ORDER N.N. Mithal, J.
1. An order making reference of dispute between the parties to arbitration passed by the Court below is under challenge in this appeal,
2. In order to understand the controversy in its correct perspective, it will be necessary to have some facts forming the background of the parties' relations and all the controversy between them. Admittedly the parties are real brothers and they along with their father Pyare Lal used to carry on partnership business along with. Rajendra Kumar under a Deed of Partnership dated 31st April, 1964. The business that they carried on was under the name, and style of M/s Indian Industries and Steel Company This business, continued upto 15th of October, 1973 when Rajendra Kumar, retired from, the firm and the remaining three partners, reconstituted themselves into a partnership firm on 16th October, 1973, each having 1/3rd share in the profits and losses. The father Pyare Lal died on 25th February, 1977, and subsequently there was again reconstitution of the partnership on 1st April, 1977. This time two partnership deeds were executed between the parties, each having half share in two partnership businesses, one in the name of Indian Industries and Steel Company and the other was Cloth business in the name of M/s. Raghunath Prasad Pyare Lal.
3. According to the plaintiff this firm has not been dissolved so far and on the basis of one of the terms in the partnership deed, he sought dispute regarding accounts between the parties to be referred to arbitration. The case of defendant-appellant, however, was that as from 1st April, 1982 both the partnerships were dissolved and there was a partition amongst the brothers as a result whereof the plaintiff-respondent was allotted cloth business and he entered into a fresh Deed of Partnership with his son Ajay Kumar and ever since they alone are carrying on buisness. Similarly the Steel business was allotted to the defendant-appellant and he also entered into a fresh partnership with his two sons on the same date and ever since the Steel business is being carried on by them exclusively.
4. The plaintiff filed the suit on the basis of partnership between the parties treating the firm to be continuing and seeking accounts from the defendant-appellant through arbitration. The defendant contested the plaintiff's right and alleged that the plaintiff had looked into the balance-sheet prepared on 31st March, 1982 and had also inspected the accounts but he did not allow the inspection of accounts of Cloth business. It was contended by him that there cannot be rendition of accounts in one case but in fact in respect of both the businesses the accounting should take place simultaneously. He also invoked a clause in the partnership deed in respect of the other business and prayed that a reference in that case should also be made. Treating this as an admission of the defendant, the trial Court directed that the dispute be referred to an arbitrator to go into the accounts in respect of Steel business but as regards Cloth business it declined to do so on the ground that a proper application should be moved separately by the defendant. We have been informed that against that Order the defendant has filed a revision which is pending in this Court.
5. Sri M. B. Lal, learned counsel for the appellant, however, strenuously urged that the order under appeal was absolutely illegal inasmuch as the Court had failed to record any finding whether the firm was still continuing or had come to an end on 1-4-1982, It is true that from the pleadings of the parties already on record, the issue as must now is not properly culled out but from the documentary evidence on the record filed by the defendant, it was necessary for the Court to frame an issue on the question as to whether the two partnerships entered into on 1-4-1977 still continued or the same had been finally dissolved and terminated and new businesses started by the parties independently as from 1-4-1982. It may be pointed out here that the position would be totally inconsistent if we were to hold that the old partnership dated 1-4-1977 was continuing although the business had been taken over exclusively by the two parties separately with effect from 1-4-1982. It was, therefore, necessary for the trial Court to pay attention to this aspect of the matter and record a clear finding whether it was so or not.
6. Sri B. D. Mandhyan, learned counsel for the respondent, however, submitted that the partnership entered into on 1-4-1977 was admittedly one at will and, therefore, the only manner in which it could be dissolved was in accordance with S. 43 of the Act. According to him, a partnership at will cannot be dissolved in any other manner except by serving a notice on the other partners in writing expressing the intention to dissolve the firm. This submission, however is not entirely correct. As a matter of fact, Chapter VI of the Indian Partnership Act deals with various aspects connected with dissolution of a firm. In S. 39 the term dissolution of firm is defined and in S. 40 it is laid down that a firm can be dissolved with the consent of all the partners or in accordance with a contract between the partners. Section 41 deals with compulsory dissolution in cases where partners become insolvent or by happening of any event which makes the business of the firm unlawful. Section 42 deals with dissolution in certain contingencies including where the death of partner occurs. Section 43 then deals with dissolution of partnership at will and S. 44 with the those cases where partnership can be dissolved at the instance of a partner by a suit under the order of the Court. Thus from the scheme of the Act, we find that there are various ways in which partnership can be dissolved and these are but alternative modes to dissolve the partnership. One mode of dissolution does not exclude dissolution of partnership by any other mode. Thus if a partnership is dissolved by agreement under S. 40 and partnership is at will, it cannot be urged that being in partnership at will, it can only be dissolved by a notice in writing. Dissolution of partnership by this mode is a special feature of partnership at will and it gives an extra right to a partner, even in the absence of mutual agreement, to dissolve and to put an end to the partnership by serving a notice unilateralry.
7. In short a partnership under Section 40 can be dissolved when there is an agreement to dissolve amongst all the partners while under S. 43 i.e. in those cases where partnership is at will, it can be dissolved even without consent of others by giving a notice in writing to all other partners of his intention to dissolve. This, however, does not preclude the partners of a partnership at will to dissolve it with the consent of all the partners thereof. Distinction between dissolution of an ordinary partnership and the one at will as seen above is but slight.
8. As matter of fact S. 43 does not at all control the other provisions of Chapter VI and, therefore, it is possible to dissolve the firm even where no notice in writing has been given under S. 43. Under S. 40, however, a partnership can be dissolved by agreement between the partners but it is not invariably necessary that such dissolution must be in writing. Ail that is necessary is that there should be unanimity amongst the partners of their intention to dissolve the firm. This may be expressed orally or in writing. It would always be a question of fact whether a partnership has been dissolved by mutual consent. Even when dissolution takes place in writing, it is at times expressed in very inadequate and vague language. In such cases the task of construing the words employed or of gathering the intention of the parties is not too easy. The previous as also the subsequent conduct of the erstwhile partners may often become very useful in determining whether the partners intended to terminate the jural relations existing between them. In the case of dissolution of firm by mutual consent, no dissolution can take place by unilateral act of a partner but even in that case if the partnership is at will, it can be dissolved by notice in writing to the other partners conveying the intention to dissolve the firm.
9. From the above discussion, therefore, it is clear that it was possible for the parties to have mutually agreed to dissolve the firm and to constitute a fresh partnership for businesses separately allotted to each of them but then this is entirely a question of fact which ought to have been determined by the trial Court. Merely because there is a term for referring the disputes to arbitration in the agreement dated 1-4-1977, it does not necessarily lead to the conclusion that this partnership was still in existence unless a clear finding was recorded by the trial Court in this regard. The contention of the learned counsel for the respondent that there cannot be any dissolution by mutual consent and by reconstitution of the firms can not be accepted. A similar matter came up before the Supreme Court recently although in a different context, in Commr. of Income-tax v. M/s. Pigot Cham-pan and Company, AIR 1982 SC 1085. In that case the earlier firm having been dissolved, a new firm succeeded to the business of the old firm and the question arose whether the benefits available to the old firm under the Income-tax Act could be claimed by the succeeding firm. In that connection, the Court considered the provisions of Ss. 40 and 43 of the Partnership Act and this is what the Supreme Court had to say on this question:--
"The question whether there is a dissolution of the firm and upon such dissolution a new firm has succeeded to the business of the old firm is a question which depends upon the intention of the parties to be gathered from the document or documents, if any, executed by and between the partners and other facts and surrounding circumstances of the case. Under Section 40 of the Partnership Act, a firm can be dissolved with the consent of all the partners or in accordance with the contract between partners; under Section 43 a partnership at will can be dissolved by any partner giving notice in writing to all the other partners of his intention to dissolve the firm and upon such notice being given the firm gets dissolved as from the date mentioned in the notice as the date of dissolution and if no date is so mentioned as from the date of communication of the notice."
10. Proceeding further the Supreme Court observed that if some of the erstwhile partners take over the assets and liabilities of the dissolved firm and carry on the same business by constituting a new firm, it would be a case of succession of the old business within S. 25(4) of the Income-tax Act. What is relevant for our purposes is the observation of the Supreme Court in that case that partnership can be dissolved under S. 40 only with the consent of all the partners and under Section 43 by any one partner giving a notice in writing to others. In the former case there is mutuality amongst all the partners to dissolve while in the latter case even when others don't agree, one of the partners can enforce the dissolution by serving notice on the rest. The same view was expressed by Hon'ble Hidayatullah, J. as he then was, of the Nagpur High Court sitting in Division Bench in Chhotey Lal Ratan Lal v. Rajmal Milapchand (AIR 1951 Nag 448). It was observed that a partnership can not be brought to an end by unilateral act of one of the partners except by giving notice in writing to the other partners of his intention to dissolve the firm. This again shows that for dissolution under S. 40 consent of all is necessary.
11. Learned counsel for the respondent also made a faint effort to urge that it was a case of retirement from the partnership and as such it was necessary that a notice in writing be given to the partners under sub-clause (1)(c). The whole argument is misconceived.
The question of retirement in the case of partnership having two partners only cannot arise at all. The whole concept of retirement is that on account of walking out, remaining partners can continue the partnership business. In the case of partnership where there are two partners, on the retirement of one, the partnership cannot exist. If any authority is needed in support of this proposition, we can refer to E.F.D. Mehta v. M.F.D. Mehta, AIR 1977 SC 1653 (sic) and Commr. of Income-tax v. Seth Govind Ram Sugar Mills, AIR 1966 SC 24.
12. From all that has been discussed above, it would be obvious that the question which needed foremost attention by the Court below was whether the partnership dated 1 -4-1977 was still subsisting or it had been dissolved or its business had been taken over and succeeded to by another firm, as was the case indirectly pleaded by the defendant. We, however, find that this aspect of the dispute has not been considered by the trial Court at all. We cannot, therefore, sustain the order passed by it.
13. In the result, we find merit in this appeal and it is accordingly allowed. The order of the trial Court is set aside and the matter is sent down to the trial Court for framing an issue on the question that the partnership dated 1-4-1977 was still continuing and had not been dissolved as from 1-4-1982 whereafter a new partnership had come into being. The trial Court will then decide the dispute afresh keeping in view the observations that we have made above. In the circum-stances of the case, we propose that the parties should bear the burden of costs themselves.
14. Appeal allowed.