Sudalai Muthu Pillai vs Santhanam

Shanmukham, J.—This second appeal raises a nice question of law arising under the Indian Partnership Act (hereinafter referred to as the

Act).

The short facts necessary for the occasion are as follows:

(1). The suit is for the recovery of Rs. 4,750 on the allegation that under the agreement between the parties, the plaintiff should invest Rs. 3,000

and the defendant Rs 1,000 for purchasing types and other materials required for the business of printing the voters'' list and that after defraying the

expenses in regard to wages, rent, etc., they should share the profit. The plaintiff''s case is that even on the date of agreement, he had paid Rs.

3,000 to the defendant and that after providing for all expenses, there could be a net profit of Rs. 2,000. The defendant received Rs. 4,011 and Rs

591.78 from the Government.

(2). The defence is that as the agreement Exhibit A-1 is a partnership agreement and as the same is not registered as per mandate in the Act, the

suit agreement cannot be enforced; the defence on merits is total denial of payment of Rs 3,000 by the plaintiff to the defendant. Further, according

to the defendant, the joint venture ended in loss of Rs. 1, 169.29.

(3). The learned District Munsif of Dindigul in O. S. No. 2154 of 1971 construed Exhibit A-1 as a simple agreement, but not a partner ship deed

requiring registration under the Act, while in A. S. No. 238 of 1972, the learned Subordinate Judge of Dindigul held that it is a partnership deed

and that therefore, it cannot be enforced in a Court of law for want of registration under the Act. The appellate Court also held on the merits that

the plaintiff did not in fact contribute Rs. 3,000 differing from the trial Court. A. S, No. 238 of 1972 by the defendant was, therefore, allowed and

the suit was dismissed.

It is urged on behalf of the appellant-plaintiff that the view of the appellate Court regarding the enforceability of Exhibit A-1 is erroneous. In

support of his contention, the learned counsel for the appellant referred me to Section 69 of the Act, particularly to Section 69(3). It is useful to

extract Section 69:

(1). No suit to enforce a right arising from a contract or conferred by this Act shall be instituted in any Court or on behalf of any person suing

as a partner in a firm against the firm or any person alleged to be or to have been a partner in the firm unless the firm is registered and the person

suing is or has been shown in the Register of Firms as a partner in the firm.

(2) No suit to enforce a right arising from a contract shall be instituted in any Court by or on behalf of a firm against any third party unless the firm

is registered and the persons suing are or have been shown in the Register of Firms as partners in the firm.

(3) The provisions of sub-sections (1) and (2) shall apply also to a claim of set-off or other proceeding to enforce a right arising from a contract,

but shall not affect:

(a) the enforcement of any right to sue for the dissolution of a firm or for accounts of a dissolved firm, or any right or power to realise the property

of a dissolved firm, or....

and the rest is omitted as not relevant for the present occasion. It is plainly patent from Section 69(3) (a) that the disability created u/s 69(1) is no

legal impediment to a party to the contract in enforcing the unregistered partnership arrangement for the dissolution of a firm or for accounts of a

dissolved firm or for realisation of the property of a dissolved firm. Had the learned Subordinate Judge noticed the above sub-section, I think, he

would not have ventured to hold that Exhibit A-1 is unenforceable in law for any purpose. Such a finding, therefore, cannot be sustained in law and

is, therefore, set aside.

Yet, I find the appellant cannot sustain the relief as claimed in his suit. For, the suit is for recovery of a specific sum. A careful reading of Section

69(3) (a) will point out that notwithstanding the prohibition contained in Section 69(1), an unregistered partnership arrangement could be enforced

for obtaining three reliefs and no more; the three reliefs are:

(i) to apply for dissolution of the firm and for accounts;

(ii) to ask for accounts of a dissolved firm; and

(iii) to realise the property of the dissolved firm.

The present Section as framed will not come under the first two categories above said. Then, the question is, whether the relief claimed by the

appellant could be brought within the ambit of the third category. The natural and plain meaning of Section 69(3) (a) in relation to ""the power to

realise the property of the dissolved firm"", in my opinion is so explicit as to refer only to the right inhered in any partner of the dissolved firm for the

benefit of the other partner or partners, but, not for his individual benefit. It is needless to state that in such a suit, the other partner or partners

should also be made parties. In my opinion, this is a safeguard envisaged under the subsection to enable any partner of the dissolved firm in case of

non-co-operation from any other partner to recover from the third party the property of the dissolved firm for the benefit of all the partners. Even,

a strained interpretation of the said clause can hardly import the meaning that the third category embraces a case where a partner of the dissolved

firm can sue the other or other for a specific sum of money. I am, therefore, of the view that the relief should be one for accounts of the dissolved

firm under the second category, but, not for recovery of a specified sum. It is relevant to notice here the two diverse positions taken by the rival

parties. Above all, even according to the plaintiff, it is only his assessment of profit, but admittedly, not arrived at on proper account-taking. Taking

of accounts assumes greater importance in this case as one would allege a profit, while the other would plead a loss. It was not argued before me

that Exhibit A-1 is not a partnership arrangement. It is, therefore, demonstrably clear that the remedy available in law, was to have asked for the

accounts of the dissolved firm on the facts of this case, which is expressly provided for in Section 69(3) of the Act.

The decision in Basantlal Jalan Vs. Chiranjilal Sarawgi and Others, , relied on by the learned counsel for the appellant does not at all support his

above contention. It can be seen from the very opening sentence of the reported judgment that the relief sought for in that case was ""for recovery

of Rs. 3,400/- or any such sum as may be found due on accounting of the partnership business with the defendant"" (Italics is mine). It is, therefore

quite clear that there was no occasion for the learned Judges to consider the question as it has presented before me. So too, the other decision in

Navinchandra Jethabhai and Another Vs. Moolchand Sadaram Gindodiya, , is not an authority for the proposition that a partner of a dissolved firm

can sue the other or others for a specific sum of money. For, all that the learned Judges held was ""giving a natural meaning to the provisions of

clause (a) which are applicable to the case of an unregistered firm, a suit for accounts of a dissolved firm or for realisation of the property of a

dissolved firm from any person, whether he be a partner or not, can be filed"".

I, therefore, held that the suit as framed is not maintainable.

The other point urged by the learned counsel for the appellant is that the finding of the lower appellate Court that the plaintiff did not invest Rs.

3,000 cannot be supported on the available materials. I was taken through the judgment of the first appellate Court in contrast with that of the trial

Court. But, the learned Subordinate Judge had explained as to why he could not agree with the learned District Munsif. I do not find any error of

law or irregularity in the learned Judge''s approach which would adversely affect his finding. A very great emphasis in made on the absence of

specific denial in Exhibit A-1, the respondent''s lawyer''s reply to Exhibit A-2. While in Exhibit A-4, it is alleged that on the date of Exhibit A-1 the

appellant invested Rs. 3,000 the respondent in his lawyer''s reply has stated that as the appellant failed to invest in time, the respondent did not

carry out the work in time and consequently, had suffered loss. This was interpreted by the learned counsel to imply the appellant''s investment if

not on the date of Exhibit A-1, but sometime later. It is sufficient for me to point out that even such interpretation does not support the plaintiff''s

case of payment on the date of Exhibit P 1. It is well laid down that the plaintiff should not be allowed to give up his case as set out in his plaint and

. to rest his claim on the defence. Thus, this finding of the lower appellate Court is unchallengeable.

The result is that the second appeal fails and is dismissed, but without costs.