V.S. Kothandapani Naidu vs P. Venkatachala Gounder and Others

V. Ramaswami, J.—The plaintiff is the appellant. He filed O. S. No. 99 of 1960 on the file of the learned Subordinate Judge of Cuddalore

praying for a preliminary decree for taking accounts of a dissolved partnership, to appoint a duly qualified auditor as Commissioner to take charge

of the accounts, and to pass a decree in favour of the plaintiff for the amount found due of him, or in the alternative to pass a decree in favour of the

plaintiff for the amounts advanced by him to the defendants for the business with interest at 6 per cent per annum from the date of plaint and for

costs.

The plaintiff''s case was this. The plaintiff is a landlord residing in Uyyakondravi village. Defendants 1 and 2 were his close friends. They were

doing jewellery mart and shroff business at Virdhachalam. The third defendant is the undivided brother of the first defendant. The fourth defendant

is the undivided brother''s son of the second defendant. The second defendant is the son-in-law of the first defendant.

About the end of 1956 defendants 1 and 2 persuaded the plaintiff to agree to commence and conduct a lorry service business and motor

workshop in partnership with them, each of them contributing an initial capital of Rs. 25,000. Defendants 1 and 2 further represented that they

would themselves conduct and manage the business and maintain regular accounts, and pay the plaintiff one third share of the profits of the

business. The plaintiff agreed to enter into the partnership and paid Rupees 26500 in three instalments as his contribution of the initial capital as

required by the defendants 1 and 2. The plaintiff is not aware whether the defendants 1 and 2 also contributed the same initial capital. He trusted

defendants 1 and 2 so much that he did not acquaint himself as to how the business was being conducted. At the commencement of the lorry

service, four lorries were purchased from ""Sri Kamakshiamma Bus service"", Vridhachalam for the partnership. As defendants 1 and 2 were each

having independent jewellery mart shop and shroff business at Vridhachalam in their names, they had one lorry registered in the name of the third

defendant (brother of the first defendant) and one lorry in the name of the plaintiff. Though the lorries were thus registered in the names of the 3rd

and 4th defendants and the plaintiff they really belonged to and were the assets of the said partnership firm. For the same reason the accounts of

the business was mentioned under the vilasam of S. K. K. representing the initials of persons in whose names the lorries had been registered

The lorry service and the motor workshop were commenced on 1st January 1957 and as stated supra the first defendant was managing the said

partnership business. Account books were maintained by him written by the clerk appointed by him therefore and by a clerk employed in his own

jewellary mart. Lorries were put on service on 1st January 1957. This went on till 15-2-1958.

On 15-2-1958 the second defendant took over the management and control of the lorry service business and motor workshop and changed the

name into ""Rajendran"" and ""Dhanalakshmi"" Motor workshop respectively. ""Rajendran"" being his son''s name and ""Dhanalakshmi Motor

Workshop"" being derived from his jewellery mart ""Dhanalakshmi Jewellery Mart"" The name ""Dhanalakshmi Motor Works"" was subsequently

changed into ""Mani Motor Works"". The second defendant was conducting the plaint partnership business and maintaining the accounts of the

partnership. He was in management of the two business till about 30-9-1958. The plaintiff did not know anything about the nature and extent of the

earnings in the lorry business, nor did he draw any amount, nor did he look into the accounts of the business. He bona fide believed that the

defendants were conducting and managing the business properly and to the benefit of all the parties. As the plaintiff was not paid any amount by

way of profits as and for his share, in the partnership business and as the defendants were giving evasive answers when the plaintiff called upon

them to render an account, misunderstanding arose between the plaintiff and the defendant and the matter was then orally referred to the decision

of a Panchayat consisting of P. Ws. 4, 5, 6, and 10. As agreed to by the parties before the Panchayatdars the partnership was dissolved on and

from 1-10-1958 and the four lorries belonging to the partnership were auctioned. The plaintiff purchased one lorry and the workshop. The

defendants purchased in the name of the fourth defendant the remaining three lorries. The Panchayatdars requested defendants to produce the

accounts. the second defendant produced only some of the account books and files of the partnership but not the complete set of accounts. The

plaintiff repeatedly asked the defendants to produce all the account books before the Panchayatdars and to pay the amounts due to him on taking

accounts but the defendants evaded doing so. Hence he has filed the suit praying for the reliefs set out above.

The defendants filed separate written statements. The 1st and 2nd defendants denied that they were partners in the suit partnership and stated

that they never managed the suit partnership. The 3rd defendant pleaded that a partnership was formed by the plaintiff, the 4th defendant and

himself, that the first defendant manager of the 3rd defendant and as his elder brother asked the 3rd defendant to join with the plaintiff and the 4th

defendant in the partnership, that the first defendant advanced the necessary capital therefore and that he continued to be a partner only fill 31-5-

1958. He further contended that the partnership of defendants 3 and 4 and the plaintiff functioned from 1-1-1957 to 31-3-1958, that differences

arose and the 3rd defendant left the partnership and a fresh partnership was run between only the 4th defendant and the plaintiff. he also claimed

certain amounts as due to him from the partnership as and by way of his share of the profit.

The 4th defendant filed a written statement supporting the claim of the plaintiff and admitting that the allegations in the plaint were true. He stated

that the partnership was originally started between the plaintiff as one party, defendants 1 and 3 as the second party and defendants 2 and 4 as the

third party, that one share capital was contributed in the name of the 3rd defendant but the joint family of defendants 1 and 3 was the real partner,

that similarly the joint family of defendants 2 and 4 was the real partner but the contribution of capital was made in the name of the 4th defendant. It

was his further case that the second defendant alone was in possession of the accounts.

The first defendant filed an additional written statement on 24-9-1960 alleging that since the lorries were not registered in the name of the

partners, the partnership was illegal under the Motor Vehicles Act and that therefore the plaintiff cannot sue for taking accounts of n illegal

partnership. A similar contention was raised by the second defendant also filed an additional written statement controverting the main allegations in

the 4th defendants written statements and stating that all his properties were his self-acquisitions and that he had nothing to do with the suit

partnership.

the plaintiff also filed a reply statement and also amended the plaint contending that the suit partnership was not illegal and that he was entitled to

a decree as prayed for.

The learned Subordinate Judge framed as many as 17 issues and came to the conclusion that defendants 1 and 2 were the real partners of the

suit business along with the plaintiff, that defendants 3 and 4 respectively were name-lenders for defendants 1 and 2 that the 3rd defendant did not

leave the partnership on 31-3-1958 as contended by him, that the 2nd defendant was in actual management and possession of the suit partnership

accounts on 1-10-1958 and that the suit partnership was dissolved on 1-10-1958. But he held relying on the decision reported in A.V.

Varadarajulu Naidu (decd.) and Others Vs. K.V. Thavasi Nadar, and some earlier decisions that the suit partnership was illegal and hence the suit

itself was not maintainable. he further held that the plaintiff was not entitled even to the return of the sums advanced by him. On the alternative relief

he gave a finding that, if the plaintiff were in law entitled to recover the original contribution, the suit was in time. He, accordingly, dismissed the suit

and the claim of the 3rd defendant with costs.

Learned counsel for the appellant contends that the view of the trial court that the suit was not maintainable on the ground that the suit

partnership was illegal is not correct and that the decision of this court in A.V. Varadarajulu Naidu (decd.) and Others Vs. K.V. Thavasi Nadar,

and relied on by the trial court in support of its view has since been overruled by the Supreme Court in K.M. Viswanatha Pillai Vs. K.M.

Shanmugam Pillai, . The defendant pleaded that, since for one lorry the permit was in the name of the plaintiff, for another lorry in the name of the

3rd defendant and for two other lorries in the name of the 4th defendant, and since the permits were not in the names of all the partners, even if

defendants 1, 3 and 4 were partners, the partnership was illegal, and alternatively, that if defendants 1 and 2 are considered to be partners as

claimed by the plaintiff, since the permits were not in the name of the partnership and some of them were in the names of defendants 3 and 4 who

were not the real partners, the partnership was illegal and that therefore the suit as not maintainable. The supreme Court in K.M. Viswanatha Pillai

Vs. K.M. Shanmugam Pillai, which is an appeal from the decision of this court in K.M. Viswanathan Pillai Vs. K.M. Shanmugam Pillai, , held that

there was nothing in the Motor Vehicles Act, which expressly or by implication bars benami transactions or persons owning buses benami and

applying for permits on that basis. They expressly overruled the decision in A.V. Varadarajulu Naidu (decd.) and Others Vs. K.V. Thavasi Nadar,

. The learned counsel for the first respondent tried to distinguish this judgment on the ground that it related to a contract carriage and not a lorry

which is a public carrier. It would be seen that some of the decisions relied on by the courts for their view in the decisions in A.V. Varadarajulu

Naidu (decd.) and Others Vs. K.V. Thavasi Nadar, and K.M. Viswanathan Pillai Vs. K.M. Shanmugam Pillai, which were overruled related to

carrying on trade in lorry for which permit was issued in the name of one of the partners alone. In T.K.P.R. Ramanatha Chettiar and Bros.,

Chandra Lorry Service Vs. Commissioner of Income Tax, , a Division Bench of this court held that the principle of the judgment of the Supreme

Court above referred to would be clearly applicable where the firm was the owner of lorries and operating them and that the partnership could not

be regarded as illegal, merely because the permits in regard to them stood in the names of third parties. We are therefore clearly of the view that

the suit partnership was not illegal and that the suit was maintainable. We accordingly reverse the finding of the lower court on this aspect.

Learned counsel for the first and second respondents wanted to support the decree of dismissal of the suit challenging the finding of the trial

court that the first and second respondents were the real partners and that the 3rd and 4th respondents were mere namelenders. We may at once

state that the findings of the courts below on these issues are based on a volume of documentary and oral evidence. We do not consider it

necessary to deal in detail with the entire documentary evidence as we are confirming the findings of the courts below. We will discuss only a few

of the relevant documents and relevant portions of the oral evidence on this aspect.

... ... ... ... ... ... ... ... ... ... ... ...

(Discussion of facts and evidence omitted).

Thus the oral evidence and the documents clearly establish that the first and second defendants were the real partners and that the third and fourth

defendants were mere namelenders. Learned counsel for the first defendant contended that there is no such thing as benami partnership known to

law and actually it is inconsistent with one of the main principles of partnership, namely, that one partner is an agent of the other partners. We are

unable to follow this argument. What we have found is that the first and second defendants were the real partners along with the plaintiff. Once we

come to the conclusion that the partnership consisted of the plaintiff and the first and second defendants how the principles of partnership could not

be applied to them is not understandable, The third and fourth defendants were never partners on our finding that the first and second defendants

were the real partners. It has been held in Dr. S. Muniswami Naidu and Others Vs. G. Thandavaraya Mudaliar, that where a contract was signed

by one person only the evidence to show that another was also a party to such an arrangement or was bound by it was admissible. In Nurul Hasan

Vs. Amir Hasan and Others, it was held that it could not be contended that business could be carried in benami with a third party, that the share in

the partnership was a property and that the ostensible partner might very well be not the real partner but only a benamidar of the real partner. In

K.M. Viswanatha Pillai Vs. K.M. Shanmugam Pillai, , it was held:

In India benami transactions are recognised and not frowned upon (See Gur Narayan v. Sheolal Singh, ILR 46 Cal 566 : AIR 1918 PC 140. In

Commissioner of Income Tax, Gujarat Vs. A. Abdul Rahim and Co., it was held by this court that the registration of the partnership deed u/s 26-A

of the Indian Income Tax Act, 1922, could not be refused on the ground that K was the benamidar of V''''

Therefore, there is no substance in this argument of the learned counsel for the respondents.

The court below having found that the first and second defendants were the real partners and that the first defendants was writing letters and

taking an active part in the beginning of the partnership held that the second defendant was in actual management on 1-10-1958. We are of the

view that both the first and second defendants were in management of the partnership business for the reason, which persuaded us to hold that the

first and second defendants were the real partners. We, therefore, modify the finding of the trial court on this aspect.

No other point has been argued in this appeal, In the result, we allow the appeal with costs. There will accordingly be a preliminary decree for

taking of accounts of the dissolved suit partnership.

Appeal allowed.