C, D and E were partners in a trading company. E retired. C and D continued to do business in the earlier name of the firm. F had supplied goods to the firm after the retirement of E. He had no knowledge of such retirement and finding E's name on the letter head of the firm, F sued E for the price of goods supplied to the firm. E had not permitted the use of his name but had not seen to it that the stationary bearing his name was destroyed. Examine the liability of E.

The Requirement of Public Notice of Retirement: Section 32

Section 32(3) provides that notwithstanding the retirement of a partner from a firm, he and the partners continue to be liable to any third party for any act done by any of them which would have been an act of the firm if done before the retirement, until public notice is given of the retirement. Section 32(4) specifies that such public notice may be given either by the retiring partner or by any partner of the reconstituted firm, and Section 72, referred to generally in this context, prescribes that public notice must be given by publication in the Official Gazette and in at least one vernacular newspaper circulating in the district where the firm has its place of business, or, in the case of a registered firm, by notice to the Registrar of Firms. The clear purpose of this requirement is to protect innocent third parties who have dealt with a firm in the past and who continue to assume, in the absence of any contrary information, that its constitution remains unchanged, since such parties cannot be expected to independently discover a retirement that has not been publicly notified.

Application to E's Retirement

There is nothing in the facts to indicate that E gave any public notice of his retirement in the manner contemplated by Section 32. F, who supplied goods to the firm after E's retirement, is stated to have had no knowledge of that retirement, and upon finding E's name still appearing on the firm's letterhead, reasonably continued to deal with the firm on the assumption that E remained a partner. Since E failed to give public notice of his retirement, he continues to be liable under Section 32(3) to F for the price of the goods supplied, exactly as if he had remained a partner, because F's transaction with the firm, namely the supply of goods on credit, is precisely the kind of act that would have been an act of the firm binding upon E had he still been a partner at that time.

The Doctrine of Holding Out: Section 28

Independently of Section 32, E's liability is also sustained by the doctrine of holding out embodied in Section 28(1), which provides that anyone who by words spoken or written, or by conduct, represents himself, or knowingly permits himself to be represented, to be a partner in a firm, is liable as a partner in that firm to anyone who has, on the faith of any such representation, given credit to the firm, whether the person representing himself or represented to be a partner does or does not know that the representation has reached the person so giving credit. The doctrine thus fastens liability on a person whose name continues to be held out as that of a partner, provided the third party has relied on that representation in extending credit to the firm, regardless of whether the represented partner was personally aware that his name had, in fact, reached and influenced that particular creditor.

E's Passive Conduct in Allowing the Stationery to Remain in Use

E's defence that he had not himself permitted the specific use of his name on the letterhead does not absolve him of liability, because Section 28 extends liability not only to a person who actively represents himself as a partner, but also to one who knowingly permits himself to be represented as such. Having been a partner in the firm and having allowed stationery bearing his name to remain in circulation and in use by C and D after his retirement, without taking any steps to ensure that such stationery was withdrawn or destroyed, E must be regarded as having knowingly permitted the continued representation of himself as a partner, since a retiring partner is under a clear obligation, arising from the very nature of the holding-out doctrine, to take reasonable steps to prevent his name from continuing to appear in a manner likely to mislead third parties into believing he remains a partner. Mere internal non-permission, without any corresponding external act of ensuring that the misleading material is withdrawn from circulation, is not sufficient to escape liability, since the continued external appearance of E's name on the letterhead is precisely what induced F to extend credit to the firm.

The Combined Operation of Sections 28 and 32

Sections 28 and 32 thus operate in a mutually reinforcing manner on these facts. Section 32(3) fixes E with continuing liability for the firm's post-retirement transactions purely because he failed to give the requisite public notice of his retirement, a default that is complete in itself and does not require any further act of representation on E's part. Section 28 independently reinforces this liability by recognising that E's passive tolerance of stationery bearing his name, which continued to circulate and was relied upon by F, amounts to knowingly permitting himself to be represented as a partner, making him liable to F on the separate footing of holding out as well. Either provision, taken alone, would suffice to fix E with liability on these facts, and their combined effect makes E's position as against F entirely untenable.

Illustration

Suppose C, D, and E carry on a trading firm under the name "CDE & Sons," and E retires without giving public notice of his retirement in any newspaper or to the Registrar of Firms, and without ensuring that the firm's letterheads, invoices, and other stationery bearing his name are withdrawn from use. F, a new supplier who has never dealt with the firm before, receives an order on a letterhead still printed with E's name as a partner, and supplies goods on credit to the firm on the strength of that letterhead, reasonably believing E to be a partner and hence answerable for the firm's debts. If the firm defaults in payment, F can successfully sue E for the price of the goods, since E remains liable under Section 32(3) for want of public notice of his retirement, and is separately liable under Section 28 for having knowingly permitted the continued use of stationery representing him as a partner, on which F relied in extending credit.

Conclusion

E is liable to F for the price of the goods supplied to the firm after his retirement. His failure to give public notice of retirement under Section 32 renders him liable for this post-retirement transaction exactly as though he remained a partner, and his failure to ensure the withdrawal or destruction of stationery bearing his name, despite his own personal non-permission of its specific use, amounts to knowingly permitting himself to be represented as a partner within the meaning of Section 28, on which representation F relied in supplying the goods on credit. E's remedy, if any, lies not against F, but against C and D, from whom he may seek indemnity for having been made to answer for a liability arising from their continued and unauthorised use of his name after his retirement from the firm.