Hari Sao vs Gulab Chamd and Another

Agarwala, J.—This is an appeal by the plaintiff from a decision of the Additional Subordinate Judge of Patna confirming a decision of the Munsif. The appeal arises out of a suit for rendition of accounts on the basis of an agreement between the plaintiff and the defendant, dated 28th August 1933. The defendant is the agent of the National Petrolium Oil Company of Bombay for the sale of their products within a certain area in this province. The agreement between the plaintiff and the defendant related to the sale of the Petrolium Company''s products in the area covered by the agency of the defendant. The Courts below have dismissed the suit holding that the agreement between the plaintiff and defendant constituted a partnership and that a suit for accounts by one partner against another is not maintainable unless the plaintiff seeks to dissolve the partnership.

The agreement is in these terms:

Babu Gulabchand and Babu Sitabohand, sons of Babu Amir Chand, deceased, by caste Agarwala, by occupation zamindars, money-lenders and traders, residents of town Arrah, mahalla Mahajan Toli No. 1, thana and P.C. Arrah, District Shahabad, hereinafter called the first party, enter into an agreement (as follows): On this the 28th day of August 1933, the first party has taken agency of oil from the National Petrolium Company of Bombay for an area from Patna City to Dinapore, and has appointed Hari Sahu Ram Das Ram, sons of...by occupation traders, residents of Bakerganj, Bankipur, Patna, hereinafter called the second party, for dealing in oil. The terms settled between the two parties are detailed below.

Memorandum of agreement between the first party and the second party:

The first party appointed the second party to deal in oil of National Petrolium Company of Bombay, for the area from Patna City to Dinapore.

The second party agreed to invest alone as much money as will be required in that oil business, and to keep always sufficient goods in stock.

All consignments of oil, etc, will be through the Bank and Railway Company. (The second party) will take delivery of the goods on payment of money, stock them in their godown and sell them.

The second party also agreed to sell goods on credit, to wholesale dealers and shop-keepers, at their own risk. This first party has nothing to do with it.

All (profits caused) by the sale of oil, or the commission and expenses received from the company will be shared half and half by both the parties; and all the losses suffered on any account whatsoever will be similarly borne by both the co-sharers according to their shares.

The rent of the godown, and proper expenses incurred in maintaining a gumashta and a peon for making collections, will be deducted from the profit, and the balance will be distributed between the two parties.

The first party will not supply goods to any other shop-keepers except the second party.

The second party shall have to send a return of daily sale and stock balance to Arrah by post every day.

If the first party discovers any mismanagement of the business on the part of the second party, the first party will have the power in that case to remove the second party from that business,

If the second party have to enter into any transaction or to do anything new, or to make any consultation as regards that business, they will have to come to Arrah and settle the same with the first party.

Section 4, Partnership Act of 1932, describes a "partnership" as the relation between partners who have agreed to share the profits of a business carried on by all or any of them acting for all. Section 6 of the Act contains rules for determining the existence of a partnership and directs that in determining whether persons are partners or not regard is to be had to the real relation between them as shown'' by all the relevant facts taken together. It cannot be denied that in the agreement with which I am concerned there are terms which are consistent with the existence of a partnership, for example, the provisions of para. 5 for the sharing of profits and some of the losses in equal shares and the provisions of para. 6 by which the defendant agreed that the costs incurred by the plaintiff in maintaining a staff should be taken into consideration in determining the profits or losses incurred in the business. But the Explanations to Section 6, of the" Act indicate clearly that these considerations are not conclusive in determining whether parties are partners or not.

It will be noticed that the agreement recites that the defendant "appointed" the plaintiff for dealing in oil and para. 9 confers upon the defendant the power to "dismiss" the plaintiff for mismanagement of the business. Partners do not appoint or dismiss each other and the use of these two expressions in the agreement is, in my opinion, a clear indication that the relationship between the parties was not that of partners. The provisions of para. 7 also indicate that the relationship between the parties was, not that of partners. By that paragraph the defendant undertakes not to supply goods to any shop-keeper other than the plaintiff. For these reasons I have no doubt that the relationship between the parties is not that of partners and that the decision of the Courts below is wrong. I would therefore set aside those decisions and remit the case to the Court of first instance to be tried in accordance with law. The plaintiff is entitled to. his costs throughout.