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Kottapally Jaggaiah Vs. Kokumanu Venkatasatyanarayana and ors. - Court Judgment

LegalCrystal Citation
SubjectCommercial
CourtAndhra Pradesh High Court
Decided On
Case NumberSecond Appeal No. 1007 of 1980
Judge
Reported inAIR1984AP149
ActsPartnership Act, 1932 - Sections 2 and 4
AppellantKottapally Jaggaiah
RespondentKokumanu Venkatasatyanarayana and ors.
Appellant AdvocateY.G. Krishna Murthy, Adv.
Respondent AdvocateP.V.R. Sarma, Adv.
Excerpt:
.....2 and 4 of partnership act, 1932 - suit laid for settlement of accounts of partnership - whether single contract with government can be subject matter of partnership - test is whether there is any activity capable of being described as business for that venture - it is enough even if single venture is capable of being carried on by two or more persons - road building activity though a single contract is spread over a particular period - firm has to employ certain workers, supervise work and prepare bills and finalise work and get approval from government and finally receive bills - transaction is not solitary one incapable of being participated by more than two individuals. - - the learned commentator in pollock & mulla on sale of goods and partnership act, fourth edition, also..........partners within the meaning of s. 4 of the partnership act 9 of 1932 in view of the fact that a single contract with the government cannot be the subject-matter of a partnership. this question was not raised before the court below nor in the memorandum of grounds. but it being a pure question of law, i have permitted it to be raised.3. the word 'business' was defined in sec. 2 (b) of the partnership act, ix of 1932, which includes every trade, occupation and profession. it is clear that the definition is not exhaustive. it was ruled as early as in 1913 in re abenheim, (1913) 109 lt 219 at p. 220 that 'business' would include a single commercial venture. lindley on partnership fourteenth edition, page 116 basing on the above decision sums up this legal position thus:-'if person who are.....
Judgment:

1. The first defendant is the appellant. The suit was laid for settlement of accounts of the partnership dealings between the plaintiff and the two defendants. The allegation in the plaint is that the plaintiff and the defendants constituted a partnership firm and agreed to jointly carry on the contract work in 1965 for the maintenance work to be carried on from the mile stone 17/10 to 26/4 in Guntur-Narasaraopet road, that the contract work was taken in the name of the 1st defendant, that the plaintiff invested a sum of Rupees 11,000/-. While the 2nd defendant invested Rs. 3,000/-, and that it was agreed that the 1st defendant should be in the management of the work, maintaining regular account books and keeping the same for perusal and inspection for at all times. When the plaintiff demanded the 1st defendant to settle the account of the partnership and pay the moneys due to the partners, he refused either to show that account or settle same. Hence suit was laid.

2. Sri Y. G. Krishnamurthy, the learned counsel for the appellant instilled life into this appeal at the end of his argument stating that there cannot be any partnership between the parties in this case as tehre is no business to be carried on by the partners within the meaning of S. 4 of the Partnership Act 9 of 1932 in view of the fact that a single contract with the Government cannot be the subject-matter of a partnership. This question was not raised before the Court below nor in the memorandum of grounds. But it being a pure question of law, I have permitted it to be raised.

3. The word 'business' was defined in Sec. 2 (b) of the Partnership Act, IX of 1932, which includes every trade, occupation and profession. It is clear that the definition is not exhaustive. It was ruled as early as in 1913 in Re Abenheim, (1913) 109 LT 219 at p. 220 that 'business' would include a single commercial venture. Lindley on Partnership Fourteenth Edition, page 116 basing on the above decision sums up this legal position thus:-

'If person who are not partners in other business share the profits and loss, or the profits, of one particular transaction or adventure, they become partners as to that transaction or adventure, but not as to anything else. For example, if two solicitors, who are not partners, are jointly retained to conduct litigation in some particular case, and they agree to share the profits accruing hterefrom, they become partners so far as the business connected with that particular case is concerned, but no further. So a partnership may be limited to purchase and sale of particular jewels, the working of a particular patent, the working of it in a particular place, the development of a parcel of land, the exploitation of a contract of service, or the sowing, cropping, harvesting and sale of a particular crop. In all such cases as these, the rights and liabilities of the partners are governed by the same principles as those which apply to ordinary partnerships, but such rights and liabilities are necessarily less extensive than those of persons who have entered into less limited contracts. The extent to which persons can be considered as partners depends entirely on the agreement into which they have entered and upon their conduct.'

Thus, the test is whether there is any activity capable of being described it as a business for that venture. It is not necessary that there must be more than one transaction or venture. It is enough even if a single venture is capable of being carried on by two or more persons. In the present case the road building activity even though is a single contract it is spread over for a particular period and the firm must employ certain workers, supervise the work and prepare bills and finalise the work and get the approval from the Government and finally receive the bills. Thus the transaction is not a solitary one incapable of being participated by more than two individuals. There is no inherent improbability of the said transaction not being capable of the subject-matter of a venture under a partnership. Hence, this contention is wholly untenable.

4. The learned counsel relied upon a judgment of the Privy Council in Senaji Kapurchand v. Pannaji Devichand, AIR 1930 PC 300 before the enactment of the Partnership Act. The question arose in that case is whether the members of the firm consisting of more than 22 was legally constituted having regard to S. 4(2) of the Companies Act, 1913 which is in the following terms:-

'No Company Association or Partnership consisting of more then twenty persons shall be formed for the purpose of carrying on any other business that has for its object the acquisition of gain by the Company, Association or Partnership or by the individual members thereof, unless it is registered as a Company under this Act, or is formed in pursuance of some other Act, or of Letters Patent.' The venture in that case was purchase of 200 bales with different shares and the question was whether that single transaction constitutes a business within the meaning of S. 4(2). If it does, considering the members of the partnership, the constitution of the firm is illegal as offending S. 4(2) of the Act. The High Court in its judgment held that 'no doubt a single venture where a single article or a number of articles on a single contract are purchased and sold may not amount to a business'. But it is pointed out in that case (but on the allegations in the plaint although a number of bales were purchased at one time, sales were to go on, profits were to be divided.) Reading the plaint as a whole it seems to us that this is not a single venture which would take it out of the definition of S. 4.' This judgment of the High Court was approved by Lord Thankerton without any independent discussion and dismissed the appeal. It is clear that the very case illustrates that the test is not whether the venture consists of a single transaction or more but whether the venture is considering its activity capable of being participated by more than one individual considering its activity.

5. The learned counsel further relied upon a judgment in Nathi Lal v. Sri Mal, (AIR 1940 All 230) holding that 'a single transaction or venture does not amount to business and consequently it does not come under 'business mentioned in S. 4, Partnership Act', relying on Senaji Kapurchand v. Pannaji Devichand (AIR 1939 PC 300). With respect, I disagree with this judgment and dissent with the view expressed in the above judgment. The learned commentator in Pollock & Mulla on sale of Goods and Partnership Act, Fourth Edition, also takes the view that this judgment does not appear to be good law. Hence, I am of the opinion that there is a valid partnership between the parties within the meaning of Sec. 4 of the Act and consequently the present contention is wholly unsustainable. Accordingly, I dismiss the appeal but in the circumstances without costs.

6. Appeal dismissed.


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