Vijay Kumar vs Shiv Narain Dev Raj

K. Kannan, J.—The following substantial questions of law arise for consideration in this second appeal:-

i) Whether the court below was justified in reversing the finding of the trial Court that there existed a relationship of partners between the plaintiff

and the defendants and the plaintiff was entitled to a preliminary decree for accounting, treating the partnership as requiring to be dissolved by the

conduct of the defendants on their failure to account to the plaintiff?

ii) Whether the court below had committed an error in characterizing the defendants only as tenants and that the instrument of partnership was a

sham document as contended by the defendants?

There is no appearance on either side. I have examined the records, formulated the propositions and have proceeded to dispose of the case on the

basis of the materials available, having particular regard to the fact that the suit was instituted in the year. 1978 and the appeal has been pending for

more than 2 1/2 decades before this Court without disposal.

The plaintiffs suit was rested on a plea that the defendants 2 to 4 entered into a partnership deed with the plaintiff for carrying on the business of

sale and purchase of agricultural produce on commission basis through a partnership deed dated 17.04.1974 under the name of style of M/s. Shiv

Narain, Dev Raj, Jind Mandi, Jind. The terms of the partnership deed allowed for mutual rights and duties of accounting and a payment of Rs.

300/- as salary to the plaintiff, apart from 20 paise share in a rupee in the profit. The partnership deed was registered with the Registrar of Firms

and with the Income Tax Department. Licences had also been taken from Civil Supplies Authorities and the Marketing Committee and they had

been renewed from time to time. The plaintiffs grievance was that the accounts of the Firm had been settled on 31.03.1978 and salary had also

been paid for the financial year 1978-79 but the defendants had breached in their obligations for payment of salary subsequent to 01.04.1978 and

failed to submit accounts for 1978-79. The suit was therefore filed for a declaration that he was a partner and for injunction restraining the

defendants from denying his status as such partners, decree for Rs. 3,600/- as arrears of salary and a decree for rendition of account. He pleaded

in the alternative that the partnership deed must be treated as having been dissolved on 16.04.1980 or to grant a decree of dissolution of

partnership.

The contest was entered by the defendants contending that there had been no partnership at all. The property where the business was being run

belonged to the plaintiff and while granting a lease, the contrivance of partnership made with an oblique motive of the landlord to deny the benefits

of the statutory provisions of the tenancy and the security of tenure. The defendants would contend that there was an agreement of sale in respect

of the property on 25.01.1978 for Rs. 50,000/- and the plaintiff had received Rs. 10,000/-, but the same was immediately returned to the 3rd

defendant-Dev Raj, which was the amount stated as a loan to the partner. It was contended that the plaintiffs own claim to title and possession

were challenged by his sons-Vijay Kumar and Shankar Dass, who had brought a suit against their father and sought for decree that they were the

owners of the shop in question. They had also sought for mandatory injunction against, the defendants to hand over possession of the property on

a plea that the defendants were only licensees being partners with their father. This suit was however dismissed as withdrawn with the permission

to file a fresh suit on 10.04.1981.

Before the suit by the plaintiffs sons was withdrawn, the present litigation commenced with the plaintiff seeking for a declaration that he was a

partner and that he was entitled to the reliefs sought for which I have outlined above. The contentions in defence were that the partnership deed

itself was a colourable device to avoid the provisions of the Haryana Rent Restriction Act and Rs. 300/- that was stated as a salary to the plaintiff

was really the rent payable for the shop to the plaintiff. The defendant was not therefore entitled to rendition of accounts.

The trial Court decreed the suit for the alternative prayer that the partnership was to be wound up and for a direction for an accounting and for

the arrears of salary claimed. The appellate Court reversed the judgment upholding the contention in defence that the partnership deed itself was a

contrivance to defeat the provisions of the Act and the plaintiff was not entitled to any accounting. In so doing, the appellate Court held that apart

from a single entry in the account book referring to a profit of Rs. 2,227.36, there was nothing shown that - the plaintiff was participating in the

profits. Since the defendants were actually relying on a rent deed contemporaneously executed and they were contending that the partnership deed

was executed to defeat the rights of the defendant, it becomes relevant to examine also the validity of the unregistered document of tease. The

Court held that the documents could not be considered for assessing the terms of the rent deed but all the same, the character of possession as

tenant could still be considered from the document. The suit of the plaintiff was dismissed holding that the defendants were not liable to even

surrender possession of the property.

There was no representation for either of the parties and therefore I have proceeded to examine the case on the basis of the records and from

the pleadings and judgment that I have extracted, on the basis of which, the substantial questions of law as set out above, have been framed.

I am of the view that the appellate Court was in error in treating the partnership as sham and a contrivance to defeat the provisions of the Rent

Act. If there had been no rent deed at all, then perhaps it was possible to contend that the plaintiff was interested in securing a partnership deed to

defeat the provisions of the Act. If there was a rent deed also and it was left in the custody of the defendants, there is no meaning in contention that

the partnership deed was executed as a device to defeat the provisions of the rent act. Though the Court was justified in saying that the documents

could not be received for proving the terms of tenancy, it was in error in stating that their possession must be taken as referable to the unregistered

document to determine their status as tenant and at the same time come to an inconsistent conclusion that die partnership deed was a sham device.

Both under the provisions of Section 106 of the Transfer of Property Act and in terms of Section 17 of the Registration Act, the document

purporting to create a lease of immovable property beyond a period of one year cannot operate to create a transfer of interest in immovable

property. If the possession of a person under a document is not relatable to any other source, it would be possible for a party to contend that such

possession was to be treated pursuant to an unregistered document and if there had been payment of rent also which was received and proved that

would have enabled a person to plead for a case of implied tenancy from month to month and use the unregistered document for collateral purpose

for proving the character of possession. However, it the unregistered lease by itself cannot be taken for proof of transfer of interest and the plaintiff

was able to show that there had been a partnership deed between the parties that was duly registered with the Registrar of Firms and Income Tax

authorities and he was also shown as credited to the profits to the percentage secured under the partnership deed, then it will be futile to contend

that it was a sham document. Every aspect of a partnership as having come into effect was available in the evidence and borne through official

documents. The trial Court was therefore perfectly justified in finding that the partnership deed was true and that the plaintiff was entitled to

accounting. The trial Court was again correct when it held that the appropriate relief would be only a dissolution of partnership and for accounting,

for a partner cannot stay in partnership and seek for accounting. No suit will lie as a general rule by one partner against another for partnership

account without praying for a dissolution. See, Mulla on Sale of Goods Act and Partnership Act, 10th edition. 2012 at page 229). Where all

partners in the partnership have been arrayed as parties, the Court will always be entitled to order dissolution for just and equitable reasons in the

manner contemplated u/s 44 of the Partnership Act. If the partnership deed was true, there was no way that the defendant could prove their

possession to be relatable only to the rent deed which was unregistered. There was no proof of even payment of rent to the plaintiff. The

contention that the salary payable to the plaintiff was an euphemism for a rent is rejected, consistent with my finding that the partnership deed was

true. The decree granted by the Court upholding the contention of the plaintiff that the decree granted by the Court was therefore perfectly justified

and the reversal of the decision by the appellate Court was erroneous. The substantial question of law raised in the appeal are answered in favour

of the appellants, who are the legal representatives of the deceased partner. Even otherwise, the death of the partner himself results in dissolution of

partnership and the dissolution ordered must therefore be upheld also for the said reason. The plaintiff would be entitled to rendition of account in

the final decree proceedings and take possession of the property on the basis that the partnership had been dissolved. The second appeal is

allowed with costs throughout.