Patna High Court
Basantlal Jalan vs Chiranjilal Sarawgi And Ors. on 20 February, 1967
Equivalent citations: AIR1968PAT96, AIR 1968 PATNA 96, 1967 BLJR 735 ILR 46 PAT 1028, ILR 46 PAT 1028
JUDGMENT K.B.N. Singh, J.
1. This appeal is by the defendant. The plaintiffs-respondents brought a suit for recovery of Rs. 3,400/- Or any such sum as may be found due on accounting of the partnership business with the defendant.
2. The plaintiffs' case is that the plaintiffs were members of a joint family, whose Karta was plaintiff No. 1. The defendant-appellant on the 5th February, 1949, submitted a tender for supply of 1000 maunds of Chanti Masoor Dal, 1000 maunds of gram Dal and 2000 maunds of gram to the Indian Government Railway Coal Department, through the Colliery Superintendent, Giridih. On the 12th February, 1949, the said tender was accepted and the supply was to be made within thirty days, as per letter of the Colliery Superintendent, Giridih (Exhibit F-3). Before the supply order could be obtained, a security deposit of Rs. 6,100 was made by the appellant. The appellant was short of funds and approached plaintiff No. 1 by a letter dated the 12th February, 1949, to be partner in the said business with the defendant and to contribute half the amount of the security deposit and also to invest half of the amount for the purchase of the grains to be supplied. The plaintiffs agreed and advanced Rs. 3,000 to the defendant the same day for depositing as security money and an acknowledgment in writing to that effect was made by the parties in duplicate and one copy was kept by each party. Thus, in short, the plaintiffs and the defendant became partners of half and half in the business and were required to invest in accordance with their share. Money invested by either of the partners over and above his share capital was to bear interest at the rate of one per cent per month. The date of supply, however, was extended upto the 7th April 1949.
3. It is the admitted position in the case that on the 8th April, 1949, 992 maunds 24 seers of Chanti Masoor Dal, worth Rs. 18,553.14 was supplied. After that no further supply was made under the circumstances to be stated hereafter. On the 10th April, 1949, an application for extension of the time limited for supply was made. On the same day, a formal deed of partnership was drawn up and was executed on the 14th April, 1949, between the parties. On the same date, account book (Ext. 2) was darted in which transactions from the 12th February, 1949, were entered. Undisputedly, file plaintiffs, between the 12th February, and 15th April, 1949, contributed Rs. 12,573.15 towards partnership business including the security deposit.
The Colliery Superintendent, Giridih, on the 21st April, 1949, refused extension of time and threatened to forfeit the security deposit. On the 21st August, 1949, the appellant received a sum of Rs. 18,057 in respect of the supply made on the 6th April 1949, from the Colliery Superintendent, after minor deductions, out of which the appellant paid to the plaintiffs a sum of Rs. 9,000. The appellant was requesting the Colliery Superintendent, Giridih, not to forfeit the security deposit of Rs. 6,100. Ultimately, on the 19th December, 1953, after minor deductions out of the security deposit of Rs. 6,100, Rs. 6,062-14-0 was refunded to the appellant by a cheque dated the 18th December, 1953, which was cashed on the 19th December, 1953, by the appellant. The plaintiffs asked the appellant for division of their share and for final accounts, to which the appellant paid no heed. Thereafter, on the 15th March, 1954, a lawyer's notice was given by the plaintiffs in respect of their claim. The office copy of the said letter is Exhibit 4 in this case. The appellant replied to the said notice, accepting the partnership and its terms, but falsely making a counter claim of Rs. 4,000 on baseless grounds. Hence the suit.
4. By a mutual arrangement between the plaintiffs, the joint family of the plaintiffs had disrupted and the dues of the family from the defendant-appellant was allotted to plaintiff No. 1, but to avoid any objection, other plaintiffs were also joined in the suit.
5. The defence case in short is that the partnership being not registered, the suit was not maintainable and was also barred by limitation. The plaintiffs failed to advance their share of money after the supply of 992 maunds and odd Chanti Masoor Dal, causing loss to me appellant. The partnership was dissolved on the 6th April, 1949, and accounting between the parties took place on the 15th April, 1949, and each party handed over the account paper to the other duly signed by them. The defendant's case further is that although the plaintiffs, by their conduct, were not entitled to any money, but still when Rs. 18,057 was received in respect of the supply alreadv made on the 6th April, 1949, the appellant, on the 21st August, 1949, paid Rs. 9,000 to plaintiff No. 1 and on that day the plaintiff No. 1 granted a receipt to the appellant in full satisfaction of all the claims in respect of the partnership business. The said receipt is Exhibit G in this case. Thus, the plaintiffs are not entitled to any amount from the appellant. The defendant's case further is that plaintiff No. 1 took oral loan of Rs. 4,000 from the appellant and this suit has been filed so as to avoid payment thereof.
6. The trial Court dismissed the suit and recorded the following findings:--
(i) The suit being not for dissolution of the partnership, but for realisation of Rs. 3,400 or any further sum as may be found due on accounting of the partnership business, the suit was hit under Section 69 of the Partnership Act and was not maintainable.
(ii) The plaintiffs' claim was fully discharged by the appellant as evidenced by the receipt Ext. G, and the plaintiffs were not entitled to any decree.
(iii) The partnership was dissolved by operation of law on the 6th April, 1949, after which date no supply was made.
(iv) Accounting between the parties took place in 1949 and the defendant was not liable for any account.
(v) The partnership was dissolved on the 6th April, 1949 hence the suit was barred under Article 106 of the Limitation Act.
7. The plaintiffs filed an appeal and the lower appellate Court set aside the judgment and decree of the trial Court and decreed the plaintiffs' suit on the following findings:--
(i) The suit, being one for accounting, was not barred under Section 69 of the Partnership Act.
(ii) The partnership was not dissolved on the 6th April, 1949, nor was there an accounting between the parties on 15th April, 1949.
(iii) Exhibit G was not a genuine document and the plaintiffs' claim was not discharged by the said document.
(iv) In the instant case the partnership was dissolved after the final realisation of the assets, i.e., on the 19th December, 1953, On these findings, the lower appellate Court held that the defendant was liable for accounting to the plaintiffs, which accounting will include the amount refunded out of the security deposit on the 19th December 1953, amounting to Rs. 6,062-14-0. Accordingly, the lower appellate Court passed a preliminary decree in favour of the plaintiffs for accounts, directing the learned Munsif to appoint a Pleader Commissioner for taking accounts from the defendant of the dissolved firm. The lower appellate Court also ordered that if the defendant failed to render the accounts, then a final decree for Rs. 3,400 would be passed in favour of the plaintiffs.
8. Mr. K. D. Chatterjee, appearing for the appellant contended that the finding of the Court below that Exhibit G was not a genuine document is vitiated as the Court below only relied upon certain circumstances for reversing the finding of the trial Court and holding that it is not a genuine document. There does not appeal to be any substance in the submission of the learned Counsel. The lower appellate Court has not accepted the evidence of the defendant and his servant (D.W. 3), who are the only witnesses examined by the defendant on the point of the document having been executed by the plaintiff. The Court of appeal below has also referred to the evidence of D.W 2 an employee of the bank, as well as the evidence and file reports of the two Experts, one examined on the either side, and on a consideration of the entire matter, has come to the conclusion that Exhibit G is not a genuine document. The aforesaid finding being a finding of fact is binding on this Court in second appeal.
9. Learned Counsel for the appellant next submitted that the suit is barred under Section 69 (1) of the Partnership Act, inasmuch as the partnership was not registered. Developing his argument, the learned Counsel further submitted that the suit being a suit for specific sum of money, it was not saved under Section 69(3)(a) of the Partnership Act. There does not appear to be any substance in this submission of the learned Counsel either. The argument clearly overlooks Sub-clause (a) of Clause (3) of Section 69 of the Partnership Act. Clauses (1) and (2) of Section 69, no doubt, bar a suit by or on behalf of an unregistered partnership. Clause (1) bars a right of a person suing as a partner in a firm to enforce certain rights arising against the firm or against any person alleged to be or to have been a partner in the firm. Clause (2) of the said section bars the enforcing of a claim by a firm against a third party. Clause (3) of Section 69 provides certain exceptions to the bars created by the earlier two clauses of this Section. Sub-clause (a) of Clause (3), which is relevant in the instant case, is quoted below:--
(3) The provisions of Sub-sections (1) and (2) shall apply also to a claim of set-off or other proceeding to enforce a right arising from a contract, but shall not affect-
(a) the enforcement of any right to sue tor the dissolution of a firm or for accounts of dissolved firm, or any right or power to realise the property of a dissolved firm."
Reading the aforesaid clause, it is apparent that apart from suing for dissolution of a firm or for accounts of a dissolved firm, an exception has been made also in case of any right or power to realise the property of a dissolved firm. Mr. Chatterjee, however, next contended that the latter portion of the aforesaid Sub-clause (a) of Clause (3) of Section 69 was an exception to Clause (2) of Section 69 and would only apply if the suit was filed against a third party. Mr. Lal Narayan Sinha. appearing for the respondent, in reply, has submitted that this argument clearly overlooks the opening lines of Clause (3), which clearly provides that the exception is applicable to both Clauses (1) and (2) of Section 69 and there is no scope for making any artificial division of the said exception between Clauses (1) and (2). Mr. Sinha also relied upon a Bench decision of the Allahabad High Court in the case of Sheo Dutt v. Pushi Ram, AIR 1947 All 229, that, "any right or power to realise the property of a dissolved firm under Section 69 (3) (a) includes the right to recover from third party as well as from one of the partners." In my view, the submission made by Mr. Sinha is well-founded and must be accepted. I would accordingly hold that, in any view of the matter, the suit is not barred under Section 69 (1) of the Partnership Act.
10. Mr. Chatterjee lastly submitted that the suit was barred by limitation under Article 106 (old) of the Limitation Act, which applied to this case, learned Counsel submitted that in paragraph 6 of the plaint the plaintiffs alleged that after the above supply of 992 maunds and odd Chanti Masoor Dal, the partnership was dissolved. Learned Counsel also referred to paragraph 8 of the written statement, where it is also mentioned that on the 6th April, 1949, the partnership dissolved and on the 15th April, 1949, the accounts had been taken. On the above footing it was submitted that the suit for accounts, having been brought after three years of the dissolution of the partnership on the 6th April, 1949, was barred by limitation and the Court of appeal below was in error in holding that the partnership was dissolved on the refund of the security deposit on the 19th December, 1953. Learned Counsel further submitted that the plaintiffs wanted to amend the plaint by mentioning that the dissolution of the partnership took place on the 19th December, 1953, which was rejected by the learned Munsif and a Civil Revision against that order (Civil Revn. No. 299 of 1958 (Pat)) was also rejected by this Court.
11. It is no doubt true that in paragraph 6 of the plaint it is alleged that the partnership was dissolved after the supply of the aforesaid 992 maunds and odd of Chanti Masoor Dal, but no definite date of the dissolution of the partnership has been mentioned therein. The date of the dissolution of the partnership has been specifically mentioned by the defendant to be 6th April, 1949, the date on which 992 maunds and odd of Chanti Masoor Dal was despatched. A question arises, as to when was the partnership dissolved. In paragraph 5 of the plaint the plaintiff alleged that the partnership between the joint family of the plaintiffs and the defendant was reduced in writing on the 10th April, 1949, and was executed by the parties on the 14th April, 1949. This is admitted by the defendant in paragraph 7 of the written statement. The defendant in paragraphs 8 and 9 of the written statement alleged that accounting was done on the 15th April, 1949, and, thereafter, when Rs. 18,057 was received by the defendant on the 21st August, 1949, from the Colliery Superintendent in respect of the aforesaid supply, Rs. 9,000 was paid to the plaintiff. In face of such other averments in the written statement, it is difficult to accept the submission of the learned Counsel that the firm should be taken to have been dissolved on the 6th April, 1949, the date of the aforesaid supply, merely because in paragraph 6 of the plaint it is stated that after above supply the firm was dissolved. The final Court of facts has, on a consideration of the entire evidence, come to the finding that there was no dissolution of the partnership on the 6th April, 1949, and there was no accounting between the parties on the 15th April, 1949. It has also found, as already stated, took the discharge receipt (Ext. G) dated the 21st August, 1949, is not a genuine document. In face of these findings, which are findings of fact, it is idle to contend that there was dissolution and accounting as alleged by the defendant.
12. Learned Counsel, however, later, assuming the finding of the Court below that there was no dissolution of the partnership on the 6th April 1949, to be correct, submitted that the partnership should be presumed to have been dissolved on the 22nd April, 1949, when the Colliery Superintendent refused to extend the time and threatened to forfeit the security deposit. Learned Counsel submitted that the partnership in question was for a single adventure, namely, to supply under the aforesaid contract, and so it must be taken to have dissolved on the date on which the Colliery Superintendent refused to extend the time for making the supply. Learned Counsel referred to Section 42 (b) of the Partnership Act and relied on the cases of Ram Narain v. Kashinath Jag-narain, AIR 1954 Pat 53 and Gherulal Parakh v. Mahadeodas Maiya, AIR 1959 SC 781.
13. The aforesaid decisions, relied on by the learned Counsel, are clearly distinguishable and have no application to the facts of the present case. In the case of AIR 1954 Pat 53, partnership was constituted to exploit a salt licence and the sale agency was obtained in the name of the partnership. The intention of the parties was that the partnership should continue so long as the agency of salt continued or till separate agency was obtained by each of the partners in their respective names. In that case, the control on salt was lifted in January, 1947, and the salt licence and agency in the name of the firm came to an end. In that situation it was held that the partnership must be held to be dissolved under Section 42 (b) of the Partnership Act, as soon as the salt control was lifted in January, 1947. That is not the position in the instant case. In the case of AIR 1959 SC 781, his Lordship Subba Rao J. (as he then was) who delivered the judgment of the Court, held as follows: "In this case, the partnership was constituted to carry out contracts with specified persons during a particular season and as the said contracts were closed, the partnership was dissolved." So this case also is of no assistance to the learned Counsel.
14. The relevant portion of Section 42(b) of the Partnership Act, is in the following terms:--
" Subject to contract between the partners a firm is dissolved-
(a)....
(b) if constituted to carry out one or more adventures or undertakings, by the completion thereof;"
In this particular case the contract was for supply of 1,000 maunds of Chanti Masoor Dal, 1,000 maunds of Gram Dal, and 2,000 maunds of gram. It is undisputed that only 992 maunds and odd of Chanti Masoor Dal was supplied. So it cannot be said that with that supply the contract work, for which the partnership was started was completed or full supply made, so as to attract the provisions of Section 42 (b) of the Partnership Act for the dissolution of the firm. Apart from that, completion of an adventure or undertaking in the instant case will not mean supply of a part of the goods for which the partnership was envisaged, but will also mean the realisation of the amount in respect of the said supply. Rs. 18,057 in respect of the aforesaid supply was received on the 21st August, 1949, and the defendant was repeatedly writing letters, requesting the Colliery Superintendent not to forfeit the security deposit. In face of these, it cannot be said that there was dissolution of the partnership on the 22nd April, 1949, as submitted by the learned Counsel.
15. The Court of appeal below, on a consideration of the entire matter, relying on the cases of Samuel Nadar v. Thangayya Nadar. AIR 1942 Mad 104 and Mani Singh v. Dial Singh, 42 Ind Cas 459 = (AIR 1917 Lah 459). recorded a finding that the partnership would be said to have been dissolved after the final realisation of the assets. In the instant case, the cheque dated the 18th December, 1953, for Rs. 6,062-14-0 was encashed by the defendant on the 19th December, 1953, and, therefore, on the finding, the firm, at any rate, cannot be said to have been dissolved till that date. In the petition for amendment, the plaintiffs wanted to mention in paragraph 6 of the plaint specific date of dissolution of partnership as the 19th December, 1953. That was not allowed, as stated above.
The finding recorded by the final Court of facts, on the other hand, is that the dissolution of the firm could only be after that date, i. e. after the 19th December, 1953, and not before that. The refusal of amendment could not stand in the way of the lower appellate Court recording a finding as to when possibly the dissolution of the partnership can be said to have occurred. The Court of appeal below was faced with the difficult situation, inasmuch as no date of dissolution was mentioned in the plaint and the date of dissolution as mentioned in the written statement to be 6th April, 1949, was rejected, as obviously incorrect. Even the plea of accounting on the 15th April, 1949, and the final discharge by receipt (Ext. G) on the 21st August, 1949, as alleged by the defendant, has not been accepted by the Court below. Hence, to decide the controversy between the parties, the Court had to decide as to when dissolution possible could have taken place. There does not seem to be any illegality committed by the Court below in adopting such a course, which is fully borne out by the pleadings of the parties and the evidence in the case.
16. Learned Counsel for the appellant relied on the case of Gopa Chetty v. Vijayaraghavachariar, AIR 1922 PC 115, in support of the proposition that the suit having been filed on the 15th June, 1954, and dissolution having been pleaded, as stated above, after the supply dated the 6th April, 1949, must be held to be barred by limitation. In that case, their Lordships observed as follows: --
" At any rate, in all cases where for any reason it did occur that after the dissolution and complete winding up of a partnership as asset which had not been taken into account fall in, it ought to be divided between the ex-partners or their representatives according to their shares in the former partnership.
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 ac-counts 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.'
17. Mr. Lal Narayan Sinha, appearing for the respondents, has contended that the aforesaid decision of the Privy Council has itself distinguished the decision of the House of Lords in Knox v. Gye, (1872) 5 H.L. 556, and submitted that the relevant article which would be applied in this case will be Article 120 of the old Limitation Act. Learned Counsel submitted that the remedy of the plaintiffs could not be barred before the right to sue accrued. In the instant case, right to sue could only accrue on the refund of the security deposit which for the time being stood forfeited. Learned Counsel also submitted that the aforesaid Privy Council decision is no longer binding on this Court and referred to a Bench decision of the Andhra Pradesh High Court in the case of Yarlagadda China Rattayya v. Donepudi Venkataramayya, AIR 1959 Andh Pra 551. In that case, the question was as to whether the claim of the sixth defendant was barred by limitation. The trial Court held that Article 100 of the Limitation Act applied and for a claim to account and a share in the profits of a dissolved firm, the starting point would be the date of dissolution. Considering the aforesaid Privy Council decision in the case of AIR 1922 PC 115, their Lordships of the Andhra Pradesh High Court observed as follows:--
"It is no doubt true it is stated there that if no accounts of a dissolved partnership had been taken and 'there is no contest that the partners have squared up', then the remedy open to any of the partners was only to have the accounts of the partnership taken when an asset belonging to the partnership had been realised. But it is also equally clear from that judgment that if at the time of settlement of accounts, an asset was not taken into consideration, such an asset ought to be divided between the partners when it falls in."
After referring to the facts of that case, their Lordships further observed:--
"That apart, we fail to see how Article 106 would have any bearing on the present enquiry. This is not a case where any asset had already fallen in or where one of the parties had collected it in which the other parties are claiming their due share. Here a new asset belonging to the partnership had come into existence. The sole controversy is whether one of the partners alone is entitled to collect it or all of them should do it.' "In such a case, there is no question of the claim of any of the partners being barred by limitation. For these reasons, the objection on the basis of Article 106 of the Indian Limitation Act raised on behalf of the appellant is untenable and cannot be given effect to."
18. In this case, on the finding recorded by the final Court of facts, that there was no dissolution till the 19th December 1953, and the suit having been filed in 1954, this question, strictly speaking, would not arise for determination. In that view of the matter, the Privy Council decision, in my opinion, is of no avail to the learned Counsel. I would, accordingly, hold that there is no substance in the contention of the learned Counsel for the appellant that the suit is barred by limitation.
19. In the result, the appeal fails and is dismissed, but, in the circumstances of the case, there will be no order as to costs of this Court.
Choudhary, J.
20. I agree.