R. Ayya Nadar Karthik vs P. Iya Nadar Charitable Trust And ... on 3 December, 2004 (rectification of trademark)

Intellectual Property Appellate Board

Equivalent citations: 2005 (31) PTC 105 IPAB
Bench: S Jagadeesan, R Singh
R. Ayya Nadar Karthik vs P. Iya Nadar Charitable Trust And Ors. on 3/12/2004

JUDGMENT

S. Jagadessan, Chairman

1. The petitioner filed these two petitions for rectification of the registered trade mark label 'CAMEL' bearing registration numbers 109120 and 439372 in class 34 in respect of safety matches and card board safety matches in the name of the first respondent. The case of the petitioner is that one P. Iya Nadar set up a match factory in the year 1945 under the name and style of South Indian Lucifer Match Works for the manufacture of safety matches. He conceived the brand name of 'CAMEL' which was registered in his favour on 4.4.1945 under the Trade Marks Act, 1940 as TM 109120. Originally being a proprietory concern, it was converted into a partnership firm in the year 1955 under a deed of partnership dated 15.12.1955 by which the said P. Iya Nadar had taken his daughters Rajathiammal and Banumathi Raja, respondents 6 and 7 herein as partners. After formation of the partnership firm, a request in form TM-24 was made on 24.6.1959 for effecting an amendment to the Register and the same was carried out. On 12.3.1962 the partnership firm was dissolved and a deed of dissolution was entered into on 4.7.1962 and thereby the South Indian Lucifer Match Works once again became a proprietory concern of the founder P. Iya Nadar. A request in form TM-24 was duly made and accepted. Thereafter, the registered trade marks had been periodically renewed from time to time. In the year 1973 once again the said Iya Nadar converted the business into a partnership and subsequently on 15.10.1974 the 10th respondent herein was readmitted to the benefits of the partnership alongwith respondents 11 to 13 and the petitioner. The petitioner and respondents 11 to 13 were all minors on the date of their induction to the benefit of the partnership firm. The request in form TM-24 was made on 24.5.1975 for including all the new partners of the firm and the same was duly carried out. Once again the partnership firm was dissolved under a dissolution deed dated 31.8.1980 and a deed of settlement dated 1.10.1980 was executed by the said Iya Nadar in favour of the first respondent trust. Again a due request was made in form TM-24 on 12.6.1981 and the same was accepted by the Trade Mark Registry on 2.4.1984. During the process the said Iya Nadar died on 27.12.1982.

2. The second trade mark No. 439372 had been directly applied for in the name of the Trust and the mark is to be treated as an associated trade mark with the earlier registered mark bearing No. 109120 in Part A of the Register. Subsequently the first respondent trust stopped the manufacturing and trading activity in its name and instead started licensing the mark to various other entities including companies owned by the petitioner's father and the petitioners apart from several third parties as well. The first respondent trust also resumed manufacturing and trading activity after passage of several years. The petitioner was a minor at the time when he was inducted for the benefit of the partnership firm as well as the time of dissolution of the partnership firm and the settlement in favour of the first respondent trust. He attained majority only on 5.1.1992. The petitioner was not aware of any of the business matters as he was not involved in the family business due to his concentration on his education. In the year 1995 he took over the management of another family business M/s Janaki Packaging Pvt. Ltd. which was in the business of tin printing and can manufacturing. Though he became a Director in some of his father's match factory units in the year 1996 he was not involved in the match industry. However, he came to know through his father that litigation is pending before the Madras High Court as well as District Court, Virudhunagar between his father and the first respondent trust. Rajapalayam Industries and Commercial Syndicate Ltd., of which the petitioner is also a Director, filed the petition for rectification of the subject mark and for expunging the same which was transferred to this Appellate Board and Numbered as TRA No. 43/2003/TM/CH. The petitioner on independent legal advice now has filed this petition for rectification for the removal of the first respondent trust's name on the ground that the first respondent trust's ownership was entered in the Register without notice to the other partners and consequently direct the reinstatement of the petitioner and respondents 2 to 13 as the co-owners of the registered mark 'CAMEL' on the following grounds:-

(i) When the form TM-24 was accepted by order dated 2.4.1984, no notice was served on the other partners and as such there is procedural irregularity in the entry of the Register while the dissolution of partnership and the settlement in favour of the first respondent trust were entered into.

(ii) The Register had entered in the register the dissolution of the partnership without a valid deed of reconstitution or dissolution. Similarly, the settlement in favour of the first respondent is not enforceable as the trade mark 'CAMEL' became the property of the firm constituted by virtue of deed of partnership dated 1.4.1973 and 5.10.1974.

(iii) The TM-24 ought not to have been acted upon in the absence of joint application by all the partners or in the alternative without any notice to those who have not signed the application.

(iv) The petitioner being minor at the time of dissolution of the firm and the settlement in favour of the first respondent, the minor's interest could not have been dealt with without prior permission of the Court and as such the dissolution of the partnership thereby the petitioner's interest in the business had been deprived is quite invalid.

(v) Even assuming the petitioner was represented by his father or mother as the guardian, it is to be tested whether they have got such authorisation or power to give up the rights of the petitioner.

The petitioner also stated that the present petition is not barred by limitation and he came to know about the dissolution deed and the settlement in favour of the first respondent trust only in August, 2003 and thereafter he has filed this petition.

3. The first and second respondents filed counter. They generally denied the allegations and further added that the founder P. Iya Nadar originally started the business as a proprietory concern and later converted it into a partnership firm and the partnership firm was dissolved and once again the partnership firm was reconstituted and dissolved. The settlement deed dated 1.10.1980 and the dissolution deed dated 31.8.1980 are with the full knowledge of the petitioner's father and as such it is not open now to the petitioner to challenge the same. Moreover, the petitioner after attaining majority in the year 1992 was fully aware about the transactions and he did not propose to challenge the action of his grand father immediately on attaining majority. Except the petitioner the other respondents do not challenge either the dissolution deed or the deed of settlement. In fact the father of the petitioner who filed TRA No. 43/2004 for removal of the trade mark from the Register did not dispute the dissolution deed and also the settlement deed in favour of the first respondent trust. Now the petitioner has challenged the deeds which were executed nearly 24 years back and as such the proceedings are barred by limitation. Further, the petitioner did not attribute any mala fide intention to his parents and as such everything done with the knowledge of his guardian regarding the dissolution deed of partnership must be taken as valid. The inordinate delay in initiating these proceedings clearly establishes that this is only an after thought on the part of the petitioner without any real grievance. The nature of dispute raised by the petitioner can be adjudicated only before a Civil Court and this Board cannot go into such details. The petitions are not maintainable under the provisions of the Act and the same are liable to be dismissed.

4. We have heard the arguments of Shri S. Natarajan and Shri R. Rajaram learned counsel for the petitioner and Shri Madan for R1 and R2 on 13.10.2004 and 14.10.2004.

5. After the matter was argued the learned counsel for the petitioner requested time to produce the original partnership deed and the dissolution deed. Time was granted till 28.10.2004. The petitioner filed those documents on 9.11.04 with a petition for condoning the delay. We perused those documents also.

6. Learned counsel for the petitioner vehemently contended that the petitioner and the respondents 11 to 13 were taken as partners when Iya Nadar converted the business into a partnership firm. At that time the petitioner and others were minors. Subsequently in the year 1980 once again the partnership firm was dissolved and the business was settled in favour of the first respondent trust under a deed of settlement dated 1.10.1980. The minors interest cannot be dealt with even by the natural guardian without the sanction of the Court and as such the dissolution of the partnership by taking away the rights of the minors without any legal sanction from the Court is illegal and as such the said dissolution deed ought not to have been acted upon by the Registrar. He further contended that the other partners were not given any notice before the order was passed on TM-24 filed by the said Iya Nadar. He also contended that the petitioner made an attempt to get the certified copy of deed of dissolution of partnership and the Trade Marks Registry was unable to furnish the same. The certificate obtained from the Registrar of Firms in respect of South Indian Lucifer Match Works reveal the induction of the partners in the year 1973 and induction of the petitioner as partner represented by his father and natural guardian in the year 1974. The certificate is dated 3.9.3003 which do reveal neither the dissolution nor the reconstitution of the firm. In that case there is no dissolution deed and the entry made by the Registrar in the Register on form TM-24 with regard to the dissolution is without any dissolution deed and as such the entry is illegal and the entries cannot be allowed to continue in the Register. Hence, the rectification is to be ordered.

7. On the contrary the learned counsel for the respondent with equal force contended that the petition is barred by inordinate delay. Due to the delay the Registrar of Trade Marks as well as the parties are not in a position to lay their hands on the original documents. There is every possibility that the documents might have been destroyed after lapse of a reasonable time. The non-availability of the dissolution deed after lapse of 25 years cannot be taken for granted that the entry in the Register is without any valid documents. Moreover, the petitioner is challenging the action of his guardian for giving concurrence to the dissolution, assuming if any, and such action cannot be raised before this Appellate Board. It can be gone into only by a Civil Court. Hence, there is absolutely no merit in these petitions.

8. Out of the arguments the questions that arise for consideration are;

(a) Whether the Registrar has made an entry on form TX-24 regarding the dissolution of the partnership firm dated 1.3.1980 on the basis of any valid dissolution deed or in the absence of any dissolution deed?

(b) Whether the action of the guardian of the petitioner in concurring for the dissolution of the partnership firm in which the petitioner was a partner during his minority is binding on the petitioner?

(c) Even assuming that the action of the guardian of the petitioner is binding on the petitioner, whether such entry is bad for want of notice to the petitioner and the other partners?

(d) Whether this Board can direct reinstatement of the petitioner and respondents 2 to 13 as co-owners of the registered marks on the ground that the dissolution deed dated 31.8.80 is illegal?

(e) To what relief the petitioner is entitled, if any?

9. In a nutshell it can be clearly stated that the petitioner's grievance at this stage is that he was taken as a partner in the partnership business South Indian Lucifer Match Works in the year 1974. Consequently the partnership was reconstituted in 1978 and 1979. Thereafter the partnership was dissolved by a dissolution deed dated 31.8.1980 and the business was settled in favour of the first respondent trust under the settlement deed dated 1.10.1980. During the execution of both the deeds the petitioner was a minor and as such the dissolution of the partnership taking away the petitioner's rights without a sanction of the Court is illegal and the entry on TM-24 without notice to the other partners including the petitioner is null and void and consequently such illegal entry cannot be permitted to be continued in the Register. Even if issue by issue the discussion is to be made, these are all the relevant matters to be discussed.

10. The petitioner has filed this application under Section 57 read with Section 125 of the Trade Marks Act, 1999. Section 125 is an enabling provision for filing rectification petition before the Appellate Board. Section 57 which deals with the power to cancel or vary the registration makes it clear, that on an application made to the Appellate Board or to the Registrar by any person aggrieved, the authority can make such order as it may think fit for cancelling or varying the registration of the trade mark on the ground of any contravention, or failure to observe a condition entered on the Register in relation thereto. Sub-section (2) of Section 57 empowers the rectification if a person is aggrieved by the absence or omission from the Register of any entry, or by any entry made in the Register without sufficient cause or by any entry wrongly remaining on the Register or by any error or defect in any entry in the Register. A perusal of the provisions and the plea raised in the petition would lead to the fact that the petitioner is seeking rectification on the ground that the entry made in the Register is without sufficient cause and the same is wrongly remaining on the Register. Without the fear of repetition we have to recall the reasons for such plea.

11. One is the non-availability of the dissolution deed of partnership. Though the said plea was available at the time of argument, in view of the production of the same, no longer the said plea is available to the petitioner. Regarding the question of want of notice is concerned, except the petitioner none of the respondents came forward to support his plea. The respondent No. 5 being father of the petitioner and who is the petitioner in TRA-43/2004 which was also heard on 14.10.2004 did not support the petitioner. Moreover, the petitioner was admittedly a minor on the date of the application, in form TM-24 and as such the petitioner is not entitled for any notice. Section 30 of the Indian Partnership Act deals with the rights of the minors admitted for the benefit of the partnership. With the consent of all the partners a minor can be admitted for the benefit of the partnership. In the case on hand, the petitioner, Ms. Malaraval, R-13 and Thirumagal R-12 were as minors admitted for the benefit of the partnership under the deed dated 3.4.1979 by the then partners Shri Iya Nadar and Mrs. Rajathi Kanagamani R-10. Thereafter, Ms. Thirumagla became major and after her exercising the option under Section 30(5) she was taken as a partner and the other minors Ms. Malaraval R-13, petitioner and one Shri Abiruban who is not a party to this petition were admitted for the benefits of the partnership under the deed dated 1.3.1980. The three partners signed the deed. Similarly the three partners signed the dissolution deed dated 31.8.1980. All these documents were produced by the petitioner. Section 39 of the Indian Partnership Act provides for dissolution of the partnership by consent of all the partners. Since the dissolution deed was signed by all the partners it has to be taken that the dissolution is only with the consent of all the partners. The said deed also mentions about the settlement of the minors' shares. The petitioner who was admitted for the benefit of the partnership cannot challenge the dissolution which is with the consent of all the partners. When once the dissolution had taken place and necessary entries were made in the Register of Trade Marks the request in form TM-24, the same cannot be said to be an entry without sufficient cause. Hence the petitions have to fail.

12. Apart from that the entries regarding dissolution were made in the Register in 1980. A direction for the continuation of partnership cannot be made without the consent of other partners. When the partnership was dissolved during the minority of the petitioner, it is not open to him to seek for such a direction after 24 long years. There is no doubt the petitioner was set up by his father for filing these petitions as alternate for his petition TRA/43/2003/TM/CH and this is clear from the request made by the petitioner to have a joint hearing of all the rectification petitions. The dissolved partnership cannot be revived by a direction of the Court especially when such dissolution is only with the consent of the partners. The relief sought in these petitions is totally a misconceived one.

13. Moreover, the petitioner has now raised the dispute with regard to the assignment of the disputed trade marks in favour of the first respondent trust which was originally owned by the partnership, firm. Section 45 of the Act deal with the registration of assignments and transmissions. Proviso to Sub-section (1) of the Section 45 specifies that where a validity of assignment or transmission is disputed between the parties, the Registrar may refuse to register the assignment or transmission until the rights of the parties have been determined by a competent Court. The proviso makes it clear that such dispute with regard to validity of the assignment of the marks cannot be enquired by the Registrar and it is open to parties to go before a Civil Court, which means such disputes with regard to the validity of the assignment is beyond the scope of this Act and thereby the authorities constituted under this Act has no power to go into the questions or disputes which falls outside the scope of the Act. Moreover, in this case no dispute was raised before Registrar. On this ground also the dispute raised by the petitioner cannot be gone into by this Board.

14. Since, the petitioner has miserably failed to establish that the entries in the Register are without any sufficient cause, we are of the view that these petitions are liable to be dismissed. Hence, the petitions are dismissed with cost of Rs. 5000.


Source: http://www.indiankanoon.org/doc/275824/

Read more

Is it compulsory to do dissolution of partnership on a stamp paper or simply plain paper notarised is okay?

Image source: www.syamaprasadinstt.org

Dissolution of Partnership firm can be at will and also as per the agreement entered into between the parties or any time frame fixed for it (efflux of time). The other one is that when one of the two partners ceases to exist.

Registration of Partnership deed is not necessary under law though, registration gives certain advantages. If the partnership deed is a registered one, it is all the while necessary to cancel the deed by way of cancellation registration.

If it is unregistered one, the firm can be dissolved by way of an agreement between all the partners on a stamp paper duly notarised. This is advisable to ward of future litigation.

Read more

Sale Of Goodwill After Dissolution Of A Partnership Firm - Author - Vanshaja Shukla

Vanshaja Shukla - IIIrd year student at National Law Instituteuniversity,Bhopal


I

Section 55 of The Indian Partnership Act, 1932 :
Sale of Goodwill after dissolution.- (1) In settling the accounts of a firm after dissolution , the goodwill shall, subject to contract between the partners, be included in the assets , and it may be sold either separately or along with other property of the firm.

Rights of buyer and seller of goodwill.- (2) Where the goodwill of a firm is sold after dissolution , a partner may carry on business competing with that of the buyer and he may advertise such business, but, subject to agreement between him and the buyer., he may not,-
(a) use the firm name,
(b) present himself as carrying on the business of the firm, or
(c) solicit the custom of persons who were dealing with the firm before its dissolution.

Agreements in restraint of trade-(3) Any partner may, upon the sale of the goodwill of a firm , make an agreement with the buyer that such partner will not carry on any business similar to that of the firm within a specified local limits and notwithstanding anything contained in Section 27 of the Indian Contract Act , 1872 ,such agreement shall be valid if the restrictions imposed are reasonable.

Introduction
Dissolution of a firm implies dissolution of the partnership between all partners of a firm. It may be by agreement, compulsory, due to contingency, by will and by the court. The settlement of accounts at this point of time is mentioned in Section 48 and basically provides for payment of debts and payments to partners. Now, the special provision for Goodwill is Section 55 which deals with the mode of dealing with goodwill at the time of dissolution. A close connection of this section exists with Section 53 and Section 54 both of which speak of restraint of trade. In this article, I have attempted to study Section 55 and have discussed its essentials and select relevant case law.

What is Goodwill?
The first issue towards approaching this section is the definition of goodwill.
'The goodwill which has been the subject of sale is nothing more than the probability that the old customer will resort to the old place.' The definition cited above is of course the very simplistic and rather lay men meaning of what goodwill results in.
It has been more elaborately defined in Trego v. Hunt by Lord Macnaughten as:
' often it happens that goodwill is the very sap and life of the business , without which the business would yield little or no profits . It is the whole advantage whatever it may be , of the reputation and connection of the firm , which may have been built up by years of honest work or gained by lavish expenditure of money.'

Goodwill is essentially an intangible asset of a firm accruing to it by the good conduct and business performance. Therefore it can effectively be defined as the benefits arising from connection and reputation of the business and is primarily an asset. It is intangible and rather difficult to identify per se. Its is also difficult to specify when the goodwill takes existence and no business which commences possesses goodwill from the start. It is generated as the business is carried on and may be augmented with the passage of time.

It has been held in the case of CIT v. B.C. Srinivasa Setty that the goodwill is affected by everything relating to the business , the personality of the owners, the nature and character of the business , its name and reputation , its location , its impact on the contemporary market and on the prevailing socio-economic ecology.

Lord Eldon's observation in the case of Churton v. Douglas is a very important aspect of the meaning of goodwill, 'goodwill must mean every advantage -every positive advantage , If I may so express it as contrasted with negative advantage of the later partner not carrying on the business himself - that has been acquired by the old firm in carrying on its business , whether connected with the premises in which the business was previously carried on, or with the late firm , or with any other matter carrying with it the benefit of business.'

It is the public approbation which has been won by the business , and that is considered as a marketable thing ; it is the probability of the customers or clientele of the firm resorting to the person or persons who succeed to the business as a going concern. 'Approbation ' was one of the original meaning of goodwill before it was used as commercial slang.

Now, at the time of dissolution, the goodwill may be sold separately or along with the other assets. If there is dissolution of a partnership with a condition that the assets fall to a particular partner and no mention of goodwill is made, it is assumed that the goodwill also falls to the partner getting the other assets. It is therefore quite clear that goodwill is an integral part of the assets. At this time goodwill might infact be the most important and valuable asset. Also if there is no express or implied agreement to the effect then the goodwill may be sold as an asset on insistence of a partner. It must be noted that earlier neither the Contract Act nor the Partnership Act had any specific provision on goodwill and it has been only a recent development to include the section on goodwill as part of partnership act. The question whether the firm has goodwill or not is a question of fact.

The name of a firm which is included in the goodwill may be excluded from the sale where use of that name is likely , to expose continuing partners , who carry on business , to liability. Goodwill of the business sold -- seller of goodwill may set up rival business but if he tries to attract customs of old firms he can be restrained by an injunction from doing so, where a person is taken on the condition that the goodwill shall bring to other partner on termination of the partnership above principles applies. Also if there exists a deed of modification to separate business , it cannot be considered a deed of dissolution and thus will not attract Section 55 of the Indian Partnership Act.

In Laxmidas v. Nanabhai , the question was regarding maintainability of a suit and counter claims.
The essential reading regarding Section 55 was laid down as ' Goodwill is a part of the assets of a firm. The prima facie rule is that the goodwill of the firm being a part of that assets has to be sold just like other assets before the account between the partners can be settled and partnership wound up.' But no particular reference to goodwill which is only one of the several assets of a firm in a plaint for taking accounts of a dissolved partnership is required. Similarly the existence of goodwill is an asset of the firm , which has to be sold and the proceeds divided between the partners in the account taking is no bar to the conversion of a counter claim into a plaint in a cross suit is not easy to comprehend.

What is therefore seen is that goodwill like any other asset can be sold at the time of dissolution.
The most relevant judgement on this section has been the case of Khushal Khemgar Shah & others v. m/s Khorshed Banu Dadibar.

The facts of the case read as follows, Dadiba Boatwalla was one of the eight partners of m/s Meghji Thoban & co. Boatwalla died and by virtue of clause 8 of the deed of partnership , the business of the firm was continued by surviving partners.
Now , his widow and son obtained the letter of administration and commenced an action in the High Court.

This was resisted by the surviving partners and the High Court held that the plaintiff (widow and son) were not entitled to an account of profits and losses after the death of Boatwalla. However the court held that the plaintiff was entitled to 6% interest per annum on Boatwalla's share including the goodwill.

In return the defendants appealed again, contending that the plaintiffs as a legal representatives were not entitled to a share in the goodwill. The reason being that the goodwill may be taken into account only when there is dissolution of the firm and in any event because Boatwalla had already agreed the interest on goodwill would cease on his death and the business would be continued by the surviving partners. The Supreme Court through Justice Shah, opined that"

'Section 55 does not allow the interpretation, that, goodwill may be taken into account only when there is a general dissolution of the firm, and not when the representatives of the partner claim their share in the firm , which by express stipulate is to continue notwithstanding death of a partner. The provision deals with the concept and consequences of dissolution of the firm. The Act does not operate to extinguish the right in the assets of the firm of a partner who dies , when the partnership agreement provides that on his death, the partnership continues.'

The court also laid down the guidelines of interpretation of the deed of partnership.

'The court must insist upon some indication that the right to a share in the assets is by virtue of an agreement; that the surviving partners are entitled to carry on business on the death of the partner to be extinguished. In the absence of a provision expressly made or clearly implied , the normal rule that the share of a partner in the assets devolves upon his legal representatives will apply to the goodwill as to other assets.'

In Dulaldas Mullick & others v. Ganesh Das Damani and others , the plaintiff was carrying on business as a paint and varnish dealer in a shop room, paying rent under the name of D Mullick & Co. He was indebted to one Gopal Lal Daga , who instituted a suit and got a decree in his favour. Execution proceedings started and the stock in trade, goodwill and furniture was sold to one Damani who took possession of the room . The basic point was whether goodwill includes right of a plaintiff as a tenant.' there can be no hard and fast rule ; no simple formula and no inflexible and rigid definitions of the term goodwill, but in each case it is necessary to see the entire nexus of facts connected with the business whose goodwill is to be determined. The bench cited Commr. Of Inland Revenue v. Muller & Co. Margarine Ltd. with respect to the meaning of the word goodwill. Lord Lindley said ' I understand the word to include whatever adds value to a business by reason of situation , name and reputation, connection .goodwill is inseparable from the business to which it adds value and in my opinion exists where the business is carried on'.

Finally the bench reached the conclusion that tenancy rights were included in goodwill. Therefore the position which emerges is goodwill is essentially a form of an asset and is treated in the same way as an ordinary asset.

Rights and Duties of Partners: at the time of sale of goodwill
At the time of dissolution all partners have the right to sell the goodwill of the firm for the common benefit of the partners. This does not restrict the right merely to general dissolution. The legal representatives of the deceased partner are also entitled to a share in the goodwill of the partnership which is continued after the death of the partner.

Goodwill is essentially an estimation by the customers and protecting goodwill means protecting the custom of the firm. The seller may continue to trade in the same field, can offer competition in every lawful manner, advertise to the general public and follow other commercial tactics. He may offer better and cheaper services , if he can so afford , and divert the flow of customers to his new place , but not, by a personalized approach or solicitation. This is necessary to ensure freedom of trade to every individual.

However if the seller of the goodwill represents to the customer that he is the same person carrying on the old business, it would destroy the buyer's purchase of goodwill. Therefore certain restrictions are required to be imposed on the seller and buyer of goodwill. This section essentially speaks of such restrictions and the boundary within which both parties have to function. Though restrictions are to be imposed, it must also be noted that common law normally does not provide for restrictions on trade . Therefore a level of balance has to be maintained.

Sub section 2 of Section 55 provides that though the seller may continue the business as he pleases, he may however not ,
# Use the firm name,
#Cannot represent to the people that he is carrying on the old business.
# He cannot solicit the custom of persons who were dealing with the firm before its dissolution.
# He cannot approach customers with the intention of diverting them to his business, but 'is at liberty to deal with them if they come to him of their own accord'.
Even the representatives of a deceased partner cannot do such solicitation.

An appropriate example at this stage can be the case of Churton v. Doughlas where a partnership business was being carried on by three persons. One of them J.D retired and the other partners continued the business under the name of 'Late J.D. & Co.' ,instead of the previous name 'J.D. & Co.'. They also resumed business in premises adjoining the old premise and distributed a circular to the customers to this effect. Towards such action, the court decided that. 'though the remaining partners had a right to establish a rival business, but they had no right to use the same name or to solicit the customers of the old firm.'

The case also held that the restriction laid down in this 'section applies not only to the use of the firm name but also use of any other name, so similar to the firm name as to lead the public to believe that they are dealing with the old firm.'

The person may be allowed to use the firm name if that happens to be his own name , though he may be restricted from using his name dishonestly. He can be restrained if it is established that the similarity of the to be assigned trade name is such as its use would be, under the particular circumstances a derogation from the grant.

Subsection 3 deals with agreement in restraint of trade and lays down that any partner may, upon sale of goodwill of a firm, make an agreement with the buyer that such partner will not carry on any business similar to that of the firm within a specified period or within a specified local limit, and not withstanding anything contained in Section 27 of the Indian Contract Act 1872., such agreement shall be valid if the restrictions imposed are reasonable.

Therefore the essential components of the section are as follows:
The seller may make an agreement with the buyer of not carrying on business :
# Similar to the firms
# Within a specified period
# Within the specified local limits, if the restrictions imposed are reasonable.
The parties provide for restrictions in the agreement. In order to maintain the value of the goodwill it is usual for the buyer to require the seller to enter into an agreement restricting his right of competition. Sub-section 3 legitimizes this. The object of the agreement is to enable the buyer of goodwill to have time to establish himself and attach to himself the custom he has bought and make it his very own. Accordingly the restriction cannot be absolute and thus the section provides that the
# It should specify the period of local limits of the restraint.
#The restriction must be reasonable.

The reasonableness of the restriction depends on the nature of the business. Where a partner of the firm manufacturing and selling bakelite goods, sold the business to the other partner and agreed not to carry on a similar business for three years within the city of Bombay , the restriction was held reasonable in the case of Krishnarao v. Shankar . Also where the agreement for dissolving a firm of insurance agents, in which an outgoing partner was restrained from carrying on insurance business anywhere except Karachi , the restriction was regarded as unreasonable because though 'it was unlimited and worldwide, permission was within very narrow limits.'

In Hukmi Chand v. Jaipur Ice & Oil Mills Co. most elaborate observations have been made on this aspect of the issue. There was a partnership composed of six partners. Two partners left the firm and the remaining continued the business upto March 31, 1958, the date on which it dissolved. Firm had a factory and a residential house. On the day of dissolution one partner Kalicharan retired and was paid his of assets and Rs. 11001 as goodwill share. At the time of dissolution , it was agreed between Kalicharan and the others like Kishanlal, Mahadeo Prasad, Satya Narayan that the land premise and the house could be the exclusive property of Kalicharan with full rights of sale and mortgage and that Kalicharan could get a boundary wall constituted or have a wire fencing and open a separate door towards the road side , but there could be no entry or exit towards the factory compound. It was also decided that Kalicharan could not carry the same kind of business on the Land.

Now, Kalicharan sold his share to his father for a consideration, by a registered sale deed. Later, Kalicharan's father, wife and son (Hukum Chand-major son, Rajgopal- minor son) entered into a partnership to carry on the business on the land. The company filed a suit through Mahadeo Prasad and asked for a permanent injunction.

The Trial Court adjudged in favour of the Company. The High Court made a reference to Section 27 , of the Indian Contract Act and Section 32, 54 and 55 of the Indian Partnership Act.

Some important observations from this landmark case are discussed below:
'The onus to prove that the condition imposed on an agreement in restraint of trade is reasonable is on the party which pleads that they are reasonable'.

It was said that there was nothing indefinite about the covenant because it appears to be reasonable to safeguard the interest of the buyer of the goodwill. Also it cannot be said that there is no time limit. The moment the purchaser ceases to carry on such business the inherent time limit ends.

The case of Shaikh Kalu v. Ram Saran Bhagat was cited stating
' whether the limits prescribed in the contract are reasonable or not depends upon the kind of business to protect which the contract is made and the reasonableness of the restraint imposed must be ascertained by reference to nature of business and situation of parties.'
A restraint can only be reasonable when:
# Its in the interest of the restraining parties
# Its in the interest of public.

In the same case Lord Macnaughten said that:
'it is not right to profess and to purport to sell that which you do not mean the purchaser to have , it is not an honest thing to pocket the price and then to recapture the subject of sale , to decoy it away or call it back before the purchaser had had time to attract it to himself and make it his very own.'

The bench also relied on the Restatement of the Law of Contract of the American Law Institute (1932 Edn. Vol II), while mentioning the situations under which trade may be considered unreasonable:
The observation was that a restraint on trade is unreasonable if it :
# Is greater than required for the protection of person for whose benefit the restraint is imposed.
# Imposes undue hardships.
# Tends to create a monopoly or controls prices artificially or unreasonably results in the alienation or use of anything.
# Is based on a promise to refrain or is not ancillary to any issue.

The case dealt at length with the issue of restraint on trade and the contractual principles attached. They applied the rule from Tulk v. Moxhay in reaching the conclusion that the,
'benefit of a negative restricted covenant with regard to the contracts concerning land may be assigned and so third parties may acquire such rights under a contract to which they are not privy. If a person acquires interest in the land from another , either by purchase , lease etc, or at the time of dissolution upon a term which binds him to observe certain covenants, the assignee will take the rights and obligations and will be bound by it.'

Where restraint affecting the commercial use of and is accepted by one who enjoyed his interest in the land before making of the arrangement under which the restraint was imposed it is clearly established that the doctrine of restraint of trade applies to the same extent as it otherwise would.

The bench finally concluded that while signing the agreement Kalicharan was aware of the restraint and therefore was expected to act according to it. Moreover, since the parties involved in the present case happen to be Kalicharan's closes family members they were also expected to know such details.

Conclusion
Despite availability of very scarce case law on the issue it can still be concluded, that the position on Section 55 is well settled and that goodwill is a saleable asset at the time of dissolution and renders certain obligations on part of both the buyer and the seller. The restraint under this section is similar to the one under Section 27 of the Indian Contract Act. The situation tackled by this section, is essentially one that falls within the exceptions of section 27. The said provision reads: 'One who sells the goodwill of a business may agree with the buyer to refrain from carrying on a similar business, within specified local limits, so long as the buyer, or any person deriving title to the goodwill from him, carries on a like business therein; provided that such limits appear to the court reasonable, regard being had to the nature of the business.' A litigation under this section would essentially involve, determination of goodwill and thereafter the duties connected and to ensue that they are in 'consonance with the common understanding of mankind and the rudiments of commercial morality.' The underlying principle of this section is benefit of the buyer of goodwill which here is assured by a relative restraint on trade by the seller.

Source:http://www.legalserviceindia.com/articles/saleog.htm

Read more

SME Toolkit India - Deed of Dissolution Of Partnership

Image source: www.slideshare.net

Deed of Dissolution Of Partnership

Deed of Dissolution of Partnership

THIS DEED OF DISSOLUTION OF PARTNERSHIP executed on the

day of Two Thousand

A M O N G :

1)

2)

3)

4)

(hereinafter referred to as the "FIRST PARTY"

"SECOND PARTY", "THIRD PARTY" and "FOURTH

PARTY", respectively, which expressions

shall, wherever the context so requires or

admits, mean and include, their respective

heirs, executors, administrators and

assigns).

WITNESSES AS FOLLOWS:

I. WHEREAS the Parties hereto are carrying on business in the

name and style of "____________________" from No._____, ____

__________, ________________, Bangalore under Reconstitution of

Partnership Deed dated __________;

II. WHEREAS the Parties hereto have decided not to continue

with the partnership and the Parties have decided to dissolve the

said Firm as under;

III. NOW THIS DEED OF DISSOLUTION WITNESSES AS FOLLOWS:

1) That the Parties hereto hereby confirm that the Firm of

"____________________" (earlier called as "__________________"

constituted under Deed of Partnership dated __________ is hereby

dissolved with effect from this date;

2) The Parties have verified the Balance Sheet and Profit and

Loss Account and received amounts to their respective share as

per the Book Balance and in view of the settlement of their

accounts and claims, the _____, ______ and _____ Parties hereby

release and relinquish all their right, title, interest and share

in the said Firm in favour of the Fourth Party;

3) The _____, ______ and ______ Parties shall keep the

______ Party fully indemnified and harmless in regard to any

claim that may arise against the ______ Party in regard to any

liabilities;

4) In consideration of the settlement of their account as

above, the _____, ______ and _____ Parties hereby release and

relinquish all their rights, title, interest and share in the

Partnership Firm including the name, licence, furniture, stock-

in-trade and benefits of contracts and use of the Premises except

debts;

5) The _____, ______ and _____ Parties hereby confirm and

declare that they have not incurred any debt in the name of or on

behalf of the Firm. In the event of the either the _____ Party

and/or ______ Party and/or _____ Party have incurred any such

debt, the _____, ______ and _____ Parties shall be responsible to

discharge the same. The _____, ______ and ______ Parties shall

also be responsible to discharge all liabilities incurred by them

in the name of "___________________";

6) The _____, ______ and _____ Parties shall keep the ______

Party fully indemnified and harmless against any cost or claim,

action or proceedings, loss or liability that may arise against

the ______ Party or the Firm by reason of any debt or liability

incurred by either the _____ Party or the ______ Party or the

_____ Party in or on account of ___ failing to discharging their

obligations as undertaken;

7) The ______ Party shall be liable to discharge all the

liabilities incurred hereinafter and he shall keep the _____,

______ and _____ Parties fully indemnified and harmless in regard

to any claim that may arise against the _____, ______ and _____

Parties by reason of the business carried on by the ______ Party;

8) The _____, ______ and _____ Parties shall do and execute

all acts, deeds and things as may be required by the ______ Party

and at the cost of the _____, ______ and _____ Parties for

completing any assessments, for obtaining any allotments,

extensions or renewals of licences or any other matter connected

with or relating to "____________________";

9) Each of the Parties hereto shall do and execute all acts,

deeds and things as required by the other parties for winding up

the affairs of the Firm and for filing return and completing

assessments;

10) It is hereby agreed by and between the parties hereto

that the ______ Party shall be entitled to carry on the existing

business as a proprietor thereof either in the same name or in

any other name of the said business and the ______ Party is

hereby entitled to the exclusive possession of the Premises made

available to ___ and the _____, ______ and _____ Parties shall

cease using the same;

IN WITNESS WHEREOF, the PARTIES hereto have executed this

DEED OF DISSOLUTION OF PARTNERSHIP in the presence of the

Witnesses attesting hereunder:

WITNESSES:



FIRST PARTY

SECOND PARTY

THIRD PARTY

FOURTH PARTY

Read more

Partnership - Agreements for Download

Image source: www.dreamstime.com

Partnership - Agreements for Download

Read more

PARTNERSHIP AGREEMENT BETWEEN ADVOCATES - Download

PARTNERSHIP AGREEMENT BETWEEN ADVOCATES

THIS DEED of Partnership made at ........................ this ............... day of .........................., 2000, between A son of ............................ resident of ........................... of the FIRST PART, B son of ........................ resident of ................. of the SECOND PART, C son of ....................... resident of .................. of the THIRD PART, and D son of ................... resident of ............... of the FOURTH PART.
WITNESSETH THAT the parties hereto shall be and become partners on the following terms and conditions:

(1) The said partners will carry on the business of Advocates in partnership at ............... under the name and style of M/s. .................................................. with effect from .............

(2) The partnership shall be for a period of ................ years unless previously determined in the manner hereinafter provided.

(3) The capital requisite for carrying on the partnership business is Rs. ...................... which shall be contributed by all the partners equally. Any further capital required from time to time shall be contributed by the partners in equal shares.

(4) The partnership firm shall open an account with .................. Bank ................................... Branch ............................... or such other bank as the partners shall from time to time agree upon.

(5) All partnership moneys, cheques, pay orders, demand drafts and other instruments for money shall as and when received be paid into or deposited in the bank to the credit of the partnership account. The moneys received by the firm or any partner on behalf of the firm of any client or third person shall forthwith be deposited in the said bank to a separate clients account to be kept by the firm.

(6) Proper books of account and diaries shall be kept by the partners at the business premises and the same shall be available for inspection by all the partners at all times.

(7) Each partner shall make full and proper entries of all business transacted by him on account of the partnership and cheek up the bills for all such matters.

(8) Each partner shall devote his whole time and attention to the partnership business and no partner shall, without the consent of the other partners engage in any other business or hold any office or appointment, provided that each partner can provide free and voluntary service to his friends or relatives.

(9) Each partner shall be entitled to ...................... days holiday in each year, and to absent himself from business to ................... days consecutively or otherwise in each year. If the period of absence of any partner exceeds ................ days, his share of the net profits of such year shall be considered as divided into 365 parts and for every day on which such partner shall have been absent in excess of such .............. days, one of such parts shall be divided equally between all the partners for the time being (including the partner so absenting himself).

(10) Each partner shall be entitled to draw a sum of Rs. ................. every month on account of his accruing share of the net profits for the current year. If in any year the aggregate amount drawn out by any partner shall be found to exceed the amount of his share in the net profits on taking of the annual account, he shall forthwith repay the excess to the partnership.

(11) No partner shall pledge and credit the partnership except in the usual and regular course of the business or conduct any business for any person, company or firm, whom the other partners shall have previously in writing, forbidden him to deal with.

(12) The firm shall not charge for acting as Advocates for a partner or the wife or any child or children of a partner or his, her, or their trustees, except out of pocket expenses or costs recovered against other parties in any proceedings or out of any estate or property the subject of any such proceedings and any costs recovered shall be credited to partnership account.

(13) No partner shall without the written consent of the other partners:
(a) Engage directly or indirectly in any business other than that of the partnership.
(b) Engage or dismiss any clerk, junior or any other employee of the partnership or take any junior, except hereinafter provided.
(c) Employ any of the moneys of the partnership or clients or pledge the credit of the partnership except in the ordinary course of business and upon the account or for the benefit of the partnership.

(14) Each partner shall be entitled at any time to receive one junior to enable the latter to qualify as an advocate without paying any premium.

(15) The general account and balance sheet shall be taken and made as at the close of each year ending on the 31st March and after the taking of the account, the same shall be audited by M/s. ..................................... Chartered Accountants, whose audit shall extend to the separate clients account and to all properties belonging to any client which are in the possession or custody of the firm.

(16) The net profits appearing on each such yearly account shall be divided in equal shares and such profits less such sums as may have been previously drawn on account by such partner, may be withdrawn by the partners respectively entitled thereto, as and when there shall be money at the said bank available for that purpose over and above the moneys necessary for the current expenses of the partnership business. However, if on taking annual account, it is found that any partner has drawn out more than the share of profits as ascertained thereby, he shall repay the excess to the partnership within ................. days from the date of preparation of final annual account.

(17) Each of the partner shall be entitled to nominate one son in the partnership business and the nominee will work as junior advocate in the firm at a salary of Rs . ................. p.m. and on the partner retiring from the firm or on death of the partner, the nominee, if then duly qualified as an Advocate, shall be admitted a partner and will be entitled to his appointed share; Provided that if the nominee shall not be duly qualified or shall refuse or have refused by reason of death or otherwise have become unable to accept such nomination and become a partner then in any such case, such nomination shall be void and of no effect and his share shall be dealt with in accordance with the provisions hereinafter mentioned. Upon the admission of any such nominee as a partner, he shall be bound by the provisions of this deed so far as applicable and he shall execute a deed covenant to perform and observe the same, if required by the other partners.

(18) If any partner dies during the continuance of the partnership and his son does not become partner of the firm due to any reason, the share of the partner so dying shall be purchased by the surviving partners and he shall pay the purchase price to the legal representatives of the deceased within three months from the death of the deceased partner. For calculating the purchase price, an account and balance sheet shall be taken up to the day of the death from the last previous annual account and the share in the capital and assets of the partnership including goodwill, office furniture, books and office papers shall be ascertained and the said sum along with the sum which upon '3 0 taking of such account and balance sheet shall appear to be due to the deceased partner in respect of undrawn profits drawn to the date of his death shall be the purchase price. The value of the goodwill of the partnership business shall be taken to be a sum equal to two years purchase of the average net profits of the business for the three years next preceding the date of valuation as appearing from the annual accounts for those three years.

(19) On the death of the partner, the surviving partners will execute in favour of the legal representatives of the deceased partner, indemnity against the debts, liabilities, and obligations and the legal representatives shall also execute proper deeds and other instruments for vesting the share of the deceased partner in the partner or partners entitled thereto under the provisions of this deed.

(20) If either partner shall commit any breach of any of stipulations contained in this deed or if a partner becomes insolvent or shall become of unsound mind or incapacitated from attending to the partnership business for .................. months consecutively or if any partner retires, the partnership shall not dissolve and the provisions contained in clauses 18 and 19 hereof shall apply, provided that on the retirement of any partner from the partnership, he shall enter into a covenant with the continuing partners that he will not open an office or practice in the ................................ city or in or at any place within a radius of ........................ kms. measured in a straight line from ................... either in his own name or as a partner in any other firm.

(21) The notice to the parties under this deed shall be deemed to be duly served, if the same shall be delivered to him personally or sent by post in a registered letter addressed to him at his usual or last known place of abode in India.

(22) If the partnership is determined by a notice by any partner or by any means not hereinbefore expressly provided for then, the partnership shall be wound up and assets distributed as provided by the Partnership Act, 1932.

(23) All disputes and differences which shall arise between the partners or between the partners and legal representatives of one or more partners or between their respective legal representatives and whether during or after the determination of the partnership relating to the rights and liabilities or interpretation of this deed or to any act or omission of either party or matter or things done or to be done in pursuance hereof, such disputes and differences shall be referred to arbitration and award of Shri ............................. and his decision and award shall be final and binding upon the parties.

IN WITNESS WHEREOF, the parties have hereunto set and subscribed their respective hands the day, month and year first above written.

Signed and delivered by the within named A
Signed and delivered by the within named B
Signed and delivered by the within named C
Signed and delivered by the within named D
WITNESSES;
1.

2.

Read more

DEED OF DISSOLUTION, WHERE ONE PARTNER TAKES OVER ASSETS AND LIABILITIES OF THE BUSINESS- Download

Image source: www.slideshare.net

DEED OF DISSOLUTION WHERE THE BUSINESS IS CONTINUED
BY SOME PARTNERS

THIS DEED of Dissolution made at ............................ this .............. day of ......................... 19......... between A, son of ................................... resident of ............................... and B, son of ........................ resident of ........................... (hereinafter collectively called as "Continuing Partners") of the ONE PART and C, son of ......................... resident of .......................... (hereinafter called as "Retiring Partner") of the OTHER PART

WHEREAS The parties hereto were carrying on the business of carrying on ................. under the name and style of M/s. ......................... at ........................... under the terms of a Deed of Partnership dated ........................... made between them.

AND WHEREAS the retiring partner has indicated his desire to retire from the
partnership.

AND WHEREAS the partners have agreed to dissolve the said partnership in the
manner hereinafter appearing.

NOW THIS DEED WITNESSETH AS FOLLOWS:

1. That the retiring partner shall retire from the partnership from the date of these presents, but the partnership between the continuing partners will continue on the terms of the said Deed of Partnership as modified by this deed.

2. That the accounts of the assets and liabilities of the said partnership have been taken and a Balance Sheet of the same has been prepared and signed by the partners showing the net value of assets of the firm at Rs. ................... after deducting the debts and liabilities thereof and the value of the share of retiring partner has been computed at Rs. ................ and the continuing partners have paid the said sum of Rs. ................ to the retiring partner vide D.D. No. ............... dated .................. drawn on ................... Bank ...................... .................. Branch, ........................ (the receipt whereof the retiring partner hereby acknowledges).

3. That in consideration of the said Rs. .................. paid by the continuing partners to the retiring partner, the retiring partner hereby assigns to the continuing partners all the share and interest of the retiring partner and in the goodwill, book debts, credits and all property, cash in hand and at the bank and chattels of or belonging to the partners hereto in connection with the partnership TO HOLD unto the continuing partners in equal shares absolutely.

4. The continuing partners hereby jointly and severally covenant, with the retiring partner to pay, discharge and fulfil all debts, liabilities and obligations of the partnership and at all times to indemnify and keep indemnified the retiring partner and his legal representatives, estate and effects and from all proceedings, costs, claims and expenses in respect thereof.

5. The retiring partner hereby covenant to execute such deeds or other documents as may be required for releasing his share and interest in the partnership and leasehold premises to the continuing partners.

6. The retiring partner hereby irrevocably appoints the continuing partners his attornies, in his name, solely or jointly with the continuing partners to collect all assets, and property of the partnership and to demand, sue, recover and receive and to sign and give full and effectual receipts and discharges for all the debts, estate and effects of or due or owing or in anywise belonging to the partnership and to settle all accounts and matters relating thereto and to compound, compromise or release all or any of the debts or claims belonging to the partnership and to institute suits, actions or other proceedings for compelling payments, discharge or delivery thereof and to appoint a substitute or substitutes for any of the purposes aforesaid from time to time and at any time to remove any substitute and generally to do all such acts or things as may be necessary or expedient for the vesting of rights and assets in the continuing partners hereby assigned.

7. The retiring partner shall not carry on or be concerned or interested in the business of ...................... within the city of .................. either, directly or indirectly, alone or jointly with or as director, manager, agent or employee of any other company, firm corporation or person.

8. The capital of the partnership shall belong to the continuing partners in equal shares and the profits and losses of the partnership (including profits and losses of capital nature) shall belong to and shall be borne by the continuing partners in equal proportion.

9. The continuing partners will give due notice of retirement of retiring partner through the gazette, newspapers and by circulars to all persons, firms and bodies with whom the partnership has had dealings. The continuing partners shall also file necessary forms with the Registrar of Firms ............... and Assessing Officer ................... regarding the retirement of retiring partner and change in the constitution of the said firm.

10. The said Deed of Partnership as modified by this deed shall remain in full force and effect as between the continuing partners.

IN WITNESS WHEREOF the parties have hereunto set their hands the day and year first above written.

Signed and delivered by the within named A
Signed and delivered by the within named B
Signed and delivered by the within named C

WITNESSES;
1.

2.

Read more