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1994 DIGILAW 465 (KER)

Issac Peter v. Issac

1994-12-02

K.G.BALAKRISHNAN

body1994
Judgment :- Narayana Kurup, J, The first counter petitioner (first defendant) in I.A. 2692/1994 in O.S.377/1994 of the 1st Addl. Sub Judge, Ernakulam is the appellant. The respondent-plaintiff is the lather of the appellant. The appeal is directed against the order of the court below in I.A. 2692 of 1994 in O.S.377 of 1994 making the ad interim order of injunction absolute, restraining the appellant from raising any loan or creating any encumbrances on the assets of the firm or from cutting and removing any trees from the estate owned by the firm or committing any waste therein. 2. The brief facts necessary for the disposal of the C.M. A. are as follows: The respondent-plaintiff is the lather of defendants 1 to 3 and 7. Defendants 4, 5 and 6 are the wives of defendants 1 to 3 respectively. Defendants 1 to 6 along with Smt.Mary Issac, Smt. Mariamnia Sunny, Smt. Agnes Issac, Smt. Rosamma Issac, M/s.Issac Peter and Co. (P) Ltd. and M/s.Scalord Hotel (P) Ltd. entered into a partnership dated 18-12-1974 in the name of Pambra Coffee Plantations with its place of business at the Parabra Estate in Wynad and Head Quarters at Ernakulam. The object of the partnership is to run and maintain the coffee estate, namely, Pambra Coffee Plantations. The firm was re-constituted on 9-9-1988 admitting the 7th defendant who was then a minor to the benefit of the partnership. As per the partnership deed the appellant-first counter petitioner-first defendant is the managing partner of the firm, the second defendant was the manager and the third defendant the Assistant Manager of the estate. While so, the partnership firm was re-constituted as per a fresh deed dated 24th July, 1990 whereby all the 7 partners agreed to admit the plaintiff as 8th party to the partnership. As per the re-constituted deed also the appellant was to continue as managing partner who was given wide powers including authority to borrow funds by hypothecating the assets of the firm. The managing partner, no doubt, has to maintain correct books of account showing the profit and loss of the firm and the other partners are given the right of inspection of the books of account. The managing partner, no doubt, has to maintain correct books of account showing the profit and loss of the firm and the other partners are given the right of inspection of the books of account. According to the respondent-plaintiff none of these obligations have been fulfilled by the appellant and according to him the appellant has raised substantial loan from banks on the security of the assets of the firm detrimental to the prospects of the firm. The respondent would further contend that there was no necessity to raise any loan as aforesaid since there was excellent coffee crops which would bring enormous amount as profit. According to the respondent, if the appellant is allowed to manage the affairs of the firm by raising huge sums as loan from various financial institutions and utilising the same for his personal needs the firm will get ruined under his management and under the circumstances the respondent prays for dissolution of the firm and for an ad interim injunction restraining the appellant from raising further loans on the security of the assets of the firm with the idea of utilising it for his personal needs. The trial court initially granted an ex-parte interim injunction as prayed for. 3. The appellant filed a detailed objection stating that as per the partnership deed the respondent and the 7th defendant agreed to share the profit and loss of the partnership at the proportion of 20% and defendants 1 to 3 at the proportion of 19% each and defendants 4 to 6,1 % each and that the appellant was to continue as managing partner with power to borrow money from any bank or financial institution on the security of the assets of the firm. The averments regarding the non-production of books of account was denied. According to the appellant, money was borrowed from Nedungadi Bank Ltd. which was done in the usual course of partnership business to meet its recurring expenses from time to time and such borrowing was made only in terms of the authority conferred under the partnership deed. The averments regarding the non-production of books of account was denied. According to the appellant, money was borrowed from Nedungadi Bank Ltd. which was done in the usual course of partnership business to meet its recurring expenses from time to time and such borrowing was made only in terms of the authority conferred under the partnership deed. According to the appellant, the plaintiff for reasons best known to him wanted the appellant to step down from the position of the managing partner of the firm and wanted himself to be appointed as managing partner which was not acceptable to the other partners, namely, defendants 2 to 6 who hold the majority shares of the firm. According to the appellant, the plaintiff is misusing his paternal authority to coerce him and others to accept his illegal demands. At any rate, according to the appellant, he has full authority to take loans from banks and other financial institutions for proper maintenance and management of the estate and if the respondent feels that the firm is running at a loss, it is open for him to retire from the firm as stipulated in the partnership deed. The allegation of mismanagement of the estate was also denied. There is no prima facie case and balance of convenience is against the grant of any injunction. 4. The trial court on a consideration of the pleadings as also Exts. Al to A4 produced by the respondent and Exts. B1 to B6 produced by the appellant found that the plaintiff-respondent has a "strong prima facie case against the defendants" and "if the injunction is not granted irreparable injury will be caused to the plaintiff. Accordingly, the court below passed the impugned order confirming the exparte injunction initially granted against the appellant. This appeal is directed against the order confirming the interim injunction as already noticed. 5. Having heard learned counsel on both sides, we are not inclined to sustain the order under challenge in this C.M.A. 6. In this connection we cannot loose sight of the fact that the plaintiff-respondent has no case that the appellant is indulging in any activity beyond the scope of the partnership business. There is no. case that the appellant has exceeded his authority conferred on him by the deed of partnership. In this connection we cannot loose sight of the fact that the plaintiff-respondent has no case that the appellant is indulging in any activity beyond the scope of the partnership business. There is no. case that the appellant has exceeded his authority conferred on him by the deed of partnership. Moreover, it must also be noted that the appellant along with his two other brothers who sail with him hold 57% (19 x 3) of the partnership firm as against 40% (20 x 2) held by respondent-plaintiff and the 7th defendant. The mere fact that the appellant had borrowed money on the security of the partnership assets will not by itself constitute sufficient justification for this court to interfere with the internal management of the firm. It is for the partners themselves to thrash out their differences by mutual discussion and deliberation and the decision of the majority must be held to be binding on the minority. Viewed in the above perspective the order of the court below granting injunction against the appellant who along with defendants 2 to 6 hold majority shares cannot be legally sustained. The following passage occurring in C.M. Row's Laws of Injunctions 7th Edition Vol.1 page 773 is relevant: 7. Internal management:-Another general rule is that with regard to the matters that are within the proper scope of the partnership business, and therefore to be decided upon and regulated by internal management, it is in the first instance for the partners as a body to discuss the matter in difference. That the majority (wither in a private firm or a public company) determine, the minority must accept, and in such matters the court does not interfere except to give effect to the will of the majority against a fictitious minority...." In the result, we set aside the order passed by the court below in I.A. 2692/1994 in O.S.377/1994 and vacate the order of injunction passed against the appellant and allow this appeal, but having regard to the relationship of the parties we make no order as to costs. C.M.A. is allowed.