Punjab-Haryana High Court
S. Mohinder Singh vs Shiv Des Singh on 21 August, 1970
Equivalent citations: AIR 1971 PUNJAB AND HARYANA 186, ILR (1972) 2 PUNJHAR 619
JUDGMENT
1. This second appeal raises a question about the abatement of a suit for dissolution of partnership and rendition of accounts. To appreciate the point involved, it is necessary to state a few facts hereunder.
2. Mohinder Singh plaintiff filed a suit on 23rd, March, 1957, on the allegation that he had entered into partnership with Shivdev Singh defendant-respondent 1 in the year 1950. It was further alleged that the plaintiff was serving in the Army as Subedar Major and that he had been sending money from there to the defendant-respondent Shivdev Singh to carry on partnership business. It was an oral partnership . On 15th October, 1955 another partnership was constituted between the plaintiff as one party, Shivdev Singh defendant respondent as second party and Chanan Singh who has since died as third party. In the plaint the averment is that Chanan Singh deceased was admitted into the partnership deed, Exhibit P. 1 as executed on 19th, November, 1955, though the new partnership has started working earlier. The first partnership was dissolved by a notice before the second was formed.
In the present suit settlement of accounts in respect of both the partnerships was asked for making defendant 1 liable in regard to first and both the defendants in respect of the second. The suit was filed by the plaintiff in his own name against the two defendants in their individual capacity and no reference was made to the name of te firm in the title of the plaint. There can be no dispute with the proposition that in a suit for rendition of accounts, every partner is practically speaking, in the position of a plaintiff or a defendant and each one of them is liable to render accounts and pay the amount found due from him. Both the defendants filed written statements and it was pleaded by them that the second partnership was only a sham transaction entered into for the purposes of income tax. They also pleaded that the suit was bad for misjoinder of causes of action inasmuch as the two partnerships being quite distinct and separate, a claim for rendition of accounts in respect of both could not be joined in one suit, Chanan Singh defendant died during pendency of the suit and his legal representatives were not brought on the record within the prescribed time. An application was made to implead them and set aside the abatement but the same was rejected. A question then arose as to whether the suit had abated as against Chanan Singh only or in its entirety. An issue was framed in the following terms:-
"What is the effect of the death of Chanan Singh defendant No. 2 on the suit?"
It was contended on behalf of the plaintiff that the abatement was not in toto and could be only so far as defendant 2 was concerned and that the plaintiff was entitled to get rendition of accounts with regard to the first partnership which carried on its business for the period from 1st December, 1950 to 14th, October, 1955, before the second partnership came into existence by adding a third partner. The argument was that the deceased defendant could not be made liable for rendering accounts for the first period and his death affected the suit regarding the second partnership only. The trial Court repelled this contention and dismissed the suit holding that it could not proceed against defendant 1 as well in respect of the period prior to the date when the deceased defendant Chanan Singh became a partner.
3. The plaintiff took an appeal to the Additional District Judge, Ludhiana but it met with no success. He has therefore, come to this Court in second appeal.
4. Arguments advanced in the Courts below have been repeated before me and the two contentions of Mr. Y. P. Gandhi , learned counsel for the appellant are -
(1) That a suit for accounts of a dissolved partnership does not abate on the death of an erstwhile partner and (2) That in the instant case, the two causes of action are entirely different though joined together in one suit, and that is so admitted by the defendants themselves in their written statements who objected to the joinder by getting a specific issue framed to this effect.
5. The first contention of Mr. Gandhi, is to be noticed only to be rejected. It is a settled proposition of law that a suit for accounts cannot be maintained against some of the partners only and that every partner is a necessary party. The reason for this rule is no far to seek. The shares of all the partners in the matter of their profits and losses have to be determined and it is neither possible nor correct to decide the extent of rights and liabilities of a partner in his absence. The cardinal rule of law is that no decree can be passed against a person in his absence.
The argument of the learned counsel founded on O. 30, R. 4 Civil P. C. is misconceived. It is only when two or more partners sue in the name of a firm and any of such partners dies, that it is not necessary to join the legal ,representatives of the deceased as a party to the suit but this provision has no application when the suit is not in the name of the firm. The present is a suit for accounts of a dissolved partnership filed by one partner against the others. In such a situation, if one of the partners dies, the right to sue cannot survive against the others and the legal representatives of the deceased have to be impleaded as a party.
6. The main question really to be determined is whether in the matter of taking accounts, the entire period of two partnership is to be treated as a continuing one or that before 15th, October , 1955, there was a distinct and separate partnership between the plaintiff-appellant and defendant-respondent 1 which had already been dissolved and from which the deceased partner could be disassociated. It is true that once it is held that the rights and liabilities between the plaintiff and defendant-respondent I could not be adjudicated with regard to the first partnership without the accounts for the subsequent period being also taken. Chanan Singh deceased was a necessary party and the suit could not proceed without his legal representatives having been brought on the record. The Courts below took the view that since assets of the first partnership were utilised to constitute the second partnership after the deceased became a partner, the accounts for both the periods had thus to be taken before the matter could be finally adjudicated. Reliance was placed on Section 31(1), of the Indian Partnership Act, 1932, which permits introduction of a partner into a firm with the consent of all the existing partners.
In order to resolve this question, it becomes necessary to make a reference to the pleadings of the parties and the partnership deed Exhibit P. 1 executed on 19th November 1955. According to his pleadings, the plaintiff appellant was serving as Subedar Major in the Army and during his period of service he advanced a loan of Rs. 4, 000/- to defendant respondent 1 and after his retirement, the entire pension was also being received by the latter. All this amount, as stated by the plaintiff, was being spent in the partnership business. The partnership firm was paying income-tax as well and continued its business till 14th October 1955. It is specifically stated by him in the plaint that he was entitled to a dissolution of partnership and rendition of accounts for the period from 1st December, 1950 to 14th October, 1955 against defendant-respondent 1 who had not rendered any accounts to him.
It is further pleaded by him that with effect from 15th October 1955, defendant respondent 2 was taken in the partnership and a partnership deed, Exhibit P. 1 executed which contained all the conditions. A perusal of this document shows that there is no reference whatsoever made therein to any previous partnership or to assets and liabilities of the same having been taken by the new partnership. It is completely an independent and distinctly new partnership between the parties brought about by the deed except that the parties had actually started business from 15th October, 1955 and that a document was executed on 19th November, 1955. We have a recital in the deed that regular account books had been started from the first day of start of business, that is from 15th October, 1955 and they were to be kept till the existence of the partnership business. Both the defendants in their written statements took objection to the joinder of two separate causes of action and the trial Court framed the following issue :-
"Whether this suit is bad for misjoinder of causes of action and parties ?". Before a decision could be given on this issue, Charan Singh defendant died.
7. It was a common case of the parties that two separate causes of action had been joined though defendants objected to the same. Without expressing any opinion on the propriety of joining the two causes which formed the subject-matter of the aforesaid issue, there is no gain saying the fact that the first partnership between the plaintiff and defendant 1, its dissolution and rendition of accounts till 14th October, 1955 when another new partnership was formed, constituted a separate cause of action. The two firms one between the plaintiff and defendant 1 which functioned till 14th October, 1955, and the other between the plaintiff-defendant 1 and the deceased defendant 2, were beyond any doubt separate legal entities and on the death of defendant 2 the cause of action against defendant defendant 1 in regard to rendition of accounts for the first partnership did not cease to survive. I am therefore of the considered view that as against defendant respondent 1, the right to sue for dissolution of partnership and rendition of accounts in regard to the first partnership exists and no question of the suit qua that cause of action having been abated arises. The learned Additional District Judge was in error in holding that no final determination of profits and losses of the partners for separate periods could be made unless both the periods were taken together.
8. A reference has been made by the Courts below to Section 31 of the Indian Partnership Act 1932, which has no bearing on the issue involved in the instant case. Partnership deed. Exhibit P. 1 does not show that the deceased was introduced as a partner into the previous firm that was constituted by the plaintiff-appellant and defendant - respondent 1 and all that this section provides is that when a partner has been introduced in a firm he does not become liable for any act of the firm done before he became a partner. No such contingency arises in the case before us when there is a separate cause against defendant-respondent 1 who along with the plaintiff constituted a separate partnership from 1st December 1950 to 14th October, 1955.
Privy Council case reported as Raj Chunder Sen v. Ganga Das Seal. (1904) ILR 31 Cal 487, relied upon by the Courts below in holding that the suit abated in toto is distinguishable on facts and not applicable to the circumstances of the present case. The plaintiff in that case asked for accounts between him and defendants and a preliminary decree was passed by the Subordinate Judge by virtue of which defendant 1 was held liable to render accounts to all the partners. Account were gone into by a Commissioner and on his report final decree by which various partners were made liable for their contributions to the liabilities of the business was passed. Two separate appeals were filed to the High Court, one by the plaintiff and another by two of the defendants. One of the defendants in both the appeals died and his legal representative was not substituted in time. When the appeals came up for hearing both of them were dismissed as having abated. The Judicial Committee of the Privy Council upheld the judgment of the High Court and observed that the right to sue did not survive against the other defendant alone as the appeals could not proceed in the absence of a representative of the deceased defendant. It was one cause of action in which the respective rights and liabilities of the different partners has to be determined and the same could not be done in the absence of one of them.
Since I am holding that the second partnership was quite distinct from the first one, the question of abatement of the entire suit does not arise. The suit can proceed with regard to the partnership as originally constituted between the plaintiff and the respondent 1.
9. In the result, the appeal is allowed, judgment and decree of the Court set aside and the case remanded to the trial Court for decision in accordance with the law in the light of the observations made above. There will be no order as to costs.
10. Appeal allowed.