Partnership at Will – Judicial Interpretation
Authored by - Aman Porwal
Keywords - Partnership Agreement, Will, Express Agreement
Will of a partner plays an important role in any partnership firm. A partnership firm mainly depends on the will of a partner or partners. Many partnership firms do not have any specific time period clause in their partnership agreement. In that case, partnership at will is the key for dissolution of such a partnership firm.
Introduction: Partnership at Will basically means that it is a partnership in which the time frame of that particular partnership is not fixed. Such partnership either has no fixed term or has an undefined term. These kinds of partnerships can be dissolved by a simple notice by a partner to the other partner (s). Any partnership in which the purpose or time of partnership is undefined will be treated as partnership at will. Many partnership firms have a written agreement for the same in which the purpose or duration is mentioned. In addition to this, such partnership may have an express agreement or an implied agreement regarding the duration of partnership as well. Indian Partnership Act, 1932 :
In Indian Partnership Act, 1932. Partnership at will is defined in these Sections– Section 7 – Partnership at Will - Where no provision is made by contract between the partners for the duration of their partnership, or for the determination of their partnership, the partnership is
‘partnership at will’. Explanation - Section 7 of Indian Partnership Act,1932 specifies that in a contract of Partnership between the partners, if the duration of such partnership is not specified then that partnership is deemed to be partnership at will. Section 43 – Dissolution by notice of a Partnership at Will – (1) Where the partnership is at will, the firm may be dissolved by any partner giving notice in writing to all the other partners of his intention to dissolve the firm. (2) The firm is dissolved as from the date mentioned in the notice as the date of dissolution or, if no date is so mentioned, as from the date of the communication of the notice. Explanation – Section 43 of Indian Partnership Act, 1932 specifies about the dissolution of a partnership at will by notice, this Section has two Sub Sections, here Sub Section (1) of Section 431 Indian Partnership Act, 1932 (Act No. 9 of 1932) says that any partner of a Partnership at will working in a firm can give a notice to the other partner of that firm with an intention aimed towards the dissolution of the partnership at will firm. Sub Section (2) of Section 43 of this Act specify about the date of dissolution of such a firm. As mentioned in this Section, the firm is dissolved as per the date mentioned in the notice and if no such date is mentioned then the date of communication of the notice is treated as dissolution of the firm. Kirtikumar Fakrichand Mehta v. Sdilipkumar Jayantilal Sanghvi-HUF Thro karta Dilipkumar1 This case is one of the most highlighted case regarding Section 7 & Section 43 of Indian Partnership Act 1932. In this case, judicial interpretation of Section 43 has been discussed; whether the notice of dissolution comes under the virtue of this Section or not? This judgement clarifies that notice of dissolution comes under this Section, if one of the partners in a Partnership firm is not willing to work. He is likely to serve the notice of such dissolution to the other partner (s) and the effect of such dissolution will be as per the date mentioned in the notice of dissolution. If not mentioned, the communication date of such notice to the partner (s) will be considered as the date of the dissolution of partnership firm. Banarasi Das v. Seth Kansiram2 This case is from 1963. In this case, Apex Court have to determine the term ‘notice’ which is used in Section 43 of Indian Partnership Act, 1932. The court interpreted that the notice used in this Section is wide enough to cover many aspects. Such partnership will be deemed to be dissolved when copy of such summons has been served to the defendant from the plaintiff in this case. Also, when there are two partners having a clash in the business, a suit can be filled in the court of law for dissolution of the firm and also to have a final decree.
B. Ramulu v. B.N. Setty3 In this case a question related to Section 7 of Indian Partnership Act,1932 arises in front of the Andhra Pradesh High court. That question is whether retirement of a partner includes dissolution of the partnership firm? The Court interpreted that retirement and dissolution are different concepts and both of them are defined in the different chapters of the Act, Chapter V and Chapter VI respectively.
Judiciary has interpreted Partnership at will in so many instances, not because it is difficult to determine but because this Indian Partnership Act is more than eight decades old. Judiciary has to interpret the law as per the requirement and in accordance to the contemporary world. Partnership at will is an old concept in which a partner has the rights to dissolution of such partnership by simply giving notice to the other partner (s).
1. C/SCA/1973/2013 2. AIR 1963 SC 1165 3. C.C.C.A. No. 69 of 1990