Kerala High Court
E. Kuttappan vs Mrs. Sarojini Bhaskaran on 23 June, 1998
Equivalent citations: AIR1998KER340, AIR 1998 KERALA 340, (1998) ILR(KER) 3 KER 744, (1998) 3 CIVILCOURTC 286, (1998) 2 KER LJ 258, (1998) 2 KER LT 406, (1999) 3 LANDLR 342
ORDER S. Sankarasubban, J.
1. This Civil Revision Petition is filed against the order in C.M. A. No. 33/96 of the Subordinate Judge Court, Kozhikode. Petitioner is the defendant in O.S. No. 976/91 on the file of the Munsiff's Court, Kozhikode. Respondent is the plaintiff in that suit. The suit was filed for rendition of accounts. According to the plaintiff, the plaint schedule premises belonged to the plaintiff and defendant. In it they jointly set up a building and a lodging house under the name and style 'Swarg lodge'. The lodge was being conducted as a partnership business. Defendant was the Managing Partner of the Firm. Till 1988 the plaintiff earnestly believed that the defendant was looking after the business honestly. But subsequently, according to the plaintiff, the defendant had been making profits of the business defrauding the plaintiff. Hence, the plaintiff was not interested in the continuation of the partnership and she terminated the same with effect from 15-6-1991 by a registered notice. The suit was filed for rendition of accounts by the defendant of the firm by name 'Swarg lodge' and for payment of plaintiffs share in the dissolved partnerhip
2. Defendant filed written statement contending that the firm was not dissolved properly and that the plaintiff has consented to the accounts prepared by the defendant. The suit was disposed of by the trial Court by judgment dated 6th July, 1996. It found that the partnership firm was terminated with effect from 15-6-1991. Regarding the contention of the defendant that the plaintiff has been participating in the conduct of the affairs of the firm and scrutinising the accounts, the Court found that the defendant could not produce even a single document signed by the plaintiff to show that either plaintiff or any of her relative ever checked the accounts. Hence, the Court found that the defendant was under an obligation to render accounts to the plaintiff. Hence, a preliminary decree was passed finding that the defendant was to render accounts.
3. An advocates was appointed as Commissioner to audit the accounts, etc. Subsequent to the decree, plaintiff field I.A. No. 3292/96 under Order 40, Rule 1 of the Code of Civil Procedure for the appointment of a receiver in respect of the management and business of the firm. Plaintiff/respondent herein prayed that a receiver be appointed to preserve the property, collect out standings, pay debtors, if any and to sell the assets for the purpose of division.
4. Defendant filed a counter affidavit. He contended that he had been preserving the property of the partnership for a long time. The petitioner was filed without any bona fide. He further contended that he had filed an appeal as A.S. No. 161/96 before the District Court, Calicut. It was further contended that a receiver cannot be appointed as a matter of course. Since there is no proof of any mismanagement, there was no reason to appoint a receiver. Another objection raised was that earlier the plaintiff had filed I.A. No. 2119/95 for the same releif and it was dismissed. Hence, this petition is filed to abuse the process of Court.
5. The trial Court, after hearing the parties, dismissed the above application. It took the view that there is no change in circumstance after the dismissal of I.A. No. 2119/95 and hence, the present application was barred by res judicata. It further held that there was no evidence to show that the respondent petitioner herein was misappropriating the firm for his own use detrimental to the interest of the respondent herein. The Court cannot appoint a receiver as a matter of course and it found fault with the plaintiff for not applying for the appointment of a receiver immediately after the termination of the partnership. Plaintiff preferred an appeal against the above order as C.M.A. No. 33/96 before the Sub Court, Kozhikode. It held that the dismissal of the earlier application for appointment of a receiver cannot be said to be res judicata. According to it, there was a change in circumstance in as much as a decree has been passed for accounts. It took note of the fact that the firm was running, at a loss for merely 20 years. Hence, it was of the view that it cannot be said that the appellant/ respondent herein was not justified in complaining that there was mismanagement. Hence, the Court allowed the application, set aside the order of the trial Court and directed the trial Court to appoint a receiver to take possession and management of the lodging house 'Swarga lodge. This Civil Revision Petition is filed against the above order.
6. Under Order 40, Rule I of the Code of Civil Procedure, the Court may by an order appoint a receiver of any property whether before or after the decree where it appears to the Court to be just and convenient. Thus, a discretion is left to the Court regarding the appointment of receivers. The words 'just and convenient' have been interpreted to mean that the Court should appoint a receiver for the protection of rights or for the prevention of injury, according to legal principles. The order is discretionary and the discretion must be exercised in accordance with the principles on which judicial discretion is exercised.
7. With regard to partnership cases, the question whether a receiver can be appointed has been considered by various authorities and decisions of Courts. Mulla C.P.C. 15th edition at page 2527 states thus :
"In considering the question of the appoint-ment of a receiver in partnership suits, adistinction has to be drawn between cases in which the contest is between partners and cases in which the contest is between partners on the one hand and non-partners on the other.
In the first class of cases, that is, where one partner seeks to have a receiver appointed against his co-partners, it is necessary to distinguish cases in which the partnership has already been dissolved from those in which the partnership is still substisting. If the partnership is already dissolved, the Court usually appoints a receiver, almost, as a matter of course."
Kerr on Receivers 16th edition at page 59 states thus:
'The readiness of the Court to appoint a receiver in partnership cases depends upon whether the partnership has been dissolved at the time when the application is made. If adissolution has clearly been effected by the service of the writ, or if the partnership has expired by effuxion of time, a receiver will readily be appointed.
though the appointment is not a matter of course, it will be enough to show that one of the former partners is delaying the winding-up and realisation of the business."
Woodroffe's Law of Receivers 6th edition at pages 116 and 117 states thus :
"The Court, therefore, will only act if it sees there is an actual present dissolution arising from the acts of the parties or that at the hearing it will dissolve the partnership .....
the Court will not, as a matter of course, appoint a receiver even where a case for dissolution is made. "It have frequently disavowed," said Lord Eldon, "as a principle of this Court that a receiver is to be appointed merely on the ground of a dissolution of a partership. There must be some breach of the duty of a partner or of the contract to partnership". When, however, in addition to the fact of a dissolution or right to dissolve some special ground is shown as that the member of the firm against whom a receiver is sought has done acts inconsistent with the duty of a partner and are of a nature to distroy mutual confidence ...
8. In Taylor v.Neate, 1888 (39) Ch Dn 538--it was observed as follows :
"After dissolution of a partnership by notice pursuant to the articles the Court will, until a sale of the business as a going conern, appoint a receiver and manager for the purpose, in the meantime, of preserving the assets by carrying into effect existing contracts and entering into such new contracts as are necessary for carrying on the business in the ordinary way, but so as not to impose, by speculative dealing or otherwise, onerous liabilities on the partners."
In Pini v. Roncoroni, 1892 (1) Ch Dn 633 --it was observed thus: "The mere fact of dissolution of a partnership does not give one partner an absolute right, as against his co-partners, to have a receiver appointed of the partnership business." In Sudhansu v. Maindra, AIR 1965 Patna 114 --a Division Bench of the Patna High Court observed as follows :
"It is well known that a receiver is to be appointed as a matter of course when a partnership is dissolved under the orders of a Court, or if the partnership has already been dissolved and any of the parties has come to the Court for seeking his reliefs due to him as an ex-partner. A receiver can be appointed to take charge of the partnership assets, collect the same and convert it into cash, if necessary, and to discharge the debts of the firm and thereafter divide the surplus between the partners. In a suit for dissolution of a partnership a receiver can also be appointed before the final adjudication if the circumstances of the case justify such a measure."
In Tilak Chand v. Darshan Lal, AIR 1985 J & K 50 -- the Court has given certain guidelines regarding the appointment of receiver with regard to dissolution of partnership. In K.G. Srinivas v. K.G. Venkatesh, ILR 1981 (2) Kant 1078: (AIR 1981 NOC 159 (Kant) ) the Karnataka High Court has held as follows at page 146 (of AIR) :--
"A receiver is to be appointed as a matter of course under the following two circumstances viz.,
(i) On a prima facie proof of dissolution of the partnership firm on the death of one of the partners, the surviving partners carrying on the business of the firm contrary to the provisions case contained in Section 47 of the Indian Partnership Act, in the aforesaid manner and without winding up the partneship affairs;
(ii) When all the partners are dead and only the heirs of the deceased partners are litigating;
receive support from the opinion expressed by the noted jurists; therefore, it is apt to refer to the same".
Even though it is stated that a receiver can be appointed as a matter of course, the Court will have to find whether some other circumstances exist, which necessitate the appointment of a receiver.
9. In the present case, it is found that the , defendants has not shown the accounts of the partnership to the plaintiff for the last so many years. Further, it is found that the business is being run at a loss and in spite of the fact that notice was served on the defendant terminating the partnership, he continued the partnership business. Hence, I agree with the Appellate Court that it is a case where a receiver should be appointed for the dissolution of the partnership.
Accordingly, the order in C.M.A. No. 33/96 is confirmed and the Civil Revision Petition is dismissed.