1. The question in this Second Appeal is whether Section 69(2) of the Indian Partnership Act, 1932, is a bar to the maintainability of the suit.

2. The facts giving rise to the said question of law may be stated. A firm known as “Burugu Viswanadham Bros.” consisting of five persons viz., Burugu Mahadevudu, his brother Burugu Veerayya, Parripati Venkataratnam and his two brothers Subrahmanyam and Venkata Subba Rao as partners was formed in 1925. They executed a registered agreement on 8-6-1925, setting out the terms and conditions of the partnership. The Indian Partnership Act (hereinafter referred to as the Act) came into force in 1932. The firm of Burugu Viswanadham Bros., consisting of those five persons was registered under the Act in 1933. The names of the said five partners are shown in the Register of Firms as partners of the firm. Burugu Veerayya died on 17-7-1939. Parripati Venkataratnam and his two brothers became divided on 11-11-1939. Under the partition the interest of the three brothers in the assets and liabilities of the firm was taken over by Venkataratnam and his brother Subrahmanyam. The third brother Venkata Subba Rao retired from the partnership. On 24-6-1940, Mahadevudu, Venkataratnam and Subrahmanyam executed a fresh agreement of partnership Ex. B-1. No notice, either of the death of Veerayya or of the retirement of Venkata Subba Rao, had been given to the Registrar. The suit dealings with the defendant-firm, the Bala Tripura Sundari Groundnut Mill and Company, Inkole, Bapatla, were commenced after 1940. The suit was filed by the plaintiff-firm for recovery of a sum of Rs. 3,951-4-0 from the defendants in respect of the dealings they had with them.

3. The defendants, inter alia, plaintiff-firm was different from that constituted in the year 1925, that it was not registered under the Partnership Act, and that section 69(2) of the Act was a bar to the maintainability of the suit.

4. The first court accepted the contention of the defendants and dismissed the suit. The appellate court held that the plaintiff-firm was the same firm as that formed in 1925 and registered under the Act and that the suit was, therefore, maintainable. The defendants have preferred the above appeal.

5. The learned Counsel for the appellants raised before me two points (1) by the death of Burugu Veerayya, one of the partners on 17-7-1939, and by the retirement of Venkata Subba Rao another partner from the partnership on 11-11-1939, the partnership formed in the year 1925 was automatically and legally dissolved and the plaintiff-firm was a new firm constituted under Ex. B-1 and (ii) Ex. B-1 expressly dissolved the old firm and constituted a new firm in its stead:—

6. The relevant provision of the Act is section 69(2). It reads:—

“No suit to enforce a right arising from a contract shall be instituted in any court by or on behalf of a firm against any third party unless the firm is registered and the persons suing are or have been shown in the Register of Firms as partners in the firm.”

7. Under this section, a firm is disabled to file a suit against a third party unless two conditions are complied with (i) the firm is registered and (ii) the persons suing are shown in the Register of firms as partners of the firm. The first question, therefore, is whether the suit firm “Burugu Viswanadham Bros.” was registered under the Act.

8. The firm was originaly constituted under the partnership agreement Ex. A-15 dated 8-6-1925. Admittedly, that was registered under the Partnership Act and the names of the five partners were shown in the register. But, it is contended that the death of one of the partners and the retirement of another had the effect of dissolving that firm. This leads on to the consideration of the two subsidiary questions, viz., (i) what is the effect of the retirement of a partner on the constitution of the firm and (ii) what is the effect of the death of a partner on its constitution?

9. Before the enactment of the Partnership Act in the year, 1932, the rights of the partners were governed by the Indian Contract Act. Section 253 prescribes the rules determing the partners' relations where there is no contract to the contrary. Section 253 clause (7) says:

“If from any cause whatsoever, any member of a partnership ceases to be so, the partnership is dissolved as between all the other members.”

10. A Full Bench of the Madras High Court in The Commissioner of Income-tax, Madras v. Muthukaruppan Chettiar 67 M.L.J 401., on the basis of that section, held that, upon the retirement of a partner from the partnership, the partnership was dissolved as between all the other members. This view is certainly unexceptionable as the provisions of section 253(7) are clear. But, after the enactment of the Partnership Act, the rules governing the dissolution of a partnership are laid down in sections 39 and 44 of that Act. In the Contract Act, the circumstances under which the dissolution of a partnership takes place and its consequences are not exhaustively and separately laid down, but in the Partnership Act a separate chapter has been allotted and definite rules are prescribed for dissolution and its consequences. Pollock and Mulla in their book on the Indian Partnership Act summarise the relevant sections at page 113 as follows:—

“We now have rules, mainly following those laid down in the English Act, for dissolution by consent (section 40) by operation of law (section 41), automatically (section 42), optionally (section 43) and Judicially (section 44) and the consequent winding up of the firm's affairs and settlement of accounts.”

11. There is no corresponding provision to section 253(7) of the Contract Act providing for the dissolution of the partnership on any member of the partnership ceasing to be a partner.

12. The learned Counsel for the appellants contended that the legislature omitted the rule as the principle embodied in section 253(7) of the Contract Act was well-settled and self evident and its separate enactment was unnecessary. What is more settled than the impact of the death of a partner on the constitution of a partnership? But yet the partnership Act provides for it. When an express provision in the Contract Act is omitted in compiling a separate Code for partnership, it is obvious that the omission is designed but not accidental. It follows that the retirement of Venkata Subba Rao from the partnership on 11-11-1939 had not the legal effect of dissolving it.

13. The next question is whether the death of Burugu Veerayya on 17-7-1939 had such an effect. Section 42 of the Partnership Act governs the situation. It reads:—

“Subject to contract between the partners a firm is dissolved (c) by the death of a partner.”

14. Under this section, the firm is dissolved by the death of a partner unless there is a contract to the contrary. Whether there is a contract to the contrary falls to be considered on a construction of the articles of the partnership agreement Ex. A-15 dated 8-6-1925. The relevant article reads:—

“Now these presents witness that the said Burugu Mahadevudu and Burugu Veerayya of the first part hereinafter jointly called the principal partners, which expression, unless it is repugnant to the subject or context shall mean and include not only the said Burugu Mahadevudu and Veerayya, but also their survivors, heirs, executors and administrators, and the said Parripati Venkataratnam, Venkata Subba Rao and Subrahmanyam of the Second part hereinafter, referred to as working partners have agreed to continue the said business at Guntur, subject to the terms and stipulations hereunder set forth.”

15. It will be seen from the aforesaid recitals that the partnership is comprised of two categories of partners (i) principal partners and (ii) working partners. A clear distinction is maintained between the two classes of partners. In the case of the former, the principal partners include not only the contracting partners, but also their heirs, executors and administrators whereas in the case of the latter, the partners do not include their heirs. It is obvious from the distinction that, under the terms of the partnership, it was not intended that the death of any of the principal partners would dissolve the partnership, I would, therefore, hold that there is a contract to the contrary in Ex. A-15 excluding the operation of section 42(c) of the Indian Partnership Act. It follows that the death of Burugu Veerayya on 17-7-1939 did not put an end to the partnership, and that the partnership constituted and carried on in the name and style of Burugu Viswanadham Bros., was not dissolved. The suit now filed is by the same firm, which was duly registered under the Act.

16. The second condition laid down in section 69(2) is also satisfied. The persons now suing i.e, the present partners, are shown in the register of firms as partners of the firm, though the same register shows other partners, one of whom died and the other retired. It may be that the fact of retirement of one of the partners and the death of another should have been notified to the Registrar under section 63(1) as the said events effected a change in the constitution of the firm. But the default made by the firm in not so notifying is not of any relevance in considering the question of the maintainability of the suit under section 69(2). There is the essential distinction between the constitution of a firm and its dissolution. Non-compliance with the provisions of section 63(1) may have other consequences but, under section 69(2) only two conditions should be complied with by a firm to enforce a right arising from a contract and those two conditions are complied with in the present case.

17. It is then contended that, under Ex. B-1, the old firm was expressly dissolved and a new firm was formed thereunder. Ex. B-1 is the partnership agreement dated 24-6-1940. The agreement is between Burugu Mahadevudu of the one part and Parripati Venkataratnam and Subrahmanyam of the other part. The document in the preamble mentions that changes in the constitution of the partnership have taken place, that Burugu Veerayya died, that the joint Hindu family of Parripati Bros., was divided, and that Venkata Subba Rao, one of the partners retired and that the remaining partners wished to continue the business in partnership for their benefit. In the operative portion, it is expressly stated that the business of the firm still continues to be carried on under the name and style of Burugu Viswanadham Bros. The same banking business is agreed to be carried on but the scope of the business is extended by including the tobacco business. There is some variation in the shares.

18. The learned counsel for appellants, relying upon the recital “whereas it is therefore expedient and necessary that the terms of this new partnership and constitution should be specified,” and also, the fact that tobacco business was also started by the firm, argued that Ex. B-1 constituted expressly as well as in fact a new partnership. I cannot hold that the mere use of the words in the document “this new partnership” makes it a new firm, if it is not, in fact a new business. Those words are losely used to convey the idea of a change in the constitution of the firm. Under Ex. B-1, the business is agreed to be carried on by the remaining partners notwithstanding the changes in the constitution of the firm under the same name viz., Burugu Viswanadham Bros. The document only, records the changes in the constitution and provides for continuing the existing business. It does not either expressly or by necessary implication dissolve the earlier partnership and form a new firm. There is nothing on record to show that the earlier accounts were looked into and the rights and liabilities of the partners were settled. The mere fact that the scope of the business has been enlarged is not decisive on the question whether the firm was dissolved, for an existing firm can always extend the scope of its business by a separate agreement. After going through the aforesaid recitals in Ex. B-1, I have no hesitation in holding that under the said document a new partnership was not formed but the old partnership was continued with certain changes in its constitution. If so, it follows that section 69(2) is not a bar to the maintainability of the present suit.

19. In the result, the appeal fails and is dismissed with costs. No leave.

T.A.B

20. Appeal dismissed.