A Partner Cannot Apply For Renewal Of Licence While His Lawsuit For Dissolution Of Firm Is Pending: Karnataka High Court

The Karnataka High Court on 8th February, 2023 has held that a partner who files suit seeking dissolution of the partnership firm and which is pending adjudication, cannot seek for renewal of licence under the Karnataka Excise Act, for continuance of the business. This was in the case of Nagalinga v. The Excise Commissioner in Karnataka & Others(WRIT PETITION NO.23306 OF 2021) and this was presided over by a single bench of Justice Suraj Govindraj.


The petitioner and the respondent are stated to be the partners in the firm M/s.Marthanda Enterprises, which is constituted under the Partnership Deed. The said M/s.Marthanda Enterprises run the business of M/s.Marthanda Wines under Form CL-2 which is transferred in the name of M/s.Marthanda Enterprises from the earlier licensee. There being certain disputes between the partners, as regards the continuance of the business, each of the partners made several allegations against the other. The petitioner alleges that respondent No.3 could not carry on the business of the partnership firm, and similar allegations have been made by respondent No.3 against the petitioner. There are various proceedings which took place between the parties. The order passed by the Karnataka Appellate Tribunal (KAT) is under challenge. By virtue of the said order, the Appellate Tribunal dismissed the appeal filed by the petitioner challenging the renewal of the licence on an application made by respondent No.3 and confirmed the order of respondent No.1-Excise Commissioner renewing the licence. It is aggrieved by the same that the petitioner is before this Court seeking for the aforesaid reliefs.


The bench said “The plaintiff in a suit for dissolution of a firm, in my considered opinion, cannot seek for renewal of a license and continuance of the business while the suit filed by him for dissolution of the partnership is pending.”

It added “Once a suit for dissolution of the firm is filed, the continuance of the firm is only for the purpose of recovery of any of the amounts which is due to the firm and for drawing up of the accounts. There would be no purpose which could be served by continuance of the firm by one of the partner s when the suit for dissolution is pending.”

Finally it said “In view of the fact that a suit for dissolution of the firm has been filed, at the most after the dissolution takes place, it would have to be adjudicated by the court as to in whose favour the licence has to be transferred or to whose share it would fall. Until then, there would be no purpose in continuing the said licence or renewal of the licence.”

The court allowed the petition and granted four weeks time to the respondent 3 to make sale of the stock which is in the premises. It said “No fresh stock shall be ordered by respondent No.3 from any of the manufacturer, wholesalers, stockiest, distributors or otherwise and it is only the stock as on today which shall be sold.”


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