Patna High Court
Deoki Prasad Rajgarhiah And Anr. vs Smt. Anar Dai Poddar And Ors. on 23 July, 1998
Equivalent citations: AIR1999PAT22, 1998(3)BLJR1836, AIR 1999 PATNA 22, (1999) 3 BANKLJ 269, (1999) 1 PAT LJR 640, 1998 BLJR 3 1836
Author: G.S. Chaube
Bench: G.S. Chaube
JUDGMENT G.S. Chaube, J.
1. This appeal is directed against the judgment and decree dated 6-9-1986 passed by the learned First Addl. Subordinate Judge, Ranchi, in Title Suit No. 170/80, 108/83 whereby the suit of the plaintiff for dissolution of the partnership and rendition of account thereof" has been decreed with cost on contest against defendants No. 1 and 4, and, against rest ex parte, but without cost. In this appeal, the sole plaintiff Srikrishna Poddar was arrayed as respondent No/ 1. However, he died during the pendency of the appeal. Consequently, his heirs and legal representatives have been substituted as respondents I series.
2. The case of the plaintiff who was respondent No. 1 in the present appeal, was that some time in 1958, the plaintiff and defendants 1, 3 and 4 as well as the father of defendant No. 2, namely, Chiranjilall Sonthalia entered into a partnership agreement for carrying some construction work under the name and style of M/s. New India Builders having its office at Calcutta and Ranchi. Consequently, the partnership agreement was executed between the partners on 27-11-1958. However, a new partnership was constituted in the year 1961 under the same name and style for the same purpose by inducting defendants No. 5 to 7 as its partners and a fresh partnership agreement was executed between them on 15-11 -1961. In the year 1962, a new partner was also included in the partnership as ninth partner by executing a deed of alteration. According to the plaintiff, the partnership business was building construction work under National Coal Development Corporation Ltd. (N.C.D.C.) at Bankisura Kocher in Madhya Pradesh and at some other places. According to the altered partnership agreement, the share of the plaintiff which was initially 25% was reduced to 12 1/2% in view of the induction of defendant No. 8 as ninth partner. The management of the work at site and the execution of the contract work was the responsibility of the first, second, third and fifth partners of the firm. Books of A/cs. were to be maintained and kept at the head office at Calcutta and weekly statements of accounts were required to be sent to Calcutta as well as Ranchi offices from time to time. In the partnership agreement there was also a provision for remuneration to the working partners. Further case of the plaintiff was that after the death of Chiranji Lall Sonthalia, one of the partners, some disputes and differences arose between the partners respecting the accounts of the partnership business. As the plaintiff was not paid his due share in the profit, he served defendants No. I to 4 with notice to render accounts; they failed. Therefore the suit was instituted for dissolution of the partnership constituted in terms of the partnership agreement dated 15-l 1-1961 as modified on 20-12-1962 and rendition of accounts thereof.
3. Only defendants 1 and 4 appeared and contested the suit by filing a joint written statement contending, inter alia, that the suit was barred by Section 69 of the Partnership Act, Law of Limitation and principles of estoppel and acquiescence; and that the court at Ranchi had no jurisdiction to try the suit. Their further plea was that the partnerships of 1958 and 1961 were dissolved by mutual consent of the partners and accounts thereof were taken; and that in the year 1962 a fresh partnership was constituted between the partners for duration of the completion of work at Bankisura Kocher. And after termination of the partnership, profit and loss accounts were prepared and shares divided amongst the partners. Since after dissolution of the partnership of 1962, the plaintiff demanded from them a huge money on account of his share by mailing a letter dated 5-10-1967, they denied to oblige him. Hence, he instituted the suit with altogether false and baseless allegations. On these grounds, they sought dismissal of the suit.
4. On the basis of the pleadings of the parties, the learned trial Court raised seven issues including the question of limitation and jurisdiction of the Court to try the suit. There was also an issue respecting the question as to whether the partnership in question stood dissolved as alleged by the defendants. In course of trial, the defendants did not press issue respecting the jurisdiction of the Court. The Court also held on evidence that, as a matter of fact, the partnership was a partnership at will and it was not dissolved earlier as contended by the defendants. Therefore, there was no question of the suit being barred by limitation. Consequently, the suit was decreed directing the partners of the firm to dissolve the partnership the partners of the firm to dissolve the partnership and to complete the account thereof and release the share of the plaintiff after deducting necessary liabilities of the firm. Aggrieved by the judgment and decree of the trial Court, as indicated above, the contesting defendants have come to this Court in appeal.
5. Learned counsel for the appellant has submitted that since in the terms of the partnership deed of 1962, the duration of the partnership business, i.e., construction work at Bankisura Kocher under National Coal Development Corporation in Madhya Pradesh had been mentioned, the partnership could not be treated a partnership at will. Therefore, the trial Court committed an error in coming to the conclusion that the partnership was a partnership at will and that it was not dissolved or terminated after completion of the work undertaken at Bankisura Kocher. He further submitted that the trial Court also committed an error in not accepting Ext. B as a genuine document in view of the fact that the document was admitted in course of the trial without objection from the other side. Its genuineness was not challenged even in course of the trail. Mr. Mehta contended that since the duration of the partnership was stated in the partnership agreement itself, i.e. completion of the work undertaken by the firm at Bankisura Kocher, it automatically came to an end on completion of the said venture in 1964, even according to the evidence of the plaintiff. Therefore, the suit for dissolution of the same partnership in 1980 is not maintainable and that for rendition of accounts thereof is barred by Article 5 of the Limitation Act.
6. On the other hand, learned counsel for the respondents submitted that reading Clause 18 of Ext. B produced by the defendants together with its provisos and Clause 4, they are indicative of the intention of the parties to continue the partnership business even after completion of the construction work under taken at Bankisura Kocher. He further submitted that even the contents of Exts. A/2 prove beyond doubt that the partnership was continuing after completion of the work at Bankisura Kocher. There was no mention either in Ext. A/1 or in the written statement of the defendants as to on what date the partnership in question was actually dissolved. He further contended that even if it is conceded that the work at Bankisura Kocher had been completed the partnership could not come to an end automatically.
7. Therefore, the question which arises for consideration in the present appeal is whether the partnership in question was a fixed duration for completing the venture liable to be dissolved after completion thereof. i.e.. construction work at Bankisura Kocher under the National Coal Development Corporation (NCDC) or it was a partnership at will as held by the trial Court; even if the partnership is taken to be for a certain duration, whether it came to an end automatically; and the suit for rendition of accounts becomes barred by limitation.
8. There is no dispute between the parties regarding constitution of the partnership between plaintiff and some of the defendants in November, 1958 and reconstitulion thereof in November 1961 by inducting three more partners to the firm. There is also no dispute between the parties that on 20-12-1962 defendant No. 8 was inducted in the partnership as the ninth partner. The case of the plaintiff is that in the year 1962 there was only an alteration in the partnership of 1960. However, the defendants alleged that anew, partnership was constituted and an agreement to this effect was executed between the partners on 20-12-1962. In the trial Court the plaintiff produced partnership agreement of 15-11 -1961 (Exhibit 1) as also the agreement purported to have been executed between the partners on 20-12-1962 (Ext. 1/a). According to the latter document (Ext. 1/a), the earlier partnership agreement of 1961 was merely altered to the extent that a new partner was inducted in the firm and share of the plaintiff was reduced to 12 1/2% from 25%, remaining 121/2% going to the new comer and the date of its commencement. In course of trial, the defendants produced another document executed by the fresh partners on 20-12-1962. The document has been marked Ext. B. This document shows that altogether a new partnership with effect from 1-1-1963 was constituted under the same name and style of New India Builders incorporating the terms and conditions thereof. The trial Court did not accept Ext. B as evidence of new partnership constituted between the partners in 1962 and abruptly came to the conclusion that the partnership was a partnership at will. In the concluding portion of paragraph 12 of the judgment, the trial Court has observed that the partnership deed produced on behalf of the defendants is perhaps not the true copy of the partnership deed of 20-12-1962. Accordingly, it held that the partnership had not been dissolved till date.
9. Nowhere in the plaint it has been even whispered by the plaintiff that the partnership in question was partnership at will. However, taking a thread from the trial Court judgment, learned counsel for the respondents has tried to convince that the parties had intended to constitute a partnership at will. Section 7 of the Indian Partnership Act, 1932 defines what is a partnership at will. According to this section, where no provision is made between a contract for dissolution of the partnership or for termination of the partnership the partnership is a partnership at will. Thus, it is manifest from Section 7 that a partnership shall be treated a partnership at will only if (i) no period has been fixed by the partners for its duration; or (ii) there is no provision in the partnership agreement itself for its termination. Whether a partnership is 'at will' or otherwise has to be gathered from the partnership deed coupled with the conduct of the partners to it.
10. As indicated above, two sets of documents have been produced by the parties one by the defendants (Ext. B) and another by the plaintiff (Exts. 1 and 1/a), According to Ext. 1/a, terms and conditions of the altered partnership remained the same as incorporated in the partnership agreement of 1961 (Ext. 1), while according to the defendants, altogether a new partnership agreement incorporating therein terms and conditions of the partnership firm was executed. A perusal of both sets of documents will disclose that there is little variation between them. A comparative chart of the relevant terms and conditions of both sets of the documents will be helpful in finding of the nature of the partnership between the parties :--
PARTNERSHIP DEED OF 1961 ALTERED BY THE DEED OF 1962 (EXHIBIT - 1) PARTNERSHIP AGREEMENT OF 1962 (EXT. - B) 1 2 Clause-3 : the business of the firm snail be undertaking contracts for building and other constructions under all Govt. departments and public bodies as also other companies and other contracting parties and individuals including railways, M.E.S. and P.W. Departments, also sales and supplies of building materials and allied commodities, supply of labour and providing technical advice and assistance to all contracting parties Clause-4 : The business of the firm shall be undertaking contract for building and other constructions under all Govt. Departments and Public Bodies as also other companies and other contracting parties and individuals including railways, M.E.S. and P.W. Department also sales and supplies of building materials and allied commodites, supply of labour and providing technical advice and assistance to all contracting parties.
Provided that the parties hereto may by common consent undertake such new venture as may be deemed profitable and beneficial to the business of the partnership.
Clause-16 : That the duration of the partnership shall be upto Dec. '63 and for such further period thereafter as may be necessary to complete the jobs on hand.
Clause-18 : That the duration of the partnership shall be upto the completion of the work at Bankisura Kacher and for such further period thereafter as may be necessary to complete the jobs on hand:-
Provided that the parties hereto may by common consent extend the period till such further period or may be mutually agreed upon.
Provided that the parties hereto may by common consent extend the period till such further period as may be mutually agreed upon.
Provided further that the parties hereto may by common consent effect an earlier termination if and when it is found that the business cannot be carried on except at a loss. .
Provided further that the parties hereto may by common consent effect an earlier termination if and when it is found that the business cannot be carried on except at a loss.
Provided again that none of the partners can retire from the partnership during thecontinuance thereof except with the consent of the other partners and that only on such terms as may be agreed upon by the other partners.
Provided again that none of the partners can retire from the partnership during the continuance thereof except with the const of the other partners and that only on such terms as may be agreed upon by the other partners.
Clause-17. That the death of the partners during the continuance of the partnership shall not effect a dissolution of the firm which shall be carried on by the surviving partners and the legal representatives of the deceased partners on the said terms and conditions unless otherwise mutually agreed upon."
Clause-19 : That the death of the partners during the continuance of the partnership shall not effect a dissolution of the firm, which shall be carried on by the surviving partners and the legal representatives of the deceased on the said terms and conditions unless otherwise mutually agreed upon."
11. The comparative chart shows that the terms and conditions respecting duration of the partnership and mode of its determination were practically the same except that while in the document produced by the defendant (Ext. B) it is stated that the duration shall be 'up to the completion of the work at Bankisura Kocher and for such period thereafter as may be necessary to complete the jobs at hand'. In the document of 1961 (Ext. 1) it is stated that the 'duration shall be up to December, 1963 and for such further period thereafter, as may be necessary to complete the jobs on hand.' Provisos to Clause 16 of Ext. 1 and Clause 18 of Ext. B disclose that the partnership could not be terminated except 'by common consent' of the parties. Even the period of partnership was to be extended by their 'common consent'. Ordinarily, by the death of a partner, partnership comes to an end. In the instant case, both the documents declare that even the death of a partner during continuance of the partnership shall not effect its dissolution and partnership business shall be continued on the same terms and conditions by the surviving partners and legal representatives of the deceased partners unless otherwise mutually agreed upon. Thus seen, it is manifest that the two exceptions of duration of partnership and mode of its termination for taking out the firm from the category of partnership at will very much exist in this case.
12. In the case of Karumulhu Thiagarajan Chettiar and another v. E. M. Muthappa Chettiar, AIR 1961 SC 1225, the facts were that a partnership agreement between the appellant and respondent for doing business of managing agency of Saroja Mills Ltd., Coimbatore was entered into. In consequence of such agreement, the managing agency of the said Mills was transferred to the firm by the erstwhile managing agent. The terms of the partnership agreement, inter alia, were for carrying on management of the agency in rotation. Even the heirs of the partners were entitled to carry on management in rotation. There was also provision in the agreement that if either partner thought of relinquishing his right of management, he was required under the agreement to surrender the same to the other partner. On such facts, the apex Court held that the partnership was not a partnership at will, but a partnership for carrying specific adventure/undertaking which having come to an end, the partnership stood dissolved. Their Lordships of the Supreme Court observed as under (at page 1229):--
"It is clear from the terms of the contract of partnership that it was entered into for the purpose of carrying on managing agency business. Further the term relating to turns of the two partners in the actual management and the further term that these turns will go on even in the case of their heirs in our opinion clearly suggest that the duration of the partnership would be the same as the duration of the managing agency. We cannot agree that this means that the partnership would become permanent. In any case even if there is some doubt as to whether the terms of this contract implied any duration of the partnership, there can in our opinion be no doubt that the terms do imply a determination of the partnership when the managing agency agreement comes to an end. It is clear that the partnership was for the sole business of carrying on the managing agency and therefore by necessary implication it must follow that the partnership would determine when the managing agency determines. Therefore on the terms of the contract in this case, even if there is some doubt whether any duration is implied, there can be no doubt that this contract implies that the partnership will determine when the managing agency terminates. In this view the partnership will not be a partnership at will as Section 7 of the Act makes it clear that a partnership in which there is a term as to its determination is not a partnership at will...
13. Learned counsel for the respondents has relied on decision of Madras High Court reported in AIR 1985 Mad 354 (Arunachalam Co. v. M. Sadasivam) to bring home the contention that the partnership was at will. While reiterating what constitute a partnership at will, relying on the contents of the document of partnership, Madras High Court held that the duration of the partnership was fixed at three years with effect from 1 -4-1970 and thereafter the partnership should be treated at will. The fact of that case was that even though the duration was three years, the partnership business continued thereafter. Law is well settled that if the partnership is for a fixed duration and after expiry of the fixed period, its business continues, it ceases to be partnership for fixed duration and acquires the attribute of a partnership at will. The facts of the present case are quite different. Indeed, in the document of 1961 said to be altered in 1962 by executing Ext. 1/a, instead of Ext. B (although learned counsel did not insist relying on Exts. I and I/a and canvassed the case of the plaintiff relying on Ext. B itself) there is a stipulation that the duration of the partnership was December, 1963. Had the document ended there and partnership continued even thereafter, as it admittedly did, there could have been little difficulty that the partnership was at will. However, the document did not stop there and added a rider that the partnership shall be extended for such further period after December, 1963, as may be necessary for completion of the works already going on. Therefore, even if in the document of 1961 duration was mentioned as December, 1963, in view of the rider the duration was actually till the completion of the venture(s) and not in(de) finitely so as to change the nature of the partnership at will.
14. According to Ext. B the partnership was constituted or reconstituted for completion of the work at Bankisura Kocher and its duration was up to completion of the construction work there. That it is so is gathered even from the preamble to the document of 1961 wherein it is stated that the existing partners had submitted a tender for building works under the National Coal Development Corporation (NCDC) and were expecting to procure the same and that three new partners were inducted with a view 'to cope with nature anti volume of the works involved'. Averments to the same effect have been made in paragraph 2 of the plaint. In paragraph 5 of the plaintiff stated that "the partnership was doing business of building construction under NCDC at Bankisura Kocher 'and other places from time to time'. Thus, it is manifest that the partnership, either reconstituted in 1962 in terms of the Ext. B or constituted in 1961 and simply altered in terms of Ext. 1/a, had been brought into being for undertaking building construction work under NCDC at Bankisura Kocher in Madhya Pradesh. Indeed, in paragraph 5 of the plaint the plaintiff stated that besides Bankisura Kocher, construction work at some other places was undertaken by the firm. In the written statement, the defendants denied the allegation and asserted that the partnership was constituted only for construction work at Bankisura Kocher.
15. An attempt was made by the learned counsel for the respondents to take advantage of the use of the words 'Jobs on hand' in Clause 16 and Clause 18 of Exts. 1 and B respectively to bolster his case, that construction works were also being carried at places other than Bankisura Kocher. In absence of word 'other' preceding words 'jobs on hand', the terminologies of these two clauses do not leave scope to infer that construction work at any other place/places was also undertaken by the firm. The evidence of the plaintiff (PW1) is a settlor of the controversy. In course of his evidence, PW1 admitted in para 9 of the cross-examination that when the second partnership was constituted, construction work at Bankisura Kocher was going on. He also admitted that the said construction work was completed in 1964. However, he could not give the month in which the said construction was completed. Counsel for the respondents submitted that the statement of PW 1 should not be taken in isolation; as a matter of fact, he had purported to deny the suggestion of the defence to the effect that the construction work at Bankisura Kocher was completed in 1964 itself. If this could be the intention of the witness, there was no necessity of the next statement that he could not say in which month of 1964 the construction work had terminated. The witness has further admitted in the same paragraph that after completion of the works at Bankisura Kocher, no other work was undertaken by the firm.
16. Learned counsel for the respondents contended that even if it is accepted for the sake of argument that the partnership business being carried by the Firm at Bankisura Kocher only was completed in 1964 as admitted by the plaintiff in course of his evidence, this fact alone cannot be construed as dissolution of the partnership. For this he has placed reliance on a decision of Madras High Court in the case of V.P.P. Thangaraju v. K. V. Perumal, AIR 1980 Mad 7 wherein it has been observed that in the law of partnership, stoppage of the partnership business is one thing, dissolution of partnership is quite another. Stoppage of business ordinarily puts an end to the main partnership activity, but it does not by itself under the legal relationship between the partners. Indeed, there are cases where even after dissolulion the business may be carried on if only for the purpose of the more beneficial winding up of the affairs of the partnership. The principle propounded in the judgment cannot be gainsaid. The observation was made in a case of dissolution of partnership at will when an attempt was made to construe a notice using words 'till it was stopped' on a given date in respect of a business of partnership at will. This decision is of no help to the plaintiff. In the present case, the partnership had been constituted for carrying on a particular job, i.e., building construction work under N.C.D.C. at Bankisura Kocher. Therefore, the moment construction work there was completed, the partnership came to an end.
17. In Samuel v. Thangayya, AIR 1942 Mad 104 a partnership was constituted for running a chit fund transaction for 50 months only. Madras High Court held that even though the period of 50 months expired, the business activity of the partnership continued until all the dues were collected from the subscribers. It was also held in that case that a suit for taking the account of partnership would not be barred unless the defendant makes out that there has been a dissolution of the partnership more than three years prior to the institution of the suit. The onus of making out such dissolution is upon the defendant and the mere fact that after a particular date on further business was done will not amount to dissolution of partnership. Apart from the fact that the facts of the case before Madras High Court were different, the principle propounded is quite contrary to the one laid down by the apex Court in Thaigarajan v. Muthappa, AIR 1961 SC 1225. A similar observation made by the same High Court reported in AIR 1937 Mad 599 (Katta Gundeyya and others v. Kattasiddappa and others) followed in AIR 1942 Mad 104 is also of little avail to the plaintiff. The observation was made in a partition suit in which a family business carried even after partition in the joint family had started, was involved, and the business was sought to be given a colour of partnership.
18. To bring home the point that even after 1964 partnership continued learned counsel for the respondents has adverted to the letter dated 15-10-1967 (Ext. A/1) of appellants sent to the plaintiff. He submitted that in this letter both the appellants and the plaintiff Sri Krishna Poddar had been described as partners of M/s. New India Builders. In the letter the appellants had threatened the plaintiff to dissociate him from the partnership from then onwards once for all. On the basis of these statements made in Ext. A/1 learned counsel submitted that unless partnership existed in October, 1967, neither the writers of the letter nor the person whom the letter was addressed, could have been described as partners of the firm; nor could have engaged any threat to dissociate one of the partners, namely, the plaintiff from the partnership. Even after dissolution of partnership, the firm remained in existence for rendition of the accounts, etc. Therefore, there was nothing wrong in mentioning the plaintiff of the present appeal as partnership of the firm. Simply because the appellants threatened the plaintiff by writing letter dated 15-10-1967 (Ext. A/1) to remove him from the partnership, it cannot be said that the partnership still existed in view of the fact that the partnership was created for a specific venture, i.e., construction work at Bankisura Kocher and it came to an end with the end of that venture in terms of Section 42(b) of the Partnership Act which envisages dissolution of a firm, if constituted to carry out one or more adventures or undertakings, by the completion thereof.
19. In view of the above discussion, there remains little scope to doubt that the partnership in question was not a partnership at will; that it was constituted for carrying out a specific undertaking or venture which came to an end in 1964 after completion of the venture, i.e., construction work at Bankisura Kocher. Therefore, it stood dissolved in 1964. The plaintiff has simply failed to show that the partnership had undertaken any other venture in terms of Clause (4) of Ext. B or Clause (3) of Ext. 1, besides the construction work at Bankisura Kocher and that venture was still continuing at the time he instituted the suit in 1980 so as to warrant decree of the Court f or dissolution of the same on the ground of misconduct of some of the partners.
20. This takes us to another question whether the suit for accounting is barred by limitation as contended by the learned counsel for the appellants. Article 5 of the Limitation Act prescribes a period of three years for filing a suit for an account of share of the profit of the dissolved partnership. The time starts running from the date of the dissolution. Learned counsel for the appellant has contended that since the partnership in question stood dissolved in 1964 after completion of construction work at Bankisura Kocher the present suit is barred because it was instituted about sixteen years after dissolution of the partnership. On the other hand, learned counsel for the respondents has submitted that the suit for account is not barred at all because the onus was on the defendants to prove that the dissolution took place in 1963-64 as contended by them. However in view of the finding that the partnership firm was constituted for doing construction work at Bankisura Kocher and that work having come to an end in 1964 and no other venture having been undertaken by the partners, the partnership came to an end in 1964 itself, Even if the letter dated 15-10-1967 (Ext. A/1) is taken to be an acknowledgement of the dues of the plaintiff by way of his share in the partnership the suit should have been instituted within a period of three years from the date of acknowledgement as required by Section 18 of the Limitation Act. The suit was instituted in 1980. Therefore, even the acknowledgment evidenced in Ext. A/1 cannot come to the rescue of the plaintiff.
21. Learned counsel for the respondents further submitted that in the suit for dissolution of a firm and taking of accounts unless the period of dissolution is fixed by the court in the preliminary decree which is required to be made, taking of accounts cannot be barred by lapse of three years. In support of this contention, he has relied on Rule 15 Order 20 C.P.C. The Rule says that where audit is for dissolution of partnership or taking of the partnership account, the court before passing the final decree may pass preliminary decree declaring the proportionate share of the parties, fixing the date on which the firm shall stand dissolved or be deemed to have been dissolved, and directing such accounts to be taken and every act as it thinks fit. The contention of the learned counsel is fallacious and devoid of merit. Rule 15 of Order 20 C.P.C. comes into play when the court finding that the partnership still subsisted directs dissolution thereof. If a partnership is found to be already dissolved beyond a period of three years by efflux of time or termination of the venture or undertaking carrying out which it was constituted and no account was submitted within a period of three years from the date of dissolution, no preliminary decree envisaged under Rule 15 need be passed. After the partnership is found to be still subsisting and decree is made for its dissolution and rendition of accounts, there is no question of suit being barred by limitation even if the accounts are rendered after more than three years of the date of dissolution fixed by the court in the preliminary decree.
22. In the result, appeal is allowed and the judgement and decree of the learned court below is set aside. The suit of the plaintiff is, hereby, dismissed. In the circumstances of the case, the parties are directed to bear their own costs of the litigation throughout.