IN THE HIGH COURT AT CALCUTTA Ordinary Original Civil Jurisdiction ORIGINAL SIDE BEFORE: THE HON’BLE JUSTICE SOUMEN SEN G.A.No.1688 of 2017 G.A.No.1571 of 2017 C.S.No.79 of 2017 RAJENDRA BAJORIA & ORS.AND CHIRANJILAL BAJORIA & ORS.versus SUDHIR JALAN & ORS.For the Plaintiffs : Mr.Mr.Mr.Mr.Mr.Mr.Mr.Mr.Anindya Kumar Mitra, Sr.Adv., Pratap Chatterjee, Sr.Adv., Jishnu Saha, Sr.Adv., Sarvapriyo Mukherjee, Adv., Ishaan Saha, Adv., Paritosh Saha, Adv.Joydeep Roy, Adv., Arijit Dey, Adv.For the Defendant No.3 : Mr.Ratnanko Banerjee, Sr.Adv., Mr.Raj Ratna Sen, Adv., Ms.Srishti Barman Roy, Adv., Mr.D.Chowdhury, Adv.Mr.S.Chowdhury, Adv., Ms.Srija Banerjee, Adv.For the Defendant Nos.2,7,8,9,11, 12,13,15,16,17,18,19,20 and 21.
: Mr.Dhruba Ghosh, Sr.Adv., Mr.Sabyasachi Chowdhury, Adv.Ms.Manju Bhuteria, Adv., Mr.Sarathi Dasgupta, Adv., Ms.Nikita Jhunjhunwala, Adv., Mr.Asim Choudhury, Adv.Hearing Concluded On : 14.09.2017 Judgment On : 22nd September, 2017 Soumen Sen, J.:- The defendant No.3 is the applicant in G.A.No.1688 of 2017.
The defendant Nos.2,7,8,9,11,12,13,15,16,17,18,19,20 and 21 are the applicants in G.A.No.1571 of 2017.
These applications are for revocation of leave under Clause 12 of the Letters Patent and for dismissal of the suit on the ground that the suit is ex facie barred by limitation.
However, the objection is restricted to the issue of limitation.
The plaintiff has filed a suit in April, 2017 praying, inter alia, for a declaration that the plaintiffs along with the defendants are entitled to the assets and properties of the firm “Soorajmull Nagarmull” as the heirs of the original partners of the reconstituted firm under the partnership dated 6th December, 1943, in the shares of the said original partners as mentioned in Paragraph 2 of the Plaint and a decree for dissolution of the said firm upon realizing the assets and properties of the firm and collecting all monies due to the firm.
Before dealing with the contention raised by the applicant, it is necessary to examine the averments in the plaint as in deciding an application in the nature of demurrer, the averments made in the plaint are required to be taken as true and correct.
The partnership firm of Soorajmull Nagarmull was commenced in the early 90s.
In the year 1943, it was reconstituted in terms of a deed dated 6th December, 1943, with the following partners as partners of the firm each having the following shares in the same:- a) Baijnath Jalan -/1/9 pie b) Mohanlal Jalan -/2/9 pie c) Babulal Jalan -/1/2 pie d) Sewbhagwan Jalan -/1/1 pie e) Keshabdeo Jalan -/1/1 pie f) Nandkishore Jalan -/1/1 pie g) Deokinandan Jalan -/1/- h) Chiranjilal Barojia Karta of Mitakshara Hindu joint family -/3/6 pie i) Chiranjilal Bajoria -/1/6 pie j) Kishorilal Jalan -1/1 pie The plaintiffs are heirs of late Chiranjilal Bajoria who had a -/1/6 pie share in the partnership and a further -/3/6 pie share in the same as the karta of his Mitakshara Hindu joint family.
The defendants are the heirs of other partners of the reconstituted firm and the other heirs of Deokinandan Jalan and Mohanlal Jalan.
The firm had diveRs.business interests and owned diveRs.assets and properties which include an immovable property measuring 29.38 acres at Bhagalpur in Bihar.
The plaintiffs in Paragraph 5 of the Plaint has stated that the partnership deed provides that notwithstanding the death of any partner, the business of the firm would continue and that subject to the consent of the surviving partneRs.the heirs of a deceased partner would be entitled to be admitted to the partnership.
The plaintiffs have relied upon Clauses 3, 6, 7 and 8 of the reconstituted partnership deed dated 6th December, 1943 in Paragraph 5 of the Plaint.
The plaintiffs alleged that notwithstanding the death of each of the partners of the reconstituted firm, profits or losses of the firm were not computed or distributed to the estates of the deceased partners at the end of the accounting period of the year during the death of each of the partneRs.On the contrary, year after year, their estates were treated to be entitled to the capital and the profits of the firm in its balance sheets.
The last partners of the firm, namely, Deokinandan Jalan and Kishorilal Jalan died on 12th July, 1997 and on 6th December, 2010 respectively.
Notwithstanding the fact that with the death of Deokinandan in July, 1997, the firm stood dissolved, no steps were taken by the deceased partners of the firm for dissolution of the firm for winding up its affairs or for settlement of accounts of the deceased partners consequent upon such dissolution.
In the year 1981, the State of Bihar initiated proceedings for acquisition of the Bhagalpur land of the firm and took possession of the land on 20th August, 1981.
The Bhagalpur land, thereafter, came to be declared as protected forest under Section 29 of the Indian Forest Act, 1927, whereupon acquisition proceedings were once again initiated by the State of Bihar by a fresh notification of 24th May, 1995.
This was followed by notification dated 17th August, 1996 under Section 17.
These proceedings were challenged by the partnership firm on 22nd July, 1998.
Thereafter, on 17th November, 2003, the State of Bihar annulled the said proceedings which led to the filing of another writ petition seeking issuance of directions on the State of Bihar to release the land in question and to handover possession of the said land.
During the pendency of the writ petition, an award was published on 27th September, 2006 of which the firm had no notice.
The writ petitions were disposed of declaring the vesting as valid.
The firm being aggrieved filed a Special Leave Petition before the Hon’ble Supreme Court.
The said appeal was disposed of by an order dated 17th August, 2015 setting aside the land acquisition proceedings.
The State of Bihar was directed to initiate fresh acquisition proceedings or to take action in accordance with law within six weeks from the date thereof.
Thereafter the fresh acquisition proceedings have started.
The plaintiffs alleged that in the said proceeding, the defendant No.1 Sudhir Jalan is representing Soorajmull Nagarmull on the basis of a power of attorney alleged to have been executed in his favour by late Kishorilal Jalan who died on 6th December, 2010.
The plaintiffs alleged that the defendant No.1 in concert with some of the other defendants is attempting to solely represent the firm to the exclusion of heirs of its other deceased partneRs.despite the fact that each of them are entitled to seek winding upon of the affairs of the firm by realizing its assets, by collecting all moneys that may be due to the firm, by applying the same in paying off the debts of the firm, if any, and in paying the capital contributed by any partner, and thereafter by dividing the residue amongst the heirs of the original partners in the shares to which they were entitled to the profits of the firm in terms of the Deed of Partnership of 6th December, 1943.
Despite a request made to Sudhir Jalan by a letter dated 28th March, 2017, the defendant No.1 did not disclose the details of the assets, properties and moneys of the firm or of the proceedings recommenced for acquisition of the Bhagalpur land of the firm.
The plaintiffs assert that being the heirs of the deceased partners of the firm Soorajmull Nagarmull, they are along with other defendants entitled to seek dissolution of the firm and for distribution of its profits and shares after meeting the existing liabilities.
It is stated that since the acquisition proceedings of the Bhagalpur land have been continuing since 1981 and are still continuing, no part or portion of the plaintiffs’ claim in the suit is barred by limitation, particularly as the plaintiffs’ cause of action in the suit is deemed to have arisen with the passing of the judgment and order dated 17th August, 2015.
The suit is essentially for dissolution of the firm is the claim of the plaintiff.
The aforesaid defendants have filed these applications for dismissal of the suit on the ground of limitation.
The defendants contend that the cause of action of the plaintiffs if any is arising out of the deed of partnership dated 6th December, 1943.
Clauses 4 to 7 of the said deed clearly state that upon death of any partner, partnership shall not be automatically dissolved but the surviving partners may admit the legal representative of the deceased unto the partnership by mutual consent.
Mr.Ratnanko Banerjee, learned Senior Counsel appearing on behalf of the defendant No.3 submits that the plaint suffers from inconsistent and mutually destructive pleadings.
While the plaintiff in Paragraph 8 has stated that the firm stood dissolved with the death of Deokinandan in July, 1997, in Paragraph 14 the plaintiffs have alleged that they along with the defendants being the heirs of the other deceased partners of the firm “Soorajmull Nagarmull” are entitled to seek dissolution of the firm.
Mr.Banerjee has referred to Clauses 4 and 6 of the deed of partnership and submits that the plaintiffs have admitted that they have not sought for accounts in this proceeding.
The suit is not for rendition of accounts.
The plaintiffs admittedly were not inducted as partners of the said firm.
As a legal representative of the deceased partner they are not entitled to seek dissolution of the partnership.
In order to show that the suit is ex facie barred by limitation, it is submitted that the plaintiffs have filed a suit as descendants of erstwhile partners of a firm by the name of Soorajmull Nagarmull.
Plaintiff Nos.1 to 3 is descendants of Chiranjilal Bajoria who died on 31st December, 1981.
Plaintiff Nos.4 and 5 claims to be descendants of Deokinandan Jalan who died on 12 July, 1997.
Plaintiff No.6 claim to be descendants of Mohanlal Jalan who died on 1st May, 1982.
In the plaint, the plaintiffs have asserted their entitlement to the assets and properties of the firm and right to represent the firm in all proceedings.
The plaintiffs have also claimed for disclosure of all assets and properties and accounts.
Mr.Banerjee has referred to Clause 4, 5 and 6 of the Partnership Deed, 1943 and submits that by reason of clause 6 of the partnership deed, legal representatives of the deceased partner only has the right to profits or losses up to end of accounting period of the year during which death occuRs.The plaintiffs as the legal representatives cannot have any right apart from what is provided in the partnership deed.
The legal representatives under the partnership deed have no right to the assets of the firm as the aforesaid clauses do not give them any right to the assets of the firm.
The plaint which proceeds on the partnership agreement therefore does not disclose any cause of action with regard to reliefs claimed.
It is argued that the right of legal representatives of deceased partner under Section 37 of the Partnership Act can only be “in the absence of a contract to the contrary”.
In this case there is contract to the contrary in clauses 4 and 6.
In view thereof Section 37 of the Act as argued cannot apply.
Mr.Banerjee has referred to Section 5 of the Partnership Act, 1932 and submits that the relationship of partners arises from contract and, therefore, the partners or their legal representatives would be bound by the contractual rights.
The rights and duties of partners by contract are statutorily recognized in Section 11 of the Act.
Mr.Banerjee would like this Court to read the general duties of the partners under Section 9 of the Act along with Section 11 of the said Act.
It is submitted that although the plaintiffs have relied upon Sections 46, 47, 48, 49, 50 and 53 of the Partnership Act and also all decisions on the interpretation of those Sections, the said Sections and/or decisions are not applicable in the instant case as the said decisions are all on rights of partners or their legal representatives on dissolution of a firm.
However, according to the plaintiff, firm has continued its business and the suit is essentially for dissolution as stated in Paragraphs 19 and 20 of the plaint.
Mr.Banerjee submits that the plaintiffs at this stage should not be permitted to jettison their own case in the plaint and argue beyond the scope of the suit.
The plaintiff cannot abandon the agreement on which the plain case has been made and rely on provisions of the Act dehors the agreement.
Mr.Banerjee submits that Section 19 of the plaint is a crucial paragraph which states the cause of action of the plaintiffs.
It is submitted that according to the plaintiff the cause of action starts from 1981 as acquisition proceeding form Bhagalpur land was continuing.
Such contention is on the face of the plaint absurd because in so far as plaintiff Nos.4, 5 and 6 are concerned their predecessors in interest were both alive in 1981.
Mr.Banerjee submits that the plaint proceeds as if the passing of the judgment and order dated 17th August, 2015 by the Hon’ble Supreme Court by directing initiation of fresh acquisition proceeding of the Bhagalpur Land gives cause of action to the plaintiffs to sue for dissolution of the firm.
It is submitted that initiation of a fresh acquisition proceeding cannot be a cause for dissolution of the firm.
It proceeds on a misconception of a continuing cause of action as there is no continuing breach.
The said paragraph, it is argued, also does not disclose any legal character or any right within the meaning of Section 34 of the Specific Relief Act and, thus, no cause of action in relation to any declaratory reliefs is disclosed.
If the plaintiffs’ contention was to be accepted and the firm stood dissolved in 1997 with death of the partner Deokinandan Jalan then any right to accounts is barred by reason of article 5 of Limitation Act (Article 106 of the 1908 Limitation Act) after three years of dissolution.
If right to account is barred then rights to asserts in the firm would also be barred.
The plaint does not disclose any case or any relief as prayed for on the basis of Clause 6 of the Partnership Deed for sharing of profits by the plaintiffs as heirs up to the end of the accounting period of the year during which the death occuRs.It is submitted that the claim for profits for the plaintiffs would be different as their predecessors-in-interest had died on different dates, that is, in 1981, 1982 and 1997 and the accounting year, therefore, was accordingly 31st March, 1982, 31st March, 1983 and 31st March, 1998 respectively.
Even if it is assumed that the partnership firm has acknowledged any payment to be made to the estate of the deceased partners on the basis of the disclosures made by the plaintiff in its affidavit.
The acknowledgement is only upto 2005 which would be barred by limitation as the right would have accrued for profits as far back as in 1981.
Since relief (a) cannot be granted as firm has continued its business, the legal representative of the deceased partners has not right to assets under the partnership deed, relief (b) also cannot be granted.
It is submitted that relief (c) is contrary to relief (b).The cause of action as pleaded in Paragraph 19 of the plaint does not confer any right or any legal character within the meaning of Section 34 of the Specific Relief Act to the plaintiffs to claim any declaration.
It is submitted that prayer (d) in the plaint is contrary to Clause 6 of the partnership deed.
The plaintiffs not being partners can seek for dissolution of the firm and, therefore, are not entitled to details of any assets and properties or for accounts for the purpose of dissolution.
It is submitted that the plaintiffs are not entitled to dissolution since Clause 7 of the partnership deed does not even entitle the partners to ask for dissolution of the firm before a court of law.
Section 40 of Partnership Act recognizes that a firm may be dissolved with the consent of all the partners or in accordance with the contract between the partneRs.It is argued that since contracts disentitle the partners to seek dissolution, the prayers cannot be allowed.
Moreover, Section 43 permits only a partner to give notice for the purpose of dissolution of the firm and Section 44 provides for dissolution by court only at the instance of the partners which in the instant case is specifically prohibited by Clause 7 of the Partnership Deed.
Mr.Banerjee submits that limitation is a jurisdictional issue and the plaint should be dismissed both on the ground of limitation as well as on the ground that the plaint does not disclose any cause of action.
These are the two grounds taken by the defendants for the purpose of dismissal of the suit.
The learned Senior Counsel in this regard has relied upon the decisions of the Hon’ble Supreme Court in Foreshore Cooperative Housing Society LTD.versus Praveen De.
Desai & ORS.reported at (2015) 6 SCC412paragraphs 48 to 56 and Pandurang Dhondi Chougule & ORS.versus Maruti Hari Jadhav & ORS.reported at AIR (1966) SCC153(paragraph 10).Mr.Sabyasachi Chowdhury, Advocate, appearing for other applicant defendants in supplementing the argument made by Mr.Banerjee has referred to Article 5 and 58 of the Limitation Act, 1963 in support of the submission that the suit is barred by limitation.
It is submitted that Article 5 of the Limitation Act, 1963 clearly states that a suit for an account and a share of profits of a dissolved partnership can be filed within a period of three years from the date of dissolution and having regard to the fact that the firm stood dissolved with the death of Deokinandan in July, 1997 or latest on 6th December, 2010, consequent upon the death of Kishorilal, the present claim is barred by limitation.
It is submitted that the right to sue for accounts and other reliefs accrued in favour of the plaintiffs soon after Chiranjilal died and in any event, in terms of Clause 6 of the deed of 1943 the estate of the deceased partner shall be entitled to receive and be responsible for all profits and losses of the partnership for the end of the accounting period as the case may be which are sought to be enforced almost after thirty yeaRs.The plaintiffs are now seeking to enforce the said right which is ex facie time barred since Chiranjilal died on 31st December, 1981.
In any event, no claim could have been made after 12th July, 1997 when Deokinandan died.
The plaintiff cannot defer its cause of action.
It is submitted that none of the plaintiffs ever claimed that he was entitled to receive and are responsible for the profits and losses up to the end of the accounting year during which their predecessor died as per Clause 6 of the reconstituted deed of partnership.
There is no assertion to that effect on the plaint.
The plaintiffs are admittedly not partners of the firm.
Although, the plaintiffs admit that the proceeding for acquisition of the Bhagalpur Land has been continuing since 1981 but the plaintiffs did not take any steps to claim any portion thereof.
The averment that the judgment and order dated 17th August, 2015 by the Hon’ble Supreme Court directing initiation of fresh acquisition proceeding of the firm’s Bhagalpur Land cannot give rise to a cause of action for the plaintiffs especially since the rights of the plaintiffs stood extinguished long time back.
It is submitted that the plaintiff cannot at this stage claim any declaratory reliefs as their right, if any, were extinguished long time back.
Per contra Mr.Anindya Kr.
Mitra, the learned Senior Counsel appearing on behalf of the plaintiffs submits that the argument of the defendants proceeds on the basis that the firm “Soorajmull Nagarmull” has been dissolved.
It pre-supposes that all necessary acts related to or connected with such dissolution are complete.
The argument on behalf of the defendants suffers from serious misconception of the Indian Partnership Act, 1932.
It is submitted that although Deokinandan Jalan died in July, 1997 and the firms stood dissolved, no steps were taken by the partners of the firm for dissolution of the firm.
Mr.Mitra has distinguished “dissolution” and “winding up”.
It is submitted that unless the winding up of the firm is complete, the firm is not dead in the eye of law.
Dissolution leads to winding up.
The plaintiffs as legal representative of the deceased partners are entitled to their share of profits corresponding to the interest of the deceased partners in the partnership till the accounts are settled.
If a partnership business is continued after the termination of the partnership by the death of one of the partners the representative of the deceased partners are entitled to have accounts taken of the partners subsequent to his death until it is final dissolution on the footing that they had the same share as a deceased partner had in the business.
It is submitted that in the suit a decree for dissolution for firm “Soorajmull Nagarmull” has been prayed by the legal representatives of the deceased original partners in the shares of the said original partneRs.The Bhagalpur property is an asset of the partnership firm and not of any individual partner.
As long as the dissolution does not take place, the plaintiffs would be entitled to their shares in the amount to be received by the partnership as compensation and from the Bihar Government on the accounts being settled and upon discharge of the liabilities.
This relief is based on Section 46 of the Indian Partnership Act, 1932.
It is submitted that Section 46 recognised that even a representative of the deceased partners will have the right to have the property of the firm applied in payment of the debts and liabilities of the firm and to have the surplus distributed among the partners or their representatives according their rights.
It is submitted that the Indian Partnership Act, 1932 recognise that all partners are joint owners of all property originally brought into the partnership stock or brought with the money belonged with the partner or acquired for purpose of the partnership business.
All such property called partnership property.
The share of each partner in the partnership property is the value of its original contribution increased or diminished by his share of profit and loss and partners are entitled to share equally in the profit of the partnership business and must contribute equally towards the losses assessed by the partneRs.It is submitted that the authorities on the subject clearly recognise that the right of the representatives of deceased partners is one of property and does not rest merely on contract and that the surviving partners who have the right and duty to realise the partnership property held fiduciary relationship towards the deceased partners’ representatives as regards his interest in the partnership property though the later have no such right in any individual assets of the partnership property as will entitle them to interfere with the surviving partner’s right to deal with and dispose of any such assets in the purpose of realisation.
Mr.Mitra has referred to Section 37 of the Indian Partnership Act, 1932 and submits that if at the trial it is established that notwithstanding the death of Deokinandan Jalan, the surviving or continuing partners carry on the business of the firm with the property of the firm without any final settlement of accounts as between them and the representative of the deceased partner or his estate then, the estate of the deceased partner is entitled to maintain a suit for the rendition of accounts and for dead partner’s share in profits of the business under Section 37 and the suit of this nature was held to be competent by a Division Bench Judgment of the Punjab High Court in P.S.Nagaranjan v.
Robert Hotz reported at AIR1954Punjab 278.
Mr.Mitra has referred to the judgment of the Hon’ble Supreme Court in Addanki Narayanappa and Anr v.
Bhaskara Krishnappa and ORS.reported at AIR1966SC1300in which Sections 14,15, 29, 32, 37, 38 and 48 of the Indian Partnership Act were elaborately discussed.
It is submitted that in the said decision it has been clearly stated that whatever may be the character of the property which is brought in by the partners when the partnership is formed or which may be acquired in the couRs.of the business of the partnership it becomes the property of the firm and what a partner is entitled to is his share of profits if any, accruing to the partnership from the realisation of this property and upon dissolution of the partnership to a share in the money representing the value of the property.
It is submitted that notwithstanding the death of one or few of the partners the firm was not dissolved.
A reading of Sections 40, 45 to 48 of the Partnership Act would show that mere dissolution of the firm is in reality the inception or the starting point of the process by which the legal existence of the firm comes to an end and not an extinction of the firm per se.
Mr.Mitra submits that this submission finds support in the decision of the Special Bench of the Allahabad High Court in Narendra Bahadur Singh v.
Chief Inspector of Stamps U.P.reported at AIR1972Allahabad page 1.
It is submitted that the main contention of the applicants is that the suit is expressly barred by the laws of limitation.
The applicants have erroneously applied Section 5 and Section 58 of the Limitation Act, 1963 without realising that so long the firm is not dissolved the right of the representation of the deceased partner to receive the share of the deceased with the corresponding liability continues and it was for that purpose a suit for dissolution has been filed.
Mr.Mitra submits that the dispute arose when the defendants want to deny the plaintiff’s share of profits in the business and trying to represent the firm before the collector and also before judicial authorities to receive the compensation to the exclusion of the plaintiffs.
The plaintiffs are equally entitled as that of the defendants to claim their share in the profits as well as liabilities of the firm to the extent of their shares.
Moreover, by reason of the death of Kishorilal Jalan the power of attorney given by him in favour of comes to an end and Sudhir cannot represent the firm.
The conduct of the partners would clearly show that the dissolution is not complete and the accounts are not yet settled.
Mr.Mitra has referred to two Division Bench judgments of our Court in Haramohan Poddar & ORS.versus Sudarsan Poddar reported at AIR1921Cal 538 and Govindoss Krishandoss versus The Official Assignee of Madras & ORS.reported at 38 CWN1018and a Privy Council judgment in Haji Hedayetulla versus Mohamed Kamil & ORS.reported at 1924 PC93for the proposition that Section 5 of the Limitation Act would not apply for dissolution of a continuing partnership.
It is submitted that since the partnership firm was and is continuing its business reliance upon Section 5 of the Limitation Act, 1963 is totally misplaced.
It is submitted that the business of the partnership firm is to be regarded up to the final decree as a continuing business although it may be contended that the partnership firm was dissolved in 1997.
Mr.Mitra has, however, categorically submitted that the dissolution of the partnership firm had not taken place and in any event the plaintiffs are not precluded from making out an alternative case on facts and it is only at the time of trial of the suit, the plaintiffs may be asked to elect.
In any event, a suit for taking the accounts of a partnership would not be barred unless the defendant makes out that there has been a dissolution of the partnership more than three years prior to the institution of the suit.
Mr.Mitra submits that a plaint cannot be dismissed at this stage merely because two sets of facts may appear to be conflicting or inconsistent although they are not.
The Court is required to take into consideration the frame of the suit and find out if any one of the clauses of Order 7 Rule 11 applies in the instant case.
Mr.Mitra submits that on reading of the plaint it cannot be said the suit is expressly barred by the laws of limitation.
In as much as the question of limitation is a mixed question of law and fact and the said issue cannot be decided in this proceeding.
Mr.Pratap Chatterjee, learned Senior Counsel representing the plaintiffs in supplementing the argument made by Mr.Anindya Kumar Mitra, Senior Advocate has referred to various sections of the Partnership Act and submits that the cause of action, in the instant case, arose when the defendants have refused to share informations with regard to Bhagalpur property and started claiming the partnership business and partnership properties to the exclusion of the plaintiffs.
It is submitted that the rights and liabilities of the partners or their legal representatives in respect of the partnership property would be discharged only when the firm is finally wound up and the properties of the firm are distributed.
Mr.Chatterjee has referred to Section 37 of the Partnership Act and submits that the said section bars the rights of the outgoing partner in certain cases to claim shares to subsequent profits.
So long the firm is not finally wound up the usufruct of the Bhagalpur property are required to be taken to the stock of the partnership and the compensation amount receivable are required to be distributed after meeting the liabilities.
The cause of action for the suit, according to Mr.Chatterjee, did not arise with the death of the predecessors of the plaintiffs.
It is submitted that each time the right of the plaintiffs to claim a share in the partnership is opposed and/or denied it gives a fresh cause of action to the plaintiffs and it is a continuing cause of action within the meaning of Section 22 of the Limitation Act.
The partners under the Partnership Act are required to follow and discharge certain statutory duties and obligations.
Since the defendants are acting in breach of their statutory duty and it is a tortious act, there is a continuous and running cause of action within the meaning of Section 22 of the Limitation Act.
Mr.Chatterjee refers to Form No.21 and Form No.22 of Schedule B of the Code of Civil Procedure and submits that the business of partnership firm can be continued after the death of a partner or partners and the partnership business in such a situation is regarded as continuing business till final decree is passed in the suit in the manner as indicated above.
It is argued that under Section 37 of the Partnership Act, there would be no question of limitation until final dissolution, that is, winding up of affairs of the firm.
A partnership firm is not extinct upon dissolution.
The firm continues until winding up.
If no accounts of a dissolved partnership had been taken and there is no contest that the partners have squared up then the remedy open to any of the partners or their legal representative was only to have the accounts of the partnership taken when an asset belonging to the partnership had been realized.
If at the time of settlement of accounts an asset was not taken into consideration such an asset ought to be divided between the partners when it falls in.
Mr.Chatterjee, in this regard, has referred to the decisions of the Hon’ble Supreme Court in Sreedhar Govind Kamerkar versus Yeshwant Govind Kamerkar & ORS.reported at (2006) 13 SCC Paragraphs 35 to 38, Bengal Waterproof Limited versus Bombay Waterproof Manufacturing Company and Anr.
reported at (1997) 1 SCC99Paragraph 10, K.
Ramadas Shenoy v.
Chief Officer, Town Municipal Council, Udipi & ORS.reported at (1974) 2 SCC506Paragraph 24, C.
Natarajan versus Ashim Bai & Anr.
reported at AIR2008SC363Paragraph 19.
Mr.Chatterjee submits that difficult questions of law and fact cannot be decided at the preliminary stage.
A plea of limitation cannot be decided as an abstract principle of law diveRs.from facts as in every case the starting point of limitation has to be ascertained which is entirely a question of fact.
A plea of limitation is a mixed question of law and fact.
Mr.Chatterjee has referred to D.
Ramachandran versus R.V.Janakiraman reported at (1999) 3 SCC267 Paragraphs 8 and 19 to submit that it is well-settled that in all cases of preliminary objection, the test is to see whether any one of the reliefs prayed for could be granted to the applicant if the averments made in the plaint are proved to be true.
For the purpose of considering a preliminary objection, the averments in the plaint should be assumed to be true and the court has to find out whether those averments disclose a cause of action or a triable issue as such.
The Court cannot probe into the facts on the basis of the controveRs.raised in the counter.
It is elementary that under Order 7 Rule 11(a) of the Code of Civil Procedure, the Court cannot dissect the pleading into several parts and consider whether each one of them discloses a cause of action.
Under the Rule, there cannot be a partial rejection of the plaint or petition.
The decision of our Court in Union of India versus Kamal Kumar Goswami reported at AIR1974Cal 231 has been relied upon in support of the submission that issue of limitation like an issue of jurisdiction should not be restricted to the averments made in the plaint alone.
This submission is made in order to impress upon the Court that the documents relied upon in the affidavit-in-opposition by plaintiff which apparently shows that notwithstanding the death of each of the plaintiff’s predecessors till about 2005, the assets of the deceased partners were treated to be entitled to the capital and profits of the firm in its balance sheets.
Mr.Chatterjee has relied upon those balance sheets to show that notwithstanding the death of each of the partners of the reconstituted firm, the profits and losses of the firm were not computed or distributed to the estate of the deceased partners on the end of the accounting period of the year during the death of each of the partners and on the contrary year after year carried forward.
On such considerations the plaintiffs have prayed for dismissal of the demurrer application.
In reply Mr.Banerjee, the learned Senior Counsel has distinguished the several decisions relied upon by the plaintiffs.
It is submitted that most of the decisions cited are actions taken after dissolution of the firm.
The defendants have never argued that the firm stood dissolved and further it is also plaintiffs’ case in the plaint that the firm is continuing.
The plaintiffs were never interested to represent the firm at any point of time in 1981, 1982 and 1997.
In fact, in C.
Ashim Bai & Anr.
reported at AIR2008SC363Paragraph 7, the Hon’ble Supreme Court of India held that the question as to whether the suit is barred by limitation or not would depend upon facts and circumstances of each case and for that purpose the averments made in the plaint are only relevant.
The averments in this case ex facie make the plaint barred.
The decision in Nilmadhab Nandi & ORS.versus Srimati Nirada Sundari Dasi reported at 45 CWN1065is distinguished by submitting that the said decision was rendered on interpretation of Section 37 of the Partnership Act.
Section 37 only applies in the absence of the contract to the contrary.
In this case partnership was dissolved and business was continued by the partneRs.The case follows the Privy Council decision mentioned at page 1067 of the report, in which the partnership was terminated.
Therefore, this case also decides on rights of partners after dissolution.
Section 37 has no application when there is a contract to the contrary.
There is no dissolution of the firm and the firm’s business has continued without dissolution.
It is submitted that it is quite apparent that the plaintiffs, according to their own admission, are not partners of the firm and since they have not sought for any accounts within one year from the death of their respective predecessORS.there is no question of dissolution of said registered partnership firm at their instance.
It is submitted that the judgment and order of the Hon’ble Supreme Court dated 17th August, 2015 cannot give rise to a cause of action for the plaintiffs in view of the fact that the rights of the plaintiffs, if any, stood extinguished long time back.
‘Partnership’ is the relation which subsists between persons carrying on a business in common with a view of profit.
There are three essential elements in a partnership, namely, (1) There must be an agreement entered into by all the persons concerned; (2) the agreement must be to share the profits as well as the losses of the business; (3) the business must be carried on by all or any of them acting for all.
(See AIR1979SC1250 AIR1985SC1143 (1971) 2 SCC873 and AIR1973Cal 193).The partnership agreement is the source of partnership.
The partnership property belongs to all the partnership constituting the firm.
A partnership firm is not a distinct legal entity and the partnership property belongs to all the partners constituting the firm.
A firm under the general law has no distinct legal entity and has no legal existence of its own.
Section 5 of the Indian Partnership Act recognizes that the relation of partnership arises from contract and not from statute.
It arises only from a voluntary agreement and is not created by statute or obtained by birth.
There are few provisions in the Partnership Act that are mandatory like Section 9 which requires ever partner to carry on the business to the greatest common advantage to be just and faithful to each other and to render all accounts and full information of all things affecting the firm to any partner or its legal representative.
The underlying principle is that a partner should make a full disclosure and are not concealed.
Similarly, Section 10 requires every partner to indemnify the form for any loss caused to it by its fraud in conduct of the business of the firm.
This section is Section 11 provides that subject to the provisions of the Partnership Act, the mutual rights and duties of the partnership may be determined by contract between the partners and such contract may be expressed or may be implied by a couRs.of dealing.
The opening words of the Section “subject to the provisions of this Court” plainly mean that the relation of partners shall be governed by contract, unless the contract is prohibited by any provision in the Act.
A partnership contract must be subject to the provisions of the Act and in case of violation of any mandatory provisions of the Act, the contract shall not prevail.
Consequently, a provision for arbitration in partnership agreement is neither illegal nor invalid and the partners may be debarred from bringing a suit for dissolution as held by our Division Bench in Sailendra Nath Komar & ORS.versus Chillar Ram & Anr.
reported at AIR1955Cal 251.
The qualifying words also refer to cases where the court interferes in spite of any agreement between the partneRs.e.g., where the Court dissolves a partnership before the expiration of the agreed term.
Similarly, Section 37 of the Partnership Act uses the expression “in the absence of a contract to the contrary” in the context of the right of the outgoing partner in certain cases to share subsequent profits.
The Hon’ble Supreme Court in Laxmidas Dayabhai Kabrawala versus Nanabhai Chunilal Kabrawala reported at AIR1964SC11has held that the said section lays down substantive law relating to the liability of a surviving partner, who, without settlement of accounts with legal representatives of deceased partner (or other outgoing partner).utilises assets of partnership for continuing business as his own.
It has also been held that the rule embodied in this section is only a branch of a well-recognized equitable doctrine that if a trustee mixes the trust fund with his own moneys and employs both in a trade of his own, the cestui que trust may either claim a proportionate share of the profits or interest on the amount of trust funds so employed.
Where any member of a firm dies or otherwise ceases to be a partner as a result of retirement, expulsion, insolvency or any other cause and the surviving or continuing partners carry on the business with the property of the firm without any final settlement of accounts it is only just and equitable that the estate of such deceased partner or the partner himself as the case may be should be entitled to share in the profits that may have been earned by the business by use of the property of the firm between the date of his death or otherwise ceasing to be partner and the date when final accounts are made up.
Since the right of the deceased or outgoing partner is depending on surviving or continuing partner carrying on business of the firm with the property of the firm, the claimant would be required to establish that the business of the firm has been carried on by partners notwithstanding the dissolution.
The partnership property vests in all the partners and every partner has an interest in the assets of the partnership.
However, during the subsistence of the partnership no partner can deal with any portion of the partnership property as his own.
In the absence of any contract to the contrary, partners are entitled to share equally the profits and must contribute equally to the losses of the partnership.
Section 17 of the Partnership Act gives general rules for the determination of the rights and duties of the partners after the happening of events which would otherwise leave these rights and duties undetermined.
The right and/or the option conferred by the provisions of Section 37 on the estate of the deceased partner cannot be properly exercised until the account of the subsequent business are made available and as such the estate of a deceased partner is not bound to make the election until the profit earned in respect of the share of the deceased partner is ascertained.
On dissolution of the firm, they will be entitled to exercise their option conferred by Section 37 when the accounts of the dissolved firm would be taken in accordance with the provisions of Section 48 of the Partnership Act; (See Tilokram Ghosh v.
Gita Rani, AIR1989Cal 254(258).In the P.S.Nagaranjan (supra) the Hon’ble Division Bench was considering the right of the heirs of the deceased partners to claim a share in the profits of the partnership business where it is continued by the partner’s share.
The plea of limitation was also considered.
In dealing with the fiRs.issue it was held that a partner may sue for rendition of accounts under Article 106 of the Limitation Act, 1908 which corresponds to Section 5 of the present Act within 3 years from the date of dissolution.
This is a right given to a surviving partner.
For the period after the death of a partner it is plain that the said Section cannot apply as the deceased partner cannot be said to have the right to institute the suit because it is only his death which entitles his legal representative to bring the suit.
In the present case if it is assumed that the partnership stood dissolved on the death of Deokinandan Jalan and accounts are sought for the subsequent period in view of the continuation of the partnership business the cause of action would continue from day to day as long as the business continued and the firm continued to make profits and the plaintiffs’ are entitled to claim the deceased partner’s share in the profits.
It is a cardinal principle of pleadings and proof that the plaintiff must succeed on the strength of its own case and not on the weakness of the defendant’s case.
It is for the plaintiff to prove that notwithstanding the dissolution in 1997, the firm continued with its partnership business.
It is not in dispute that the present partnership is a partnership at will.
A partnership is at will where no provision is made by contract between the partners for the duration of their partnership or for the determination of their partnership.
The plaintiff has given two versions on the issue of dissolution.
The fiRs.version of the plaintiff is that firm stood dissolved in 1997 with the death of Deokinandan.
However, at a later stage of the pleading, the plaintiffs assert that the firm is still continuing.
The plaintiffs’ case of dissolution appears to be extremely weak but that is not the consideration for a plaint to be rejected on that ground.
The plaint is required to be read as a whole.
The character of any particular asset of the partnership has little to do in ascertaining the share to which a partner or his representative is entitled to the property of the firm on dissolution and accordingly it cannot be urged that where the assets of the firm consists of immovable property, they will not be governed by Article 5 of Limitation Act, 1963.
But where the claim relates not to the share of the dissolved firm, but to the profits made by the use of their assets, in that case, Article 5 will not apply since the cause of action continues from day to day as long as the business continues and the firm made profits utilize of the deceased partners’ assets in the business.
There is no dispute that the firm is the owner of the Bhagalpur property.
The defendants admitted that the firm is continuing.
In the plaint although there is an averment in Paragraph 8 that the firm stood dissolved in 1997, but in Paragraphs 12, 13 and 14 it is stated that the firm is still continuing and is still represented by Sudhir Jalan.
The applicants also admit that the firm is not dissolved and is still carrying on business.
Article 106 of the Indian Limitation Act, 1908, corresponds to Article 5 of the present Limitation Act, 1963.
That article provides that the suit for an account and a share of the profits of dissolved partnership firm must be instituted within three years from the date of the dissolution.
This section applies only to a dissolved partnership.
It is obvious that limitation cannot apply so long as the partnership continues.
The plaintiff alleged that the firm continued notwithstanding dissolution as the land acquisition proceeding of the Bhagalpur property of the firm was pending and this fact the plaintiffs shall be able to prove at the trial of the suit.
An agreement may be proved by an express declaration to the effect or may be determined from the conduct of the parties.
In paragraphs 8 to 13 of the plaint, such assertions have been made.
Moreover, a suit for taking the accounts of a partnership would not be barred unless the defendant makes out that there has been a dissolution of the partnership more than three years prior to the institution of the suit.
The onus of making out such dissolution is upon the defendant and the mere fact that after a particular date no further business was done will not amount to a dissolution of partnership.
(See Samuel Nadar versus Thangayya Nadar, AIR1942Madras
104) For rejection of plaint under Order 7 Rule 11 only contents of the plaint have to be seen and read as a whole and nothing else.
As long as the plaint discloses cause of action, mere fact that plaintiff may not succeed in suit cannot be ground for rejection of plaint.
The decisions cited by the applicant with regard to the non-production of the agreement in support of Paragraph 6 of the Plaint, is a matter of proof and evidence which has to be assessed at the trial of the suit.
A plaint cannot be defeated due to lack of proof at this stage since in deciding an application in the nature of demurrer, the Court is not supposed to assess as to whether the plaintiff would be ultimately able to prove its case.
There is a distinction between lack of pleading and lack of proof.
A plaint must fail if there is a lack of pleading leading to non-disclosure of a cause of action.
Under such circumstances, the applications being G.A.No.1688 of 2017 and G.A.No.1571 of 2017 stand dismissed.
It is, however, made clear that the observations made in the order are only for the limited purpose of deciding the applications and shall not be construed as a final expression of opinion on the merits of the dispute between the parties.
However, there shall be no order as to costs.
Urgent Photostat certified copy of this judgment, if applied for, be given to the parties on usual undertaking.
(Soumen Sen, J.)