Bombay High Court
Fatima Correa Nee Fatima Yakub Ali vs Mrs. Hasina Mohamed Shafik Laljee & Ors on 19 September, 2013
Author: Roshan Dalvi
Bench: Roshan Dalvi
jsn 1 ARBP No.503_2013
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
ARBITRATION PETITION NO.503 OF 2013
Fatima Correa nee Fatima Yakub Ali - Petitioner
V/s.
Mrs. Hasina Mohamed Shafik Laljee & Ors. - Respondents
Mr. Akshay Patil, Adv. a/w. Mr. Suraj Iyer, Adv. for the Petitioner.
Mr. Chirag Mody, Adv. i/b. Ashok Purohit & Co. for Respondent Nos.1
to 4.
CORAM : MRS. ROSHAN DALVI, J.
DATE OF RESERVING THE JUDGMENT : 29th August, 2013. DATE OF PRONOUNCING THE JUDGMENT :19th September, 2013 J U D G M E N T
1. This Petition is filed U/s.9 for interim reliefs pending the arbitration. The Petitioner claims to be sole heir and legal representative of a deceased partner. The Respondents are stated to be the legal heirs of the other partner.
2. One Mahomedali Esmail commenced the partnership firm and purchased the immoveable property belonging to the firm. He is the predecessor-in-title of both the parties. He entered into a partnership with one Yakub Ali, the father of the Petitioner. After his death Yakub Ali made his nephew, the father of the Respondents, his partner under the partnership deed executed on 1 st June, 1965. The Petitioner claims that upon the death of the Yakub Ali the firm stood dissolved but the partner of Yakub Ali, the said nephew continued the business, kept charge of the assets and continued collecting rents.
::: Downloaded on - 27/11/2013 20:19:34 :::jsn 2 ARBP No.503_2013 The Petitioner claims that hence he held the assets in trust for the heirs of Yakub Ali. The Petitioner claims to be a only heir of the Yakub Ali. After the death of the said nephew, his heirs, the Respondents herein, continued representing the firm and claimed that the said nephew was the sole proprietor and continued the firm as such. They executed certain declaration-cum-indemnity in their name.
3. The Petitioner claims that the premises were owned by Yakub Ali and purchased out of the capital contributed by him and consequently the Petitioner as his heir is entitled to a share in the said property.
4. The Petitioner resided in Kuwait after her marriage. She has returned to India and claimed a share in the said partnership.
5. The partnership agreement between Yakub Ali and the said nephew dated 1 st June, 1965 specifies in clause 14 thereof that in the event of death of any partner the firm shall not stand dissolved. Consequently, the said nephew continued the firm as sole proprietor.
The incidents of such continuation would only have to be seen as between the heirs of the two partners in arbitration. Similarly, under the earlier agreement between Mahomedali Esmail and Yakub Ali dated 17th January, 1961 also under clause 11 thereof upon the death of the partner the business was to continue without any right of admission to the heirs of the partner. Consequently the initial partnership between Mahomedali Esmail and Yakub Ali and later partnership between Yakub Ali and his nephew would continue.
6. The conveyance in favour of Mahomedali Esmail dated 28 th February, 1978 which constitutes the property of the firm would prima facie continue as such in the firm. Upon the death of the Yakub Ali, the predecessor-in-title of the Petitioner, in 1982, and the ::: Downloaded on - 27/11/2013 20:19:34 ::: jsn 3 ARBP No.503_2013 consequent dissolution of the firm, the Petitioner could claim her share in the accounts of the firm as also the property thereof. That has not been done until the arbitration has been invoked by the Petitioner's advocate notice dated 15th February, 2013.
7. The fact that the partnership was not dissolved as claimed by the Petitioner in paragraph 2(h) would be the determinative factor in the arbitration invoked by the Petitioner as the heir of the deceased partner.
8. It is contended on behalf of the Petitioner that only when the Respondents sought to make certain declarations to get the property of the firm transferred to their names, as the only heirs of the sole proprietor who was the last partner of the firm, that the Petitioner sought her rights.
9. The Respondents have claimed that the claim is barred by limitation as it has not been made since 1982. That aspect would have to be considered in arbitration. Yet as observed by this Court in the case of Perma Container (uk) Line Ltd. Vs. Perma Container Line (India) Pvt. Ltd. 2010 (2) BCR 419 and drawing from the Supreme Court dictat in the case of National Insurance Co. Ltd. Vs. Boghara Polyfab Pvt. Ltd., 2009 4 BCR 891 this Court is enjoined to consider, prima facie, the question of the bar of limitation.
10. The Petitioner is the legal representative of the deceased partner of the firm. The claim by the Petitioner is in respect of a dissolved partnership. The Petitioner claims a share in the accounts as also the property of the firm. The partnership has long since been dissolved.
11. It would have to be prima facie seen whether the claim of the Petitioner for accounts of the firm and the claim of the Petitioner in the assets of the firm would be barred by limitation.
::: Downloaded on - 27/11/2013 20:19:34 :::jsn 4 ARBP No.503_2013
12. In the case of K. Gopal Chetty & Anr. Vs. L.G. Vijayaraghavachariar, AIR 1922 Privy Council 115, a partner of a dissolved firm sued for accounts and share in the assets. The partnership had stood dissolved in 1910. The suit was filed in 1913 after a period of three years from the dissolution. The suit for accounts was distinctly barred under Article 106 of schedule I to the Limitation Act of 1908 (which is on par with Article 5 of the Limitation Act, 1963). The question that was to be considered was whether when the suit for accounts was barred, the suit for share in the assets be also barred. This is what the Privy Council has had to observe at Pg.119 of the judgment :
If on the other hand no accounts have been taken and there is no contest that the partners have squared up, then the proper remedy where such an item falls in is to have the accounts of the partnership taken; and if it is too late to have recourse to that remedy, then it is also too late to claim a share in an item as part of the partnership assets, and the Plaintiff does not prove, and cannot prove that upon the due taking of the accounts he would be entitled to that share.
13.. In the case of Nilmadhab Nandi & Ors. Vs. Srimati Nirada Sundari Dasi, Calcutta Weekly Notes, (Civil Appellate Jurisdiction) Pg.1065, a suit filed by legal representative for accounts as also a share in the assets was held not barred under article 106 of the Limitation Act because under Article 106 the right of the legal representative was taken to be not to a share in the profits of the dissolved partnership, but a right accruing to him by subsequent dealing with the assets belonging to the deceased partner. It was observed that where on the death of the partner the partnership business was continued by the remaining partners, the representative ::: Downloaded on - 27/11/2013 20:19:34 ::: jsn 5 ARBP No.503_2013 of the deceased partner is entitled to a share of his predecessor-in-
interest in the assets and to the profits attributable to the use of that share. Hence he is entitled to have accounts U/s.37 of the Partnership Act. It was held that the right of the legal representative is not right to share in the profits of the dissolved partnership within the meaning of Section 106 of the Limitation Act, 1908. It is a right accrued into him by subsequent dealing with the assets belonging to the deceased partner. Hence he can sue for the share of the assets of the business and for the profits which the Defendant made from the business after the death of the partner and the suit would not be hit by Section 106 of the Limitation Act.
14. The claim of a representative of a deceased partner has been considered again in the case of Peeran Sahib & Anr. Vs. Pedda Jamaluddin Sahib & Ors., AIR 1958 ANDH. PRA. 48 (V 45 C 14) in which the aforesaid two judgments have not been considered. The heirs of a deceased partner applied not only U/s.37 of the Partnership Act for accounts and sharing the profits as such heirs and legal representatives but claimed that the firm was not dissolved and that there was impliedly an agreement by which they became partners, a fact they could not prove. Considering Section 42 of the Partnership Act, 1932 which affirms dissolution of partnership on the death of the partner except in case of agreement to the contrary and no agreement, expressed or implied having been seen, it was held that the suit filed under that section was to claim their rights as partner upon claiming continuation of the firm and not dissolution by the death of one of its partners and that claim would fall within Article 106 of Schedule 1 to the Limitation Act, 1908.
15. Both the aforesaid sections have been considered in that judgment. It is observed in paragraph 13 thereof that a partner would ::: Downloaded on - 27/11/2013 20:19:34 ::: jsn 6 ARBP No.503_2013 be entitled to a share of profits attributable to the share of his predecessor-in-title. For that purpose the Plaintiff must sue for such share. Such suit would be U/s.37 of the Partnership Act, 1932 for recovery of profits earned by the deceased partner's assets being utilised by the surviving partners. A suit for accounts of the partnership was held squarely falling under Article 106 and the period of limitation was held to begin from the date of the death of the partner. It was observed that such a suit cannot be filed under Article 120 of the said Act which was residuary Article since a specific provision for suit for accounts even by the heirs was made under Article 106. In this case also the Petitioner claimed that the partnership was not dissolved. As aforesaid it is clearly seen that the partnership was dissolved. The Petitioner's claim may lie only with regard to the assets attributable to her grandfather which came to be utilised by his nephew who was taken into the partnership and not for accounts of the firm as a going concern. If such is the claim it would stand barred by the law of limitation.
16. In the case of Addanki Narayanappa & Anr. Vs. Bhaskara Krishnappa, AIR 1966 Supreme Court 1300 (V 53 C
251), the care of the property of the partnership firm came to be considered whilst the firm was going concern. A property brought into the partnership and which became the property of the firm was held to represent the money value of the property upon dissolution.
17. The firm would have no legal existence upon dissolution. The partnership property would vest in all the partners and further the partners would have interest in the property of the partnership. It is observed in paragraph 3 (iv) of the judgment thus :
No doubt, since a firm has no legal existence, the partnership property will vest in all the partners and in that sense every ::: Downloaded on - 27/11/2013 20:19:34 ::: jsn 7 ARBP No.503_2013 partner has an interest in the property of the partnership.
18. In the case of M.M. Valliammai Achi & Ors. V. Kn. Pl. v.
Ramanathan Chettiar, AIR 1969 Mad 257, a suit for partnership accounts and a half share in the immovable property was filed by the heirs of a deceased partner. The property was acquired from the moneys due to the partnership and formed the assets of the partnership. The partner who was predecessor-in-title of the Plaintiff died in 1933. Other partners died in 1947. A suit for accounts was filed in 1959. It was the case of the Plaintiff that the suit property was withdrawn from the partnership and used by the Plaintiff and the surviving partners as co-owners. Relying upon Privy Council decision in the case of K. Gopal Chetty (Supra) it was held in a suit for accounts and the share of the assets of the firm, the former being barred, the latter would also stand barred. It was observed in paragraph 8 that:
The proper remedy of a partner in the circumstances is to have accounts taken to ascertain his share and if the right to sue for accounts is barred by limitation, the partner cannot sue any partner in possession of the assets for a share therein.
It was observed that suit was filed and the share in the items were claimed a quarter century after the death of partner, the properties could be dealt with by the surviving partner, one of whom was also died after the first partner. It was observed:
The silence for nearly quarter of a century is therefore significant.
19. The Court considered the case of Ahinsa Bibi V. Abdul Kader Saheb (1902), ILR 25 Mad 26, in which five partners carried ::: Downloaded on - 27/11/2013 20:19:34 ::: jsn 8 ARBP No.503_2013 on business. One of them died in 1890. No accounts were taken. No representatives of the deceased partner were taken into the partnership. The surviving partners continued the business and in 1891 one of the surviving partners was also died. No accounts were taken. No representatives of that partner were also taken in the partnership. The other surviving partners continued the business. In 1898 the legal representatives of the 2nd deceased partner sued for a share of the profits of the partnership. It was only because one of the Plaintiffs was a minor on the death of the partner in 1891 and on the date of the suit that the case was held to fall U/s. 7 and 8 of the Limitation Act, 1908. The case of Nilmadhab Nandi V. Nirada Sundari Dasi, (Supra) was distinguished as not applicable to the facts of that case.
20. The Court considered that the business was continued and the profits were made by the use of the assets of the deceased partner in the dissolved firm and hence the right of the legal representatives was not in the share in the profits of the firm within the meaning of Article 106 of the Limitation Act. It was observed that when the business was continued and the firm made profits using the deceased partner's assets in the business, the cause of action can be taken to have continued from day to day.
21. Lindley on the Law of Partnership, 15 th Edition has set out the liability of the surviving partners for assets improperly continued in business at Pg. 768. It is observed that when a partner dies and the surviving partners have allowed his assets to remain in their business, they would be responsible inter-alia to the next-of-kin of the deceased in the loss sustained thereby. But if the heirs of the deceased partner allowed the property to be used by the surviving partners, the liability of the surviving partners would arise only upon ::: Downloaded on - 27/11/2013 20:19:34 ::: jsn 9 ARBP No.503_2013 a breach of trust which would have to be proved by the heirs of the deceased partner.
It is observed thus:
If the personal representatives of a deceased partner leave the assets of the deceased in the business, if it apprehended that the surviving partners, who are not personal representatives, are entitled to assume that those assets are properly left there unless they know or ought to know the contrary.
22. As observed by the Supreme Court in the case of National Insurance Co. Ltd. Vs. Boghara Polyfab Pvt. Ltd., 2009 (4) BCR 891 this Court is enjoined to consider, prima facie, the question of the bar of limitation in a Petition under Section 11 of the Act.
23. The Petitioner has allowed assets of her grandfather to remain in the business which was carried out by the surviving partners. They would not, therefore, be liable for employing the assets in their business. The Petitioner contends the Respondents have sought to transfer the properties of the firm to their names and the exclusion of the Petitioner thus constituting a breach of trust. This the Petitioner would have to prove. It was for the Petitioner to sue for her share as an heir of the deceased partner upon the dissolution of the firm, which having not been done, the firm continued.
24. Lindley on the Law of Partnership, 15th Edition at Pg.77 has considered the separate aspects of partners being joint tenants and tenants-in-common (or co-owners or joint owners), the real difference being in how the property survives after the death of the co-owner or the joint owner. This legal position is settled. Upon the death of the partner his heirs and legal representatives would obtain his share in ::: Downloaded on - 27/11/2013 20:19:34 ::: jsn 10 ARBP No.503_2013 the properties as the partnership would stand dissolved. That share would not survive to the other partner and the surviving partner would not become the owner of the whole, unless it was agreed that the partnership would not be dissolved on the death of a partner as has been specified in clause 14 of the Partnership Deed dated 1 st June, 1965. The Petitioner's claim may, therefore, at best be considered in the arbitration but the case for injunction against Respondents with regard to those properties used in their business throughout is not made out.
25. Consequently, the Petition is dismissed.
ig ( ROSHAN DALVI, J. )
::: Downloaded on - 27/11/2013 20:19:34 :::