Research › Search › Judgment

Gujarat High Court · body

2013 DIGILAW 169 (GUJ)

HASMUKHLAL JEKISHANDAS v. AMRUTLAL NANABHAI

2013-03-20

C.L.SONI

body2013
JUDGMENT C. L. SONI, J. This appeal under Sec. 100 of the Code of Civil Procedure is filed by the original defendants against whom the respondents original plaintiffs filed Regular Civil Suit No. 1428 of 1980 for declaration that the partnership firm is dissolved and for rendition of accounts of the partnership firm. The plaintiffs also prayed for permanent injunction restraining the defendants from entering into the premises bearing Ward No. 7, Nondh No. 4259 and also restraining the defendants from carrying on the business in the said premises. The plaintiffs also prayed for appointment of Receiver for taking over all the properties of the partnership. 2. The case of the plaintiffs is that the father of the plaintiff named Nanabhai Nathubhai was tenant of the premises bearing Ward No. 7-Nondh No. 4259 in the city of Surat and was doing the business therein. Since, his financial condition was not sound, he decided to do the business in partnership and the partnership was started in the name of Abhay Traders from 19-4-1977 by executing the partnership-deed on the same day. Nanabhai Nathubhai died on 15-9-1980 and as per Condition No. 14 of the Partnership Deed, plaintiff No.2 being the son of deceased-Nanabhai Nathubhai was taken as partner in place of deceased-Nanabhai Nathubhai. The partnership was a partnership at will. For dissolution of the partnership, requirement of one month notice was provided in the deed. The conduct and behaviour of the defendant since was not liked by the deceased-Nanabhai Nathubhai, he wanted to dissolve the partnership but he could not take any action for the said purpose but after his death, since the defendants were not providing details of accounts to the plaintiffs nor permitting the plaintiffs to inspect the accounts of the partnership, the plaintiffs issued legal notice for dissolution of the partnership. As per the condition of partnership, after the notice was served and even as per Sec. 42 of the Partnership Act, after death of one of the partners, partnership stood dissolved. Defendants however did not render accounts to the plaintiffs and continued with the partnership business. As per the condition of the partnership deed, on dissolution of the partnership, rights of tenancy in the property was given to the plaintiffs, and therefore, the plaintiffs have also prayed for permanent injunction in the suit. Defendants however did not render accounts to the plaintiffs and continued with the partnership business. As per the condition of the partnership deed, on dissolution of the partnership, rights of tenancy in the property was given to the plaintiffs, and therefore, the plaintiffs have also prayed for permanent injunction in the suit. It is further averred that the defendants have got no right to continue with the tenanted premises of Nanabhai Nathubhai and since the defendants have not acted as per the notice and are likely to manipulate with the accounts of partnership, the suit is filed. 3. The defendants resisted the suit and denied any partnership with the deceased-Nanabhai Nathubhai. It is stated that neither the deceased-Nanabhai Nathubhai nor his heirs had any right or interest in the business of their partnership. It is stated that deceased-Nanabhai Nathubhai was not a partner of the partnership firm but since the deceased was tenant of the premises, the partnership deed was made with deceased-Nanabhai Nathubhai so that the deceased could permit use of the premises for the business of the partnership firm. It is further stated that deceased-Nanabhai Nathubhai had not been involved in the business of partnership but the terms of the partnership clearly go to show that deceased-Nanabhai Nathubhai was getting fixed amount for letting the premises for the business of partnership. Deceased-Nanabhai Nathubhai was never the partner of the partnership firm, therefore, the plaintiffs who are heirs of deceased-Nanabhai Nathubhai are not entitled to ask for accounts of the partnership firm and for dissolution of the partnership firm. 4. The learned trial Judge came to the conclusion that deceased Nanabhai Nathubhai was taken as partner in the partnership business and after the death of deceased-Nanabhai Nathubhai, his one of the heirs is also taken as partner in the partnership firm. Learned trial Judge further recorded that as per the terms of the partnership deed, if any partner is to retire, he has to serve one months notice which was served by the plaintiffs to the defendants and still, the partnership firm was not dissolved, and therefore, suit is filed. Learned trial Judge further came to the conclusion that though as per the partnership deed, deceased-Nanabhai Nathubhai was not to invest any fund in the partnership business, still, he first gave Rs. 2,000/-, then, at the second time, he gave Rs. 2,000/- and third time, he gave Rs. Learned trial Judge further came to the conclusion that though as per the partnership deed, deceased-Nanabhai Nathubhai was not to invest any fund in the partnership business, still, he first gave Rs. 2,000/-, then, at the second time, he gave Rs. 2,000/- and third time, he gave Rs. 1,000/-, and thus, in all, he gave Rs. 5,000/- in the partnership business as per the admission of defendant No.1. Learned trial Judge further came to the conclusion that Exh. 62 was not a rent agreement but it was a partnership agreement between the parties, and therefore, it is clearly proved that there was a partnership between the deceased-Nanabhai Nathubhai and the defendants and pursuant to the notice issued by the plaintiffs, the partnership stood dissolved and the defendants are liable to render the accounts. Learned trial Judge thus allowed the suit and declared the partnership firm as dissolved and ordered the defendants to give accounts of the partnership business to the plaintiffs. The learned trial Judge passed permanent injunction restraining the defendants from using the premises for the business of partnership firm. 5. The defendants, therefore, preferred Regular Civil Appeal No. 39 of 1986. The learned appellate Judge recorded finding that the deed Exh. 62 is partnership deed and not a rent note. The learned appellate Judge further recorded that as per the terms of the partnership deed, after deceased-Nanabhai Nathubhai had died, his one of the heirs Jayantilal Nanabhai plaintiff No.2 was taken as partner in the partnership firm. Learned appellate Judge came to the conclusion that the partnership was not a sham and bogus, but it was a genuine partnership. The learned appellate Judge also recorded that the partnership business was subject to assessment by the Income Tax Department and the plaintiffs have contributed to the capital of the firm. The learned appellate Judge therefore came to the conclusion that the learned trial Judge has not committed any error in allowing the suit. On such conclusion, the learned appellate Judge dismissed the appeal by judgment dated 21st March, 1994 and confirmed the judgment and decree passed by the learned trial Judge. Hence, this appeal. 6. This appeal was admitted on 17-5-1994 on the following substantial question of law : "Whether in the facts and circumstances of the case and on proper misinterpretation of Rent Note/Partnership deed at Exh. Hence, this appeal. 6. This appeal was admitted on 17-5-1994 on the following substantial question of law : "Whether in the facts and circumstances of the case and on proper misinterpretation of Rent Note/Partnership deed at Exh. 62 read with Sec. 6 of the Partnership Act, Lower Courts were right in holding that the Partnership was created between the parties and in further ordering dissolution of partnership and granting the relief of settlement of accounts?" 7. I have heard learned Advocates for the parties. Ms. Archana Acharya learned Advocate for the appellants original defendants submitted that the Courts below have, on wrong construction of partnership deed, seriously erred in holding that the deceased-Nanabhai Nathubhai was a partner of the partnership firm. She submitted that the deceased-Nanabhai Nathubhai since was tenant of the premises, he agreed to let his premises used for the partnership business and in turn, the defendants who were the partners of the partnership business agreed to give certain amount to meet user charges of the premises. Learned Advocate Ms. Acharya submitted that the intention of the parties from the terms of the partnership deed clearly reveals that the deceased was never acting as partner of the partnership business. She submitted that the terms of the partnership deed clearly provided that the deceased-Nanabhai Nathubhai was neither required to contribute any fund in the partnership nor was required to bear the loss in the partnership. Terms of the deed further provided that the deceased-Nanabhai Nathubhai was allowed only 00-05 paise from Rupee 1/- from the profit of the partnership business which would indicate that the deceased-Nanabhai Nathubhai was having interest qua premises. It is fortified by further clause in the deed that even if the partnership incurs losses, the deceased-Nanabhai Nathubhai was to take away Rs. 500/- per month and such amount would then be adjusted in the profit in future. The term of the partnership even further provided that as and when the partnership is dissolved, except deceased-Nanabhai Nathubhai, all partners would have share from whatever capital left and from the other amounts on settlement of accounts. It is provided therein that so far as the premises is concerned, those partners shall not claim any right. Ms. The term of the partnership even further provided that as and when the partnership is dissolved, except deceased-Nanabhai Nathubhai, all partners would have share from whatever capital left and from the other amounts on settlement of accounts. It is provided therein that so far as the premises is concerned, those partners shall not claim any right. Ms. Acharya submitted that from all the terms of the deed, the deceased-Nanabhai Nathubhai could not be treated as partner in the partnership, and therefore, the plaintiffs are not entitled to ask for dissolution of the partnership business and rendition of accounts of partnership business. Ms. Acharya submitted that if the plaintiffs are not entitled to ask for the dissolution of the partnership and also for accounts of the partnership business, suit of the plaintiff is not maintainable. She submitted that the Courts below have failed to read and correctly construe the deed Exh. 62 and have materially erred in holding that the deceased-Nanabhai Nathubhai was a partner in the partnership firm. She, thus, urged to allow the appeal on the above substantial question of law. 8. As against the above arguments, learned Advocate Mr. Rutul P. Desai appearing for the respondents submitted that the partnership deed specifically provides for share of the deceased-Nanabhai Nathubhai in the partnership business, and therefore, the Courts below could not be said to have committed any error in reading and construing the deed. Mr. Desai submitted that simply because the premises of the deceased-Nanabhai Nathubhai was used for the partnership business and simply because there was clause for paying Rs. 500/- to deceased-Nanabhai Nathubhai even if the partnership business runs into losses, would be no ground to hold that the deceased-Nanabhai Nathubhai was not partner in the partnership business. Mr. Desai submitted that the Courts below on appreciation of the evidence and on construction of the deed, rightly came to the conclusion that the deceased was a partner in the partnership business and such being finding of fact, this Court may not interfere in the judgment and decree passed by the Courts below while exercising powers under Sec. 100 of the Code of Civil Procedure, 1908. Mr. Mr. Rutul Desai submitted that the term in the partnership deed when provided that on death of any of the partners, his heir would be taken as partner in the firm and after the death of Nanabhai Nathubhai, since his son-plaintiff No.2 was taken as partner, such was strong indication that the deceased was partner of the partnership firm. Mr. Desai submitted that Clause 7 provides for dissolution of the partnership at the instance of any of the partners by issuing one month notice. He submitted that this clause does not provide that the deceased-Nanabhai Nathubhai was not entitled to ask for dissolution of the partnership business. He submitted that since all the partners including the deceased-Nanabhai Nathubhai were entitled to ask for dissolution of the business by giving one month notice, even if the deceased-Nanabhai Nathubhai was not to provide the capital or not to share the fund and other assets after the accounts are rendered on dissolution, that would not be a ground to suggest that the deceased was not a partner in the partnership firm. He submitted that the evidence on record clearly proves that the deceased had acted as partner of the firm, and therefore, the plaintiffs are entitled to ask for dissolution of the partnership ad also for accounts of the partnership business. He, thus, submitted that the suit of the plaintiffs was maintainable and urged to dismiss the appeal. In support of his submissions, learned Advocate Mr. Rutul Desai has relied on the decision of Hon'ble the Supreme Court in Helper Girdharbhai v. Saiyed Mohmad Mirasaheb, 1987 (2) GLH 261 (SC). 9. Having heard the learned Advocates for the parties and having perused the judgment and decree passed by the Courts below with the records and proceedings of the case, it appears that the plaintiffs who are the heirs of deceased-Nanabhai Nathubhai have prayed for dissolution of the partnership and for accounts of the partnership business on the ground that the deceased-Nanabhai Nathubhai was partner of the partnership firm and they are entitled to ask for accounts of the partnership firm and on service of notice for dissolution of the partnership firm as per the terms of partnership deed, the partnership stood dissolved and the defendants who are partners rendered themselves liable to give accounts of partnership business. 10. Under the provisions of Sees. 10. Under the provisions of Sees. 43 and 44 of the Partnership Act, 1932, a partner is entitled to ask for dissolution of the firm. Section 43 provides that if the partnership is at will, the firm may be dissolved by any partner by giving notice in writing to all other partners of his intention to dissolve the firm. Section 44 provides that a partner can file the suit for dissolution of the firm on the grounds mentioned therein. In the present case, the suit is filed on the ground that the defendants were not properly managing the business and giving true and correct accounts of the partnership business and also on the ground that the partnership is at will and the plaintiffs have issued notice to the defendants-other partners for dissolution of the firm. As stated earlier, the defendants have disputed the status of plaintiff No. 2 and other plaintiffs as partners of the firm. Therefore, the question is as to whether the deceased-Nanabhai Nathubhai was in fact a partner in the partnership firm or not. As per the provisions of Sec. 6 of the Act, for determining as to whether a person is or is not a partner in a firm, regard shall be had to the real relation between the parties as shown by all relevant facts taken together. 11. The deed between the defendants and the deceased-Nanabhai Nathubhai is on record at Exh. 62. In absence of the deceased-Nanabhai Nathubhai, only terms of Exh. 62 would be guiding factor to decide the relationship between the deceased-Nanabhai Nathubhai and the defendants. 12. There is no dispute about the fact that the premises which was permitted to be used for the partnership business by the deceased was held by the deceased-Nanabhai as tenant. In the deed, deceased-Nanabhai is described as Party No.1 and the defendants have been described as second, third, fourth and fifth party respectively. Clause 2 of the partnership deed provides that the business of the partnership shall be carried at the premises being Ward No.7, House No. 4259. Clause 4 provides that the parties Nos. 2, 3, 4 and 5 shall bring the capital in the firm and they will be entitled to 12% interest thereon. Clause 5 mentions shares of the parties from the profit from the business of the firm. As per the same, deceased-Nanabhai's share is fixed at 00-05 paise from Rs. Clause 4 provides that the parties Nos. 2, 3, 4 and 5 shall bring the capital in the firm and they will be entitled to 12% interest thereon. Clause 5 mentions shares of the parties from the profit from the business of the firm. As per the same, deceased-Nanabhai's share is fixed at 00-05 paise from Rs. 1/-. Share of the second party is fixed at 00-35 paise, third party at 00-30 paise, fourth party at 00-10 paise, fifth party at 00-20 paise. Clause 6 provides that the deceased-Nanabhai Nathubhai shall not share the loss in the business of the firm but even if there is loss in the firm, the deceased would continue to withdraw Rs. 500/- per month as expenses and such withdrawal would be adjusted in future in the profit of the firm. In this very clause, shares in the loss of the remaining parties have been fixed. As per Clause 7, the partnership firm is described as partnership at will and if anybody wants to retire from the firm or dissolve the firm, he shall be required to give one months notice in writing. In this very clause, it is provided that as and when the partnership is dissolved, and the accounts are settled, the parties of the second, fourth and fifth part shall take away whatever capital left and whatever other amount found according to their share. In this very clause, it is also provided that the second, third, fourth and fifth party shall not claim any right in the premises. Clause 8 provides that till the firm carries on business in the premises taken on rent by the first party deceased Nanabhai, the first party shall pay rent for the premises. It is then provided in the said Clause that the second, third, fourth and fifth party shall not claim any tenancy rights or good-will in the said premises and the party of the first part shall continue to enjoy his tenancy rights in respect of the said premises. Clause 9 provides that all books of accounts of the partnership firm shall be maintained by the parties except the first party. Clause 9 provides that all books of accounts of the partnership firm shall be maintained by the parties except the first party. Clause 10 then provides that if the firm is required to be registered with the office of the Income Tax or Sales Tax or with the office of the Registrar of Firms, same shall be done by the parties except the first party and the other parties shall be required to take the books of accounts to the office of the Income Tax or Sales Tax or with the Registrar of Firms. In the same Clause, it is further provided that the partnership business is to be carried on by the second, third, fourth and fifth party under their personal supervision. Parties of the second, third, fourth and fifth part are also responsible for the same. Clause 14 provides for taking Jayantilal Nanabhai-plaintiff No.2, son of the first party-deceased-Nanabhai Nathubhai as partner in the partnership firm for the same share held by deceased-Nanabhai. Clause 16 provides for opening of the Bank accounts in the name of the partnership firm and to be operated under the signature of the second, third and fourth party. 13. Above are the important terms of the deed to decide the relationship between the party of the first part with the parties of the other part. Above terms clearly provided that the parties never intended deceased-Nanabhai to be the partner of the partnership firm. Deceased-Nanabhai was not to bring any capital in the firm. Deceased-Nanabhai was not to share in the loss in the firm but instead, even in the time of losses, he was to continue to withdraw Rs. 500/- per month as expenses. It is further provided that at the time of dissolution of the partnership firm, except deceased Nanabhai, all other partners had to take the remaining capital and other income as per their respective shares and the deceased-Nanabhai was to continue with his premises as tenant. From the terms of the deed at Exh. 62, it clearly appears that the other parties were not only to carryon the business of the firm but they were the only parties who had to maintain the business of the partnership firm and they were also responsible to go to the office of the Income Tax, Sales Tax and Registrar of Firms etc. 62, it clearly appears that the other parties were not only to carryon the business of the firm but they were the only parties who had to maintain the business of the partnership firm and they were also responsible to go to the office of the Income Tax, Sales Tax and Registrar of Firms etc. Plaintiff No. 2 was taken as heir of the deceased-Nanabhai for the same share which is fixed for the deceased-Nanabhai. Even the bank account of the partnership firm was also to be opened and operated under the signature of the other parties. Thus, from all the above terms, it clearly appears that the relationship of deceased-Nanabhai with the defendants-parties of the other part was never intended to be of the partner of the firm but the document was a kind of lease agreement between the deceased-Nanabhai and other parties. Deceased-Nanabhai had not to act as partner of the partnership firm, but was entitled only to receive the amount as charge to permit the other parties to use the premises for the business of the partnership firm. 14. At this stage, Sec. 6 of the Act is required to be reproduced as under : "Mode of determining existence of partnership :- In determining whether a group of persons is or is not a firm whether a person is or is not a partner in a firm, regard shall be had to the real relation between the parties, as shown by all relevant facts taken together. Explanation 1 :- The sharing of profits or of gross returns arising from property by persons holding a joint or common interest in that property does not itself make such persons partners. Explanation 1 :- The sharing of profits or of gross returns arising from property by persons holding a joint or common interest in that property does not itself make such persons partners. Explanation 2 :- The receipt by a person of a share of the profits of a business, or of a payment contingent upon the earning of profits or varying with the profits earned by a business, does not of itself make him a partner with the persons carrying on the business; and in particular, the receipt of such share or payment - (a) by a lender of money to persons engaged or about to engage in any business, (b) by a servant or agent as remuneration, (c) by the widow or the child of a deceased partner 5, as annuity, or (d) by a previous owner or part owner of the business, as consideration for the sake of the goodwill or share thereof, does not of itself make the Receiver a partner with the persons carrying on the business." 15. Section 6 provides that for determining whether a person is a partner or not, regard shall be had to the real relation between the parties, as shown by all relevant facts taken together. Explanation-2 provides that the receipt by a person of a share of the profits of a business, or of a payment contingent upon the earning of profits or varying with the profits earned by a business does not of itself make him a partner with the persons carrying on the business. Said explanation further provides that a receipt of such share or payment by a lender of money to persons engaged or about to engage in any business, by a servant or agent as remuneration, by the widow or child of a deceased partner as annuity or by a previous owner or part owner of the business as consideration for the sale of the goodwill or share thereof, does not itself make the receiver a partner with the persons carrying on the business. 16. Therefore, for deciding whether the deceased-Nanabhai was a partner of the firm or not, the relationship between the deceased-Nanabhai with the other parties is of prime importance and such could be decided on the basis of the terms of the deed. 16. Therefore, for deciding whether the deceased-Nanabhai was a partner of the firm or not, the relationship between the deceased-Nanabhai with the other parties is of prime importance and such could be decided on the basis of the terms of the deed. I have already discussed above the intention of the parties on the basis of the terms from which it clearly appears that the relation between the parties was not of partners in the business of the firm. 17. Simply because share of deceased-Nanabhai is provided at 00-05 paise from one Rupee, that alone is not sufficient to make him partner with the other parties-defendants who have been stated to be responsible for the business of the firm. 18. In the case of M. P. Davis v. Commissioner of Agricultural Income Tax, reported in AIR 1959 SC 719 , Hon'ble the Supreme Court has held that for determining whether a person is a partner or not, relationship between the parties could be gathered from the terms of the document together with the conduct of the parties. 19. The trial Court has recorded that the deceased-Nanabhai had given money to the firm twice. However, when the term of the deed clearly provides that the capital shall be brought by the other parties except the deceased-Nanabhai, even if the deceased had subsequently provided money, that would not make him partner in the firm. 20. Reliance placed by the learned Advocate Mr. Desai for the respondent on the decision in the case of Helper Girdharbhai, [1987 (2) GLH 261 (SC)] would not render any help to the respondent in the facts of the present case. In the said case, the issue was whether the partnership created was just camouflage to shield sub-letting of the premises which had arisen in the context of the provisions of the Bombay Rent Act. Hon'ble the Supreme Court has held in that case that the tenant who bring the premises for the business of the partnership firm could also be said to be a partner and there is no sub-letting of the premises by the tenant who was a partner in the partnership firm. However, for deciding whether a person is a partner or not, terms of the deed in each case would be a guiding factor. In my view, terms of the deed at Exh. However, for deciding whether a person is a partner or not, terms of the deed in each case would be a guiding factor. In my view, terms of the deed at Exh. 62 are so clear that the parties never intended to take deceased-Nanabhai as partner in the firm. Therefore, the Courts below have materially erred in construing the deed at Exh. 62 to hold that there was partnership between the parties. On true and correct construction of the deed at Exh. 62, it could not be said that there was relationship of partners between the parties. The deed was in the nature of lease between the parties and the deceased-Nanabhai could not be said to have been taken as partner in the partnership firm. Therefore, this appeal is required to be allowed. 21. For the reasons stated above, this appeal is allowed. Judgment and decree passed by the Courts below are quashed and set aside. R. & P. to be sent back forthwith. (HSS) Appeal allowed.