Andhra HC (Pre-Telangana)
B. Janardhan Gupta (Died) And Anr. vs B. Padmanabha Gupta on 4 February, 1993
Equivalent citations: 1993(2)ALT419
ORDER A. Gopal Rao, J.
1. Plaintiff is the appellant in this appeal. During the pendency of the appeal, plaintiff died and his son was brought on record as his legal representative.
2. For convenience, the parties will be referred to as they are arrayed in the suit.
3. The suit was filed for (a) partition and separate possession of plaintiff's one-half share in the plaint, 'A' and 'B' schedule properties and (b) directing the defendant to render a full and detailed account of the income from the plaint schedule properties.
4. Plaint 'A' schedule consists of immoveable properties and plaint 'B' schedule consists of rice mill, electric motor, starter, items of machinery and furniture in the rice mill.
5. The case of the plaintiff, as per the averments in the plaint is:- The defendant is his younger brother. Their father, Eswaraiah, was doing a petty business at the time of his death. Plaintiff and defendant were members of a Joint Hindu Family. The defendant was a minor at that time and he was brought up by the plaintiff till he attained majority. Plaintiff started his own business with M/s. Volkart Brothers as a broker in the year 1928 and continued that business till 1930. He started a rice and oil mill at Hindupur in 1950 in the name and style of 'B. Janardhana Gupta'. Plaintiff claims that this business is a separate business. Plaintiff and defendant purchased, under Exs.A-1 to A-6, site from various persons between 1942 to 1955 under registered sale deeds. They constructed the rice and oil mill and groundnut decorticator over that land purchased under Exs. A-1 to A-6 and jointly running the said business from the year 1950. Plaintiff shifted to Bangalore, due to health reasons, leaving the management of the business in the hands of the defendant. Since the defendant is acting adversely to the interests of the plaintiff, plaintiff filed the present suit.
6. The suit was resisted by the defendant, admitting the relationship between him and the plaintiff but denying the other averments in the plaint. It is stated that, after 1967 there is no joint business between the plaintiff and the defendant. Plaintiff shifted to Bangalore after the accounts are settled and assets of the joint family are divided between plaintiff and the defendant. On 1-1-1965, plaintiff and the defendant entered into a partnership and were doing business in the name and style of M/s. B. Janardhana Gupta and Brothers' till 31-8-1967, on which date the partnership was dissolved at the instance of the plaintiff. The defendant claims that the plaintiff has no share in the business or other assets after 31-8-1967. Defendant also claims that he is in possession and enjoyment of the suit properties for over the statutory period peacefully, openly and to the knowledge of the plaintiff and, therefore, acquired right to the said properties by adverse possession. It is further averred that the suit for partition and separate possession of plaintiff's share is not maintainable as the suit properties form part of partnership assets and the suit is barred by time.
7. On the basis of the above pleadings, the lower court framed the following issues on 11-7-1979:
1. Whether the business adverted to in the plaint is being jointly conducted by plaintiff and defendant?
2. Whether the dissolution pleaded by the defendant is true?
3. Whether the plaintiff is in joint possession and enjoyment of the plaint properties?
4. Whether the defendant has perfected his rights by adverse possession?
5. Whether the suit is in time?
6. Whether the Court-fee paid is not correct?
8. On 3-8-1981, the following additional issues were framed:
1. Whether the plaintiff is entitled to a half share in the plaint 'A' and 'B' schedule properties?
2. To what relief?
9. The plaintiff examined himself as P.W.I and two other witnesses and marked Exs. A-1 to A-6. Defendant examined none, but marked Exs.B-1 to B-11.
10. After considering the entire material on record, the lower court held that the business is not a joint business, it is a partnership business between the plaintiff and the defendant; that the partnership got dissolved; that plaintiff is not in joint possession of the plaint schedule properties; that defendant has not perfected his rights/ title by adverse possession; that plaintiff is not entitled to a share in the properties; that the suit is barred by time as it was not filed within three years from the date of dissolution of the partnership firm. In that view of the matter, the suit was dismissed. Aggrieved by the same, plaintiff has filed this appeal.
11. Sri. R. Prasad, learned counsel for the appellant/plaintiff contends that the properties continued to be the assets of the firm and they were not divided between plaintiff and the defendant; the nature of the properties as assets of the firm have not been altered; since the firm has no liabilities, plaintiff is entitled to half share in the properties even in the absence of a prayer for rendition of accounts; since plaintiff is not pressing for the relief of accounting against the defendant, the suit having been filed within 12 years, it is not barred by time and plaintiff is entitled for partition and separate possession of his half share in the properties.
12. Sri. T. Bali Reddy, learned counsel for the respondent/defendant contends that the suit, in substance, is filed for dissolution of the partnership and as the partnership was dissolved on 31-8-1967 on the basis of Ex. B-6 notice dated 31-8-1967, the suit filed on 28-12-1978 is clearly barred by time. He also contends that the suit for partition is not maintainable as against a partner in business.
13. In view of the rival contentions mentioned, the points that arise for determination in this appeal are:
1. Whether the suit is barred by limitation?
2. Whether the plaintiff is entitled for partition and separate possession of half share in the suit schedule properties?
14. Points 1 and 2:- The admitted facts are: (1) Plaintiff and the defendant are brothers. They purchased immoveable properties in their individual names and also in joint names under Exs.A-1 to A-6. The oil mill was constructed on the entire land covered by Exs.A-1 to A-6. (2) M/s. B. Janardhan Gupta & Brothers is a firm of which the plaintiff and the defendant are the partners. Plaintiff shifted to Bangalore in the year 1965, leaving the management of the business of the firm in the hands of the defendant. (3) Plaintiff prayed for partition of the suit schedule properties and for allotment of one half share in the same by metes and bounds and for delivering his one half share out of the said properties.
15. Admittedly, plaintiff and the defendant divided all other properties, except the properties belonging to the firm of M/s. B. Janardhan Gupta & Brothers. Ex.B-5 letter, dated 5-2-1965, written by the plaintiff to the Income -tax Officer, 'C Ward, Anantapur, will disclose beyond any doubt that the plaintiff and the defendant have entered into a partnership under the name and style to M/s. B. Janardhan Gupta & Brothers. The plaintiff in his evidence as P.W.I, has stated that Ex.B-5 contains his signature and the contents therein are correct. He also stated - "This suit is for-dissolution of the partnership and for rendition of accounts." Plaintiff also admitted having written Ex.B-6 letter on 31-8-1967 to the defendant. In Ex.B-6 letter plaintiff had stated - "In regard to the firm M/s. B. Janardhan Gupta & Brothers, in the changed circumstances, it is better to dissolve this firm also. You may treat this letter of mine as a notice of dissolution."
16. In view of the averments in the plaint, statements made in the deposition by the plaintiff as P.W.I and having regard to Exs. B-5 and B-6, we have no hesitation in holding that the plaintiff and the defendant are partners of M/s. B. Janardhan Gupta & Brothers and that they did the business as partners upto 31-8-1967, on which date the plaintiff wrote a letter Ex. B-6 for dissolution of the firm. Therefore, the lower court has rightly held that the business done in the name and style of M/s. B. Janardhan Gupta & Brothers is not a joint family business but it is a partnership business of which the plaintiff and the defendant are partners. We also hold that the lower court is right in holding that the partnership firm got dissolved on 31-8-1967, at the instance of the plaintiff, when he wrote Ex.B-6 letter giving notice for dissolution of the firm.
17. As stated earlier, the immovable properties on which the oil mill was constructed were purchased by the plaintiff and the defendant in their individual names and also jointly. Subsequent to the dissolution of the firm of M/s. B. Janardhan Gupta & Brothers on 31-8-1967, the properties viz., assets of the firm are not divided between the partners till now. The defendant in his written statement has not mentioned that the partnership has got any liabilities at all. On the other hand, it is specifically stated in the written statement "this defendant has been in possession and enjoyment of the suit properties for over a statutory period peacefully, openly and to the knowledge of the plaintiff, thus, this defendant acquired right over the suit properties by adverse possession". Therefore, the defendant is claiming exclusive title to the properties mentioned in plaint 'A' and 'B' schedules by adverse possession. The lower Court, after assessing the evidence on record, negatived the claim of the defendant that he has perfected his title to the properties by adverse possession. As mentioned already, the firm was dissolved on 31-8-1967 by virtue of Ex. B-6 letter dated 31-8-1967, written by the plaintiff to the defendant. The present suit was filed on 28-12-1978 by the plaintiff claiming one half share in the plaint schedule properties. Therefore, the lower court has rightly held that the defendant has not perfected his title to the plaint schedule properties by adverse possesion.
18. The learned counsel for the appellant submits that when once the partnership firm is dissolved, the properties of the firm vest in the partners and, therefore, each partner will be entitled for his share in the properties. He therefore, contends that except division of properties between the partners, there is nothing else to be done. He further submits that the finding recorded by the lower court that the suit is barred by limitation as the same is not filed within three years from the date of dissolution of the firm, is not correct.
19. Section 48(b)(iv) of the Indian Partnership Act is in following terms:
"48. Mode of settlement of accounts between partners:- In settling the accounts of a firm after dissolution, the following rules shall, subject to agreement by the partners, be observed:-
(a) .........
(b) The assets of the firm, including any sums contributed by the partners to make up deficiencies of capital, shall be applied in the following manner and order:-
(i) to (iii)............
(iv) the residue, if any shall be divided among the partners in the proportions in which they were entitled to share profits."
20. Relying upon Sub-clause (iv) of Clause (b) of Section 48 of the Indian Partnership Act, the learned counsel submits that after the dissolution of the partnership, as there are no liabilities for the firm, the properties that remained as assets of the firm have necessarily to be divided between the partners. He contends that, for mere division of the properties between the partners, there is no need to file the suit within three years and, therefore, the suit now filed is in time.
21. In Malabar Fisheries Co. v. I.T. Commr., Kerala, , the Supreme Court, while considering a case under Section 34(3)(b) of the Income-tax Act held:
"Now every dissolution must in point of time be anterior to the actual distribution, division or allotment of the assets that takes place after making accounts and discharging the debts and liabilities due by the firm. Upon dissolution the assessee-firm ceases to exist, then follows the making up of accounts, then the discharge of debts and liabilities and there upon distribution, division or allotment of assets takes place in terse between the erstwhile partners by way of mutual adjustment of rights between them. The distribution, division or allotment of assets to the erstwhile partners, is not done by the dissolved firm."
22. In Narayanappa v. Bhaskara Krishnappa, the Supreme Court, while dealing with the provisions of the Partnership Act held:
"The provisions of Sections 14, 15, 29, 32, 37, 38 and 48 make it clear that whatever may be the character of the property which is brought in by the partners when the partnership is formed or which may be acquired in the course of the business of the partnership it becomes the property of the firm and what a partner is entitled to is his share of profits, if any, accruing to the partnership from the realisation of this property and upon dissolution of the partnership to a share in the money representing the value of the property. No doubt, since a firm has no legal existence, the partnership property will vest in all the partners and in that sense every partner has an interest in the property of the partnership. During the subsistence of the partnership, however, no partner can deal with any portion of the property as his own. Nor can he assign his interest in a special item of the partnership property to anyone. His right is to obtain such profits, if any, as fall to his share from time to time and upon the dissolution of the firm to a share in the assets of the firm which remain after satisfying the liabilities set out in Clause (a) and Sub-clause (i), (ii) and (iii) of Clause (b) of Section 48."
23. As stated earlier, the firm was dissolved on 31-8-1967 and admittedly there are no liabilities for the partnership firm. The properties of the firm after dissolution have to be divided, in the absence of any liabilities, between the partners according to their shares in the partnership business.
24. The learned Counsel for the appellant has stated that the appellant/ plaintiff is not pressing the relief for accounting. Therefore, for the purpose of mere division of the residual properties after dissolution of the partnership firm, the suit need not be filed within three years from the date of dissolution of the firm. The defendant has not acquired title by adverse possession to the residual properties of the partnership firm as the suit itself is filed within 12 years from the date of dissolution of the firm. The defendant holds the properties of the partnership firm as a trustee for and on behalf of the other partner, viz., the plaintiff, in view of the fact that he did not acquire title to the said properties by adverse possession.
25. In this connection, it is pertinent to notice the observations made by the Supreme Court Karbali Begum v. Mohd. Sayeed, AIR 1981 SC 76, which run thus:
"Indeed even if this fact is admitted, then the legal position would be that the co-sharers in possession would become constructive trustees on behalf of the co-sharer who is not in possession and the right of such co-sharer would be deemed to be protected by the trustees."
26. In spite of the dissolution of the firm on 31-8-1967, the properties of the firm continued to be the assets of the partners of the firm and, therefore, the failure of one partner to bring a suit for partition will not result in the other partner becoming the owner of the entire properties. Otherwise, it would amount to unreasonable and unjust enrichment of the defendant, which is clearly opposed to Public Policy. In the face of the finding that the partnership was dissolved, there are no partnership debts and the appellant's share is to the extent of half of the partnership assets to drive the appellant to another suit is but sterile legalism and so we think we should not do so. The finding as to the proportions of the shares of the plaintiff and the defendant in the partnership assets will, undoubtedly, constitute an issue of estoppel in any subsequent litigation. Viewed in this light, the finding recorded by the lower court that the suit is barred by limitation cannot be sustained.
27. Sri T. Bali Reddy, learned counsel for the respondent/defendant, relying upon the decision in Sudarsanam Maistri v. Narasimhulu Maistri, ILR 25 Madras 149, contended that the suit for partition of partnership assets does not lie and the remedy of the plaintiff is only to file a suit for dissolution of the partnership and for accounts. He, therefore, contends that for filing the suit for dissolution of the partnership and for accounts, the claim is barred by limitation, and no relief can be granted to the plaintiff for division of the properties.
28. In the decision, Sundarsanam Maistri's case (4 supra), the suit was brought by the plaintiff for taking an account of the property alleged to have been jointly acquired by the plaintiff and the first defendant therein as undivided brothers, for ascertaining the respective shares of the plaintiff and the first defendant therein and for a decree awarding to him his share in such property. In that case, the existence of partnership itself was in doubt and the court had to decide on the basis of evidence available as to whether there is partnership between the plaintiff and the first defendant. Therefore, that decision is distinguishable on the facts. In the present case on hand, admittedly, there was partnership in existence and that partnership had dissolved and admittedly there are undivided properties which are the assets of the dissolved firm.
29. For these reasons, we hold that the suit is in time and the plaintiff is entitled for partition and separate possession of his half share in the suit schedule properties. Both points 1 and 2 are answered accordingly.
30. In the result, this appeal is allowed setting aside the judgment and decree under appeal. Parties to suffer their respective costs in this appeal.