Kesho Ram vs Manohar Lal

R.L. Anand, J.—This is defendant''s first appeal and has been directed against the judgment and decree dated 2.5.1994 passed by the Court of Sub Judge Ist Class, Dhuri, in Civil Suit No. 335 of 1988, by which the learned Sub Judge decreed the suit of plaintiffrespondent No. 1 Manohar Lal for dissolution of partnership and for rendition of accounts, as prayed for.

The brief facts of the case are that Manohar Lal, plaintiffrespondent No. 1, filed a suit for dissolution of partnership and for rendition of accounts of M/s Punjab Foundry and Engineering Works, Dhuri, and claimed accounts with effect from 1.1.1982 till the date of finality of suit and he also prayed that defendants Nos. 1 to 3, namely, Kesho Ram, Charanjit and Mangal Sain, be directed to render accounts as they were managing the affairs of the said firm. The plaintiff also claimed a decree for possession of 1/5th share by way of partition of entire movable and immovable property of the firm in the shape of building and machinery. The plaintiff also claimed 1/5th share being the partner of 20% share in the partnership in the godowns and also in the land measuring 16 Bighas 14 Biswas, fully described in the head note of the plaint itself.

The case set up by the plaintiff was that previously land measuring 16 Bighas 14 Biswas was the ownership of Punjab Foundry and Engineering Works, Dhuri, and Smt. Rukmani Devi defendant No. 7 was its sole owner. She purchased this property in the name of M/s Punjab Foundry and Engineering Works, Dhuri, but could not raise construction and carry on business being single handed. She entered into a contract with the plaintiff and defendants Nos. 3, 4, 5 and 6, namely, Mangal Sain, Naresh Kumar, Partigya Paul and Sham Lal, and threw the suit property in the joint pool of partnership concern and she agreed to deal with the construction of building, godowns and installation of machinery and to carry on business in partnership with the plaintiff as well as defendants Nos. 3, 4, 5 and 6. It was further agreed that the name and style of the firm will remain M/s Punjab Foundry and Engineering Works, Dhuri. Share of the plaintiff was agreed to be 20%, of defendant No. 3 Mangal Sain 20%; of defendant No. 4 Naresh Kumar 15%; of defendant No. 5 Partigya Paul 15%; of defendant No. 6 Sham Lal to be 20%; and of defendant No. 7 Smt. Rukmani Devi to be 10%. All the assets and liabilities of the previous firm owned by Smt. Rukmani Devi were taken over by the firm. Partnership deed was executed by the partners on 1.1.1975. All the partners signed the partnership deed in token of correctness and copies of the partnership deed were also produced before the bank authorities, Punjab Financial Corporation, Sales Tax and Income Tax Departments. The factum of ownership of partnership concern over all the assets, including the landed property was confirmed in decree passed in Civil Suit No. 354 decided on 7.9.1977, which was filed by Rukmani Devi and others against Sh. Mangal Sain seeking declaration of their shares. The shares of the parties were inadvertently mentioned in the said suit and this mistake was ultimately rectified by the High Court vide order dated 22.11.1984. Special Leave Petition filed by Mangal Sain against the said order was also dismissed by the Hon''ble Supreme Court. The plaintiff alleges that thereafter the parties to the partnership continued their business upto 31.12.1980 and the accounts were settled upto the said date. Thereafter Mangal Sain did not render accounts to the other partners, resulting in strained relations between them. Said Mangal Sain also leased out building, godowns and machinery to some other party. The lessees filed suit for permanent injunction against the other partners, which was ultimately decreed. It was held that share of present plaintiff of the lease money shall be deposited in the Court. Thereafter the share of Sham Lal defendant No. 6 was purchased by defendant No. 1 Kesho Ram. Share of Smt. Rukmani Devi defendant No. 7 was also purchased by Kesho Ram. Their shares were purchased by Kesho Ram defendant No. 1 through separate sale deeds dated 6.9.1983 and 7.9.1983. Share of Naresh Kumar defendant No. 4 was purchased by Mangal Sain defendant No. 3 vide sale deed dated 16.11.1983. Share of Partigaya Paul was also purchased by Mangal Sain defendant No. 3 and Charanjit defendant No. 2. The plaintiff stated that he was not interested to remain joint nor he was interested to keep the partnership business with defendants Nos. 1 to 3 and filed the present suit.

Defendants Nos. 1 and 2 filed separate written statements and denied that the property was in the name of M/s Punjab Foundry and Engineering Works, Dhuri. They took the plea that Smt. Rukmani Devi widow of Parshotam Dass was the owner and in exclusive possession of the entire property mentioned in head note of the plaint, including godowns, which were in dilapidated condition. Kesho Ram defendant No. 1 purchased the said land, including godowns from Rukmani Devi vide two sale deeds dated 6.9.1983 and 7.9.1983 for valuable consideration. Thereafter Kesho Ram installed rice sheller under the name and style of M/s Charanjit Rice Mills. They constructed their new godowns, constructed the boundary wall and installed the machinery. In this manner spent huge amount after taking loan from the Punjab Financial Corporation and Punjab National Bank. Defendant No. 1 claimed himself to be in exclusive possession of the suit property. Defendant Nos. 1 and 2 denied that the plaintiff had any right or authority to claim share in the landed property. They also pleaded that the suit is bad for misjoinder of parties; that it is not properly valued for the purpose of Court fee and jurisdiction; that the plaintiff is estopped by his own act and conduct from filing the suit; that the suit is beyond limitation. These defendants also took the specific plea that the plaintiff never challenged the sale deeds in favour of defendant No. 1. The alleged partnership in between the different partners cannot affect the rights of defendant No. 1 since he is a bona fide purchaser for valuable consideration from Smt. Rukmani Devi defendant No. 7.

Defendant No. 3 Mangal Sain filed separate written statement and stated that Smt. Rukmani Devi was the sole proprietor of the firm M/s Punjab Foundry and Engineering Works, Dhuri, and she was the sole owner and in exclusive possession of the land measuring 16 Bighas 14 Biswas. According to him, the partnership was created just for running the business in the year 1975. The plaintiff and defendants Nos. 3 to 6 did not contribute any amount towards land or building, which was previously in the ownership of defendant No. 7. Defendant No. 3 admitted that Smt. Rukmani Devi sold the disputed property to defendant No. 1 vide two sale deeds and since then defendant No. 1 Kesho Ram is in joint ownership and possession of the suit property. The judgment and decree dated 7.9.1977 was the result of fraud and misrepresentation and the signatures of defendant No. 3 were obtained on the written statement by misrepresentation. According to defendant No. 3 he never became the owner of any property, movable or immovable, which was actually owned by Smt. Rukmani Devi. He denied that he leased out the building or he received any lease money. It was also pleaded by defendant No. 3 that Sham Lal defendant No. 6 compromised with defendant No. 1 Kesho Ram and admitted his ownership. A valid and legal partnership never came into existence.

Defendant Nos. 4 to 7 also filed a separate written statement and they adopted the same stands as that of defendant No. 3. Also it was pleaded by these defendants that the firm was constituted by the plaintiffs and defendants Nos. 3 to 7 in order to conduct the business in the year 1975 only and for running the foundry, but since no business was conducted, the question of settlement of accounts did not arise. These defendants also pleaded that Smt. Rukmani Devi never executed any sale deed in favour of the plaintiff and defendants Nos. 4 to 7.

The plaintiff filed separate replications to the written statements filed by the defendants in which he reiterated his allegations as made in the plaint and denied those of the written statements.

From the above pleadings of the parties, the trial Court framed the following issues :

Whether the suit is properly valued for the purpose of Courtfee and jurisdiction ? OPP.

Whether the suit is barred by limitation ? OPP.

Whether the suit is bad for misjoinder of causes of action ? OPP.

Whether the suit is bad for nonjoinder necessary parties ? OPP.

Whether the suit property was the joint ownership of the parties and plaintiff is owner of the suit property to the extent of 1/5th share ? OPP.

Whether the plaintiff is entitled to rendition of accounts and partition ? OPP.

Whether the defendants are entitled to special costs ? If so, to what extent ? OPP.

Relief.

The parties led voluminous evidence, both oral and documentary, in support of their case and finally the suit was decreed by the trial Court and a preliminary decree was passed in favour of the plaintiff declaring him to be entitled to 20% share in the movable and immovable property of the firm M/s Punjab Foundry and Engineering Works, Dhuri, and that he is also entitled to claim by way of partition and rendition of accounts with effect from 1.1.1982 till the finality of the suit. Aggrieved by the judgment and decree dated 2.5.1994 passed by the Sub Judge Ist Class, Dhuri, the present first appeal has been filed by Kesho Ram defendant.

I have heard Shri J.S. Chahal, Advocate, on behalf of the appellant, and Shri S.K. Goyal, Advocate, on behalf of respondent No. 1, and with their assistance have gone through the record of this case.

Before me the learned counsel for the appellant has assailed the finding of the trial Court only on issues Nos. 2 and 5 and I shall confine my discussion on these points.

In order to say that the suit of the plaintiff, which was filed in the year 1988, was barred by limitation, learned counsel for the appellant submitted that the partnership firm only worked upto 31.7.1977 and moreover the plaintiff settled the accounts upto 31.12.1981. In these circumstances the cause of action arose to the plaintiff either on 31.7.1977 or on 31.12.1981, and, accordingly, the suit is barred as the same has been filed after three years. In support of his contention the learned counsel has referred to the statement of Gauri Shanker (DW 13), who produced the account books of the firm with effect from 1.1.1978 upto 31.12.1981 and stated that the firm worked upto 31.7.1977. Reliance was also placed on the statement of plaintiffManohar Lal who admitted that he settled the accounts with the partners upto 31.12.1981 and thereafter no accounts have been rendered to him with effect from 1.1.1982.

The argument raised by the learned counsel for the appellant is devoid of any merit. Mere fact that the firm worked upto 31.12.1977 and its accounts were settled upto 31.12.1981, is not a presumptive evidence to show that the firm was dissolved on these dates. It is an admitted fact that earlier the partnership was created by a document in writing (Exhibit P1). No dissolution of partnership deed was ever executed either on 31.7.1977 or thereafter or on 31.12.1981 or thereafter. Rather the record would show that after 31.7.1977 and 31.12.1981 the property of the firm was being dealt with when the premises of the firm were given on lease by Mangal Sain (defendant No. 3) vide agreement dated 1.8.1983 to Sarvshri Gian Chand and Gauri Shanker at the rate of Rs. 10,000/ per month. Said Gian Chand and Gauri Shanker lessees filed a suit on 21.9.1983 against Sham Lal, Manohar Lal and Mangal Sain and sought a decree for permanent injunction that they should not be dispossessed except in due course of law; they being the tenants; and the said suit was decreed on 14.9.1985. Mangal Sain was receiving lease rent on behalf of the firm from these tenants and, therefore, it cannot be said that after 1977 the partnership firm did not transact any business. The firm continued to work for gain upto the year 1985 when the judgment (Exhibit P20) was passed on 14.9.1985. The accounts which were settled on 31.12.1981 was an interim arrangement and in the year 1983 the property of the firm was dealt with by Shri Mangal Sain when he leased out the premises of the firm to Gian Chand and Gauri Shanker. The partnership firm can only be dissolved in the manner as laid down in ChapterVI of the Indian Partnership Act and there is no evidence of conduct on behalf of defendant Kesho Ram, from which it can be inferred that the firm stood dissolved in the year 1977 or on 31.12.1981. For the first time the plaintiff served a legal notice to the defendants on 26.2.1988 (Exhibit P2) and the present suit for dissolution was filed on 23.4.1988. Once a valid partnership has come into existence, the presumption would be that it continues unless its dissolution is proved as per the provisions of the Partnership Act as contained in ChapterVI or by the conduct of the partner who claims that the partnership firm was never dissolved. In the present case it can be reasonably inferred that the firm stood dissolved either on 26.2.1988 or with the institution of the suit, i.e. on 23.4.1988. The first aspect of the case highlighted by Mr. Chahal regarding the limitation goes against the appellant and I hold that the suit was instituted within limitation as the firm was never dissolved either in the year 1977 or on 31.12.1981. I further hold that the accounts which were settled upto 31.12.1981 was only an interim arrangement and thereafter the managing partners had the liability to account for with effect from Ist January, 1982.

Assailing the findings of the trial Court on issue No. 5, learned counsel for the appellant submitted that, in fact, the partnership firm was regarding business only. The property of Smt. Rukmani Devi was never put in hotchpotch nor it was never treated as the property of the partnership firm and in these circumstances the plaintiff is not entitled to claim 1/5th share with respect to all those properties claimed in the suit. It is the proved case on record that Smt. Rukmani Devi was the owner of the landed property and she along with Sham Lal, Naresh Kumar, Manohar Lal, Partigaya Paul and Mangal Sain constituted a partnership business under the name and style of M/s Punjab Foundry and Engineering Works, Dhuri. As is evident from the partnership deed (Exhibit P1) the share of Manohar Lal plaintiff is 20%.

This argument is again devoid of any merit. Firstly, as per the partnership deed it is presumed that the land referred to above in the name of Punjab Foundry and Engineering Works became the property of the partnership concern. Moreover, Sham Lal, Rukmani Devi, Manohar Lal, Partigaya Paul, and Naresh Kumar themselves filed Civil Suit No. 354 on 22.8.1977 against Mangal Sain, seeking a decree to the effect that the share of Sham Lal is of 20%; Naresh Kumar is the owner of 15%; Partigaya Paul is the owner of 15%; Manohar Lal is the owner of 20% and Smt. Rukmani Devi is the owner of 10%; and the said suit was decreed vide decree sheet Exhibit P11. The parties are bound by this decree; so much so, there was some clerical mistake in the decree, which was rectified by the High Court and the share of Manohar Lal plaintiff was held to be 20%. Necessary correction was made in the High Court on 14.2.1985 and an amended decree sheet was drawn. This view further finds support from the copies of the sale deeds Exhibits P13, P18 and P19 through which Partigya Paul and Naresh Kumar sold their assets in the partnership firm to Charanjit Lal and Mangal Sain. So much so, the mutation was also sanctioned in favour of plaintiff Manohar Lal qua the property of the partnership on the basis of the decree passed in Civil Suit No. 354 dated 22.8.1977. The argument of the learned counsel for the appellant falls to the ground that Smt. Rukmani Devi remained the sole owner of the land and the construction thereon. In case Smt. Rukmani Devi was the exclusive owner, then why Charanjit and Mangal Sain purchased the share of Partigya Paul and Naresh Kumar vide sale deeds Exhibits P13, P18 and P19. They ought to have purchased the share from Smt. Rukmani Devi. The act of making purchase by Charanjit and Mangal Sain from Partigya Paul and Naresh Kumar makes it clear that Smt. Rukmani Devi had earlier transferred the landed property to the partnership firm.

It was submitted by Mr. Chahal that the alleged transfer by Smt. Rukmani Devi was not done by virtue of any sale deed. Such sale deed, therefore, does not convey a valid title. This argument is again devoid of any merit. Smt. Rukmani Devi became partner in the partnership firm through, her property, treating it as a partnership property. When the assets whether movable or immovable became the property of the partnership firm, it could be transferred without the compulsory registration under Section 17(1) of the Registration Act. Also it was submitted by Shri Chahal that Kesho Ram and Charanjit were bona fide purchasers for valuable consideration and they had no knowledge of the rights of Manohar Lal plaintiff. This argument is again devoid of any merit because the sale deeds Exhibits P14 and P15 are dated 6.9.1983 and 7.9.1983. The name of Manohar Lal finds mention in the revenue record as is clear from the Jamabandi (Exhibit P9) for the year 198394. Had Kesho Ram and Charanjit consulted the revenue record, they could easily know that Manohar Lal had been recorded as an owner in the property to the extent of 20% share. In these circumstances, Kesho Ram and Charanjit Lal cannot be held be bona fide purchasers for consideration.

Summing up on this issue it stands proved from the record that Smt. Rukmani Devi through her property entered into the partnership firm on 1.1.1975 when the partnership deed (Exhibit P1) was executed. Plaintiff Manohar Lal became the partner in all the assets of the partnership firm to the extent of 20%. The accounts were settled upto 31.12.1981 and, thereafter the managing partners were liable to render the account to the plaintiff with effect from 1.1.1982. It is also held that Kesho Ram and Charanjit Lal were not the bona fide purchasers nor Smt. Rukmani Devi remained exclusive owner of the property.

Lastly, it was submitted by Mr. Chahal that if none of his contentions prevailed upon the mind of the Court, then the preliminary decree may be modified. According to Mr. Chahal, the trial Court fell in error by declaring that the plaintiff is entitled to claim by way of partition and rendition of accounts with effect from 1.1.1982 till the finality of the suit. Mr. Chahal submitted that the assets of the firm as on 1.1.1982 could be accounted for. The argument is devoid of any merit. All the accumulations and all the transactions which were conducted by any of the partners after 1.1.1982 till the final decree is prepared should be accounted for. The trial Court has rightly held that the plaintiff is entitled to claim by way of partition and rendition of accounts of all the assets of the partnership firm with effect from 1.1.1982 till the finality of the suit. I do not see any illegality of law or fact in the well reasoned judgment given by the trial Court, which has discussed each and every aspect of the partnership firm in detail.

Resultantly, I affirm the findings of the trial Court on all the issues, including issues Nos. 2 and 5, and do not see any merit in this appeal and dismiss the same with no order as to costs.