Partnership – Rights of outgoing partner – Firm continued its business – Retired partner cannot claim share in subsequent profits made by firm: Partnership Act, 1932 section 37.

The case of the plaintiff is that the first defendant is the partnership firm comprising of four partners i.e. the plaintiff and defendant nos 2 to 4 by virtue of partnership deed dated 03-04-1992. The partnership firm was engaged in advertising business and allied matters. Each of the partner has contributed a sum of Rs. 10,000/- towards share capital and the partnership was one at will. While so, the plaintiff expressed her willingness to retire from the partnership firm and sent letter on 17-01-1994. The said letter was acknowledged by the defendants 2 to 4 by letter dated 24-01-1994, confirming that the plaintiff was deemed to have retired from the partnership firm with effect from 18-01-1994. Though the plaintiff retired from the partnership firm, the existing partners reconstituted the deed of partnership and carried on their business. It was contended by the plaintiff that the partnership firm did not settle her accounts on retirement despite several demands and that she demanded to settle all her share in respect of transactions from 03-04-1992 to 18-01-1994, till the date of settlement of her dues. The plaintiff also had given break-up of the amounts that she is entitled to from the partnership firm

The suit was contested by the defendants who are the other partners on the ground that the plaintiff was acting detrimental to the interest of the partnership firm. It was further contended that the suit was not maintainable as the plaintiff only retired voluntarily from the partnership firm and the partnership firm was not dissolved as alleged by her.

The Hon’ble Court observed that u/s. 37 of the Partnership Act, the court can grant relief to outgoing partner who has not been made a final settlement and the partnership is carrying out of the business with the surviving partners and the court has jurisdiction to grant such relief based on the findings of the fact. In the instant case plaintiff partner has categorically stated that she voluntarily resigned from the firm. Therefore, she cannot be expected to claim profits of the partnership firm subsequent to her exit as there was no contribution from her side. Share of the partner would be his/her proportion of the partnership assets after they have been all realised and converted into money, all the partnership debts and liabilities have been paid and discharged. Liability to pay arises when the partnership firm is dissolved and the legal existence is taken away. After voluntary resignation of partner from firm even presuming that immovable assets purchased from the plaintiffs participation in the firms as a partner and admittedly the partnership firm was continuing the business even after the exit of the plaintiff, the retired partner can only demand her share, be it an asset or liability based on the value on the date of her exit and she cannot claim profits of the firm.