M/S AVK TRADERS Vs KERALA STATE CIVIL SUP. CORP. LTD.
Bench: K.S. RADHAKRISHNAN,A.K. SIKRI
Case number: C.A. No.-009697-009697 / 2013
Diary number: 22233 / 2012
Advocates: MADHURIMA TATIA Vs
RAMESH BABU M. R.
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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