D.R. Khanna, J.
(1) These two consolidated suits bearing Nos. 333 and 334 of 1970, were brought by Smt. Sunder Devi in May, 1959 for rendition of accounts of two partnership concerns. The first was in the name of M/s. Prem Sukh Das Narsingh Das, cloth commission agents and cloth merchants, Nai Sarak, Delhi. There were three partners in it, namely, Mela Ram, Kedar Nath who were brothers, and Brij Lal who their nephew. Mela Ram died on 2-5-1956, and on his death the partnership stood dissolved by operation of Law as there was no saving clause in the partnership deed that the death of any partner would not result in dissolution. The plaintiff is the daughter of Mela Ram, and claims to be his heir, and as such entitled to rendition of accounts.
(2) Of the other two partners, Kedar Nath died on 6-5-1956, leaving behind two sons, namely Ghanisham Dass and Hanuman Prasad. Hanuman Prasad claims to be the adopted son of Mela Ram, and on this ground sought to defeat the plaintiff's claim. This case of adoption, however, was not accepted when the preliminary decree for rendition of accounts in the present suit was passed on 9-2-1967. That part of the controversy is, thereforee no longer open.
(3) The defendants imp leaded in the first suit were Brij Lal, Ghanisham Dass and Hanuman Prasad. the latter two being as heirs of Kedar Nath partner. Hanuman Prasad died . during the pendency of the suit in November, 1970, and his widow Smt. Gindori Devi stands imp leaded as her legal - representative. Brij Lal also died during the pendency of the .suit in June 1975, and his son and daughter, namely, Hukam Chandand Gomati Devi were imp leaded as his legal representatives. His widow Jamuna Devi too was so added but she has also hi the meanwhile died.
(4) The suit bearing No. 334 of 1970, concerns the firm Narain Dass Mela Ram. cloth commission agent and cloth merchants, Kalba Devi Road, Bombay-2. In-this. the partners were Mela Ram,. Brij Laland Ghanisham Dass. According to the plaintiff. Shashi Kant minor was entitled to the benefit of. partnership but- she did not accept the same.
(5) A preliminary decree for-accounts in this case was also passed on 9-2-1967. One Shri Shiv Shankar was appointed as Commissioner to go into the accounts of the two firms. He submitted two reports, one in each case, on 17-1-1970. In report relating to suit No. 333 of 1970, he allowed an amount of Rs. 51,082 as principal and Rs. 96,147 as interest. The total of these amounting to to Rs. 147,229 was held payable to Smt. Sunder Devi from Ghanisham Da's and Brij Lal.
(6) In the other suit, nothing was held due to any of the parties on the ground that the account books of that firm were not produced before him.
(7) Against these reports, Ghanisham Dass defendant filed objections. According to him, the approach adopted by the Commissioner in the first case was enlirely misdirected as the requirements of sections 46 and 48 of the Partnership Act were not complied with. The accounts of the firm were not gone into in terms of these provisions, and without ascertaining and adjusting the assets and liabilities of the firm, the amount shown in the account of Mela Ram partner was straight away allowed.
(8) In the other suit, it has been contended that the account books were lying with Hukam Chand from whom they ought to have been summoned by the Commissioner. In their absence the Commissioner, it is urged, entirely failed to carry out his duty of going into the accounts.
(9) These objections were controverter from the side of the plaintiff.
(10) Following iseue in each of these cases was framed
'1. Whether the report of the Commissioner is liable to be set aside as alleged in the objections '
(11) Sh. Shiv Shankar was appointed to go into the accounts by a joint statement dated 7-12-1967 of the counsel for the plaintiff and Ghanisham Das defendant. It was mentioned that he was to be the local commissioner and arbitrator for settlement of accounts between the parties. This statement thus described him as arbitrator also. However, the matters have throughout proceeded taking him to be the local Commissioner. He did not submit any award but simply filed his reports.
(12) In suit No. 333 of 1970, the report is dated 17-1-1970. and it has been mentioned that only the plaintiff and Ghanisham Dass defendant appeared before the Commissioner. Hanuman Pershad, the other son of Kedar Nath Partner, had sent a letter that he had nothing to do with the partnership. Brij Lal partner though served, also did not appear. The Commissioner then went into a copy of the account of Mela Ram which Ghanisham Dass had produced, and found that Rs. 52,327-14-3 were shown as due to him from the firm Prem Sukh Dass Narsingh Dass. After discussing some other entries made before and after the death of Mela Ram, the Commissioner concluded that Rs. 51,082 were still due to Mela Ram as per account books of the firm. He noted that Ghanisham Dass on his part had admitted this amount to the extent of Rs. 47,594. After adding interest at rates prevalent from time to time in the Hindustani Merchantile Association. the Commissioner further allowed an amount of Rs. 96,147 as interest on the principal amount of Rs. 51,082. The total thus came to Rs. 1,47,229 which the plaintiff was held entitled to from Ghanisham Dass and Brij Lal.
(13) During the course of the proceedings before the Court Ghanisham Dass appeared as his witness, and stated that the Commissioner did not make any endeavor to prepare balance-sheet or profit and loss account of the firm. No attempt was made to ascertain its total assets and liabilities. Instead the Commissioner simply looked into the personal account of Mela Ram in the account books of the firm. He produced document marked 'B' which was said to be balance- sheet and the statement of realisations of debts after the death of Mela Mam. So also were produced document marked 'C' reflecting the balance still due from third parties, document marked 'D' showing the amounts paid by the defendants to different parties and document marked 'E' showing the amounts still due to third parties. None of these, however, were produced before the Commissioner.
(14) In cross-examination Ghanisham Dass admitted that it was he who had produced Mela Ram's account before the Commissioner. He also added that he had produced the other accounts of the firm as well. He conceded that interest at the rate of 12 per cent was prevalent in the Mercantile Association.
(15) The other witness examined is Shiv Shankar.the Commissioner. He admitted that Ghanisham Dass had produced the bahi khata of the firm Prem Sukh Dass Narsingh Dass of Samvat 2012 and 2013. He, however, did not prepare the Chittha showing the amounts payable by the firm and to be .received by it. He also did not prepare any profit and loss account.
(16) The main grievance of Ghanisham Dass defendant against the report of the Commissioner is that he simply allowed the amount shown due in the personal account of Mela Ram in the firm's books. No endeavor was made by him to prepare the balance-sheet and profit and loss account and ascertain what were the assets and liabilities of the firm. It is pleaded that it could only be after the .adjustment of assets and liabilities and the clearance of the capital accounts of, the partners that the. surplus could be divided, amongst the partners.
(17) I find force in this contention. Section 46 of the Indian Partneriship Act, 1932, in this regard dearly envisages that on .the dissolution of a firm, the property of the firm has first to be applied in payment of debts and liabilities of the firm, and it is only thereafter that the surplus can. be distributed amongst the partners according to their shares.
(18) Section 48 next elaborates the mode of settlement of amounts between partners. Losses, including deficiency of capital, have first to be paid out of profits next out of capital and lastly if necessary, by the partners individually, in the proportions in which they were entitled to share profits. As regards, the assets of the firm, including any sums contributed by the partners to make up deficinecies of capital, the mode to be adopted is that first the debts of the firm to third parties have to be paid, then the loans as distinguished from capital investments given bypartners to 'the firm rateably discharged. Thereafter each partner is rateably given what is due to him on account of capital. title residue left thereafter has to be divided amongst the partners in proportion in which they were entitled to share profits.
(19) None of this procedure and mode of taking accounts was adopted by title Commissioner. He simply allowed the amount standing due to Mela Ram in his personal account with the firm. Payment of this amount could only arise when the debts of third parties were cleared) and so also the loans, if any, obtained by the firm from the partners Rateable and proportionate distribution had to be done of the residue towards capital investment of the partners and share of profits. It thus follows that one partner has no right or action against another of the balance owing to him. and till after final settlement of the account. Ordinarily the liabilities have to be paid and assets collected and the business wound up. Thus the Judicial Committee in 1925 P C 257, in Mt. Nag Kur v. Sham Lal Sahu and others (1), observed that on dissolution of partnership, liabilities to others, costs and expenses have first charge, and payment of capital amounts if any due to partners are then made and then only partnership assets are divided in proportion to shares of partners. The Lahore High Court in its Full Bench decision 1947 Lahore It in Ajudhia Pershad Ram Pershad v. Sham Sunder and others (2), too observed that the Partnership Act contemplates complete liquidation of the assets of the partnership as a preliminary to the settlement of accounts between partners upon dissolution of the firm and it will, thereforee, be correct to say that, for the purposes of the Partnership Act, and irrespective of any mutual agreement between the partners, the share of each partner is 'his proportion of the partnership assets after they have been all realised and converted into money, and all the partnership debts and liabilities have been paid and discharged'.
(20) The Allahabad High Court has also in a Special Bench decision in observed that the partners are entitled to divide only the residue, namely, the balance of the assets of the firm which remain after payment of its liabilities to outsiders as well as to the partners in paying to them the loan as distinguished from capital which the firm had obtained from them. It is there after that the residue can be divided amongst the partners. The Delhi High Court has taken similar view in cases of Same is the view of the Calcutta High Court in the case of.
(21) From the side of the plaintiff, it has been sought to be urged that when Ghanisham Dass had produced the copy of the accounts of Mela Ram before the Commissioner, he ought to have as well produced the balance-sheet and other statements as later tendered in the Court, bringing out the various assets and liabilities of the firm. Since he did not do so, it lias been pleaded that the Commissioner was justified to grant relief to the plaintiff on the basis of the account of Mela Ram produced before him.
(22) I, however, find that the Commissioner has in bids deposition, admitted that the account books of this firm were produced by Ghanisham Dass before him. Once this had taken place, it was as much the duty of the learned genuineness and to get prepared balance-sheet, profit and Commissioner to go into these accounts. after satisfying them loss account and statements of the other assets and liabilities. It was primarily for the purpose of settling the accounts in the mode provided by sections 46 and 48 of the Partnership Act, that he was appointed Commissioner. Since he did not do so, I am constrained to send back the matter to him for proceeding afresh in the light of observations made above. He should abide by the mode of taking of accounts mentioned in sections 46 and 48 of the Partnership Act. I am conscious that this is a very old suit pending from the year 1959, and the plaintiff as the widow of late Mela Ram. has to still wait after the lapse of such long period before any relief due to her, can be granted. However, in the absence of proper taking of accounts, I do not see, however, the same can be allowed to her at this stage. The Commissioner, however, is directed to procced with the matter as expeditiously as possible. and submit his report preferably within a month or so. Both the plaintiff and Ghanisham Dass defendant, who have been appearing before the Commissioner, are directed to appear before him on 5-11-1980 at 5.00 P. M. at his premises to enable him to give further date.
(23) Adverting to the other suit bearing No. 334 of 1970, report of the Commissioner shows that Ghanisham Dass had produced a copy of an award dated 22-8-1962, showing an amount of Rs. 54,682 due from Mela Ram. This award, however, had been given after the death of Mela Ram, and without any notice to the plaintiff. It was. thereforee, not relied upon, and in my opinion rightly. Ghanisham Dass had further produced before the Commissioner the account of Mela Ram, Samvat 2017, which was found to be in conflict with the balance-sheet of 1956. The Commissioner, thereforee, held that the account which was prepared after the death of Mela Ram, was not reliable. No other account books were produced of the firm Narain Dass Mela Ram, although the defendants were required to do so. hi the circumstances, the Commissioner was unable to hold that any amount was due to any of the parties. The report does not show that Ghanisham Dass had sought to plead before the Commissioner that the account books were not in his possession, and instead were with Hukam Chand. In his objections to the report, he has, however, sought to so plead. I am, however, unable to lay any emphasis on this belated plea. More so when an account of Samvat 2017 was, in-fact, produced by him before the Commissioner along with balance-sheet of 1956. If the account books were not available with him, it is difficult to see where from he procured these documents. I, thereforee, do not find any infirmity or flaw in this report. The same is accepted. Nothing is held due to any of the parties in this suit. The same shall be treated as dismissed, leaving the parties to bear their own costs.
(24) Before concluding reference may be made to two applications bearing 1. A. Nos. 1303 and 1304 of 1971, moved by the plaintiff in suit No. 333 of 1970. They are under sections 14, 16, 42, 50 and 55 of the Partnership Act. The first refers to the tenancy rights of premises No. 654, Nai Sarak, Delhi, which was said to be on lease with the firm and the goodwill of the partnership. These were not taken into account by the Commissioner while settling accounts. Let him now do so. In the second application, the plaintiff seeks that the profits of the business which the defendants carried on after the death of Mela Ram should also be gone into and accounts rendered. I am afraid, no relief in this regard can be given at this stage. The proper course was to have agitated this before the preliminary decree was passed. This application shall stand rejected.
(25) Let the Commissioner submit his report in suit No. 333 of 1970 on 28-11-1980.
(26) The other suit No. 334 of 1970, as already stated above, shall stand dismissed leaving the parties to bear their own costs.