INDEMNITY

1) Birmingham & Dist Land Co v London & NW Railway Company

Rly interfering w the land belonging to the Land Co. being leased out by the lessor. Q as to
whether there was an implied indemnity by way of nature of transaction- no. If express or
implied, the seller will compensate the buyer for any third party. The land sold to the Rly
was not encumbered, the use of the land by the Rly would merely interfere with the Land Co.
Thus, they also failed to argue misrep or mistake(breach).
2) Gray v Lewis; Parker v Lewis
Conspiracy/ Sham. Shareholder gets decree against plaintiff bank and defendant director for
mismanagement of company and malafide holding of accounts- contention of indemnifier
decree can be appealed against liability isn’t absolute- failed- he was liable to pay. Where A
contracts to indemnify B, and a judgement decree is passed against them, and he pays the
sum, he now cannot content that the judgement was erroneous.
3) Dugdale v. Lovering
P in charge of trucks, claimed by D and also K.P. Colliery. P asked for indemnity if given to D
who said send asap. Even if there is no pre-existing relationship, if there is an implied
indemnity, one must indemnify the other- stand-alone contract, on its own merits. When an
act is done under the express directions of the defendant, which occasions injury to a 3rd
party, he shall be bound to indemnify the plaintiff.
4) Gajanan Moreshwar Parelkar v. Moreshwar Madan Mantri
124-125 is both amending and consolidating- personal covenant may reserve his right against
security- liability became absolute. P transferred the plot to the defendant at the request of D
promised who promised pay off the mortgage-P had mortgaged the land to building supplier
for D who wanted to erect building on land. Not transfer of lease yet, and no ACTUAL loss
yet. Equity invoked- If it is inequitable to make a person wait for actual loss, he can be
indemnified if loss is absolute/imminent/certain.
5) Smith and Another v South Wales Switchgear Co. Ltd.
Employee of supplier (Switchgear) is injured due to negligence caused by purchaser (Motor
company). Switchgear paid employee and wants indemnification from Motor. Indemnity due
to a person’s own negligence unless clearly expressed or implied from the contract.
Indemnity clause must be construed narrowly (contra preferentem). Test: (1) express
exemption (2) if implied, whether the clause covers negligence (3) if yes, whether the damage
may be based on some other ground. Indemnity clause includes acts of Switchgear and not the
supplier, therefore no indemnity.
6) Kishan Lal and Satya Narain v Bhanwar Lal
Forward contract of bullion was collateral to contract of indemnity between agent and
principal- doctrine of severability. Contract between the principal and the agent regarding
the right to indemnity is collateral to the contract of sale and purchase and is enforceable
unless the main contract is illegal. Wagering contracts were illegal in Marwar but the contracts
were made in Indore, so not hit by this notification. Payment & indemnity were valid.
7) Lala Shanti Swarup v Munshi Singh & Ors
P sold half the land which was mortgaged to the D, with a condition that they would pay off
the encumbrance- D defaulted-limitation starts from actual damnification from the date of
executing self-liquidating mortgage- implied contract of indemnity when encumbered
property is sold.
8) Nallappa Reddi v Vridhachala Reddi
P(minor) had asked D to manage his properties and pay interest off them-D failed. P then had
to pay and sought to recover his loss. Where there is a contract to indemnify, and a decree is
passed against the person entitled to indemnity, the correctness of the decree cannot be
impeached by the person bound to indemnify.
9) Ramaswami Chettiar v Muthukrishna Iyer
Minor’s father sells off part of the property w an indemnity bond incase minor sues upon
attaining majority. Buyer sells property to plaintiff & assigns the indemnity bond as well.
Minor sues, acquires his share of the property, but due to some debts, his creditors auction the
property off. The plaintiff buys back the property previously owned by him. Indemnity bond
is only enforceable if the vendee is dispossessed of his properties. Since plaintiff was never
de-possessed, he only gets the auction amount back, and did not get indemnified.
10) Guild v Conrad
Statute of frauds section4- guarantee required to be in writing however in this case it was a
contract of indemnity and not guarantee- plaintiff accepted certain bills of exchange for a firm
in which the defendant’s son was a partner- primary liability- indemnity- no tripartite contract.
Not a promise to answer a debt, but an original contract to indemnify.
11) Holme v Brunskill
Guaranteed that the pastures and sheep would be redelivered in good condition-the tenant gave
up some part of the land in consideration for reduction of rent. Sheep returned in reduced and
deteriorated number. Any alteration to an agreement must be made only with the consent of
the surety. If he has not consented, he himself must be sole judge as to whether he continues
to remain liable notwithstanding the alteration. Since surety was not asked at the tie of
alteration, he is discharged from liability. [Dissent by Brett- alteration was immaterial]
12) Lakeman v Mountstephen
D was employed to construct a sewer, sent notice to all to connect their drainage or else the
board would do it their cost P (board chairman) said ‘you go on and do the work, and I will see
you paid’. P then refuses to pay since their consent was not authorized. A contract of
suretyship must have a principal debtor (who may be constituted ex post facto). Until
then, it is not a contract of suretyship. P made a personal and primary contract to indemnify
and hence must pay. Since board was unaware, it does not qualify as a principal debtor.
13) Ramchandra Loyalka v Shapurji Bhownagree [REVISE]
P was the sub-broker of D(broker)- dispute wrt amounts allocated. If clients don’t pay for
service, then P will step-in for them. Clients didn’t ask P to pay for them, they only needed a
broker. A brokerage contract existed only between the broker and client and did not include
the sub-broker. Individual contracts b/w the PD and the creditor and the creditor and the
surety are not sufficient for a contract of guarantee. There MUST be 3rd contract w the PD
reassuring repayment to the surety. This is an indemnity, and not a guarantee.
14) Hobson v Bass
Hobson (wine and beer merchant) doing business, whose creditor supplies goods. 2 guarantors-
both limited to 250£. Hobson goes bankrupt. If a person guarantees a limited portion of a
debt, all the authorities show that if he pays that portion, he has in respect of all the rights
of a creditor. Plaintiffs contracted to be a surety up to 250£, and therefore had all the rights of
a surety. Surety may enter into an obligation to be liable to a limited amount for the ultimate
balance remaining after all the moneys obtained from other sources have been applied in
reduction of the debt, but a guarantee of that nature must be specifically stated & cannot be
ascertained later. Thus , plaintiffs are entitled to their share.
15) ALSPP Subramaniam Chettiar v Monaim Narayanaswami Gounder
Madras agriculturalist relief act- debt scaled down- surety liable to pay scaled down amount.
The liability of the surety is co-extensive with that of the PD, unless otherwise provided in
the contract. Surety’s liability is only dependent upon that of the PD. Otherwise, would defeat
the purpose of the provision, since surety would want to recover the amount from the PD.
16) State of Orissa v United India Insurance Co. Ltd
Indemnity wider than 124- marine insurance policy to cover non-supply of bulldozers can also
be indemnity if envisaged by parties- loss is not caused by indemnifier or third party in this
case-yet is a contract of indemnity- branch manager exceeded his authority in authorizing the
policy-insurance company was held not liable by operation of 237. Termination w notice does
not amount to breach (unless malafide) since parties are permitted to terminate acc to the
contract. Liability had not arisen, since the insure co. terminated the contract before the goods
were even loaded in the ship.
17) State Trading Corporation of India v UOI
Foreign buyers haven’t sued STC yet- contract was frustrated under section 56 banned export
of silver- LOSS ISNT CAUSED YET- Liability is not absolute or imminent.
18) Amrit Lal Goverdhan Lalan v State Bank of Travancore
Creditor allowed to withdraw securities as long as equivalent amounts of money were
deposited. Some extra time was given once to deposit equivalent amount. The surety is not
discharged since this is wrt security and not the actual debt. Bank had lost substantial amount
of collaterals, surety is liable to the reduced extent. [Ref class notes]
19) Anand Singh v Collector of Bijnor [DID NOT UNDERSTAND]
Failure of the creditor to bring the suit within the limitation period against the PD is not an
omission on the creditor’s part. It was not necessary for the creditors to sue the PD, because
at the time of suit against the surety the PD had already become insolvent. Although debt is
time-barred, surety is not discharged under S.134. PD’s liability to repay is limited to the
amount the surety was bound to pay at the date of the suit against the surety at the expiry of the
period of limitation. (agreement b/w surety and creditor w/o PD)
20) Annadana Jadaya Goundar v Konammal
Inter-se compromise b/w the judgement debtor and creditor. If in a post-decretal stage, there
is an inter-se agreement between the 2, without the consent of the surety, the surety is
discharged.
21) Bank of Bihar v Damodar Prasad
Creditor can claim amount due from the surety even when all the remedies against the PD
have not been exhausted. The surety’s liability is immediate and co-extensive and cannot be
deferred until the creditor exhausts all remedies against PD. Surety cannot dictate terms of
payment to creditor.
22) Barclay’s Bank v O’Brien
Mrs O’Brien was signed the legal charge w no explanation of the effect of the documents and
now seeks undue influence grounds. If there has been undue influence, misrep or some other
legal wrong, unless the creditor has taken reasonable steps to satisfy himself that the surety
entered into the obligation freely and with complete knowledge of facts, the creditor will be
unable to enforce the surety obligation because he will be fixed with constructive notice of the
surety’s right to set aside the transaction. Presumed undue influence- fiduciary relationships,
and a case of general trust.
23) Durga Priya Chowdhury v Durga Pada Roy
Surety for D1 for his period of service under P as a gomasta. S.130- death of a surety acts as a
revocation of a continuing guarantee. However, contract provided otherwise- “our legal heirs
shall be bound by the terms.” Surety bound his heirs who would now be bound.
24) Greer v Kettle
Surety agreed to guarantee a debt that was supposed to be secured by shares- sham. Creditor
claims that the surety is estopped by his word. Estoppel only applies wrt unambiguous
statements, does not apply when deed is fraudulent or illegal (mistake, misrep, etc.)
25) Gopala Maller v Vallithokuvayil Velloth Krishnan
2 people were jointly and severally indebted under a contract and had renewed their original
liability with a fresh promissory note. S.132- mere knowledge about the inter-se arrangement
of liability between 2 co-debtors will not affect their liability towards the creditor under the
contract.
26) Smith v Wood
Creditor had released 1 of the 10 promisors, increasing individual liability of all. Surety ought
to be consulted about any kind of alteration unless unsubstantial. Since the alteration was
material, and the sureties (other depositors) did not consent, they stand discharged.
27) M.S. Anirudhan v Thomco’s Bank
App had agreed to stand as surety for Respondent Bank- max amount 25k. Bank refused since
it didn’t want to give sum larger than 20k. Debtor made the alteration to the amount. Appellant
pleaded that the doc was altered w/o his consent and was discharged from his liability.
However, the debtor was merely acting on behalf of the surety via a principal-agent relationship
(Kapoor) and there was no material alteration (Hidyatullah). Dissent (Sarkar)- No consensus
ad idem due to the material alteration, therefore NO CONTRACT.
28) Raja Bahadur Dhanraj Girji v Raja Parthasarathy
Whether liability of the surety is discharged by a compromise decree depends on the terms
of the bond itself. If the surety executed the bond knowing that he might be liable under the
compromise decree, he is not discharged. Impossible to prove that a compromise decree was
within the contemplation of the sureties, hence they are discharged.
29) Ram Narain v Lt. Col. Hari Singh and Anr.
No consideration passed from the plaintiff at the time of execution of the agreement/on that
day. Any promise for the benefit of the PD must be contemporaneous to the surety’s contract
in order to constitute consideration. Past consideration is invalid- done must not be given
unnatural meaning under 127- applying illustration directly. No consideration- void.
30) Sripatrao Sadashiv Upre v Shankarrao Sarnaik
S.145 does not debar a surety from making a claim against PD in cases where he has not made
the payment under the guarantee but has become liable only in praesenti to do so. A surety is
entitled to come into equity to compel the PD to pay what is due from him, to the intent that
the surety may be relieved. Surety had fully discharged his own liability, and now he must be
indemnified by the PD.
31) State Bank of Suarashtra v Chitranjan Rangnath Raja
PD pledged 5k tins of groundnut oil with the creditor (Bank) on personal guarantee of surety.
If the creditor loses (without the consent of the surety) parts of the other security the surety
would be discharged to the extent of the value of the security. Although contractual clause
enabled the Bank to vary its credit, it only pertained to a volitional act- which this was not,
since this was on account of negligence.
32) State of MP v Kaluram
Contract stated that a contractor could be prevented from removing forest produce if he were
to default on payment. Eventual remedy against the PD become impaired cos the state allowed
him to take the felled trees when he defaulted in payments as opposed to selling them- state
parted with their charge over goods- hence surety is discharged- 14. Security includes all rights
which the creditor has against the property at the date of the contract. Surety is entitled to
the benefit of all these rights upon payment to the surety. Since the Forest Officers allowed
the security to be lost, the surety is discharged.
33) Suresh Narain Sinha v Akhauri Balbhadra Prasad
If CoA has arisen within the Court, even if one party is a foreign party, the court has the
jurisdiction to give a verdict.
34) The Eastern Bank ltd v Parts Services Of India ltd
Limited liability for a period of one year- only for transactions that occur within that time
period. Liability of a surety cannot be extended unless the words of the contract are
unequivocally clear. Bill purchase and import
demand loan related to a time beyond the period of guarantee, surety is not liable.
35) Avtar Singh v Union of India
How to determine the fidelity of an employee: 1) suppression or false information of
involvement in a criminal case – if trivial, the employer could choose to ignore it, and if not,
the employer could cancel his candidature. 2) truthful declaration of a concluded criminal case-
employer has the right to consider the appointment and is not compelled to appoint him. 3) if
case is pending- employed can decide after considering the seriousness of the crime.
36) Seth Pratapsing Moholalbhai and anr v Keshavlal Harilal Setalwad and anr
1.25 lakhs for four properties- in reality 1 lakh for three properties substantial variation in the
nature of the contract, even if on the face of it it isn’t prejudicial surety is the best judge to
determine it. Guarantor should be discharged since OD never consented to the alteration,
lack of consensus ad idem.
37) Mahanth Singh v U Ba Yi
Old trustees of the firm were substituted by the new ones- could not bring a fresh suit joining
the new trustees of the pagoda thus his remedy against the original PD was extinguished due
to procedural requirements failure to comply-however surety still liable since the debt has not
been released or discharged. It merely prevents the creditor from suing the PD, and mere
forbearance to sue to PD does not discharge the surety.
38) Union of India v. Narayanasetti Jugdeswararao [DIDN’T UNDERSTAND]
Creditor failed to inform the surety about the availability of the railway receipt. Liability of
surety is co-extensive with that of PD until the point when the goods arrive at Midnapur station
However, since the railway staff knew that the original RR was with somebody else, and
despite that delivered the goods on the strength of the indemnity bond, the objective of the
bond gets frustrated and the delivery of the goods becomes a breach of the main purpose of the
bond (fraudulent delivery by pretending the RR was lost). Surety is not liable.
39) Aziz Ahmad v Sher Ali
Whether a surety is discharged when the creditor allows the execution of his decree against the
PD to be barred by limitation. Mere forbearance on the part of the creditor to sue the PD or
to enforce any other remedy against him does not, in the absence of a provision in the
guarantee to the contrary, discharge the surety. Failure of the creditor to pursue legal
remedies against the PD does not discharge surety.
40) Charan Singh v M/s Security Finance
Change in nature of surety relationship after decree is obtained against PD- both of them are
liable in the character of co-judgement debtors- There can be no inter-se compromise between
the PD and creditor that results in the discharge of the surety. S.133-139 apply only where
no decree has been passed- no question of variation post decree. Surety is thus not discharged.
BANK GUARANTEE
41) Hindustan Construction v State of Bihar
Only chief engineer could invoke it-only for failure to comply with certain provisions of
clause 9 or for misappropriation. This bank guarantee is not unconditional or unequivocal.
Invocation was wholly wrong, Bank not obliged to pay amount, bank guarantee not invoked.
42) Margaret Lalita Samuel v Indo Commercial Bank ltd
H&W said they would be liable for the ultimate balance, after all the other debts are offset.
Guarantor’s liability only begins when the ultimate balance is determined. Limitation starts
running when final amount is ascertained- can also use for agent with interest- bank was
entitled to recover all debts due from dg of food supplies- account was a live one. Only after
offsetting all the debts, and using the collaterals, is the amount the surety is liable to pay
determined.
43) Syndicate Bank v Channaveerappa Beleri & Ors
Directors agree dot continually guarantee “on demand of the creditor”. Limitation thus begins
only when the creditor asks for it. Demand has to be made before the debt becomes time
barred against PD.
44) Moschi v Lep Air S vices
Rightful rescission of contract after principal debtor makes a repudiatory breach of it by failure
to pay installments of a loan does not amount to material variation of contract- only primary
obligations are discharged secondary obligations still remain. Guarantee of performance, you
sue for damages- when PD breaches contract it means G breached his contract of guarantee
also- secondary obligations- unlike guarantee of default(where he just pays the instalments)
GoP he is liable for damages of breach of contract of PD and whatever loss arose to the C as a
result of this. G had limited his liability to 40k.
45) Poysha Oxygen Pvt Ltd; Goal Mg gases Pvt Ltd v Ashwini Suri
Consideration in the form of pre-existing liability is also valid if acknowledged by the surety.
Past consideration qualifies as sufficient consideration since the guarantors were aware of
acknowledgement of transaction b/s petitioners and borssers. The deeds of personal guarantee
referred to the IDC agreement and were executed simultaneously to the ICD agreement.
46) United Commercial Bank v Madan Mohan Dide [Check]
Surety gave up his rights under the sections on guarantee and agreed to be joint debtors- inter
se arrangement doesn’t matter directly apply section 132.

47) B.R. Thadani v Oriental Bank of Commerce

Case for joinder of surety as party to suit as he is interested, and his liability is co-extensive
with that of PD-PD went into liquidation by operation of law- G still liable. When a case is
filed by a creditor against the debtor, the guarantor can implead to be included in the
litigation since he is a necessary party to the contract. Applicant should be given an
opportunity to be heard in the matter where he is likely to be adversely affected if the order of
the liquidator is set aside.
48) State Bank of India v Indexport
No obligation to enforce mortgage remedy before invoking guarantee
49) Hukumchand Insurance Company v Bank of Baroda
Surety can’t dictate terms to creditor asking him to pursue other remedies- mortgage security
is a different contract from the guarantee contract- cannot ask him to enforce that.
50) Bank of Bihar v Damodar Prasad
Neither the PD nor the surety had discharged the liability despite demands. The creditor is not
bound to exhaust his remedy against the PD before suing the surety. The very object of a
guarantee is defeated if the creditor is asked to postpone his remedies against the surety.
Security will become useless if rights against the surety can be so easily cut down.
51) Venkata Kristnayya v Karnedan Kothari
Application of S132 under a promissory note. It is not open to 2 co-debtors to prove that
between them one is surety and that in consequence by the conduct of the plaintiff towards
defendant 1, his liability is discharged. (Ref S132, Illustration a)
52) Bonar v William Macdonald
Although A had guaranteed to make good the loss suffered by the bank, this particular loss was
to B’s increased liability that was not communicated to A. Thus he cannot be called on to make
good the loss though it fell within the terms of the original agreement as the fresh arrangement
was the substitution of a new agreement for the former one, and A is thus discharged. A
variance in the agreement was made without the knowledge or consent of the surety, which
discharges the surety.
53) Rees v Berrington [LANDMARK CASE- read case highlights]
Extension of time granted by the creditor to PD without the consent of the surety results in
the discharge of the surety.
54) Hamilton v Watson
A current account between the debtor and the bank. The surety steps in but is unaware of the
past transactions for which debts were due. However, it is not necessary for the creditor to
convey all information regarding the account unless questions are particularly put forward.
There is also no proof of active concealment of information in this case. S.141 and 142 require
there to be active concealment. Mere silence does not serve as a valid ground to discharge
the surety.

BANK GUARANTEE
55) Bolivinter Oil S.A. v Chase Manhattan Bank
The plaintiffs agreed to transport crude oil for the 3rd defendant, along with a bank guarantee.
1st def opened an irrevocable letter of credit. Disputes over performance of contract arose, and
injunctions were filed. Whether injunction should be granted to prevent payment by a bank
under a guarantee? If a person is allowed to derogate from a bank’s personal and irrevocable
undertaking, by obtaining an injunction restraining the bank from honouring that
undertaking, he will be undermining the bank’s greatest asset- its reputation for financial
and contractual probity. If the challenge is not substantial, prima facie, no injunction should
be granted and the bank should be left free to honour its contractual obligation, although
restrictions may be well imposed upon the freedom of the beneficiary to deal with the money
after he has received it. The wholly exceptional case where an injunction may be granted is
where it is proved that the bank knows that any demand for payment already made/ which may
be made thereafter will clearly be fraudulent. But the evidence must be clear both as to fact of
the fraud and to the bank’s knowledge. This case does not constitute irretrievable injustice to
issue injunction(any demand for payment will be fraudlent)

56) Union of India v IndusInd [DIDN’T UNDERSTAND]

Textile commissioner made it condition precedent to furnish bank guarantee for issuance of
tenders- Limits the liability to 6 months- creditor seeks to enforce the guarantee after period
specified- for debt that accrued outside that period- whether unamended section 28 would
apply- nope you can extinguish rights, it doesn’t seek to curtail the limitation period put forth
by the law- does not reduce the time for enforcement of remedy- amendment change in
substantive provisions of law not retrospective. 3 essential ingredients of S.28- (1) party
should be restricted absolutely from enforcing his rights (2) Such absolute restriction should
be to approach by way of usual lsegal proceeding (3) Such restriction may related to limiting
of time within which the party may enforce his rights.
Neither clause purports to limit the time within which rights are to be enforced. The clause
restrictions envisage the need for the appellant to lodge a claim based on the guarantee and that
if this was done, a suit to invoke rights under the guarantee could be filed within the limitation
period. It can almost be regarded a condition precedent for filing of the suit that the appellant
should have exercised the right within the period agreed to between the parties.
57) ITEK Corp v First National Bank of Boston
Contractor entered into an agreement with the Iran govt seeking to terminate his liability on
standby letters of credit issued by an American bank in favour of Iranian bank as part of the
contract. Conditions in Iran had changed radically since time of execution of contract, and
access to Iranian courts were futile. Since the plaintiff had demonstrated that it had no
adequate remedy and that the allegations of irreparable harm were genuine and immediate,
relief was granted.
58) Mahatma Gandhi Sahakra v National Heavy Engineering Co-op
BG represents an independent contract between the bank and the beneficiary. All that is
relevant are the terms incorporated in the BG. On an analysis of the BG, it was held to be an
unconditional one. The person in whose favour the BG is furnished cannot be prevented by
an injunction from enforcing the guarantee except on the ground of fraud and irretrievable
injury (not proved in this case). Thus, the purchaser is free to invoke the BG, and realise the
guaranteed sum from the guarantor.
59) UP State Sugar Corp v Sumac International Ltd
When in the course of commercial dealings, an unconditional BG has been granted, the
beneficiary is entitled to realise it irrespective of any pending disputes. The bank is bound to
honour it as per its terms irrespective of any dispute raised by the customer. The very purpose
of giving a BG would otherwise be defeated. 2 exceptions to invocation of a BG: (1 )Fraud
that would vitiate the very foundation of the BG (2) irretrievable harm/injustice resulting out
of the encashment of the BG. Existence of a dispute between the parties is not a ground for
issuing an injunction to restrain the enforcement of a BG.
 PARTNERSHIP
60) Commissioner of Income Tax, WB v Juggilal Kamalapat
A mill was run by 3 persons (who created a trust), and a partnership was formed between the
trust and a 3rd person. They applied for registration under the Income Tax Act. They had given
executed deed of relinquishment of assets of the old firm to the new firm- and had put it in
favour of the partnership (trust). Deed of relinquishment does not require registration since
the moment the property coms into the partnership, it loses its character and becomes a
personal property. Thus, this inter-se arrangement does not require any formality.
61) Abbashbhai Golwala v RG Shah
Most of the partners of the partnership wanted a dissolution but 1 wanted continuation. S.40
states that for the dissolution by agreement, all the partners must consent. In this case, there
was no consensus ad idem, among the partners. The partnership deed used the phrase “any
remaining partners” and the Court held it to include ‘ONE remaining partner’. Thus, a contract
to the contrary existed, and the partnership continues.
62) Rajkishore Guru Prasad Khatri v Jwala Prasad
Dissolution of firm allegations of fraud, misconduct, etc. Partnership agreement with an
arbitration clause. When they file a suit for dissolution can the Court refuse to hear it based on
the arbitration clause in the contract? Invoking S.44-Involved exercise of judicial discretion-
more conveniently left in the hands of the court.
63) Mangilal v Bhanwarlal
Transferee was demanding accounts and his share, but he failed to prove dissolution, he only
proved mere stoppage of business. Mere lack of business does not prove dissolution.
Death/Retirement/insolvency/winding up of business/public notice are needed.
64) Commissioner of Income Tax, MP v Seth Govindram Sugar Mills [SETTLES Q OF
RETIRING PARTNER AND 1 REMAINING PARTNER]
A partnership existed between 2 people, and the partnership agreement stated that the death of
any one of them shall not dissolve the partnership, and the legal heir of the deceased shall take
his place. While this can be done normally, it cannot be done in a partnership of just 2 people.
Irrespective of whether there is a contract to the contrary, if there is a partnership of 2 people,
the death of one person automatically results in the dissolution of the firm. Additionally,
with the death of one, the deceased cannot be simply be replaced by his legal heir. There is a
break in the continuity of the partnership. Also, there was no proof of a new partnership being
formed when the legal heir (widow) joined the partnership.
65) Ms Glorious Plastics v Laghate Enterprises
4th respondent had retired and had published info of it. In his later dealings, he neither
represented that he was still a partner, nor had the 3rd person had any knowledge of the fact that
he had been a partner. They had sued respondent since the actual firm was not paying and were
trying to get him to pay instead. They failed, since in this case there was no holding out, and
therefore no estoppel.
66) Mohansundaram & Ors v Neelambal & Ors
Partner died, dissolution, no account settlement, other partner started new business but with no
malafide intention (same trade). He had overdrawn beyond his share from the accounts of the
previous partnership but did not use that money/share to carry out the new business. He used
his own personal investment for the 2nd business. If nothing of the share of the old business
is taken, it does not amount to unjust enrichment. Cannot apply S.37.
67) Valji Shamji Chheda v BHuderbhai Bajidas Patel [Same as Raptakos]
1 partner fraudulently gives away some unregistered firm’s property to a 3rd party and the firm
is suing for this. They say that they do not rely on any registration of firm and are not trying to
enforce any contractual rights- they’re simply claiming statutory rights by asserting
themselves as owners and providing documents to prove historical facts of having bought it.
They succeeded. Rights arising out of legislation (TOPA) and common law are not barred.
68) Rajinder Singh v Kartar Singh
Unregistered partnership of 2 people. 1 partner dies, and his legal heirs want arbitration for
dissolution and accounts. Lack of registration should not affect the ability to sue for
dissolution and accounts. Thus, they are allowed to go for dissolution.
69) Ganesh Chandra Mukherji v Gopal Chandra Hazra
Partnership at will-Allegation that the expulsion of a partner is malafide. Courts find that
there is no malafide intention. A partner may not be expelled from a firm by any majority of
partners, save in the exercise of good faith of powers conferred. There was no proof of
fraud or victimization. Hence expulsion was valid.
70) Paulraj v TM Mathalal Nadar Sons
Plaintiff is the supplier of sugar, member of the firm. One other partner of the firm left and
opened up a sugar shop ban opposite the original firm. Now the plaintiff was supplying sugar
to both shops. He claims that he was unaware about the retirement of the 1st partner, and the
reconstitution of the original firm. S.32(3) will not apply since while there was no public
notice, individual notice had been provided to the plaintiff (supplier). Thus, the argument of
estoppel cannot be applicable.
71) Ramniklal Mohanlal Chawda v Sharad Vasant Kotak
7 partners of a registered firm, 1 partner dies ad is replaced by an unregistered partner. Another
registered partner dies and is replaced similarly. A different deed was singed after each change,
but the registration was not updated. Thus, when they finally field for dissolution, it was an
entirely differently registered partnership. However, the death of a partner does not result in
the dissolution of the firm. Registration of a firm does not completely wipe out the firm. Right
until dissolution, the firm remains valid. Registration of a firm can only be cancelled by the
process of cancellation under the IPA. Lack of reconstitution does not dissolve the firm, but
it may result in a penalty of a fine.
72) Shreeram Finance Corp v Yasin Khan
Registered firm contracting for hire-purchase with a third party. Some new partners retire and
new incoming partners are not registered- no update of registration. 3rd party only paid one
installment and then breached and bounced. Then, the new partners told the Registrar to rectify
and update. It was held in the favour of the firm, but no relief was granted to the partners due
to the lack of registration.