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<h1>Court limits surety's liability to Rs. 5,000 in dissolved partnership case</h1> The court partially allowed the writ petition, quashing one recovery notice and limiting the surety's liability to the specified amount in the surety bond ... - Issues:1. Liability of a surety for payment of sales tax.2. Effect of dissolution of a partnership on the liability of a surety.3. Compliance with statutory provisions regarding transfer of business.4. Interpretation of section 133 of the Contract Act.Detailed Analysis:1. The primary issue in this case revolves around the liability of a surety, who had executed a surety bond for a partnership firm, for the payment of sales tax dues. The surety had stood surety up to a certain amount, and the question was raised whether the surety could be asked to pay more than the extent of his liability under the surety bond. The court acknowledged that the surety's liability was limited to the amount specified in the bond, which in this case was Rs. 5,000.2. Another crucial issue addressed in the judgment was the effect of the dissolution of the original partnership firm on the liability of the surety. The petitioner argued that the liability of the earlier partnership was taken over by the new partnership formed after the dissolution, thereby discharging the surety from his obligations. However, the court held that the surety's liability remained for the duration of the original partnership, as there was no provision under the Act discharging the surety upon the transfer of a business.3. The judgment also delved into the compliance with statutory provisions regarding the transfer of business, specifically focusing on sections 16 and 17 of the Act. It was noted that the registration certificate was not amended upon the formation of the new partnership, and the business continued to operate under the same name and style. The court emphasized that the mere change in the partnership constitution did not alter the registration status of the business.4. Lastly, the interpretation of section 133 of the Contract Act was briefly discussed in the judgment. It was conceded that the surety's liability ceased as to transactions subsequent to the formation of the new partnership, in accordance with section 133 of the Contract Act. This acknowledgment further supported the court's decision that the surety could not be held liable for the obligations of the subsequent partnership.In conclusion, the court allowed the writ petition partially, quashing one of the recovery notices and limiting the surety's liability to the extent specified in the surety bond. The judgment clarified the extent of a surety's liability, the impact of partnership dissolution on surety obligations, and the importance of compliance with statutory provisions in matters of business transfer.
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