  

other sole surviving heir is his sister.  Sister is admittedly not  

interested in joining the firm and, therefore, she is not taking  

over the assets and liabilities of the firm.  Therefore, there  

has been a complete devolution of interest in favour of the  

Appellant.  Under the circumstances, the Subordinate Court  

had allowed the amendment and permitted the Appellant to  

proceed with the suit, granting necessary amendment, which,  

according  to  the  Subordinate  Court,  was  necessary  for  a  

proper and effective adjudication of real dispute between the  

parties.   The  High  Court,  in  our  view,  by  taking  a  

hypertechnical approach held that if such a prayer is allowed,  

the same would alter the nature and character of the suit.  In

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10 our view, such a stand cannot be countenanced considering  

the peculiar facts and circumstances of the case.   

10. We are of the view that the legal consequences pointed  

out by the High Court might apply in a case where one of the  

several partners dies in the suit instituted in the name of the  

partnership  firm  as  compared  to  when  one  of  the  two  

partners of the partnership dies.    Further,  the High Court  

failed to notice that if the partnership firm succeeds in the  

suit,  the  decree so  granted would  not  be executable,  and  

hence a nullity.   In such circumstances, we are inclined to  

allow this appeal and set aside the order of the High Court  

interfering with the order of the Subordinate Court allowing  

the application for amendment and permission to prosecute  

the suit as prayed for.  Ordered accordingly.  

   ……..……………………..J.            (K.S. Radhakrishnan)

……………………………J.    (A.K. Sikri)

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11 New Delhi, October 29, 2013