Indian Oil Corporation Ltd. Vs Shree Niwas Ramgopal & Ors. (Supreme Court of India)
Partnership does not dissolve on partner’s death if deed provides continuity & legal heirs’ consent not mandatory for reconstitution of firm, Rules Supreme Court
The case concerned a dispute between Indian Oil Corporation Ltd. (IOCL) and the partnership firm M/s Shree Niwas Ramgopal, which held a kerosene dealership. After the death of one of the principal partners (Kanhaiyalal Sonthalia, holding 55% share), IOCL halted kerosene supply due to pending reconstitution of the firm involving the legal heirs. Disputes arose among the legal heirs, with some seeking inclusion as partners and others raising objections or claiming rights under a will. The Calcutta High Court’s Single Judge (2012) and Division Bench (2018) directed IOCL to continue kerosene supply to the existing firm until its reconstitution or dealership termination. The High Court ruled that IOCL could not act arbitrarily or discontinue supply without terminating the dealership agreement.
The key legal issue involved was whether IOCL was justified in discontinuing the kerosene supply based on its internal guidelines (Clause 1.5 of the 2008 policy) and whether reconstitution of the firm required all legal heirs of the deceased to join or explicitly decline to join.
