Retirement of one partner in a partnership firm of two amounts to dissolution of the firm: Supreme Court of India

WHAT WAS THE CASE ABOUT?  

In the case of Guru Nanak Industries vs Amar Singh the supreme court bench of Justice NV Ramana, Sanjiv Khanna and Krishna Murari held that when there are only two partners in a partnership firm and one of them agrees to retire then the retirement amounts to the dissolution of the firm.

FACTS OF THE CASE    

1. Swaran Singh and Amar Singh constituted a partnership firm in the business of manufacture and sale of print machinery for paper, polythene etc.
2. Initially the profits and losses were to be divided in the ratio of 69:31 however later it was altered to 60:40.
3. Later Swaran Singh filed a suit against Amar Singh claiming that the latter had retired from partnership and had voluntarily accepted payment of his share capital and also had been advanced loan from funds of the partnership.
4.  Amar Singh contended that he had never resigned; rather some disputes arose between him and Swaran Singh when he had written a letter to the bankers to stop operation of the bank account. He also contended that as a partner he had written a letter which was signed by Swaran Singh, stating that the dispute between the partners had been settled and bank may allow operation of the account.
5. Thereafter the trail court dismissed the suit, so the appeal was filed.

COURT HELD THAT: 

There were only two partners in the firm and one agreed to retire so the retirement amounts to dissolution also there is overwhelming evidence on record that Amar Singh had not resigned as a partner.