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2003 DIGILAW 120 (KER)

N. Rajan Nair v. M. T. Balakrishnan Nair

2003-02-13

R.BHASKARAN

body2003
Judgment :- This second appeal is filed by the plaintiff in a suit for settlement of accounts and realization of share of profits of a partnership firm. The plaintiff and the 1st defendant were partners of a registered firm, which was dissolved on 3-1-1984. The 2nd defendant is the brother-in-law of the plaintiff. The case of the plaintiff is that he was away on account of his employment and the 1st defendant was conducting the business on behalf of the firm and that he amassed wealth by using funds of the firm and purchasing property in the name of his wife, the 2nd defendant. The plaint schedule shows 16 items of properties out of which 14 items are immovable properties which according to the plaintiff the defendants purchased out of the funds from the partnership firm. Defendants 1 and 2 filed separate written statements. Both of them contended that the suit is barred by limitation. The allegation that the properties were purchased by making use of the partnership fund was denied. It was contended that the 1st defendant had other business also. 2. The trial court considered the question of limitation as a preliminary issue and found that the suit is barred by limitation and dismissed the suit on that short ground. The appellate court confirmed the judgment and decree of the trial court. 3. In this second appeal, it is contended that the trial court went wrong in considering the question of limitation as a preliminary issue. It was contended that only after the trial of the case it could be decided whether the suit is barred by limitation or not. The further contention was that the defendants are on the position of trustees and the suit cannot be dismissed on the ground of limitation in view of S. 10 of the limitation act. 4. If on the basis of the allegations in the plaint, the suit is found to be barred by limitation, there is no necessity to look into the written statement or to receive evidence and spent time for the trial of the suit. It is so held by the Supreme Court in Saleem Bhai v. State of Maharastra (2003) 1SCC 557). In that case the trial court had directed the defendant to file a written statement when the defendant filed an application under Order 7 Rule11. It is so held by the Supreme Court in Saleem Bhai v. State of Maharastra (2003) 1SCC 557). In that case the trial court had directed the defendant to file a written statement when the defendant filed an application under Order 7 Rule11. The Supreme Court found fault with the trial court and held that for the purpose of deciding an application under Rule 11 of Order 7, the averments in the plaint are germane and the pleas taken by the defendant in the written statement would be irrelevant. Therefore, there is nothing wrong in the courts below disposing of the suit on the basis that the suit is barred by limitation without entering any finding on the merits. In this case, the firm was dissolved by notice dated 3-1-1984 and the suit was filed on 2-11-1987. Therefore, it was filed after the period of 3years as provided under Article 5 of the Limitation Act. Therefore, by a mere reading of the Article, it can be seen that the suit is barred by limitation. 5. The learned counsel for the appellant put forward three contentions is support of the appeal. The first is that the 1st defendant is in the position of a trustee, being the partner of the firm and by virtue of s.10 of the Limitation Act, there is no limitation applicable for filing the suit. I do not think that it is possible to accept the above contention since Section 10 specifically states that no suit against a person in whom property has become vested in trust for any specific purpose shall be barred by any length of time because the 1st defendant is only a partner of the firm. The appellant sought assistance from section 88 of the Trusts Act which says that where a trustee, executor, partner, agent, director of a company who is bound in a fiduciary character to protect the interests of another person by availing himself of his character gains for himself any pecuniary advantage he must hold it for the benefit of such other person the advantage so gained. Illustration (d) specifically says about a partner buying land in his own name with funds belonging to the partnership, in which case the partner holds the land for the benefit of the partnership. Illustration (d) specifically says about a partner buying land in his own name with funds belonging to the partnership, in which case the partner holds the land for the benefit of the partnership. Section 10 of the Limitation Act came up for interpretation before this court in Annamma V. Thresiamma (AIR 1972 Kerala 170) and it was held that section 10 applies in the case of a suit only against a person to whom the property is vested in trust for any specific purpose. It was also held that implied trusts or obligations in the nature of trusts are not within the scope of Section 10 of the Indian Trusts Act. If Section 10 is to be interpreted in such a way as the learned counsel for the appellant wanted, then Article 5 of the Limitation Act will become otiose and such an interpretation has to be avoided as far as possible. The Supreme Court in Prem Ballabh v. Mathura Datt (AIR 1967 SC 1342) had occasion to consider the question whether a partner was bound in a fiduciary capacity to account for the assets of the partnership in his hands. Referring to Halsbury's Laws of England and the decision in Piddocke V. Burt (1894) 1 Ch. 343) and other decisions it was held that a partner must observe the utmost good faith in his dealings with the other partners. He is bound to render accounts of the partnership assets in his hands. But in the absence of special circumstances he cannot be regarded as a kind of trustee for the other partners or liable to render accounts to them in a fiduciary capacity. The question whish arose before the Supreme court was whether in the execution of a final decree for dissolution of a partnership firm and accounting the managing partner could be arrested for realization of the amounts due under the decree. It was found that in the absence of any fraud or clandestine dealing alleged or proved, it is not possible to say that the decree was for a sum for which he was bound to account in a fiduciary capacity. 6. The second contention raised by the learned counself for the appellant is that by virtue of Section 17 of the Limitation Act, the period of limitation shall not begin to run until the plaintiff discovers the fraud or the mistake. 6. The second contention raised by the learned counself for the appellant is that by virtue of Section 17 of the Limitation Act, the period of limitation shall not begin to run until the plaintiff discovers the fraud or the mistake. There is no allegation of fraud in the plaint which would attract section 17 of the Limitation Act as it says only in cases where fraud has been committed by the defendant and it was not known to the plaintiff and the plaintiff must state that the fraud was discovered only subsequently. Since there is no allegation in the plaint, section 17 of the Limitation Act will not come to the help of the plaintiff. 7. The third contention raised by the learned counsel for the appellant is that since some of the properties are in the name of the 2nd defendant and relief is sought against the 2nd defendant also, this suit is not barred by limitation. In support of the above contention, the learned counsel relied on the decision of the Allahabad High Court in Ram Kumar v. Kishan Lal Chhotey Lal (1971 Allahabad Law Journal 108). In that case, the High court found that the plaintiff-partner could not have filed the suit for rendition of accounts against the other partner since the accounting naturally depended on material which was in the hands of a third party and until the third party settled accounts and revealed the position of profits and loss, any accounting inter se between the partners was not possible. Because of that reasoning, the Allahabad High Court held that it is the residuary article that will apply and not Article 106 of the Limitation Act, 1908, that will apply. After the commencement of the new Limitation Act there is no difference in the period of limitation between Article 5 and Article 113 as both the provisions fix the period as three years. Therefore, the mere fact that 2nd defendant was impleaded as a party to the suit and she was not a partner will not by itself extend the period of limitation. In view of the above discussion, I do not think that there is any infirmity ion the reasoning of the courts below and the suit was rightly dismissed on the preliminary issue of limitation. The second appeal is therefore without any merit and it is dismissed. In view of the above discussion, I do not think that there is any infirmity ion the reasoning of the courts below and the suit was rightly dismissed on the preliminary issue of limitation. The second appeal is therefore without any merit and it is dismissed. Taking into account the relationship of the parties they will suffer the costs in the second appeal.