The firm was
granted an over-draft facility for Rs. 40,000/- in 1982 and a medium term loan
of Rs. 50.000/- in 1983. The necessary security documents were furnished to the
Bank (The State Bank of Travancore, Cochin Branch). The defendants executed
revival letters in respect of the over draft facility and medium term loan
account facility. The defendants executed the revival letter for the over-draft
facility in 1985 and in 1986 the medium term loan was revived. He retired from
the partnership in 1983. Copy of the retirement deed was duly handed over by
the defendant to the plaintiff’s then Branch Manager John, who had duly noted
this fact in the relevant books. The entire liability of the firth defendant
was taken over and the business carried on by defendants on the basis of the
term and conditions of the retirement deed. The plaintiff also agreed to the
same and further agreed not to connect the defendant with any of the affairs of
another defendant. It is also stated that the above facts will be clear from
the subsequent conduct to the plaintiff and also from the fact that in none of
the documents executed subsequent to 1983, the defendant was either asked by
the plaintiff to be a party or made a party. The defendant denied that he had
executed any revival letter. He also denied that lawyer’s notice was send to
him. Since the amount was not paid, the suit was filed by the plaintiff for the
recovery of a sum of Rs. 90, 182.05 alleged to be due from the defendants to
the plaintiff with interest and costs.
The court raised relevant issues. One of the
issues is whether the defendant stands discharged from the plaint liability by
reason of his retirement from the partnership? The court found this issue
against the defendant. The suit was decreed and the plaintiff was allowed to realize
the entire debt from other defendants and by sale of the plaint schedule
property. If the plaintiff is unable to realize the entire debt from other
defendants and by sale of the property, the plaintiff can precede against other
defendants. As stated, this appeal is filed by the defendant, he should be
deemed to be discharged from the liability of the Firm by the conduct of the
Bank as well as other partners. It is true that normally a retiring partner is
made liable for the debts which have been incurred by the firm while he was a partner, But under
Section 32 of the Partnership Act, there are certain instances where a partner
may be discharged from the liability even with regard to the debts which were
incurred by the Firm at the time when he was a partner, under Section 32(2) of
the Act, discharge may be made by the agreement by the restring partner to any
third party and the partners of the re-constituted Firm and such agreement may
be implied by a course of dealing between such third party and constituted Firm,
after he had knowledge of the retirement.
The decree of the Court of Kerala making
the defendant liable is debt aside and the appeal is allowed. Defendant has
been discharged from plaint liability to the Bank. No order as to costs.