Andhra HC (Pre-Telangana)
N. Satyanarayana Murthy And Ors. vs M. Venkata Bala Krishnamurthy on 24 August, 1988
Equivalent citations: AIR1989AP167, AIR 1989 ANDHRA PRADESH 167, (1987) 2 ANDH LT 881
Author: K. Ramaswamy
Bench: K. Ramaswamy
JUDGMENT
1. The appeal of seven defendants against a preliminary decree of dissolution of Minerva Talkies, Vizianagaram, a partnership firm (for short "the firm") of which they and the respondent-plaintiff are partners, rendition of accounts and payment of his l/5th share granted by trial court raises a question whether it is "just and equitable" to dissolve the firm.
2. The admitted facts are that on Feb. 1, 1947, a vacant site and a dilapidated building were purchased and a cinema theatre was constructed thereon and from June 2, 1949, the firm started exhibiting cinematographs. Initially the respondent had l/6th share, but on his purchasing the share of another partner he augmented to l/5th share thereof and invested Rs. 35,0007-. The appellants together have 4/5th share(the details of their respective shares are not necessary). The partnership deed was executed on Jan. 20, 1970, but due to change of partners another unregistered partnership deed Ex. B1 dated November 9 1975 was executed. From its inception the 1st appellant was the managing partner, the rest including the respondent are the "sleeping partners". The 1st appellant is a qualified Sound and Radio Engineer having had wide experience in management of cinema business. He appointed initially one Bramhajirao and on his demise his son Ramakrishnarao as the Manager and he was getting the theatre managed. The firm is an on-going business earning good profits. For long over 27 years none of the partners including the respondent had any mistrust in in the 1st appellant or grievance in his I management. The 1st appellant has been paying at' the rate of Rs. 500/-to each partner including himself. He opened an account in the firm's name in a bank and he has been crediting the residue amount to the "reserve fund". He also constructed shops from it and leased them out to the tenants, rents collected arc also being credited to the account. The partnership deed Ex. Bl provides thus : Clause(i) relates to appointment of the 1st appellant as the managing partner to run the theatre on fixed remuneration; Clause (ii) relates to the respective shares; Clause (iii) enjoins to settle the accounts every year by March 31; Clause (iv) empowers to admit hew partners with the consent of all; Clause (v) which is material for I the purpose of this case reads thus :
"If any partner is "not satisfied with the management of the managing partner and with the management" he "cannot ask for the dissolution of the firm," but he can give to the managing partner one month's notice so as to enable the Managing Partner to close the accounts up to that date and ascertain "the retiring partner's" share inclusive of the profits acquired up to that date and can take back the amount thus found due to him."
Clause (vi) empowers the members to borrow as loan from the firm with interest at 12% p.a. subject to the availability of funds; Clause (vii) reserves to incorporate further conditions by mutual consent. The partners are obtaining loans from the reserve fund. Respondent too had the benefit and was charged interest at the rate of 12% p.a. as reflected in the letter Ex. A7 dated Dec. 21, 1970. Every month copy of the accounts are being regularly sent along with fixed amount to and received by all the partners. They are being audited annually by a qualified auditor, the firm and partners arc paying their respective income-tax. At no point of time there was any dispute regarding the correctness of the accounts or the liabilities of the parties or the profits derived by the firm. These are the undisputed facts.
3. It would appear that the respondent was in financial stringency and to tide over the same he offered to sell his share in the firm valuing at Rs. 1,80,000/- and the first appellant agreed to purchase but when it was not agreed to by others, he negotiated for sale of the firm itself as reflected in his letter Ex. B2 dated Dec. 5, 1973. It is now an admitted fact that he offered to sell his share at Rs. 1,20,0007- to third parties. But when it was turned down it has ignited the respondent to cause the notice Ex. A5 dated March 1, 1976 issued imputing erosion of his confidence reposed in the 1st appellant; accounts were not being settled; the 1st appellant in collusion with the manager Bramhajirao, manipulated the accounts; misused the reserve fund by diverting to his cinema production business at Madras; by lending on interest to third parties and without being credited to the account of the firm or to the knowledge of the partners, the 1st appellant, thereby is "culpable for misappropriation and falsification of accounts". He is "guilty of fraud and misappropriation" by "acts of commission and breach of confidence reposed." It was denied by the first appellant in reply Ex.A6 dated March 13, 1976 with a positive statement that accounts were settled in terms of Clause (v) of Ex. Bl and the respondent was relieved as partner from Feb. 29, 1976 He was called upon to produce income-tax clearance certificate so as to enable them to pay his share of the amount. Thus the suit came to be filed. The respondent reiterated all the averments in the plaint, with an additional averment that he was unilaterally and deliberately excluded from the firm in collusion with other partners and thereby he was dismissed from the firm, thereby confidence he reposed in the first appellant "was rudely shaken". These allegations were again refuted in the common written statement of all the appellants contending that the firm is not liable to dissolution, Clause (v) of the partnership deed Ex. Bl provides a right to a partner who is dissatisfied with the management to retire, by issue of one month notice to the managing partner so as to enable the Managing Partner to close the account up to that date and to ascertain his share inclusive of the profits. Therefore action was taken in terms thereof and it is neither an expulsion nor dismissal, but an action to retire the respondent in terms of the contract and intimation given under Ex.A6.
4. The trial court framed six issues of which fourth issue relates to maintainability of the suit in terms of Ex.Bl which was heard as a preliminary issue in I.A. No. 566/76 and by order dated March 14, 1977 it was held that the suit is maintainable, against which C.R.P. No. 1446/76 was filed and this Court dismissed it reserving the right to raise the same at the time of final hearing. The trial court held that the finding on maintainability of the suit became final; the accounts were not settled; or the meetings were not being held, legal share of the profits were not being paid; the 1st appellant was dealing with the firm "according to his wishes and fancies." It is beyond his power and against the provisions of law. The statement of accounts pursuant to Ex.A6 is not correct, the respondent was unilaterally expelled from the partnership with effect from March 1, 1976; it is illegal, void and hit by Section 32 of the Indian Partnership Act (Act 9 of 1932) (for short "the Act"), the 1st appellant mismanaged the affairs of the business of the firm, caused great prejudice to the respondent by forcibly retiring him from the firm without any authority, the respondent lost confidence in the management by the 1st appellant; and accordingly directed dissolution of the partnership with effect from Feb. 13, 1980 (date of suit). It appointed both the appellants' advocate as well as the respondent's advocate as Commissioners with direction to take accounts from Jan. 9,1973 Ex.Bl partnership deed till date of suit, directed them to take accounts of the firm immediately by getting them audited by an Auditor of their choice with the leave of the Court, to verify the daily collections without changing the existing management and the staff, estimate the present day market value of the assets, determine the value of the l/5th share of the respondent, adjust the loan amounts received by the appellants without interest not exceeding his l/5th share out of the amount so fixed, in case the loan amount exceeds his l/5th share, charge the same at 12% p.a. interest, directed to prepare a statement of account etc.
5. It is seen that under Ex.Bl partnership deed provides no duration. It is an on-going firm, therefore it is a partnership at will. The relationship of the partnership arises from the contract Ex.Bl. Secion 11(1) of the Act provides that -
"subject to the provisions of this Act the mutual rights and duties of the partners of a firm may by determined by contract between the partners, and such contract may be expressed or may be implied by a course of dealing.' Section 32(1) of the Act gives right to a partner to retire from partnership either (a) with the consent of all other partners; (b) in accordance with an express agreement by the partners; or (c) where the partnership is at will, by giving notice in writing to all the other partners of his intention to retire. The other sub-sections are not necessary and hence omitted. Section 33(1) prohibits expulsion of a partner which reads thus:
"A partner may not be expelled from a firm by any majority of the partners, save in the exercise in good faith of powers conferred by contract between the partners."
In Ex.Bl there is no express power conferred on the partners to expel a partner from the firm. Clause (v) of the contract Ex.Bl provides a right to retirement in case a partner is "not satisfied with the management of the Managing Partner". The contention of Sri Poornaiah, learned counsel for the appellant, therefore, is that there is no power for the respondent to seek dissolution of the firm except his retirement. On receipt of Ex.A5 notice since the respondent expressed for the first time his dissatisfaction with the management by the 1st appellant who is a managing partner it was treated to be a notice as contemplated under Clause 5 and accordingly he was made to retire, but not an expulsion as contended and countered by Sri J. V. Suryanarayana Rao, learned counsel for the respondent. Therefore, as was found favour with the court below, the question at issue is, whether it is an expulsion or a retirement.
Section 33(1) of the Act prohibits expulsion of a member from a firm by majority except when the power is exercised in good faith, that too that power is traceable to a contract between the partners. As seen Ex.Bl does not provide any power of expulsion. The question, therefore, is whether the action taken by the appellants is an expulsion as contended by the respondent or is a retirement as contended by the appellants.
6. A reading of the evidence and the notice Ex.A6 in the light of Section 32,1 am inclined to take the view that the action taken by the appellants only appears to be in terms of Clause (v) of the contract. It is an admitted fact that for the first time the dissatisfaction regarding the management by the Managing Partner was voiced by the respondent in the suit notice Ex.A5. The evidence also does not establish any expression of such dissatisfaction on any prior occasion by any partner much less the respondent, except for the first time under Ex.A5 notice. Therefore, quite legitimately the appellants construed it to be a dissatisfaction in terms of Clause (v) of Ex.B1 and an expression of respondent's intention to retire from the partnership. Accordingly they consented to his retirement and asked the respondent to retire from the next accounting year March 1, 1976. Therefore, I find that it is not an expulsion but is one of retirement of the respondent from the partnership.
7. The question then is, whether the respondent is entitled to seek dissolution of the firm. The contention of Sri Suryanarayana Rao is that the 1st appellant as DW 1 admitted that he was sending collection reports every month, thereby made an implied admission that the accounts are not settled in terms of Clause (iii) of Ex.Bl equally only fixed monthly amounts were being paid crediting the residue to the "reserve fund" operated by the managing partner. It is therefore a breach of contract. It is further argued that the accounts were not shown to the partners, the respondent was driven to a corner; they were not prepared either to sell his share at a reasonable price or permit the third parties to become partners, they intended to grab the respondent's share at book value, when he complained of the same and asked for convening a meeting of the partners it was not done, on the other hand he was unilaterally expelled from partnership and therefore he has no option except to invoke Section 44 of the Act seeking dissolution. We have on record documentary evidence and oral evidence of the respondent as PW 1 and the first appellant as DW 1. I have heard extensively the learned counsel on either side and given my most anxious consideration and read the evidence with anxiety. On a fair and critical reading of the evidence I am not inclined to agree with the respondent's theory set up or argued as across the bar. It is already seen that the averments in the suit notice and as repeated in the plaint are that the managing partner, the 1st appellant has committed misfeasance or malfeasance to the detriment of the firm, the Manager "was always playing -second fiddle to the nefarious activities" of the 1st appellant and thereby he benefited himself by misuse of the firm funds in his private business, production of cinemas, committed breach of the confidence reposed by the partners etc. The respondent as PW 1 admitted that at no point of time he made any complaint against the management of the firm. As already seen it is an on going firm well managed, capital assets were improved and huge profits are being earned. No complaint by any partner was made at any time, auditing was done regularly, subjected , to income-tax returns, accepted by the income-tax and sales tax authorities without any demean our. The partners including the respondent were paying income-tax from the profits of the firm, apart from the firm paying the income-tax and sales tax. Thus the charge that the 1st appellant Managing Partner committed breach of the contract and thereby lost confidence etc. remained to be averments in desperation, carrying no conviction to the court. No meetings were ever held in all the 39 years. It is admitted that he was sending every month statements of collection, expenditure and profits and of fixed profits are being paid and received by the partners. No arrears of taxes due. Reserve Fund is kept in deposit in a hank to the credit of the firm account. No traces of evidence in diversion for personal use of the first appellant nor of defalcation or mismanagement. Section 44(d) of the Act on which Mr. Suryanarayana Rao places reliance provides that a partner, other than the partner suing, willfully or persistently commits breach of agreements relating to the management of the affairs of the firm or the conduct of its business, or otherwise so conducts himself in matters relating to the business, provides sufficient ground for dissolution by the Court. But the evidence shatters the hope of the respondent of his reliance on Section 44(d). Alternatively, the respondent has fallen on Clause (g) "any other ground which renders it just and equitable'1 as a last straw on camel's back to dissolve the firm, but received rebuff from Sri Poornaiah, contending that the contract Ex. B1 saddled the respondent with no power to seek dissolution.
8. Chapter VI of the Act deals with dissolution and Section 40 empowers that a firm may be dissolved with the consent of all the partners or in accordance with the contract between the partners. Bx.Bl does not empower a partner to dissolve the firm nor the appellants consented to. So Section 40 does not apply. Section 41 provides compulsory dissolution which does not apply to the facts. Section 42 provides happening of certain contingencies for dissolving the firm to which facts of this case are not attracted. Section 43(1) provides that where the part- nership is at will the firm may be dissolved by any partner giving notice in writing to all the other partners of his intention to dissolve the firm. Sub-section (2) provides the dale of dissolution. Section 44 gives power to the Court to dissolve a firm. Thus a firm may be dissolved either by the consent of (he parties or in accordance with the terms of the contract or happening of certain events or by one of the partners giving a notice of dissolution, if it is a partnership at will or by the Court if the circumstances enumerated in Clauses. (a) to (g) are attracted. Section 42 provides dissolution of a partnership subject to the contract to of the parties. Section 43 gives a statutory right to a partner to dissolve a partnership by giving a notice in writing to all the other partners of his intention to dissolve the firm. It is not the ease of the respondent nor in fairness contended by Sri Suryanarayana Rao, that Section 43 can be taken aid of. A fair reading of Ex.A5 also does not indicate it to be a notice of dissolution. On the other hand Clause (9) of Ex.A5 manifests his intention "to file a suit for dissolution."-Therefore. I the only provision under which the firm can be dissolved is that under Section 44 of the Act- The question, therefore, is whether the respondent is entitled to invoke Section 44 of the Act.
9. In Rehmatunnissa Begum v. Price, AIR 1917 PC 116: ILR42 Bom 380, Sir Lawrence Jenkins speaking for the Board held that "a partner's claim to a decree for dissolution rests in its origin, not on contract, but on his inherent right to invoke the Court's protection on equitable grounds. In spite of the terms in which the rights and obligations of the partners may have been regulated and defined by the partnership contract". This was followed in V. Venkalaswami v. G. Venkalaswami, by Safyanarayana Rao, J. It was held that Section 44 is not made subject to the contract between the parties and gives a right to the partner to seek the assistance of a court to have a partnership dissolved on grounds specified in the section. Section 11 makes the contract between the parties subject to the provisions of the Act and Section 44 gives power to the Court. The same view was held by Jaswant Singh, J. (as he then was) in Sardar Hardutt Singh v. Mukha Singh, AIR 1973 J and K 46. Therefore, the contract Ex.B1 is subject to Section 44. Accordingly, I bold that the suit is maintainable under Section 44 despite the omission to provide such a right to dissolution under Ex.Bl contract and the respondent is entitled to invoke and avail of Section 44 of the Act. The contention of Sri Poornaiah that the ratio in Venkalaswami's case (supra) is no longer a good law in view of Vishnu Chandra v. Chandrika Prasad, and Mohan Reddy v. Rama Subbareddy, (1984) 2 APU 84 : (AIR 1985 NOC 134) is not tenable. In fact this question did not arise in those cases.
10. The heart of the matter, therefore, is whether the court below is justified in law to dissolve the firm. As already seen, that the Court directed dissolution on the grounds enumerated herein before and Sri Suryanarayana Rao seeks to place reliance on Clause (d) of Section 44. It is already seen that the claim of the respondent of the loss of' confidence and the acts of misfeasance and malfeasance or breach of confidence etc. are blown off as without substance. Admitted fact is that the respondent was subjected to financial problems and to tide over the same he attempted to sell or alienate his l/5th share in the firm and when his attempt was frustrated by the refusal of the appellants he was driven to break off from the firm. The only solution is the dissolution. Obviously as a last string in his bow, the respondent laid the suit for dissolution. But as already held that the allegations made in the suit notice Ex. A5 or in the plaint bear no solid foundation except a desparate attempt to wriggle out from the partnership. Therefore, 1 have no i hesitation to hold that Clause (d) of Section 44 does ! not apply.
11. The question then is, whether the court below is justified to exercise the power i under Clause (g) of Section 44 to dissolve the firm.
What is the meaning of the phrase "just and equitable" and under what circumstance it can be invoked to dissolve a firm. The further question then is whether the respondent can invoke Section 44(g) when the enumerated grounds in Section 44(d) are not attracted. It is well settled that the clause "just and equitable" cannot be read ejusdem generis with the preceding enumerated clauses in a given section. Though the enumerated conditions of the Clause (a) to (f) are not available to exercise the power to dissolve a firm, still the court can exercise the power under residue power given in "just and equitable" clause. In R. E. S. Corpn. Ltd. v. Nageswara Rao, ; J. A. Raghurama v. East Coast T. and S. Co., AIR 1958 Andh Pra 259 and Hind Overseas Pvt. Ltd v. R. P. Jhunjhunwalla, it was held that the phrase "just and equitable" clause in VI under the provisions of the Companies Act are not to be construed ejusdem generis with the enumerated subjects in the preceding Clause I to V. The same ratio applies here. I hold that "just and equitable" clause in Section 44(g) cannot be read ejusdem generis with the preceding enumerated Clause (a) to (f) of Section 44 of the Act. The Court has power to exercise its jurisdiction under Section44(g) which is independent of the preceding Clause (a) to (f).
12. The phrase" just and equitable "under Section 44(g) does not appear to be subject of any decision. Let us, therefore, track on the first principles. The clause "just and equitable" for the first time came to be considered In re Yenidji Tobacco Co. Ltd., (1916) 2 Ch D 426. Lord Cozens Hardy M.R.'s statement has attained celebrity. It was held therein that when a complete deadlock had arisen, on account of the conduct of the two partners who constituted a company, the substratum of the company was gone and that it was "just and equitable" within Section 129 of the Companies (Consolidation) Act, 1908, to wind up the business. This decision was approved by the Privy Council in Loch v. John Blackwood Ltd., (1924) AC 783 and it was held therein that the doctrine of ejusdem generis rule does not apply when the statute gives power after enumerated circumstances are given to the Court in wide language to wound up a company. Lord Shaw speaking for the Board, held at pages 787 and 788 that consideration of justice and equity in pronouncing an order for winding up ought to proceed upon-a sound induction of all the facts of the case and should not exclude, but should include circumstances which bear upon the problem of continuing or stopping courses of conduct which substantially impair those rights and protections to which shareholders, both under statute and contract, are entitled. It was further held thus:
"It is undoubtedly true that at the foundation of applications for winding up, on the "just and equitable" rule, there must lie a justifiable lack of confidence in the conduct and management of the company's affairs. But this lack of confidence must be grounded on conduct of the directors, not in regard to their private life or affairs, but in regard to the company's business. Furthermore the lack of confidence must spring not from dissatisfaction at being outvoted on the business affair or on what is called the domestic policy of the company. On the other hand, wherever the lack of confidence is rested on a lack of probity in the conduct of the company's affairs, then the former is justified by the latter, and it is under the statute just and equitable that the company be wound up."
In that case complete loss of confidence brought about winding up of the company and was upheld.
13. In D. Davis and Co. Ltd. V. Brunswick Ltd., AIR 1936 PC 114 it was held by the Privy Council that the position of the Court in determining whether it is just and equitable to wind up the company requires a fair consideration of all the circumstances connected with the formation and the carrying on of the company and the common misfortune which had be fallen the two shareholders in the company does not involve the consequence that the ultimate desires and hopes of the ordinary shareholders should be disregarded merely because there is a strong interest in favour of liquidation naturally felt by the holders of the preference shares."
14. In Ebrahimi v. Westbourne Galleries Ltd., (1973) AC 360 at 376. Law Lord Wilberforce reviewed the entire case law arid held thus "a considerable body of authority in favour of the use of the "just and equitable" provision in a wide situation including those of expulsion from office the principle has found acceptance beyond all commonwealth I jurisdiction.
14A. In Rajahmundry Electric Supply Corporation Ltd. v. Nageswara Rao, (supra) the word "just and equitable" incorporated in Section 162(vi) of the Companies Act, 1913 came up for consideration, While reviewing the English case law Venkatarama Ayyar. J. speaking for their Lordships of the Supreme Court held that -
"the words "just and equitable" are not to be construed "ejusdem generis" with the matters enumerated in Clause (i) to (v) and, therefore it was held that where mismanagement of the directors is a ground for a winding up becomes a question to be decided on the facts in each case. It was further held that where nothing more is established than that the directors have misappropriated the funds of the company, an order for winding up would not be just or equitable, because if it is a sound concern such an order must operate harshly on the rights of the shareholders. But if, in addition tosuch misconduct, circumstances exist which render it desirable in the interests of the shareholders that the company should be wound up, there is nothing in Section 162(v) which bars the jurisdiction of the Court to make such an order.
In that case apart from the alleged mismanagement there were other grounds and so the order of winding up was upheld. This was followed by this Court in Raghurama v. East Coast T and S. Co., (AIR 1958 Andh Pra 259) (supra). Satyanarayana Raju, J. (as he then was) who applied the doctrine of just and equitable ground in Section 433 of the Companies Act, 1956 to wind up the company. The matter again came up before the Supreme Court in Hind Overseas Pvt. Ltd v. R. P. Jhunjhunwalla, (supra) and Goswami, J. speaking for their Lordships of the Supreme Court reviewed the entire case law regarding the ambit of the word "just and equitable" and the circumstances to invoke' the same in winding up the proceedings, it was held that the clause "just and equitable" under Section 433 of the Companies Act, 1956, is not to be read as being ejusdem generis with the preceding five clauses, the just and equitable clause leaves the entire matter to the wide and wise judicial discretion of the Court, the only limitations are the force and contents of the words "just and equitable".
15. It was further held that the general interests of the shareholders may not be readily sacrificed at the altar of squabbles of directors of powerful groups for power to manage the company. In para 36 it was further held that the court may refuse to make an order of winding up if it is of opinion that some other remedy is available to the petitioners and that they are acting unreasonably in seeking to have the company wound up instead of pursuing that other remedy. In para 43 it was further held that on the facts in that case that the allegation that the company cannot run smoothly in the best interest of the general shareholders cannot be countenanced. Accordingly, upheld the ' order dismissing the winding up petition by the company Law Judge.
16. In the Commentaries on Law of Partnership by Story, 1881 Edition, it is stated in Section 272 under Chapter Tacit or Implied Renunciation of the Partnership, it is stated thus: --
"As to dissolution by tacit renunciation or by implicit from circumstances, it may arise in various ways as by withdrawal of a partner from the business of the partnership.....
Vinnius has enumerated several modes under Roman Law by which a tacit renunciation to the effect upon the ground of their inconsistency with the relationship of partnership .....
(1) by a novation of the action, pro-socie effected by one of the partners; (2) by an action brought out by one partner against the other for the purpose of dissolving the partnership. In the foot-note it is stated that a proposal for a dissolution, not accepted, is not a dissolution."
17. Mukerji on Indian Partnership Act, 3rd Edition, 1974 at page 370 para 22, the scope of the word "just and equitable under Section 44(g) has not been defined precisely, has stated thus -
"But, it is submitted, that the Court's power to act under this sub-section is virtually unlimited and cannot be restricted to the particular instances of the cases enumerated in the preceding Sub-sections; and, whenever it is no longer possible to carry on the partnership business according to the true intent and meaning of the articles of co-partnership or to carry out essential purposes of the company with a view to which it was brought into being, it will be "just and equitable" for the court to determine the partnership."
18. Lindley on Partnership, 14th Edition at page 628 has staled thus :
"The court ought not to fetter itself by any rigid rules; and any case in which "it is no longer reasonably practicable to attain the object with a view to which the partnership was entered into or to carry out the partnership contract according to its terms will", it is apprehended, be within this section. Though the provisions in the articles of partnership will not bind the court in the exercise of its discretion it will nevertheless take them into consideration."
19. Pollock and Mulla on Sale of Goods and Partnership Act, 4th Edition, at page 379 stated that" just and equitable" meanshowever something more than "convenient". A mere opinion of the Court that dissolution would on the whole be the best course is not enough.
20. In the light of the above discussion it must be held that the width of the words "just and equitable" in Section 44(g) of the Act is of wide import, with unfettered discretion on the exercise of the power by the Court and it is incapable of precise definition. But itself is a limitation upon the court to exercise the discretion wisely taking into account not only the true intent and meaning of the articles of the partnership but also general interest of all the partners; the essential purpose for which the partnership has been formed and the detriment the partnership suffers from, while at the same time assuasing the rights of the aggrieved partners. The court would induct into all relevant consideration eschewing irrelevant or its inclination to dissolve the firm keeping in mind that it operates harshly annihilating the on going business on profitable lines, it must find whether it is no longer reasonably possible to carry the business according to true interest and meaning of the articles of the partnership. Each case furnishes its own peculiar facts calling for applicable or non-applicable of Clause (g). The court also must endeavor to see whether any alternative just relief without dissolving the firm could be granted to the plaintiff. On considering all the pros and cons if the court is of opinion that equity and justice demands dissolution, it is perfectly open to the Court to exercise the power under Section44(g) of the Act. The cases dealt by the Privy Council, House of Lords and the Supreme Court are cases relate to the Company, but the meaning and purport is the same shedding illumination in its application to varied situations, though the partnership is founded on contract and not on status.
21. Lindley on Partnership, 14th Edition, at page 630 it is stated thus :
In order to avoid the necessity of a general dissolution when a partner may wish to retire, special provisions are frequently introduced into partnership articles; but it is not frequently found that, owing to unforeseen circumstances, these provisions cannot be carried into effect; and when that is the case," a dissolution, with its usual consequences is the only alternative if a partner is to retire otherwise than by the consent of his copartners."
At page 632 under the caption "Driving a partner to a dissolution" while emphasising the attempt by a partner who has driven to seek a dissolution of the partnership it is stated thus :
"But it need hardly be said that a scheme of this kind will if possible, be frustrated; and redress may be obtained in such a case wihtout dissolving the partnership,"
22. In Vishnu Chandra's case (supra) Desai, J. speaking for their Lordships of the Supreme Court while affirming the right in the plaintiff for dissolution, construed the terms in the partnership deed and held that without dissolving the partnership the accounts can be taken and a preliminary decree could be drawn in that regard for giving the relief to a retiring partner though the partnership does not provide for a right to retirement.
23. It is undoubtedly true as distinguished by Sri Suryanarayana Rao, that in that case without going into the question whether the partnership is at will the question considered was whether the plaintiff is entitled to retire without dissolution of the firm and given the above relief. Equally in N. Pothufaju v. M.V. V. Satyanarayana, AIR 1949 Mad 686 was a case where the site belonging to the plaintiff and without site the super structure of the mill cannot he sold. In those circumstances dissolution was not upheld as rightly distinguished by Sri Suryanarayana Rao.
24. In Morris Robert Syers v. Daniel Backhouse Syers, (1876) 1 AC 174(HL) Lord Cairns(The Lord ChancelIor) in a case where' as against wishes of seven partners one of the partner is seeking dissolution, it has been held thus:
"it appears to me that, looking at the nature of this business' and looking at the very small interest which was taken in it by the respondent, it would certainly not be desirable in this case to have a sale or to bring these premises to the hammer for the purpose of ascertaining what sum ought to be given for them."
Thus the decree of dissolution was not upheld in that case. The ratio squarely applies to the facts of the case.
25. In Gur Dayal Prasad v. Raghunath Prasad, and the following relied on by Sri Poornaiah, the Division Bench has held that the partnership provided for the withdrawal of the partner who considered his rights have been purchased or desired to sell his share for some reason took away the right of any partner to dissolve the partnership and to bring the business of the mill to a standstill. It was held in those circumstances, the right to dissolution available under Section 44 was held not available.
26. In Pannalal v. Padmabati, the same view was taken by the Calcutta High Court. In Mohan Reddy v. Ramasubba Reddy, (1984) 2 APLJ 84 at page 88 : (AIR 1985 NOC 134) (supra) my learned Brother Kodandaramayya, J. speaking for the Division Bench has held that accounts can be settled without dissolving the firm.
27. From the above discussion it is clear that though there is a wide power under Section 44(g) of the Act while exercising equitable Jurisdiction to dissolve a firm, the Court has to consider the circumstances whether it would warrant dissolution or without dissolution whether the firm can be allowed to subsist in the interest of the remaining partners without jeopardising the right of retiring a partner. The Court would be circumspect and take into account all the facts and circumstances and would mould the relief on the exigencies available on the facts in a given case.
28. The question, therefore is, whether the facts in this case, warrant dissolution. As already stated that the respondent is having only 1/5th share. It is an on-going firm earning profits and the assets were improved. The management is on sound lines. None of the partners except the respondent had any grievance in the management by the 1st appellant. There is no detriment to the interest of any of the partners. Therefore, by the hammer of dissolving the firm not only the goodwill would be lost but also a harsh on sought annihilating the existence of a firm which otherwise existed on sound lines, for over 27 years prior to the suit. Therefore, I have no hesitation to hold that the facts and circumstances do not warrant dissolution of the firm. It is next contended by Sri Suryanarayana Rao, that the trial Court exercised discretionary power and placing reliance on Rehamtunnissa Begum's case (AIR 1917 PC 116) (supra) argued that the appellate Court would not imperil the discretion exercised by the trial Court. If the contention is subscribed the co-extensive power of the appellate Court would be rendered fruitless. It is true that the Privy Council pointed out in that case thus :
"It cannot be said that the court acted capriciously or in disregard of any legal principles in exercise of its jurisdiction which can fairly be recorded as amply warrant for the purpose of court's discretion."
In that case the defendant was doing his own business apart from the partnership business. Under those circumstances, dissolution was ordered by the trial Judge and confirmed by the Privy Council though interfered by the appellate Court. It must be remembered that if the broad contention receives credence then the very purpose of judicial review will be scuttled and the decree of the trial Court, though founded on untenable grounds, cannot be interfered with by the appellate court as a Court of equity and conscience. It may amount to mere thumb and a capricious decree of the Court below has to be affirmed It may be made clear that before disturbing the decree of the trial Court all the facts and circumstances that weighed with the court below are to be given due credence and after due consideration it is open to the appellate Court on the facts and circumstances in a given case either to affirm or reverse the decree. T accordingly hold that the appellate Court's discretion is not fettered to interfere with the decree of the trial Court.
29. The contention of Sri Suryanarayana Rao in A.S. No. 1085/80 is that the Court below committed two errors viz., directing to take the accounts from the date of the suit and also appointing advocates as Commissioners instead of appointing a Receiver. It is already seen that till the date of Ex. A-5 notice, there are absolutely no disputes. The trouble started only when the offer to sell his share either to the appellants or to the third parties was turned down, he laid the suit. On receipt of Ex. A-5 notice the appellants claim to have settled the accounts and directed the respondent to produce the income-tax clearance certificate so as to enable him to receive his share. Thus it could be seen that anterior to Ex. A-5 dated March 1,1976, viz., up to the accounting year ending with Feb., 29, 1976 there are' no disputes, Therefore, the respondent would be entitled to have his share ascertained and accounts settled from the accounting year's starting from March 1, 1975. Therefore, the Court below has committed' error in directing rendering of accounts from the date of suit i.e., Feb., 13,1980 or till date of leasing out the' theatre. Accordingly, the respondent is1 entitled-to have the' accounts settled' from March 1,1975 till date of suit i.e., Feb., 13,1980, 'It is true as contended by Sri Suryanarayana Rap, learned counsel for the respondent that in a matter for dissolution of partnership, the appointment of Receiver to take over the management of the dissolved partnership and to work out the rights of the parties is almost a matter of course. But discretion is given to the Courts, in given circumstances whether to appoint or other mode of relief could be given. The Court below with a view to assuage, any mistrust either in the Receiver or to avoid future onslaught of bias by either party against him appointed the advocates of both 'parties as Commissioners so that the confidence of the parties would continue to subsist till the matter is completely set at rest. Accordingly, I hold that the appointment of advocates of both the parties as Commissioners is not illegal on the facts of the case.
30. As already seen that the dissolution of the partnership is not warranted on the facts of this case. The need to go into the contention on either side regarding the date from which the decree of dissolution becomes effective is unnecessary. I hold that there is no need for dissolving the firm but appropriate relief could be granted under Section 44(g) of the Act. It is admitted that the theatre and the shops are leased out. Under Clause (vi) of Ex. B-1 the partner is liable to pay interest at 12% on the borrowings from the reserve fund. In para 4 of the preliminary decree, the Court below has directed the Commissioners to take charge immediately of the management of the partnership firm, to have the accounts audited, ascertain the l/5th share ~of the respondent' in the firm, including goodwill, adjust the loan taken by the respondent without charging interest to the extent of l/5th share and to charge 12% interest in excess thereof; etc. ;
31. In this regard, Clauses 4 to 6 of the preliminary decree are modified as follows : (1) The Commissioners are directed to have the 'accounts audited from March 1,1975 till date of 'leasing of the theatre to third party; (2) to ascertain the net profits from the theatre as well as the lease of the shops after giving credit to, the expenditure incurred in the management there of; (3) to have ascertained market value of the capital assets including the goodwill as on today; (4) the respondent is liable to pay interest at 12% on the loans taken from the reserve fund from the respective dates till the date of payment; (5) to give credit to the total loans and interest accrued thereon from respondent's l/5th share so ascertained; (6) pursuant to the direction in L.P.A. Nos. 1, 4 and 5/81 given by this Court, it is stated that the respondent has been receiving every month Rs. l,000/-and also received Rs. 8,500/- pursuant to the interim order passed by the learned single Judge. The total amounts paid pursuant to the directions shall be deducted from his l/5th share; (7) the balance shall be paid to the respondent; and (8) Any expenditure incurred by the Commissioners in working out the above reliefs shall be met with from the firm on obtaining the orders of the Court below and the report submitted. In respect of other clauses viz., Clause 1, 2, 5 and 9, they are deleted; clauses 3, 7 and 8 confirmed and Clause 4 to 6 are modified as indicated above. In view of the facts and circumstances of the case, each party is directed to bear their own costs throughout.
32. Both the appeals are partly allowed and partly dismissed as indicated above.