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Prem Ballabh Khulbe Vs. Mathura Datt Bhatt - Court Judgment

LegalCrystal Citation
SubjectCommercial
CourtSupreme Court of India
Decided On
Judge
Reported inAIR1967SC1342; 1967(0)BLJR321; 1967MhLJ652(SC); (1967)69PLR290; [1967]2SCR298
ActsCode of Civil Procedure (CPC), 1908 - Sections 51; Partnership Act - Sections 9, 15, 18, 46 and 48
AppellantPrem Ballabh Khulbe
RespondentMathura Datt Bhatt
Cases ReferredVelji Raghavji Patel v. State of Maharashtra
Books referredHalsbury's Laws of England 3rd Edition, Vol. 38
Excerpt:
.....51 of code - said provision is applicable when 'decree is for sum for which judgment debtor was bound in fiduciary capacity to account' - executing court held that said provision was satisfied and issued warrant for arrest of respondent - on appeal high court set aside order of executing court - partnership itself does not create fiduciary relation between partners - in absence of special circumstances partner cannot be regarded as kind of trustee for other partners or liable to render accounts to them in fiduciary capacity - on facts of present case it cannot be said that decree was for sum for which respondent was bound to account in fiduciary capacity - held, conditions of clause (c) of proviso to section 51 were not satisfied. - land acquisition act (1 of 1894)section 23:..........on the taking of the accounts it was found that he overdrew the partnership account and a decree for the sum due was passed against him. no fraud or clandestine dealing is alleged or proved. on these facts it is not possible to say that the decree was for a sum for which he was bound to account in a fiduciary capacity. the high court rightly held that the conditions of clause (c) of the proviso to s. 51 of the code of civil procedure were not satisfied. 8. the appeal is dismissed. there will be no order as to costs. 9. appeal dismissed.
Judgment:

Bachawat, J.

1. The appellant, the respondent and two other persons carried on business in partnership under the name and style of Nayagaon Farm. The respondent was the managing partner and was incharge of the partnership assets. The firm was dissolved and a suit was instituted by the appellant for the taking of the accounts of the dissolved firm. Eventually a final decree was passed in the suit in favour of the appellant against the respondent for Rs. 17,143/11/0 and Rs. 3,171/6 as on account of costs. The appellant applied for execution of the decree by arrest and detention of the respondent in prison. In this affidavit in support of the application, the appellant relied upon the grounds mentioned in clauses (a) and (b) of the proviso to s. 51 of the Code of Civil Procedure 1908. At the hearing of the application those grounds were not pressed but his counsel relied upon the ground mentioned in Clause (c) of the proviso. By Clause (c) of the proviso to s. 51, the court is empowered to order execution of a money decree by detention of the judgment debtor in prison if it is satisfied 'that the decree is for a sum for which the judgment debtor was bound in a fiduciary capacity to account'. The executing court held that the provisions of Clause (c) were satisfied and issued a warrant for the arrest of the respondent. On appeal, the High Court of Allahabad set aside this order. The decree holder now appeals to this court under a certificate granted by the High Court.

2. On behalf of the appellant our attention was drawn to Sections 9, 15, 18, 46 and 48 of the Indian Partnership Act 1932 and Sections 88, 94 and 95 of the Indian Trusts Act 1882, and it was urged that the respondent as the managing partner of the firm was bound in a fiduciary capacity to account for the assets of the partnership in his hands and the decree against him must be regarded as a decree for a sum for which he was bound in a fiduciary capacity to account.

3. On the question whether a fiduciary relation exists between the partners, the law is stated thus in Halsbury's Laws of England 3rd Edition, Vol. 38, art. 1363, p. 820 :

'Partnership itself does not create a fiduciary relation between the partners or make one of them a trustee for the other or for his representatives. The relation may, however, arise on the death of one of them or be created by other special circumstances.'

4. This statement of law is consistent with the provisions of the Indian Partnership Act 1932 and the Indian Trusts Act 1882.

5. In Piddocke v. Burt. [1894] 1 Ch. 343 Chitty, J. held that a partner failing to pay moneys in his hands and received by him on account of the partnership was not liable to be imprisoned under s. 4(3) of the Debtors Act 1869 as a person 'acting in a fiduciary capacity' within the meaning of that statute. He said :

'I should be straining the law if I were to hold that a partner receiving money on account of the partnership - that is, on behalf of himself and his co-partners - received it in a fiduciary capacity towards the other partners. The law allows one partner - one of several joint creditors - to receive the whole debt on account of the firm to whom it is due, and I am unable to recognise any such distinction, as was endeavoured to be made by Mr. Church, between the case of a partner receiving money of the firm and not accounting for it, and that of a partner over-drawing the partnership account; because if this distinction were true, it would apply to every case where one partner wrongly over draws the partnership account.'

6. This decision was approved of by Lord Atkinson in Rodriguez v. Speyer Brothers, [1979] A.C. 59 and by Harries, C.J. in Bhuban Mohan Rana v. Surender Mohan Das. I.L.R. 1952 Cal. 23. The last case received the approval of this Court in Velji Raghavji Patel v. State of Maharashtra : 1965CriLJ431 . A partner must observe the utmost good faith in his dealings with the other partners. He is bound to render accounts of the partnership assets in his hands. But in the absence of special circumstances he cannot be regarded as a kind of trustee for the other partners or liable to render accounts to them in a fiduciary capacity.

7. In the present case, the respondent as the managing partner was liable to render accounts of the partnership assets in his hands. On the taking of the accounts it was found that he overdrew the partnership account and a decree for the sum due was passed against him. No fraud or clandestine dealing is alleged or proved. On these facts it is not possible to say that the decree was for a sum for which he was bound to account in a fiduciary capacity. The High Court rightly held that the conditions of Clause (c) of the proviso to s. 51 of the Code of Civil Procedure were not satisfied.

8. The appeal is dismissed. There will be no order as to costs.

9. Appeal dismissed.


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