Biswanath Halwal v. Amritlal Halwal — 1989 DIGILAW 387 (CAL)

JUDGMENT Lilamoy Ghosh, J.: The shop room in 180, Vivekananda Road, Calcutta is the subject-matter of this appeal and the suit out of which it arises. The crucial question for determination is whether the plaintiff and the defendant entered into a partnership agreement with regard to the business in the shop or whether the plaintiff sublet a room to the defendant. 2. The plaintiff pleaded that he was running the confectionery shop from before and because of his advanced age, it become difficult for him alone to manage the said sweetmeat shop. In that situation, it was stated, the plaintiff entered into a partnership business with the defendant for running the sweetmeat business in the shop and a partnership deed was executed between the parties on the 20th August, 1563. The various terms of the partnership deed are set out in the plaint, but it is necessary to refer at this stage to only the salient features of the agreement. It was agreed, as per the deed, that the first party (plaintiff) would be entitled to a fixed profit of Rs.105/- per month and would not be liable for any loss. It was also stipulated that the monthly rent of the shop room would be paid regularly by the plaintiff and all charges to Corporation would be paid by him and the trade licence would also stand in his name. The 9th clause of the deed, which is very important, is that in case the second party, that is, the defendant, failed to pay the first party his fixed profit by the time fixed, the partnership would stand dissolved. Incidentally, it may be mentioned that in the deed, there is also a stipulation that the first party (plaintiff), would assist the defendant in all possible ways. The plaintiff alleged that the business was being carried on accordingly for some time and the defendant also made payments of monthly profits upto the month of August, 1972. Thereafter, it was alleged, the defendant defaulted. So, on the ground that the defendant became guilty of breach of the terms of the deed. the plaintiff instituted the suit for reliefs set out in the prayer portion. The plaintiff asked for a declaration that the partnership stood dissolved. The plaintiff also prayed for decree for ejectment and for restraining the defendant from interfering with the carrying on of the is business by the plaintiff. the plaintiff instituted the suit for reliefs set out in the prayer portion. The plaintiff asked for a declaration that the partnership stood dissolved. The plaintiff also prayed for decree for ejectment and for restraining the defendant from interfering with the carrying on of the is business by the plaintiff. Similarly, he has prayed for that the defendant be restrained from carrying on the business at the suit premises. There was also a prayer for accounts. 3. The main defence of the defendant was that there was no partnership business between the plaintiff and the defendant and that the plaintiff had sublet the premises to him. It was stated in paragraph 11 of the written statement that in 1952 the sweetmeat shop of the plaintiff came to a standstill due to want of funds and the plaintiff stopped that business. In 1952, as stated by the defendant, the plaintiff sublet the suit premises to the defendant and since then the defendant was carrying on the business in the suit premises. At first, the rent was fixed at Rs. 100/- per month. Later, in order to avoid the decree for eviction in a suit filed by the superior landlord, the parties brought into existence a partnership deed, to conceal the position of subletting. At that time, according to the defendant, the rent was enhanced to Rs. 105/- per month. The defendant, however, admitted in paragraph 12(a) that the plaintiff permitted him to use some of his articles. Title Suit No. 193 of 1963 was filed against the defendant in the City Civil Court, Calcutta, in order to avoid the provisions of s. 13(1)(6) of the West Bengal Premises Tenancy Act, as pleaded by the defendant. The defendant emphasised that he was the sole proprietor of the business and was in exclusive possession and that the plaintiff had only the right to collect rent from him on certain conditions, which right also he forfeited for failure to perform his duty. These in short, were the respective cases of the parties. 4. The matter was fought out in the trial court and both sides led oral evidence. The plaintiff also filed certain documents. 5. The learned trial court, un a consideration of the materials on record, came to the finding that there was a Case of hinden lease and no partnership in reality was found. 4. The matter was fought out in the trial court and both sides led oral evidence. The plaintiff also filed certain documents. 5. The learned trial court, un a consideration of the materials on record, came to the finding that there was a Case of hinden lease and no partnership in reality was found. On that basis, the learned court below dismissed the main Part of the plaintiff's case, but allowed a part decree for Rs. 3,780/-, on account of rent due from the defendant from the month of September, 1972. 6. Tile propriety of the judgment and decree is now being challenged in this appeal. 7. Mr. Dasgupta, the learned Advocate for the appellant plaintiff, has contended that the learned court below has completely misconstrued the instrument in question, indicating that a partnership business was formed. He has also argued that the learned court below has not been able to apply the proper law for deciding how and under what condition a partnership business can be started. In that connection, Mr. Dasgupta has referred to a number of decisions. 8. Mr. Banerjee, the learned Advocate for the respondent, on the other hand, has argued that the background of the-case and the other surrounding circumstances, including the internal evidence as furnished by the instrument, all indicate that it was a case of hidden lease. 9. It is therefore. to be resolved whether the said partnership deed dated the 20lh August, 1963 (Ext.1) was really a partnership agreement or it was a case of lease in disguise. To resolve that question, we have first to address ourselves to the terms of the deed itself. It is stipulated that the plaintiff would be entitled to a fixed profit of Rs. 105/- per month and shall not be liable for any loss. Now, this stipulation is not against the concept of partnership. In any case, the intention of the parties is to be gathered, as a partnership is a matter of contract between the parties. As laid down in the case reported in AIR 1965 SC 610 , to find out the real import and purpose of a certain agreement, the Court has to decide the question of the intention of parties. In any case, the intention of the parties is to be gathered, as a partnership is a matter of contract between the parties. As laid down in the case reported in AIR 1965 SC 610 , to find out the real import and purpose of a certain agreement, the Court has to decide the question of the intention of parties. That was, however, in the context of whether it was a case of a leases or a licence, but the guiding principle is that in matters of agreements, the intention of the party should be ultimate decisive factor. In a case reported in 1988 (1) Cal. Law Times 14, it has been decided that an agreement that one partner alone will bear losses is not inconsistent with the existence of partnership. In AIR 1987 SC 1782 , it has been held that the fact of carrying on business of the partnership in the premises would not about to subletting, leading to the forfeiture of the tenancy. With reference to s. 6 of the Partnership Act, it has further been observed that whether a group of persons is or is not a firm. or whether a person is or is not a partner, for determining that, regard shall be had to the real intention between the parties, as shown by all the relevant facts taken together. Their Lordships have laid down certain tests; (1) There must be an agreement entered into by all the parties concerned; (2) The agreement must be to share profits of the business, and (3) The business must be carried on by all or any of the persons concerned acting for all. We find that all the tests laid down are satisfied in this case. There is an agreement, evidenced by Ext. 1. There is an agreement to share profits of the business. The business was to be carried on by the defendant for himself and on behalf of the plaintiff. We find that all the tests laid down are satisfied in this case. There is an agreement, evidenced by Ext. 1. There is an agreement to share profits of the business. The business was to be carried on by the defendant for himself and on behalf of the plaintiff. In the case cited just now (AIR 1987 SC I782, supra), it has further been observed that where a partner brought in as his asset tenancy in the premises in which the partnership business is to be carried on, the fact that the partner in question was to share the profits only and was to get a fixed percentage of the profits or the further fact that the said partner was not to operate the bank accounts there being intrinsically wrong in law from constituting a partnership in the manner it was done, it could not be said that no genuine partnership had come into existence. In that case, Their Lordships referred to a fixed percentage of profits; the distinction here is that the plaintiff was to get a fixed profit and not a fixed percentage. Still, the position would not be altered because of this In any case, there is participation in profits and Their Lordships have not laid down that participation in loss must be an essential factor. In AIR 1927 Bombay 187, it was held that as regards the question of losses it was perfectly open to partner 'A' to say that as between himself and has partner 'B', the partner 'A' should bear all the losses of the business. In other words, it was not essential to constitute a partnership that the partners should agree to share the losses. Thus, an agreement that one partner would not share the losses' is not a concept obnoxious to the principle of partnership. In AIR 1956 Hyderabad 27, it was observed that the partners might agree either to share the profits in specific proportions or specific sums. Those observations cover our case; it is not a case of getting a specific percentage, but a specific fixed sum. The decision cited clearly supports the view that such a situation is not inconsistent with a partnership business. 10. Mr. Banerjee, the learned Advocate for the respondent, has referred to certain other decisions to make out a contrary proposition. He has first referred to the case reported in AIR 1959 Madras 379. The decision cited clearly supports the view that such a situation is not inconsistent with a partnership business. 10. Mr. Banerjee, the learned Advocate for the respondent, has referred to certain other decisions to make out a contrary proposition. He has first referred to the case reported in AIR 1959 Madras 379. In that case, three elements have been referred to for a partnership business and they are; (1) there must be an agreement entered into by all the persons concerned; (2) the agreement must be to share the profits of the business; and (3) the business must be carried on by all or any of the persons concerned acting for all. We do not see how the decision cited militates against the case propounded by the appellant. All the elements referred to in the decision are found to be present on going through the text of the instrument. Thus the decision cited by Mr. Banerjee rather supports the contention of the appellant. The next case cited by Me. Banerjee is the decision reported in AIR 1939 Bombay 410. The important portion in the decision is that the essential element of a partnership is that there must be an agency. That undoubted by is the legal position. It is a truism that if there was a partnership between the plaintiff and the defendant, one would be the agent for the other. And as a matter of fact, the deed itself contemplates that. Then Mr. Banerjee has referred to a decision reported in AIR 1937 Nagpur 68. This case IS cited for showing that as no date when the partnership business was to commence, was mentioned, no such partnership was at all formed according to law. We are afraid that such a proposition cannot be accepted. In the Nagpur case, the plaintiff advanced certain sums of money to the defendants for the purchase of partnership property and even took a house on rent for it. The defendants however, released to execute the deed of partnership. It was noticed in that case that the date of commencement of partnership was never agreed upon between them as the space for it was left blank. In that context, it was held there was no partnership formed between the parties. We do not find that this case has any application with the facts of our case. The document has been executed by both sides. In that context, it was held there was no partnership formed between the parties. We do not find that this case has any application with the facts of our case. The document has been executed by both sides. There is no blank space for date. Such being the position the intended date must be the date of execution. Then again, Mr. Banerjee has referred to the decision reported in AIR 1933 Cat. 151. It is observed that the fact of partnership must be proved by evidence, showing that the persons alleged to be partners have agreed to combine their property, labour and skill in the business. That was in the context of joint family coparcener. The ratio was that from the mere fact that a person carrying on business was a Coparcener in a joint Hindu family, it did not necessarily follow that all his coparceners were his partners in that business. We are not concerned here with the activities of the coparceners in relation to a Joint Hindu Family. That case has got no application. The case reported in AIR 1959 SC 719 settles the principle that all the circumstances of the case, specially the conduct of the parties, together with the important terms of the documents, were to be considered. In that case upon a consideration of those facts and circumstances, it was held that it could not be said that there was intention to bring about the relation of partnership. That is the law undisputedly. Here also, we have to take into consideration the important terms of the deed and refer to the other circumstances, including the conduct of the parties and the antecedents of the case. The ca e cited, does not go against the appellant. 11. We find, upon a construction of the deed, Ext. 1, that a partnership was contemplated. The intention is clear. The mere fact that there was a stipulation for sharing of profits only and there was no provision for sharing losses, cannot affect the partnership business. We have referred to the several decisions settling that 'participation in loss is not essential for bringing about a partnership business. The other essential elements, as referred to in the various decisions, have been found to be present. Upon a construction of the document itself we have no hesitation that there was a real partnership business. We have referred to the several decisions settling that 'participation in loss is not essential for bringing about a partnership business. The other essential elements, as referred to in the various decisions, have been found to be present. Upon a construction of the document itself we have no hesitation that there was a real partnership business. We cannot conclude that it was a hidden sublease, merely on suspicion. The conclusion we have made above is fortified by the antecedent facts Earlier, that plaintiff filed a suit against the defendant for certain reliefs. The plaint has not referred to that case, but the defendant himself has pointed out that there was such a suit filed. Therefore, when the plaintiff introduces the compromise decree in that suit as a piece of additional evidence, it cannot be said that the defendant is taken by surprise or is prejudiced in any way. Rather the plaintiff comes out to the aid of the defendant by elucidating what that position was. That compromise decree has been marked High Court Ext. I. The plaint is not available, but it is indicated that it was a case of partnership business. There is a clause "with a direction to make over the stock-in-trade.". Thus trade and stock-in-trade were contemplated. Though not conclusive, that strongly suggests that the suit was filed on the premises that there was a partnership business. The terms of the compromise itself make the position very clear. The plaintiff and the defendant admitted the existence of a partnership between them relating to the sweetmea1 business from sometime past run and conducted at 180, Vivekananda Road, in a rented shop room of the plaintiff. The defendant categorically denied the existence of any sub-tenancy in respect of the said rooms in his own favour or in favour of anybody else. That concludes that even earlier, the business carried on there was a partnership business. 'B' Schedule properties were described as the utensils commonly used in a sweetmeat shop. The defendant admitted the plaintiff's right in the 'B' Schedule properties. Now in Ext. 1 also, it was settled that the 'B' Schedule properties belonged to the plaintiff. That concludes that even earlier, the business carried on there was a partnership business. 'B' Schedule properties were described as the utensils commonly used in a sweetmeat shop. The defendant admitted the plaintiff's right in the 'B' Schedule properties. Now in Ext. 1 also, it was settled that the 'B' Schedule properties belonged to the plaintiff. No doubt, the 'B' Schedule properties were to be returned to the plaintiff, but it was not contemplated that the same should be returned forthwith, because they were to be returned in the same condition as they were excepting natural wear and tear. The last expression "natural wear and tear" connotes that the 'B' Schedule properties were to be used for the business. We may also point out that in Ext. 1, it is specifically stipulated that though the defendant would manage the concern, the first party should assist him mall possible ways. Therefore, in some way, the plaintiff also was involved in the business. The partnership deed, Ext. I, along with the High Court Ext. 1, clearly settles that a partnership business 'I as being carried on and that was contemplated to be carried on further on the basis of Ext. I, the instrument dated the 20th August, 1963. 12. Then there arc certain other surrounding circumstances which also fit in with the case of partnership. The deed stipulates that the trade licence and the municipal tax etc. would by paid by the plaintiff. The defendant, in his evidence, has admitted that the trade licence stood in the name of the plaintiff and was obtained in his name only five or six years before his deposition. Therefore, after the execution of the partnership deed, Ext. 1, the trade licence continued to be in the name of the plaintiff for long. This subsequent event is very significant. 13. Then again in paragraph 12(a) of the written statement, the defendant has admitted that the plaintiff permitted him to use some of articles of the plaintiff in 1952. Mr. Banerjee, the learned Advocate, has commented upon the fact that the plaintiff in his evidence has at one place used the expression that he filed the suit for arrears of rent. It seems that the learned trial court has also been seriously influenced by that loose statement. Mr. Banerjee, the learned Advocate, has commented upon the fact that the plaintiff in his evidence has at one place used the expression that he filed the suit for arrears of rent. It seems that the learned trial court has also been seriously influenced by that loose statement. But a little after this P.W.1 himself has explained that the previous suit was filed against the defendant as the defendant failed to pay a sum of Rs. 105/- to be paid out of profit. We are to take the entire evidence and should not be guided or influenced by stray and loose statements of ordinary persons like P.W.1. The document, High Court Ext.1 also indicates that it was not a suit for recovery of arrears of rent. So far as the defendant himself is concerned. He has also used the expression that the sweetmeat shop was settled with him as a tenant. If we go by that statement, it would mean that the defendant did not take settlement of the premises, but of the shop room itself. But, no conclusion should be founded on mere stray and isolated statements. The oral evidence in the case does not very much decide the issues involved in the suit. But the defendant has significantly admitted that not only the trade licence was in the name of the plaintiff before, but it was made in his name before the institution of the suit. That statement was made just before the close of his evidence. 14. There again the defendant has sought to make out that this agreement Ext. 1, brought into existence in order to avoid a decree of ejectment in a suit filed by the superior landlord against the plaintiff. But D.W. 2 has clearly admitted that the suit was filed by the landlord against the plaintiff on the ground of default. It is nobody's case that the suit was filed on the ground of subletting. Therefore, the fact that the instrument was brought into existence in order to avoid a decree for ejectment on the ground of subletting, has no reality. 15. Other backgrounds of the case may be taken into consideration. It is admitted by the defendant himself in his evidence that the sweetmeat shop earlier belonged to the plaintiff. Therefore, the fact that the instrument was brought into existence in order to avoid a decree for ejectment on the ground of subletting, has no reality. 15. Other backgrounds of the case may be taken into consideration. It is admitted by the defendant himself in his evidence that the sweetmeat shop earlier belonged to the plaintiff. The plaintiff's case is, it all along belonged to him and when he found it difficult to manage because of his old age, he entered into a partnership business with the defendant. It is also evident that the plaintiff had some other shops. Therefore, the running of a sweetmeat shop was not a new venture for the plaintiff, it was his profession admittedly and it is very likely that he would, as a partner, carryon his avocation with the aid of another. 16. The documents on record and the antecedent facts and the other facts leave no doubt that it was a case of partnership. 17. Now Mr. Banerjee has referred to certain subsequent events. It is pointed out that the superior landlord got decree against the plaintiff and took symbolical possession of the suit premises. An affidavit has been filed to that effect and it is set out that subsequently, the joint administrators accepted the defendant as a tenant in respect of the wit premises and realised rent from him. We do not see how on the basis of this ipse dixit, the plaintiff's legitimate claim can be ignored. The authenticated court papers are not before us. We do not know also in exactly what condition the proceeding remains. Whether it is a settled position or is still in a fluid state, we yet do not know. At any rate, from the affidavit itself, we get that the landlord took symbolical possession. We do not feel that even if that be the position, the plaintiff's right as founded on the original cause, would be defeated by the subsequent events. The matters are different and distinct one in between the plaintiff and the defendant, flowing from the partnership business the other is between the superior landlord and the plaintiff himself. We do not feel that even if that be the position, the plaintiff's right as founded on the original cause, would be defeated by the subsequent events. The matters are different and distinct one in between the plaintiff and the defendant, flowing from the partnership business the other is between the superior landlord and the plaintiff himself. The plaintiff will square up his accounts with the superior landlord, but he will not be debarred from dealing with the defendant on the basis of his right, flowing from a different transaction, as long as he is not evicted in due course of law. What effect the suit of the landlord would have upon the plaintiff, we are not concerned with presently. The plaint stands on independent grounds which are not affected by any other proceeding by the landlord. The plaintiff will undoubtedly reckon with the defendant. We feel that the suit of the landlord, of which we do not have full account and for which there is no cogent evidence, cannot cast its shadow "pan the plaintiff's valid grounds in the present proceedings. 18. The other subsequent event referred to by Mr. Banerjee is that the plaintiff has withdrawn the money decreed in his favour by the learned trial court on account of arrears of rent. We do not think that this will prejudice the plaintiff in prosecuting the appeal. From the annexure to the affidavit of the defendant, we find that there was full satisfacation of the decree for an amount of Rs. 4,000/- and odd on 11.3.80. The appeal was filed before that. In AIR 1961 SC 1327 , it was held that a vendee, who filed an appeal to the Supreme Court was not precluded from proceeding with the appeal because he had withdrawn the preemption money. On the same principle, if the plaintiff has withdrawn The money which he is entitled to get, but which was described by the lower court as an amount for rent, cannot preclude him from prosecuting the appeal. 19. We are of the view that the learned trial court was not justified in holding that there was a sublease in favour of the defendant, There was a partnership formed between the plaintiff and the defendant and for breach of the term of the instrument, 'the partnership automatically stood dissolved. The plaintiff's first prayer is for such a declaration. 19. We are of the view that the learned trial court was not justified in holding that there was a sublease in favour of the defendant, There was a partnership formed between the plaintiff and the defendant and for breach of the term of the instrument, 'the partnership automatically stood dissolved. The plaintiff's first prayer is for such a declaration. Undoubtedly, the plaintiff can get a decree for that and also for some other reliefs. The plaintiff can get injunction for restraining the defendant from carrying on the business because after the dissolution of the partnership, Partnership, the defendant cannot exploit the business. The prayer for restraining the defendant from interfering with the carrying on of the business by the plaintiff cannot be allowed, because that is anticipatory. If the plaintiff begins the business afresh and if then the defendant comes out to disturb him then only such an injunction can be granted. No injunction can be granted in anticipation. There is a prayer for decree for Rs. 3,780/- and that is on account of the profits. The amount would be the same and the learned court below has decreed that amount, describing it as an amount for the rent. The plaintiff will get that amount, but the decree in that respect would be converted into a decree for claim of profits. We have said before, the plaintiff can get a decree for ejectment. The plaintiff cannot get any other reliefs. 20. The appeal succeeds the judgment and the decree of the learned trial court are hereby set aside and the suit is decreed against the defendant. It is declared that the partnership created by the deed of partnership executed by the plaintiff and the defendant on August 20, 1963 stands dissolved. The defendant is restrained from carrying on the business at the same premises. The learned trial courts decree for a sum of Rs. 3,780/- with proportionate cost is maintained, but it is converted into a decree on account of profits due to the plaintiff The plain riff also do get a decree for ejectment against the defendant from the sweetmeat shop room at Premises No. 180, Vivekananda Road, P. S. Amherst Street, Calcutta after evicting the defendant therefrom. The plaintiff is not entitled to any other reliefs. We make no order for costs of this appeal. This order will not come into operation before the 1st October, 1989. The plaintiff is not entitled to any other reliefs. We make no order for costs of this appeal. This order will not come into operation before the 1st October, 1989. Sunil Kumar Guin, J.: I agree. Suit decreed; appeal allowed.