Devi Textiles and Others v. S. Suganthi — 1999 DIGILAW 661 (MAD)

Judgment :- The Order of the Court was as follows : Two suits in O. S. Nos. 269 and 270 of 1997 were filed before the Subordinate Judge's Court, Tirupur to declare that the 1st defendant-firm is dissolved on and from 31-1-1997 and to direct to take an account of the assets and liabilities of the firm and distribution of the same to the respective sharers and to allot plaintiff's share, direct the defendants 2 and 3 to render account of the firm from the date of commencement, appoint a Receiver to manage the affairs of the firm till settlement of account, award the costs of the suit and grant such other reliefs as the Court deem fit and proper. 2. Two firms M/s. Devi Textiles and Maruthi Fabrics at Tirupur are the first defendant respectively in O. S. Nos. 269 and 270 of 1997. Plaintiff in both the suits is a partner having 50% share in M/s. Devi Textiles and Maruthi Fabrics. In both the suits, the 2nd defendant is having remaining 50% share. It is admitted by both sides that it is a partnership at will. 3. Misunderstanding arose between the partners and finally elders intervened and panchayat was also held. Even though the defendant agreed to abide by the panchayat decision, they backed out and finally the defendants issued a notice on 31-1-1997 accusing the plaintiff and her husband for the sorry state of affairs and gave notice for the dissolution of the firm. The plaintiff also replied stating that the firm stands dissolved with effect from 31-1-1997 and called for rendition of accounts. 4. Even though the firm stands dissolved on 31-1-1997, the defendants did not submit the accounts and they still carrying on business as if the firm is continuing. According to the plaintiff, the intention of the defendants is to manipulate the accounts to serve their own end. It was under those circumstances, the above suit was filed for the above reliefs. Along with the suit, the plaintiff filed I. A. Nos. 588 and 590 of 1997 for appointment of Receiver to take over the assets and liabilities of M/s. Devi Textiles and Maruthi Fabrics. The same was seriously objected by the petitioners and they pleaded before the trial Court that no ground has been made out for appointment of Receiver. 5. Along with the suit, the plaintiff filed I. A. Nos. 588 and 590 of 1997 for appointment of Receiver to take over the assets and liabilities of M/s. Devi Textiles and Maruthi Fabrics. The same was seriously objected by the petitioners and they pleaded before the trial Court that no ground has been made out for appointment of Receiver. 5. The trial Court as per orders dated 24-10-1997 came to the conclusion that fit case had been made out for the appointment of Receiver and held that it is just and convenient to have the management of the assets be entrusted with the Receiver. 6. Aggrieved by the orders, the petitioners have filed C. M. A. Nos. 96 and 97 of 1997 on the file of the II Additional District Judge, Coimbatore which did not meet with any success. The appeals were dismissed. 7. In this revision, learned counsel for the petitioners challenges the legality of the order. Counsel submitted that Receiver should not have been appointed for the running business and the discretion has not been properly exercised. 8. As against the said contention, learned counsel for the respondent submitted that there is no running business, petitioners themselves wanted a dissolution of the firm and it was the petitioners to inform (sic) my notice of their intention to dissolve the firm. The plaintiff also agreed for the dissolution with effect from 31-1-1997. It is contended that being a partnership at will, when one of the partners communicates his intention to dissolve the firm, that will dissolve the firm. It is submitted that this is a case of dissolved partnership and the intervention of Court sought for is only for the purpose of winding up the business and in such cases, Receiver is appointed as a matter of course. 9. It is not disputed by the petitioners that the firms M/s. Devi Textiles and Maruthi Fabrics are partnership at will. Under section 43 of the Indian Partnership Act, a partnership at will is dissolved by any partner giving notice in writing to all the other partners of his intention to dissolve the firm. It also says that the firm is dissolved as from the date mentioned in the notice as a date of dissolution or if no date is mentioned as from the date of communication of the notice. It also says that the firm is dissolved as from the date mentioned in the notice as a date of dissolution or if no date is mentioned as from the date of communication of the notice. In view of this statutory provision, it goes without saying that the two firms stand dissolved by sending notice. It is further admitted fact that the petitioners themselves issued notice to the plaintiff about their intention to dissolve the firm with effect from 31-1-1997. The plaintiff also agreed to the said course and informed the petitioners that the firms stand dissolved with effect from 31-1-1997. Both the plaintiff and defendants are having 50% shares and both of them agreed to have the firm dissolved with effect from 31-1-1997. In view of the statutory provision, both these firms stand dissolved with effect from 31-1-1997. 10. In regard to appointment of Receiver of a dissolved firm, Woodroffe's Law of Receivers, 6th Edition (Reprint) at pagee 118 and 119, it is said thus : "It is consequently a matter of course to appoint a Receiver when all the partners are dead, and a suit is pending between their representatives or where such appointment is sought by partner against the representatives or assignees in bankruptcy of his late co-partner. If the partnership is already dissolved, the Court usually appoints a Receiver as a matter of course. The Court has jurisdiction to appoint a Receiver of a partnership business with a view to selling the business as a going concern, notwithstanding that the partnership has expired in pursuance of a provision to that effect contained in the partnership-deed. In a suit for an account of a dissolved partnership a decree should, it was held, be passed under Civil Procedure Code, S. 215 of the last Code in accordance with form No. 132 in Schedule IV thereof; and it should direct an account to be taken of the dealings and transactions between the parties and of the credits, property and effects due and belonging to the late partnership, and it should direct the appointment of a Receiver of the outstanding debts and effects." 11. Kerr on Receivers, 16th Edition at page 59, the learned author says, "The readiness of the Court to appoint a Receiver in partnership cases depends upon whether the partnership has been dissolved at the time when the application is made. Kerr on Receivers, 16th Edition at page 59, the learned author says, "The readiness of the Court to appoint a Receiver in partnership cases depends upon whether the partnership has been dissolved at the time when the application is made. If a dissolution has clearly been effected by the service of the writ, or if the partnership has expired by effluxion of time, a Receiver will readily be appointed, though the appointment is not a matter of course; it will be enough to show that one of the former partners is delaying the winding-up and realisation of the business. Conversely, if all that is shown is that a partner has retired from the partnership, leaving the remaining partners to carry on the former business, he will not be entitled to such an appointment." 12. In 1965 AIR(Pat) 144 (Sudhansu v. Manindra), in para 2 of the Judgment at page 146 it held thus : "it is well known that a Receiver is to be appointed as a matter of course when a partnership is dissolved under the orders of a Court, or if the partnership has already been dissolved and any of the parties has come to the Court for seeking his reliefs due to him as an ex-partners. A Receiver can be appointed to take charge of the partnership assets, collect the same and convert it into cash, if necessary, and to discharge the debts of the firm and thereafter divide the surplus between the partners." The above decision was followed in 1972 AIR(Pat) 75 (Sheonarain v. Shri Kripa Shankar), in para 8 of the judgment. Their Lordships held thus : 8. The next contention put forward on behalf of the appellants was that the Court below has not found fraud, mismanagement or wastage on the part of the defendants in respect of the partnership business. Therefore, the firm could not be dissolved and as such if the firm could not be dissolved, no Receiver could be appointed. Reliance was placed in this case on the two English decisions referred to above. In the case of 1820 (37) ER 492 the plaintiff had brought an action for the dissolution of the partnership firm and a prayer was made in that case for appointment of a Receiver. Reliance was placed in this case on the two English decisions referred to above. In the case of 1820 (37) ER 492 the plaintiff had brought an action for the dissolution of the partnership firm and a prayer was made in that case for appointment of a Receiver. In context of the case following observation was made by Lord Chancellor :- "This is a bill filed for the purpose of having a dissolution of the partnership declared and if the Court can now see that that must be done, it follows very much of course that a Receiver must be appointed; but if the case made stands on such a state that the Court cannot see whether it will be dissolved or not, it will not take into its own hands the conduct of a partnership, which only may be dissolved". The aforesaid quotation was quoted with approval in the latter case 1850 (42) ER 56. It is true that in the present case the Court below has not recorded any finding regarding fraud, mismanagement or wastage on the part of the defendants, and if the suit would have been for the dissolution of the partnership, there might not have been a prima facie case in favour of the plaintiffs and in such a case no receiver could have been appointed in absence of such findings, and the principles laid down in the two English decisions would have been applicable. But the present suit is a suit for the distribution or partition of the assets of a dissolved firm. Therefore, the observation of the Lord Chancellor that even in a case of dissolution of partnership when the court finds that the firm must be dissolved, a receiver should be appointed as a matter of course, equally applies when the suit is for the distribution of the assets of a dissolved firm. A Division Bench of this Court in Sudhansu Kanta v. Manindra Nath, 1965 AIR(Pat) 144 held that a receiver is to be appointed as a matter of course when a partnership has already been dissolved under the orders of the Court, if the partnership has already been dissolved and any of the parties has come to the Court for seeking his relief as an ex-partner. A receiver can be appointed to take charge of the partnership assets, collect the same and convert it into cash if necessary to discharge the debts of the firm and thereafter divide the surplus between the partners and in a suit for dissolution of a partnership, a receiver can also be appointed before the final adjudication if the circumstances of the case justify such a measure. Therefore, the question arises as to whether the present suit is for the dissolution of a partnership firm and for accounts or it is a suit for distribution of the assets of a dissolved firm." 13. In , a Division Bench of the Kashmir High Court held thus : " The appointment of a Receiver in respect of a dissolved partnership is in the discretion of the Court and in exercising that discretion, the Court will be guided by the consideration of preserving and protecting the property and assets of the dissolved firm and will not permit it to be dissipated or used by one partner exclusively to the detriment and manifest disadvantage of the other partners who are excluded from such property and assets." The object of appointing a receiver is to place the partnership assets under the protection of court and to prevent everyone, except the officer of the court, from in any way intermeddling with them. It is also well settled that receiver so appointed have no power to carry on business. 14. In 1986 AIR(All) 34 (Khaderan Ram v. Sharda Prasad), a similar view was taken thus : " If the partnership has been dissolved or is sought to be dissolved by the filing of the suit, Receiver can be appointed as a matter of course provided his appointment is sought for the taking of the assets of the firm and ultimately for distribution thereof to the partners and the relationship between the partners is extremely strained. In the cases in which one of the partners has completely excluded the other from the management and the profits of the firm and funds are misappropriated, Receiver can again be appointed." 15. Taking into consideration the above legal position, I do not think that the discretion exercised by the court was in any way improper. 16. In the cases in which one of the partners has completely excluded the other from the management and the profits of the firm and funds are misappropriated, Receiver can again be appointed." 15. Taking into consideration the above legal position, I do not think that the discretion exercised by the court was in any way improper. 16. There is further allegation in the plaint as well as in the Interlocutory Application, not after the dissolution of the firm, the petitioners are continuing the business as if the firm is still continuing. The trial court has recorded that this allegation in the affidavit is admitted by the petitioners. If that be so, that will be an added ground for the appointment of receiver. One thing that is clear from the correspondence between the parties is that they are not retaining good relationship in spite of panchayat being held. Due to various misunderstandings, the same was also not acted upon. It is not the case of the petitioners that they are permitting the plaintiffs also in participating the management of the business. In fact, the plaintiff have been excluded and the petitioners are continuing in management even after dissolution. All these circumstances taken together justifies the appointment of receiver and the discretion exercised by the trial Court as confirmed by the lower appellate Court is not liable to be interfered. 17. After the appeal was dismissed, the receiver has already taken possession and custody of the assets of the firm. Learned counsel for the petitioners submitted that the Advocate should not have been appointed as Receiver since they have no acquittance or expertise in dealing with such business. I have already said since the relationship of the parties are very much strained, it may not be proper on the part of the court to appoint one of the partners as Receiver. A third party had to be appointed. Advocate Receiver has already taken possession. Learned counsel for the petitioners also placed before me a panel of names and requested that any one of them may be appointed as Receiver. Learned counsel for the respondent/plaintiff seriously opposed the appointment of any of those persons. 18. I also feel that the appointment of an Advocate as Receiver will not be the best interest of the parties. The Advocate is not aware and he has no knowledge how to do the business. Learned counsel for the respondent/plaintiff seriously opposed the appointment of any of those persons. 18. I also feel that the appointment of an Advocate as Receiver will not be the best interest of the parties. The Advocate is not aware and he has no knowledge how to do the business. At least till the winding up process is completed, the firm has to continue. Under these circumstances, I feel that is only a proper some other person be appointed in the place of Advocate Receiver. I direct the lower Court to appoint a suitable person after hearing both sides. Such order has to be passed within a period of one month from the date of receipt of this order. Till another suitable person assumes management of the firm and takes custody of the assets, the Advocate Receiver shall continue in management. 19. When both have already agreed for dissolution, I feel that it is only proper on the part of the lower court to take expeditious steps to dispose of the suit and consider whether as preliminary decree is passed without any further delay. I direct the lower court to do so within a period of three months from the date of receipt of this order. If any other parties have to file written statement, the same also have to be filed within one month from today. 20. The C. R. Ps. are dismissed with the above directions. Consequently, C. M. P. Nos. 9036 and 9037 of 1999 are closed. Order accordingly.