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K.T. Abdul Badsha Saheb and anr. Vs. Century Wood Industries - Court Judgment

LegalCrystal Citation
SubjectCommercial
CourtKarnataka High Court
Decided On
Case NumberSecond Appeal No. 290 of 1949-50
Judge
Reported inAIR1954Kant33; AIR1954Mys33; ILR1953KAR427
ActsPartnership Act, 1932 - Sections 4 and 69(2); Hindu Law; Mahomedan Law
AppellantK.T. Abdul Badsha Saheb and anr.
RespondentCentury Wood Industries
Appellant AdvocateA. Viswanatha Iyer, Adv.
Respondent AdvocateD. Srinivasiah, Adv.
Excerpt:
.....to acquire the properties in shares leaving each of them to do whatever he liked with his share, that will not amount to partnership. nor can it be truly said that any analogy exists between this case and the well-known cases in bankruptcy where, one partner, a trustee, having employed trust moneys with the knowledge and consent of his co-partners in the partnership business, joint debt is contracted by all the partners. 5. a contention was raised that the brothers are carrying on business as in the case of a joint hindu family and that it is not unusual in these parts that muslim brothers behave like hindu brothers. ' these observations are clearly applicable to the facts of the present case and it is clear that the concern of the plaintiffs is one of partnership......not a firm in the strictest sense of the word and that though their company is not registered the suit filed by them is tenable. both the courts below have dismissed the suit on the ground that the plaintiffs' company is a firm and that it ought to have been got registered and as the same is not registered the suit is not maintainable.2. the main point for consideration is whether the concern run by k.t. abdul badsha saheb and his brother k.t. abdul rasheed under the name and style k.t.a. rasheed & coy., is a firm of partners or not. according to the evidence of k.t.a. rasheed, the two brothers are living together and have not divided the properties which jointly belong to them. the two brothers sold a garden of theirs for rs. 5,000/- and invested this sum in business. he states that.....
Judgment:

1. The plaintiffs styling themselves as K.T.A. Rasheed & Coy.' by partners K.T. Abdul Badsha Saheb and K.T. Abdul Rasheed filed a suit against the defendant-respondent for recovery of some money due in connection with their having supplied some poles. Among other grounds the defendant intended that the firm of the plaintiffs was not registered in the books of the Registrar of Firms as required under the Partnership Act and that the suit is, therefore, not maintainable under Section 69(2), Partnership Act. The plaintiffs on the other hand contend that they are the sole-proprietors of the business which is not a firm in the strictest sense of the word and that though their company is not registered the suit filed by them is tenable. Both the Courts below have dismissed the suit on the ground that the plaintiffs' company is a firm and that it ought to have been got registered and as the same is not registered the suit is not maintainable.

2. The main point for consideration is whether the concern run by K.T. Abdul Badsha Saheb and his brother K.T. Abdul Rasheed under the name and style K.T.A. Rasheed & Coy., is a firm of partners or not. According to the evidence of K.T.A. Rasheed, the two brothers are living together and have not divided the properties which jointly belong to them. The two brothers sold a garden of theirs for Rs. 5,000/- and invested this sum in business. He states that there is no partnership agreement between them, but he admits that it he and his brother have to divide the profits, each of them will get half the profits. They have been acquiring properties jointly for the benefit of both of them. In cross-examination it has been elicited that either one or the other brother might take a loan and that payment may be made by either of them.

3. What has to be considered in this case iswhether under the circumstances referred toabove, it could be said that the concern run byK.T. Abdul Badsha Saheb and K.T. AbdulRasheed is a partnership concern. According toSection 4, Partnership Act,

' 'Partnership' is the relation between personswho have agreed to share the profits of abusiness carried on by all or any of them acting for all.'

The first point to be noticed in this definition is that before we think of partnership there should be a relationship between two or more persons. The second point that will be noticed is that these persons must run a business. Thirdly, the business must be run by them with the intention of realising profits. Fourthly, it is not sufficient if the profits are intended to be taken exclusively by one of the partners. The agreement must be that every one of the partners should share the profits. The last but not the least of the points that have to be borne in mind is whether there was an agreement between the parties that the business should be run by all or any one of them acting for all.

In this case it will be noticed that the concern is run by more than one person. Admittedly the plaintiff-company is running a business. It is not disputed that their intention is to realise profits. What is contended is that they have at no time divided the profits and that it is possible they may never divide in their lifetime. But it is admitted that in case they divide, each will get half a share in the profits. As regards the last point, the evidence referred to above shows that one of the two is acting for both either in borrowing money for the concern or in discharging the loan. In fact it will be noticed that the suit transaction was entered into by one of the partners and the other brother K.T. Abdulla examined as third witness for the plaintiffs clearly admits that he does not know anything about the suit transaction.

It is thus clear that all the conditions referred to above are fulfilled and if at all the only point in respect of which there is some difference of opinion between the parties is that there was at no time division of profits, it may happen that they never divide profits; but it has to be remembered that what the section requires is not actual division of profits; but parties agreeing to share the profits. It is not contended that the profits of the business hava to be taken exclusively by one of the brothers; and it is clear that the profits have to be shared by both and that at such a time as the parties might think of dividing, however remote that time might be, the two brothers are entitled to divide the profits.

4. Sri Viswanatha lyer, the learned counsel for the appellant could only say that the relationship between the two brothers is that of joint proprietors and it does not amount to one of partners. The distinction between co-owners and partners is that in the case of co-ownership the co-owners do not intend to carry on a business, still less do they intend to share the profits realised. On the other hand, in case of partnership concern they intend to carry on business with money or property which belongs to both of them. They intend to realise profits and share the same. If two or more persons buy a land on joint account with the intention of having an interest according to the amounts invested by them they arc merely co-owners. They do not become partners merely because they are entitled to share the income they get according to their shares.

On the other hand if two or more persons put together certain amounts of money in certain shares for the purpose of purchasing properties and selling them for profits for common benefit, it has to he said that such a business amounts to a partnership concern. That is if two or more parsons expressly acquire property for the purpose of joint business they bring the property into partnership stock and they become partners. If, however, by the agreement the parties merely intend to acquire the properties in shares leaving each of them to do whatever he liked with his share, that will not amount to partnership. In this connection it is Useful to notice the following observations made in the decision reported in -- 'London Financial Association v. Kelk' (1883) 26 Ch. D. 107 at p. 143 (A):

'One of the charges pressed by the plaintiffs was that the directors by entering into the agreement of August 1865 had committed the Association to a partnership with Mr. R, and Messrs. Kelk & Lucas, and that they had, in this respect violated and exceeded the terms of the memorandum, and had exposed the assets of the Association to the risks attendant upon a partnership. It does not appear to me that either in law or in fact any kind of partnership was created. Each of the three parties was entitled under the contract to an undivided share in the subject. Each paid for that share with individual separate money. The three had, no doubt, in a sense, a common interest in the subject, but no one of the essential elements of a partnership was found to exist in the case, for no one of them could interfere with either of the others in whatever disposition the other might make of their separate shares, nor could the death or bankruptcy or transfer or devolution of the shares of any one of the parties affect the rights of the others; neither of them could object to the introduction of any other person, or be liable in respect of any debt or engagement of the others.

Nor can it be truly said that any analogy exists between this case and the well-known cases in bankruptcy where, one partner, a trustee, having employed trust moneys with the knowledge and consent of his co-partners in the partnership business, joint debt is contracted by all the partners. Here the only money furnished by the directors was for the purchase of the separate share acquired by them, while each of the parties dealt only with their own moneys and each of them acquired rights and interests wholly distinct from those of the others.'

In this case a property which belonged to the two brothers was sold for Rs. 5.000/-. This sum was invested for running a business with the idea of realising profits to be shared by both. They were co-owners of the property sold and in the amount realised, but when the amount which belonged to both of them was invested in a business with the intention of realising and sharing the profits and when they agreed that both of them should carry on the business and that each of them should carry it on behalf of the other, as is clear by the evidence of the two brothers, their association or concern is one of partnership.

5. A contention was raised that the brothers are carrying on business as in the case of a joint Hindu family and that it is not unusual in these parts that Muslim brothers behave like Hindu brothers. But there is no evidence to show that by custom, Hindu Law is applicable to the plaintiffs. As observed in -- 'Mahomed Abdul Rahim v. Mahomed Abdul Hakim' AIR 1931 Mad 553 (B), relied on in the course of arguments:

'It is not an uncommon thing in the Madras Presidency where members of a Mohamedan community live surrounded by Hindus that they absorb and adopt Hindu social ideas and tend to look on their own social customs from a Hindu point of view. It is very common in the Madras Presidency for descendants of Mahomedans to live and trade together and the property of the ancestor is then held by the several members of the family in the shares to which they are entitled under the Mahomedan law.....

Where the descendants of a deceased Mahomedan live and trade together and the property is held by the several members according to their shares under Mahomedan law, the Court in a suit for profits by the other members of the family will not obviously apply Hindu Law, but that is not the proper way to decide cases of such kind though it may be the way of least resistance. Such cases are not problems of law nor does their decision depend upon the ideas of law which the parties have put in their pleadings but are concerned with questions of fact and have to be decided on the facts.'

In this case no question of any family property arises and no question of the property of minors or persons who have not actually come to an agreement to run the business for purposes of trade is involved. This is a case of two brothers agreeing to use their joint funds for purposes of running a business for profit for the benefit of both. It may or may not be true that there was no express agreement between the brothers but there is hardly any doubt that there was implied agreement between them to run a business for profit to be shared by both, each acting lor the other in running the business. As observed in -- Haji Isa Haji Noor Firm v. Sam Bai' AIR 1938 Nag 324 (C) by Vivian Boss J. which was a case in which two members of a Mohamedan family were found to be running a business as in this case;

'An agreement of partnership need not be express. It can arise out of a mutual understanding evidenced by a consistent course of conduct, and indeed, by the express admission of the parties concerned.'

It is also observed in that case as follows:

'When more than one businessman associate together for the purpose of carrying on a business, it is legitimate to infer that they are not doing it for philanthropic purposes but intend to make a profit out of it; also that they all intend to share in the benefit of the proceeds. The person who actually conducts the business acts on behalf of all his associates, that is to say, on behalf of all who are joint proprietors with him. He does not act for his own separate and exclusive benefit. His intention is obviously to further the business as a whole for the benefit of all who own the concern.'

These observations are clearly applicable to the facts of the present case and it is clear that the concern of the plaintiffs is one of partnership. The lower Courts were therefore light in dismissing the suit on the ground that the suit is not maintainable as the plaintiffs' firm was not registered in the books of the Registrar of Firms, as required under the Partnership Act.

6. During the course of the suit the plaintiffs who filed the suit as partners supplied for amendment and this was allowed and with the amendment the name of the plaintiffs' concern was changed as K.T.A. Rasheed & Coy., by its proprietors K.T. Abdul Badsha Saheb and KT. Abdul Rasheed. It is clear even here that the suit continued to be by K.T.A. Rasheed & Coy., by its proprietors. It need hardly be said that partners of a firm are also its proprietors. However when this appeal had to be filed it was realised that the suit should have been filed in the name of the two brothers, if necessary, by describing them as proprietors of the company, and in fact the appeal was filed by 'K.T.A. Abdul Badsha Saheb and K.T. Abdul Rasheed, proprietors of K.A. Rasheed & Coy.'.

If it was intended that the suit should be filed by the two brothers & not by the company, this is no doubt the correct form in which they should have described themselves in the plaint. It is rather strange that an amendment was not sought for in the form in which the appeal is now filed. However, though the suit has been filed in the name of the firm the appeal has been filed by the two brothers in their individual capacity and a question was raised that the appeal is not maintainable as it was not filed by the company who was the party to the suit and the regular appeal filed in the first appellate Court.

To rectify this defect an application has been filed to restore the name of the company by its proprietors as the plaintiff-appellant. The proper thing for the appellants to do was to file the appeal in the name of the company as it stood alter amendment in the trial Court and then to seek for the amendment to substitute the names of the brothers as plaintiffs. No purpose is gained by allowing the amendment now sought for and alter all irrespective of the amendment the main question is whether the two brothers are partners of a firm and it has been held that they are. Therefore no useful purpose is served by any amendment as even if the amendment is allowed it would be of no help to the plaintiffs.

7. In the circumstances, the appeal stands dismissed with costs. The application for amendment is also dismissed.

8. Appeal and application dismissed.


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