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Sadannand Vaman Sadekar Vs. Manju Avinash Wardekar and Others - Court Judgment

LegalCrystal Citation
CourtMumbai Goa High Court
Decided On
Case NumberAppeal Under Arbitration Act No. 15 of 2009
Judge
AppellantSadannand Vaman Sadekar
RespondentManju Avinash Wardekar and Others
Excerpt:
.....is admissible in evidence, even where the partnership owns immovable property. the learned judges pointed out that though a partner may be a co-owner in the partnership property he has no rights to ask for a share in the property but only that the partnership business should be wound up including, therein the sale of immovable property and to ask for his share in the resulting assets. this decisions was not accepted as laying down the correct law by a division bench of the same high court in samuvier v. ramasubbier. the learned judges there relied upon the decision in ashworth v. munn in addition to the opinion of telang, j., and also referred to the decision gray v. smithin coming to a conclusion contrary to the one in the earlier case. it may be pointed out that the learned.....
Judgment:

Oral Judgment:-

Heard Shri M. B. Da Costa, learned Senior Counsel appearing for the appellant and Shri V. P. Thali, learned counsel appearing for the respondents.

2. The above appeal challenges the judgment dated 23.09.2009 passed by the learned District Judge, North Goa, Panaji, whereby the objections raised by the respondents herein to the award passed by the learned Arbitrator under Section 34 of the Arbitration and Conciliation Act, 1996 came to be allowed (hereinafter referred to as “the Act of 1996”).

3. Briefly, the facts of the case are that the appellant claiming to be a partner of the partnership firm known as M/s Western India Service Centre filed a suit in the Court of the Civil Judge Senior Division, Ponda, inter-alia claiming that the letter of retirement obtained by the respondents from him was taken by undue influence at the time when the appellant was suffering from a heart ailment. The respondents disputed the said claim and inter-alia contended that there was an arbitration clause in the partnership agreement. It appears that this Court thereafter appointed the Hon'ble Chief Justice Shri G. D. Kamat (Retd) a sole Arbitrator to adjudicate the said dispute. The learned Arbitrator after recording of evidence and hearing the parties passed an award in favour of the appellant herein inter-alia directing the payment of a sum of Rs.9,71,356.97 along with interest at the rate of 12% per annum from 22.07.1997 till payment thereon. The respondents filed their objections to the said award under Section 34 of the Act of 1996 before the learned District Judge. After hearing the parties, the learned District Judge allowed the said objections and set aside the award passed by the learned Arbitrator. Being aggrieved by the said judgment, the appellant has preferred the present appeal.

4. Shri M. B. Da Costa, learned Senior Counsel appearing for the appellant has assailed the impugned judgment on the ground that the learned District Judge has gone on the premise that merely because the partnership agreement contemplated that in case of retirement of the partners, such partners shall be entitled only to the balance amount as shown in the books of account as payable to such partners, the appellant was not entitled to claim any amount towards his share in the assets of the partnership firm. The learned Senior Counsel further pointed out that once the appellant is accepted to be a partner of the partnership firm, it is well settled that he is entitled for all the assets as well as the liability of such partnership firm and merely because he has retired, it cannot be said that he waives or forfeit his right in such assets in the partnership firm. The learned Senior Counsel further pointed out that in fact the appellant was entitled for the dissolution of the partnership firm pursuant to the said letter of retirement as the appellant was excluded from the affairs of the partnership firm. The learned Senior Counsel further pointed out that the learned Judge has totally misconstrued the relevant provisions of law as the principles which govern the right of the partners in such firm are well settled. The learned Senior Counsel further pointed out that the learned Arbitrator has rightly considered the matter in dispute and has come to the conclusion that the appellant was entitled to the share of the assets to the extent attributable to the share of the appellant in the partnership firm. The learned Senior Counsel further pointed out that the Chartered Accountant/ Accountant was appointed to value the assets of the partnership firm as on the date of the retirement and as such the learned Judge has erroneously interfered in the said award and passed the impugned judgment.

5. On the other hand, Shri V. P. Thali, learned counsel appearing for the respondents has supported the impugned judgment. The learned counsel has pointed out that the appellant is entitled for the amount as specified in the partnership agreement and no further amount. The learned counsel has taken me through the Clause 14 of the partnership agreement and pointed out that the terms therein clearly provide that the appellant would be entitled only to the amount as shown to his credit in the books of account of the partnership firm. The learned counsel further pointed out that the appellant has entered into the partnership firm without any fixed assets or capital and as such, the question of claiming any right to the assets of the partnership firm cannot be accepted. The learned counsel further pointed out that in any event the valuation which has been done by the Chartered Accountant/Accountant appointed by the learned Arbitrator is not at all in accordance with the well settled principles of law as according to him the valuation done is exorbitant apart from the fact that the same does not meet the requirements of valuing the assets as contemplated under the Partnership Act. The learned counsel further pointed out that the valuer has valued the assets considering what would be the costs of putting up such construction as on the date of the alleged retirement of the appellant and thereafter deducted an amount considering the age of such construction. Shri V. P. Thali, learned counsel appearing for the respondents however, pointed out that the manner of doing such valuation is totally unsustainable in law. The learned counsel further pointed out that the learned Arbitrator was also not justified to award interest at the rate of 12% per annum as according to him even in the Partnership Act, the interest which the partner is entitled on account of his share in the partnership assets is much on the lower side. The learned counsel as such submits that in any event considering that the learned Judge has rightly complied with the principles of law governing the right of the partners in terms of the Partnership Act, no interference is called for in the impugned judgment. The learned counsel further pointed out that the provisions of Section 48 of the Partnership Act which govern the manner in which the assets are to be distributed has not been considered by the learned Arbitrator while passing the said award.

6. I have carefully considered the submissions of the learned counsels and I have gone through the records. On perusal of the impugned judgment basically the learned Judge has rejected the claim of the appellant on the ground that the appellant is not entitled to any share of value of the assets of the partnership firm. This findings of the learned Judge cannot be sustained in view of the judgment of the Apex Court reported in AIR 1966 SC 1300 in the case of Addanki Narayanappa and anr. V/s Bhaskara Krishnappa. The Apex Court has observed at para 5 thus:

“5. It seems to us that looking to the scheme of the Indian Act no other view can reasonably be taken. The whole concept of partnership is to embark upon a joint venture and for that purpose to bring in as capital money or even property including immovable property. Once that is done whatever is brought in would cease to be the trading asset of the person who brought it in. It would be the trading asset of the partnership in which all the partners would have interest in proportion to their share in the joint venture of the business of partnership. The person who brought it in would, therefore, not be able to claim or exercise any exclusive right over any property which he has brought in, much less over any other partnership property. He would not be able to exercise his right even to the extent of his share in the business of the partnership. As already stated, his right during the subsistence of the partnership is to get his share of profits from time to time as may be agreed upon among the partners and after the dissolution of the partnership or with his retirement from partnership of the value of his share in the net partnership assets as on the date of dissolution or retirement after a deduction of liabilities and prior charges. It is true that even during the subsistence of the partnership a partner may assign his share to another. In that case what the assignee would get would be only that which is permitted by Section 29(1), that is to say, the right to receive the share of profits of the assignor and accept the account of profits agreed to by the partners. There are not many decisions of the High Courts on the point. In the few that there are the preponderating view is in support of the position which we have stated. In Joharmal v. Tejram Jagrup,(1893) ILR 17 Bom. 235 which was decided by Jardine and Telang JJ., the latter took the view that though a partner's share does not include any specific part of any specific item of partnership property, still where the partnership is entitled to immovable property, such share does include an interest in immovable property and, therefore, every instrument operating to create or transfer a right to such share requires to be registered under the Registration Act. In coming to this conclusion he mainly purported to rely upon an observation contained in the fifth edition of Lindley on Partnership at p. 347. This observation is not to be found in the present edition of Lindley's Partnership nor in the 9th or 10th editions which were brought to our notice. The 5th edition, however, is not available. The learned Judge after quoting an earlier statement which is that the “doctrine merely amounts to this that on the death of a partner his share in the partnership property is to be treated as money, not as land” says: “This obviously would not affect matters either during the lifetime of a partner-Lindley, L.J.”, says in so many words that it has no practical operation till his' death (p. 348)- or as against parties strangers to the partnership,' e.g., the firm's debtors.” While it is true that the position so far as third persons are concerned would be different it may be pointed out that in Forbes v. Steven James, V.C., has, as quoted by the learned Judge, said: “It has long been the settled law of this Court that real estate bought or acquired by a partnership for partnership purposes (in the absence of some controlling agreement or direction to the contrary), is, as between the partners and as between the real and personal representatives of a partner deceased personal property, and devolves and is distributable and applicable as personal estate and as legal assets.” Telang, J., seems to have overlooked, and we say so with great respect, the words “as between the partners” which precede the words “and as between the real and personal representative of the partner deceased” and to have confined his attention solely to the latter. We have not found in any of the editions of Lindley's Partnership an adverse criticism of the view of the Vice-Chancellor But, on the contrary, as already stated, the view expressed is in full accord with these observations. Jardine, J., has discussed the English authorities at length and after referring to the documents upon which reliance was placed on behalf of the defendant stated his opinion thus:

“To lay down that the three letters in question, which deal generally with the assets, movable and immovable, without specifying any particular mortgage or other interest in real property require registration, would, incline to think, in the present state of the authorities, go too far. It may be argued that such letters are not ‘instruments of gift of immovable property but rather disposals of a share in a partnership of which the business is money lending, and the mortgage securities merely incidental thereto.”

The view of Telang, J., was not accepted by the Madras High Court. in Chitturi Venkataratnam v. Siram Subba Rao. ILR 49 Mad 738 (AIR 1926 Mad 1040). The learned Judges there discussed all the English decisions as also the decisions in Sudarsanam Maistri v. Narasimhulu Maistri ( 1902) ILR 25 Mad 149 and Gopala Chetty v. Vijayaraghavachariar ILR 45 Mad 378: 1922-1 AC 488: (AIR 1922 PC 115) and the opinion of Jardine, J., in Joharmal case, (1893) ILR 17 Bom 235 held that, an unregistered deed of release by a partner of his share in the partnership business is admissible in evidence, even where the partnership owns immovable property. The learned Judges pointed out that though a partner may be a co-owner in the partnership property he has no rights to ask for a share in the property but only that the partnership business should be wound up including, therein the sale of immovable property and to ask for his share in the resulting assets. This decisions was not accepted as laying down the correct law by a Division Bench of the same High Court in Samuvier v. Ramasubbier. The learned Judges there relied upon the decision in Ashworth v. Munn in addition to the opinion of Telang, J., and also referred to the decision Gray v. Smithin coming to a conclusion contrary to the one in the earlier case. It may be pointed out that the learned Judges have made no reference to the decision of the Privy Council in Gopala Chetty case though that was: one of the decision relied upon by Phillips, J., in the earlier case. In so far as Ashworth case is concerned that was a case which turned on the provisions of the Mortmain Acts and is not quite pertinent for the decision on the point which was before them and which is now before us. In Gray v. Smith Kakewich, J., held that an agreement by one of the partners to retire and to assign his share in the partnership assets including, immovable property, is an agreement to assign an interest in land, and falls within the Statute of Frauds. The view of Kekewich, J., seems to have received the approval of Cotton, L.J., one of the Judges of the Court of Appeal, though no argument was raised before it challenging its correctness. It may, however, be observed that even according to Kekewich, J., the authorities (Foster v. Hale and Dale v. Hamilton establish that one may have an agreement of partnership by parol, notwithstanding that the partnership is to deal with land. He, however, went on to observe:

“But it does not seem to me to follow that an agreement for the dissolution of such a partnership need not be expressed in writing, or rather than there need not be a memorandum of the agreement for dissolution when one of the terms of the agreement, either expressly or by necessary implication, is that the party sought to be charged must part with and assign to others an interest in land. That seems to me to give rise to entirely different considerations. In the one case you prove the partnership by parol; you prove the object, the terms of the partnership, and so on. But in the other case it is one of the essential terms of the agreement that the party to be charged shall convey an interest in land, and that seems therefore to bring it necessarily within the 4th section of the Statute of Frauds”.

In the case before us also in Samuvier's case the document cannot be said to convey any immovable property by a partner to another expressly or by necessary implication. If we may recall, the document executed by the Addanki partners in favour of the Bhaskara partners records the fact that the partnership business has come to an end and that the latter have given up their share in “the machine etc., and in the business” and that they have “made over same to you alone completely by way of adjustment”. There is no express reference to any immovable property herein. No doubt, the document does recite the fact that the Bhaskara family has given to the Addanki family certain property. This however, is merely a recital of a fact which had taken place, earlier. To cases of this type the observations of Kekewich, J., which we have quoted do not apply. The view taken in Samuvier case seemed to commend itself to Varadachariar, J., in Thirumalappa v. Ramappa but it was reversed in Ramappa v. Thirumalappa (AIR 1939 Mad 884)”.

7. On going through the ratio laid down by the Apex Court as aforesaid patently the findings of the learned Judge while passing the impugned judgment to the effect that the appellant is not entitled to the value of the assets cannot be accepted. Considering the facts and circumstances of the case, I find that the findings of the learned Judge on that count deserve to be quashed and set aside.

8. Once that finding is set aside, the only aspect to be considered is as to whether the amount which has been shown by the learned Arbitrator is in accordance with the terms of the Partnership Act and whether there is any infraction in complying with the provisions of Section 48 of the Partnership Act, is contended by Shri Thali, learned counsel appearing for the respondents. On perusal of the impugned judgment, I find that the learned Judge has not at all considered the said aspect in view of the finding of the learned Judge which has been otherwise set aside herein above. In the peculiar facts and circumstances of the case and in the interest of justice, I find it appropriate that with regard to the other contention raised by Shri Thali, learned counsel appearing for the respondents as to the objections to the award, the matter deserves to be remanded to the learned District Judge to decide the said aspect afresh after hearing the parties in accordance with law.

9. Subject to the above, I pass the following:

ORDER

(i) The appeal is partly allowed.

(ii) The impugned judgment dated 23.09.2009 is quashed and set aside.

(iii) The learned District Judge is directed to decide the objections filed by the respondents under Section 34 of the Act of 1996 afresh in the light of the observations made herein above after hearing the parties in accordance with law.

(iv) All contentions of the parties on merits with that regard are left open.

(v) Parties are directed to appear before the learned District Judge on 08.04.2013 at 10.00 a.m.

(vi) The appeal stands disposed of accordingly.


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