Madras High Court
Sivagnanathammal vs S.V. Nallaperumal Pillai on 12 January, 1934
Equivalent citations: AIR1935MAD165, 155IND. CAS.783, AIR 1935 MADRAS 165
JUDGMENT
1. These two appeals are appeals against the preliminary and final decrees in O.S. No. 53 of 1925, on the file of the Subordinate Judge's Court of Tuticorin. In both the appeals defendant 2 is the appellant. The suit was filed for the winding up of a partnership and for taking its accounts and for the recovery of such amount as may be found due to the plaintiff. The plaintiff estimates that the amount due to him would be approximately Rs. 22,000. It will now be convenient to state the history of the partnership whose winding up is sought. The plaintiff's father, defendant 2's husband and a third person originally carried on a partnership under the style of Section V. from the year 1904. The plaintiff's father died in the year 1905 and the third person retired from the business in the year 1911. So legally a new partnership consisting of the plaintiff and defendant 2's husband (Kailasam Pillai) began to work from the year 1911. The business of the partnership consisted of the manufacture of salt under licenses issued by the Government and under the rules of the salt department. In the year 1918 it was agreed that the capital of the partnership should be two lakhs of which the plaintiff contributed three-fourths, i.e., lakh and fifty and Kailasam Pillai contributed the remaining one-fourth. As a matter of fact this capital was contributed from out of the profits of the prior business. The capital itself was to bear no interest but interest at 1 per cent was to be charged on the drawings by the partners and on the sums standing to their credit.
2. The partnership possessed 1327 salt pans in Levynjipuram extension factory bearing licenses Nos. 102 and' 155. Besides these there were also another set of 11 salt pans which were purchased in auction in the name of Kailasam Pillai. There was some dispute about the ownership of these salt pans at one time in the lower Court, but now they are also admitted to be the property of the partnership. Kailasam Pillai died on 27th June 1922. At the time of his death he had made considerable overdrawings from the partnership funds. There is no dispute about the amount of his overdrawings. By February 1922, this amount was Rs. 47,041. There was also a sum due from him under another account called market account. The account of the transactions between the firm and Kailasamo Pillai has been filed as an annexure to the plaint. It appears that there was a large stock of salt belonging to the partnership remaining to be sold and this amounted to 6,83,600 maunds. In para. 11 of the plaint the plaintiff alleges that on 28th January 1923 he fixed a reasonable price for the aforesaid salt heaps and took them to his own account, lie also took to his own account some of the outstandings due to the partnership and also the salt pans. He also took over the lands, houses, gardens and 6ther immovable properties belonging to the partnership at a certain price. The plaintiff states that so far as the salt is concerned he took it over for such price as he considered reasonable according to the then market and with reference to the superior or inferior quality of the goods. The salt consisted of several varieties and also of the stock of several years, i.e., some portion of it was old and belonged to the stock of prior years.
3. On the footing that the defendant raised no objection to this taking over of the properties of the partnership it was found that a sum of Rs. 25,506-6-4 was still duo to the plaintiff from the deceased Kailasam Pillai on 28th January 1923, Afterwards the parties got a rebate from the Government of duty, in which defendant 2's share which amounted to Rs. 4,075. Deducting this amount, at the time of the suit a sum of Rs. 21,431-6-4 would still be due according to the plaintiff from defendant 2, the widow of Kailasam Pillai. Defendant 1 is a brother of Kailasam Pillai. At one time he claimed all the properties left by the deceased Kailasam Pillai to be joint family properties and there was litigation between him and the widow (defendant 2). It is said on behalf of defendant 2 that the plaintiff set him up and helped him in that litigation. But it is unnecessary to determine whether this is correct or not. On the ground that there was a rival claimant to the estate of Kailasam Pillai his brother was impleaded as defendant 1, but now that it is decided in the other litigation that defendant 2 is the sole heir to Kailasam Pillai he has no further interest in the suit and he is not a party in the appeal. In para. 13 of the plaint the plaintiff alleges that besides the sum ;due from defendant 2 there are a number of other outstandings due to the partnership. These amount to about Rupees 37,600. On the plaint it was estimated that probably there would be a loss of Rs. 12,000 in respect of the outstandings and it was expected that the rest would be collected.
4. Defendant 2 pleads that the prices at which the properties of the partnership were taken over were not the proper prices. She contends that much larger sums than those at which the plaintiff took over the properties should be debited against him, and if this is done far from her owing a sum of Rs. 21,000 due by her there would be a large sum of money due to her. She therefore prayed that the suit should be dismissed with costs. It is scarcely necessary to add that the so-called settlement of 28th January 1923 was all made behind the back of defendant 2 and though it may ultimately turn out to be fair, defendant 2 is entitled to insist that it should be scrutinized. What the rights of the parties exactly are on such scrutiny will have to be further considered. On 29th October 1923, defendant 2 sent a registered notice through vakil, Mr. A. Bama-swami Ayyar, claiming some documents and moveables belonging to her husband. A reply was sent to this on 12th November 1923 (Ex. 11) by Mr. Yenkatachala Ayyar, a vakil, on behalf of the plaintiff. After replying to the subject-matter of the notice under reply, the letter winds up by saying:
You are hereby informed that in respect, of the dealings had by the said Kailasam Pillai when he was a partner of our client's salt firm, there is a sum of Rs. 25,506-6-4 inclusive of principal and interest up to the 15th Thai, 1098 (28th January 1923) due to our client from the said person as well as subsequent interest and that he is ready to take the requisite proceedings for recovery of the said amount.
5. It is noticeable that this is the first; information given by the plaintiff of the so called settlement of 28th January 1923, which was effected by the plaintiff behind the back of defendant 2 and, even this does not give any details of the settlement. In reply to Ex. 11 defendant 2 sent Ex. IV dated 5th December 1923, through a different vakil, Mr. K. Ramaswami Ayyangar instead of his, former vakil. In this letter after replying to the prior correspondence it alleged that a sum of Rs. 60,000, will be due from the plaintiff if accounts were taken of the business. So the plaintiff is called upon to give the details of the accounts, the balance sheets of the salt business, to state what had become of the moveables, immovables, stock-in-trade and outstandings and to give any other details that may be relevant. In reply' to this the plaintiff sent Ex. IV-a dated 7th January 1924, through his vakil Ganapathiappa Pillai. In this for the first time the information is given that the accounts were closed on 28th January 1923, the properties of the partnership being taken over at the then market price, It refers to the former notice, Ex. XI, and alleges that it was already mentioned in it that Kailasam Pillai consented to the plaintiff taking over 6i the partnership properties. This last statement is incorrect there being no swell allegation in the prior notice. Then it says that it is not possible to give in a mere reply notice the details of the accounts. It was then alleged that the plaintiff never raised any objection to anybody, interested in Kailasam Pillai coming and examining the accounts. The plaintiff offers to show the accounts to any person coming on behalf of defendant 2 within a month from the date of the notice. This notice, it may be said, gives a fair opportunity to defendant 2 to look into the accounts and gave also some information about the details of the settlement of 28th January 1923, though no such offer had been made previously. But this offer was hot availed of by defendant 2. She sent nobody to examine the accounts and to raise specific questions about the validity of the entries therein. It appears that, up to the date of the suit, she merely kept quiet without utilising the offer made by the plaintiff. The present suit was filed on 6th July 1925 by the plaintiff.
4. Issues 3, 4 and 5 raise the questions as to what are the moveable and immovable properties, the outstandings and the liabilities of the partnership. Issue 2 is now immaterial. Issue 1 arises only in the cross; appeal. Without recording any evidence on any of the issues the Subordinate Judge referred the whole matter to a Commissioner and after the receipt of the Commissioner's report he dealt with the issues. One of the points strenuously pressed before the Commissioner and afterwards before the Court was as to the price which the plaintiff should have paid for the salt pans. As. to this it will be convenient first to state the legal position. Prima facie, the plaintiff is not bound to take the salt pans. If he takes the salt pans at a price agreed upon between the parties, then no question arises. But if he takes the salt pans, though not bound to take them, and credits in favour of the partnership some price of his own fixing, i.e., behind the back of the other partner the other partner is not bound by such valuation and if he questions the valuation, the Court is entitled to scrutinise it. So far, the parties are agreed. But defendant 2 says that while she is entitled to repudiate the taking over by the plaintiff at a price of his own fixing, she is not bound to take back the pans and she is entitled to insist that the plaintiff should now be compelled to pay the proper price of the pans in January 1923. The plaintiff, while conceding that if his price is not found to be the proper price by the Court his taking; over might be set aside, contends that he cannot be compelled to purchase them at the price found by the Court to be the proper price. The only result of setting aside his taking over of the salt pans would be that his so-called one sided purchase is simply set aside and the pans remain as partnership property.
5. If the parties agree to wind up the partnership, the Court may sell the salt pans or if defendant 2 is willing to retain them she may take her share of them. But the third alternative suggested that the plaintiff can be compelled to take the pans at the price now, found by the Court to be the proper price does not exist. To direct such a course would be according to him to compel the plaintiff to complete a contract never existed 6r to thrust a purchase which upon him which he never agreed to take. In Muthiah Chetty v. Veerappa Chetty 1929 Mad. 627 myself and Jackson, J. held that a settlement by which one partner takes the partnership assets solely for himself on a. valuation fixed by himself is not prima facie binding on the other partners, "and the Court is entitled to look into the matter." In that case Mr. Varadachari, who appeared for the respondent argued that the price at which the partner took over the assets was proper price. That point was found against him and another price was, found by the Court below as the proper price. The respondent in that case was willing to take the properties, at the price fixed by the lower Court and Mr. Varadachari did not raise the further argument before us that he was. not bound to take the properties at the price fixed by the lower Court. In that case the respondent was very anxious to retain the house in Rangoon at whatever cost and the argument that the purchase should not be thrust upon him against his will was never urged before us. In these circumstances, that case cannot be authority for the proposition now contended for by the appellant. In Vyse v. Foster (1874) 7 H.L. 318, the articles of partnership contained a term that if. any partner dies his share was to be purchased by the other partners and the value of his share was to be paid by promissory notes. It was found that the surviving partners took over the share of the deceased, partner under this term, that there was no misconduct and that the omission of the formality by which promissory notes were to be executed for the price did not vitiate the purchase, and the suit by one of the children of the deceased partner asking for profits or interest on the value of the father's share was dismissed. At p. 329 Lord Cairns laid down three rules in the case of the death of partner: (1) If there is nothing special in the contract of partnership and there is no settlement ;of account, the estate of the deceased partner is entitled to the benefit of a share of the profits which were made in the trade after his. death; (2) if there was an option given to the surviving partners to take his share on certain terms, then those terms must be acted upon and (3) if they are not acted upon the partnership ramains unliquidated and the estate of the deceased partner will again be entitled to a share of the profits. So far as the profits of the partnership subsequent to the death of Kailasam Pillai are concerned, there is no difficulty in laying down the rule of law as to what the rights of defendant 2 are. They are now expressly stated in Section 37, Partnership Act, and this section is substantially in conformity with the rule laid down by Lord Cairns. In the present case there is no term in the articles of partnership and as defendant 2 does not agree to the taking over by the plaintiff at the price fixed by him it may be that she is entitled to her shared of the profits of the partnership acquired after the death of Kailasam Pillai and which may properly be attributed to her share of the partnership assets. But we are not now dealing with the question as. to what share of the profits defendant is entitled after Kailasam Pillai's death.
6. We have first to deal with the question as to the disposal of the corpus of Kailasam Pillai's share of the partnership assets. I do not think that the decision in Vyse v. Foster (1874) 7 H.L. 318 helps us in, this matter. In Syers v. Syera (1876) 1 A.C. 174, it was held that a partnership at will, in a music hall and tavern was started in. June 1869 and that it was afterwards, dissolved by a letter of August 1872. As to the intervening period the plaintiff was entitled to a share of profits, and, also to a share of the assets as they, stood in 1872, the date of dissolution. As to the share of the assets it was held that the Court of Chancery had power either to grant a sale of the undertaking as a going concern or to make a proposal for the purchase by the owner of the seven-eighths share of the plaintiff's one-eighth share. The decree in that case accordingly directed that a, valuation, should be made of the one-eighth share of the plaintiff; and that an option should; be given to the defendant appellant to take it at that valuation. If he takes it at that, valuation no further accounts are to be taken, but if he does not-take it at the valuation fixed by the Court, the last clause of the decree provides that the music hall and tavern be sold as a going concern and that the assets be divided between the parties. This last provision to some extent, supports the argument of the plaintiff. But Mr. Srinivasa Ayyangar appearing for defendant 2 contends that there was no taking, over by the defendant in that case and therefore the question did not strictly arise. The decision in Lord Provost etc of Edinburgh v. Lord Advocate (1879) 4. A.C. 823, relates only to the profits acquired since the death of the partner, and has nothing to do with the corpus of the property in Cassels v. Stewart (1881) 6 A.C. 64, it was found that the assignment of the interest of one partner to another was in exact conformity with the agreement in the articles of partnership and cannot be questioned by a third partner. It was also observed at p. 73 that a partner acquiring any benefit by using his position as a partner is bound to communicate it the others and he should not separate his interest from theirs.
7. The principle is stated in Lindley on Partnership, Edn. 9, pp. 395 and 396, in respect of renewals of leases. The case in Manley v. Sertori (1927) 1 Ch. D. 157 also relates to profits earned after the death of a partner. The case in Bess In re, Bess v. Bess (1903) 2 Ch. D. 40, also deals with the case of renewal of a partnership lease and the duty of one partner not to acquire any special advantage over any other partner (p. 61). " The decision in Hordern v. Hordern (1910) A.C. 465, was very much relied on by Mr. Srinivasa Ayyangar. In that case the articles of partnership provided that on the death of one of the partners the survivor should pay to the executors of the deceased the full share to which they may be entitled on the taking of a general account of the partnership assets, the assets being valued by mutual agreement or by valuation in the usual way. It was held by the Privy Council that this clause was a binding contract of sale and purchase and that the valuation was only an incident in carrying out the same. Mr. Srinivasa Ayyangar contends that as the plaintiff had himself taken over the share of Kailasam Pillal his act was binding upon him and he could not got go behind it and now offer to return the share. The valuation of the share is only an incident and he must now be compelled to take the share at the proper price which the Court may now find. But I do not agree with this contention and I am of opinion that this case does not help the appellant.
8. In that case there was a contract between the partners that the surviving partner should take over the share of the deceased partner at a proper valuation. The moment the proper valuation is arrived at by the Court the contract of sale and purchase can be made to operate. But in the present case we have no such contract. What the plaintiff did was strictly illegal on his part and unless defendant 2 accepts it, the only thing we can do is to set it aside. We cannot proceed further and insist upon the carrying out of a contract into which he never entered and compel him to take over the properties at a valuation to be arrived at by the Court. The decision in Hugh Stevenson and Sons v. Aktiengsellischaft Fur Carton Nagen Industrie (1918) A.C. 239, again does not help us. It was there held that the German company were entitled to a share of the profits made after the dissolution by reason of the war by the carrying on of the business by the English company with the aid of the German company's share capital. In some of these cases there is no question of the valuation of the corpus because the corpus of the property consisted of merely capital and not of immovable property or any right analogous to the right in salt pans, and that portion of the case presented no difficulty. But it does present some difficulty in the present case. On the whole I have come to the conclusion that so far as the salt pans themselves are concerned, while agreeing with the contention of the appellant that the value at which the plaintiff has sought to take them over is an undervalue and therefore does not bind her, she is not entitled to insist on the plaintiff taking her share of the partnership at the proper valuation which may now be arrived at. Defendant 2 will now be entitled to her share of the partnership property which she may keep and manage if she so likes. But if she does not she may ask for a sale of the salt pans as a part of the winding up. We are not satisfied that the sale made by the Commissioner after the preliminary decree was a sale made after due advertisement.
9. That sale realised only Rs. 44,000 as against Rs. 69,090 at which the plaintiff took them over with the result that the lower Court found that the plaintiff was entitled to a larger sum than he prayed for in his plaint. We do not think we can allow such tin anamalous result. The salt pans should be sold only after proper advertisement, i.e., after giving not less than a month's notice, fixing the price the plaintiff had paid as upset price. If after one or two attempts no higher offer is forthcoming they should be regarded as sold to the plaintiff at the price he took them over and defendant 2 would not be entitled to obtain anything under this heading. If there is a higher offer, defendant 2 will get the benefit of the higher price and interest between January 1923 and the date of such sale.
10. Now coming to the next heading argued by the appellant, this relates to Rs. 6,83,600 maunds of salt left at the time of Kailasam Pillai's death, This salt consisted of two portions, the stock in Arumuganeri and the stock in Tuticorin. On the estimate of the Commissioner he found that the Tuticorin salt actually fetched a profit of Rupees 3,318-8-0. It is said that the reason for the profit was that the salt was mostly exported to Calcutta and other outside ports. But in the case of Arumuganeri salt it was sold at a loss of nearly Rs. 20,000 because there were four or five other salt merchants at the time and they had all considerable stocks of salt and it was not easy to dispose of such a large stock of six lakhs of maunds. Whatever the reasons may be after carefully considering the arguments of the learned advocates, and the report of the Commissioner, vide p. 361, etc., I am unable to find sufficient materials for differing from the conclusion of the lower Court. The average price at which the salt was taken by the plaintiff ranged from 1 anna per maund up to 4 annas 6 pies per maund. As regards the sales by the plaintiff in 1922, 1933 and 1924 the average price secured by him ranged from 6 pies per maund to 6 annas 6 pies per maund and the Commissioner finds that as a matter of fact in the re-sale of the stock by the plaintiff he sustained very heavy loss. And in cases where the average price ranges so widely as from 6 pies to nearly 7 annas it is impossible for the Court at this distance of time to find that there is any impropriety in the act of the plaintiff. Even on the footing that the Court is entitled to scrutinise the taking over by the plaintiff at the instance of defendant 2 we are unable to say that the price credited by the plaintiff in favour of defendant 2 is improper. The matter might have been left at that stage in the Court below. But what the Court did was because defendant 2 would not accept the price at which the plaintiff took over the stock of salt it proceeded to consider, the amount realised by the sale of the salt by the plaintiff as if it was a sale held on account of the partnership and debited a considerable portion of the loss to defendant 2. We do not think this portion of the lower Court's action is justified. The moment we find that the price at which the plaintiff took over the salt is the proper price, there is an end of this item, and it is unnecessary to debit further loss to defendant 2 simply because she refused to recognize the price paid by the plaintiff as the proper price.
11. The third item argued is the item of outstandings. As already mentioned, para. 13 of the plaint refers to this item and the amount of the outstandings is mentioned as Rs. 37,000. As a matter of fact during the pendency of the suit some more outstandings were collected by the plaintiff and this nearly amounted to about Rs. 18,000. As to the remaining outstandings they were all sold in auction and the plaintiff purchased them at a valuation of Rs. 300 and defendant 2 questions the propriety of the sale. Though apparently this sale looks like a sale at an undervalue, on a closer scrutiny we do not think there is anything substantial in this item. Of the Rs. 37,000 outstandings the most important item is an item of Rs. 31,000 due on a mortgage and an item of Rs. 2,356 due as an unsecured debt from a firm called S.P.S.N. Brothers of Madura. The debt due from this firm alone amounts to Rs. 33,492 and the balance consists of small items due from various persons. The mortgage decree against S.P.S.N. Brothers was executed and Rs. 18,000 was all that could be realised. As to the other debts practically nothing has ever since been collected by the plaintiff. The plaintiff is even now willing that defendant 2 should take any share of these debts if any portion of them has since been realised or should have a declaration o£ her right to a share in these items. In these circumstances I think that there is really nothing in this item.
12. The next item which was the subject of controversy between the parties is an item of Rs. 5,251-11-0 due from defendant 2's husband to the plaintiff on an account called Tanadu chitta or private account. The books containing the private account are produced by the plaintiff and at one stage I thought that this fact was a fact supporting the plaintiff's case. But Mr. Varadachari with his usual fairness pointed out that all defendant 2's papers and documents were with him and they were produced by him and that no particular significance should be attached to the fact that the books are produced by the plaintiff. Leaving therefore this fact aside we have got to see what do these account books really represent. These books contain a number of debit items representing the amounts spent by Kailasam Pillai for his private expenses. As many of these books open with a debit, it is difficult to see whence the amounts were obtained by him to enable him to incur the expenses. After the debits amount to Rs. 3,000 or Rs. 4,000 sometimes we find a large credit from the partnership account, very often a credit large enough to wipe off the debit and leave a surplus. On the basis of such entries it is argued by Mr. Varadachari that the debits really represent drawings from the partnership funds. As each expense was incurred the amount was really drawn from the partnership account, but instead of the amount being entered in the account at the time, they were all totalled up later and a lump sum was entered as if it was drawn on that date.
13. Now, after the debits and credits cancelled each other for some time, the last of the debits remaining at the time of Kailasam's death were not counterbalanced by any credit item and these debits amount to Rs. 5,251. Mr. Varadachari therefore contends that they are really drawings from the partnership funds and that defendant 2 is bound to pay those drawings amounting to Rupees 5,251, or in other words the, amount should be taken as a debit item against her. It is. contended on the other hand by Mr. Srinivasa Ayyangar that though, sometimes the debit items were-counter-balanced by credit items large enough to wipe them out, there are other entries-showing that the credit item did not always wipe off the debit item. It was sometimes a smaller item of credit than the debit. His argument is that the credit item represented a real credit when actually drawn but where there was no such entry, no such drawing, from the partnership fund should he presumed. The consideration that if Kailasam did not draw the amount from, somewhere he could not have incurred the expenses raises the suspicion that, perhaps Mr. Varadachariar's explanations is true. But his case suffers under one disadvantage. With his explanation the account books cease to be accurate account books with the value of account books. The very object of accounts being kept especially of day books is the, value that is to be attached to the entries made as each event happened. It is on the likelihood of such entries being made that the value of accounts depends. But if an argument is advanced that though a drawing is made from the partnership account it is not debited in the day book at the time when it is drawn but only a lump sum is debited several months afterwards, it is not a proper day book; it ceases to be such an account book to which Courts are accustomed to attach value. He relied upon an account (a rough note book) known as ditta chitta. His argument is that, the balances in the day books of the-firm did not represent the real cash balances on any particular day. To get the cash balance not only the final) account in the day books should be taken but also of the various other account books containing debits and credits including the tanadu chitta, and only when all these are put together the-actual cash balance can be ascertained. One such ditta chitta in which the amounts in the various accounts were brought together in one place and the total was arrived at was filed. When the attention of P.W. 1 (the accountant) was drawn to the cash balances in the; day books he said that the cash balances-could only be ascertained by looking at the ditta chittas : vide Ex. S.S.
14. Now though one such ditta chitta was filed it does not relate to the period now in question and though he was given time to-produce the ditta chitta for the period in question the plaintiff was unable to produce it. So that even if the one ditta chitta which was only filed for the previous year somewhat supports the plaintiff's argument we cannot extend it to the period in question by reason of the absence of the ditta chitta.
15. The Utmost that Can be said in his favour is that there is a suspicion that possibly his argument his correct. There are other difficulties. These tanadu chitta accounts date from 1908 and if the last figure in them is taken, the result would be to debit the plaintiff with the result of all the former accounts ranging from 1908. But it is conceded that all the accounts between the plaintiff' and Kailasam were settled somewhere in 1921 and the result of the older accounts need not be Considered. Again the actual totals of these day books and tanadu accounts seem to be written by the plaintiff later in pencil before being filed and afterwards inked and the totals were not made by Kailasam himself. The truth of the matter is that the exact nature of these tanadu accounts is wrapped in some mystery. It is not possible for the Court to unravel it and the party who relies upon such uncertain and indefinite accounts and accounts which on the face of the argument do not represent the actual transaction that took place must fail. On this ground I would hold that so far as this item is concerned the appeal should be allowed and the plaintiff should lose this item.
16. The next item that was argued relates to interest. The plaintiff is charging interest at the end of each year after deducting also counter interest. This in substance amounts to charging compound interest. The appellant contends that the plaintiff is not entitled to compound interest and relies on Suleman v. Abdul Latiff 1930 P.C. 185. But Mr. Varadachari replies that the accounts themselves show that whenever accounts were settled at the end of each year the parties have charged interest on the overdrawings of each partner. At the various stages of the case each side was insisting upon the payment of counter interest on the footing that he was going to recover some amount. Defendant 2 herself repeatedly filed objections before the Commissioner saying that interest ought to be charged against the plaintiff on some real or supposed items due to her. In these circumstances I must hold that the plaintiff is entitled to compound interest on the principal he has charged. But of course on our findings with reference to the tanadu chitta such portion of it as is attributable to Rs. 5,251-11-0 must now be excluded. Otherwise the plaintiff is entitled to the interest he claims.
17. Now as already stated on the accounts made up by the plaintiff there is a sum of Rs. 21,431-6-4 due to him and on the findings we have now arrived at as above, only a sum of Rs. 5,251-11-0 with its interest must be excluded out of this. Roughly there is a sum of Rs. 16,000 due to the plaintiff. I say roughly because the actual accounts may have to be taken on the basis of our findings and with reference to the further consideration to be pointed out. This sum of Rs. 16,000 would be due to the plaintiff on the footing that the taking over of the salt pans by the plaintiff for Rs. 69,000 odd stands. If defendant 2 is now willing to accept that purchase by the plaintiff, then the matter becomes simple and this sum of Rs. 16,000 would be due to the plaintiff. But if defendant 2 does not wish to accept that purchase the Rs. 69,000 has to be credited to the plaintiff and debited to the partnership and the salt pans will remain to be dealt with either by re-sale or otherwise. As already mentioned they must either be sold again unless defendant 2 chooses to retain them. But for the purpose of determining the question whether on a valuation defendant 2's share of the partnership can be valued at a particular figure so that defendant 2 may be entitled to interest on that figure for the subsequent years as profit or actual profits earned on the principle of Section 37, Partnership Act, we have still to consider the valuation of the salt pans in 1923. It is contended for defendant 2 that the valuation of Rs. 69,000 is an under valuation. We are inclined to agree with this contention.
8. In dealing with this portion of the case the Subordinate Judge has not considered one important document relied on by defendant 2. (Ex. 5). This document relates to the sale of certain salt pans on 14th June 1922, a few days before the death of Kailasam and six months before the plaintiff's taking over. Under that document 54 pans were sold for Rs. 9,415. It is conceded by all parties that these pans are of a bigger size. They are what are called one cent pan, whereas the pans which are in question in this suit are not of that size but are only 5/8ths cent pans. This document works at Rs. 167 a pan and 5/8ths cent pans would be valued at Rs. 104. And according to Mr. Srinivasa Iyengar, even making a reduction of Rs. 20, each pan in question ought to have been sold for Rs. 84, and 1327 pans in the suit ought to be valued at, Rs. 1,12,800. But even on this footing, i.e., crediting an extra Rs. 44,000 as the price of salt pans, the quarter share of Kailasam would only be Rs. 11,000 still leaving him on the debit side at the date of his death, viz., June 1922. Whatever reasonable valuation we give for the salt pans and debiting the highest figure suggested by Mr. Srinivasa Ayyangar himself we find that the debit side (Rs. 60,000) cannot be wiped out. The result of this finding would be that even crediting the full value of the pan for the purpose of valuation of defendant 2's shire at the date of Kailasam's death we are not able to find the actual share of Kailasam, taking the account of his liability, on the credit side. And if it is on the debit side she is not entitled to any interest on the valuation. If defendant 2 insists on her share of the actual profits earned from 1922 up to now she will be entitled to it, and Mr. Varadaehariar has not objected to it.
9. The case will now have to go back to the Court below for taking the final valuation on the following basis: (1) Defendant 2 must now finally elect, forgetting all the past transactions, whether she will accept the plaintiff's purchase of the salt pans at the price for which he took them over or whether she still insists upon another sale in which case they will be sold after reasonable notice with the plaintiff's price as the upset price and the sale will be taken into account only if a higher sum is realized; if not it will be regarded as if it never happened. In the case of a higher price being realized, defendant 2 may share in the benefit of this extra amount, but in that case she will have to pay interest on the ground of her debit being enhanced by one-fourth Rs. 69,000 from. January 1923 up to the date of such, sale. But either if she accedes to the sale or if the sale results in no higher price the old purchase by the plaintiff will stand and no further accounts need be taken on this matter; (2) defendant 2 is not entitled to any interest in substitution of the profits of the partnership as one of the alternatives allowed to her by law because on valuation her share of the partnership assets turns to be of the minus side. But if she insists she is entitled to a proportionate share of the profits actually earned (on the basis of the principle of Section 37, Partnership Act.)
10. It is sufficiently seen from the above-judgment that probably a good deal of loss was suffered by the firm. That is certainly the plaintiff's case. Anyhow if defendant 2 wants an account to be taken of the subsequent profits she is entitled to it subject to these two points being worked out, the further debits against defendant 2 will be taken as Rs. 16,179-11-4 minus any interest on Rs. 5,251 which has got to be deducted. This account should be taken by the lower Court or by the Commissioner. To this, amount the result of the sale of the salt pans and the profits should be added. If defendant 2 does not want any further accounts to be taken, the decree of the-lower Court will stand modified as a decree against defendant 2 for Rs. 16,179-11-4 with further interest from 28th January 1923 at 12 per cent compound interest upto the date of the lower Court's decree and 6 per cent on the aggregate amount up to date of payment. If the matter ends here the parties will give and take proportionate costs on the basis of this figure. But if further accounts are taken because defendant 2 wants them to betaken the costs will be finally given, when the figures are finally ascertained, but they will be on the same principle, i.e., of giving and taking proportionate costs. In A.S. No. 85 of 1928 the parties will have proportionate costs here and in the lower Court on the footing that the plaintiff succeeds to the extent of Rs. 16,179-11-4. In A.S. No. 128 of 1929 the appellant will have costs on Rs. 15,000. These appeals having been set down to be spoken to this day, the Court made the following:
ORDER
11. In case defendant 2 elects to accept the value given by the plaintiff to the salt pans, the question whether plaintiff should be compensated to the extent of Rs. 728 as the value of 11 pans confiscated by Government on account of the alleged obstruction of defendants will be considered and decided by the Court below and provided for in the final decree.