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1970 DIGILAW 334 (ALL)

Ram Kumar v. Kishan Lal Chhotey Lal

1970-08-31

M.N.SHUKLA

body1970
JUDGMENT M.N. Shukla, J. - This is a somewhat extraordinary case inasmuch as it does not follow the pattern into which the suits arising out of disputes of partnership usually fall. The material facts giving rise to this appeal briefly stated are that the plaintiff brought a suit on the allegations that the defendants Nos. 2 to 6 were till recently members of a joint Hindu family and the firm Kishan Lal Chhotey Lal (defendant No. 1) was a joint Hindu family firm owned by the aforesaid defendants, that in the year 1947 the aforesaid firm through Kanti Prakash (defendant No. 3) entered into partnership with the plaintiff firm Tulsi Ram Murli Dhar which was owned by Ram Kumar, that the partnership was in respect of a single item of business namely the purchase and sale of 400 bags of sugar through firm Ram Nath Madan Gopal arhatis of Chandpur. It was further alleged by the plaintiff that after the partnership had been entered into, the arhatis were asked to purchase sugar and that the plaintiff also advanced to them Rs. 6,536/- in instalments in this connection. It was said that most of the payments were made through Kanti Prakash, that the plaintiff Ram Kumar in the present suit and Kanti Prakash both were under the impression that there had been a profit in the business done through the arhatis and that the arhati in the year 1949 brought a suit No. 519 of 1949 against Ram Kumar plaintiff and Kanti Prakash (present defendant No. 3) alleging that the sugar purchased had been sold by them and that there had been considerable loss. 2. Ram Kumar in his turn brought suit No. 4 of 1951, putting forward a counter claim on the allegation that the arhatis' allegation that there was loss and incorrect and, on the contrary, there had been profit in the partnership business. It was also stated that Kanti Prakash who was the partner of Ram Kumar had not agreed to join as plaintiff and he was arrayed as a proforma respondent in the suit. Kanti Prakash in that suit contended that he had, not carried on any business in partnership of Ram Kumar and that the business had been carried on by Ram Kumar alone and as such, he alone was entitled to profit and liable for the loss. 3. Kanti Prakash in that suit contended that he had, not carried on any business in partnership of Ram Kumar and that the business had been carried on by Ram Kumar alone and as such, he alone was entitled to profit and liable for the loss. 3. Both suits were referred to an arbitrator, who held that Ram Kumar and Kanti Prakash were partners in the business and that there had been loss to the extent of Rs. 7036/-. The arbitrator gave an allowance of Rs. 6536/- which amount purported to have been paid by Ram Kumar and the payment whereof was also admitted to the arhatis. After adjusting that amount it was found by the arbitrator that Ram Kumar and Kanti Prakash were liable to pay another sum of Rs. 500/- to the arhatis. On the basis of this award a decree Exhibit 7 in the sum of Rs. 500/- was passed by the court against Ram Kumar and Kanti Prakash on 12-7-1956. Rain Kumar submitted to the decree but Kanti Prakash filed an appeal which was dismissed on 18-2-1958. 4. In July 1959 the plaintiff brought a suit (No. 59 of 1959) which ha given rise to the present appeal saying that the firm Kishan Lal Chhote Lal of which the defendants Nos. 2 to 6 were the owners had entered into partnership with him and that they were liable to pay him half of the amount which had been invested by him in the business. It was pleaded that he had advanced Rs. 6,536/- to the orhatis and that the defendants were liable to pay half of the amount i.e. Rs. 3,268/-. He also claimed Rs. 2,818 as interest on the principal amount at the rate of 10/- annas per cent per month. Thus, he prayed that a decree for a sum of Rs. 6,086/- be passed against the defendants. It was further averred in the plaint that the plaintiff had learnt that there had been separation between defendants Nos. 2 to 3 on the one hand and the other defendants on the other hand and the firm Kishan Lal Chhotey Lal had been allotted to the share of defendants Nos. 2 to 3. He, therefore, prayed that the decree against all the defendants be passed or at any rate it should be passed against defendants Nos. 1 to 3. 5. Defendants Nos. 2 to 3. He, therefore, prayed that the decree against all the defendants be passed or at any rate it should be passed against defendants Nos. 1 to 3. 5. Defendants Nos. 2 to 6 contended that separation in the family had taken place in the year 1946 and at that very time Kanti Prakash had also got separated from his father Janki Prasad. It was also contended that since 1946 defendant No. 2 had been the exclusive owner of the business under the name and style Kishan Lal Chhotey Lal and that this firm had never entered into partnership with the plaintiff firm. Even Kanti Prakash denied that he had entered into partnership with the plaintiff or the plaintiff firm. It was also denied that the plaintiff had invested anything in the business. It was asserted that the account books of the plaintiff were fictitious and false. The plea of limitation was also raised. 6. The suit was dismissed by the trial court as well as the lower appellate court. In appeal, however, the court below recorded findings that separation between defendants Nos. 2 and 3 had taken place in the year 1956 but they were joint in the year 1947 when the partnership was alleged to have been entered into, that the firm Kishan Lal Chhotey Lal was a partner in the business, that Kanti Prakash alone was a partner and he had entered into partnership in his personal capacity, that it had been proved beyond doubt that Ram Kumar plaintiff had invested a sum of Rs. 6,536/- in the business and that his account books were genuine. On the question of limitation the lower appellate court came to the conclusion that Article 106 of the Limitation Act applied to the case and the suit was, therefore, barred by limitation. Hence, the plaintiff has come in second appeal to this court. 7. The various findings of fact to which I have already adverted relate to questions of fact and cannot be reviewed in second appeal as nothing has been pointed out to me which may warrant such interference. The main point, however, which has been debated is the one relating to the question of limitation. The finding recorded by the court below was vigorously assailed by Sri K.C. Saxena appearing for the appellant. The main point, however, which has been debated is the one relating to the question of limitation. The finding recorded by the court below was vigorously assailed by Sri K.C. Saxena appearing for the appellant. He contended that the facts of the present case were peculiar and, therefore, it could not be regarded as just a suit for accounts and share of profits and dissolution of partnership for which Art. 106 of the Limitation Act provided a limitation of three years since the date of dissolution. He referred to the reasonings of the court below and pointed out that it was wholly erroneous. According to the lower appellate court the partnership came to an end and stood dissolved in 1949 and hence the suit for rendition of accounts and for recovery should have been filed within three years of the date on which the partnership stood dissolved. The lower appellate court rejected the appellant's plea that in 1949 he had no knowledge of the fact that there had been a loss in the partnership business, that on the contrary both he and Kanti Prakash (defendant No. 3) were under the impression that there had been profit and that is why Ram Kumar (the present plaintiff) had earlier brought suit No. 4 of 1951 against the arhatis and also Kanti Prakash, that it was only after the decision of the two suits i.e. 519 of 1949 and 4 of 1951 that they became aware of the fact that there was a loss in the partnership business, that the appeals arising out of those decrees based on award were eventually decided on 18-2-1958 and hence the present suit was within time. The lower appellate court expressed the opinion that the limitation started running at any rate from the date on which it became known to the plaintiff that there was a loss, that in reality half of the amount invested by the plaintiff had become due and payable to him on the date the bags of sugar were sold and the partnership stood dissolved, that if the plaintiff was not aware of the fact that there had been a loss, that could not save limitation. The same proposition had been ought to be submitted by the learned counsel for the respondent before me. 8. The same proposition had been ought to be submitted by the learned counsel for the respondent before me. 8. The first question which has to be considered is as to whether the partnership was still subsisting when the present suit was filed in the year 1959. The learned counsel for the appellant cited a number of authorities before me in support of the contention that where no accounting had taken place between the parties, where there was no allegation that the partnership actually stood dissolved. and no proceedings for disposal of the assets etc. had taken place, the partnership should be deemed to be subsisting and it was incumbent on the plaintiff to bring a suit for dissolution and rendition of accounts which could be filed within three years from the date of the dissolution and consequently the present suit could not be held to be barred by Article 106 of the Limitation Act. This contention, however, must be completely rejected. Sec. 42 (b) of the Indian Partnership Act clearly provides that subject to contract between the partners a firm is dissolved if constituted to carry out one or more adventures or undertakings by the completion thereof. It is the case of the parties that in the present case the partnership was confined to a single item of business namely purchase and sale of 400 bags of sugar through firm Ram Nath Madan Gopal arhatis of Chandpur. Therefore, since these bags were sold in the year 1949 the partnership stood dissolved. I am fortified in the view that I am expressing in this regard by a decision of the Supreme Court in Gherulal Parkash v. Mahadeodas, A.I.R. 1959 Supreme Court 781. 9. The next question which, therefore, arises is : Where the partnership stood dissolved, what would be the period of limitation applicable to the suit Which was filed for recovery of a specified amount, being half of the total investment exclusively made by the plaintiff in the partnership business. According to the respondent the case was fully covered by Article 106 of the Limitation Act and the limitation could not be extended beyond three years from the date of the dissolution i.e. 1949 but it appears to me that the present suit does not fall within the ambit of Section 106 of the Limitation Act. According to the respondent the case was fully covered by Article 106 of the Limitation Act and the limitation could not be extended beyond three years from the date of the dissolution i.e. 1949 but it appears to me that the present suit does not fall within the ambit of Section 106 of the Limitation Act. It is neither a suit for accounts nor for recovery of share of profits and consequently, the terms of the aforesaid provisions of the Limitation Act cannot be stretched to cover a suit of this nature. The learned counsel for the respondent submitted that even though it is not obstensibly a suit for rendition of accounts, the plaintiff being one of the partners allowed the limitation for bringing a suit for rendition of accounts to run out and his suit even for a share of a particular asset or assets or a particular item would be time-barred. He relied on Gopal Chetty v. Vijayaraghavachariar, A.I.R. 1922 P.C. 115, for the dictum that where after the dissolution and complete winding up a partnership an asset had escaped being taken into account a suit could still lie with regard to it but where no accounts had been taken, then the proper remedy for an aggrieved partner was to bring a suit for accounts of the partnership within the period prescribed by the Limitation Act and in case he failed to do so, the plaintiff's suit for his share of the asset or assets alleged to have been received by the defendant as debt would also be deemed to be barred by limitation. The Privy Council case was followed in Meyappa Chettiar v. Palaniappa Chettiar, A.I.R. 1949 Madras 109, in which it was observed that where one of the partners of a firm was compelled to discharge the whole or more than his share of a partnership debt a suit by him for contribution against his other co-partner was not maintainable; his remedy was by way of a suit for partnership accounts which must be filed within three years from the date of dissolution. To the same effect was the decision in Mannilal v. Narain Das, A.I.R. 1946 Oudh 118. In that case there was no settlement of accounts between the partners and the suit for accounts had become barred by limitation. To the same effect was the decision in Mannilal v. Narain Das, A.I.R. 1946 Oudh 118. In that case there was no settlement of accounts between the partners and the suit for accounts had become barred by limitation. It was held that the plaintiff could not claim contribution from the other partner or his heirs as he had failed to bring the suit for settlement of accounts within the period of limitation. The above decisions on which the learned counsel for the respondent has placed reliance ruled that where a partner can call upon another partner to render accounts it is imperative that a suit for accounts must be filed and the suit would be governed by Article 106 of the Limitation Act. There could be no doubt about the correctness of that proposition and usually the dispute, arising out of partnership do conform to the pattern of suits contemplated by Article 106 of the Limitation Act. As I observed at the very outset of my judgment, the present is rather an extraordinary case and its facts are peculiar. Ordinarily, the only parties who would be concerned with rendition of accounts would be the partners themselves in the business of partnership and such accounting does not involve the instrumentality of a third party. In the present case the point which has been greatly emphasised by the learned counsel for the appellant is that it was not possible for the plaintiff to ask for accounts from the defendant No. 3 prior to the decree of the award at the only item of business which formed the subject-matter of the partnership was the sale of 400 bags of sugar which was done through the coin mission agency of the arhatis. The plaintiff as well as Kanti Prakash must be labouring under the impression that the business would have yielded profits, but when the arhatis themselves filed suit No. 519 of 1949 it dawned on the plaintiff that losses were incurred in the partnership business. This is what immediately induced the plaintiff to bring his own suit No. 4 of 1951 in which Kanti Prakash refused to join as a plaintiff and had to be arrayed as defendant and in which he categorically denied the factum of partnership itself. This is what immediately induced the plaintiff to bring his own suit No. 4 of 1951 in which Kanti Prakash refused to join as a plaintiff and had to be arrayed as defendant and in which he categorically denied the factum of partnership itself. I am satisfied that in these circumstances it is manifest that Ram Kumar plaintiff could not have brought suit for rendition of accounts against his partner Kanti Prakash. The accounting naturally depended on material which was in the hands of a third party i.e. arhatis. Until the latter had settled accounts and revealed the position of profits or losses, any accounting inter se between the partners of the partnership namely the plaintiff and Kanti Prakash was not possible. In my opinion therefore the provision of Article 106 of the Limitation Act cannot be applicable to a suit of this nature, otherwise that would result in grave injustice. The intention of law could not be to defeat the just claim of a partner who was not in a position to institute a direct suit for rendition of accounts against his own partner on account of the intervention of a third party through when alone the entire partnership business consisting of a solitary item was carried out. I am, therefore, of the opinion that a claim of this nature could not be covered strictly within the terms of any specific provision of the Indian Limitation Act in this regard and consequently, it must be deemed to attract the residuary Article 120 of the Limitation Act, which provides that a suit for which no period of limitation is provided elsewhere must be brought within six years from the date when the right to sue accrues. Sri K.C. Saxena's contention is that the right to sue in the present case accrued on 18-8-1858 when the appeals arising out of the award were decided or at the worst on the 12th July, 1956, which was the date of the decree passed on the basis of the award. Since the present suit was filed within six years from that date, it was clearly not barred by limitation. 10. The only case on which the learned counsel for the appellant could lay hands for the purpose of applying the appropriate provision of the Limitation Act and containing somewhat parallel facts is Rathan Chand Kumaji v. Amichand, A.I.R. 1934 Madras 665. 10. The only case on which the learned counsel for the appellant could lay hands for the purpose of applying the appropriate provision of the Limitation Act and containing somewhat parallel facts is Rathan Chand Kumaji v. Amichand, A.I.R. 1934 Madras 665. The facts of that case were that in a suit for partnership accounts the plaintiff had prayed that. the usual partnership accounts be taken of the total amount and profits earned in the business be ascertained and the amount due to the plaintiff for his share of the profits be also ascertained. The Commissioner in that case had submitted a report determining the amounts due to the various partners and the partners all of whom were parties to the suit accepted it and the court granted a decree to the plaintiff in terms of the report. Subsequently, one of the defendants in the suit, who never put in appearance and never availed himself of the opportunity to ask for a decree in his favour, filed another suit for the amount, which as per accounts taken in the former suit he would be entitled to. In those circumstances it was held that the suit did not fall within the scope of Article 106 of the Limitation Act and that the right to sue for enforcement of rights declared in a former judgment or decree was not restricted to cases where the former judgment or decree fixed a definite amount as payable by one party to another. The plaintiff had a right to make a claim on the basis of the Commissioner's report in the former suit. The decision in the former suit might be deemed to have declared the rights of all parties to it. On the analogy of that decision it was contended on behalf of the appellant that the rights of the parties in the present case were actually declared by the award and thereafter alone it became possible for the plaintiff to proceed against defendant No. 3 without loss of any time by filing the suit after the appeal from the award had been dismissed. 11. I am inclined to accept this submission made on behalf of the appellant. 11. I am inclined to accept this submission made on behalf of the appellant. I have already observed that on account of the peculiar circumstances of the present case the rights of the plaintiff were in a nebulous state and they crystallised only when the award was given in regard to the two suits, earlier instituted which were heard and decided by the arbitrator. Then alone it was possible for the plaintiff to claim the ascertained amount which was the subject matter of the present suit and hence the residuary Article 120 of the Limitation Act would be attracted on the facts of the present case. 12. Thirdly, the learned counsel for the respondent strenuously urged that even if Article 120 of the Limitation Act applied to the present case, the suit should have been filed within six years from 1949. It was submitted that the right to sue had accrued in that year as the entire business of partnership was over and the partnership stood dissolved. Consequently, in any view of the matter the plaintiff could not have deferred the right of filing his suit beyond six years from 1949. In other words, the suit could not have been brought after the year 1955 and the present suit was, therefore, still barred by limitation. It was contended that so far as the investment made by the plaintiff was concerned, he could be in no illusion about it after the year 1949 when the entire transaction had concluded and the partnership had come to an end and he was fully aware of the total amount of money invested by him. Therefore, there was nothing to prevent the plaintiff from suing defendant No. 3 for the half share of the investment which the plaintiff had been forced to make. Sri K.C. Saxena, however, argued that this contention would be repugnant to the settled notion of partnership and the law relating to a suit which a partner can under the law bring against a co-partner. He contended that this was foreign to the whole concept of partnership that a suit for a solitary item or sundry items should be brought by one partner against the other or that he should be forced to institute a suit of this nature without taking proceedings to settle accounts and ascertain precisely the amount which he claimed from his partner. He referred me to a judgment of Dalal, J. in Khadyalal v. U.P. Government, A.I.R. 1959 Allahabad 236, for the dictum that when there had been a partnership there could be no suit until it was known what amount was due. He also relied on Kashi Nath Kedari v. Ganesh, 26 I.L.R. Bombay 739. There the facts were that the two plaintiffs were the owners and sole partners of the firm Apaji Kashinath. They were also partners in the defendant firm: Ganesh Hari Narkar, which latter firm ceased to do any business in 1897, although the partnership was not formerly dissolved. In 1899 the plaintiffs brought a suit against the firm Ganesh Hari Narkar to recover their advance. Being partners in the firm, the plaintiffs appeared also as defendants (Nos. 3 and 4) in the suit, the real object of the suit being to recover from the other partners (defendants 1, 2 and 5) their share of the amount alleged to be due by the firm to the plaintiffs. It was held by a Division Bench in the above circumstance that the suit as framed was not maintainable. The money claimed was only one item in the partnership account between the plaintiffs and the defendants. Without taking a general partnership account it was impossible to say whether there was anything due by the defendants to the plaintiffs. In Sonum Ram v. Sewa Ram, A.I.R. 1938 Lahore 456 a Division Bench observed that after dissolution, until the accounts of the partnership were completely settled, individual partners could not sue for their share of any separate part of the partnership assets. In Ramappa v. Thirumalappa, A.I.R. 1939 Madras 884. It was held that up to the time of dissolution the partners must be regarded as joint owners of the properties. Until account has been taken and provision has been made for the discharge of the liabilities no partner could claim to be entitled to any definite share in a particular asset. The decision in 26 I. L.R. Bombay 739 was followed in Kansi Ram v. Jai Ram, A.I.R. 1956 H.P. 4 and it was held as follows :- "Where the sum sought to be recovered by a suit is one item in the partnership account then until the accounts between the partners are settled it cannot he recovered by the suit. The decision in 26 I. L.R. Bombay 739 was followed in Kansi Ram v. Jai Ram, A.I.R. 1956 H.P. 4 and it was held as follows :- "Where the sum sought to be recovered by a suit is one item in the partnership account then until the accounts between the partners are settled it cannot he recovered by the suit. The reason is that one partner cannot sue for money lent by him to a firm of which he is a member. The advance is but an item in the partnership account." 13. Thus, the consensus of opinion appears to be that until accounts are settled between the partners. they are joint owners of the partnership assets and property and piecemeal suits by one partner against the other for mere items of partnership business or individual amounts would neither be proper nor legal. This view alone would succeed in doing substantial justice between the parties and this proposition applies with special force to a situation where a partner may be prevented on account of reasons beyond his control and the intervention of a third party from ascertaining exactly the amount which he can rightly claim under the law against another party. The learned counsel for the appellant invited me to visualise the various possibilities of vagaries of partnership business which might result in losses or profits in such a manner as to completely liquidate the amount of investment. He submitted that the invested money for which eventually one partner may sue another partner was not a fixed quantity and it was bound to vary with the vicissitudes of business. Consequently, no suit for an amount could be legally filed until the amount could be known to certainty. I find force in this submission and come to the conclusion that in the present case it was when the rights of the parties had been declared by the decree of an award that the right to sue accrued to the plaintiff and hence the suit having been brought within six years from the date of the award was not barred by limitation. 14. In the end the learned counsel for the respondent submitted that no decree for interest should be passed in the present case even if the suit be decreed as not being barred by limitation. 14. In the end the learned counsel for the respondent submitted that no decree for interest should be passed in the present case even if the suit be decreed as not being barred by limitation. He referred me to sub-secs (c) and (d) of Section 13 of the Indian Partnership Act and contended that the trial court came to the conclusion that the plaintiff had not proved that he had made any investment in the partnership business. The finding of the lower appellate court, however, is clearly to the effect that Ram Kumar plaintiff had invested Rs. 6,536 in the business and that finding is binding in second appeal. In the plaint the interest was claimed at the rate of 10/- annas per cent per annum and calculated on that basis the total amount of Rs. 2,818/- was claimed by way of interest up to the date of the suit. The relief of pendente lite and future interest was also claimed. The learned counsel for the parties could not point out any written deed of partnership on the record of the case. In his deposition the plaintiff stated that according to the terms of the partnership he was liable to make the entire investment. In view of this clear statement clause (d) of Section 13 of the partnership Act is excluded. That is applicable only where a partner makes any payment or advance beyond the amount of capital he has agreed to subscribe. The learned counsel for the appellant relied on clause (c) of Section 13 and stated chat an agreement with regard to interest having been pleaded by the plaintiff and also deposed to in evidence, he was entitled to interest at the rate of 10/- annas per cent per annum. It is evident from clause (c) that a partner is entitled to interest on the capital subscribed by him but such interest is payable only out of profits. The plaintiffs' own case is that according to the finding of the award the partnership business had run into losses and no profit was earned. The appellant, however, contended that the opening words of Section 13 of the Partnership Act are "Subject to contract between the partners" and in the instant case the plaintiff had pleaded such contract and also deposed to the same effect in the witness box. The appellant, however, contended that the opening words of Section 13 of the Partnership Act are "Subject to contract between the partners" and in the instant case the plaintiff had pleaded such contract and also deposed to the same effect in the witness box. I have gone through the statement of Rama Kumar and I find that he merely stated that interest at the rate of 10/- annas per annum was agreed between the parties to be paid but he did not state that this was to be paid irrespective of the profits. Therefore, in view of the statutory provision and in the absence of a contract to the contrary being established by evidence it must be inferred that the interest would be payable only within profits and since admittedly in the present case there were no profits the plaintiff was not entitled to the interest payable to him. 15. The result is that this appeal partly succeeds. The plaintiff's suit for recovery of Rs. 3.268/- is decreed and also for pendente lite and future interest at the rate of 6 per cent per annum. Parties will be entitled to costs proportionate to their success and failure in this appeal.