Madan Lal vs Shiv Narain

J.V. Gupta, J.—This is defendant''s second appeal against whom the decree for dissolution of partnership and rendition of accounts has been passed by both the Courts below.

Both the plaintiff and the defendant started joint business of dal, oil and flour at Kanina Mandi on October 19, 1961 in the name and style of M/s. Siri Ram Chander Dal and Oil Mills. The partnership deed dated October 26, 1962, Exhibit P-2, was executed between the parties. The partnership was at will. The firm worked satisfactorily till 1968-69 when differences arose between the partners on account of the mishandling of its capital. Consequently, vide document dated April 7, 1969, Exhibit P-1, the partnership was dissolved. According to the plaint, the business of the partnership was suspended in the year 1968 by the consent of the parties. The plaintiff filed the present suit on October 6, 1972, for the dissolution of the partnership arid rendition of accounts as the accounts of the firm were maintained by the defendant. In the written, statement, the defendant denied that he was in possession of the account bocks of the firm or that he, was lable to render the accounts to the plaintiff. According to him, the firm was dissolved on April 7, 1969, vide document, Exhibit P-1, and, therefore, the present suit was barred by time as the same was filed after more than three years of the execution of the said document. The main controversy between the parties was as to whether the suit was within time from the date of the execution of the document, Exhibit P-1. According to the defendant, by virtue of the said document, the firm stood dissolved whereas according to the plaintiff, the work of partnership was suspended Till the accounts were settled finally, the partnership continued and, therefore, the suit was filed within time. The trial Court negatived the contention raised on behalf of the defendant and accepted the one raised on behalf of the plaintiff. Consequently, the suit was decreed. In appeal, the learned Senior Subordinate Judge with enhanced appellate powers affirmed the findings of the trial Court and, thus, maintained the decree passed in favour of the plaintiff. Dissatisfied with the same, the defendant has filed this second appeal in this Court.

The main controversy between the parties centres around the interpretation of the document, Exhibit P-1. Even at the time of the motion hearing, it was observed that the substantial question of law involved in this appeal was whether the terms of the document, Exhibit P-1, amounted to the dissolution of the firm or not.

According to the learned counsel for the appellant, by document, Exhibit P-1, the partnership was put to an end and the business of the partnership was also closed. Only the winding up of the accounts thereof remained which was to be done later. Thus, argued the learned counsel, the suit for rendition of accounts could be filed within three years from April 7, 1969, when the firm was dissolved, as provided under Article 5 of the Limitation Act (hereinafter called the Act). In support of the contention, the learned counsel relied upon Baijnath and Another Vs. Chhote Lal and Another and Saligram Ruplal Khanna and Another Vs. Kanwar Rajnath, . On the other hand, the learned counsel for the plaintiff-respondent submitted that by virtue of the document, Exhibit P-1, unless the accounts were settled, the partnership continued and, therefore, the suit was filed within time. In support of the contention, the learned counsel referred to Haramohan Poddar and Another Vs. Sudarsan Poddar and Others, Vazirbhai Sultanbhai Tamboli Vs. Gadmal Nathmal Marwadi, AIR 1927 70 (Privy Council) Katta Gundayya and Others Vs. Katta Siddappa and Others,

The main controversy between the parties, as observed earlier, centres around the interpretation of the document, Exhibit P-1. From the recitals of the said document, it is quite evident that the partnership between the parties was put to an end. The only other stipulation therein was that from that day, the previous accounts would be settled and no fresh business will be carried out. Thus, it is clear that the business of the partnership was terminated and only the previous accounts were to be settled. No other interpretation except the one placed is possible after the reading of the said document as a whole. Once it is so found that the partnership was dissolved at the time of the execution of the said document, i.e., April 7, 1969, then, then suit having been filed on October 6, 1972, was clearly barred by time under Article 5 of the Act. Haramohan Poddar''s case (supra) distinguishable on facts. Therein, it was inter alia held that neither the stoppage of business nor refusal of a partner to make further advances on capital account can be treated as dissolution of the firm. Such is not the position in the present case. Herein, as observed earlier, by virtue of the document, Exhibit P-1, the partnership between the parties stood terminated with effect from April 7, 1962. In all the other cases relied upon by the learned counsel for the respondent, reliance was placed on the Privy Council decision in Sathappa''s case (supra), wherein it was observed that the mere fact that after a particular date no further business was done will not amount to a dissolution of the partnership. The said case was noticed by the Allahabad High Court in Baijnath''s case (supra) and observed,--

In the Privy Council decision relied upon by the learned counsel it was not laid down by their Lordships as a general proposition of universal application that a partnership cannot be deemed to have been dissolved till all its outstandings have been realised. Having regard to the nature of the particular partnership, which formed the subject-matter of consideration in that case and having regard to the other facts pointed put by their Lordships in the course of their judgment, their Lordships came to the conclusion that the findings of the High Court in that case that the partnership was not dissolved till all the outstandings belonging to the partnership had been realised, was correct.

However, in the aforesaid case, it was also observed,--

Though it is true that a mere suspension of business of partnership does not necessarily lead to the conclusion that there has been,a dissolution of that partnership, still the cessation of the business coupled with other circumstances may legitimately lead to the inference that the partnership had been dissolved.

As regards the present case, the business of the partnership was not suspended, but was put to an end and, therefore, the partnership, as such, was dissolved by the parties themselves. The settlement of accounts was for the purpose of the winding up of the business after dissolution of the firm as provided u/s 46 read with section 47 of the Partnership Act. Somewhat similar matter came up for consideration before the Supreme Court in Salig Ram''s case (supra). In paragraph 30 of the said case, it was inter alia observed,--

The proposition, in our opinion, cannot be disputed that after dissolution, the partnership subsists merely for the purpose of completing pending transanctions, winding up the business, and adjusting the rights of the partners; and for these purposes, and only these, the authority, rights and obligations of the partners continue (see page 573 of Halsbury''s Laws of England, Third Edition, Vol. 27.

From the aforementioned observations, it is clear that even after dissolution, the partnership may subsist for the purposes of completing the pending transactions or winding up the business or for settling the accounts, etc., but that will not mean that since the accounts were to be settled, the partnership was not dissolved. In the casein hand, as observed earlier, the partnership was dissolved vide Exhibit P-1, and only the accounts were to be settled for winding up of the partnership business. In these circumstances, the view taken by both the Courts below is wrong and illegal. It is not disputed that once it is held that the partnership was dissolved vide Exhibit P-1, then the present suit filed on October 6, 1972, being beyond three years, was barred by time under Article 5 of the Act.

Consequently, this appeal succeeds, and is allowed. The judgments and decrees of the Courts below are set aside. The plaintiff''s suit is dismissed with no order as to costs.