Skip to content


Abdul Latif and ors. Vs. Mohammad Siddiq - Court Judgment

LegalCrystal Citation
SubjectCommercial
CourtDelhi High Court
Decided On
Case NumberInterim Application Nos. 74, 75 and 76 of 1984 and Suit \No. 25 of 1984
Judge
Reported in27(1985)DLT423
ActsPartnership Act, 1932 - Sections 14 and 53; Delhi Rent Control Act, 1958 - Sections 16(3); Code of Civil Procedure (CPC), 1908 - Order 39, Rule 1
AppellantAbdul Latif and ors.
RespondentMohammad Siddiq
Advocates: A.B. Saharia,; S.M. Babu,; J.K. Seth and;
Cases ReferredIn Miles v. Clarke
Excerpt:
.....no dispute regarding date of dissolution of partnership as well as shares of respective partners - business of partnership still carried on by defendant in same premises - plaintiffs have 1/4th share in partnership assets. - - (8) the defendant has filed a written statement as well as replies to all the applications. saharya argued that circumstances show that the tenancy rights were brought into the stock of the firm and even otherwise on agreement between the partners has been pointed out under which the tenancy rights were to remain separate and thus under section 14 of the partnership act it has to be held that the properties of the firm included the tenancy rights as well. seth on the other hand referred to various provisions of the delhi rent control act, 1958, particularly,.....d.p. wadhwa, j. (1) m/s. mohammed hasan and mohammad siddiq, a partnership firm was constituted of abdul karim (now deceased) and mohammad siddiq, defendant as partners. it was engaged in the business of general merchandise but principally in the manufacture and sale of umbrellas. the deed of partnership is dated 14-12.1949. abdul karim died on 4-8-1982. the partners had following share ratio of profit and losses : 1. mohd. siddiq -75% 2. abdul karim -25% (2) admittedly, even after the death of abdul karim the erstwhile business of the partnership is being carried on by the defendant at the same premises as heretobefore. (3) the plaintiffs as legal representatives of abdul karim have filed this suit firstly for passing a preliminary decree declaring the proportionate shares of the.....
Judgment:

D.P. Wadhwa, J.

(1) M/S. Mohammed Hasan and Mohammad Siddiq, a partnership firm was constituted of Abdul Karim (now deceased) and Mohammad Siddiq, defendant as partners. It was engaged in the business of general merchandise but principally in the manufacture and sale of umbrellas. The deed of partnership is dated 14-12.1949. Abdul Karim died on 4-8-1982. The partners had following share ratio of profit and losses : 1. Mohd. Siddiq -75% 2. Abdul Karim -25%

(2) Admittedly, even after the death of Abdul Karim the erstwhile business of the partnership is being carried on by the defendant at the same premises as heretobefore.

(3) The plaintiffs as legal representatives of Abdul Karim have filed this suit firstly for passing a preliminary decree declaring the proportionate shares of the plaintiffs/parties and secondly for passing a final decree directing the defendant to render accounts of the firm and to allot the plaintiffs their shares with interest thereon. Along with the suit the plaintiffs filed three applications seeking certain interim reliefs.

(4) LA. 74/1984 is under order 39 rule I of the Code of Civil Procedure. The prayer is that during the pendency of the suit the defendant be restrained from removing and/or disposing of and/or alienating the properties mentioned in Schedule A (tenancy rights in respect of 3 immovable properties) and B (movable properties).

(5) I.A. 75/84 is under section 33 of the Partnership Act and the prayer is that the defendant be restrained from carrying on the business of general merchandise or any other business in the name of the firm and from using the properties of the firm during the pendency of the suit.

(6) I.A. 76 of 1984 is Under Order 40 rule I of the Code of Civil Procedure. The prayer is that a receiver be appointed in respect of the properties mentioned in Schedules A and B to the plaint and for removal of the defendant from possession and custody of the said properties and conferring upon the receiver all the power of management, protection and preservation of these properties.

(7) By order dated 5-1-1984, the court issued notices of these applications to the defendant and in the meantime the defendant was restrained from alienating any of the assets of the erstwhile partnership firm except in the ordinary course of business.

(8) The defendant has filed a written statement as well as replies to all the applications. Partnership is admitted and so also the share ratio. That the plaintiffs are the legal representatives of deceased partner Abdul Karim is also not disputed. It is, however, alleged by the defendant that Abdul Karim was merely a working partner and had not invested in the capital of the firm. It is then mentioned that the firm was originally carrying on the business of general merchandise, but for a long time it was carrying on the business of manufacture and sale of umbrellas. In para 2 of the written statement a background has been given as to how originally the partnership M/s. Mohd. Hasan Mohd. Siddiq was constituted and how Abdul Karim became a partner when the share ratio was 2 annas in a rupee which was ultimately increased to 4 annas, i.e., 25 paise in a rupee and how finally both the defendant and Abdul Karim came to be the only two partners of this firm. The last partnership deed is stated to be dated 14-12-1949 effective from 1-9-1949. Principal dispute in the case, however, appears to be in respect of the tenancy rights of the properties which are detailed in Schedule A to the plaint. The plaintiffs allege that the tenancy rights were part of the stock of the firm and reliance is placed on the provisions of Section 14 of Partnership Act. The defendant however, contends that the tenancy rights solely belong to him and after the dissolution of the partnership, these have to revert back to him though these premises were being used for the business of the partnership. Again in para 5 of the written statement details have been given as to how tenancies were created in respect of these properties. With reference to the provisions of the Delhi Rent Control Act, 1958, it is submitted that the tenancy rights cannot be parted with in favor of the plaintiffs being the legal heirs of Abdul Karim, deceased partner even involuntarily. It is then alleged by the defendant with reference to properties detailed in Schedule B to the plaint that after the death of Abdul Karim whatever was found due to him was kept aside and deposited in a separate account. A sum of Rs. 73,758.78 is stated to have been found due to Abdul Karim. This was after taking into consideration all the goods mentioned in schedule B to the plaint, so it is alleged. It is then alleged that this amount could be paid to the plaintiffs on their production of the succession certificate. It is, however, not denied that the business of the firm M/s. Mohd, Hasan Mohd. Siddiq is still being carried on business in the premises even after the death of Abdul Karim.

(9) Replication in this case has also been filed. Though . in the written statement the defendant did allege that Abdul Karim was merely a working partner, yet during the course of arguments it was not disputed that except for the tenancy rights in respect of the 3 premises detailed in Schedule 'A' to the plaint, Abdul Karim had share in all the assets of the firm. Rather it is claimed by the defendant that after taking the accounts a sum of Rs. 73,758.78 was found due to Abdul Karim. This figure is denied by the plaintiffs and so accounts would have to be gone into. Mr. J.K. Seth, learned counsel for the defendant did not dispute the rights of the plaintiffs to the accounts of the partnership including the stocks and other assets thereof. As noted above, the principal dispute centres round the tenancy rights of the 3 premises.

(10) Referring to a decision of full bench of the Allahabad High Court in Board of Revenue v. Auto Sales : AIR1979All312 , Mr. Ab Saharya, learned counsel for the plaintiff submitted that the concept of partnership is to embark upon a joint venture and for that purpose to bring in a capital or even property including immovable property. He referred to the following observations:

'Once a partner brings his property to the common hotch potch of a partnership, whatever is brought in would cases to be the exclusive of that property. It would be trading asset of the partnership in which all the partners would have their shares. As a practical matter, now the partnership, rather the partners, owns the firm's property. A partner subject to any agreement between the partners has an equal share with his partners to possess specific partnership property for partnership purposes, but has no right to possess such property for any other purpose. Hence, in the absence of a special agreement neither a partner separately owns or has the exclusive right of possession of any particular article of partnership property, nor does either partner own any proportional part of any partnership property, but each has domain over the whole article and over the entire partnership property.'

(11) This judgment relied upon a decision of the Supreme Court in Narayanappa-v.Bhaskra Krishnappa : [1966]3SCR400 . There could not be any dispute with the proposition laid, but the question remains if the tenancy rights were brought into the common hotch potch and the partnership in fact and could be so brought in law. Mr. Saharya argued that circumstances show that the tenancy rights were brought into the stock of the firm and even otherwise on agreement between the partners has been pointed out under which the tenancy rights were to remain separate and thus under section 14 of the Partnership Act it has to be held that the properties of the firm included the tenancy rights as well. He then referred to the decision of the Supreme Court mentioned above wherein it is was held that since a partnership firm has no legal existence. The partnership property will vest in all the partners and in that sense every partner has an interest in the property of the partnership. Mr. Saharya pointed out that all through the rent of these premises has been paid by the partnership firm and that rent receipts have been in the name of the firm and that the tenanted premises were being exclusively used for the business of the partnership.

(12) Mr. Seth on the other hand referred to various provisions of the Delhi Rent Control Act, 1958, particularly, Sections 16(3) Section 48(2) and proviso (b) to Section 14(1) and submitted that these provisions applied irrespective of any contract to the contrary between the parties and that subletting or parting with possession or assignment of the tenanted premises would not only entail eviction from these premises but there could be prosecution as well. But according to Mr. Saharya only a prima facie view of the matter is to be taken and as to what a landlord would do under the circumstances should not be taken note of at this stage. I am afraid I cannot accept this argument of Mr. Saharya. Prima facie it appears to me that the tenancy rights of the premises in question could not be the subject matter of the partnership assets, and the Drc Act forbids any subletting parting with possession of assignment of the tenanted premises without the express consent in writing of the landlord. Mr. Seth relied upon a decision of the Supreme Court in Arjun Kanoji Tankar v. Santa Ram Kanoji Tankar : (1969)3SCC555 . Facts in this case were some what similar to those in the present case. It was submitted before the Supreme Court as by the plaintiff in this case before me that in any event by virtue of section 15 of the Partnership Act, all the assets with the aid of which the business was carried on must 'be deemed in law to have become partnership assets. The Supreme Court quoted a passage from Lindley on partnership, observed as under :

'property belonging to a person, in the absence of an agreement to the contrary, it is not on the person entering into a partnership with others, become the property of the partnership merely because it is used for the business of the partinership. It will become property of the partnership only if there is an agreement expressed or implied that the property was under the agreement of partnership, to be treated as the property of the partnership.'

(13) In Lindley on 'Partnership' 12th Edition it is stated on page 365 :

'AGAIN,it by no means follows that the property used by all the partners for partnership purposes is partnership property. For example, house and land in and upon which partnership business is carried on often belongs to one of the partners only, either subject to lease of the firm, or without any lease at all. If, however, a partner brings such property into the common stock as part of his capital, it becomes partnership property, and any increase in its value will belong to the firm. The only true method of determining as between the partners themselves what belongs to the firm, what not, is to ascertain what agreement has been come to open this subject. But this is by no means always an easy matter.'

'We are unable to agree with the Counsel for the Defendant that whenever there is a partnership and the assets are originally belonged to one of the partners are used for the purposes of the partnership, they must be presumed to have become partnership assets. In Miles v. Clarke (1953)1 All Er 779 the Defendant started the business of a photographer and then admitted the Plaintiff a successful, free lancer photographer as a partner. Leasehold premises, furnitures and studio, equipment, belonged to the Defendant. It was intended to record the terms of the partnership into a formal agreement, but no terms were ever settled, except that partners were to share the profit equally. On dissolution of the partnership it was held that no terms ought to be implied except such as were essential to business efficacy and that only consumable items of stock in trade were to be regarded as assets of the partner, and the lease of the property, equipment and personal goodwill were to be treated as being property of the partners who brought them into the business.'

(14) With this background of the law on the subject and the prima facie view which I have taken, I have to decide the three applications seeking interim relief during pendency of the suit. After giving my careful thought, I am of the opinion that in this case a preliminary decree should be passed straightaway keeping open the question of division of the tenancy rights in the immovable properties if it is ultimately held that these form part of the assets. It is not necessary for me to wait for a formal framing of issues, since there is no dispute regarding the date of Dissolution of the partnership as well as shares of the respective partners. It has been noted above that business of the partnership is still being carried on by the Defendant in the same very premises. The course which I am adopting would also avoid delay and while I decide the question of tenancy rights, the Receiver may go into accounts of the partnership. This course will also take care of these three applications before me.

(15) I, thereforee, pass a preliminary decree holding that the partnership stood dissolved on 4-8-1982 on the death of Abdui Karim and that the Plaintiffs, being the legal heirs of Abdui Kaiim, have l/4th share in the partnership assets. I direct that accounts be taken of the partnership as on the date of passing of the preliminary decree, as admittedly the business of the partnership is being carried on from the date of the death of Abdui Karim. The preliminary decree shall accordingly be withdrawn up as per Form No. 21, Appendix-D, to the Code of Civil Procedure.

(16) I would also direct that the business of the partnership, be stopped forthwith in the premises as given in the Schedule-A to the plaint and the Defendant is restrained from carrying on any such business in these premises. I appoint Mr. Pran Nath Talwar, Advocate, as the Receiver to go into the accounts of the partnership. The Receiver will submit his report within four weeks. The Receiver will take possession of all the assets of the partnership excluding tenancy premises mentioned in the Schedule-A to the plaint, but be will be in joint possession of the same Along with the Defendant. The Receiver will prepare an inventory of the stock and assets and liabilities of the partnership including book-debts and recoveries to be made. In the report, the Receiver will state if the stock etc., could be kept in any of the 3 premises or any portion thereof, when other premises or the portions could be exclusively used by the Defendant for any purpose other than carrying on the business of manufacture and sale of umbrellas in those premises. The fee of the Receiver is fixed at Rs. 2.000.00 in the first instance and shall be paid within one week by both the parties equally. As to whether the fee would be cost in these proceedings or is to be borne by the parties in proportion of their shares would be decided later.

(17) I further direct that the Defendant pay into the Court the amount of Rs. 73,758.78 paise which according to him is due to the plaintiffs being the share of the deceased, Abdul Karim, within four weeks, The plaintiffs shall be entitled to take this amount from the Court.

(18) The parties shall be entitled to seek further orders if circumstances so demand. Meanwhile, I restrain the Defendant from alienating, parting with possession, or creating any charge on the properties mentioned in the Schedule 'A' to the plaint.

(19) With these orders, all the three applications would, thereforee, stand disposed of.

(20) I frame the following issues :

(1)Whether the tenancy right of the premises : (i) No. XIV/130, Main Sadar Bazar, Delhi (Double storey shop with two doors). (ii) No. XIV/401-402, Gali Old Post Office, Sadar Bazar, (big godown having six doors). (iii) No.XIII/3261, Bahadur Garh Road, Delhi (garage) are partnership assets and if so, to what effect (2) Relief.

(21) Parties shall file their documents within four weeks from today and the case will be listed for trial at an early date. Parties will appear before the Deputy Registrar on 14th December, 1984 for further proceedings.


Save Judgments// Add Notes // Store Search Result sets // Organizer Client Files //