TaxTMI 
TaxTMI 
TaxTMI 
2025 (7) TMI 919
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.... 04.07.2018 passed by the Division Bench of the High Court upholding the mandamus issued by the Single Judge on 03.07.2012 in a writ petition directing the IOCL to maintain the supply of kerosene to the respondent No.1 till it is reconstituted or its dealership agreement is terminated. 5. The brief facts giving rise to the present dispute and to this Special Leave Petition are that Respondent No.1 - M/s Shree Niwas Ramgopal herein was a proprietorship firm of one Kanhaiyalal Sonthalia. The said Kanhaiyalal Sonthalia reconstituted the firm on 24.11.1989 and included his two sons, Ramesh Sonthalia and Gobinda Sonthalia along with himself as partners in the said firm. The firm was reconstituted as a partnership firm with Kanhaiyalal Sonthalia having 55% share, Ramesh Sonthalia having 35% share and Gobinda Sonthalia holding 10% share in the said partnership business. 6. The partnership was to work as an agency/distributor of kerosene oil for the IOCL. The said partnership firm entered into a kerosene dealership agreement with the IOCL on 11.05.1990 which inter alia specifically provided that in the event of death of any of the partners of the partnership firm, the dealer shall immedi....
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....s and one another legal heir of the deceased i.e., Bijoy Sonthalia, with necessary documents and the reconstitution fee of Rs.25,000/-. 11. Despite the above, the firm was informed that the validity of the token to supply kerosene would not be extended beyond 14.06.2010 if a fresh agreement is not executed. The representations of the partners to continue supplies were all in vain. Thus, the firm and its partners were compelled to invoke the writ jurisdiction of the High Court under Article 226 of the Constitution by filing Writ Petition No. 758 of 2010 M/s Shree Niwas Ramgopal & Ors. vs. The Director of Consumer Goods & Ors. The firm and its subsisting partners therein prayed for declaring Clause 1.5 of the policy guidelines dated 01.12.2008 to be illegal and contrary to the provisions of the Indian Partnership Act, 1932, for a mandamus to renew the licence to supply kerosene and to allow reconstitution of the partnership firm in terms of the partnership deed dated 24.11.1989. A further prayer was made to extend the validity of the token for the supply of the kerosene and not to stop it after 14.06.2010 so that the partnership firm may continue its business till the reconstitution....
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....ove arguments, the counsel for the Respondents 1,2 and 3 i.e., the partnership firm and the surviving partners submitted that under the deed of partnership dated 24.11.1989, it has been specifically stipulated vide Clause 18 that in the event of death of any of the partner, the partnership will not cease to function, rather it shall continue to carry on the business and the surviving partners may admit any of the competent heirs of the deceased partner to the partnership so as to reconstitute it. The Dealership Agreement dated 11.05.1990 also does not provide for the cessation of the existing partnership on the death of one of the partners, rather it provides to continue the dealership with the existing firm or to have a fresh dealership agreement with the firm, if reconstituted, or to terminate the dealership agreement. Since the dealership agreement was never terminated, the IOCL is not empowered to stop the supplies of the kerosene or to treat the business having come to an end. 17. In the light of the facts as narrated above and the submissions advanced by the counsel for the parties, it would be prudent to first refer to the Dealership Agreement dated 11.05.1990 which lays do....
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....nd dissolved inter alia on the death of the partner but this is applicable in cases where there are only two partners constituting the partnership firm. The aforesaid principle would not apply where there are more than two partners in a partnership firm and the deed of partnership provides otherwise that the firm will not stand automatically dissolved on the death of one of the partners. 22. In the case at hand, the partnership consisted of three partners and the deed of partnership, in unequivocal terms, provided that the death of a partner shall not cause discontinuance of partnership and the surviving partners may continue with the business. Therefore, the principle laid down under Section 42 of the Partnership Act would not be applicable and the partnership would continue despite the death of one of the partners. 23. This Court in M/s Wazid Ali Abid Ali vs. Commissioner of Income Tax, Lucknow 1988 (Supp) SCC 193 observed that under the Partnership Act, on death or demise of a partner, the firm shall not be dissolved but shall be carried on with the remaining partners or by including the heirs and representative of the deceased partner on such terms and conditions mutually agr....
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....the competent heirs of the deceased partners, which means that it is not imperative upon the surviving partners to induct all the heirs of the deceased partner in the reconstituted partnership firm. The insistence of the IOCL that all the legal heirs of the deceased partner should join the reconstituted firm or give 'No Objection Certificate' to the reconstituted firm would be contrary to the spirit of the original deed of partnership. The IOCL has no role to play in determining as to who is the competent heir of the deceased partner. It should be left on the wisdom of the existing partners. 26. In the wake of the above analysis and the discussion, the IOCL appeared to have misconstrued its own guidelines in not recognising the reconstitution of the partnership firm with the surviving partners and one new partner being one of the competent heir and legal representative of the deceased partner. 27. It is trite to mention that the IOCL is supposed to act in a manner which is beneficial for the continuance of the business and not to adopt an arbitrary approach thereby creating hinderance in the running business. It is for this reason that the learned Single Judge and the Division Be....