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Laxmidas Dahyabhai Kabarwala Vs. Nanabhai Chunilal Kabarwala and ors. - Court Judgment

LegalCrystal Citation
SubjectCommercial
CourtSupreme Court of India
Decided On
Judge
Reported inAIR1964SC11; [1964]2SCR567
ActsCode of Civil Procedure (CPC), 1908 - Order 6, Rule 17 - Order 8, Rule 6; Partnership Act, 1932 - Sections 37; Constitution of India - Article 136; Arbitration Act - Sections 34
AppellantLaxmidas Dahyabhai Kabarwala
RespondentNanabhai Chunilal Kabarwala and ors.
Cases ReferredBai Bhuri v. Rai Ambalal Chotalal
Excerpt:
commercial - counter claim - order 6 rule 17 and order 8 rule 6 of code of civil procedure, 1908, section 37 of partnership act, 1932, article 136 of constitution of india and section 34 of arbitration act - firm commenced by plaintiff and widow of deceased partner - winding up of firm sought - oral agreement entered for distribution of property of firm - respondents denied agreement after death of widow - counter claim filed seeking ascertainment of claim and cost - suit filed by appellant - respondent filed written statement denying statement - respondent had no right to have their counter claim treated as plaint - respondent to file suit to enforce subject matter of counter claim - when court directs counter claim to be treated as plaint then date of presentation of plaint is date of.....ayyangar, j. 1. the principal point that is raised for consideration in this appeal byspecial leave is as regards the legality and propriety of an order by thelearned single judge of the high court of gujarat directing a counter-claimfiled by the respondents to be treated as a plaint in a cross-suit andremanding the case for trial on that basis. 2. the facts necessary to appreciate the points raised before us are brieflyas follows : the plaintiff, who is the appellant before us, and one jamnadasghelabhai were partners in a business commenced in october 1913 and carried onunder the name and style of bharat medical stores at broach, the two partnershaving equal shares. during the subsistence of the partnership and from and outof the assets thereof an immovable property - a house was.....
Judgment:

Ayyangar, J.

1. The principal point that is raised for consideration in this appeal byspecial leave is as regards the legality and propriety of an order by thelearned Single Judge of the High Court of Gujarat directing a counter-claimfiled by the respondents to be treated as a plaint in a cross-suit andremanding the case for trial on that basis.

2. The facts necessary to appreciate the points raised before us are brieflyas follows : The plaintiff, who is the appellant before us, and one JamnadasGhelabhai were partners in a business commenced in October 1913 and carried onunder the name and style of Bharat Medical Stores at Broach, the two partnershaving equal shares. During the subsistence of the partnership and from and outof the assets thereof an immovable property - a house was purchased at Broachin July 1932. Jamnadas Ghelabhai died on August 12, 1943 but the partnershipbusiness was continued thereafter by the plaintiff-appellant taking in BaiItcha - the widow of the deceased partner - in his place. A change was,however, made in the shares of the two partners, in that Bai Itcha was givenonly a 1/4th share as against the 1/2 share enjoyed by her husband. With thisalteration the same business was carried on between the two partners. In theearly part of 1950 Bai Itcha fell ill. It was the case of the plaintiff thatthere were negotiations between the two partners as regards the winding up ofthe firm and it was his further case that on July 9, 1950 two matters were thesubject of a concluded agreement with her. These were (1) that the partnershipwould stand dissolved from July 15, 1950 and that Bai Itcha would receive fromthe plaintiff a sum of Rs. 13,689/- in full satisfaction in respect of thecapital contributed by her as well as for her share of the profits of the firm,(2) that the plaintiff was to take over the immovable property in Broachpurchased by the firm in July 1932 for its book value and that he should onthat account pay over to Bai Itcha Rs. 2,202/9/9 being a moiety of the bookvalue. The agreement was stated to be wholly oral and was admittedly notreduced to writing. Before, however, anything was done in pursuance of thealleged arrangement, Bai Itcha died on July 31, 1950 leaving as her heirs therespondents who were the sons of a brother of Jamnadas Ghelabhai - Bai Itcha'shusband. It was the further case of the appellant that after the death of BaiItcha respondents 1 and 2 examined the accounts of the partnership and aftersatisfying themselves that Rs. 13,689/- was the proper figure of the sum due tothe deceased partner agreed to receive the same in full satisfaction of theamount to which they were entitled in respect of that item. All theseallegations about the agreement with Bai Itcha and the confirmation by them ofthe said agreement after her death were, however, denied by the respondents whoinsisted upon their rights under the law as legal representatives of thedeceased partner.

3. The appellant consequently filed a suit in the Court of the Civil Judgeat Broach for enforcing the agreement which he alleged and for relief on thatbasis. It would be necessary to set out and discuss in detail the reliefsclaimed in this suit as the same have a material bearing on some of thearguments addressed to us. We shall, however, revert to this after completingthe narrative of the proceedings up to the stage of the appeal before us. Tothis suit the respondents who had been impleaded as defendants filed a WrittenStatement which was mainly concerned with denying the truth of the agreementwith Bai Itcha and the story regarding the subsequent confirmation bythemselves and they wound up the statement by a counter-claim which mightusefully be extracted even at this stage. In paragraph 25 of the WrittenStatement they pleaded :

'25. In view of the above facts the plaintiff suitmay please be dismissed and the defendants costs may be awarded. The defendantsfurther pray that if the Honourable Court holds that the said partnership wasdissolved upon the death of Bai Itcha on date 31-7-50, the same may be legallywound up under the supervision and directions of the Honourable Court. Andnecessary instructions for the purpose may please be given, the accounts up tothe date of complete winding up may be lawfully taken, the claims of theparties against one another may be ascertained and the costs of the defendantsmay also be awarded. The defendants have filed this counter claim for thispurpose.'

4. The concluding paragraph - paragraph 26 contained details of thevaluation of the counter-claim and of the court fee they paid for the reliefwhich they sought in the preceding paragraph.

5. The plaintiff thereafter filed a reply to the counter-claim and of thecontentions raised in this reply it is sufficient if at this stage we noticethe plea that a counter-claim was not legally maintainable and they prayed forthe dismissal of the counter-claim with costs. The Civil Judge framed thenecessary issues but most of them related to the claim made in the plaint onthe basis of the alleged agreement and Issue No. 15 relating to thecounter-claim and the plaintiff's objection to the maintainability thereof ran:

'15. Are defendants entitled to the counter-claimmade by them ?'

6. On these pleadings and the issues as framed the parties went to trial. Byjudgment dated November 30, 1954 the Civil Judge recorded findings on theseveral issues relating to the plaintiff's claim and dismissed the plaintiff'ssuit on the ground that he had failed to prove the agreement. Coming to IssueNo. 15 relating to the counter-claim the learned Judge considered, in the firstplace, a contention urged by the defendants - the respondents before us - thatthe suit was virtually one for dissolution and the taking of accounts on aparticular basis, viz., on the basis of a settled account and that when theplea of settled accounts failed the suit got reduced into a plain one for thetaking of the accounts of a dissolved partnership and on that footing thedefendants had a legal right to have the relief of accounting. The learnedJudge negatived this contention basing himself on the allegations in the plaintand holding the real nature of the suit to be one for the specific enforcementof the agreement set up. He next considered the question whether the counter-claimwas admissible in law and after an examination of the decisions on the pointreached the conclusion that in the absence of any specific provision thereforin the Civil Procedure Code and in the light of certain decisions of the PrivyCouncil and of the High Courts a counter-claim was not admissible in theMuffasil. A prayer by the defendants to treat the counter-claim as a plaint ina cross suit by them was rejected. The learned Judge therefore dismissed thecounter-claim but he added that the defendants could bring a separate suit foraccounts and for a share of the profits of the dissolved partnership if soadvised.

7. The plaintiff was content with the judgment which he obtained on hisclaim but the defendants preferred an appeal to the District Judge Broachquestioning the correctness of the order dismissing the counter-claim as notmaintainable. The learned District Judge examined the authorities and reachingthe same conclusion as the trial Judge, dismissed the appeal. Thereafter thedefendants brought the matter before the High Court by way of a second appealand before the learned Single Judge who heard it an oral application was madeto treat the counter-claim made in paragraph 25 of the written statement as theplaint in a cross-suit and that the same should be tried and disposed of as ifit were such a suit. An objection was raised by the plaintiff - respondentbefore that Court to the granting of this prayer on various grounds, the mainone being that on the date when the matter was before the High Court and whensuch an order was being prayed for - in August 1961, the claim for accounts washopelessly barred by limitation. The learned Judge, however, following anunreported decision rendered by a Division Bench of the Bombay High Court inSeptember, 1956 allowed the application and passed an order setting aside thedismissal of the counter-claim and remanding it to the trial Judge 'with adirection that the counter-claim be treated as a plaint in the cross-suit andthat the reply of the plaintiffs to the counter-claim be treated as a writtenstatement to the cross-suit and that the cross-suit be tried and disposed of inaccordance with law', adding that the issues arising in the cross-suitwhich also arose in the suit and which had been disposed of already should notbe tried over again and the final decisions on those issues reached in the suitand the appeal therefrom shall be binding on the parties in the cross-suit. Itis the correctness of this order by the learned Single Judge that is challengedin this appeal.

8. The first submission made by Mr. Desai, learned Counsel for the appellantwas that no counter-claim was maintainable in the Muffasil. There is not muchcontroversy before us about this point and in view of the course of the proceedingsit really does not arise for consideration, though we must add that we are notto be understood as doubting the two propositions that a right to make acounter-claim is statutory and that the present case is admittedly not withinO. VIII. r. 6, Civil Procedure Code. We say it does not arise because a findingadverse to its maintainability was recorded by the trial Judge and by theDistrict Judge on appeal on a consideration of the decisions of the PrivyCouncil and the various High Courts and when the matter was in the High Courtthe learned Judge also proceeded on the basis that a counter-claim was notadmissible and the respondents have not preferred any appeal therefrom and thathas become final. We might therefore proceed with the points arising in thecase on the basis that a counter-claim is not admissible in the Muffasil, andthe only question is whether the Court could treat a counter-claim as theplaint in a cross-suit.

9. Learned Counsel for the respondents however made two alternative submissions: (1) That even without converting the counter-claim into the plaint in a crosssuit the defendants in the present case were entitled to the taking of theaccounts of the dissolved partnership on the pleadings as they stood, and (2)that in the circumstances of the case the order of the learned Judge directingthe conversion was legal and was proper and justified on the merits. Weconsider that the first of the above submissions has not substance. The pointurged was that the plaintiffs suit was in substance one for the taking of theaccounts of the dissolved partnership, though in form the primary reliefclaimed was for a decree on the basis of a settled account. It was submittedthat when that primary relief, viz., a decree on a settled account was rejected,because the facts alleged were not proved, there remained a plaint praying foran account of which the defendant was entitled to take advantage and claim thesame relief. In support of this submission a number of decisions rendered onthe construction of s. 69(3)(a) of the Partnership Act were referred. In thesedecisions it was held that in every suit for dissolution a prayer for accountsand a relief for accounting was implicit. We consider that these authoritiesare of no assistance for determining the nature of the plaint before us. It wasin substance one for specific performance of an agreement by which one partneragreed to convey his interest to his co-partner. In such a suit there couldobviously be no prayer for any relief for accounting and unless there is aprayer for accounting there is no question of a defendant claiming the benefitof that relief in the same suit. The decisions in which it has been held thatin a suit for accounts between accounting parties a defendant is virtually a plaintiffhave no application to cases where the relief prayed for by the plaintiff isnot one for the rendition of accounts. That situation will apply only to caseswhere the relief sought is common to the parties, though ranged on either side.The suit in the present case filed by the plaintiff prayed for no such reliefand could not in the nature of things pray for any such, and hence unless thereis a claim made by the defendant for accounting and that claim is treated as aplaint the defendant is entitled to no relief.

10. The other submission of learned Counsel for the respondents seeking tosupport the judgment of the High Court stands on quite a different footing.

11. Mr. Desai contended that the learned Judge of the High Court had nojurisdiction to treat the counter-claim contained in paragraph 25 of theWritten Statement as the plaint in a cross-suit. As we stated earlier, thelearned Judge took this course because he considered there was authority forthis mode of proceeding in the decision of a Division Bench of the Bombay HighCourt. Mr. Desai contended that this decision of the Division Bench was wrong.He pointed out that the sole authority for the adoption of such a treatment ofa counter-claim was a passage in Mr. Mulla's commentary on the Civil ProcedureCode (12th Edition) at page 634 where the learned author relies on a decisionof a Bench of the Rangoon High Court in Saya Bya v. Maung Kyaw Shun I.L.R.(1924) Rangoon 276.. Mr. Desai pointed out that no reasons are adduced forthe proposition laid down by the learned Judges of the Rangoon High Court fortheir conclusion that 'There is nothing to prevent a Judge treating thecounter-claim as a plaint in a cross suit and hearing the two together if he isso disposed and if the counter-claim as properly stamped'. His furthercontention was that the view here expressed was contrary to two decisions ofthe Privy Council reported in Currimbhoy and Co. Ltd. v. Creet (1932) L.R. 60 IndAp 297, and (Mian) Pir Bux v. Mohomed Tahar . It is,no doubt, true that no authority is cited in the Rangoon decision for thedictum and the learned Judges seem to proceed on the basis that in the absenceof any established principle or binding precedent their conclusion wasreasonable, but the further submission of Mr. Desai that their view is opposedto the decisions of the Privy Council is not correct. Currimbhoy and Co. Ltd.v. Creet , is not authority for any proposition otherthan that a counter-claim is not maintainable in the Muffasil and the othercase - (Mian) Pir Bux v. Mohmed Tahar , which is to thesame effect merely affirms the law as accepted in Currimbhoy and Co. Ltd. v. Creet . Neither of these two decisions, Mr. Desaiadmitted in terms, refers to the conversion into or treatment of acounter-claim as a cross-suit, nor do they in terms or even inferentiallynegative the legality of the adoption of such a course.

12. For such a position, however, Mr. Desai, relied on the decision of theCalcutta High Court in Gour Chandra Goswami v. Chairman of the NabadwipMunicipality A.I.R. 1922 Cal. 1, where the learned Judges set aside inrevision an order of the Munsif allowing the defendant's additional Written Statementto be treated as a cross plaint. There is no doubt that this is some authorityfor the proposition contended for by Mr. Desai. It is not, however, clear fromthe judgment whether it proceeds upon the facts of the case then before themparticularly as regards the contents of the Written Statement which was treatedby the District Munsif as a plaint in a cross-suit or whether the propositionof law was intended to have a wider application. The learned Judges correctlypointed out that a counter-claim is the creation of the statute and in theabsence of a provision in O. VIII of the Civil Procedure Code for acounter-claim apart from the relief specified in r. 6 thereof, a counter-claimas such was inadmissible. From this the learned Judges proceeded to equate thebar to the maintainability of a counter-claim to a bar to a counter-claim beingtreated as a cross-suit. It must, however, be pointed out that for effectingthis equation no reasons are adduced by learned Judges nor for holding that aCourt was precluded from treating an additional Written Statement as a crossplaint.

13. The question has therefore to be considered on principle as to whetherthere is anything in law - statutory or otherwise - which precludes a courtfrom treating a counter-claim as a plaint in a cross suit. We are unable to seeany. No doubt, the Civil Procedure Code prescribes the contents of a plaint andit might very well be that a counter-claim which is to be treated as across-suit might not conform to all these requirements but this by itself isnot sufficient to deny to the Court the power and the jurisdiction to read andconstrue the pleadings in a reasonable manner. If, for instance, what is reallya plaint in a cross-suit is made part of a Written Statement either by beingmade an annexure to it or as part and parcel thereof, though described as acounter-claim, there could be no legal objection to the Court treating the sameas a plaint and granting such relief to the defendant as would have been openif the pleading had taken the form of a plaint. Mr. Desai had to concede thatin such a case the Court was not prevented from separating the WrittenStatement proper from what was described as a counter-claim and treating thelatter as a cross-suit. If so much is conceded it would then become merely amatter of degree as to whether the counter-claim contains all the necessaryrequisites sufficient to be treated as a plaint making a claim for the reliefsought and if it did it would seem proper to hold that it would be open to aCourt to covert or treat the counter-claim as a plaint in a cross suit. To holdotherwise would be to erect what in substance is a mere defect in the form ofpleading into an instrument for denying what justice manifestly demands. Weneed only add that it was not suggested that there was anything in O. VIII. r.6 or in any other provision of the Code which laid an embargo on a Courtadopting such a course.

14. Mr. Desai's next contention was that even if it was open to the Court toteat the counter-claim as a plaint in a cross suit, the action of the learnedSingle Judge in granting this relief was, in the circumstances of this case,illegal or, at any rate, improper. In support of this further submission heurged two points : (1) The conversion of a counter-claim into a plaint in across suit was not any inherent or enforceable right of a defendant but thematter lay in the discretion of the Court to be exercised on judicialprinciples so as not to cause hardship to either side. In the present case heurged that the relief by way of counter-claim had been objected to by theplaintiff as not maintainable but the defendants had, till the very end,persisted in claiming this inadmissible relief. Besides, both the learned trialJudge as well as the District Judge on appeal had considered the prayer fortreating the counter-claim as the plaint in a cross suit and had, for veryproper and cogent reasons and in the exercise of their discretion, rejected it.The learned Single Judge of the High Court, however, it was submitted, had,without even considering the grounds upon which the Courts below had exercisedtheir discretion and without assigning any reasons of his own set aside theirjudgments and allowed the defendants the relief for which they prayed.

(2) Mr. Desai further submitted that at the worst even if the prayer of thedefendants was allowed, having regard to the long interval between the date ofthe counter-claim and the date when the conversion was being allowed as anindulgence to the defendants the learned Judge ought to have put the defendantson terms and not have granted the relief in the absolute terms which we haveextracted earlier.

15. We shall now proceed to consider these objections in detail. Whenanalysed they fall under three heads : (1) The reason adduced by the trialJudge and the 1st appellate Court for refusing to grant the prayer forconversion have not been considered by the High Court and if these had beentaken into account the learned Judge would have disallowed the prayer, (2) If,as it must be conceded, the trial Judge and the District Judge on appeal had adiscretion to convert or not to convert the counter-claim into a plaint in across-suit, the learned Single Judge had no jurisdiction under the CivilProcedure Code to interfere with that discretion and, in any event, there wereno sufficient reasons set out to justify such interference, and (3) Havingregard to the circumstances of the case the defendants ought to have been puton terms.

16. It was pointed out that there were three matters which were taken intoaccount by the trial Judge for disallowing the defendants' prayer for treatingthe counter-claim as a cross-suit : (a) limitation, (b) s. 37 of thePartnership Act, and (c) goodwill. The point of limitation was this : Theprayer in the counter-claim being one for the taking of the accounts of adissolved partnership - on the basis that the partnership was dissolved on thedeath of Bai Itcha on July 31, 1950, a suit claiming the relief of accountingcould under the Indian Limitation Act, be filed only within three years fromthe date of dissolution (Art. 106). As the Written Statement of the defendantwas filed on October 18, 1951 no doubt if the counter-claim itself be treatedas the plaint, the suit would be in time. But the learned trial Judge held thatlimitation had to be computed on the footing that the suit was filed on thedate when an application was made to him in November 1954 at the stage of thearguments for treating the counter-claim as a plaint in a cross suit. If socomputed obviously the cross suit would be barred by limitation and that wasassigned as one of the reasons for rejecting the prayer for conversion. It wasurged before us that the learned Judge of the High Court had not addressedhimself to this aspect of the matter. It was also submitted that strictlyspeaking the correct date on which the plaint in the cross-suit should be takento have been filed, in view of the orders of the trial and 1st appellate courtsrejecting this prayer was that on which the oral prayer was made before thelearned Single Judge i.e., 1961. It is obvious that the learned Judgeconsidered that the correct date for the computation of limitation in suchcases had been decided in the unreported decision of the Division Bench of theBombay High Court to which we have already made a reference. The learned Judgesthere took the view that the crucial date for the purpose of determining whenthe plaint in a cross suit should be treated as having been filed was not thedate on which the conversion was ordered but the date on which the WrittenStatement containing the counter-claim was filed. We considered that thisdecision of the Bombay High Court lays down the correct rule in cases of thiskind. It is, no doubt, true that, save in exceptional cases, leave to amendunder O. 6, r. 17 of the Code will ordinarily be refused when the effect of theamendment would be to take away from a party a legal right which had accrued tohim by lapse of time. But this rule can apply only when either freshallegations are added or fresh reliefs sought by way of amendment. Where, forinstance, an amendment is sought which merely clarifies an existing pleadingand does not in substance add to or alter it, it has never been held that thequestion of a bar of limitation is one of the questions to be considered inallowing such clarification of a matter already contained in the originalpleading. The present case is a fortiori so. The defendants here were notseeking to add any allegation nor to claim any fresh relief which they had notprayed for in the pleading already filed. If on the allegations contained inthat pleading the relief prayed for could not be obtained by the defendants,the plaintiff is not precluded from urging such a contention. The defendantshad valued the relief sought as if it were a plaint in a cross suit and hadpaid the requisite court fee payable on such a plaint and there was no disputethat either the valuation or the Court fee was incorrect. Mr. Desai sought tobelittle the circumstance about the valuation of the relief and the payment ofthe court fee payable thereon by the defendants by pointing out that the courtfee was a comparatively small sum. If under the relevant statute the court feepayable for a particular type of relief is a small sum and a party has paid if,he has done all that the law requires, and the legal consequence of such an actcannot be discounted merely because the pecuniary burden borne by the party isnot heavy.

17. In the circumstances, there being no addition to the allegation or tothe relief, it is not possible to accept the argument that by the conversion ofthat pleading which was contained in the Written Statement into a plaint in across suit a fresh claim was made or a fresh relief which had not already beenprayed for was sought which would enable the plaintiff to contend thatlimitation started from the date on which the conversion took place. To thefacts of the present case therefore the decisions holding that amendments couldnot ordinarily be allowed beyond the period of limitation and the limitedexceptions to that rule have no application.

18. The learned trial Judge next referred to s. 37 of the Partnership Actand expressed the opinion that in view of the provisions of that section theconversion prayed for should not be granted. He observed :

'Defendants have been given special rights under s.37 of the Indian Partnership Act. No issues have been framed in this suitregarding the matter covered by s. 37 of the Indian Partnership Act...... thequestions under s. 37 are not within the scope of this suit. Such questions canbe within the scope of defendant's suit for an account and share of the profitsof a dissolved partnership.'

19. It is, however, difficult to appreciate the import of these remarks. Solong as the counter-claim is held to be inadmissible as the basis on which adefendant could be granted relief and so long as the conversion of it into aplaint is not granted, the questions raised by s. 37 would not be within the scopeof the suit, and naturally until such a conversion is effected, no issues couldor would be framed. But by themselves the matters set out could hardly beobjections to the exercise of the discretion by the Court to grant the prayerfor conversion. Again, what the provision in s. 37 has to do with the exerciseof the discretion to permit the conversion is not also clear. That sectionreads :

'37. Where any member of afirm has died or otherwise, ceased to be a partner, and the surviving orcontinuing partners carry on the business of the firm with the property of thefirm without any final settlement of the accounts as between them and theoutgoing partner or his estate, then, in the absence of a contract to thecontrary, the outgoing partner or his estate is entitled at the option ofhimself or his representatives to such share of the profits made since heceased to be a partner as may be attributable to the use of his share of theproperty of the firm or to interest at the rate of six per cent per annum onthe amount of his share in the property of the firm :

Provided that where by contractbetween the partners an option is given to surviving or continuing partners topurchase the interest of a deceased or outgoing partner, and that option isduly exercised, the estate of the deceased partner, or the outgoing partner orhis estate, as the case may be, is not entitled to any further or other shareof profits; but if any partner assuming to act in exercise of the option doesnot in all material respects comply with the terms thereof, he is liable toaccount under the forgoing provisions of this section.'

20. It would be seen that s. 37 lays down the substantive law relating tothe liability of a surviving partner who without a settlement of account with thelegal representatives of the deceased partner utilises the assets of thepartnership for continuing the business as his own. If in the present case theplaintiff has done so he would be liable to the obligation laid by theprovision and if he has not, he would not be so liable. Therefore the sectioncannot stand in the way of the conversion prayed for by the defendant. Mr.Desai suggested that what the learned trial Judge had in view in referring tothe section was the complete absence of any allegation in the counter-claimthat the plaintiff had utilized the assets and had thus become liable for theobligations laid down by the provision. But if this were so it would only meanthat the accounts which the plaintiff would be entitled to obtain if his counter-claimwere treated as a plaint in a cross-suit would be an accounting withoutreference to s. 37, but that again would not be a ground for refusing theconversion. If such were the construction of the counter-claim as the plaint ina cross-suit, the plaintiff might not be entitled to particular reliefs. In thecircumstances therefore we consider that the learned trial Judge fell into anerror in considering that the provisions contained in s. 37 and the reliefsthat would be open to a plaintiff under its provisions rendered it improper forthe Court to allow the conversion.

21. The third circumstance that was referred to by the learned trial Judgeand which was also relied on by Mr. Desai was as regards goodwill. On this partof the case the trial Judge remarked :

'Defendants also urged that there was a goodwill ofbusiness. Whether there was a goodwill or not and what is the value of thegoodwill are also questions of fact for which no issues have been framed in thesuit. I am not therefore disposed to hear the counter-claim as a cross-suitalong with the plaint in this suit. All these questions about goodwill.......are not within the scope of this suit'.

22. We consider that the question of goodwill has even less bearing on theexercise of the discretion by the Court than even the accounting contemplatedby s. 37. Goodwill is a part of the assets of a firm and s. 55(1) of thePartnership Act enacts that in settling the accounts of a firm afterdissolution the goodwill shall, subject to contract between the partners, beincluded in the assets and it may be sold either separately or along with otherproperty of the firm. The prima facie rule therefore is that the goodwill ofthe firm being a part of the assets has to be sold just like other assets beforethe accounts between the partners can be settled and the partnership wound up.Why there should be any particular reference to goodwill which is only one ofthe several assets of a firm in a plaint for taking accounts of a dissolvedpartnership is hard to see. How similarly, the existence of goodwill as anasset of the firm which has to be sold and the proceeds divided between thepartners in the account-taking is a bar to the conversion of a counter-claiminto a plaint in a cross-suit is not easy to comprehend.

23. These were the only three matters which were taken into account by thelearned trial Judge in refusing the defendants' prayer for treating thecounter-claim as a plaint in a cross-suit.

24. The way in which the matter was dealt with by the learned District Judgeon appeal was this. He first expressed doubts about the correctness of thedecision of the Rangoon High Court in Saya Bya v. Maung Kyaw Shun I.L.R. (1924) Ran 276. But on the assumption that the Court had jurisdictionto effect the conversion his reasons for rejecting the prayer of the defendantswere : (1) The suit of the plaintiff and the counter-claim of the defendantswere totally dissimilar i.e., the evidence needed to prove the facts in eachwould be different, (2) In the counter-claim a question about the goodwill ofthe firm and the right to use the premises of the firm would arise, (3) Noissues had been raised in regard to the matters alleged in the counter-claim,(4) That the defendants would not be prejudiced if they were asked to file afresh suit. We consider it unnecessary to canvass the relevancy or correctnessof these reasons as what we have stated already as regards the judgment of thetrial Judge would suffice to show that they are untenable. In this view we donot consider that the appellant derives any advantage by the criticismregarding the absence of any reference to the grounds on which the discretionwas exercised by the trial and appellate courts in the judgment of the learnedSingle Judge.

25. The next submission of Mr. Desai was, and he laid considerable stressupon this, that the learned Judge of the High Court could not, in secondappeal, have interfered with the discretion exercised by the Courts below. Weconsider that in the circumstances of this case this particular aspect losesall significance because, as already indicated, we are satisfied that even ifthe Courts below exercised their discretion they did so on grounds not legallytenable and the learned Judge was justified in ignoring the exercise of theirdiscretion.

26. It was next submitted that the learned Judge of the High Court had notassigned any reason for exercising a discretion in favour of the defendants atthe stage of the second appeal and that on that account we should set aside thatJudgment. It is no doubt true that the learned Judge has not adverted to orassigned any reason why he was allowing the conversion and contented himselfwith referring to the unreported decision of the Division Bench of the BombayHigh Court as justifying the course that he took. We are, however, notpersuaded that considering that this appeal is by special leave under Art. 136any interference is called for with the order passed by the learned Judge. Weare satisfied that there has been no miscarriage of justice by reason of theorder and that even if he had properly applied his mind to it and consideredthe matter from the point of view of his having a discretion, the sameconclusion would have been arrived at. We are not therefore disposed to interferewith the order directing the treatment of the counter-claim as a plaint in across-suit.

27. The next part of Mr. Desai's submission was concerned with his grievancethat the learned Judge ought to have put the plaintiff on terms before hepassed the order directing the conversion. The 'terms' couldobviously not be terms as to costs, because in this case the counter-claim wasdismissed with costs by the trial Judge and the appeal therefrom was alsodismissed with costs. So far as the costs in the High Court were concerned,they were directed to be the costs in the cause.

28. Mr. Desai, however, urged that apart from any order as to costs,'terms' ought to have been imposed regards the nature of theaccounting to be ordered if a decree were passed, directions given restrictingthe date from which such accounting should start and such like terms. We areunable to agree that it would have been proper for the Court to have imposedsuch terms. The whole basis of the order of the High Court was that the defendantshad by their counter-claim filed practically a plaint duly valued and court feepayable thereon paid, though in a defective form. The defendants had on thebasis that the counter-claim was as such inadmissible under the Civil ProcedureCode prayed to the Trial Court for an order for treating that counter-claim asa plaint in a cross-suit. That had been opposed by the plaintiff and the prayerhad been rejected on grounds which, as we have pointed out elsewhere, werewholly insufficient. Besides, the plaintiff had come forward with a case of theaccounts having been settled and the story which he put forward had beendisbelieved and his suit dismissed and that decision had become final. In thecircumstances it is not easy to see the propriety of imposing any terms eitheras to the manner or as to duration etc. of the accounting which ought to takeplace on the averments in the counter-claim if the defendant succeeded in thatcross-suit. We therefore, consider that no legitimate objection could be taken tothe unconditional order passed by the learned Judge.

29. Lastly, Mr. Desai contended that the learned Judge erred in confiningthe plaintiff to the pleas which he had raised in the reply to thecounter-claim and in not allowing him to file fresh pleadings to thecounter-claim when it was being treated as a plaint. It was pointed that theobjections taken in the reply statement were on the basis of their beinganswers to a counter-claim, and that if the defendants were being permitted toalter the character of their pleading, the plaintiff should be given a chanceto add such further defences as would be open to him to the claim in a plaint.In this connection Mr. Desai pointed out that in the unreported decision of theBombay High Court on which the learned Single Judge relied, the parties hadbeen permitted to file fresh pleadings to make the same accord with therequirements of a plaint and Written Statement under the Civil Procedure Code.We consider that there is force in this submission. No doubt, the plaintiff hadtraversed the allegations of fact and the sustainability in law of the claimmade in the counter-claim, but still this was on the basis of the defendant'splea being a counter-claim merely. Taking into account the circumstances inwhich the plaintiff's plea in regard to the counter-claim were filed, we areclearly of the opinion that justice requires that he should be afforded anopportunity to raise his defences on the footing that the counter-claim, evenwhen originally made, should be treated as a plaint in a cross-suit, and thishe should be permitted to do in a Written Statement which he should bepermitted to file and there will be a direction to that effect in the decree tobe drawn up by this Court. As the trial of the claim by the defendants hasalready been delayed the plaintiff should file this fresh Written Statementwithin 8 weeks from the date of the receipt of this order by the trial Court.

30. A question has also been raised as to whether the defendants should notbe likewise permitted to file a fresh pleading more in accordance with the formindicated by O. VII of the Civil Procedure Code - as was permitted to be donein the Bombay case above referred to. Mr. Desai indicated that he would notobject to any such liberty being given. There will be a direction that thedefendants are at liberty to file a fresh pleading in the place and stead oftheir counter-claim contained in paragraphs 25 and 26 of the Written Statementdated October 17, 1951, provided however that there shall be no substantialvariation in the allegations to be made or the reliefs to be claimed by them insuch fresh pleading. This they might file within 4 weeks of the receipt of thisorder by the trial Court. In the event of the defendants exercising the option herebygiven, the plaintiff shall file the Written Statement within 4 weeksthereafter. We ought to make it clear that by the directions we have givenabove we do not intend to preclude the parties from seeking any other orfurther amendment of the pleadings or to fetter, in any manner, the power ofthe Court to permit such amendment under O. VI. r. 17, Civil Procedure Code atany subsequent stage of the proceedings.

31. Subject to the above directions, the appeal fails and is dismissed withcosts.

Sarkar, J.

32. The appellant carried on a business in partnership with one JamnadasGhelabhai from sometime in 1923 till August 12, 1943, when Jamnadas died.Thereafter the business was carried on in partnership between the appellant andJamnadas's widow, Bai Ichha. Bai Ichha died on July 31, 1950. Disputes thenstarted between the respondents, who are Bai Ichha's heirs, and the appellantconcerning the partnership and a certain house and those disputes led to thesuit out of which this appeal arises.

33. The appellant contended that by an agreement made with Bai Ichha shortlyprior to her death, the partnership between them had been disolved as from July15, 1950, and it had been decided that upon the appellant paying to Bai Ichhathe amount found due to her on the taking of the accounts, she would give upher rights in the business which would thereafter become the sole property ofthe appellant; that Bai Ichha died before the accounts could be taken; and thatthereafter the accounts were settled between the respondents and the appellantwhereby a sum of Rs. 13,689/- was found due to the respondents in respect ofBai Ichha's share in the firm. The appellant also contended that Bai Ichha hadagreed to convey to him a half share in a house which she had inherited fromher husband and the other half share in which belonged to the appellant, for asum of Rs. 2,202-9-9. The appellant said that he had offered the said sum ofRs. 13,689/- to the respondents in respect of Bai Ichha's share in the firm andrequested them to convey the half share in the house upon payment of Rs.2,202-9-9 but the respondents wrongfully denied the agreements and adjustmentof accounts and refused to convey their share in the house to the appellant andwere further obstructing him in the conduct of business. On these allegationsthe appellant filed the suit in the Court of the Civil Judge, Broach, on July15, 1951 claiming the following reliefs :- (a) a declaration that thepartnership between him and Bai Ichha stood dissolved as from July 15, 1950, orfrom July 31, 1950, and that its accounts had been settled, (b) an orderdirecting the respondents to convey to him a half share in the house uponpayment of Rs. 2,202-9-9 and (c) an injunction restraining them frominterfering with his conduct of the business.

34. The respondent No. 1 filed a written statement in that suit on October18, 1951, which was adopted on the same day by the other respondents. Therespondents denied that there was any agreement with Bai Ichha about thedissolution or otherwise and also that there had been any settlement ofaccounts with them. The written statement contained a paragraph in which it wasstated that the partnership between the appellant and Bai Ichha stood dissolvedon her death on July 31, 1950 and it was claimed that the accounts of the firmbe taken. In the end of this paragraph it was stated, 'The defendants havefiled this counter-claim for this purpose.' They paid counter-fee on thecounter-claim as on a plaint claiming the accounts of a dissolved firm. Theappellant filed a reply to the written statement in which dealing with thecounter-claim, he stated that it was 'not in accordance with law and thedefendants have no right to make such a counter-claim.'

35. The appellant's suit was dismissed by the trial court on November 30,1954. With regard to the counter-claim which was for accounts of thepartnership, the trial court held that it was 'incompetent and any suchclaim must be enforced by a separate suit.' It appears that at the stageof arguments learned counsel for the respondents had verbally requested thecourt to treat the counter-claim as a plaint in a cross-suit and this the courtrefused to do. The appellant did not appeal from the judgment of the trialcourt but the respondents did from the decision holding that the counter-claimwas incompetent and not maintainable. That appeal was heard by the DistrictJudge of Broach who on April 27, 1956, upheld the decision of the trial court.It appears that he also had been asked to treat the counter-claim as a plaintin a cross-suit but refused to do so.

36. The respondents then went up in further appeal to the High Court ofBombay. This appeal was on the creation of the State of Gujarat transferred tothe High Court at Ahmedabad. In the High Court it was contended, as it had beenin the two courts below, that the counter-claim was maintainable and the HighCourt was also requested verbally to treat the counter-claim as a plaint in across-suit. The High Court did not go into the question of the competence ofthe counter-claim but by its judgment and order of August 22, 1961 accepted therequest of the respondents to treat it as a plaint in a cross suit. Relying onan unreported judgment of the Bombay High Court in Bai Bhuri v. Rai Ambalal Chotalal(First Appeal No. 737 of 1951.), to which I will have to refer later, itrejected the contention of the appellant that the counter-claim could not betreated by the High Court as a plaint in a cross-suit because a suit on thatplaint had become barred by limitation long before the matter had come to thatCourt. The High Court held that the cross-suit would be within time as it mustbe deemed to have been filed on the date that the written statement containingthe counter-claim had been filed. In the result, the High Court sent the matterback to the learned trial Judge with a direction to treat the counter-claim asa plaint in a cross-suit and the reply of the appellant to it as his writtenstatement and to try the cross-suit according to law. It is from this judgmentthat the present appeal arises.

37. Now the counter-claim made by the respondents was clearly to enforce anindependent right unconnected with the claim made in the plaint. It is acounter-claim strictly so called and not intended to be a defence to the claimin the plaint. Our laws, except, it appears, a rule made by the Bombay HighCourt for its Original Jurisdiction, have made no provision for such acounter-claim. In other courts, like the court in Broach, a defendant ispermitted to plead a set off as contemplated in O. 8, r. 6 of the Code of CivilProcedare and also what is called an equitable set off. Plainly, the presentcounter-claim is not either of these. I would like to observe here that inEngland, a counter-claim strictly so called has always been the creature ofstatute : see Halsbury's Laws of England, 3rd ed. vol. XXXIV p. 410. In Englandapparently no equitable right to such a counter-claim is recognised. The reasonperhaps is that a suit can always be filed on the subject-matter of thecounterclaim and where there is remedy in law, aid of equity is not available.The position should be no different in our country. There is, therefore, nojustification for allowing a counter-claim as such in the absence of astatutory provision. The decision of trial court and the Court of first appealthat the counter-claim was not maintainable was obviously right. As I havealready said the High Court did not go into this question.

38. It was then said that the suit of the appellant was really a suit forthe accounts of the partnership and in such a suit each side was in theposition of a plaintiff and, therefore, the respondents were entitled to adecree for the accounts even without the counter-claim. This contention isclearly unfounded, for the suit was not for the partnership accounts at all. Itwas a wholly different suit, for it asked for a declaration that thepartnership accounts had been taken out of court and could not, therefore, beordered by the court. In such a suit a defendant partner has obviously no rightto ask that the partnership accounts be taken.

39. The real question that was argued in this appeal was whether the HighCourt was right in directing the counter-claim to be treated as a plaint in across-suit. I do not think it was. First, it is obvious that the respondentsthemselves had no right in law or equity to have their counter-claim treated asa plaint. As no counter-claim is maintainable to enforce a right independent ofthe claim in the plaint, as I have earlier said, the respondents should havefiled a suit to enforce the subject matter of the counter-claim. If they didnot, that was their error and an error cannot create a right. It is true thatin the law reports there are a few cases where courts have permitted acounter-claim to be treated as a plaint in a cross-suit. I will assume that acourt has the power to do so. But even so, the court exercises the power by wayof granting the defendant an indulgence out of pity at the defendant's folly.It is not a case of granting a discretionary relief in which case the partyasking for the relief would have a right to it, a right at least that thediscretion be judicially exercised. I think it is entirely for the court askedto grant the indulgence, to decide as its free choice, whether it will do so ornot. No question of its decision being erroneous can arise for there can be noerror in refusing to grant that to which there is no right. That being so, Ithink that the High court had no right in appeal to set aside the order of thecourts below refusing to treat the counter-claim as a plaint in a cross-suit.

40. I also venture to think that the High Court's order was erroneous foranother reason. Under s. 3 of the Limitation Act a suit instituted after theperiod of limitation prescribed for it must be dismissed and a suit isinstituted when the plaint is duly presented to the court. Now it seems to methat when, as in the present case, a court directs a counter-claim to betreated as a plaint in a cross-suit, the date of presentation of that plaint isthe date of the court's order. The reason is this. I have earlier said such anorder is made only by way of an indulgence for no one has any right or equityto have what was not a plaint, treated as a plaint. It is the court's orderwhich makes what was not a plaint, a plaint for obviously if there was alreadya plaint filed, no order would be necessary treating it as a plaint. As theorder turns something which was not a plaint into a plaint, that plaint comesinto existence on the date of the court's order; it must, therefore, be aplaint filed on that date. I would like here to observe, as indeed is wellknown, that no court has any power to extend the prescribed period oflimitation and from this it would follow, a court has no power either to treata plaint filed on a certain date as having been filed on an earlier date so asto avoid the bar of limitation. If this is the correct view, as I think it is,a court would not make an order treating a counter-claim as a plaint on a datewhen a suit filed on that plaint would be barred, for the court would not makea futile order.

41. It seems to me that the order in the present case is futile for thereason mentioned above. The cross-suit which came into existence as a result ofthe High Court's order in this case was for the accounts of a partnership whichwas dissolved on July 31, 1950. Under Art. 106 of the First Schedule to theLimitation Act, such a suit would be barred if filed after July 31, 1953. Theorder of the High Court was made long after that date, namely, on August 22,1961. That order was, for the reasons earlier mentioned, completely futile asit brought into existence a suit which was bound to be dismissed.

42. The High Court following Bai Bhuri's case (First Appeal No. 737 of1951.), earlier mentioned, however, took the view that in such a case theplaint in the cross-suit must be deemed to have been filed when the writtenstatement containing the counter-claim was filed. The reason for this view isin the judgment in Bai Bhuri's case to which I now turn. In that case theplaintiff had objected to an order treating the counter-claim as a plaint in across-suit on the ground that the court would thereby 'be permitting anamendment to the written statement after a suit for specific performance isbarred by lapse of time'. The counter-claim there, it appears, was forspecific performance of a contract. This objection was rejected and the Courtobserved, 'We are unable to agree with the contention...... By putting thewritten statement in the form of a plaint in a counter claim of a cross-suit,the defendants are not seeking to make any new averment which was not containedin the written statement. What the defendants are seeking to do is merely toput the written statement in the form of a plaint in a cross suit. To such anamendment the rule that an amendment will not be permitted to be made if ittakes away from the opposite party a defence which he has acquired by lapse oftime, will not apply.'

43. I venture to think that the contention dealt with by the Court in BaiBhuri's case was based on a misapprehension. There is no question of amendmentwhen a court orders a counter-claim to be treated as a plaint in a cross-suit,because initially a counter-claim is part of a written statement and byamendment a written statement cannot be converted into a plaint. I am not awareof any rule which permits of such amendment, nor has any been brought to ournotice. Indeed what is done here is to split up a pleading expressly filed as awritten statement into two, one of which remains a written statement and theother becomes a plaint. That is why it is said that the counter-claim istreated as a plaint in a 'cross-suit'. Even if such a thing ispermissible, it does not seem to me that it is achieved by an achieved by anamendment and its propriety cannot be judged by rules whereby amendment ofpleadings is governed.

44. Neither does it seem to me that the order can be treated as one curingan irregularity; as a case where the counter-claim had been a plaint from thebeginning but as it had not complied with the rules concerning a plaint it hadbeen a plaint irregularly filed. First, the respondents never contended thatthey had filed a plaint. They said, they had filed a written statement in whichthey had made a counter-claim and that counter-claim was maintainable as such.That was their contention. They persisted in this attitude all through. Theydid not even raise an issue as to whether they were entitled to treat the counter-claimas a plaint. It would be strange if the Court said that the respondents hadfiled a plaint though they did not themselves say so. Secondly, I am not awarethat a plaint and a written statement can be combined in one pleading so thatthe filing of the one is the filing of the other. This is impossible under ourprocedure. It must be taken that what had originally been filed was a writtenstatement, and, therefore, that no plaint had at all been filed. If no plainthad been filed, no question of curing any irregularity in the filing of aplaint can arise.

45. For these reasons I would allow the appeal with costs here and in theHigh Court.

46. BY COURT : In accordance with the majority opinion the appeal isdismissed with costs subject to the directions contained in the judgment.

47. Appeal dismissed.


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