Gowa Petha vs N.H. Moos

Wort, J.—This is an appeal by the defendant in an action brought by a receiver appointed by the High Court, Bombay, claiming accounts against the defendant, one Gowa Petha. The action succeeded and an account has been ordered from the year 1921.

One of the contentions by the defendant was that the action was barred by limitation. It was stated that Article 89, Limitation Act, applied but it is quite obvious that what is called the residuary article, namely Article 120, Limitation Act, applies, and in those circumstances from the facts which will presently appear I have no doubt that that plea fails.

The action in which the plaintiff receiver was appointed was one in which the plaintiffs were a firm known as Khimji Poonja & Co. carrying on business with in the fort of Bombay and the defendants also were a firm known as Tricumji Jivandas, who also carried on business in Bombay.

The contention on behalf of the plaintiff was that the defendants Tricumji Jivandas and Gopaldas Tricumji were partners with the defendant in this action. Gowa Petha, in a colliery business carried on at Jharia. It appears that the plaintiffs in the Bombay action Khimji Poonja & Co., had given financial assistance to Tricumji Jivandas and that on 13th November 1923 Tricumji Jivandas had assigned, amongst other things, their interest amounting to one and a half annas in the coal mine in which they alleged they were partners.

A number of questions arose, and it was contended by the defendant before us that in the first place no action lay for accounts as the receiver had not, and indeed was not, in a position to ask for dissolution. That argument was based on the assumption that there was in fact a partnership between Tricumji Jivandas and Gowa Petha. But, as an alternative argument it was contended that there was no such partnership and that the most that could be said was that there was some form of partnership in a railway contract which Gowa Petha was working.

Another matter that was argued was that, even assuming that there was a partnership between the parties, the receiver under the law was entitled only to such accounts as the partners Tricumji Jivandas cared to render and that the receiver could not call the other partners in the partnership to account. A number of other incidental matters were argued, amongst them being that the charge that was created by the decree in the Bombay action charged not the whole interest of Tricumji Jivandas in the partnership but only that of Gopaldas Tricumji who was the senior partner. It had better be stated at once that Tricumji Jivandas was the name of the father of Gopaldas who had died more than 40 years ago but that the business was carried on under his name, although the partners are now Gopaldas Tricumji and Morarji his nephew only.

It is rather remarkable that in the action in the High Court in Bombay the defendants were described as Gopaldas Tricumji, Deoji, who was the brother of Tricumji Jivandas, and thirdly, the firm Tricumji Jivandas. This is possibly explained by the fact that one of the signatories to the deed of assignment of 13th November 1923, was the same Deoji although there was also a third Ranchhodas Tricumji. There are certain facts in the case which are quite clearly established and not denied. It is perhaps unnecessary to set out in detail the various deeds under which Gowa Petha acquired the colliery lands. But commencing from the year 1900 and ending in the year 1908, Gowa Petha had acquired some 300 bighas of colliery lands, 100 of which he conveyed to Manji Navaji and by another document in 1917 he conveyed 20 bighas to Tricumji Jivandas, that is to say at the time of this action he held only 180 bighas but during the earlier years of the alleged partnership the colliery lands consisted of 200 bighas.

On the question of partnership or no partnership, it is necessary to rely upon the evidence in the case as there is no deed which could be properly described as a deed of partnership between the firms.

Two points arise on this question, one whether there was a partnership as to the business only, and secondly, whether there was a partnership both as regards the business and the colliery lands. This is an important point as it is quite clear that the remedies of the plaintiff would be considerably affected according to the decision arrived at on this question. There are however a number of documents which are produced in evidence to prove the partnership, the first being an agreement dated 7th December 1904. That states (incidentally it is signed by Gowa Petha) that as regards the amount of 100 bighas of land in the Jharia coal field which the party of the other part (Gowa Petha) has managed in his name and the railway contract work undertaken in both the names, the party of the first part, that is Gopaldas Tricumji, has a share of one and a half annas. Then it is recited later that moneys have been drawn from Gopaldas for the aforesaid works and further each party has to invest moneys in the colliery according to his respective share and each party has to debit interest to the said colliery according to his respective share.

There is a further provision by way of postscript which is to the effect that any moneys advanced in excess of the share shall bear interest. A further document of 22nd September 1906 recites the fact that Gowa Petha had taken money from Gopaldas, that the profit is to be divided in accordance with the said books of account and in proportion to the shares. Then there is a provision as to the payment of certain sums advanced and the distribution is to be made in respect of the profits every year and that the profit is to be divided among all. There is still a further and important provision that the colliery is to be continued to be worked as joint concern.

It appears that Gowa Petha had certain subpartners and they appear to have been apprised of the arrangement between Gowa Petha and Gopaldas. The facts are very important on this question. The original sum advanced by Tricumji Jivandas to Gowa Petha was Rs. 5,000, and it is one of the contentions of the defendant that the arrangement between the parties was merely that in consideration of this advance Tricumji Jivandas should have an interest in the colliery business by way of a share of the profits. It must be agreed that if that is the arrangement then that was consistent with there being no partnership between the parties in the colliery business; but it appears to be negatived by the facts. The facts are that that sum of Rs. 5,000 was paid off in 1910, that accounts were rented from time to time by Gowa Petha, that sums were paid on account of interest in the profits, and indeed it has been found, and not now disputed, that the last account so rendered was in the year 1921. That there was a partnership in the colliery business seems to me to be beyond doubt. I have said that Sir Sultan Ahmad, who argued the case on behalf of the appellant, stated that it was in the railway contract only, but the document upon which he relied namely, the first to which I have referred distinctly states that his interest is in the contract as well as in the colliery. The further question to be determined is whether there was a partnership in the colliery lands as well as in the colliery business. There is evidence on behalf of the plaintiff that there was such a partnership. The matters on which Mr. Hasan Imam on behalf of the plaintiff relies are first of all Ex. 4 which was a document between Gowa Petha and his subpartners in which he recites the fact that

a writing in my name has already been made in any respect of the shares allotted to Tricumji Jivandas in the 100 bighas of land.

That was dated 1901 and at that time only 100 bighas of land were in the possession of Gowa Petha; it was not till 1908 that the other 200 bighas were acquired. I do not think that there can be any doubt that there was also a partnership in the colliery. But there is one point on this question which creates some difficulty.

On 18th December 1916, Gowa Petha conveyed to Gopaldas Tricumji 20 bighas of the remaining 200 bighas, and it is contended that that is wholly inconsistent with the partnership in the colliery lands. But it is pointed out by Mr. Hasan Imam that on 19th December there was an account prepared in the form of a receipt given to Tricumji Jivandas from which it appears that some six or seven thousand rupees were due from Gowa Petha on account of the distribution of profits and that the consideration money for these 20 bighas, namely Rs. 10,500 is placed on the other side of the account, that is to say, that the Rs. 10,500 went into the partnership accounts and not into the pocket of Gowa Petha. This transaction is somewhat difficult to explain. On the facts and circumstances of the case, I do not think however that there is any serious obstacle to the contention that there was a partnership in the colliery, as well as in the colliery business.

Sir Sultan Ahmad raises another question. He has stated that in any event an account in this case is impossible because all the partners in the partnership business are not before the Court. The answer of Mr. Hasan Imam is that in the judgment of the Bombay High Court and the decree prepared thereunder which makes a charge on the share of Gopaldas only, the parties were treating Gopaldas Tricumji as the firm. The senior partner was Gopaldas and in the deed of agreement of 7th December 1904, Gopaldas Tricumji Jivandas''s firm was described as a firm carrying on business as also in the deed of 22nd September 1906, and that to all intents and purposes the parties, as I have stated, considered that Tricumji Jivandas and Gopaldas Tricumji were interchangeable names. That might be an explanation that the judgment and decree in the Bombay action was against Gopaldas Tricumji. But Sir Sultan Ahmad contends that there was a compromised action and that all that the parties could do in the circumstances was to charge Gopaldas Tricumji''s share. He suggests that the arrangement was a collusive one; but there is no evidence of that, and it seems to me that the explanation put forward by Mr. Hasan Imam on behalf of the respondent appears to be the correct one.

We are met however in this case with a much more serious obstacle in the way of the plaintiff. The partnership share which was being assigned is the share in the business and in the colliery: in other words, the partners are partners both as regards the profits and also in the mine itself. In those circumstances the partners are partners to all intents and purposes and their rights are governed by the ordinary law of partnership.

The exception to the rule that an assignee of a partnership share cannot get accounts against the co-partners is that of a case in which although the partners are partners in the profits of the mine, they are not co-partners in the mine itself but merely co-owners, and in those circumstances not only can they assign their share but obtain accounts against the copartners; see Bentley v. Bates [1840] 4 Y. & C. 182. The only section in the Contract Act which has any connexion with this matter is Section 253 which provides that a partner cannot be pressed upon the partnership without the consent of all parties and it is upon the basis of that principle that the rights and liabilities of an assignee of a share in the partnership are prescribed. We have in India no definite statutory provisions relating to the specific question before us, namely whether an assignee can claim an account by action against the partners. In England, before the Partnership Act of 1890, there was a difference of opinion and it was thought that the case of Whetham v. Davey [1885] 30 Ch. D. 574 represented the view that an account could be had. There was authority however against the proposition, and indeed, when the case to which I have referred is examined it is seen that it is a case in which an account had been claimed after dissolution.

There is no dispute that after dissolution an assignee can claim an account against the partners. By Section 31, Partnership Act, 1890, the better opinion as it was described in England was given statutory effect and under that section an assignee is entitled to receive a share of the profits to which the assigning partner would be entitled and the assignee must accept the accounts of profits agreed to by the partners and there is a direct prohibition against an assignee requiring any accounts of the partnership transactions or interfering in any way with the management or administration of the partnership. I do not think that there is any doubt that the better opinion, so called, which is now represented in England by Section 31, Partnership Act of England, represents the law in India, although there is no statutory provision to that effect, and for that reason alone I would hold that the plaintiff in this action is not entitled to succeed.

There are a number of subsidiary questions which it is unnecessary to determine having regard to my decision on the last point.

In my judgment the appeal should be allowed with costs.

Fazl Ali, J.

The principal question which seems to me to require decision in this appeal is whether the plaintiff is entitled to sue for accounts in the circumstances of the case. The question is not an easy one and I was first inclined to think that it should be answered in the affirmative. The facts which weighed with me were: (1) that the plaintiff having been appointed a receiver in respect of the right, title and interest of Tricumji Jivandas may well be regarded as being in a somewhat better position than the mere assignee of a share in a partnership, and (2) that by maintaining that there was no partnership between the defendant and Tricumji Jivandas and withholding their share of the profits of the business, the defendant has been virtually trying to exclude a partner from the partnership. It appears to me however on a fuller consideration of the matter that the view taken by my learned brother is correct.

It is well established that the relationship inter se between the partners being one of mutual confidence and fiduciary in its character, one partner cannot by merely transferring his interest in the partnership without the knowledge and consent of the other partners confer on the transferee all the rights and privileges which he himself possessed as a partner. It is also well recognized that partners are not as regards partnership dealings considered as debtor and creditor inter se, until the concern is wound up or until there is a binding settlement of accounts. On these principles, it has been held that ordinarily a stranger to the partnership is not entitled to an account of the partnership and that the Court will not as a general rule order an account of partnership dealings even at the instance of a partner, unless he also claims dissolution or alleges that the partnership is dissolved.

Both these rules however are subject to exceptions. For example, an account may be ordered without a claim for dissolution where a partner is trying to exclude his partner from some secret benefit from the partnership or to force him to a dissolution, or where there is a refusal to account, or where a limited account will meet the interest of justice of the case: see Halsbury''s Laws of England, Vol. 22, p. 71. It was held by the Lahore High Court in Harji Mal Mela Ram v. Kripa Ram Brij Lal AIR 1922 Lah. 195, that where a partner withholds the profits of the concern from a partner of the firm the partner excluded from the profits may bring a suit for an account and for his share of the profits and such a suit cannot be dismissed for the reason that the plaintiff does not claim a dissolution. Similarly in special circumstances strangers to the partnership have been held to be entitled to an account but, so far as I am aware, most of these cases are those where on the death or bankruptcy of one of the partners the legal personal representative of the deceased partner or a trustee in bankruptcy has been allowed to have an account against the other partners.

Turning now to the facts of the present case it will appear that Messrs. Khimji Poonja & Co., at whose instance the plaintiff was appointed a receiver by the Bombay High Court, had obtained a decree which declared that they had a valid charge upon the share of Gopaldas Tricumji (who from the evidence appears to be the managing partner of the firm of Tricumji Jivandas) in the colliery worked by Gowa Patha. Their position therefore virtually is that of a mortgagee whose charge has been declared upon the interest of one of the members of the partnership. The question which is to be considered is what are the rights of such a person in the partnership. The Indian statute law nowhere defines the rights of an assignee or a mortgagee of a share in a partnership. In England however the rights of such persons are governed by Section 31, Partnership Act, 1890,which is as follows:

(1) An assignment by any partner of his share in the partnership, either absolute or by way of mortgage or redeemable charge, does not, as against the other partners, entitle the assignee, during the continuance of the partnership, to interfere in the management or administration of the partnership business or affairs, or to require any accounts of the partnership transactions, or to inspect the partnership books, but entitles the assignee only to receive the share of profits to which the assigning partner would otherwise be entitled, and the assignee must accept the account of profits agreed to by the partners.

(2) In case of a dissolution of the partnership, whether as respects all the partners or as respects the assigning partner, the assignee is entitled to receive the share of the partnership assets to which the assigning partner is entitled as between himself and the other partners, and, for the purpose of ascertaining that share, to an account as from the date of the dissolution.

The Courts in this country have often remarked that what has been laid down by this section may also be taken to represent the law in India: see Chidambaram Chetty v. Karuthan Chetty 34 Ind.Cas. 543 and Dhanaji Jhelaji Vs. Gulabchand Pana, and it follows, therefore that as a general rule a mortgagee or an assignee cannot sue for accounts. In some cases however it has been held that where a partner disposes of his entire interest in the partnership by way of sale or where his interest is sold in an execution sale the partnership comes to an and u/s 254, Clause (3), Contract Act, and therefore an assignee may sue for dissolution u/s 265, Contract Act, or sue for account upon the dissolution of the partnership: see Juggut Chander Dutt v. Rada Nath Dhur [1884] 10 Cal. 669 and Pervatheesam v. Bapanna [1890] 13 Mad. 447 ; sea also Section 253, Clause 7, Contract Act. On the other hand it was held in Dhanaji Jhelaji Vs. Gulabchand Pana, that an assignment by one of the partners in a firm, of his share in the partnership does not cause an immediate dissolution of the partnership, nor does the assignment give the assignee a right to the account of the profits. It merely gives a right to the other partners to dissolve the partnership.

However that be, this is not a case in which the interest of one of the partners has been completely disposed of, and it is conceded that the position of Messrs. Khimji Poonja & Co. was merely that of a mortgagee or a charge holder. Upon general principles therefore such a person cannot in ordinary circumstances sue for accounts and a question arises as to whether he can, by securing the appointment of a receiver, do indirectly what the law does not entitle him to do directly. It has been urged before us on the one hand that the position of a receiver is better than that of a mere assignee, and, on the other, that it is oven worse than that of the latter.

However that may be, no authority has been placed before us to warrant the proposition that a receiver appointed at the instance of an assignee in circumstances such as those of the present case is entitled to sue for accounts where the assignee himself cannot do so. I may mention that it has also been pointed out on behalf of the appellant that, although evidence was adduced on behalf of the plaintiff to show that the firm of Tricumji Jivandas (or the persons who have chosen to describe themselves as such) were partners in the colliery business, what Messrs. Khimji Poonja & Co. prayed for in their plaint was that a charge may be declared only upon the share of Gopaldas Tricumji in the colliery. It was also pointed out in this connexion that Gopaldas Tricumji is only one of the partners in the firm of Tricumji Jivandas and there seams to be no apparent reason why Messrs. Khimji Poonja & Co. did not pray for a charge on the interest of Tricumji Jiwandas in the colliery although the firm had been impleaded as a defendant in the suit. It is again pointed out that curiously enough, although by the decree passed by the Bombay High Court on 8th April 1924 it was declared that the plaintiffs had a valid charge upon defendant 1''s share in the coal mine, that is to say, the share of Gopaldas Tricumji, yet the plaintiff has been appointed a receiver not only in respect of the right, title and interest of Gopaldas Tricumji but also in respect of the right, title and interest of the firm of Tricumji Jivandas. There is no doubt that these facts somewhat complicate the position, but what chiefly weighs with me is that the plaintiff has not succeeded in showing why the present case should be taken out of the general rule that a partner should not be made liable to render account to a mere assignee or to a person who is a stranger to the partnership. I am somewhat fortified in this view when I find that a case like the present seems to be covered by a definite provision of law both in England and in India. In England Section 23, Partnership Act, provides that the High Court or a Judge thereof... or a county Court, may on the application by summons of any judgment-creditor of a partner make an order charging that partner''s interest in the partnership property and profits with payment of the amount of the judgment-debt and interest there on and may by the same or a subsequent order appoint a receiver of that partner''s share of profits (whether already declared or accruing) and of any other money which may be given to him in respect of the partnership and direct all accounts and inquiries and give all other orders and directions which might have been directed or given if the charge had been made in favour of the judgment-creditor by the partner or which the circumstances of the case may require. This is also exactly what Order 21, Rule 49, Civil P.C., provides.

Thus, under the latter rule it is possible for an assignee who has also become a decree-holder not only to secure the appointment of a receiver but also to obtain from the Court an order against the other partners directing accounts to be taken. It is to be noted that this rule does not suggest that the receiver who is appointed will be entitled to institute a suit for accounts, but what it seems to provide is that he will merely receive such profits as are actually paid out of the partnership and as will, but for his appointment to go into the hands of the judgment-debtor partner. As to the accounts, Sub-rule (2) makes it clear that it will be ordered only after the application of the decree-holder is served on the judgment-debtor as well as his partners or such of them as are within British India. Thus, if any account is to be taken, it will be taken in the presence of all the partners, including the judgment-debtor, as should be done whenever an account is ordered to be taken in respect of the partnership business. It is true that, as was held in Brown Janson & Co. v. Hutchinson & Co, [1895] 2 Q.B. 126 the Court will order accounts only under special circumstances, but I do not think there would be any difficulty in the Court ordering accounts to be taken where there is evidence that one of the partners is trying to exclude his partner from the partnership or where there is evidence of a refusal to account.

Now, in the face of this definite provision, I do not think it could have been intended that an assignee of a share in partnership who has also obtained a decree against the partner instead of having recourse to this provision should force the other partners to account by means of securing the appointment of a receiver especially when the partnership is still subsisting and the partnership has not been dissolved. It is needless to say that the present suit is only for account and not for dissolution and accounts, a suit which could have been brought by the partner himself only under special circumstances. I think therefore that the present suit is entirely misconceived and as such liable to be dismissed.

I may here incidentally point out that it was held in Jagat Chunder Roy v. Iswar Chunder Roy [1893] 20 Cal. 693, that the share of a partner in a partnership business is a saleable property and can therefore be attached and sold in execution of a decree by a creditor against that partner. In concluding the judgment of that case the learned Judges who decided that case observed:

In the present case the partnership is apparently still subsisting and we think that the decree-holder is entitled to attach the partnership property If the decree is not satisfied he may proceed to put up to sale the two annas share in the partnership business which it is alleged belongs to his judgment-debtor. If any such sale takes place it will then be open to the purchaser or to the other partners to apply to have the partnership wound up and an account stated.

This case was decided before Order 21, Rule 49 was enacted, but I take it that what has been laid down there is still good law with the exception perhaps of the remarks relating to the attachment of partnership property as distinct from the right, title and interest of the individual partner against whom a decree may have been obtained) and indicates one of the courses open to the creditor who has obtained a decree against one of the partners in the partnership.

I do not think I can usefully add to the judgment of my learned brother on the questions of fact which have been decided by him in favour of the plaintiff, and I shall only say hero that I entirely agree with his conclusions. I, therefore concur in the order proposed by him that this appeal should be allowed with costs.