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PETITIONER: SHIVAGOUDA RAVJI PATIL AND OTHERS

       Vs.

RESPONDENT: CHANDRAKANT NEELKANTH SEDALGE AND OTHERS

DATE OF JUDGMENT: 08/05/1964

BENCH: SUBBARAO, K. BENCH: SUBBARAO, K. AYYANGAR, N. RAJAGOPALA MUDHOLKAR, J.R.

CITATION:  1965 AIR  212            1964 SCR  (8) 233

ACT: Indian Partnership Act-A minor admitted to the benefits of a partnership-Partnership   dissolved-Thereafter   the   minor attains  majority  He  did not exercise his  option  not  to become a partner-He cannot he adjudicated insolvent for  the acts of insolvency of other partners Indian Partnership Act, 1932 (IX of 1932), s. 30(5). 234

HEADNOTE: The  respondent No.  1 while he was a minor was admitted  to the  benefits of a partnership constituted of respondents  2 and  3.  The  partnership  owed  a  certain  amount  to  the appellants.  The partnership was dissolved and  subsequently respondent No. 1 became a major but he did not exercise  the option not to become a partner under s. 30(5) of the  Indian Partnership  Act, 1932.  Respondents 2 and 3 committed  acts of  insolvency and the appellants filed an  application  for adjudicating the three respondents as insolvents.  The first respondent  resisted the application without success but  on second appeal the High Court held that he was not a  partner of  the  firm  and  hence he could  not  be  adjudicated  an insolvent for the debts of the firm.  The present appeal was filed on a certificate granted by the High Court. The  appellant  contended  before this Court  that  the  1st respondent had become a partner of the firm by reason of the fact  that he had not elected to become a partner  under  a. 30(5) of the Partnership Act and therefore he was liable  to be adjudicated an insolvent. Held:(i)  A  person under the age  of  majority  cannot become  a partner by contract and he cannot be one  of  that group  of persons called a firm.  It therefore follows  that if during minority of the 1st respondent the partners of the firm  committed  an act of insolvency, the minor  could  not have been adjudicated insolvent on the basis of the said act of  insolvency  for  the simple reason that  he  was  not  a partner of the firm. Sanyasi Charan Mandal v. Krishnadhan Banerji, (1922)  I.L.R. 49 Cal. 560, relied on. (ii)It  is implicit in the terms of sub-s. (5) of s. 30  of the  Partnership Act that the partnership is in  existence,.

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A minor, after attaining majority, cannot elect to become  a partner of a firm which ceased to exist.  The entire  scheme of  s. 30 of the Partnership Act posits the existence  of  a firm and negatives any theory of its application to a  stage when the firms ceased to exist. (iii)Since the 1st respondent became a major after  the partnersship was dissolved s. 30 of the Partnership Act does not  apply  to  him.  He is not a partner of  the  firm  and therefore he cannot be adjudicated insolvent for the acts of insolvency committed by respondents 2 and 3, the partners of the firm.

JUDGMENT: CIVIL APPELLATE JURISDICTION: Civil Appeal No. 244 of 1964. Appeal from the judgment and order dated September 21,  1962 of the Mysore High Court in Civil Revision Petition No.  929 of 1958. G.   S. Pathak and R. Gopalakrishnan, for the appellants. S.   G.  Patwardhan,  V.  Kumar  and  Naunit  Lal,  for  the respondent No. 1. 235 May, 8, 1964.  The Judgment of the Court was delivered by SUBBA  RAO, J.This appeal by certificate raies the  question whether  a  minor  who was admitted to  the  benefits  of  a partnership  can  be adjudicated insolvent on the  basis  of debt  or  debts of the firm after the partnership  was  dis- solved,  on the ground that he attained majority  subsequent to the said dissolution, but did not exercise his option  to become a partner or cease to be one of the said firm. The  facts  are not in dispute and may  be  briefly  stated. Mallappa  Mahalingappa  Sadalge and  Appasaheb  Mahalingappa Sadalge, respondents 2 and 3 in the appeal, were carrying on the  business  of commission agents  and  manufacturing  and selling  partnership  under the names of two firms  "M.   B. Sadalge" and "C.  N. Sadalge".  The partnership deed between them  was  executed  on  October 25,  1946.   At  that  time Chandrakant  Nilakanth Sadalge, respondent 1 herein,  was  a minor   and  he  was  admitted  to  the  benefits   of   the partnership.    The  partnership  had  dealings   with   the appellants and it had become indebted to them to the  extent of Rs. 1,72,484.  The partnership was dissolved on April 18, 1951.  The first respondent became a major subsequently  and he  did not exercise the option not to become a  partner  of the firm under s. 30(5) of the Indian Partnership Act.  When the appellants demanded their dues, the respondents 2 and  3 informed  them that they were unable to pay their  dues  and that they had suspended payment of the debts.  On August  2, 1954,  the appellants filed an application in the  Court  of the  Civil Judge, Senior Division, Belgam, for  adjudicating the three respondents as insolvents on the basis of the said debts.   The  1st respondent opposed the  application.   The learned Civil Judge found that respondents 2 and 3 committed acts  of  insolvency and that the 1st  respondent  had  also become   partner as he did not exercise his option under  s. 30(5)  of  the Partnership Act and, therefore, he  was  also liable  to  be  adjudicated  along  with  them.   The  first respondent  preferred an appeal to the District  Judge,  but the appeal was dismissed.  On second appeal, the High  Court held that the 1st respondent was not a partner of the 236 firm  and, therefore, he could not be adjudicated  insolvent for the debts of the firm.  The creditors have preferred the present appeal against the said decision of the High Court.

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Learned  counsel  for the appellants, Mr.  Pathak,  contends that the 1st respondent had become a partner of the firm  by reason  of the fact that he had not elected not to become  a partner  of  the firm under s. 30(5) of the  Patnership  Act and,  therefore, he was liable to be  adjudicated  insolvent along with his other partners. The  question  turns upon the relevant  provisions  of  the, Provincial  Insolvency Act, 1920 (5 of 1920) and the  Indian Partnership  Act.   Under the provisions of  the  Provincial Insolvency  Act, a person can only be adjudicated  insolvent if he is a debtor and has committed an act of insolvency  as defined  in  the Act: see ss. 6 and 9. In the  instant  case respondents  2 and 3 were partners of the firm and they  be- came indebted to the appellants and they committed an act of insolvency   by  declaring  their  inability  to   pay   the debts   .and  they  were,  therefore,  rightly   adjudicated insolvents But the question is whether the first respondent could  also be  adjudicated insolvent on the basis of thE said  acts  of insolvency committed by respondents 2 and 3. He could be, if he  had become a partner of the firm.  It is contended  that he  had  become a partner of the firm, because lie  did  not exercise his option not to become a partner thereof under s. 30(5)  of  the  Partnership  Act.  Under  s.  30(1)  of  the Partnership  Act a minor cannot become a partner of  a  firm but  he  may be admitted to the benefits of  a  partnership. Under  sub-ss. (2) and (3) thereof he will be entitled  only to  have a right to such share of the properties and of  the profits  of  the firm as may be agreed upon, but he  has  no personal  liability  for any acts of the  firm,  though  his share is liable for the same.  The legal position of a minor who is admitted to a partnership has been succinctly  stated by the Privy Council in Sanyasi Charan Mandal v. Krishnadhan Banerji(1) after considering the material provisions of  the Contract Act, (1)[1922] I.L.R. 49 Cal. 560, 570. 237 which at that time contained the provisions relevant to  the law of partnership, thus :               "A  person  under the age of  majority  cannot               become          a          partner          by               contract......................     and      so               according  to the definition he cannot be  one               of  that group of persons called a  firm.   It               would seem, therefore, that the share of which               s.  247  speaks  is no more than  a  right  to               participate in the property of the firm  after               its obligations have been satisfied." It follows that if during minority of the 1st respondent the partners  of  the firm committed an act of  insolvency,  the minor could not have been adjudicated insolvent on the basis of the said act of insolvency for the simple reason that  he was  not a partner of the firm.  But it is said that  sub-s. (5) of s. 30 of the Partnership Act made all the  difference in  the case.  Under that sub-section the quondam  minor  at any time within six months of his attaining majority, or  of his  obtaining  knowledge that he had been admitted  to  the benefits  of partnership, whichever date is later, may  give public  notice that he has elected to become or that he  has elected not to become a partner in the firm and such  notice shall  determine  his position as regards the firm.   If  he failed  to give such a notice, he would become a partner  in the  said  firm after the expiry of the said period  of  six months.  Under sub-s. (7) thereof where such person  becomes a partner, his rights and liabilities as a minor continue up

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to  the  date  on which he becomes a partner,  but  he  also becomes  personally liable to third parties for all acts  of the  firm  done  since he was admitted to  the  benefits  of partnership and his share in the property and profits of the firm shall be the share to which he was entitled as a minor. Under  the said two sub-sections, if during the  continuance of  the partnership a person, who was admitted at  the  time when he was a minor to the benefits of the partnership,  did not within six months of his attaining majority elect not to become a partner, he would become a partner after the expiry of the said period and thereafter his rights and liabilities would be the same as those of the other partners as from the date he was admitted to the partnership. 238 It  would follow from this that the said minor would  there- after  be  liable  to the debts of the  firm  and  could  be adjudicated  insolvent for the acts of insolvency  committed by  the partners.  But in the present case  the  partnership was  dissolved before the first respondent became  a  major; from  the  date of the dissolution of the  partnership,  the firm  ceased  to exist, though under s. 45 of the  Act,  the partners continued to be liable as such to third parties for the acts done by any of them which would have been the  acts of  the  firm if done before the  dissolution  until  public notice  was  given of the dissolution.  Section  45  proprio vigore  applies  only  to partners of the  firm.   When  the partnership itself was dissolved before the first respondent became a major, it is legally impossible to hold that he had become  a  partner of the dissolved firm by  reason  of  his inaction after he became a major within the time  prescribed under  s. 30(5) of the Partnership Act.  Section 30  of  the said  Act presupposes the existence of a partnership.   Sub- ss.  (1),  (2)  and  (3) thereof  describe  the  rights  and liabilities   of  a  minor  admitted  to  the  benefits   of partnership  in respect of acts committed by  the  partners; sub-s. (4) thereof imposes a disability on the minor to  sue the  partners for an account or payment of his share of  the property  or  profits of the firm, save  when  severing  his connection with the firm.  This sub-section also assumes the existence of a firm from which the minor seeks to sever  his connection by filing a suit.  It is implicit in the terms of sub-s.  (5)  of  s.  30 of  the  Partnership  Act  that  the partnership  is  in  existence.   A  minor  after  attaining majority  cannot elect to become a partner of a  firm  which ceased  to exist.  The notice issued by him also  determines his  position  as  regards  the  firm.   Sub-s.  (7)   which describes  the  rights  and  liabilities  of  a  person  who exercises  his option under sub-s. (5) to become  a  partner also  indicates  that  he is inducted from that  date  as  a partner  of  an  existing  firm  with  co-equal  rights  and liabilities along with other partners.  The entire scheme of s. 30 of the Partnership Act posits the existence of a  firm and negatives any theory of its application to a stage  when the  firm  ceased to exist.  One cannot become or  remain  a partner of a firm that does not exist. It  is common case that the first respondent became a  major only after the firm was dissolved.  Section 30 of the                             239 Partnership  Act, therefore, does not apply to him.   He  is not  a  partner  of the firm and, therefore,  he  cannot  be adjudicated  insolvent for the acts of insolvency  committed by respondents 2 and 3, the partners of the firm.  The order of the High Court is correct. In the result, the appeal fails and is dismissed with costs. Appeal dismissed.

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