1995 (10) TMI 197 - HC - Companies Law

Partnership not dissolved by citizenship change; decree for dissolution granted. Commissioner appointed for settlement.

Sd. Gurmukh Singh Anand HUF Versus Sd. Suchacha Singh Anand

The court held that the partnership between the plaintiff and defendants was not automatically dissolved upon the plaintiff obtaining American citizenship ... Restrictions on establishment of place of business in India Issues Involved:1. Whether the partnership between the plaintiff and the defendants stands dissolved in view of the provisions of the Foreign Exchange Regulation Act, 1973Rs.2. Whether a preliminary decree for dissolution of the partnership is to be passed in the suitRs.3. What order and decree as per the orderRs.Issue-wise Detailed Analysis:1. Dissolution of Partnership under Foreign Exchange Regulation Act, 1973:The primary issue was whether the partnership between the plaintiff and the defendants stands dissolved due to the provisions of the Foreign Exchange Regulation Act, 1973. The defendants contended that the plaintiff, having obtained American citizenship in 1977, could not legally carry on any business in India under the said Act, thereby dissolving the partnership. The court examined the relevant provisions, particularly sections 29 and 47 of the Act. It was noted that the partnership was established before the Act came into force and continued without any directive from the Reserve Bank of India to cease operations. The court concluded that merely because no application was made to the Reserve Bank, the business did not become illegal. Therefore, the partnership did not automatically dissolve upon the plaintiff obtaining American citizenship. The court ruled that the partnership had not come to an end and was not dissolved due to the plaintiff's change in citizenship.2. Preliminary Decree for Dissolution of Partnership:The plaintiff sought a preliminary decree for the dissolution of the partnership firm under Order XII, rule 6 read with section 151 of the Code of Civil Procedure. The defendants admitted the existence of the partnership and the equal shareholding between the plaintiff and the defendants. Given these admissions, the court found it appropriate to pass a preliminary decree for dissolution. The court emphasized that the plaintiff did not wish to continue the partnership, and thus, a preliminary decree for dissolution was warranted. Consequently, the court ordered the dissolution of the partnership from the date of the judgment.3. Order and Decree:The court appointed a Commissioner to handle the dissolution process, including selling the partnership business and taking accounts from April 1, 1971, to the date of dissolution. The Commissioner was tasked with determining the plaintiff's entitlement towards his 50% share in the partnership. The Commissioner's fee was initially fixed at Rs. 10,000. Additionally, the court addressed a related application (I. A No. 9440 of 1995) regarding the withdrawal of funds from the partnership's bank account. Given the plaintiff's absence abroad, the court authorized the Local Commissioner to sign cheques jointly with defendant No. 2 for withdrawing funds, ensuring proper management amidst ongoing disputes.Final Order:1. The partnership between the plaintiff and defendant No. 2, established in April 1963, stands dissolved from the date of the judgment.2. Shri Muni Lal Jain, a retired District Judge and practicing advocate, is appointed as Commissioner to sell the partnership business and take accounts from April 1, 1971, to the dissolution date, determining the plaintiff's 50% share.3. The Commissioner's fee is fixed at Rs. 10,000.4. A preliminary decree is drawn accordingly.5. For bank withdrawals, cheques must be signed jointly by defendant No. 2 and the Local Commissioner, Shri B. B. Gupta, ensuring compliance by the Canara Bank, Kashmiri Gate branch.The court disposed of the interim application (I. A. No. 9440 of 1995) with these directives, ensuring the orderly dissolution and settlement of the partnership business.