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Mohatta Brothers Vs. the Bharat Suryodaya Mils Co. Ltd., Ahmedabad - Court Judgment

LegalCrystal Citation
SubjectCommercial
CourtSupreme Court of India
Decided On
Case NumberCivil Appeal Nos. 2075 and 2076 of 1968
Judge
Reported inAIR1976SC1703; (1976)4SCC420; [1976]3SCR1022; 1976(8)LC486(SC)
ActsCode of Civil Procedure (CPC) - Order 30, Rule 2; Partnership Act - Sections 59, 69 and 69(2)
AppellantMohatta Brothers
RespondentThe Bharat Suryodaya Mils Co. Ltd., Ahmedabad
Appellant Advocate A.K. Sen,; L.M. Singhvi,; S.K. Bagga,;
Respondent Advocate R.P. Bhatt, ; B.S. Trivedi, ; H.S. Parihar, ;
Prior historyFrom the Judgment and decree dated the 29th March & 1st April 1968 of the Gujarat High Court in First Apeals Nos. 769 and 1029 of 1960
Excerpt:
.....69 provides for registration of newly admitted partner of reconstituted firm in register of firm - partnership deed was executed wherein one x was shown as partner of plaintiff firm - newly constituted firm had not been registered - entire course of dealing shows that despite execution of subsequent partnership deed same was not acted upon - relations between partners of plaintiff firm continued to be governed by old deed of partnership - trial court right in holding that plaintiff's suit not barred by section 69 as subsequent partnership deed was not acted upon. - - in that view of the matter it would be wholly unnecessary to go into any, of the other contentions which have been raised in these two appeals and to record any finding on the issues relating to the merits of the..........plaintiff firm was the execution of deed of partnership dated october 24, 1949, according to this deed} satyavati become a partner to the extent of 4 annas share out of 16 annas, which had been previously held by her minor son shashi kumar, shashi kumar under the deed of partnership of may 19, 1949 was entitled to the share of profits to the extent of four annas in a rupees and was not liable for the losses which were to be borne by the other five partners. satyavati became entitled under the deed of october 24, 1949 not only to the share of profit to the extent of 4 annas in a rupee but also became liable to share losses to that extent. the other circumstance relied upon by the high court was resolution dated january 21, 1950 passed by the board of directors of the defendant-company......
Judgment:
ORDER

Defendants do pay Rs. 77, 286-0-2 and the cost of the suit to plaintiff with future interest at 6 per cent from 1st January, 1955. The plaintiff should pay the remaining Court fees within a month. Defendants to bear their own cost.

7. Two cross-appeals were filed against the judgment and decree of the trial court. One appeal was by the defendant company praying for the dismissal of the plaintiff's suit. The other appeal was by the plaintiff firm claiming for enhancement of the amount decreed by the trial court. One of the contentions advanced by the defendant-company was as under:

The plaintiff firm was not entitled to file a suit as the plaintiff-firm was differently constituted from the firm of Mohatta Brothers as on 31st July 1950, and, in any event, as the minor Shashi kumar had become major in 1953 and had become a partner of the plaintiff-firm Mohatta Brothers, Ahmedabad, and as even the name of Satyavati Devi who was the partner suing did not appear in the entry in the register of firms the present suit was barred under Section 69(2) of the Act.

Dealing with the above contention, the High Court disagreed with the finding of the trial court that partnership deed Ex. 116 dated October 24, 1949 had not been acted upon. The learned Judges of the High Court held so far as the first part of the above contention is concerned that when a firm is reconstituted by introduction of a new partner, it would remain the same registered firm, and there would be no necessity of fresh registration if the continuing firm was registered with the Registrar of the Firms under Section 59 of the Indian Partnership Act. Dealing with the contention that Shashi Kumar and the whole argument in this respect was based on mere conjecture. On the latter part of the submission, the High Court held that the mandatory condition under Section 69(2) of the India Partnership Act was not fulfilled in the present case as the name of Satyavati who was a partner of the reconstituted firm and in whose favour a cause of action had accrued was not shown in the register of the firms. This defect was held to be fatal. The High Court in this context observed:

In view of this legal position which we have discussed the second mandatory condition under Section 69(2) is not fulfilled in the present case as the name of Satyavati who was partner of the reconstituted firm and in whose favour the cause of action had accrued is not shown in the register of firms. This defect would be fatal as the first defect of want of registration of the firm itself and in both the cases we would have no option but to dismiss the suit. In that view of the matter it would be wholly unnecessary to go into any, of the other contentions which have been raised in these two appeals and to record any finding on the issues relating to the merits of the case or as regards the other appeal of the plaintiff as well. Howsoever much we may regret to dismiss the plaintiff's suit which apparently is well founded by upholding this technical objection of the defendant company, we are bound to dismiss this suit as in law a non-compliance of this second mandatory condition is also equally fatal as the non-compliance of first condition. At the same time, however, in the circumstances of the cases while dismissing the plaintiff's suit we would order both the parties shall bear their own costs all throughout.

8. In appeal before us Mr. Sen on behalf of the appellants has assailed the judgment of the High Court in so far as it has disagreed with the finding of the trial court that Satyavati was not a partner of the plaintiff firm and the deed of partnership dated October 24, 1949 had not been acted upon. Mr. Sen has also questioned the correctness of the view taken by the High Court regarding the construction of Section 69(2) of the Indian Partnership Act. As against that, Mr. Bhatt on behalf of the respondents has canvassed for the correctness of the view taken by the High Court, both on the question of fact as well as on the question of law.

9. After hearing the learned Counsel for the parties and after having been taken through the relevant material on the record, we are of the opinion that the trial court took a correct view of the matter in so far as it has held that Satyavati did not become a partner of the plaintiff-firm and that the deed of partnership dated October 24, 1949 was not acted upon.

10. The main consideration which prevailed with the High Court in holding that Satyavati became a partner of the plaintiff firm was the execution of deed of partnership dated October 24, 1949, According to this deed} Satyavati become a partner to the extent of 4 Annas share out of 16 Annas, which had been previously held by her minor son Shashi Kumar, Shashi Kumar under the deed of partnership of May 19, 1949 was entitled to the share of profits to the extent of four Annas in a rupees and was not liable for the losses which were to be borne by the other five partners. Satyavati became entitled under the deed of October 24, 1949 not only to the share of profit to the extent of 4 Annas in a rupee but also became liable to share losses to that extent. The other circumstance relied upon by the High Court was resolution dated January 21, 1950 passed by the Board of Directors of the defendant-company. That meeting was presided over by Shivratan G. Mohatta, partner of the plaintiff firm. In that resolution there was reference to partnership deeds dated May 19, 1949 and October 24, 1949, which has been received along with letter dated December 1, 1949 from Mohatta Brother. The Board of Directors took note of the changes mentioned in the above two partnership deeds and agreed to accept the partners therein mentioned. The third circumstance relied upon by the High Court is letter dated August 1, 1950 Ex. 118 which was sent on behalf of the plaintiff firm, Mohatta Brothers, for the purpose of tendering resignation as Secretaries, Trasurers and Agents of the defendant company. This letter was signed, besides the other, partners, by Satyavati. There was, however, no indication in the letter as to whether Satyavati signed it in her capacity as a partner of as the guardian of her minor son Shashi Kumar.

11. As against the circumstances relied upon by the High Court, we find that in the register relating to the registration of firms kept under the Indian Partnership Act, an entry was made on May 5, 1952 relating to the registration of the plaintiff-firm. The above entry was plainly in pursuance of application filed on behalf of the plaintiff firm shortly before the making of that entry. The above entry shows that the position taken up on behalf of the plaintiff firm even in the year 1952 was that there were only five partners of the plaintiff firm and that in addition to that, Shashi Kumar minor was admitted to the benefit of partnership. The entry thus reveals that even in the year 1952 the stand of the partners of the plaintiff firm was that Satyavati was not a partner of the plaintiff-firm and that it was her minor son Shashi Kumar who was entitled to share in the profits of the partnership. This entry would be inexplicable if Satyavati had become a partner of the plaintiff firm with effect from October 24, 1949.

12. Another circumstance which goes to show that Satyavati did not become a partner of the plaintiff-firm is the entry in the registers of the defend-ant-company. According to Section 87 of the Indian Companies Act 1913, which was the Act in force at the relevant time, every company shall keep inter alia at its registered office a register of managing agents containing with respect to each of them the following particulars, that is to say, in the case of a firm, the fullname, address and nationality of each partner and the date on which each became a pertner. The entry which was made in the register of the defendant-company regarding the partners of its managing agents showed that after April 1, 1949 there were five partners besides Shahi Kumar minor under the guardianship of his mother Satyavati, of the firm of the managing agents Mohatta Brothers. Although the above entry was made on October 6, 1949, no subsequent entry was made thereafter showing Satyavati as partner of the firm of Mohatta Brothers. Had Satayavati in fact become a partner since October 24, 1949 of Mohatta Brothers, it seems unlikely that an entry to that effect would not be made in the register of the defendant-company. It may also be mentioned in the above context that return has to be sent to the Registrar of the Firms under Section 87 regarding any change in the particulars required to be contained in the register. Failure to comply with the directions entailed imposition of fine.

13. The third significant circumstance which tends to show that Satyavati despite the execution of the deed of partnership dated October 24, 1949 did not become a partner of the plaintiff firm is evidenced by application in connection with the registration of tint firm which were presented to the income-tax authorities under Section 26A of the Indian Income-tax Act, 1922. Ex. 280 to 286 are the applications which were filed on behalf of the plaintiff firm for the years 1949-50 to 1956-57. In all these applications, Shashi Kumar minor under the guardianship of Satyavati was shown entitled to 4 Annas share in a rupee in the plaintiff-firm. Satyavati was not shown in any of these applications as partner of the plaintiff-firm. All these applications which were signed by Satyavati clearly go to show that during these years she did not claim herself to be partner of the plaintiff-firm. On the contrary, she acknowledged that it was her minor son Shashi Kumar who was entitled to 4 Annas share in the profits of the partnership.

14. Documentary evidence which has been brought on the record, in our opinion, clearly lends support to the statement of Shivratan (PW 1) that partnership deed dated October 24, 1949 was not acted upon and that Satyavati did not become a partner of the plaintiff firm, Jivan Das PW, who was an employee of the defendent-company, has likewise deposed that Satyavati was never a partner of Mohatta Brothers.

15. During the hearing of the appeal, affidavit of Satyavati has been filed stating that she was never a partner of Mohatta Brothers & it was her son Shashi Kumar who at all material times admitted to the benefit of the partnership. Mr. Bhatt has objected to this Court taking notice of the contents of the affidavit of Satyavati including her disclaimer of any interest in the plaintiff-firm. In this respect we are of the view that even without the above affidavit, the material on the record clearly goes to show that Satyavati was not a partner of the plaintiff firm.

16. In addition to what has been pointed cut, we find that in the statement of accounts of the plaintiff firm it is Shashi Kumar and not Satyavati who is shown to have 4 Annas share in the plaintiff-firm. Entries show that Shashi Kumar shared the profits as well as the losses in that proportion. The significant thing which emerges from the account books is that Satyavati was not shown as the person entitled to 4 Annas share in the partnership firm.

17. Soon after the present suit had been filed, an application filed on behalf of the defendants under Order XXX Rule 2 of the CPC, names of the partners of the plaintiff firm were declared on behalf of the plaintiff-firm. ID the declaration the name of the Satyavati was not mentioned as one of the partners of the plaintiff firm. The question as to who should share the profits of the plaintiff-firm and should be otherwise entitled its assess is essentially a matter for the partners of the plaintiff-firm. The facts of the case disclose that the partners of the plaintiff-firm have agreed between themselves that so far as the 4 Annas share in the profits and a assets of the plaintiff-firm are concerned, it would be Shashi Kumar who would be entitled to the same. That position is also accepted by Satyavati in the applications in connection with the registration of the firm to the income-tax authorities. It would, in our opinion, be a wholly untenable plea for the defendant from whom money is claimed, to urge that even though Satyavati as well as the other partners claim that it is not she but her son Shashi Kumar who is entitled to 4 Annas share in the partnership the court should hold that it is Satyavati who is entitled to that share. The distinction between a plaintiff firm and a defendant-firm in the above context should not be lost sight of. So far as a defendant-firm against whom a suit for recovery of money has been filed is concerned, it would be open to the plaintiff to prove that a person is a partner of the defendant firm despite the denial of that fact by that person as well as the other partners of the defendant-firm The reason for that is that a creditor of a defendant-firm except in some cases 10 which it is not necessary to refer, also proceed against the personal assets of each and every partner Such a consideration does not hold good when the dispute relates to the question as to who are the partners of the plaintiff-firm.

18. It has been mentioned above that Shivratan stated in the course of his deposition that partnership deed dated October 24, 1949 had not been acted upon This statement is against the pecuniary interest of Shivratan. It is plain that if Satyavati were a partner of the plaintiff firm, Shivratan and other partners would have to bear losses to the extent of 12 Annas in a rupee. As against that, if Shashi Kumar be entitled to share profits to the extent of 4 Annas in a rupee and be not liable for the losses, in such au event Shivratan and other partners would have to bear the losses to the full extent of 16 Annas in a rupee. If despite that fact, Shivratan has deposed that Satyavati did not become a partner of the plaintiff firm and the deed of partnership dated October 24, 1949 was not acted upon, his statement in this respect should not, in our view be rejected, especially when there is overwhelming documentary evidence which lends support to the above statement.

19. The entire course of dealing shows that despite the execution of the deed of partnership dated October 24, 1949, the said partnership deed was not acted upon and the relations between the partners of the plaintiff firm continued lo be governed by the deed of partnership dated May 19, 1949 according to which it was not Satyavati but her son Shashi Kumar who was entitled to four Annas share in the partnership. The question, to which a reference has been made in the course of arguments as to when it was decided not to act upon the deed of partnership dated October 24, 1949 is hardly of much importance, the material thing is that the said deed was not given effect to or acted upon by the parties concerned. The firm which came into existence as per deed of partnership dated May 19, 1949 was admittedly registered under the Indian Partnership Act and its partners were shown in the Register of Firms.

20. Looking to all the facts we are of the opinion that the trial court took a correct view of the matter in so far it held that Satyavati had not become a partner of the plaintiff-firm and that the deed of partnership dated October 24, 1949 had not been acted upon. The High Court, in our opinion, was in error in reversing that finding of the trial court. In view of this conclusion of ours, it is not necessary to go into the legal question as to what should be the proper construction of Section 69(2) of the Indian Partnership Act. learned Counsel far the parties are agreed that such question would arise only in case we had affirmed the finding of the High Court that Satyavati had become a partner of the plaintiff firm and that deed of partnership dated October 24, 1949 had been acted upon.

21. The High Court did not deal with the merits of the cross appeals filed by the parties in view of its finding on the point as to whether Satyavati had become partner of the plaintiff-firm and the construction it placed upon Section 69(2) of the Indian Partnership Act. In the light of the conclusion we have arrived at, it becomes essential to remand the matter to the High Court so that the cross-appeals tiled by the parties may be disposed of on mertis. We accordingly accept the appeals, set aside the judgment of the High Court and remand the case to it for disposal of the appeals tiled by the parties on merits. Looking to all the circumstances, we leave the parties to bear their own costs of these appeals.

22. As the matter has been pending for a long time, the High Court may dispose of the appeals at an early date.


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