Skip to content


L. Shiam Lal Vs. Shiam Lal and anr. - Court Judgment

LegalCrystal Citation
SubjectCivil
CourtAllahabad
Decided On
Reported inAIR1935All1008; 159Ind.Cas.433
AppellantL. Shiam Lal
RespondentShiam Lal and anr.
Cases ReferredBaijnath v. Chhote Lal
Excerpt:
.....this appeal have extended over a wide range, but we have come to the conclusion that the decrees of the courts below are perfectly correct and ought to be affirmed. 4. the trial court held that, as the partnership was for a fixed term of three years, and as there was no reliable evidence to show that the parties either expressly or impliedly agreed to extend that period, the partnership came to an end on 9th march 1928. in this connexion that court emphasised the fact, that, long before the expiry of three years, the plaintiff withdrew a substantial portion of the amount contributed by him towards the working capital of the partnership and that, as from the very outset the business was carried on at a loss, it was to the interest of the parties to terminate the partnership as soon as..........into between the plaintiff-appellant and the defendant-respondents by means of a registered deed of partnership dated 9th march 1925. the partnership was to run an oil mill at allahabad. the building and the machinery belonged to the defendants and the plaintiff agreed to invest a sum up to rs. 40,000 as working capital. it was provided in the deed of partnership that no partner shall have the right to dissolve the partnership for a period of three years, and that if the partners desired to carry on the partnership business after the expiry of three years they could do so with mutual consent. it was also provided by the deed that at the time of the conclusion of partnership the stock, etc., in hand will be sold by auction.3. the present suit was filed by the plaintiff on 19th.....
Judgment:

Iqbal Ahmad, J.

1. The arguments in this appeal have extended over a wide range, but we have come to the conclusion that the decrees of the Courts below are perfectly correct and ought to be affirmed.

2. The suit giving rise to the present appeal was for settlement of accounts and, if necessary, for the dissolution of a partnership, which was entered into between the plaintiff-appellant and the defendant-respondents by means of a registered deed of partnership dated 9th March 1925. The partnership was to run an oil mill at Allahabad. The building and the machinery belonged to the defendants and the plaintiff agreed to invest a sum up to Rs. 40,000 as working capital. It was provided in the deed of partnership that no partner shall have the right to dissolve the partnership for a period of three years, and that if the partners desired to carry on the partnership business after the expiry of three years they could do so with mutual consent. It was also provided by the deed that at the time of the conclusion of partnership the stock, etc., in hand will be sold by auction.

3. The present suit was filed by the plaintiff on 19th March 1931. It was alleged in the plaint that the partnership was not dissolved till the month of June 1928, and, as the suit was filed within three years from that date, it was within time. The defendants contested the suit inter alia on the ground that the partnership was dissolved more than three years before the date of the suit and the suit was barred by limitation. This contention of the defendants has been accepted by both the Courts below.

4. The trial Court held that, as the partnership was for a fixed term of three years, and as there was no reliable evidence to show that the parties either expressly or impliedly agreed to extend that period, the partnership came to an end on 9th March 1928. In this connexion that Court emphasised the fact, that, long before the expiry of three years, the plaintiff withdrew a substantial portion of the amount contributed by him towards the working capital of the partnership and that, as from the very outset the business was carried on at a loss, it was to the interest of the parties to terminate the partnership as soon as possible. The trial Court also made reference to the fact that the accounts of all the servants of the mill were cleared up and the servants were discharged in February 1928, and that after January 1928, the mill never worked.

5. In the trial Court it was argued on behalf of the plaintiff-appellant that, even if the partnership was for a fixed period of three years, it could not he deemed to have been dissolved till June 1928, as the business of the partnership was not commenced till June 1925. The trial Court repelled this contention holding that there was nothing in the partnership deed to show that the period of three years was to be computed from the date from which the mill began to work and that, in the absence of any such indication, the date of the commencement of the partnership must be deemed to be the date on which the partnership deed was executed. The trial Court pointed out that the contention of the plaintiff that the partnership did not commence business till June 1928, was unfounded as it appeared that the period between the date of the execution of the partnership deed and June 1925 was spent in cleaning the mill and in making 'preparations for crushing oil seeds.

6. It appears that some of the stock of the partnership remained undisposed of on 9th March 1928, and this stock was sold up to June 1928. The plaintiff maintained that the sale of the stock was in continuance of the business of the partnership, and, as such, the partnership must be deemed to have continued till the stock was sold, viz., till 23rd June 1928. The trial Court held that the sale of the stock was not in pursuance of any express or tacit agreement to continue the partnership business, but was simply with a view to winding up the business, and, as such, the partnership could not be deemed to have been in existence during the period during which the stock in hand was sold.

7. Having arrived at the findings noted above the trial Court dismissed the plaintiff's suit. On appeal by the plaintiff the lower appellate Court accepted the conclusions arrived at by the trial Court. It commenced its judgment with the observation that the trial Court had written a very clear judgment to which nothing of importance could be added. It held that the partnership commenced from the date of the partnership deed, viz., from 9th March 1925, and, as the partnership was for a fixed period of three years, it came to an end on 8th March 1928. It also accepted the finding of the learned Munsif that the sale of the stock was not in continuance of the partnership business, but was simply with a view to facilitate the winding up of the concern.

8. The position that the partnership was for a fixed term of three years, with the option to the parties to continue business after the expiry of that period, has been contested on behalf of the plaintiff-appellant. But in our judgment the conclusion arrived at by the Courts below Ion the point is correct. The deed provides that it shall not be open to any of the partners to sever his connexion with the partnership for a period of three years. This provision in the deed is followed by another stipulation that if the partners desired to continue the partnership after the expiry of three years they could do so. These two provisions in the deed of partnership lead to the irresistible conclusion that the parties contemplated that the business of the partnership shall be carried on for a fixed period of three years and that this period could not be curtailed by any of the partners. It is further clear that the parties to the deed also intended and did agree that the period of three years could not be extended except with the mutual consent of all the parties concerned. It follows that the period fixed for the continuance of the partnership business was a fixed term of three years a period which could not be cut short, but which could be extended by the express or implied consent of the partners. The conclusion of the Court below that the partnership was for a fixed period of three years, is therefore correct.

9. Learned Counsel for the plaintiff-appellant next contended that the partnership did not come into existence till the business of the partnership, viz., the crushing of oil seeds, actually commenced, and as this event did not happen till June 1925 and the suit was filed within three years from that date, the suit was within time. In support of this contention the learned Counsel has referred to the definition of partnership in the English Partnership Act of 1890, (53 and 54 Victoria, Clause 39, para. 1(1). By that Act 'partnership' has been defined as the relation which, subsists between persons carrying on a business in common with a view of profit. It is argued that having regard to this definition a partnership cannot be deemed to have come into existence till the business is actually carried on. In our judgment there is no substance in this contention.

10. In the case before us we are not concerned with any oral agreement for carrying on a partnership business and we need not therefore discuss the various questions that may arise when a partnership is or has been carried on in pursuance of such an agreement. In the present case we have a written deed of partnership and, the question that arises for consideration is whether the mere fact, that toe pressing of the oil seeds did not commence till June 1928, leads to the conclusion that the partnership business did not commence from the date of the partnership deed, though there is nothing in the deed to indicate that the partnership was to come into existence not from the date of the execution of the deed, but from a future date.

11. Prima facie every instrument takes effect from the date of its execution provided there is no expression in the document indicating an intention to postpone its operation to a future date. A deed of partnership must also be governed by a similar rule, and therefore unless there is something in the deed to show that the partnership evidenced by it was not to commence till a future date, the presumption is that the partnership came into existence on the very date of the execution of the deed; vide Lindley on Partnership, Edn. 9, p. 501. Whether or not parol evidence is admissible to show when a partnership actually commenced, when there is no provision in the deed of partnership specifying a date from which the partnership is to commence, is a question that does not arise in the present case. In the case before us it is specifically mentioned in the partnership deed that the parties became partners from the date of that deed. The whole tenor of the deed shows that the parties were in right earnest to run the mill immediately, and there is nothing in the deed to suggest directly or indirectly that the parties contemplated to defer the business of the partnership to a future date. Apart from this, as pointed out by the Courts below, the period intervening between March 1925 and June 1925 was utilised for the purpose of setting the mill in order with a view to working the same when the seeds were available. That being so, there is no escape from the conclusion that the partnership came into existence from the date of the deed of partnership and, as the partnership was for a fixed term of three years, it stood dissolved on 8th March 1928, unless it could be shown that the parties by express or implied agreement consented to continue the partnership business.

12. This brings us to the consideration of the question whether the contention of the plaintiff-appellant that the partnership was continued till 23rd June 1928, is or is not correct. The finding recorded by the lower appellate Court on the point is adverse to the plaintiff-appellant. The learned Counsel for the respondent's has urged that the finding is a finding on a question of fact, and is, as such, binding on us in second appeal. In support of this contention reliance has been placed on a Division Bench decision of this Court in Baijnath v. Chhote Lal 1928 All. 58. One of the members of this Bench was a party to that decision. In that case the question was when the partnership stood dissolved and it was observed, towards the close of the judgment in that case, that the appeal was concluded by the 'finding of fact' recorded by the lower appellate Court. The case relied upon by the learned Counsel no doubt lends support to this contention, but, on further consideration, we have come to the conclusion that the question when a partnership was dissolved is a mixed question of fact and law. The facts relied upon by the parties in support of their respective contentions on the question as to when a partnership was dissolved must necessarily be questions of fact and the findings recorded on those questions must therefore be findings on questions of fact. But the conclusion drawn from proved facts is always a question of law. In other words the question, whether the inference about the dissolution, or non-dissolution of a particular partnership drawn by the lower appellate Court from the facts found by it is or is not correct, is a question of law. It follows that in the case before us we must accept the facts found by the lower appellate Court, but we must decide whether the conclusion drawn by that Court from those facts, viz., that the partnership was dissolved in March 1928, is or is not correct, in law. The facts found by the lower appellate Court are as follows : (1) The partnership business was run at a loss from the very outset, and, as such, it was to the interest of the parties to terminate the business as soon as possible. (2) The mill ceased, to work from January 1928. (3) The accounts of the servants of the mill were cleared up and the servants were discharged in February 1928.

13. These facts coupled with the fact that the partnership was for a fixed term of three years furnished sufficient justification for the finding recorded by the lower appellate Court that the partnership came to an end in March 1928. We therefore accept that finding. The answer to the question, whether or not the disposal of the assets of a partnership, which had been entered into for a fixed and definite period, is or is not in pursuance of an agreement to continue the business after the stipulated period is never free from difficulty. In some cases the disposal of the assets may be in pursuance of such an agreement; in others the disposal may be simply to facilitate the winding up of the concern. The decision of each case much depend on its own facts and circumstances and it is impossible to lay down any rule of universal application on the subject. In the present case the Courts below held that the sale of the little stock that remained in hand could not be deemed to have been in pursuance of an agreement to extend the period of partnership and we agree with that finding.

14. Learned Counsel for the appellant lastly argued that a reply to a notice sent on behalf of the defendants to the plaintiff constituted an acknowledgment of liability on the part of the defendants to render accounts and as the present suit was filed within three years of the date of that acknowledgment, it was within time. This point was not raised in either of the Courts below, nor was any reference to this alleged acknowledgment made in the plaint as required by Order 7, Rule 6, Civil P.C. It would not therefore be fair to the respondents to allow this point to be raised for the first time in second appeal. Apart from this, on a perusal of the reply referred to, it is abundantly clear that it does not contain an acknowledgment of liability by the defendants to render accounts to the plaintiff. For the reasons given above we affirm the decrees of the Courts below and dismiss this appeal with costs.


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