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Madras High Court · body

2000 DIGILAW 238 (MAD)

V. v. Durairaj VS Sakthi & Company and another

2000-02-29

S.S.SUBRAMANI

body2000
Judgment :- Judgment-debtor in O.S.No.135 of 1982 on the file of Sub Court, Vellore is the revision petitioner here in. 2. M/s.Sakthi & Company and M/s.Sivasakthi & Company obtained a decree for sale of mortgaged properties. Preliminary decree was passed on 30.4.1985 and final decree was passed on 17. 1985. In execution when the properties were brought for sale, an application was filed by petitioner under Sec.151 of Code of Civil Procedure contending that the decree is not executable. It was contended in that application that Chandrasekara Mudaliar, who represented both these firms was only one of the partners and since he died long before execution petition was filed, execution cannot be proceeded. It is also contended that M/s.Sakthi & Company and M/s.Sivasakthi & Company are only firms having two partners viz., Chandrashekara Mudaliar and his wife and automatically on the death of one of the partners, entire firm stands dissolved since the degree is in favour of the firm and a firm is not in existence, property cannot be brought for sale and execution petition is also not maintainable. 3. Against the said contention, counter affidavit was filed by first respondent alleging that two firms are really Hindu Joint Family Firms and Chandrasekara Mudaliar was representing family as Karta. First respondent who has now been impleaded is the Karta of the family on his death being elder male member of the family. It is also contended that first respondent is already on record representing second respondent as its partner. It is also alleged that the present application is only to delay the execution proceedings and they prayed for dismissal of the application. 4. Lower court after hearing both sides held that the application filed by petitioner is not maintainable. It is joint family firm and on the death of a member, firm is not dissolved and consequently respondents herein are entitled to execute decree. The same is challenged in this revision petition. 5. Learned counsel for petitioner put forward his argument as was urged before the lower court, i.e., both respondents are Firms in which they are only two partners, Chandrasekara Mudaliar and his wife and on the death of Chandrasekhar Mudaliar, the firm gets automatically dissolved. Since the firms are dissolved, decree in favour of the Firms cannot be executed. 5. Learned counsel for petitioner put forward his argument as was urged before the lower court, i.e., both respondents are Firms in which they are only two partners, Chandrasekara Mudaliar and his wife and on the death of Chandrasekhar Mudaliar, the firm gets automatically dissolved. Since the firms are dissolved, decree in favour of the Firms cannot be executed. Reliance was also placed on the decision reported in Commissioner of Income Tax v. G.S.Mills Commissioner of Income Tax v. G.S.Mills Commissioner of Income Tax v. G.S.Mills , A.I.R. 1966 S.C. 24 for the said purpose. In para. 7 of the judgment, it is held thus: “….Partnership, under Sec.4 of the Partnership Act, is the relation between persons who have agreed to share the profits of a business carried on by all or any of them acting for all. Sec.5 of the said Act says that the relation of partnership arises from contract and not from status. The fundamental principle of partnership, therefore, is that the relation of partnership arises out of contract and (not) out of status. To accept the argument of the learned counsel is to negative the basic principle of law of partnership. Sec.42 can be interpreted without doing violence either to the language used or to the said basic principle. Sec.42(c) of the Partnership Act can appropriately be applied to a partnership where there are more than two partners. If one of them dies, the firm is dissolved; but if there is a contract to the contrary, the surviving partners will continue the firm. On the other hand, if one of the two partners offer firm dies, the firm automatically comes to an end and, thereafter there is no partnership for a third party to be introduced therein and, therefore, there is no scope for applying Cl.(c) of Sec.42 to such a situation. It may be that pursuant to the wishes or the directions of the deceased partner the surviving partner may enter into a new partnership with the heir of the deceased partner, but that would constitute a new partnership. In this light Sec.31 of the Partnership Act falls in line with Sec.42 thereof. It may be that pursuant to the wishes or the directions of the deceased partner the surviving partner may enter into a new partnership with the heir of the deceased partner, but that would constitute a new partnership. In this light Sec.31 of the Partnership Act falls in line with Sec.42 thereof. That section only recognises the validity of a contract between the partners to introduce a third party without the consent of all the existing partners: it presupposes the subsistence of a partnership: it does not apply to a partnership of two partners which is dissolved by the death of one of them, for in that event there is no partnership at all for any new partner to be inducted into it without the consent of others.” 6. The said legal position is not disputed by respondent also. According to learned counsel for respondent, the question here is entirely different. According to learned counsel, it is not partnership coming under Partnership Act but purely governed by the principles of Hindu Law. Counsel submitted that it is trading family and death of one member will not put an end to the family firm. 7. Mulla onHindu Law, Seventeenth Edition (1998) at page 350 has said thus: “In Hindu Law a business is a distinct heritable asset. Where a Hindu dies leaving a business, it descends like other heritable property to his heirs. If he dies leaving male issue, it descends to them. In the hands of the male issue, it becomes joint family firm. The joint ownership so created between the male issue is not an ordinary partnership arising out of a contract, but a family firm created by the operation of law. Therefore, the rights and liabilities of the coparceners constituting the family firm or not to be determined by exclusive reference to the provisions of the Indian Partnership Act, 1932, but must be considered also with regard to the general rules of Hindu Law which regulate the transactions of joint families. A Hindu joint family business does not cease to be so is in addition to the heirs of the deceased owner, it is also owned by his daughter married to a gharjamai and by other members and relations who are de facto members of the family, provided the proceeds of such business are utilised for the legitimate expenses of the family. Points of distinction between a Partnership and the joint Hindu family firm: (i) In a joint family business, no member of the family can say that he in the owner of one half, one-third or one fourth. The essence of joint Hindu family property is unity of ownership and community of interest, and the shares of the members are not defined. (ia) Dissolution by death: A joint family firm is not dissolved by the death of a coparcener. An ordinary partnership is dissolved by the death of a partner.” 8. In one of the earlier decision of Calcutta High Court Baij Nath v. Ram Gopal , A.I.R. 1939 Cal. 92 this question was considered which reads thus, “…In considering this matter in appeal it is perhaps desirable to remind ourselves of the definition of partnership as now contained in the Partnership Act of 1932, which by Sec.4 declares that partnership is the relation between persons who have agreed to share the profit of a business carried on by all or any of them acting for all. Sec.5 says that the relation of partnership arises from contract and not from status, and in particular the members of a Hindu undivided family carrying on a family business assets are not partners in such …. business. It is however pointed out at p.354 of Mr.Golap Chandra Sarkar Shastris well-known treatise on Hindu Law that joint Hindu family trade is a species of ancestral joint property in which every member of a Mitakshara joint family acquires by birth an interest in the same way as in other kinds of property. They become not only coparceners but also co-partners of the trading firm. A joint family trading partnership appears to differ from ordinary partnership in two respects, namely (i) it is not dissolved by the death of any member and (ii) a member of the family becomes a co-partner by operation of law.” [Italics supplied] 9. Sec.5 of the Indian Partnership Act also gives the clue that the provisions of Partnership Act have no application to Hindu undivided family business. The Act says that for creating partnership under the Act, it arises out of contract and not from the status. 10. S.D.Singh and J.P.Gupta on Law or is Partnership in India (4th Edn. Sec.5 of the Indian Partnership Act also gives the clue that the provisions of Partnership Act have no application to Hindu undivided family business. The Act says that for creating partnership under the Act, it arises out of contract and not from the status. 10. S.D.Singh and J.P.Gupta on Law or is Partnership in India (4th Edn. 1992) commenting on Sec.5 have said thus, “The term” Joint Hindu family“- What it meanse - A joint Hindu family is the creation of the Hindu Law and is not based on any contract. Every member of the joint Hindu family holds a status in family by but according to Hindu Law and not by any contract between the parties. They members of the joint Hindu family or not called partners in the joint Hindu family firm. The firm which consists of the male issues becomes a joint family firm. The joint ownership so created between the male issues is not an ordinary partnership arising out of a contract, but a family partnership, created by the operation of law. Therefore, the rights and liabilities of the coparceners constituting the family firm are not to be determined by exclusive reference to the provisions of the Indian Partnership Act, 1932, but must be considered also with regard to the general rules of Hindu Law which regulate the transactions of joint families. A joint Hindu family business does not cease to be so if in addition to the heirs of the deceased owner, it is also owned by his daughter married to a Gharjamai and by other members and relations who are de facto members of the family, provided the proceeds of such business are utilised for the legitimate expenses of the family. Following further cases may be noted in this connection: Partnership arising out of statute of parties as such joint Hindu family business is taken out of the provisions of the Act. A divided member or some of the divided members of erstwhile joint family can certainly enter into partnership with third parties under some arrangement among members of divided family. Their shares in partnership depend upon terms of partnership and the share of members of divided family in the interest of their representatives in partnership depend upon terms of partnership deed. Difference does not affect the validity of partnership. Their shares in partnership depend upon terms of partnership and the share of members of divided family in the interest of their representatives in partnership depend upon terms of partnership deed. Difference does not affect the validity of partnership. A joint Hindu family trading partnership differs from ordinary partnership in two respects, namely, (i) it is not dissolved by the death of any member; and (ii) a member of the family becomes a co-partner by operation of law.” [Italics supplied] 11. On the basis of above legal position, learned counsel for respondent argued that the contention now raised by petitioner has no merit. 12. Lower court has entered a finding that respondents are family concerns and not creation of partnership under Indian Partnership Act. That finding is not seriously challenged by learned counsel for petitioner. If respondents are family concerns or a trading family, merely because one of the members died, it does not follow that the firms have dissolved. Chandrasekara Mudaliar is the Kartha or Manager of the family and only in that capacity, he instituted the suit. Being Kartha/manager of the family, he became representative of the trading business also. On his death, the elder son became Kartha of the family and representing the trading family. The argument that the firms stand dissolved and consequently execution petition cannot be proceeded with and the decree is not executable is an argument without merit. 13. In the result, the revision petition is dismissed with costs.