Jesu Rasiah and another v. Mercolin Babu alias Mercolin Mohan Babu and others
2000-04-12
S.S.SUBRAMANI
body2000
DigiLaw.ai
Judgment : First defendant in O.S.No.111 of 1999 on the file of Principal Sub Court, Nagercoil is the revision petitioner herein. 2. Suit filed by plaintiff was one for declaration that the firm M/s.M.Sebastin & Co. be declared to have been dissolved with effect from 15. 1999, the date of filing of the suit or with effect from the date on which the Honourable Court deem fit and proper and to declare the shares of partners and also for rendition of accounts. 3. Thematerial averments in the plaint could be summarised thus: Defendants and one Arulappan were partners of M/s.Sebastin & Co. when Arulappan retired from the firm, plaintiff was inducted as partner and the partnership was reconstituted. On 25. 1992 a fresh deed of partnership was executed. Plaintiff is the fifth party to the deed. As per deed of partnership, defendants 1 and 3 are entitled to 2/7th share each and 1/7th share each go to defendants 2 and 4 and plaintiff. As per the agreement plaintiff and first defendant are working partners and they are also eligible for remuneration for the services rendered by them. Plaintiff also contributed a sum of Rs.60,000 and he is also entitled to remuneration as provided in the deed and as prescribed under Income Tax Act, 1961. Defendants 3 and 4 are mother and elder brother of plaintiff respectively. First defendant is paternal uncle of plaintiff and second defendant is the wife of first defendant. 4. The nature of business carried on by the firm is purchase and sale of timber and its species and sawing timbers and present worth of machineries and the superstructures is more than Rs.2,00,000. It is alleged in the plaint that from 1. 1989, fires defendant and his sons prevented plaintiff from entering into the premises and in spite of best efforts plaintiff was not permitted to peruse the accounts of the firm. Plaintiff was therefore compelled to file a suit against first defendant for permanent prohibitory injunction restraining him from preventing plaintiff from being physically present in the premises of the firm or from functioning as working partner of the firm. Even after order of injunction is passed, defendant did not permit plaintiff to peruse the accounts.
Plaintiff was therefore compelled to file a suit against first defendant for permanent prohibitory injunction restraining him from preventing plaintiff from being physically present in the premises of the firm or from functioning as working partner of the firm. Even after order of injunction is passed, defendant did not permit plaintiff to peruse the accounts. Court order permitting plaintiff to peruse the accounts was also informed to first defendant but in spite of it, first defendant did not come forward to permit plaintiff to verify the accounts. Defendants 3 and 4 were also prevented from perusing the accounts of the firm. According to plaintiff, first defendant is not maintaining proper accounts and attempting to tamper the accounts so as to defraud other partners. As per the the terms of partnership deed, opinion of majority partners will prevail. When first defendant began to act against the interest of other partners and wilfully committed be each of agreement, plaintiff and defendants 3 and 4 issued notice to first defendant for dissolution of partnership and for rendition of accounts. In spite of the same, first defendant did not come forward to co-operate with other partners to dissolve the firm and to render accounts, which necessitated filing of the suit. It is alleged that partnership is at will and as per the terms of the partnership deed, it can be dissolved when the majority of partners intend to get it dissolved. plaintiff and defendants 3 and 4 are having majority and they have already expressed their intention to get the partnership dissolved. 5. Along with the suit, plaintiff filed two applications in I.A.No.159 of 1999 and I.A.No.160 of 1999, one for injunction to restrain first defendant from acting against the terms of partnership deed and the other for appointment of receiver. 6. Trial court as per order dated 30.7.1999 dismissed the petitions. Trial court held when plaintiff had already filed a suit and obtained interim order there is no necessity for filing another suit and get another order of injunction. Trial court further held that plaintiff has not disclosed pendency of other proceeding and he has not come to court with clean hands. With regard to application for appointment of receiver, trial court was of the view that there is nothing to show that plaintiff is a partner and even partnership deed has not been produced.
Trial court further held that plaintiff has not disclosed pendency of other proceeding and he has not come to court with clean hands. With regard to application for appointment of receiver, trial court was of the view that there is nothing to show that plaintiff is a partner and even partnership deed has not been produced. Trial court further held that since alleged partnership deed has not been registered, consequence of Sec.69 will have to follow and therefore even maintainability of the suit was doubted. The application for appointment of receiver was dismissed. 7. Against the said order, plaintiff preferred C.M.A.Nos.39 of 1999 and 40 of 1999 on the file of District Court, Nagercoil. Lower appellate court reconsidered the entire evidence. Additional evidence was also let in by both parties. It held that plaintiff in entitled to get injunction and also entitled to have the receiver appointed. Appeal are allowed. It is against the said judgment, first defendant has preferred these revision petitions. 8. I heard the learned counsel on both sides. 9. It is admitted that partnership deed dated 25. 1992 is not registered under Partnership Act. But, under Sec.69(3) proviso, the non-registration of firm is not a bar for dissolution of firm. Clause 13 of the partition deed days, ‘partnership shall be terminated when the majority of partners decide to wind up partnership. Out of five partners, plaintiff, defendants 3 and 4 have informed first defendant about their intention to dissolve the firm and also requested to render accounts. This is a partnership at will, which is not disputed by counsel for appellant. Mode of dissolution of partnership at will is provided under Sec.43 of the Partnership Act. It says, though the partnership is at will, the firm may be dissolved by any partner giving notice in writing to all the other partners of his intention to dissolve the firm. Sub-sec.(2) of Sec.43 says that the firm is dissolved as from the date mentioned in the notice as the date of dissolution or, if no date is so mentioned, as from the date of the communication of the notice. Notice has been served on 3. 1999 long before institution of the suit and the same has been received by defendant.
Sub-sec.(2) of Sec.43 says that the firm is dissolved as from the date mentioned in the notice as the date of dissolution or, if no date is so mentioned, as from the date of the communication of the notice. Notice has been served on 3. 1999 long before institution of the suit and the same has been received by defendant. In the counter-affidavit filed by defendant to both these petitions, the main allegation is that 4th defendant is a person of unsound mind for last eight years and 4th defendant might not have signed the document. It is further alleged that deed of partnership has been registered and even deed is intended only to pay some money to plaintiff as remuneration for working partner and plaintiff is not entitled to any other relief. 10. As per deed of partnership, plaintiff and first defendant are to jointly look into the accounts and over all management of the business. But for the purpose of convenience, first defendant was given power of management, supervision and control and to operate bank accounts. Even in the counter it is said that first defendant has been looking ever the firm properly and be believed the words of plaintiff. According to him, plaintiff has taken huge amounts from partnership firm but he did not make any demand since he was under the belief that plaintiff and defendants 3 and 4 have retired from the partnership firm. 11. The question to be considered is whether any ground has been made out for appointment of receiver in this case. 12. KERR on the Law and Practice as to RECEIVERS (sixteenth Edition) has considered the question of appointment of receiver in partnership cases. At page 59 and 60 of the Book, learned author has said thus: “The readiness of the court to appoint of 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.
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.” [Italics supplied] Again at page 63 of the Book, learned author says when a party is excluded from management that will be a good case for appointment of receiver. Relevant portion reads thus: “There is a case for a receiver, even although there be no misconduct endangering the partnership assets, if one partner excludes another partner from the management of the partnership affairs. This doctrine is acted on where the defendant contends that the plaintiff is not a partner, or that he has no interest in the partnership assets, or where the partnership is disputed by the defendant on the ground of illegality as, for instance, where its object is contrary to public policy.” 13. Mulla on Code of Civil Procedure abridged 13th edition, 1999, learned author at page 1422 and 1423 has said thus: “In considering the question of the appointment of a receiver in partnership suits, a distinction has to be drawn between cases in which the contest is between partners, and cases in which the contest is between partners on the one hand and non-partners on the other. In the first class of cases, that is, where one partners seeks to have a receiver appointed against his co-partners, it is necessary to distinguish cases in which the partnership has already been dissolved from those in which the partnership is still subsisting. If the partnership is already dissolved, the court usually appoints a receiver almost as a matter of course. The jurisdiction of the court to appoint a receiver is not ousted by a arbitration clause providing for a reference to arbitration of all matters in dispute between the parties. But if the partnership is still subsisting, no receiver will be appointed unless some especial grounds for the appointment can be shown.
The jurisdiction of the court to appoint a receiver is not ousted by a arbitration clause providing for a reference to arbitration of all matters in dispute between the parties. But if the partnership is still subsisting, no receiver will be appointed unless some especial grounds for the appointment can be shown. There must be fraud or gross misconduct of some kind, or wilful denial of the complaining partners rights or persistence in conduct, under cover of right, endangering the assets. In the second class of cases, that is, where the contest is between partners on the one hand and non-partners on the other, legal representatives of a later partner, a receiver will not e.g., granted against a member of the firm at the instance of the legal representatives unless some special grounds for the interference of the court can be established. But it is a matter of course to appoint a receiver where such appointment is sought by a partner against the legal representatives of his late co-partners, or where all the partners are dead and an action is pending between their representatives.” 14. A.N.Saha on the Code of Civil Procedure, 5th Edition (2nd volume) commenting on Order 40, Rule 1 at page 1851 learned author has said thus: “If the partnership is dissolved or sought to be dissolved by a suit. Receiver can be appointed as a matter of course, if the relationship between the partners are strained and the Receiver is appointed for taking the assets of the firm and ultimately for distribution of the same to the partners. When one partner has been excluded from management, the profits and funds are misappropriated, Receiver is to be appointed. …” Learned author has also taken into consideration the decision reported in Tilak Chand v. Darshan Lal , A.I.R. 1985 J. & K. 50 wherein guidelines for appointment of receiver in respect of dissolved partnership firm is given. In para.60 of the judgment, the Division Bench of Jammu and Kashmir High Court held thus: “That would bring us to the considerations, which are relevant for appointment of a receiver in a suit for dissolved firm.
In para.60 of the judgment, the Division Bench of Jammu and Kashmir High Court held thus: “That would bring us to the considerations, which are relevant for appointment of a receiver in a suit for dissolved firm. On consideration of various authorities discussed hereinabove, the principles on which court would generally appoint a receiver in respect of dissolved partnership business with a view to winding up of the business are laid down as under: .(i) A partner seeking appointment of a Receiver must have a strong case in his favour and claim asserted by him must be free from doubt. .(ii) That a partners seeking relief of appointment of a receiver must further show that he has been excluded from partnership property in which he has an equitable interest and the partnership property as it stood on the day of dissolution had not been distributed in accordance with the provisions of Secs.46 and 48 of the Partnership Act. (iii) A partners seek relief must further show that partnership property including assets, goodwill, in which he has a share are retained by the partners against whom the relief is sought, in violation of the provisions of the Partnership Act. .(iv) There must be prima facie proof of misconduct against a partner who is said to be in control of the partnership property to the detriment of a partner who seeks the relief. Misconduct will be inferred if one partner carries on trade on his own account with the partnership property and assets of the dissolved firm. Inference of misconduct will be readily drawn if the partner who has control over the assets and partnership property of dissolved partnership has employed the share of the outgoing partner to his own use without his permission. .(v) Property, assets and goodwill being in possession of one partner to the exclusion of others is not ground for refusing to appoint a receiver. It will be a different matter if it is shown that a partner seeking relief has expressly abandoned his share in the dissolved firm or has rendered himself disentitled by being guilty of laches or inordinate delay not explained by him.
It will be a different matter if it is shown that a partner seeking relief has expressly abandoned his share in the dissolved firm or has rendered himself disentitled by being guilty of laches or inordinate delay not explained by him. .(vi) Principles which govern the appointment of a Receiver as regards dissolved partnership are not the same which are taken into consideration in this regard in relation to a running partnership business, though element of mismanagement of partnership property and its income is present in both cases. (vii) The appointment of a Receiver in respect of a dissolved partnership is in the discretion of the court and by 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 them to the 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.” [Italics supplied] .15. On the above legal principles, let us consider whether ground has been made out for appointment of receiver. I have already extracted relevant portion of the counter. Plaintiff is admittedly a partner in a firm which is not registered. It is also in evidence that even when Arulappan was partner, firm was not registered and it was in the place of Arulappan, plaintiff was substituted. Bank Account is also opened in the name of firm is clear from the documents produced in this case. Even though revision petitioner contended that plaintiff has no right over the same, once it is admitted that there was partnership between petitioner and plaintiff, plaintiff is entitled to have the firm dissolved as per the provisions of the deed. The very fact that plaintiff has been excluded form managing the affairs itself is a ground to appoint a receiver. In this connection para 12 of the counter statement says. .…1st defendant has not questioned plaintiff legally for the money taken by the plaintiff since 1st defendant believes that all the three have retired from partnership firm.] 16. In appeal before lower appellate court, additional evidence was let in and one of the document produced was partnership deed dated 1. 1999 marked as Ex.B-5 in the case. That is a reconstituted firm between defendants 1 and 2 and their son Knox Xavier.
In appeal before lower appellate court, additional evidence was let in and one of the document produced was partnership deed dated 1. 1999 marked as Ex.B-5 in the case. That is a reconstituted firm between defendants 1 and 2 and their son Knox Xavier. In that deed, there is a statement that Chellammal. Rhymon Johnson and Mersolin Babu (defendants 3 and 4 and plaintiff) have retired from the said firm with effect from 312. 1998 at their own will, and consequently they are reconstituting the firm. It is clear from this date itself first defendant has excluded plaintiff and defendants 3 and 4 from managing the affairs of business on the assumption that they have already retired from the firm on 312. 1998. This document also shows that plaintiff and defendants 3 and 4 are active partners and it is not on the basis of provisions of Income Tax alone plaintiff was made a partner of the firm. 17. By his own admission evidenced by Ex.B-5 and also from the counter statement it is clear that plaintiff and defendants 3 and 4 are excluded from the firm. As per partnership deed between plaintiff and first defendant first defendant is in exclusive control of bank accounts and money dealings. Provision further says that plaintiff is entitled to jointly manage with first defendant. In view of exclusion of plaintiff from management, receiver has to be appointed as a matter of course. 18. Lower appellate court has exercised discretion property. Strained relationship between partners, exclusion of majority of partners from the firm, execution of Ex.B-5 by reconstituting firm even before earlier firm is dissolved, retaining accounts and not permitting plaintiff and defendants 3 and 4 even to persue the accounts, are all circumstances to hold that it is just and convenient to appoint receiver. Lower appellate court rightly appointed receiver and no ground is made out for interference. 19. Grant of injunction was also only after accepting the reasons given by plaintiff. No interference is called for in granting of injunction also. .20. After the order of lower appellate court, an advocate receiver was appointed. He visited the property and found the premises locked. He also has filed his report which is also on among the typed set of papers, which shows that first defendants son has even threatened the receiver not to resort to court order.
.20. After the order of lower appellate court, an advocate receiver was appointed. He visited the property and found the premises locked. He also has filed his report which is also on among the typed set of papers, which shows that first defendants son has even threatened the receiver not to resort to court order. Receiver was also warned of dire consequences by first defendants son. Receiver wanted direction of the court to broke open the locks of suit property with the help of Inspector of Police. He said while the application was pending consideration by lower court, this revision was filed and interim order was also obtained. 21. Taking into consideration the conduct of first defendant and his son. I feel, that necessary protective orders also will have to be given to receiver. Receiver being Officer of the Court, is entitled to be protected by court. If there is any obstruction from any source, in his assuming management, necessary police protection shall be provided by lower court and see that obstruction is removed. Lower court is directed to see that first defendant and plaintiff manage the firm under the supervision of advocate receiver. In case first defendant or his son makes any further interference in the management or supervision by receiver, on complaint or application filed by receiver, before lower court, will be entitled to exclude first defendant from management and receiver shall assume management along with plaintiff. 22. In the result, both the revision petitions are dismissed with costs. I direct the lower court to implement this order forthwith. Connected C.M.Ps. are dismissed.