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Retail out let – partnership firm – two partners relinquished their rights in the firm by agreement – one of the partner died – Lrs were brought – acceptance of reconstitution of partnership firm by company appellant due to pending of civil cases – mere pending of set aside exparte order is not pending of a case – the decree is to be considered as in force- insisting for No Objection certificate from the out gone partners – Apex court held that consider the reconstitution of partnership firm by treating the agreement of relinquishment rights of out gone partners as No Objection certificate with out insisting for it separately = Bharat Petroleum Corp. Ltd. .. Appellant(s) -vs- B.M. Motors & Ors. .. Respondent(s) = 2014 (April.Part ) http://judis.nic.in/supremecourt/filename=41422

 Retail out let – partnership firm – two partners relinquished their rights in the firm by agreement – one of the partner died – Lrs were brought – acceptance of reconstitution of partnership firm by company appellant  due to pending of civil cases – mere pending of set aside exparte order is not pending of a case – the decree is to be considered as in force- insisting for No Objection certificate from the out gone partners – Apex court held that consider the reconstitution of partnership firm by treating the agreement of relinquishment rights of out gone partners as No Objection certificate with out insisting for it separately =

The firm M/s  B.M.  Motors  was  constituted  on  26.6.1973  with  four

    partners  and  the  said  firm  was  running  the  retail  outlet  from

    12.8.1975 onwards.  It is also admitted  that  all  the  four  partners

    entered into subsequent agreement dated 3.5.1984 and as per  the  terms

    and conditions of the said agreement   partner  nos.  1  and  2  namely

    respondent nos.2 and 3 herein would receive 100 litres  of  petrol  per

    month or its value thereof.  They further agreed that  they  will  have

    neither right in the retail outlet nor claim right  in  the  assets  or

    liabilities of the firm and partner nos. 3 and 4 would run  the  retail

    outlet in the name of the firm.   A  reading  of  the  agreement  dated

    3.5.1984 clearly reveals that respondent  nos.  2  and  3  herein  have

    virtually retired from the partnership and their entitlement  was  only

    to supply of 100 litres of petrol per month from  the  said  date.   In

    other words   it cannot be said  that  the  original  partnership  deed

    continued thereafter. It is also relevant to  point  out  that  partner

    nos. 3 and 4  were recognized as partners of  the  reconstituted   firm

    from that date. The agreement dated 3.5.1984 was  also acted  upon  and

    it is not  in dispute that 100 litres of petrol per month was  supplied

    to respondent nos. 2 and 3 herein till June 1993.

 

 

    9.     Thereafter the firm instituted a suit being Civil Suit No.368 of

    1995 against Respondent nos. 2 and  3  herein  seeking  for  decree  of

    permanent  injunction  to  restrain  them  from  interfering   in   the

    management and working of the plaintiffs retail outlet and the suit was

    decree ex-parte on 14.1.2004.  Though respondent nos. 2  and  3  herein

    have claimed that they have filed an application  to set aside the  ex-

    parte decree and the same is still pending  and the decree is in force.

     In other words the retail outlet in the name of the firm  continue  to

    be run by partner nos. 3 and 4  only for   nearly  three  decades.   In

    such circumstances  the agreement  dated  3.5.1984  is  in  effect  the

    retirement deed executed by respondent nos. 2 and  3  herein  from  the

    firm B.M. Motors and it has to be treated as No  Objection  Certificate

    in so far as they are concerned.

 

 

    10.    Respondent No.1 herein in its counter affidavit  dated  31.01.14

    have stated that in compliance of the direction of the  High  Court  in

    the impugned judgment, it had  sent  the  bank  draft/pay  order  dated

    10.6.2013 for a sum of Rs.8,64,650/-  issued  by  Canara  Bank  Kannauj

    Branch to respondent nos. 2 and 3  herein  towards  the  value  of  100

    litres of petrol per month for the period from June 1993 to June  2013.

    Respondent Nos. 2 and 3  in  their  letter  dated  28.6.2013  shown  as

    Annexure  CA-2  to  the  counter  affidavit  of  respondent  no.1  have

    acknowledged the receipt of the said pay order  and  have  stated  that

    they have kept the said pay order as security and will  not  encash  it

    till the final decision is taken  by  the  Corporation  in  respect  of

    reconstitution of the firm. It appears that the said pay order has  not

    been encashed and had expired.  Be that as it may the order  passed  by

    the High Court is, in our opinion, just   and  equitable  inasmuch  as,

    while  it  had  protected  the  interests  of  the  retiring  partners-

    respondents 2 and 3, it had ensured that they do not  frustrate  either

    the agreement by which they had surrendered their rights in the  profit

    and losses of the partnership or interfere with the smooth  running  of

    the business by the continuing partners, in breach of the decree passed

    in  their favour.  The arrangement arrived at between the partners  may

    not have been disclosed to the petitioner  corporation  but  such  non-

    disclosure should not be allowed to result in termination of the agency

    especially  when  one  of  the  parties  is  acting   unreasonably   or

    armtwisting the other party, to extract an extra pound  of  flesh  from

    it.  The petitioner-corporation would in such a case be expected  as  a

    public sector entity, to act fairly  and  objectively  to  prevent  one

    party taking undeserved  advantage  over  the  other  on  technical  or

    procedural grounds.  There is no gain  saying  that  while  considering

    reconstitution of the partnership the petitioner-corporation  shall  be

    free to stipulate conditions that would protect its business  interest,

    goodwill and reputation among its consumers.

 

 

    11.    Since the Bank draft received by respondents 2  and  3  has  not

    been encashed we direct that the first respondent firm shall deposit  a

    sum of Rs.8,64,650/- with the Registrar of the High Court of Allahabad,

    to be released in favour of  respondent  Nos.  2  and  3  herein,  upon

    surrender of the bank draft/pay order dated 10.6.2013 received by  them

    from respondent No.1.  The needful shall be done within a period of one

    month from the date of judgment.  Upon the deposit  of  the  amount  as

    aforesaid, the proposal for reconstitution of the  1st  respondent-firm

    submitted  to  the  appellant-corporation,  shall  be  considered   for

    acceptance, treating agreement dated 3.5.1984 entered into between  the

    original partners as a “No Objection Certificate” by respondent Nos.  2

    and  3  to  such  reconstitution.       The  appeal  is   disposed   of

    accordingly. No costs.

 2014 (April.Part ) http://judis.nic.in/supremecourt/filename=41422

T.S. THAKUR, C. NAGAPPAN

NON-REPORTABLE

IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 4595 OF 2014
[Arising out of Special Leave Petition (Civil) No.482 of 2014]

 

 

Bharat Petroleum Corp. Ltd. .. Appellant(s)

-vs-

B.M. Motors & Ors. .. Respondent(s)
J U D G M E N T

C. NAGAPPAN, J.

 

1. Leave granted.
2. This appeal is preferred against the judgment dated 30.5.2013 of
the Division Bench of the High Court of Judicature at Allahabad in Writ
Petition (Civil) No.59450 of 2012. Respondent No.1 therein viz. M/s
Bharat Petroleum Corporation Limited is the appellant herein.

 

3. Briefly the facts leading to the filing of the writ petition are
as follows: Respondent No.1 herein, partnership firm was constituted
on 26.6.1973 consisting of four partners with the following profit
sharing ratio:

(1) Subhash Chandra 1%

(2) Brijrani 33%

(3) Ramesh Kumar Tandon 33% and

(4) Roop Rani Tandon 33%

A licence agreement was executed on 12.8.1975 between the said firm
and the then M/s Burmah Shell Oil Storage & Distribution Company of
India Ltd. to run a retail outlet and the business was carried on.
Subsequently another agreement was entered between all the four
partners on 3.5.1984 under which the partner nos.1 and 2 referred to
above demanded 100 litres of petrol per month, to which the partner
nos. 3 and 4 agreed and partner nos. 1 and 2 further agreed that with
effect from the said date the business of the petrol pump in the name
of firm will be run by partner nos. 3 and 4 and partner nos. 1 and 2
shall have no right, share or interest in the running of the business
and also in the assets or the liabilities of the firm. As per the
Agreement the outlet was run in the firm’s name by partner nos.3 and 4.

 

4. As agreed upon, partner nos.3 and 4 referred above supplied 100
litres of petrol per month to partner nos. 1 and 2 and dispute arose in
the year 1993 and partner nos. 3 and 4 filed a civil suit in Civil
Suit No.368 of 1995 on the file of Civil Judge Senior Division Kannauj
for permanent injunction to restrain partner nos. 1 and 2 from
interfering in the management and working of the retail outlet. The
said suit was decreed ex-parte on 14.1.2004. Partner nos. 1 and 2 who
are respondent nos. 2 and 3 herein, have filed an application to set
aside the ex-parte decree and the said application is said to be
pending. The appellant –Corporation stopped supply of petrol to the
outlet and respondent No.1 herein namely the firm filed another civil
suit in Suit No.582 of 1998 against the Corporation to restore supply.
In the said suit respondent Nos. 2 and 3 herein namely partner nos.1
and 2 referred to supra filed an application to implead themselves as
defendants and the said application was dismissed by the trial court
and challenging that order a writ petition came to be filed by
respondent nos. 2 and 3 herein and that also was dismissed.

5. Partner no.4 Roop Rani Tandon expired on 11.6.2011 and a
letter was sent by the firm on 22.3.2012 to the Corporation intimating
the death of the partner. The Corporation stopped supply on 30.3.2012
and directed to apply for a temporary dealership. The firm filed Writ
Petition No.19606 of 2012 to restore the supply and the High Court
after hearing both sides by its order dated 3.9.2012 directed the
Corporation to dispose of the representation. The Corporation by order
dated 31.10.2012 rejected the representation of the firm. Aggrieved by
the same the firm filed Writ Petition © No.59450 of 2012 to quash the
impugned order dated 31.10.2012 and for direction to restore supply.
Partner no.3 Ramesh Kumar Tandon also died during pendency of the writ
petition leaving his widow and son as legal heirs. The legal heirs
impleaded themselves as partners of the firm in the writ petition. The
High Court after hearing both sides by impugned judgment dated
30.5.2013 directed the firm namely the writ petitioner, to make payment
of amount equivalent to 100 litres of petrol per month from July 1993
to the date of the judgment and on such payment directed partner nos.1
and 2 referred to supra to give No Objection Certificate for
reconstitution of the firm and further directed the Corporation to
take a decision regarding the reconstitution of the firm. It was
further observed in the order that even after payment is made, if
partner nos. 1 and 2 do not give no objection, the Corporation shall
reconstitute the firm waiving the No Objection. Challenging the
judgment, Bharat Petroleum Corporation Limited has preferred the
present appeal.

6. The learned counsel appearing for the appellant –corporation
contended that the agreement dated 3.5.1984 reconstituting the firm
was not intimated to the Corporation and only after the death of
partner Roop Rani Tandon the request for reconstitution of the firm
was received in the year 2012 and the said proposal was not in
accordance with their policy for reconstitution of partnership
dealership and the High Court erred in directing the Corporation to
proceed with the reconstitution of the firm waiving No Objection
Certificate from respondent nos. 2 and 3 herein and hence the impugned
judgment is liable to be set aside.

7. Per contra the learned counsel appearing for the firm namely
respondent No.1 herein contended that after the agreement dated
3.5.1984 respondent Nos. 2 and 3 herein are no longer partners of the
firm and said fact was intimated to the Corporation and after the death
of partner Roop Rani Tandon a request for reconstitution was submitted
in writing and the Corporation is obliged to reconstitute the firm and
the impugned judgment is sustainable. The learned counsel appearing
for respondent nos. 2 and 3 submitted that even after the agreement
dated 3.5.1984 respondent nos. 2 and 3 continued to be partners of the
firm though their entitlement was restricted to the supply of 100
litres of petrol per month or its value thereof.

8. We carefully considered the rival contentions of the parties.
The firm M/s B.M. Motors was constituted on 26.6.1973 with four
partners and the said firm was running the retail outlet from
12.8.1975 onwards. It is also admitted that all the four partners
entered into subsequent agreement dated 3.5.1984 and as per the terms
and conditions of the said agreement partner nos. 1 and 2 namely
respondent nos.2 and 3 herein would receive 100 litres of petrol per
month or its value thereof. They further agreed that they will have
neither right in the retail outlet nor claim right in the assets or
liabilities of the firm and partner nos. 3 and 4 would run the retail
outlet in the name of the firm. A reading of the agreement dated
3.5.1984 clearly reveals that respondent nos. 2 and 3 herein have
virtually retired from the partnership and their entitlement was only
to supply of 100 litres of petrol per month from the said date. In
other words it cannot be said that the original partnership deed
continued thereafter. It is also relevant to point out that partner
nos. 3 and 4 were recognized as partners of the reconstituted firm
from that date. The agreement dated 3.5.1984 was also acted upon and
it is not in dispute that 100 litres of petrol per month was supplied
to respondent nos. 2 and 3 herein till June 1993.
9. Thereafter the firm instituted a suit being Civil Suit No.368 of
1995 against Respondent nos. 2 and 3 herein seeking for decree of
permanent injunction to restrain them from interfering in the
management and working of the plaintiffs retail outlet and the suit was
decree ex-parte on 14.1.2004. Though respondent nos. 2 and 3 herein
have claimed that they have filed an application to set aside the ex-
parte decree and the same is still pending and the decree is in force.
In other words the retail outlet in the name of the firm continue to
be run by partner nos. 3 and 4 only for nearly three decades. In
such circumstances the agreement dated 3.5.1984 is in effect the
retirement deed executed by respondent nos. 2 and 3 herein from the
firm B.M. Motors and it has to be treated as No Objection Certificate
in so far as they are concerned.
10. Respondent No.1 herein in its counter affidavit dated 31.01.14
have stated that in compliance of the direction of the High Court in
the impugned judgment, it had sent the bank draft/pay order dated
10.6.2013 for a sum of Rs.8,64,650/- issued by Canara Bank Kannauj
Branch to respondent nos. 2 and 3 herein towards the value of 100
litres of petrol per month for the period from June 1993 to June 2013.
Respondent Nos. 2 and 3 in their letter dated 28.6.2013 shown as
Annexure CA-2 to the counter affidavit of respondent no.1 have
acknowledged the receipt of the said pay order and have stated that
they have kept the said pay order as security and will not encash it
till the final decision is taken by the Corporation in respect of
reconstitution of the firm. It appears that the said pay order has not
been encashed and had expired. Be that as it may the order passed by
the High Court is, in our opinion, just and equitable inasmuch as,
while it had protected the interests of the retiring partners-
respondents 2 and 3, it had ensured that they do not frustrate either
the agreement by which they had surrendered their rights in the profit
and losses of the partnership or interfere with the smooth running of
the business by the continuing partners, in breach of the decree passed
in their favour. The arrangement arrived at between the partners may
not have been disclosed to the petitioner corporation but such non-
disclosure should not be allowed to result in termination of the agency
especially when one of the parties is acting unreasonably or
armtwisting the other party, to extract an extra pound of flesh from
it. The petitioner-corporation would in such a case be expected as a
public sector entity, to act fairly and objectively to prevent one
party taking undeserved advantage over the other on technical or
procedural grounds. There is no gain saying that while considering
reconstitution of the partnership the petitioner-corporation shall be
free to stipulate conditions that would protect its business interest,
goodwill and reputation among its consumers.
11. Since the Bank draft received by respondents 2 and 3 has not
been encashed we direct that the first respondent firm shall deposit a
sum of Rs.8,64,650/- with the Registrar of the High Court of Allahabad,
to be released in favour of respondent Nos. 2 and 3 herein, upon
surrender of the bank draft/pay order dated 10.6.2013 received by them
from respondent No.1. The needful shall be done within a period of one
month from the date of judgment. Upon the deposit of the amount as
aforesaid, the proposal for reconstitution of the 1st respondent-firm
submitted to the appellant-corporation, shall be considered for
acceptance, treating agreement dated 3.5.1984 entered into between the
original partners as a “No Objection Certificate” by respondent Nos. 2
and 3 to such reconstitution. The appeal is disposed of
accordingly. No costs.
………………………….J.
(T.S. Thakur)
……………………………J.
(C. Nagappan)
New Delhi;
April 17, 2014

 

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