Bhawanlal vs Mathura Prasad

P.K. Tare, J.—This appeal is by the first defendant against the preliminary decree, dated 31-12-1959, for dissolution of an unregistered partnership and accounts, passed by Shri B. B. L. Shrivastava, first Additional District Judge, Bhopal, in regular civil suit No. 3-B of 1959.

The Central India Bidi Works, Begumganj, a bidi manufacturing business, was being run by the appellant and the second respondent, Laxmichand, who is related to him, as a family business, till the year 1946. On 14-8-1946, the plaintiff-respondent 1, Mathuraprasad was introduced as a partner and a deed of partnership of the same date (Ex. P-1) was executed between the three partners. However, the partnership was not registered under the Indian Partnership Act. The business was carried on in partnership till Diwali of the year 1954 according to the appellant.

The first respondent''s allegation in the plaint was that the partnership was never dissolved; and, as such, he filed a suit on 10-5-1958 for dissolution of the unregistered partnership and for taking accounts thereof.

The defence of the appellant was that the partnership was dissolved on accout of the retirement of the second respondent, Laxmichand from the Diwali of the year 1953, as also the retiremect of the plaintiff with effect from the Diwali of the year 1954. Thereafter, the appellant carried on the business exclusively for himself. The appellant in his written statement alleged that after the retirement of Laxmichand in Diwali of the year 1953, there was an agreement between the appellant and the first respondent, agreeing to dissolve the firm with effect from Diwali of the year 1954. It was further stated that the notice given by the first respondent on 4-1-1955 (Ex. P-5) did not dissolve the partnership, nor was the partnership dissolved as per clause 11 of the agreement of partnership, dated 14-8-1946 (Ex. P-1)

Further, it was the defence of the appellant that there were no profits till Diwali 1954. On the other hand, the partnership was running in loss and there were liabilities against the partnership firm. It was on account of this that the plaintiff decided to severe his connections with the firm and, in pursuance of that, he retired from the partnership and did nothing, so as to continue the partnership. As such, the appellant alone was entitled to appropriate the profits earned after Diwali of the year 1954. It was also contended that the partnership having ceased to exist with effect from 26-10-1954 (Diwali), the suit filed on 10-5-1958 was barred by time tinder Article 106 of the Indian Limitation Act. The defence of the second respondent in addition was that he was never a partner of the firm, inasmuch as, the deed was not signed by him, but by his brother, Sobhagmal, who had no authority to sign the deed on his behalf. As such, it was alleged that it was Sobhagmal, who was, in fact, a partner and who should have been impleaded in the suit.

An application was made by the plaintiff for impleading Sobhagmal as a party to the suit. But, it was rejected by the trial Judge, holding that Sobhagmal was not a partner, and, as such, not a necessary party to the suit.

The trial Judge held that the partnership was not dissolved in Diwali 1944; and, as such, the plaintiff was entitled to an account till the date of passing the decree for dissolution. The suit was held to be within time; and accordingly, a preliminary decree was passed, declaring the appellant and the first respondent''s share to be -/6/- each and that of the second respondent to be -/4/-. An account of the partnership assets and liabilities was directed to be taken from the inception of the partnership to the date of passing of the decree, namely, 31-12-1959.

The learned counsel for the appellant, inviting attention to the pleas raised by the parties, urged that although the appellant might have faied to prove that the firm was dissolved by act of the parties, the plaintiff would not be entitled to any account, as he had retired from the partnership with effect from Diwali 1954. We may, therefore, have to examine the said question apart from the question of dissolution of the firm due to an act of the parties.

It is, therefore, necessary to refer to the pleadings of the parties on the question of dissolution and retirement.

In paragraph 11 of the plaint, the first respondent made the following, allegations:-

That on 4-1-1955 plaintiff sent a notice to defendant No. 1 conveying his desire that he was no longer willing to continue the business of partnership and that he should render accounts to plaintiff (copy attached hereto). No reply was received from any of the defendants accepting the suggestion of plaintiff that he be permitted to retire from partnership nor were accounts given to plaintiff. On the contrary letter dated 4-1-1955 was received from defendant No. 1 through his counsel Shri Govindram Tanwani admitting plaintiff to be the partner. Partnership continued as usual and does continue still. Not only the defendants did not accept the suggestion of the plaintiff about his retirement but they treated him as the partner whenever any occasion arose. The defendants did not settle accounts with the plaintiff nor have they given him his share of the profits including the moneys that he invested in the partnership and till today the defendants have been carrying on the business of the firm with the share of plaintiff without any final settlement of the accounts as between them and the plaintiff.

The appellant, in his written statement, made the following averments, the relevant extracts of which are reproduced below:

Paragraph 4-Para 9 is deliberately false to the knowledge of the plaintiff. As already stated the defendant No. 2 had retired from the firm with effect from Diwali 1953 and the plaintiff had also ceased to be so with effect from Diwali of the year 1954 A. D. and thereafter the partnership formed under the deed dated 4-5-1946 (incorrect it should be 14-8-46) stood dissolved.

Paragraph 6.-Allegations of Para 11 of plaint are not quite correct. As the business of the partnership was running continuously at a loss and the liabilities of the firm had exceeded its capital, and the creditors of the firm were dunning hard for payments, when the accounts of the partnership upto Diwali 1954 were being made, in view of the apprehended heavy losses the plaintiff expressed his intention that the firm be dissolved and the defendant No. 1 agreed to this being done. Thus the dissolution of the firm became effective from Diwali 1954 A. D. as per oral agreement between the plaintiff and the defendant. It was not dissolved by the plaintiff''s notice dated 4-1-1955, nor vide term 11 of the deed of partnership. It (i. e. the partnership) could be dissolved by such a notice with effect from Diwali 1954. The notice of the plaintiff dated 4-1-1955 only mentions what was already an accomplished fact, viz., that ''this partnership was dissolved on the last Diwali as my client'' (i. e. the plaintiff) was no longer willing to continue the partnership business. This notice of the plaintiff dated 4-1-1955 had crossed this answering defendant''s notice of the same date in the course of transmission; and thus this answering defendant''s notice dated 4-1-1955 had no concern at all and was not in any way connected with the plaintiff''s notice dated 4-1-1955 given through his counsel Shri N. C. Nihalani which was received by this defendant only on 10-1-1955. As after dissolution of the firm, the plaintiff had on 12-12-1954 stealthily, without the consent or knowledge of this defendant, removed the books of account of the firm, and this defendant in consequence was unable to produce them before the Income Tax Authorities, the notice dated 4-1-1955 was given by this defendant to the plaintiff for the return of those books, through Shri Govindram Tanwani, Advocate. The partnership having been already dissolved by mutual consent with effect from Diwali 1954, it could not revive again by any unilateral act of any one of the partners. After that there could be only a fresh partnership with the agreement of both the partners, and there was never any such fresh agreement between the parties ...............

Therefore, we have to decide the question of dissolution of the firm and retirement of the first respondent from the partnership, taking into consideration the pleadings of the parties and the evidence on record. The appellant''s case relating to dissolution of the partnership was based on an alleged oral agreement between himself and the first respondent, the third partner, Laxmichand having already retired in Diwali 1953. In the alternative, the appellant pleaded that the first respondent had retired from the firm with effect from Diwali 1954.

Before considering the oral evidence of the parties on these two questions, it would be pertinent to see the conduct of the parties, as is disclosed from the notices, and the correspondence or record.

On 1-1-1958, the first respondent, through his counsel, sent a notice (Ex. P-2) stating that his confidence had been shaken by the acts of the defendants avoiding to render accounts. Therefore, he felt that continuance of the partnership business would be hazardous to his interest, as the defendants did not appear to have bona fide intentions. This notice was given much weight after the alleged dissolution in Diwali 1954.

Although the appellant, in his defence, pleaded that the partnership was not dissolved by the plaintiff''s notice dated 4-1-1955 (Ex. P. 5), he sought to use the admission made by the appellant in the said notice, which was as follows:-

This partnership was dissolved on the last Diwali as my client was no longer willing to continue the partnership business. My client accordingly conveyed his desire to you and the other partner the said Nauratanmal Bhanwnnlal in respect of the dissolution and asked for the settlement of accounts. But accounts have not yet been settled and both of you have evaded so far. This is, therefore, to call upon you to render accounts to my client and give him the amount due to him.....

On the other hand, the plaintiff relied on the counter-notice given by the appellant through his counsel on 4-1-1955 (Ex. P-6) in which the following allegations were made:-

That you are his one of the partners in the Central India Bidi Works, Begumganj. You are the only financing partner in that firm. Accordingly my client who is the working partner, has to maintain all the accounts books.........You little realise that this action of your hits hard the whole business by which the firm suffers and all the partners will be put to an unnecessary loss...... If you fail to return the books of accounts and necessary documents it shall be presumed that you are detaining them with dishonest and malafide intention and you can also be held liable for removing the same without the consent of the person having their custody.

You are at full liberty to inspect the same when you so desire but you can only do the same at the business premises....."

The first question for consideration would be whether the partnership was dissolved by act of the parties on the basis of the alleged oral agreement said to have been made by the appellant and the first respondent in Diwali of the year 1954.

On the question of dissolution of the firm by an oral agreement, the first respondent as P. W. 1 stated, that although he had given the notice, dated 4-1-1955 (Ex. P-5), the proposal was not acceptable to the defendants, who requested him to continue as a partner. The first respondent agreed to this and accepted to continue as a partner. He further stated that he was taken in that partnership, mainly for the purpose of financing the business, as the defendants had no sufficient capital. The responsibility for maintaining the accounts was that of Bhawanlal. He also stated that in all he had advanced an amount of Rs. 12,629/7/- at different times. He also admitted that he has taken away some account books of the partnership and that he was prepared to return them, but, the appellant did not agree to take them away.

Jankiprasad (P. W. 2) stated that in January 1955 when he met the appellant, Bhawanlal, the tatter expressed anxiety about the firm, as Mathuraprasad was intending to retire. When the witness conveyed this to Mathuraprasad, the latter agreed to continue as a partner. Damrutal (P. W. 3) and Mannulal (P. W. 4) also deposed in similar terms.

The evidence led on behalf of the appellant indicated that the plaintiff had decided to retire from the partnership, as the firm was suffering loss. However, Aajaz Ahmad Hafiz (D. W. 1) stated that when he approached Bhawanlal in April, 1955, the latter told him that the plaintiff was also a partner and that the witness should approach him. This witness does not, therefore, support the defence contention regarding the retirement of Mathuraprasad from the partnership even in April, 1955. The appellant, as D. W. 2, stated that the plaintiff expressed his intention to retire from the firm and that the plaintiff did not do anything for the firm thereafter. Although, the appellant had pleaded an oral agreement about dissolution of the partnership in Diwali. 1954, in his deposition he stated that about 3 or 4 days before Diwali of 1954, the plaintiff had expressed his intention to retire from the firm with effect from Diwali, 1954. This merely indicates that the plaintiff was intending to retire from Diwali, 1954. It does not establish the oral agreement pleaded, which was said to have been arrived at in Diwali. 1954. Poonambhai (1 D. W. 2) in his deposition stated that in 1955 the appellant bad told him about the dissolution of the partnership. This witness had no personal knowledge and his assertion was based on mere hearsay. Similarly, Navaratanmal (1 D. W. 3) and Washarat All (1 D W. 4) also stated that the source of their knowledge was the information supplied by the appellant. The other witnesses for the appellant did not specifically state anything about that. Therefore, it is clear that the appellant failed to establish the alleged oral agreement about dissolution of the partnership said to have been entered into between himself and the first respondent in Diwali 1954. Consequently, the conclusion arrived at by the learned trial Judge that there was no such agreement was correct under the circumstances; and, we confirm the said finding.

From the oral evidence on record, as also the correspondence that went on between the parties, it is clear that there was never any specific agreement about dissolution of the partnership. What happened was that as the firm was suffering loss in business, the first respondent expressed his intention to retire from the partnership. The relations between the parties became sufficiently strained as the appellant was not rendering any accounts of profits or losses and the possibility of the first respondent advancing further money appears to be very slander under the circumstances. What, however, actually occurred was that the appellant expressed his intention to withdraw from the partnership. As it was the impression of the partners that the firm had suffered losses, the appellant desired the first respondent to continue as a partner. But, however, the first respondent did not do anything active thereafter, although he neither did anything so as to dissolve the firm or so as to retire from the firm. It is definite that be did not do anything positive thereafter either in the interest of the firm or against the firm. The appellant might have thought that on taking accounts and on fastening the liability of the losses on each partner, the partnership may not be in a position to return whatever money might be due to the first respondent. Therefore, he was anxious to see that the first respondent continued as a partner.

The learned counsel for the appellant sought to use the first respondent''s admission made in the notice dated 4-1-1955 (Ex. P. 5), also in the statement, dated 5-11-1955 (Ex. 1, D. 2) in proof of the fact that the first respondent had retired from the partnership with effect from Diwali 1954. On the other hand, the first respondent relied on the admission made by the appellant in his notice dated 4-1-1955 (Ex. P. 6). The conduct of the parties, as is disclosed from their depositions, as also the correspondence on record, shows that the first respondent was keen on retiring from the partnership; but, the appellant, on the other hand, insisted on treading the first respondent as a partner. But, the net result of all this appears to be that the first respondent never retired from the firm.

The learned counsel for the appellant based his agruments on the fact of retirement of the first respondent from the partnership and urged that in view of this abandonment by the first respondent, he would not be entitled to demand either accounts or profits with effect from Diwali 1954 Our attention was invited to the observation of their Lordships of the Privy Council in Moung Tha Huyin Vs. Mah Thein & another ILR 28 Cal. 53 PC and Chandra Kunwar Vs. Choudhri Narpatsingh and others ILR 29 All 184 PC in support of the proposition that a partner deserting the partnership in the mid stream would not be entitled to the benefits thereo after such abandonment. We are of opinion that the appellant had failed to establish any abandonment on the part of the first respondent, so as, to disentitle the latter either to claim accounts or profits on the principles laid down by their Lordships of the Privy Council. On the other hand, we have the indisputable fact that the defendants took an advance of Rs. 12,000/- and odd as loan from the first respondent in the partnership. They utilised the same for the benefit of the partnership. It is not known as to what the state of accounts was in Diwali 1954. although the impression of the partners was that there might be losses When the first respondent expressed his intenion to retire, the appellant insisted on the first respondent continuing as a partner. The appellant would not settle the accounts and return whatever liras due to the first respondent. On the other hand, he continued to utilise the funds advanced by the first respondent to the extent of Rs. 12,000/- and odd and it appears thereafter the business made lot of profits. Therefore, we are of opinion that the case of an abandonment by the first respondent is not established.

An admission can only be used against a party, if it amounts to an estoppel, as provided by Section 31 of the Indian Evidence Act. It is always open to a party to explain the admission made by him. As laid down by their Lordships of the Supreme Court in a series of cases, namely, Dhiyan Singh and Another Vs. Jugal Kishore and Another, ; Nagubai Ammal and Others Vs. B. Shama Rao and Others, and Kishori Lal Vs. Mst. Chaltibai, a party can show that either the admission was made under a mistake or under differant circumstances and unless there has been a prejudice to the opposite party on account of the admission having been acted upon or on account of any representation made by the admitting party, it would not bind the party unless it amounted to an estoppel In Kedar Nath Motani and Others Vs. Prahlad Rai and Others, their Lordships of the Supreme have further laid down that where each other made admissions detrimental to itself, the mutual admissions would cancel each the result that the question for consideration have to be decided on the material on record irrespective of such alleged admissions. We are of opinion that the present one is a case of this type, where the conduct of the parties, as also the correspondence on record, show the admissions made by the parties against their own interest Therefore the alleged admission said to have been made by the first respondent in his notice, dated 4-1-1955 (Ex. P. 5) would have no particular significance in view of the counter admission made by the appellant in his notice, dated 4-1-1955 (Ex. P. 6). The present case, therefore, cannot be decided on the alleged admission alone. But, as already discussed earlier, we have taken into consideration the subsequent conduct of the parties, as also the correspondence that ensued between them.

Even if we were to assume that the first respondent retired from the partnership with effect from Diwali of the year 1954, there is no doubt that u/s 37 of the Partnership Act, he would be entitled to claim a share in the profits or to claim 6 percent interest on the capital advanced by him unless the other partners settled the accounts and cleared of all the dues that might be due to him. Even from that point of view, there is no substance in the contention of the learned counsel for the appellant that the first respondent is not entitled to anything after Diwali, 1954. u/s 37 of the Act, it is the choice of the first respondent to claim either accounts or interest at 6 percent per annum on the advances, whichever be greater. The choice is his. This is an unfettered right of an outgoing partner. There is no doubt that the appellant utilised the money advanced by the first respondent for the benefit of the partnership and that there was never any dissolution of the firm, nor any abandonment on the part of the first respondent. Even as a retiring partner, the first respondent would be entitled to the benefit conferred by Section 37 of the Indian Partnership Act.

The learned counsel for the appellant further urged that the suit would be barred by time under Article 106 of the Indian Limitation Act, in as much as the partnership stood dissolved in Diwali 1954, while the present suit for dissolution was filed on 10-5- 1958. As we have held earlier that there was no dissolution of the firm at any time, the question of limitation under Article 106 of the Indian Limitation Act would not at all arise. We agree with the learned trial Judge that the suit was within time.

The learned counsel for the second respondent Laxmichand, filed an application purporting to be one under Order 41, Rule 33 of the Civil Procedure Code, praying, firstly, that he be transposed as an appellant and contendig secondly that he never became a partner of the firm, as the deed had been signed not by him, but his brother, Sobhagmal, who had no authority to sign on his behalf.

As regards the question of transposition of the second respondent as an appellant, we may observe that it is too late now for the second respondent to reek to be transposed as an appellant. In the trial Court he was one of the defendants along with the appellant. He had raised certain pleas, which were found against him, and a decree was accordingly passed against both the defendant. He was apparently satisfied with the decree passed and therefore, he elected not to file an appeal against the decree, to permit him to be transposed as an appellant after the unsuccessful attempt of the appellant to challenge the decree would be prejudicial to the interest of the first respondent. The second respondent, having elected to be impleaded as a respondent, might urge whatever grounds he could in such capacity, without seeking to be transposed as an appellant. Therefore, we reject his prayer for being transposed as an appellant.

As regards the question whether the powers conferred by Order 41, rule 33 of the CPC could be invoked by the second respondent in the manner suggested by his learned counsel, the said provision is as follows:-

The Appellate Court shall have power to pass any decree and make any order which ought to have been passed or made and to pass or make such further or other decree or order as the case may re quite, and this power may be exercised, by the Court notwithstanding that the appeal is as to part only of the decree and may be exercised in favour of all or any of the respondents or parties, although such respondents or parties may not have filed any appeal or objection:-

Provided that the Appellate Court shall not make any order u/s 35-A, in pursuance of any objection on which the Court from whose decree the appeal is preferred has omitted or refused to make such order."

The wording of Order 41, Rule 33 indicates that the Court has the power to vary the decree in favour or any of the non-appealing respondent, if it thinks it necessary to do so and if it further thinks that such an interference with the decree is required on account of the decree in favour of an appellant being varied or reversed. But, the said provision does not confer any right on any of the non-appealing respondent to claim to duplicate the rights and privileges exercisable by an appellant. Therefore, we are of opinion that although the Court would have the power to reverse or vary a decree in favour of a non-appealing respondent, the respondent concerned cannot demand it as a matter of right, he having elected to be satisfied with the decree passed by the trial Court.

However, we shall consider the second respondent''s defence raised in his pleadings. He alleged that the partnership, dated 14-8-1946 was between the appellant and the first respondent alone and that he himself was never a partner. He also stated that the suit was barred by time and that his brother Sobhagmal had no authority to sign the deed on his behalf. As regards the other questions raised By the second respondent, we have already considered them in connection with the grounds on appeal raised by the appellant. Therefore, it is not necessary to reconsider those questions. The only question we might consider is whether the second respondent was a partner at the inception and whether his brother Sobhagmal could sign the deed on his behalf.

The partnership deed, dated 14-8-1946 (Ex. P-l), was signed by Sobhagmal as follows: "S. M. Tanted for Laxmichand: Subhagmal". Bhawanlal (1. D. W. 2.). in his deposition, stated that his intention was to mike Sobhagmal and not Laxmichand a partner. The partnership deed was scribed by the witness. Sobhagmal signed the same in his presence. After the singing of the deed, the witness and the first respondent, Mathuraprasad went to Sobhagmal and had talks with Laxmichand. According to this witness, Laxmichand did not agree to be a partner. Therefore, his version was that he, Mathuraprasad and Sobhagmal became partners. However, he further stated that he treated Laxmichand also to be a partner and that he always showed Laxmichand as the partner in the dealings, as also in the written Statement filed in Court. He further stated that Laxmichand and Sobhagmal are joint and that out of the two, Laxmichand of the elder brother.

Laxmichand (2. D. W. 1), in his deposition, asserted that he never became a partner and that he had never authorised Sobhagmal to sign the deed on his behalf. He also Stated that he had no business, styled as ''Laxmichand Sobhagmal''. He stated that he was joint with his brother and that his father was the Karra of the family. His firm was styled art ''Gulabchand Sobhagmal'' for the last 20 years. Further, he admitted that he never sent a reply to the plaintiff''s notice denying the fact that he was a partner. However, he further stated that he knew that his name had been included in the partnership. Further, he stated that soon after Sobhagmal had signed the partnership deed, Sobhagmal and Bhawanlal had gone to him at Shujalpur. They informed him that Sobhagmal had signed the partnership deed for him. Lastly, he stated that as he was not a partner, the question of retirement in the year 1953 did not at all arise and any assertion in that behalf by Bhawanlal was incorrect. Therefore, from the testimony of this witness, it is clear that he was aware of the fact that Sobhagmal had signed the deed on his behalf. His conduct thereafter shows that he never protested against it and that he continued to be a partner of the firm. Under the circumstances an implied authority can be inferred in favour of Sobhagmal for singing the partnership deed. Even the subsequent conduct of Laxmichand shows ratification of the action, although Sobhagmal may have not been specifically empowered by a power of attorney. Therefore, it is dear that it was, Laxmichand who was, in fact, a partner and the view of the learned trial Judge that Sobhagmal was not a partner appears to be correct under the circumstances. Therefore, we are of opinion that the application for impleading Sobhagmal was rightly rejected by the trial Judge and the decree against Laxmichand in his capacity as a partner was correct under the circumstances of the case.

As on merits we have taken a view against the appellant, there is no occasion to interfere with the decree passed by the trial Court and consequently no question for consideration under Order 41, rule 33 of the CPC arises in the present case.

For the reasons aforesaid, the appeal fails and is dismissed with costs. The second respondent shall bear his own costs of this Court. The costs of the trial Court shall be borne as directed by that Court. Counsel''s fee in this Court according to schedule or certificate, whichever be less.