Retired partner liability survives dissolution where an existing creditor had no notice, and Section 264 was not read to change that rule.

A retired partner remained liable to an existing creditor on a promissory note executed after dissolution where the creditor had received no notice of dissolution, despite public notice being given. Section 264 of the Indian Contract Act, 1872 was held not to displace the settled rule of commercial law by implication, because its negative wording did not clearly express an intention to alter existing liability. The Contract Act was treated as not being a complete code, and the partnership provisions were not read as exhaustive of all partnership questions. The settled construction and commercial practice were therefore preferred, leaving the retired partner liable.

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Issues: Whether a retired partner remained liable on a promissory note executed after dissolution of the firm where public notice of dissolution had been given but no notice had reached the creditor, and whether Section 264 of the Indian Contract Act, 1872 displaced the existing rule of liability.

Analysis: The liability of a retired partner to an existing customer who had no notice of dissolution had been long recognised. Section 264 of the Indian Contract Act, 1872 was framed in negative language and did not clearly express any intention to alter that settled rule. A construction enlarging the section by implication would have effected a substantial change in commercial law without clear words, which was not justified. The Contract Act was also not a complete code, and the partnership provisions were not exhaustive of all questions arising in that field. In view of the ambiguity, the settled construction and commercial practice were preferred.

Conclusion: The retired partner remained liable notwithstanding public notice of dissolution, and Section 264 of the Indian Contract Act, 1872 did not absolve him from liability to the creditor.

Ratio Decidendi: A negative statutory provision will not be construed to alter a settled rule of commercial law by implication; unless the statute clearly says otherwise, a retired partner remains liable to an existing creditor who had no notice of dissolution.

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