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2010 DIGILAW 1047 (BOM)

Resources International v. Lithoferro

2010-07-26

N.A.BRITTO

body2010
Judgment :- Rule. By consent, heard forthwith. 2. This Writ Petition is filed by the defendant nos. 1 to 3 against Order dated 21.7.2008 of the learned Civil Judge, Senior Division in Special Civil Suit No. 96/2003/C by which learned Civil Judge, has allowed transposition of defendant no.5 (g), 5(h) and 6 as plaintiffs in place of Court receiver appointed to manage the affairs of the firm M/s Lithoferro. Parties hereto shall be referred to in the names as they appear in the cause title. 3. Some facts are required to be stated to dispose of this Writ Petition. M/s Lithoferro was a partnership firm reconstituted by deed dated 23.1.1989 between Vinayak D. Sawkar and Meghashyam K. Nevgi. The said partnership was at will, profits and loss were to be shared equally between two partners; it also provided that retirement, death or insolvency of any one of the partners, would not dissolve the firm but business would be carried out by surviving partner and option was also given to the surviving partner whether or not to admit the successor to the share of the deceased partner. 4. Differences having arisen between both the partners, Meghashyam K. Nevgi filed civil suit for declaration, permanent injunction, dissolution and accounts against the said Vinayak D. Sawkar. Preliminary decree was passed and a Court receiver was appointed in the said civil suit being Special Civil Suit no. 203/1991. The dispute also came before this Court in Civil revision application no.65/1993 which was dismissed by order dated 15.6.1995. The said Meghashyam K. Nevgi as well as said Vinayak D. Sawkar expired and their legal heirs were brought on record. It is undisputed that all the legal heirs of said two partners and parties to the said civil suit were brought on record and eventually they arrived at a compromise and the civil suit ended in a compromise decree dated 23.2.2006. 5. As per the consent decree, the parties agreed that they had settled their differences in respect of said firm M/s Lithoferro; they also agreed that there was no room to have the partnership dissolved; they agreed that from the side of the original plaintiff Mr. Meghashyam K. Nevgi, plaintiff no. 3 Vaishali M. Nevgi and plaintiff no. 7 Mr. Rajiv M. Nevgi shall continue to be partners of the said firm and from the side of original defendant Mr. Meghashyam K. Nevgi, plaintiff no. 3 Vaishali M. Nevgi and plaintiff no. 7 Mr. Rajiv M. Nevgi shall continue to be partners of the said firm and from the side of original defendant Mr. Vinayak D. Sawkar his son Kaustubh, defendant no.1(ii) would continue to be a partner; they further agreed that the said partnership was continued from 14.2.1992 with the said plaintiff nos. 3, 7 and defendant no.1(ii) as partners and to that extent preliminary decree would be modified; they also agreed that the preliminary decree dated 16.12.2000 to the extent it dissolved the firm M/s Lithoferro would be ineffective and further agreed that original firm which was reconstituted by deed dated 23.1.1989 still subsisted and was not dissolved; they further agreed that the transactions done by the late Shri Vinayak Sawkar from 25.7.1991 and after the death of Meghashyam K. Nevgi and which were listed alongwith the said consent terms, would not be binding on the plaintiffs; they agreed that the suit filed by the Court receiver i.e. Special Civil Suit no. 96/2003/C for the recovery of Rs.47,38,150.79/- (Rupees forty seven lakhs thirty eight thousand one hundred fifty and seventy nine paise only) against the present petitioners, upon the recovery of the amount would be shared half by plaintiff nos. 3 and 7 and half by defendant no. 1(ii) but the suit would be continued by the parties and not by the Court receiver and the said suit namely SCS no.203/1991/B being disposed of, the Court receiver would be discharged. This was specifically stated in clause (f) at page 9 of the consent terms. 6. In accordance with the consent terms, it appears that the said 3 parties namely defendant nos.(5(g), 5(h) and 6 have registered the firm with the Registrar of Firms on 6.8.2007 but w.e.f. 14.2.1992 and there is also no dispute about it. 7. Defendant no. 5(g), 5(h) and 6 therefore filed the application dated 8.6.2006 for substitution of new partners in place of Court receiver and deletion of their names from the cause title at serial no. 5(a) to 5(h) and 6 which application came to be granted by the learned Trial Court by impugned Order dated 21.7.2008 although the same was objected to by the petitioners herein, interalia, stating that the application was not maintainable and was not filed by the competent person. 8. 5(a) to 5(h) and 6 which application came to be granted by the learned Trial Court by impugned Order dated 21.7.2008 although the same was objected to by the petitioners herein, interalia, stating that the application was not maintainable and was not filed by the competent person. 8. Learned CJSD, by the impugned order came to the conclusion that the Court receiver was discharged by the parties by virtue of consent decree in Special Civil Suit no. 203/1999/B in which he was appointed and there is no question of him now representing the firm M/s Lithoferro and since new partnership is formed it is necessary that these persons have got to be added to the cause title of the suit and name of the Court receiver as representing the said firm required to be deleted. 9. Shri Lotlikar, learned senior counsel appearing on behalf of the petitioner concedes that defendant no. 5(g), 5 (h) and 6 could be substituted but further submits that the consent terms/decree in Special Civil Suit no.203/1999/B are against law. He further submitted that the new firm which has been registered from 6.8.2007 cannot step in the shoes of old firm and that the application for substitution was filed even before new firm M/s Lithoferro was registered on 6.8.2007. According to the learned counsel said consent terms are ab-initio void. Learned counsel further submits that only three persons want to continue the business of old firm in terms of clause (f) of the consent decree but the parties by consent, cannot arrest the flow of inheritance. Learned counsel further submits that defendant nos. 1 to 3 would be certainly concerned as to who is recovering money claimed on behalf of the old firm through the receiver. Learned counsel further submits that the parties to the Special Civil Suit no. 203/1999/B could not have relinquished the shares of the original partners and even assuming they could, after the dissolution of the firm, after the death of Meghashyam Nevgi the new firm could not have been revived by consent. Learned counsel further submits that one fails to understand how in case the agreements dated 4.3.1992, 3.3.1992, 1.12.1992 and 1.12.1992 entered into by Vinayak D. Sawkar with the present petitioners were not binding on the plaintiffs as agreed upon by virtue of clause(d), how the suit filed to recover the money due on the said agreement could continue. Learned counsel further submits that one fails to understand how in case the agreements dated 4.3.1992, 3.3.1992, 1.12.1992 and 1.12.1992 entered into by Vinayak D. Sawkar with the present petitioners were not binding on the plaintiffs as agreed upon by virtue of clause(d), how the suit filed to recover the money due on the said agreement could continue. Learned Senior Counsel further submits that the defendants could not seek deletion of other defendants even before they were allowed to be substituted in place of Court receiver as plaintiffs in the civil suit. Learned counsel submits that the defendants had to show devolution of rights in their favour by assignment or by a deed. 10. Learned Senior Counsel has placed reliance on judgment of this Court inter partes dated 5.6.1995 in civil revision application no.65/1993. Reliance is placed on the case of Commissioner of Income Tax Vs. Seth Govindram Sugar Mills, ( AIR 1966 SC 24 ) wherein the Apex Court has observed that section 42(c) of the Partnership Act, 1932 can be appropriately be applied to 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 of a firm dies, the firm automatically comes to an end and, there is the no partnership for a third party to be introduced therein and, there is no scope for applying clause(c) of section 42 to such a situation. 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 it would be a new partnership. In this light section 31 falls in line with section 42. An agreement between the two partners that on death of any of them his legal heir or nominee would take the place of the deceased partner, will not, therefore, have the effect of automatically making such heir or the nominee a partner of the firm. In this light section 31 falls in line with section 42. An agreement between the two partners that on death of any of them his legal heir or nominee would take the place of the deceased partner, will not, therefore, have the effect of automatically making such heir or the nominee a partner of the firm. Reliance is also placed on decision in the case of P. Ananda Rao and another vs. G. Raja Rao and others, ( AIR 1976 AP 256 ) wherein the High Court followed the case of Commissioner of Income Tax (supra) and it was observed that if there are only two partners and one of them dies, there is no partnership for a third party to be introduced. An agreement between the two partners on the death of any one of them that his legal heir or nominee would take the place of the deceased partner, will not have the effect of automatically making such heir or nominee a partner of the firm. It is however open to the surviving partner to enter into a new partnership with the heir of the deceased partner, but that would constitute a partnership. An agreement to this effect can be implied from the circumstances namely that the business of partnership was being carried on by such heir and the other remaining partner. Reliance is also placed on case of Arjan Singh Vs. Punit Ahluwalia and ors, ( AIR 2008 SC 2718 ) wherein it is observed that Appellant not being party to the compromise was not bound by consent decree. 11. On the other hand, Mr. Usgaonkar learned counsel appearing on behalf of the said defendants, has submitted that their application was under Order 1, Rule 10(2) C.P.C., for substitution of the said defendants, as plaintiffs in the civil suit namely three persons who were admitted as partners of the firm M/s Lithoferro. Learned counsel further submits that after the said consent terms, registration of the firm with the said 3 partners has been done retrospectively w.e.f. 14.2.1992 and this is covered by section 69 of Indian Partnership Act. Learned counsel further submits that after the said consent terms, registration of the firm with the said 3 partners has been done retrospectively w.e.f. 14.2.1992 and this is covered by section 69 of Indian Partnership Act. Learned Counsel further submits that the petitioners have no locus to challenge the consent decree passed between the legal heirs of the partners of M/s Lithoferro in the said civil suit and that if advised the petitioners as defendants, in the suit can take proper defences after the defendant nos. 5(g) (h) and 6 are substituted as plaintiffs in the civil suit. 12. I have given thoughtful consideration to the submissions made by the learned counsel. I have already referred to the some of the consent terms filed by the legal heirs of the original partners of M/s Lithoferro namely Meghashyam Nevgi who was plaintiff and Shri Vinayak D. Sawkar who was defendant in Special Civil Suit no. 203/1999/B. As already stated, all legal representatives of the plaintiff and the defendant, the original partners, were brought on record and it is they who have decided that the firm Lithoferro will be run by plaintiff nos. 3 and 7 and from the side of plaintiffs and defendant no.1(ii) from the side of defendant/s retrospectively w.e.f. 14.2.1992 and have also registered the firm with new partners retrospectively. Whether the suit would succeed or not in view of clause (d) of the consent decree is entirely different matter which will be decided at the trial and the defendants are entitled to take appropriate defences in that regards. 13. The suit was filed by the receiver appointed in Special Civil Suit no. 203/1999/B to recover a sum of Rs.47,38,150.79/- (Rupees forty seven lakhs thirty eight thousand one hundred fifty and seventy nine paise only) which were due to the firm by the petitioners on account of agreements entered into by late Vinayak Sawkar from 25.7.1991. That has been taken care of by clause (f) of the consent decree. 14. That the Court receiver would be discharged was specifically agreed by all the parties to the said civil suit and that had the approval of the Court and therefore the contention that the parties could not have discharged the court receiver needs to be rejected. 15. All the parties in the said civil suit also agreed that the present suit namely Special Civil Suit no. 15. All the parties in the said civil suit also agreed that the present suit namely Special Civil Suit no. 96/2003/C will be continued by said three parties namely plaintiffs no. 3 and 7 and defendant no. 1(ii). The legal heirs of the deceased plaintiff and the defendant by virtue of said consent terms also decided that the firm M/s Lithoferro still subsisted and further agreed that preliminary decree was ineffective. Nothing prevented the legal heirs of both the parties entering into such an compromise and obtaining a consent decree in terms thereof. There is no prohibition in law which would come in the way of the legal heirs of the said original two partners of M/s Lithoferro who were plaintiff and defendant in the said civil suit to decide how the rights and liabilities of the partners of the firm should be dealt with. To my mind, the consent decree is not prohibited by any provision of law and the parties were always at liberty to divide the assets and liabilities of their deceased partners in relation to the firm in writing and in terms thereof obtain a consent decree. In my view, the agreement/consent decree is not opposed to any known provision of law nor any provision of law, is brought to my notice which would prohibit such an agreement. The consent decree is not also opposed to the principles of law set out in the decisions cited on behalf of the petitioners, which have been referred herein above. The legal representatives in their wisdom decided by way of consent decree that they would continue the firm as if it subsisted and not dissolved and have registered it with new partners with retrospective effect. I find nothing wrong in this arrangement which is perfectly legal as it is not opposed to any other provision of law including the Partnership Act. To repeat, inheritance can always be divided by a deed in writing. Nothing prevented the legal heirs of the original partners of M/s Lithoferro to agree that the firm M/s Lithoferro at its originally stood was not dissolved but subsisted and to register the same on 6.8.2007 retrospectively. To repeat, inheritance can always be divided by a deed in writing. Nothing prevented the legal heirs of the original partners of M/s Lithoferro to agree that the firm M/s Lithoferro at its originally stood was not dissolved but subsisted and to register the same on 6.8.2007 retrospectively. The agreement arrived at and the consent decree in terms thereof, passed by the Court is not at all opposed to any provision of law and therefore by virtue of said consent decree the defendant no.5 (g), 5(h) and 6 were bound to be substituted as plaintiffs in the suit as presently they are required to continue as partners of the firm M/s Lithoferro. 16. On facts, the decision in Commissioner of Income Tax (supra) has no application to the facts of this case since the legal heirs of partners of the firm M/s Lithoferro have in their wisdom decided to continue the old firm with present partners namely defendant nos. 5(g), 5(h) and 6 as if the old firm was not dissolved but subsisted. The submission that some parties could not be substituted without first deleting them is wholly misconceived once the defendants Nos. 5(g), 5(h) and 6 are substituted as plaintiffs, their names as defendants are bound to be deleted. 17. Considering the facts of the case, therefore, no fault can be found with the impugned Order. There is no substance in this writ petition. Consequently the same is hereby dismissed with costs. Rule discharged.