1. Kartar Singh and Prem Singh, two brothers, entered into partnership and started business of commission agents under the style of 'Prem Singh Kartar Singh'. Under the partnership agreement, the accounts were to be maintained by Prem Singh, who was in charge of the account books. It was agreed between the parties that on the death of either of the partners, the partnership would not be dissolved but the heirs of the deceased partner would be substituted in place of the deceased as partners. Prem Singh died on November, 1957. Consequently, his heirs became partners in his place. On 4-2-1958, the partnership was dissolved and a new firm came into being on 5-2-1958 to carry on business under the style of 'Kartar Singh Balbir Singh'. The heirs of the deceased started another firm on 5-2-1958 under the name of 'Prem Singh Harcharan Singh'.
2. On the above facts, Kartar Singh instituted the suit on 4-2-1961 against Harcharan Singh and other heirs of the deceased partner, Prem Singh, for rendition of accounts of the dissolve firm 'Prem Singh Kartar Singh'. The defendants resisted the suit, alleging that the partnership had dissolved on 3-11-1957 by operation of law, i.e. on the death of Prem Singh, and that, consequently, the suit was time-barred. It was denied that there was any agreement between the partners, Prem Singh and Kartar Singh, that on the death of a partner his heirs would be substituted in his place. The parties went to trial on these issues:
1. Whether there was a firm known as Prem Singh Kartar Singh. If so, what were the terms between the partners?
2. Whether there was any agreement between the partners to this effect that on death of a partner, his legal representatives become partners. If so, what is its effect?
3. Whether the suit is within time?
4. Whether the account books of the firm are with defendants, and they are liable to render accounts?
5. Whether the defendants are entitled to special costs?
3. Under issue No. 1, it was found that there was a contractual partnership carrying on business udner the style of 'Prem Singh' and that Prem Singh and Kartar Singh were its partners, sharing profits of the business equally. Issues 4 and 5 were decided against the defendants in favour of the plaintiff. Issues 2 and 3 were decided against the plaintiff. In the result, the suit was dismissed as time-barred. The plaintiff's appeal was dismissed by the Senior Subordinate Judge, exercising enhanced appellate powers at Ferozepore. Hence this second appeal by the plaintiff.
4. The first contention of Mr. J. N. Kaushal, the learned counsel for the appellant is, that in this case both the Courts below have grossly misconstrued the documents, Exhibits PA and PB, and drawn a conclusion therefrom which no judicial mind will ever arrive at. In short, it is stressed that the concurrent finding of the Courts below on issue no. 2 is a perverse finding and, therefore, the High Court has, under Section 100 of the Code of Civil Procedure, jurisdiction to reopen the finding and examine and review the evidence itself. In support of his contention, the learned counsel has taken me through the writings, Exhibits PA and PB, and has referred to Sree Meenakshi Mills Ltd. Madurai v. Commissioner of Income-tax, Madras, AIR 1957 SC 49; V. Ramachandra Ayyar v. Ramalingam Chettiar, AIR 1963 SC 302 Smt. Lal v.Muni Lal (1960) 62 Pun LR 29; Commissioner of Income-tax v. Rama Wholesale Cloth Syndicate, (1965) 67 Pun LR 601; and Khushal Chand (1965) 67 Pun LR 1164.
5. On the other hand, Shri S.C. Goyal, the learned counsel for the respondents contends that it is wrong to say that the view taken of the documentary evidence. Exhibits PA and PB, by the Courts below is perverse. It is stressed with reference to Section 47 of the Indian Partnership Act, 1932 (hereinafter called 'the Act') that these documents, Exhibits PA and PB, are not a deed of dissolution of partnership or even evidence of such dissolution; at best, they are evidence of the fact that the affairs of the old firm, which had been dissolved on the death of Prem Singh, were wound up on 5-2-1958. In the alternative, it is contended that even if the Courts below have misconstrued the writings, Exhibits PA and PB, that will not give jurisdiction to this Court below, because only a misconstruction of those documents, which are title deeds or form the basis of the suit, amount to an 'error of law' within the meaning of Section 100 of the Code of Civil Procedure. In support of this contention, reliance has been placed on a judgment of the Privy Council in Wali Muhammad v. Muhammad Bakhsh, ILR 11 Lah 199 : (AIR 1930 PC 91).
6. The question for determination before the Courts below was, whether the suit was time-barred. This issue further resolves itself into the question, when was the partnership dissolved? Whether it was dissolved automatically on the death of Prem Singh as alleged by the defendants, or it was dissolved on 5-2-1958. Answer to the last question involved determination of the issue as to whether there was any agreement between Prem Singh and Kartar Singh, partners, that in the case of death of either of them, the heirs of the deceased would become partners in place of the deceased. In this case, the plaintiff brought on record the documents, Exhibits PA and PB, to show that on the death of Prem Singh, his heirs, including his eldest son, Harcharan Singh defendant, continued the business with the surviving partner. Kartar Singh plaintiff, till it was dissolved by mutual consent on 5-2-1958. The language of Exhibit PA and PB, which are entries in the account books of the dissolved firm, is almost identical. Rendered into English, Exhibit PA reads as follows:
'The shop of M/S. Prem Singh Kartar Singh has been divided today, the 5th February, 1958, and this shop has fallen to the share of Kartar Singh Balbir Singh. Henceforth no entry shall be made in these account books. If any dues are recoverable, the same shall be divided half and half between the proprietors.
7. Some surrounding circumstances may also be noted: (1) Prem Singh and Kartar Singh partners were real brothers. Consequently, the existence of a contract between them that on the death of either of them the heirs of the deceased would be substituted as partners, would not be something unusual, because such a convenant will not lead to the induction of any stranger into the business, but only the kith and kin of the surviving partner, (2) Harcharan Singh, who signed the memoranda, Exhibits PA and PB, is admittedly the eldest son of the deceased partner, Prem Singh, (3) The writings, Exhibits PA and PB, are entries made in the account books of the dissolved firm, which account books, according to the finding of the trial Court, used to remain in the custody of Prem Singh and were maintained by him.
8. Harcharan Singh defendant when he appeared in the witnesses -box was confronted in cross-examination with the writings, Exits PA and PB, and asked to explain them, He admitted that these entries were in his hand, but added that he had executed them with regard to the division of the building of the shop, and that on that day at th same time, the entire urban property was divided, But no particulars of that property were entered in these writings, This explanation given by Harcharan Singh defendant was as ridiculous as it was ludicrous. The only reasonable construction which could be placed on these writings was, that they evidence division of the partnership known as the shop of 'M/s. Prem Singh Kartar Singh and th closing of its business on that day. In ordinary parlance also, the word 'shop' is often used forth term 'firm' . In this case, however, in the context., the word' shop' does not admit of any other construction , except as meaning the 'firm' or the 'partner ship' It is immediately followed by the words 'M/s. Prem Singh Kartar Singh', the name of the firm.
The word 'shop' cannot be read in isolation from the following words and sentences appearing in the writing. The next sentence 'Henceforth no entry shall be made in these account books' further clarifies and emphasis that by; th use of the word 'shop' the firm or the partnership , namely 'M/s. Prem Singh Kartar Singh ' was meant, and not the building in brick and mortar, in which th firm was carrying on its business, th firm was carrying on its business. Thus, the only reasonable construction of these writings was that the firm 'M/s Prem Singh Kartar Singh' continued to function after the death of Prem Singh till 5-2-1958, on which date the accounts of that firm were closed. It clearly raises the inference that the death of Prem Singh, his heirs stepped in o his shoes as partners of th firm along with th surviving partner.
9. The Court below has attached undue importance to the fact that these writings were signed only by Harcharan Singh, one of th alleged partners, and that, consequently these writings had no binding effect. The argument is attractive but fallacious. It is nobody's case that this was a contract or agreement between the partners dissolving th firm. These writings , at best, are only a memoranda or recital of a transaction that had already taken place. They are just a piece of evidence----- and I must say, a valuable piece---showing the conduct jof th eldest son an heir of th deceased n partner as well as the surviving partner. In other words, it show that even after the death of Prem Singh, the business of the firm under the same style an name was continued by his heirs, particularly his eldest son and the surviving partner, Kartar Singh.
10. The main fact in issue is, whether there existed an agreement between the original partner, Prem Singh and Kartar Singh, to the effect that on the death of either of them the heirs of the deceased would become partners with the survivor in the firm. In view of th definition of 'proved' given in Section 3 of the Evidence Act, this fact could be established either (1) by producing direct evidence as to its existence ,such as, a written agreement executed by the original partners , or by any past admission of the surviving partners or (2) by circumstances which would make the existence of this fact so probable that a prudent man ought, under the circumstances of th particular case, to act upon the supposition that such an agreement existed. Instance of such circumstances of the particular case, to act upon the supposition that such an agreement existed. Instance of such circumstance e would be the conduct of th surviving partner an the heirs of th deceased . In th instance case, the proof falling under th first category was not adduced. But circumstances relating to the second category were established, from which the existence of such an agreement between the original partners can be inferred.
11. In this case, there is evidence of the conduct of the heir of the deceased partner and the surviving partner. Kartar Singh in continuing the business of th firm in partnership till 5-2-1958. That is to say, th writings Exhibits PA and PB read in the light of th other circumstances clearly showed that the firm actually continued to function till 5-2-1958. There is abatement authority for the proposition that from such conduct and circumstances . the existences of an agreement of the kind in question between the original partners can be inferred. On this point, Mr. Kaushal has referred to Lala Ram Kumar v. Kishore Lal AIR 1946 all 259 (d. B) : Chainkaran sidhakaran Oswal v. Radhakishan Vishwanath Dixit, AIR 1956 Nag 46 ( DB) Punjab and Sind Bank Ltd v. Kishen Singh Ghulab Singh Air 1935 Lah 350 (DB) and AIR 1959 Raj 140.
12. Grossly misconstruing the clear language of the writings, Exhibits PA and PB, and accepting the transparently ridiculous explanation furnished by Harcharan Singh defendant, the lower Court has taken such a view of the evidence that no judicial mind, guided by reason and common sense, can ever take. That perverse finding, though on a question of fact, is open to attack in second appeal as erroneous in law. For authorities on the point, reference may be made to 1956 SCR 691 : (AIR 1957 SC 49); Oriental Investment Co. Ltd. v. Commissioner of Income-tax Bombay, AIR 1957 SC 852; (1960) 62 Pun LR 29; (1965) 67 Pun LR 601; (1965) 67 Pun LR 1164; and AIR 1963 SC 302.
13. The finding of the Courts below on this question of fact being perverse, this Court is not debarred from reviewing it in second appeal and setting matters right. Wali Muhammad's case, ILR 11 Lah 199 : (AIR 1930 PC 91) does not advance the point canvassed by Mr. Goel. It rather helps the appellant, inasmuch as in the instant case the misconstruction by the Courts below is of writings which form the sheet-anchor of the plaintiff's case. Their Lordships of the Privy Council have clearly laid down in that case that a decision of fact by a first appellate Court, which proceeds on a misconstruction of documents which are instruments of title or otherwise the direct foundation of rights, does involve a question of law so as to be open to reconsideration upon second appeal under Section 100 of the Code of Civil Procedure.
14. Mr. S.C. Goyal, the learned counsel for the respondents, does not seriously dispute the principle that an agreement between the partners to continue the partnership on the death of any one of the partners by substituting the heirs of the deceased in place of the deceased, can be gathered and inferred from the conduct of the parties, but he maintains that this general principle will not apply where the original partnership consists of only two partners. In the case, of such a partnership, says Mr. Goel, the death of a partner puts an end to partnership, because one partner cannot, by his own conduct, impose a partnership upon his heirs or legal representatives, partnership being not a matter of status but a matter of contract. In support, of this contention, the learned counsel relies upon the dictum of the Division Bench in Mt. Sughra v. Babu, AIR 1952 All 506. He has urged that the authority of AIR 1946 All 259 (DB) has been badly shaken, if not altogether exploded, by the subsequent ruling of the same Court in Mt. Sughra's case, AIR 1952 All 506. He has tried to distinguish the other rulings cited by Mr. Kaushal, on the ground that in all those cases the original partnership consisted of more than two partners. He has also referred to M. S. Narayanan Chettiar v. S. M. Umayal Achi, AIR 1959 Mad 283.
15. Before I discuss the rulings cited on both sides, it will be useful to refer to the provisions of Section 42 of the Partnership Act, which read as follows:
'42. Subject is dissolved -
(a) if constituted for a fixed term, by the expiry of that term;
(b) if constituted to carry out one or more adventures or undertakings by the completion thereof;
(c) by the death of a partner; and
(d) by the adjudication of a partner as an insolvent.'
16. It will be seen that there is nothing in Section 42 that the contract to which the operation of clauses (a), (b), (c) and (d) of that section is subject, should only be an express contract, or that it should be a contract between more than two partners. Of course, it is presumed that the contract should be a valid contract recognised by law. Now is there anything in the Contract Act or any other law, which says that where the business is carried on between tow partners only, they cannot lawfully enter into an agreement that on the death of either of them the heirs of the deceased would be substituted as partners of the firm? It is another matter that the heirs may or may not continue the partnership business. It, however, does not mean that the original contract between the old partners, if their number did not exceed two was bad.
17. The first case cited by Mr. Kaushal is AIR 1935 Lah 350, in that case, the Bank sued the firm Messrs. Kishen Singh Gulab Singh through its proprietors, Dr. Kishen Singh, Sardar Gulab Singh and Sardar Anup Singh on the footing of an equitable mortgage. One of the original partners, Uttam Singh, died before the mortgage. An argument was advanced that on the death of Uttam Singh, the firm had been dissolved and the mortgage being executed only by Defendants 1 to 3, their 3/4th share in the factory could alone be held liable. Rejecting this argument, Bhide J., who spoke for the Division Bench, observed: -
'It appears that Uttam Singh had died before the mortgage of 1925, but it does not necessarily follow that the firm was dissolved. The dissolution of a firm, in between the parties, (vide Section 42, Partnership Act), and an intention to continue the business in partnership with the legal representative, may be gathered from the conduct of the parties......
'In the present instance it appears from the conduct of the parties that they intended that there should be no dissolution and that the business of the firm should be carried in partnership with the legal representative of the deceased partner.'
18. It may be noted that in that case, the original partners of the firm were more than two persons.
19. The next case is AIR 1956 Nag 46. In that case also, it was laid down that existence of an agreement between the partners to the effect that the death of a partner shall not cause dissolution of the contract of a partner, can be inferred from the conduct of the parties, and it was not necessary that there should be direct evidence of an express agreement to that effect. In that case, two out of the several old partners had died.
20. Same is the ratio decidendi of the case Kesrimal v. Dalichand, AIR 1959 Raj 140.
21. The most important of all the cases relied on by Mr. Kaushal is the one reported as AIR 1946 All 259. The original partnership in that case consisted of only two partners, namely, Mussamal and Ram Kumar. Musamal died and thereafter the surviving partner, Ram Kumar, brought a suit on a bond executed in favour of the firm. The suit was brought in the name of the firm on the allegation that the partnership was not dissolved on the death of the deceased, but was continued with his wife and adopted son. The Division Bench consisting of Iqbal Ahmad C. J. and Sinha J. held that the conduct of the parties evidence a contract between the original partners that the partnership should not be dissolved on the death of either of them. After discussing the case law on the point, the learned Judges laid down that the words 'subject to the contract between the partners' at the beginning of Section 42 of the Partnership Act do not mean that the contract must be press. Hence, a contract to continue the partnership after the death of a partner may be implied from the conduct of the parties. Though the contract must be one between the original partners, the conduct of the surviving partner and the heirs of the deceased partner after the death of partner may evidence an original contract that the partnership should not be dissolved on the death of a partner.
22. The facts of Lala Ram Kumar's case AIR 1946 All 259 are very near parallel to the one before me. If I may say so with respect, that case correctly enunciates the law on the point.
23. The contrary view taken by another Division Bench of the same High Court in Mt. Sughra's case, AIR 1952 All 506, it is submitted, with due deference, does not lay down the law correctly. In that case, after the death of the old partner his major heirs along with the other partner continued the old partnership business with the old Partnership assets with the same rights and liabilities as before with this difference merely that in place of the old partner his heirs were substituted, the major heirs became the partners and the minor heirs became entitled to the benefits of the partnership. In that case also, the original partnership had two partners, namely, Abdul Shakur and Wali Mohammad. Abdul Shakur died and it was urged before the High Court that the partnership had dissolved on his death, though it was admitted that on the death of Abdul Shakur the partnership business was carried on by Wali Mohammad in partnership with the heirs of the deceased. Thereafter, Wali Mohammad also died but the business was carried on in partnership between the was constituted after the death of Abdul Shakur or the old partnership continued. From the conduct of the heirs of Abdul Shakur and Wali Mohammad's son, the lower appellate Court must have been a contract between the original partners, that the partnership would not be dissolved by the death of a partner. For this proposition, the lower Court relied, inter alia, on Lala Ram Kumar's case, AIR 1946 All 259.
24. The learned Judges observed:
'It appears to us that the view taken by th Court below cannot be supported. The general rule is that a partnership is dissolved after the death of a party. This rule is, however, subject to a contract to the contrary. When it is said that a partnership will not be dissolved by the death of one party, what is meant is that the partnership will continue between the surviving partners even after the death of a partner . It follows that in order that the exception to the general rule may apply, the original partnership must consist of more than two partners. In the case of a partnership consisting of only two partners to the effect that on the death of one of them the partner ship will not be dissolved but will continue . Nor is the position affected by bringing in the heirs of a deceased partner on the scene. One partner cannot, by his own contract, impose a partnership upon his heirs or legal representatives. Partnership is not a matter of status, it is a matter of contract. No heir can be said to become a partner with another person without his own consent express or implied.'
'When however, there are more than two partners and when there is a contract between the partners that the partnership will not be dissolved by the death of one of them the old partnership continues as between the surviving partners and the heirs, if they come in, many come in place of the deceased partner and become partners upon the old terms. In such case it will not be a new partnership but will be treated as the old partnership which continued without a break'.
25. Discussing Lala Ram Kumar's case, AIR 1946 ALL 259 the learned Judges said;
'In AIR 1946 All 259, there were only two paratners. It was held that since the business was carried on even after the death of one partner by the surviving partner and the heirs of the deceased partaner, it must be presumed that there was an argument between theoriginal partners that the partnership would not be dissolved upon the death of a partner. With great respect we are unable to agree with this pronouncement. Not only can such an agreement be considered to be valid, (sic) when made in the case partnership consisting of only two partners, but also the mere fact that on one occasion only on the death of one of the partners, the heirs continued the business of partnership, will be too slender a foundation for drawing an inference about the existence of an agreement to the contrary within th meaning of section 42 between the original partners'.
26. With utmost respect to the learned Judges who decided Mr. Sughra's case, AIR 1952 All 506, the validity or otherwise of a contract, Viz., that on the death of a partner there will be no dissolution of the firm but the business would be continued by the surviving partner with heirs of th deceased, does not depend on the number of th partner among or between whom such agreement exists. There is absolutely no warrant for this proposition. After expressing in a somewhat dogmatic way that such an agreement cannot be considered to be valid, the learned Judge, shifting their stand, hastened to add that the mere fact that on the deah of one of the partners the heirs continued the business of partnership, will be 'too slender a foundation' for drawing an inference about the existence of an agreement to the contrary within the meaning of Section 42 between the original partners.
27. A observed above, there is nothing in Section 42 of the partnership Act or any; other law which requires that only an express contract will prevent dissolution of a partnership of the death of a partner. If that were the intention of the legislature they would have clearly said so in S. 42 that the contract referred to in this section, at the beginning, means only an express contract in writing means only an express contract in writing between the partners of a firm, whose number exceeds two.
28. The fallacy of the reasoning adopted, by the learned Judge in Mt. Sugra's case, AIR 1952 All 506 is demonstrated by the fact that in the ultimate analysis, the learned Judges had to arrive at substantially the same conclusion which was directly drawn on similar facts in Lala Ram Kumar's case. AIR 1946 All 259. This is how they have attempted to get over the difficulty.
'Even though however, in our view a new partnership was created on th death of Abdul Shakor , the right to have the accounts taken from the commencement of th old partnership is not affected. As already observed ,m after the death of Abdul Shakoor the major heirs along with Wali Mahamood continued the old partnership business with the old partnership assets with the same rights and liabilities as before with this difference merely that in place of Abdul Shakoor his heirs were substituted, the major heirs became the partners are the minor heirs became entitled to the benefits of a partnership. In these circumstances an agreement between the parties must be implied that rights and liability of a new partners will be taken to be as if Abdul Shakoor' death had created no dissolution in the partnership or in other words that they were liable on the accounts being taken from th commencement of th old partnership or from the date of th last accounting, as the case may be.'
This means that the learned Judges arrived at the same conclusion , though by; a circuitous route. They referred to Abdul Jaffar's case, AIR 1924 Mad 708 wherein a similar view was taken, Thus even if the view (which in my opinion is not the correct view ). Taken in Mt. Sughra's case, AIR 1952 All 506 by Allahabad High Court, an Abdul Jaffar's case , AIR 1924 Mad 708 by;t hd Madras High Court, id adopted, the result so far as the plaintiff's claim is concerned, will be the same.
29. In the light of what has been said above, I would , reversing the finding of th Court below on issue no. 2 hold that there was an implied agreement between Prem Singh and Kartar Singh, the original partners, that on the death of any of them the partnership would not be dissolved, but the business would be carried on by the survivor in partnership with the heirs of the deceased. I that infact, this partnership business was continued till it was finally closed on 5-2-1958. The suit was instituted on 4-2-1961, i.e., within three years of the date of the dissolution of partnership and was thus within time. In the result, the judgment and decree of th Court below is set aside, the plaintiff's appeal is accepted, and a preliminary decree for rendition of accounts of the dissolved firm 'Prem Singh Kartar Singh' is passed in favour of th plaintiff and against the defendants. In view of the fact that they parties are related to each other, they are left to bear their own costs throughout.
30. Appeal allowed.