Skip to content


Madho Prasad Vs. Makhan Lal - Court Judgment

LegalCrystal Citation
SubjectCivil
CourtAllahabad
Decided On
Reported inAIR1939All328
AppellantMadho Prasad
RespondentMakhan Lal
Excerpt:
- .....therefore a suit for dissolution of partnership and rendition of accounts cannot be deemed to be a suit in respect of any debt within the meaning of section 7(1)(b) of the act. i therefore hold that the suit under appeal was not a suit in respect of a 'debt' within the meaning of the act. this view finds support from the observations of their lordships of the privy council in suleman v. abdul latif (1930) 17 a.i.r. p.c. 185. at p. 871 their lordships are reported to have observed as follows:this is not an action to recover some debt of which it can be said that it was due at the date of she plaint. it is an action to dissolve and wind up the affairs of a partnership; and until the accounts have been taken it is impossible to say what, if anything, is due from any partner to his.....
Judgment:

Iqbal Ahmad, J.

1. This is an appeal against an order of remand passed by the lower Appellate Court in a suit brought by the plaintiff-respondent for dissolution of partnership, rendition of accounts and recovery of Rs. 500 or such sum as may be found due to the plaintiff as a result of accounting. The plaintiff-respondent and defendant-appellant entered into a partnership to carry on a grocery shop and the business of the partnership was carried on for some time. The plaintiff's case was that the defendant was in charge of the business, but he closed the shop in November 1935 and removed some of the goods of the partnership. The plaintiff therefore maintained that the defendant was liable to render accounts. Before the institution of the suit the defendant had filed an application under the Encumbered Estates Act (Act 25 of 1934) and the Collector had passed an order under Section 6 of the Act. The defendant maintained that after the passing of the order under Section 6, the suit was not maintainable in view of the provisions of Section 7(1)(b) of the Act and, accordingly he filed an application in the trial Court praying that the suit be dismissed. This application was allowed by the trial Court and the plaintiff's suit was dismissed but, on appeal by the plaintiff, the lower Appellate Court reversed the decree of the trial Court and remanded the suit for trial on its merits. It is this order of remand that is assailed by the present appeal. Section 7(1)(b) runs as follows:

When the Collector has passed an order under Section 6 the following consequences shall ensue : (b) no fresh suit or other proceedings...shall be instituted in any Civil or Revenue Court in the United Provinces in respect of any debts incurred before the passing of the said order.

2. It is argued by the learned Counsel for the defendant-appellant that the suit was 'in respect of' a 'debt' within the meaning of Section 7(1)(b) and was therefore not maintainable. In support of this contention reliance is placed on the definition of the word 'debt' in Section 2(a) of the Act and on the decisions of this Court in Mukat Behari Lal v. Manmohan Lal : AIR1938All165 and Kanhya Lal v. Maheshwar Narain : AIR1938All479 and on a decision of the Board of Revenue in Ram Adhar Pathak v. Indradeo Singh (1937) R.D. 444. Section 2(a) of the Act provides that:

In this Act unless there is anything repugnant, in the subject or context (a) 'debt' includes any pecuniary liability except a liability for unliquidated damages.

3. Section 7(a) no doubt bars a suit with respect to a 'debt' that was incurred before the passing of an order by the Collector under Section 6, but in my judgment the suit under appeal was not with respect to a 'debt' as defined by the Act, and, as such, Section 7(1)(b) had no application to the case.

4. A suit for dissolution of partnership and for accounts is not a suit for enforcement of any pecuniary liability but is a suit to terminate and wind up the business of the partnership and to settle the accounts between the partners. That this is so is apparent from the fact that so long as the accounts of the partnership are not settled it is impossible to predicate as to whether the plaintiff or the defendant in the suit is under a liability to pay any amount to the other. The right of a partner to claim accounts is a statutory right and even a partner who has during the continuance of the partnership received more than his share in the assets of the partnership is entitled to claim accounts from his copartner. In other words, the right of a partner to claim accounts from his copartner is irrespective of the fact whether or not the partner who is called upon to account is under a liability to pay any amount to the plaintiff. It is true that some tentative value has to be put on the relief for accounts but this does-not mean that the defendant in the suit is under a pecuniary liability to the plaintiff on the date of the suit. So long as the accounts between the partners are not settled it is impossible to say what amount, if any, is duo from one partner to the other and therefore a suit for dissolution of partnership and rendition of accounts cannot be deemed to be a suit in respect of any debt within the meaning of Section 7(1)(b) of the Act. I therefore hold that the suit under appeal was not a suit in respect of a 'debt' within the meaning of the Act. This view finds support from the observations of their Lordships of the Privy Council in Suleman v. Abdul Latif (1930) 17 A.I.R. P.C. 185. At p. 871 their Lordships are reported to have observed as follows:

This is not an action to recover some debt of which It can be said that it was due at the date of she plaint. It is an action to dissolve and wind up the affairs of a partnership; and until the accounts have been taken it is impossible to say what, if anything, is due from any partner to his copartners.

5. The definition of the word 'debt' given in Section 2 of the Act is controlled by the Proviso that 'unless there is anything repugnant in the subject or context.' In the case before mo the subject of the suit was the business of a partnership and in my judgment, it would be repugnant to that subject to hold that the relationship of partners between the parties occasioned the existence of a debt due from one partner to the other. A claim for accounts brought by a partner against his copartner is merely a claim for She adjustment of accounts between them and for the restoration by one to the other of such amount as either may have received in excess of his share in the assets of the partnership. The basis of such a claim is not any pecuniary liability, but the claim is founded on the legal obligation of partners to settle the accounts between themselves if and when called upon to do so.

6. There in yet another ground for holding that the present suit was not barred. Section 7(1)(b) in confined in its operation to suits with respect to debts 'incurred before the passing of the' order 'by the Collector under Section 6 and has no application to suits with respect to debts that may have been incurred sifter the passing of the said order. As in the present case before the settlement of accounts it could not be said that any amount was due to the plaintiff from the defendant on the date of the suit Section 7(1)(b) had no application to the case.

7. The view that I take is in no way in conflict with the two decisions of this Court referred to above. In Mukat Behari Lal v. Manmohan Lal : AIR1938All165 the suit was for ejectment of a tenant of a house on the ground that a forfeiture had been incurred by reason of the non-payment of the rent of the house and it was held that the suit, under the circumstances, was a suit 'in respect of' the arrears of rent, and, as such, was barred by Section 7(1)(b) of the Act. In that case the alleged forfeiture was due to a pecuniary liability incurred by the defendant and therefore the suit was deemed to be a suit in respect of a debt. I have already given my reasons for holding that the suit under appeal was not a suit to enforce any pecuniary liability.

8. In Kanhya Lal v. Maheshwar Narain : AIR1938All479 the Bench while observing that in the majority of cases a suit for specific performance of a contract of sale does not come within the purview of Section 7(1)(b) of the Act held that as in that particular case 'the greater part of the consideration for the sale which was agreed upon between the parties was in lieu of prior debts' which were due from the defendant to the plaintiff 'it could not be said that the suit was not in the nature of a proceeding in respect of a debt within the meaning of Section 7(1)(a), Encumbered Estates Act.' In the case before me there is no question of any prior debt being due from the defendant to the plaintiff and Kanhya Lal v. Maheshwar Narain : AIR1938All479 has therefore no application.

9. In the case decided by the Board of Revenue, Ram Adhar Pathak v. Indradeo Singh (1937) R.D. 444, on which reliance was placed by the learned Counsel for the appellant the facts were as follows:

A suit for pre-emption was brought by the plaintiff against the defendant. The suit was decreed by the trial Court and the plaintiff then deposited the purchase money and took possession of the pre-empted property. The money deposited was withdrawn by the defendant. On appeal by the defendant the High Court dismissed the suit and the defendant then recovered possession of the pre-empted property without paying back the money that he had withdrawn from Court. The plaintiff then applied under Section 144, Civil P.C., for restitution and as the defendant did not pay the money, the Court ordered sale of his property. Thereafter the defendant applied under the Encumbered Estates Act and the Collector then ordered that the sale proceedings be stayed. The Board held that Section 7 of the Act was applicable to the case. With all respect I am unable to agree with this decision.

10. It is no doubt one of the recognized canons of interpretation that the words used in a statute should be given their plain and ordinary meaning. But if such a method of interpretation results in manifest anomalies and is calculated to defeat the object with which the statute was passed, it is open to the Courts to so interpret the words used as to give effect to the intention of the Legislature. The Encumbered Estates Act was passed with a view to provide for the relief of encumbered estates in the United Provinces and not with the object of enabling dishonest litigants to pocket the money belonging to their adversary in the litigation. In the case before the Board of Revenue the pre- emptor had deposited the purchase money as a consideration for securing possession of the pre-empted property and not with a view to advance that amount to the vendee by way of debt. The moment the vendee regained possession of the preempted property, it was his duty to repay to the plaintiff the money that he had withdrawn from the Court. What the plaintiff in that case was seeking was restitution and not the enforcement of any pecuniary liability and Section 7 of the Act had therefore no application to the case. For the reasons given above I dismiss this appeal with costs. Leave to appeal under the Letters Patent is granted.


Save Judgments// Add Notes // Store Search Result sets // Organizer Client Files //