Om Parkash and Another vs Ram Nath and Another

R.L. Anand. J.—This is defendants'' appeal and has been directed against the judgment and decree dated 30.1.1993 passed by the Court of Additional District Judge, Faridkot, who set aside the judgment and decree dated 22.5.1992 passed by the Sub Judge Ist Class, Faridkot, and decreed the suit of the plaintiff-respondent for dissolution of partnership and rendition of accounts.

The pleading of the parties can be summarised in the following manner :-

Ram Nath plaintiff-respondent filed a suit for dissolution of partnership - rendition of accounts against Om Parkash, Bimla Devi and Chaman Lal and it was alleged by the plaintiff that he was a partner in the firm M/s Krishan Saw Mill, Kotkapura, carrying on business at Bathinda Road, Kotkapura. This firm was duly registered with the Registrar of Firms and the Plaintiff was a partner to the extent of 50%. A partnership deed was also executed on 4.4.1973 amongst the partners. The account books of the firm were being maintained by Chaman Lal on behalf of Om Parkash and Bimla Devi. Said Chaman Lal defendant No. 3 is the real brother of Om Parkash. According to the plaintiff, the account of books are in the custody of all the three defendants. A dispute took place between the parties which could not be settled amicably. The partnership was at will. The firm was carrying on business under the name and style of M/s Krishna Saw Mill, situated at Bathinda Road, Kotkapura. It may be mentioned here that defendant No. 3 Chaman Lal was not a partner of the said firm, but allegedly was in possession of the business premises and the account books of the partnership firm and for that reason he has been impleaded as defendant No.3. The plaintiff alleges that the defendants were called upon several times to dissolve the firm and render the accounts, but to no effect. Hence the suit.

The suit was contested by the defendants. A joint written statement was filed by defendants Nos. 1 and 2, who took preliminary objections such as the suit of the plaintiff was not maintainable and the same is hit by the principles of res judicata; that the suit is barred by time and that the partnership deed was at will and was dissolved with mutual consent in the year 1973. On merits the stand of these defendants is that the firm M/s Krishna Saw Mill does not exist now. This firm was, however, registered and the plaintiff had 50% share. The relationship of defendant No. 2 Smt. Bimla Devi with Chaman Lal defendant No. 3 has been admitted, but it has been stated that Chaman Lal never maintained the accounts of the firm. The firm stood dissolved long back and no dispute was left to be settled. This firm worked only for a few days at Kotkapura and thereafter it was dissolved with the mutual consent of the parties and the accounts were settled. All the wood and timber etc along with tractor No. PNR 6040 was given by the firm to the plaintiff and the tractor was got transferred by the plaintiff in the name of his son Ashok Kumar. This very tractor was later on transferred by Ram Nath plaintiff to somebody else in the settlement of the accounts. After the dissolution of the firm the plaintiff worked with one Balbir Chand with whom the dispute took place. Thereafter the plaintiff worked with one Ashok Kumar and the business with Ashok Kumar also met with the same fate. In short the defence of these defendants is that in the year 1973 the firm stood dissolved and the accounts were settled and that the firm was not existing at the time of the institution of the suit.

Chaman Lal defendant No. 3 filed a separate written statement and denied the allegations of the plaintiff. He admitted his relationship with Om Parkash and Smt. Bimla Devi. He stated that there was now no firm known as M/s Krishna Saw Mills in which the plaintiff is a partner, at Bathinda Road, Kotkapura. According to this defendant he is alone carrying on the business at Bathinda Road, Kotkapura. The firm in dispute was dissolved in the year 1973 as told to him by Om Parkash and that he never maintained account books on behalf of M/s Krishna Saw Mill. No account books are in his posession.

The plaintiff filed a replication to the written statements of the defendants in which he reiterated his allegations made in the plaint by denying those of the written statements.

On the pleadings of the parties, the trial Court framed the following issues :-

1) Whether plaintiff is partner of M/s Krishna Saw Mill? OPP.

2) Whether the plaintiff is entitled to rendition of account and dissolution of the firm? OPP.

3) Whether the firm was already dissolved in the year 1973, as alleged? OPD.

4) Whether the suit is barred by principle of res judicata? OPD.

4-A) Whether the suit is within time? OPP.

5) Relief.

The parties led oral and documentary evidence in support of their case and on the conclusion of the trial, the trial Court returned findings on issues Nos. 1, 2 and 3 against the plaintiff and in favour of the defendants. Issue No.4 was, however, decided against the defendants. The additional issue 4-A was also decided against the plaintiff and finally the suit was dismissed.

Aggrieved by the judgment and decree, the unsuccessful plaintiff Ram Nath filed an appeal in the Court of additional District Judge, Faridkot, who vide the impugned judgment and decree dated 30.1.1993 accepted the appeal and set aside the judgment and decree of the trial Court and decreed the suit of the plaintiff by passing a preliminary decree in his favour and against defendants Nos. 1 and 2 only for rendition of accounts and appointed a Local Commissioner in order to determine the accounts between the parties. This time the defendants are aggrieved by the judgment and decree passed by the Ist appellate Court and have come in the present R.S.A.

I have heard Shri L.M. Suri, Sr. Advocate, on behalf of the appellants and Shri T.N. Gupta, Advocate on behalf of the respondents, and with their assistance have gone through the record of the case.

The undisputed facts are that plaintiff Ram Nath entered into partnership with defendants Nos. 1 and 2 in the year 1973. Plaintiff Ram Nath had 50% share in that partnership. It is also the common case of the parties that the name of the firm was M/s Krishna Saw Mill and it started its business at Bathinda Road, Kotkapura and the firm was dealing in the business of wood and timber.

The disputed facts of this case are that whereas the plaintiff alleges that he is still continuing a partner in the said firm and is entitled to the rendition of accounts; the defence of defendants Nos. 1 and 2 is that the said firm stood dissolved in the year 1973 itself after doing business after a short while and the parties mutually agreed to dissolve the firm. The accounts were settled and the goods lying in the partnership firm in the shape of timber and wood were handed over to the plaintiff besides the tractor, which was ultimately got transferred in the name of the son of the plaintiff. Since the partnership firm was not existing on the date of the filing of the suit i.e. 16.1.1989, therefore, the plaintiff is not entitled to file a suit for the rendition of the accounts nor he is entitled to any decree for the dissolution of the partnership. Also it is the defence of the defendants that the suit of the plaintiff is barred by time as it has not been instituted within three years from the date of the alleged dissolution.

In the light of the above controversy, the only point which requires to be determined is whether the partnership firm by the name of M/s Krishna Saw Mill, which once came into existence on 4.4.1973 by partnership deed, was dissolved in the year 1973 itself and the accounts between the parties were settled as alleged by the defendants. If the above point is decided in favour of the defendants, automatically it has to be inferred that the plaintiff was not a partner of M/s Krishna Saw Mill on the date of the institution of the suit and, therefore, he was not entitled to any decree as prayed for.

Section 40 of the Indian Partnership Act, 1932 lays down that a firm may be dissolved with the consent of all the partners or in accordance with a contract between the partners. As per Section 43 of the said Act, where the partnership is at will, the firm may be dissolved by any partner giving notice in writing to all the other partners of his intention to dissolve the firm. No doubt once the existence of the partnership is established and the one partner alleges that the firm had already been dissolved in the past, the onus of proof of dissolution would be on the party who alleges the dissolution and in the present case the onus would be on the defendants to prove that M/s Krishna Saw Mill, carrying on business at Kotkapura stood dissolved in the year 1973 itself after doing little business, as alleged in the written statement. On scrutiny of the evidence led by the parties, this Court is of the considered view that the firm which came into existence on 4.4.1973 stood dissolved with the consent of the parties in the year 1973 itself and in this regard I would like to refer to the statement of P.W.I Ram Nath plaintiff, who admitted in his cross-examination that he did not know whether the firm did transact any business in the year 1973. No doubt the plaintiff has stated in the cross-examination that he had no such knowledge because of his illness, but this excuse cannot be accepted. Had this firm been doing business in the year 1973 and afterwards, the plaintiff would have been in the know of the transactions which were entered into by the firm with the third persons. Not a single witness has been examined to prove that after the year 1973 the plaintiff was seen carrying on business in the premises of Krishna Saw Mill and this firm had been transacting the business with the third parties. No accounts of the third parties have been produced nor anybody has deposed that he had been seeing the plaintiff working as a partner in the premises of M/s Krishna Saw Mill at Kotkapura. Rather the plaintiff further admits in the cross-examination that he does not remember if after the year 1973 any Income Tax Return was submitted of the business of M/s Krishna Saw Mill. It is the specific stand of the defendants that in the year 1973 one tractor was handed over to the plaintiff and this tractor was ultimately transferred in the name of the son of the plaintiff. While appearing as P.W.I the plaintiff nowhere alleges or states that this tractor was not handed over to him. He has not been able to explain under what circumstances he got the tractor from the defendants. No doubt this tractor was transferred in the year 1981, but the plaintiff has not been able to show that there was some independent dealings between his son and the defendants or that the defendants owed some amount to his son and for this reason the tractor was transferred. The conduct of the plaintiff clearly indicates that the partnership firm stopped its business in. the year 1973 itself. It stood dissolved by the consent of the parties and the accounts were settled. There is no earthy reason to believe why the plaintiff remained silent for 16 long years in the institution of the suit. When the plaintiff was allegedly being deprived from participating in the business of partnership, he ought to have served some notice upon other partners calling upon them to allow him to participate in the business proceedings. No such action has been taken, which clearly suggests and gives rise to only reasonable inference that the firm stood dissolved in the year 1973 itself as alleged by the defendants. The accounts were settled and the plaintiff was satisfied with the transfer of the business assets and the tractor and in this manner the defendants-appellants have been able to discharge the onus of issue No. 3 to prove that the firm had already been dissolved in the year 1973. Even Jagtar Singh P.W.2 admits in the cross-examination that the saw mill of Chaman Lal is located at Bathinda Road, Kotkapura. It looks that at one point of time the plaintiff, Om Parkash and Smt. Bimla Devi started their business at Bathinda Road, Kotkapura and with the dissolution of this firm the premises were taken over by Chaman Lal defendant, where he started his business and for this reason Jagtar Singh noticed the presence of Chaman Lal at the saw mill, which is situated at Bathinda Road, Kotkapura. Jagtar Singh nowhere states that the business was carried on by M/s Krishna Saw Mill at Bathinda Road, Kotpapura after 1973. Even Sohan Lal P.W. 3 has stated that he did not visit the Saw Mill after 1974 and whenever he had the occasion to visit the premises, he used to meet Chaman Lal, Om Parkash and Ram Nath. Meaning thereby that the firm did not transact any business after the year 1973. So far as the transfer of the tractor is concerned, it stands proved from the statement of P.W.4 Clerk of the office of the District Transport Officer, who stated that the tractor was transferred by Om Parkash in favour of Ashok Kumar son of Ram Nath in the year 1981. This clearly suggests that the partnership stood dissolved in the year 1973 and thereafter in the same very premises Chaman Lai started his own business. Being the real brother of Om Parkash, he paid the consideration in the shape of tractor and other goods to the plaintiff in full and final settlement of his claim without getting any writing in that behalf regarding the factum of dissolution. For this omission the plaintiff has taken the advantage and has brought the present suit for the dissolution of the partnership and rendition of accounts. The plaintiff has not been able to establish that there was any independent transaction between his son and Om Parkash or that Om Parkash owed any amount to him (Ashok Kumar) necessitating the former for the transfer of the tractor. The tractor was physically handed over to Ram Nath but formal documents of transfer were executed in the year 1981. The long silence" on the part of the plaintiff in not bringing the suit earlier goes a long way to establish that with the consent of the partners the firm stood dissolved as per Section 40 of the Indian Partnership Act. Chaman Lal defendant also appeared as D.W.I and he stated that he retired from M/s Krishna Saw Mill in the year 1973 and that he had no link with the firm.

Shri T.N. Gupta, learned counsel appearing on behalf of the respondents, relied upon the provisions of Section 43 of the Partnership Act and submitted that once the factum of partnership stands admitted it has to be proved by the defendants that in a case of partnership at will any notice was given by the plaintiff in writing to all other partners expressing his intention to dissolve the firm. I do not agree with the argument raised by Shri Gupta. It has been held in Harish Kumar Vs. Bachan Lal and others, , that in a case of partnership at will, intention to dissolve can be inferred from circumstances showing that son of the partners had abandoned his interest in the concern. As highlighted above, from the conduct of the plaintiff his intention to dissolve the firm can be inferred when he started taking no interest in the year 1973. He accepted the tractor, got it transferred in the name of his son in the year 1981. The firm did not transact any business after the year 1973. There was no dealings by this firm with any third party. All this is a clincher in favour of the defendants regarding the dissolution of the firm in the year 1973.

The learned first appellate Court held in para No. 11 of the judgment that the evidence led by the defendants apparently did not show that any settlement of accounts was made or that the firm was actually dissolved. The defendants had failed to produce any writing to evidence the fact of settlement of accounts and of dissolution. I do not subscribe to the reasons adopted by the learned first appellate Court. In this case the consistent stand of the defendants is that this firm did a very little business. If at the time of dissolution held in the year 1973 the defendants have not been able to obtain any writing from the plaintiff, no inference can be drawn in favour of the plaintiff that the partnership business never stood dissolved or the accounts settled. Once the conduct of the plaintiff goes to prove that the firm had already been dissolved, it will be enough evidence which can be relied upon by the defendants in support of their plea regarding the dissolution of the firm. The other reason adopted by the learned first appellate Court was that no evidence was led by the defendants to prove that the firm owned and possessed a tractor and why it was not transferred to the name of the son of the plaintiff in the year 1973 itself. In these circumstances the first appellate Court held that the tractor belonged to Om Parkash in his individual capacity and not to the firm. This reason again cannot be approved by me. Sometimes even the strange partners move on trust. There is no explanation how the son of the plaintiff got the tractor which at one point of time was in the ownership of Om Parkash defendant. How a costly item like the tractor could be easily parted or transferred in the family of the plaintiff?. For this there is no cogent explanation on the record confirming the plea of the defendants regarding the dissolution of the firm. Learned counsel for the respondents relied upon Samuel Nadar v. Thangayya Nadar AIR 1942 Mad 104 and submitted that onus of making out a case of dissolution was upon the defendants and the mere fact that after a particular date no further business was done would not amount to dissolution of the partnership. The authority is distinguishable. The cited case was a case of chit fund where on the completion of the tenure of the chits, the monies due to the partnership were yet to be collected and the liabilities were yet to be discharged and in these circumstances it was held that on the expiry of the last chit, the business of the partnership did not come to an end. As against this it has been clearly ruled in Harish Kumar''s case (supra) that settlement of accounts between the partners is not a necessary ingredient for the dissolution of the firm nor the continuance of the accounts in the firm''s name with the Banks after dissolution was of any consequence. The intention of dissolution amongst the partners has to be gathered from the evidence and the circumstances. In the present case the plaintiff abandoned his interest in the concern in the year 1973 itself by accepting the goods in the shape of timber and tractor which is enough evidence to persuade me to hold about the dissolution of the firm and the settlement of the accounts in the year 1973 itself.

In the aforesaid circumstances, I reverse the findings of the learned first appellate Court on issues Nos. 1 and 3 and hold that both these issues were rightly decided against the plaintiff by the trial Court. I also reverse the finding of the first appellate Court on issue No. 4-A when it held that the suit of the plaintiff was within limitation. I have already held above that the firm stood dissolved in the year 1973 itself and the accounts were settled. In these circumstances the suit was misconceived. If the plaintiff was still unsatisfied, he should have filed the suit within three years from the date of the dissolution of the firm. The present suit has been instituted on 16.1.1989, which is hopelessly time-barred. Therefore, I reverse the findings of the first appellate Court on issue No.4-A and restore the findings of the trial Court.

The nut shell result is that this appeal succeeds. The impugned judgment and decree of the first appellate Court dated 30.1.1993 is set aside and the suit of the plaintiff-respondent for dissolution of partnership firm and for rendition of accounts is hereby dismissed with no order as to costs.