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Jubedabi Kom and ors. Vs. Jainabi Kom and ors. - Court Judgment

LegalCrystal Citation
SubjectCommercial
CourtKarnataka High Court
Decided On
Case NumberSecond Appeal No. 118 of 1971
Judge
Reported inAIR1975Kant7; ILR1974KAR1473; 1975(1)KarLJ66
ActsIndian Partnership Act, 1932 - Sections 13 and 48; Code of Civil Procedure (CPC), 1908 - Sections 34; Madras Motor Vehicles Act
AppellantJubedabi Kom and ors.
RespondentJainabi Kom and ors.
Appellant AdvocateN.A. Mandagi, Adv.
Respondent AdvocateS.L. Benadikar, Adv.
Excerpt:
.....fail since the amounts invested as capital form items of account between partners so that when a suit for accounts fails, they cannot be the subject-matter of independent adjudication as amounts recoverable apart from accounting. but assuming that the books cannot be obtained or utilized, still an account must be taken of the partnership and of the property if any, still belonging to the partnership, in the best manner the court can arrive at. on failure of the defendant to produce the relevant books etc. it was held that an adverse inference could only have been drawn against the plaintiffs-respondents if the appellant had asked the court to order them to produce the accounts and they had failed to produce them after admitting that the accounts were being kept. the commissioner did..........of the defendant, namely, his widow, has wilfully withheld the books of account relating to the suit partnership business which were maintained by her husband and which had come into her custody after his death. this is a finding of fact which is not liable for interference in second appeal. mr. mandagi, however, contended that an adverse inference should not have been drawn against the defendant in view of the joint memo, ext. 261, filed by the legal representative of the defendant as well as by the legal representatives of the plaintiff. his contention is that the plaintiff waived his right to insist upon an adverse inference against the defendant on account of the non-production of the account books by filing the above joint memo. but it is stated in the joint memo that the account.....
Judgment:

1. The appellants are the legal representatives of the deceased-defendant. The respondents are the legal representatives of the plaintiff. The plaintiff filed R.O.S. No. 120 of 1952 in the Court of the Civil Judge, Belgaum, for dissolution of partnership and accounts. The partnership was entered into in December, 1948. The partnership business related to excavation of Manganese ore extracted in Goa territory. The plain tiff and defendant each contributed Rs 8000/- and they agreed to share the profit and loss equally and the defendant had to keep the accounts of the business. The partnership business appears to have been carried on from 1949 to 1951. The plaintiff issued a notice in November, 19.51 to the defendant to render accounts of the partnership business. The defendant denied the existence of the partnership and also the investment of Rs. 8,000/- by the plaintiff. The trial court, after recording evidence, passed a preliminary decree on 30-8-1954. Mr. K. V. Kulkarni, pleader, Belgaum, was appointed as Commissioner to take accounts or the partnership business. The defendant appealed against the preliminary decree in Civil Appeal No. 457 of 1954. The appeal was partly allowed by the learned District judge who held that the liability to account related to the ore extracted from only one of the two hills and not from two hills as found by the trial court. The defendant filed second appeal before this Court namely, Second Appeal No. 32 of 1957 which was dismissed on 2-12-1960. The Commissioner submitted his report to the trial Court on 12-9-1964 stating that since neither party produced any evidence before him, he could not proceed with the work entrusted to him. On 16-12-1965 a joint memo was filed on behalf of the legal representatives of the plaintiff's as well as on behalf of the legal representatives of the defendant since both the parties had died by then, which is Ext. 261. It reads as follows:--

'Defendant (deceased) had not produced any accounts of partnership, His heir also has not produced the same. His heir also has no written account. They want to adduce only oral evidence in the case. The case may be decided on the oral evidence to be adduced by both the parties.' Thereafter, the oral evidence was recorded. The trial Court dismissed the suit. On appeal, the lower - appellate Court reversed the finding of the trial Court and held that the defendant is liable to refund Rs. 8,000/-the capital invested by the plaintiff. It passed a final decree in favour of the plaintiff for Rs. 8,000/- as well as interest thereon at the rate of 9 per cent from the date of the suit till realisation with costs throughout.

2. The finding of the trial Court before it passed the preliminary decree was that the defendant was keeping the accounts of the partnership business. Its finding also was that Rs. 8,000/- was contributed by the plaintiff to the partnership business as his share of the capital. These findings have been confirmed in the second appeal by this Court on 2-12-1960.

3. On behalf of the plaintiff some tip pans or chits were produced. The lower appellate Court held that they are not of much help in determining the dispute between the parties with regard to the partnership business. The oral evidence adduced on behalf of both the parties has been considered to be unsatisfactory by both thelower courts. The widow of the defendant stated in her evidence that the defendant was maintaining accounts of his other business and that the accounts books relating to those businesses had come into her custody subsequent to the death of the defendant, which was in 1957. But, she has stated that the defendant was not maintaining accounts with regard to the extraction of the ore from the suit mine and that she had not come into possession of any account books relating to the suit mine. She stated in her evidence that her husband was paying income-tax to the Government and the Government recovered Rs. 7,000/- as estate duty. She also admitted that the documents are in her custody to show that she had paid royalty of the mines in Shimoga District as well as the list of sales of manganese ore, The lower appellate Court, therefore, disbelieved her statement that she had no documents relating to the suit mining lease and the partnership business and that she has suppressed documents relating to the partnership business in order to de-fraud the plaintiff. The evidence adduced on behalf of the plaintiff was to the effect that the partnership business made a profit of Rs. 80,000/- per year and the lower appellate Court considered that evidence as improbable. It accordingly held that the defendant is liable to pay Rs. 8,000/, being the plaintiff's share of the capital invested by him.

4. It is contended by Mr. Mandagi, learned Counsel appearing for the appellants, that without taking accounts and without determining whether there was profit or loss it was not possible for the lower appellate Court to direct the refund of the plaintiff's share of the capital. He relied on Section 48 of the Indian Partnership Act which sets out the rules to be followed in settling the accounts of a dissolved firm. Under Clause (b), the rules for application of the assets of the firm are set out. It is Only after paying the debts of the firm to third parties and after paying to each partner rateably what is due to him from the firm for advances as distinguished from capital, that payment to each partner rateably what is due to him on account of capital is provided for. His contention is that the lower appellate Court has held that the oral evidence adduced by both the parties is unreliable and admittedly the accounts of the partnership firm had not been produced, and therefore it was not right in directing the payment of Rs. 8,000/- to the plaintiff.

5. He has relied on the decision in : AIR1966AP209 , Satyanarayana v. Appa Rao. In that case the suit was filed for dissolution and rendition of accounts of a partnership in motor transport. The partnership was held to be illegal and void ab initio as contravening the provisions of the Madras Motor Vehicles Act. It was held that the plaintiff's suit to recover the moneyadvanced by way of capital must also fail since the amounts invested as capital form items of account between partners so that when a suit for accounts fails, they cannot be the subject-matter of independent adjudication as amounts recoverable apart from accounting. The earlier decision of the same Court in : AIR1959AP647 , Peddi Virayya v. Subbarao was relied on. In that case it was held that a party to an illegal contract cannot invoke the aid of a Court to have such a contract carried into effect as law will not tolerate any party to violate any moral or illegal duties. As a corrollary from this principle, if money is advanced for a purpose which is either op posed to morals or law or in furtherance of an illegal transaction such advance is not recoverable having regard to the maxim ex turpi causa non oritur actio. But, in the present case there is no question of advancing money for any illegal or immoral purpose.

6. In (1881) ILR 7 Cal 428 (Ham Chunder Shaha v. Manick Chunder Banikya) the manner of taking accounts of a dissolved partnership has been set out and it has been observed as follows:

'Now, if it were the fact that the defendants were the principal occupants of the guddi, it might be inferred that they would be at least as equally responsible for the books as the plaintiffs. But assuming that the books cannot be obtained or utilized, still an account must be taken of the partnership and of the property if any, still belonging to the partnership, in the best manner the Court can arrive at. For example, if no books are forthcoming, the Court must call upon each party to furnish a statement of facts in respect of the business and its transactions, and to support such statement by evidence; and upon those statements of facts, as supported or contradicted by the evidence bearing thereupon, the Court must come to a conclusion and shape its decree accordingly.'

7. In : AIR1953Cal244 (Panmal Lodha v. Omraomal Lodha) the position in law where a decree for accounts has been made against a legal representative of the original accounting party, has been stated as follows:--

'(a) The legal representative must produce all the books of accounts, documents and vouchers kept by the deceased accounting party.

(b) He cannot however be compelled to explain or vouch for them. But if he is able to explain the account or any part thereof, or vouch for the account, or any part thereof he must do so.

(c) If the legal representative does not produce the books of accounts, vouchers or documents relating to the transactions or produce only a part, the Court will be at liberty to investigate and find out whether he is withholding the same and in the eventof a finding to that effect, draw such inferences as it thinks proper.

(d) If the books, documents and vouchers are produced, the plaintiff will be at liberty to prove that they are not the proper books, documents or vouchers or that the contents thereof are not correct, or that the items are not true. The onus would be upon him. In such a case, the legal representative can answer the challenge if he so chooses.

(e) If the books, documents and vouchers are not produced (either wholly or in part), the plaintiff will be at liberty to prove by secondary evidence or other evidence as to what he claims the dead accounting party to have realised or expended and the balance payable by him, for which the legal representative will be liable to the extent of the assets of the deceased in his hands. The onus of doing so will be upon him and the legal representative will have the right to adduce evidence in answer.' It has also been observed that the liability consequent upon accounting is not in any way affected by the death of the original accounting party, as the accounting party by his death cannot avoid liability or improve his account or make it more sacrosanct though his death may make inordinate difficulty for the other side to establish his wrong. From the above decision it is also clear that if the Court finds that the legal representative of the deceased accounting patty is withholding the books of account, vouchers or documents relating to the transactions or produces only a part of them, it can draw such inferences at it thinks proper. On failure of the defendant to produce the relevant books etc., the plaintiff will be at liberty to prove by secondary evidence or other evidence the liability of the deceased.

8. He has also relied on the decision in : [1967]1SCR153 (Ramrati Kuer v. Dwarika Prasad). In that case no attempt was made on behalf of the appellant to ask the Court to order the party in whose possession the accounts were to produce the same. It was held that an adverse inference could only have been drawn against the plaintiffs-respondents if the appellant had asked the Court to order them to produce the accounts and they had failed to produce them after admitting that the accounts were being kept. But no such prayer was made to that Court and it was held that no adverse inference could be drawn for the non-production of accounts. But that was not a suit for dissolution of partnership.

9. In the present case the trial Court held that the defendant was maintaining the accounts and the preliminary decree directed the accounts being taken and the Commissioner was appointed for the purpose of taking accounts. It cannot be, therefore, said that the defendant was not called upon to produce the accounts. The Commissioner did call upon the defendant to produce theaccounts, but the defendant failed to do so. Hence, the observations in the above decision are not applicable to the facts of the present case.

10. Mr. Benadikar, the learned Counsel for the respondents, relied on the decision in : [1953]4SCR758 (Hiralal v. Badkulal). In that case the suit was for recovery of the amount due on the basis of adjustment of accounts signed by the defendant. The defendant denied correctness of amount found due. It was urged on behalf of the defendant that it was no part of his duty to produce them unless he was called upon to do so and that the onus rested on the plaintiff to prove their case. This argument was negatived, relying upon the observation of the Privy Council in AIR 1917 PC 6 (Murugesam Pillai v. Gnana Sambandha Pandara Sannadhi), deprecating the practice of the parties withholding from the Court important documents or information and lying by, trusting to the abstract doctrine of the onus of proof,

11. At page 307 in the Law of Partnership by S. T. Desai it is stated as follows:

'Where it appears to the Court that an accounting party is wrongfully withholding the books of accounts or has destroyed them, it will presume everything against him, consistent with the established facts.'

12. The lower appellate Court, on a consideration of the evidence, has come to the conclusion that the legal representative of the defendant, namely, his widow, has wilfully withheld the books of account relating to the suit partnership business which were maintained by her husband and which had come into her custody after his death. This is a finding of fact which is not liable for interference in second appeal. Mr. Mandagi, however, contended that an adverse inference should not have been drawn against the defendant in view of the joint memo, Ext. 261, filed by the legal representative of the defendant as well as by the legal representatives of the plaintiff. His contention is that the plaintiff waived his right to insist upon an adverse inference against the defendant on account of the non-production of the account books by filing the above joint memo. But it is stated in the joint memo that the account books were not produced by the deceased defendant and that the plaintiffs legal representatives also have no account books to produce and that the Court may decide the dispute after recording oral evidence. By this statement it cannot be said that there was any waiver on the part of the legal representatives of the plaintiff, as contended. The joint memo only recognised the fact that the account books were not produced by the deceased defendant. The lower appellate Court was, therefore, justified in drawing an adverse inference against the defendant and his legal representatives. The adverse inference is that if the account books had been produced, itwould be against the interests of the defendant. In other words, that the defendant will be found liable to make repayment of the amounts which may be found legally due to the plaintiff on taking accounts. This contingency will arise if the partnership business resulted in a profit or it resulted in neither profit nor loss. In view of the evidence adduced the lower appellate court was justified in drawing the adverse inference that the partnership business could not have resulted in a loss. Since the plaintiff and his legal representatives did not adduce even secondary evidence to satisfactorily prove their allegation that the partnership business fetched a profit of Rs. 80,000/- as alleged by them, the lower appellate Court rejected their contention that the partnership business resulted in a profit. Hence, it directed repayment to the plaintiff a sum of Rs. 8,000/- being his contribution to the partnership business. This finding cannot be said to be erroneous.

13. The next question is whether the decree relating to the direction to pay interest at the rate of 9 per cent from the date of suit till realisation is sustainable. Under Section 34 of the Code of Civil Procedure, interest can be awarded only at the rate of 6 per cent per annum for the period subsequent to the decree. This position is also not disputed by Mr. Benadikar. Hence, the interest awarded at 9% has to be reduced to 6% so far as the period subsequent to the date of the final decree is concerned.

14. The next question is whether the plaintiff is entitled to interest from the date of suit upto the date of the decree, and if so, at what rate?

In (Suleman v. Abdul Latif), it has been held that in an action to dissolve and wind up the affairs of a partnership, until the accounts have been taken, it is impossible to say what if anything is due from any partner or copartners and that interest should only be allowed to the plaintiffs from the date of final decree by which the amount (if any) is found due from the defendants to the plaintiffs. In AIR 1942 PC 61 (Lala Hakim Rai v. Lala Ganga Ram), the suit was brought nearly two years after the dissolution of a partnership against the former managing partner, who had been retaining in his hands and for his own purposes the partnership assets without making any attempt to pay the share of the assets or their proceeds to his copartner. It was held that interest is properly chargeable against the accounting defendant even though he has not acted fraudulently. The earlier decision , was distinguished on the ground that in that case the suit was for dissolution and winding up of a going partnership. In AIR 1948 Mad 231, the suit was for dissolution of a partnership and for accounts. The decision in , was followed and it was held that interest should be allowed to the plaintiff only from the date of the final decree and not from the date of the plaint.

In : AIR1952Mad769 , the suit was filed for accounts of a dissolved partnership. The abovesaid two decisions of the Privy Council were referred to and it was observed as follows:

'It is therefore, clear that though the ordinary rule in a suit for dissolution of partnership is to award interest only from the date when the amount due from the one to the other is ascertained, in a case where the suit is for an account in respect of a dissolved partnership, interest may be given even from the date of the filing of the plaint, if the circumstances in that case establish that the other partner was in possession of the assets or utilised them for the purpose of his business, or was otherwise guilty of latches.'

In that case though the partnership was dissolved, the defendants did not take any steps to discharge their liability to the plaintiffs, but continued to carry on the business ignoring the rights of the plaintiff and took up an attitude which was absolutely unhelpful to the plaintiff even when the suit was filed. It was held that interest should be awarded from the date of the plaint. It is contended by Mr. Mandagi that in view of the decision in , no interest can be awarded for the period prior to the decree in a suit for dissolution and rendering of accounts relating to a going concern like the one in the present case. As against this Mr. Benadikar contended that even in cases like the present interest can be awarded from the date of the plaint if the court comes to the conclusion that such an order is justified on account of the conduct of the accounting party. His contention is that the attitude of the defendant when he was alive, and that of his legal representatives subsequent to his death, in withholding the accounts from the court must be taken into consideration and the discretion vested in the court under Section 34 C. P, C. must be exercised in favour of the plaintiff and interest should be awarded from the date of the plaint. He has relied on the decisions in : AIR1962Mad301 (B. R. & Sons v. C. P. V. K Chetti and Co.,) and (Nathmal Bhaironbux and Co., v. Kashi Ram).

In : AIR1962Mad301 it has been held that under Section 34 CFC discretion is given to the trial court in the matter of interest for the period from the date of plaint till the date of decree at such rate as the Court deems reasonable and by an amendment of Section 34 by the Central Act 60 of 1956 the discretion of the Court was curtailed and the rate of interest was limited to 6 per cent for the period subsequent to the date of the decree.

In the decision inAIR 1948 Mad 231 was considered. Thedecision in AIR 1954 Nag 300 (Basant Kumar v. Roshanlal) which lays down that there is no warrant for the proposition that in a suit for accounts interest prior to the ascertainment of the account cannot be given was referred to. It was also held that the Court is vested with wide power with regard to the award of pendente lite and future interest. Whether interest should be awarded pendent lite or for future and if so, at what rate, are matters which lie within the discretion of the Court though such discretion has to be exercised judicially in the light of the facts and circumstances of each case.

15. Mr. Mandagi relied on Section 13 Clause (c) of the Indian Partnership Act which provides that, subject to contract between the partners, where a partner is entitled to interest on the capital subscribed by him such interest shall be payable only out of profits. He has relied on the following passage at page 77 of Desai's Law of Partnership :

'It is well established that where interest on capital is payable between partners it stops running at the date of dissolution unless otherwise agreed. So in taking the accounts of a partnership, interest after the date of dissolution will not in general be allowed to the partners on their respective capital, though interest is allowed by agreement during the partnership with annual rests.'

But the same Author has stated as followsat page 70 commenting on the decision inPrivy Council in .

'It does not follow from the decision of the Privy Council that even special circumstances and equities of the case have to be disregarded by the Court. No rule of general applicability can be suggested as to what these may be since each case must rest on its own facts. A not uncommon instance of the applicability of what may be regarded as exception to the ordinary rule arises where a partner after dissolution does not make up the accounts of the partnership and uses for his own benefit the partnership moneys and assets or has suppressed the partnership books of account. So also will the Court allow interest to be charged when a partner has been guilty of fraud or such misconduct as would render it equitable to allow interest to be charged after date of dissolution.' and at page 79, the Author has stated asfollows:--

'The Court may, however, allow interest to be charged after dissolution even apart from cases where there is agreement to allow and charge such interest. This would for instance be done where the capital left in by a partner can be regarded as an interest bearing loan or there are other special circumstances.'

Hence, the dictum in , that interest should be awarded in a suit fordissolution of a going partnership only from the date of the decree determining the amount due by the defendant, cannot be considered as an inflexible rule curtailing the discretion of the Court under Section 34. C. P. C. It is open to the Court to award interest in suitable cases from the date of the plaint if the circumstances of the case justify even in cases where the suit is for dissolution of a going partnership. Hence, the award of interest by the lower appellate Court for the period from the date of suit to the date of the final decree cannot be said to be illegal, Under Section 34 C. P. C., the Court can award interest only at the rate of 6 per cent for the period subsequent to the date of the decree. But it is open to the Court to award interest at a higher rate for the period upto the date of the decree. By awarding interest at the rate of 9 per cent per annum for the period! prior to the date of the decree it cannot be said that the lower appellate Court has acted illegally in the exercise of its discretion.

16. This appeal succeeds in part, the decree of the lower appellate Court is modified to the extent that the interest is awarded at the rate of 6 per cent for the period from the date of the final decree to the date of realisation. But for this modification, the decree of the lower appellate Court is confirmed.

17. Since the appellant has succeeded in part, parties shall bear their own costsin this appeal.

18. Appeal allowed in part.


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