In C.M.A(MD)Nos.521 & 523 of 2017, the Madurai Bench of the Honorable Madras High Court in the case Dr. S. Vel Aravind vs Dr. Radhakrishnan, on 10 April, 2018 has held that Section 33 of the Indian Partnership Act,1932, is unambiguously clear that partners cannot be expelled even by majority of partners. Partners can be removed or expelled only in exercise of good faith of powers conferred by contract between partners. The above proposition that the relationship between the partners in a partnership is that of principal to agent for one another is confirmed by a plethora of cases decided by various High Courts.
The section 33 reads as below:
EXPULSION OF A PARTNER.
(1) A partner may not be expelled from a firm by any majority of the partners, save in the exercise in good faith or powers conferred by contract between the partners.
(2) The provisions of sub-sections (2), (3) and (4) of section 32 shall apply to an expelled partner as if he were a retired partner."
Therefore, in the absence of explicit provisions in the contract i.e. Partnership Deed agreed to between the partners regarding expulsion of partners, only remedy available to the disgruntled partners is taking recourse to Section 44 of the Indian Partnership Act for dissolution to be ordered by the Court on a suit of the partner and they cannot dismiss or expel the other partner.
Even assuming that the partners have committed malpractice, the Arbitrator alone has to decide the dispute according to law and therefore, the expulsion of the partner by the another partner is erroneous. In this regard, it is relevant to extract below Paragraph Nos.34 to 36, 40 and 41 of the decision of the Calcutta High Court in Santiram Mullick vs HiranmonyBagechi and Others reported in (1991) 2 CALLT 399 HC.
"34. I have carefully considered the submissions made by both the parties. It is an admitted fact that even though in the earlier Arbitration agreement there was a specific provision for expulsion ofpartners, no such provision has been made in the agreement dated 1st April 1987 by which the partner ship firm was reconstituted and the petitioner and the Respondent nos. 1, 2 and 3 have become partners on the reconstitution of the partnership business. The partnership agreement in Clause 13 provides that retirement or a death of a partner will not ipso facto operate as a dissolution of the firm and the remaining/surviving partners shall continue the profession with or without any other partner or partners. Clause 12 provides that on retirement of a partner being incapable of carrying on profession or in the event of a death of a partner a goodwill shall be raised and the value thereof shall be computed or arrived at on 2 years purchase price and the last three years average,net profits of the firm, and the net profits for this purpose as computed in terms of Clause 12 shall be paid to the retiring or deceased partner. The only provision regarding the expulsion of a partner is contained in Section 33 of the Partnership Act and Section 33 as already been referred to in the above, does not contemplate expulsion of a partner unless the terms of agreement of the partnership firm confer upon the majority of the partners to do so and that too such power has to be exercised in good-faith. Therefore, the law of the land is that a partner may be expelled from a firm by the majority of the partners and in good-faith if the terms of partnership confer such power, otherwise not. Admittedly terms of partnership did not confer such power to the partners to expel any partner from the firm. However, the Partnership Act does not make the partners without any remedy when any of the partners commits breach of the partnership agreement. The remedy is in Section 44 of the Partnership Act. If a partner commits breach of the agreement then under Clause (d) of Section 44 at the suit of a partner, the court may dissolve the partnership firm.
35. I am unable to accept the contention of Mr. Gupta that the court has power in a similar circumstances in case of breach of agreement of partnership by a partner to order his expulsion. The Partnership Act does not confer such power upon the court. If under the agreement a majority of the partners expelled a partner then the partner who has been so expelled or the majority of the partners expelling the partner may approach the court either to challange or to uphold the action of expulsion and in such a case the court will have to decide the issue. If the court finds that the partnership agreement conferred such power to the majority of the partners to expel a partner, it has still to consider as to whether the same was done in good faith or not. But if the partnership agreement does not provide for expulsion, no partner can approach the court seeking relief for expelling a partner from the partnership business on the allegation that the concerned partner had committed the breach of the partnership agreement.
36. It is true that the partnership agreement may either expressly or by implication provide the provision regarding expulsion. It is also true that a partnership agreement may be varied by subsequently to incorporate the provision of expulsion if originally in the agreement there was no such power. But there is nothing to show save and except that in the statement of facts before the Arbitrators the partners for the first time asked the arbitrators to exercise the power of expulsionthat there was no contract either express or implied that the partners of the present partnership business at any time agreed that the majority of the partners would be competent to expel a partner. On behalf of the respondents, it is submitted that in the statement of the claim of the petitioner before the Arbitrators he sought for the expulsion of the Respondent no. 2 and the Respondent nos.1, 2 and 3 sought for the expulsion of the petitioner before the Arbitrators and there-fore the Arbitrators were clothed with the jurisdiction to expel a partner on coming to the finding that he committed the breach of the partnership agreement. The relief was sought for before the arbitrators in their separate statements of claim that the partners themselves no doubt but the parties were not at ad idem on the question of expulsion. But each of them made separate allegations against each other and sought for expulsion of a particular partner. The petitioner sought for expulsion of the Respondent no. 2 and the respondents sought for expulsion of the petitioner.
40. In that view of the matter, I am convinced that even if in the statements of claim the partners demanded expulsion of the partners committing breach of the agreement, the arbitrators who are to decide the disputes according to law and are bound to follow and comply the law definitely committed an error of law by ordering expulsion of the petitioner when under the law a partner cannot be .expelled unless there is a specific agreement between the parties authorising such expulsion of a partner by majority of the partners. Therefore, that part of the award of the majority of the arbitrators ordering expulsion of the petitioner being an error apparent on the face of the award being contrary to law is liable to be set aside. The arbitrators have also committed misconduct in law by ordering expulsion when under the law the arbitrators could not expel a partner in the absence of such sanction of expulsion in the partnership agreement and when Section 33 of the Partnership Act only authorised expulsion. When the partnership agreement empowers the majority of the partners to expel a partner.
41. In the petition, however, the petitioner has also challenged the money award, I find from the award that the arbitrators on own admission of the petitioner about the realisation of the amount of Rs. 68,800/- by earning made from the other parties which was in violation of the partnership agreement directed the said amount to be returned to the firm within 30 days from the date of the award has been passed by the majority of the arbitrators. But I do not find any error apparent on the face of the award. I have already indicated that Section 16(b) of the Partnership Act provides that if a partner carries on a business of the same nature and is competing with the firm he shall account for the payment received by him in that business. Therefore, there was definite sanction in the law for the majority of the arbitrators passing that money award. That money award is severable from the other part of the award, namely, the expulsion of the petitioner. Therefore, even if that part of the award regarding expulsion is set aside by this court, the money award can be upheld as the said award is in accordance with law and there is no error apparent on the face of the award to justify setting aside of the money award made by the majority of the arbitrators."
Therefore, the majority partners cannot remove any one partner as per Section 33 of the Indian Partnership Act 1932
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