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Suraj Bahadur Vs. Mahadeo - Court Judgment

LegalCrystal Citation
SubjectCommercial
CourtRajasthan High Court
Decided On
Case NumberSecond Appeal No. 274 of 1956
Judge
Reported inAIR1963Raj241
ActsRegistration Act, 1908 - Sections 2(6), 5, 17(1) and 28; Code of Civil Procedure (CPC) , 1908 - Sections 100 - Order 20, Rule 15; Partnership Act, 1932 - Sections 44
AppellantSuraj Bahadur
RespondentMahadeo
Appellant Advocate M.B.L. Bhargava, Adv.
Respondent Advocate M.M. Vyas, Adv.
DispositionAppeal dismissed
Cases Referred and Bailey v. Ford
Excerpt:
.....if i might put the whole thing in a slightly different way, what i should like to say is that the terms and conditions mentioned in ex. and if one of these two supports crumbles down, there is no reason why they should not be considered to remain alive and intact on the other support, which is a good oe sound one. 17. the next question to consider is whether the present suit for dissolution of partnership is bad because it discloses no cause of action. if that is permitted, there would be no limit to the legitimate bounds of litigation, 18. apart from that, however, i should like to point out that there is no force in this plea on the merits either. the court has of course a discretion in a matter like this; ford, (1843) 13 sim 495. 19. in the view of the matter i take i am clearly of..........to witness this, while the plaintiff and the defendant continued the partnership under a new deed of partnership (ex. 1) dated the 18th may, 1949, which was registered at kekri. under this new deed, the shares of the partners were fixed as ten annas for the plaintiff and six annas for the defendant in a rupee from the 1st january 1949. it was further agreed between the parties that the earlier partnership had resulted in loss to the tune of rs. 33704/8/9 upto the 31st december, 1948, and that this would be first recouped from the profits, if any, of the business of the partnership from the 1st january, 1949, and that none of the parties would be entitled to take anything out of the profits of the partnership until the same was recouped, whereafter they would be entitled to earn.....
Judgment:

I.N. Modi, J.

1. This is a civil regular second appeal by the defendant Suraj Bahadur against a preliminary decree in a suit for dissolution of partnership and rendition of accounts.

2. The plaintiff's case was that on the 27th April, 1946, he, the defendant and a third person named Anant Dattatray Ratna Parkhe had entered into a partnership for the purpose of working mica mines at village Para, Tehsil Kekri, and for carrying on business in that commodity by a partnership deed Ex. 3 which was executed at Ajmer and registered there. It was decided between the parties to carry on the business in the name of Malla and Company. This partnership continued for some time when Ratna Parkhe withdrew from it on the 18th May, 1949, and executed a deed of relinquishment to witness this, while the plaintiff and the defendant continued the partnership under a new deed of partnership (Ex. 1) dated the 18th May, 1949, which was registered at Kekri. Under this new deed, the shares of the partners were fixed as ten annas for the plaintiff and six annas for the defendant in a rupee from the 1st January 1949. It was further agreed between the parties that the earlier partnership had resulted in loss to the tune of Rs. 33704/8/9 upto the 31st December, 1948, and that this would be first recouped from the profits, if any, of the business of the partnership from the 1st January, 1949, and that none of the parties would be entitled to take anything out of the profits of the partnership until the same was recouped, whereafter they would be entitled to earn profits in the proportion of ten annas and six annas in a rupee and would also be liable to pay losses in the same proportion. It was further stipulated between the parties that the plaintiff who was staying in Para would look after and manage the affairs of the partnership and as such entitled to receive a remuneration of Rs. 100/- per mensem out of the partnership funds, and similarly the defendant would be paid at the rate of Rs. 100/- per mensem during his stay at Para in connection with the partnership business. And apart from a certain provision which was made in connection with two other persons Ganesh Mahadev Ratrekar and Vinayak Mahadev Ratrekar who were stated to 'be employed in the partnership with which provision in the deed we are not concerned for the purposes of the present appeal, the only other condition which it is necessary to mention is that the parties agreed that they shall be bound by the conditions stated in the partnership deed dated the 27th April, 1946, already referred to as Ex. 3, obviously meaning thereby that those conditions would govern the relationship of the parties in so far as no provision was made to the contrary in the new deed of partnership. The plaintiff's case was that in accordance with the terms of the original partnership, he alone had been the financing partner with the result that he had invested a sum of Rs. 1,20,000/- approximately in the business of the partnership. According to the plaintiff, however, in spite of his best efforts to make the business of the partnership a prospering one, it did not succeed and continued to run at a loss throughout. Confronted with this situation, his case is that he made an offer to the defendant that the latter might take it entirely on himself but the defendant did not agree. Thereafter the plaintiff also alleges to have suggested to the defendant that the partnership business might be sold to a third party who was prepared to purchase it but the defendant did not agree to this either. Consequently, the plaintiff brought the suit, out of which this appeal arises, for dissolution of the partnership business and for rendition of its accounts. This suit was filed on the 20th January, 1951, in the Court of the Sub-Judge, First Class, Kekri.

3. The defendant resisted the suit. His case was that the original deed of partnership Ex. 3 was inadmissible in evidence as the Sub-Registrar, Ajmer, had no jurisdiction to register the same. The defendant admitted his signatures on this document but his contention was that as it was not validly registered, it could not be acted upon. As regards the second document Ex. 1, the defendant also admitted his signatures on this document but contended that it was riot duly attested, and, therefore, it had no legal effect. As for the remaining allegations made by the plaintiff, the defendant did not accept them and put him to proof thereof.

4. Two main issues framed in the case were whether the documents Exs. 3 and 1 dated the 27th April, 1946, and the 18th May, 1949, respectively were admissible, and the third issue was to what relief was the plaintiff entitled. Both. Courts decided that the deed of partnership Ex. 1 dated the 18tb May, 1949, did not require attestation and was, therefore, not invalid for want of it and was admissible in evidence. So far as the document Ex. 3 goes, and that is the deed of partnership of 1946, the trial Court held that it did not require registration at all, and, therefore, was rightly admissible in evidence, while the learned Additional District Judge held that the partnership included the extraction of mica from the mines and amounted to dealing in immovable property within the meaning of Section 2(6) of the Registration Act and was, therefore, compulsorily registrable and as the mines were situate in village Para in Kekri division, the proper place of registration was not Ajmer but Kekri, and inasmuch as it was not so registered, it was inadmissible in evidence. The learned appellate Judge, however, further went on to hold that even if Ex. 3 was not admissible in evidence and could not be used as a document for dissolution of partnership or rendition of accounts by itself, still in the deed of partnership Ex. 1 which was executed subsequently, it was mentioned that certain terms of the previous document would be binding on the parties, and, therefore, these terms formed part of the later document and could be taken into consideration. And in this view of the matter, the learned Judge below upheld, the decree passed by the trial Court and dismissed the defendant's appeal. Aggrieved by this decision, the defendant has come up in second appeal to this Court.

5. This appeal was dismissed for want of prosecution by my order dated the 8th May, 1962, and it was thereafter restored to its original number by my order dated the 1st December, 1962. This is how it has come up for a decision on the merits.

6. The main contention raised by learned counsel for the defendant in the memorandum of appeal filed before this Court and which was argued before me was that having come to the conclusion that the deed of partnership of 1946 was not admissible in evidence, the learned Additional District Judge had fallen into serious error in holding that by virtue of the reference contained thereto in the subsequent document of 1949, the former could be taken into consideration in finding out the terms and conditions of the partnership and that as that could not be done, the plaintiff's suit should have been dismissed. By an application dated the 25th March, 1963, a further point was sought to be raised in this Court on behalf of the appellant that the position being that the appellant alone was the lessee and a licensee from the Government with respect to the mines in question, and no sanction or approval of the Government had been obtained by the parties in respect of the agreement of partnership alleged to have been entered into by them, consequently, the said agreement was void, being against public policy and no decree could be passed on the basis of such agreement. It is contended that this is a pure point of law and should be allowed to be argued. Yet another point which was raised by learned counsel, at the time of arguments was that the plaintiff had no cause of action whatever for bringing a suit for dissolution of the partnership business as this was a partnership for a fixed period of twenty years and was not a partnership at will. It was equally strenuously contended on behalf of the respondent that these new points should not be allowed to be argued when they had not been taken up in the Courts below. I propose to deal with the contentions mentioned above one by one.

7. The first question to consider is whether the deed of partnership of 1946 Ex. 3 was compulsorily registrable or not. For while the contention on behalf of the defendant appellant has been that it was compulsorily registrable, and that has been upheld by the learned Additional District Judge, it was submitted on behalf of the plaintiff respondent that it was not. In order to decide this question, it clearly seems to me that we must look at the nature of the business with which this partnership was concerned. Quite definitely, it was not a case of mere purchasing or selling of mica which had already been separated from the mines but the partnership was concerned with the extraction of mica from the mines. That, in my opinion, clearly amounts to dealing with immovable property and fails within the ambit of Section 2(6) of the Registration Act which defines 'immovable property' as follows -.

' 'immovable property' includes land, buildings, hereditary allowances, rights to ways, lights, ferries, fisheries or any other benefit to arise out of land, and things attached to the earth or permanently fastened to anything which is attached to the earth, but not standing timber, growing crops nor grass.'

There can be no doubt that the extracting of mica out of a mine would fall within the meaning of the phrase 'any other benefit to arise out of land' occurring in this definition. Such a partnership business, therefore, cannot but be held to be a business relating to immovable property.

8. Now it further seems to me that an instrument which creates or declares any right, title or interest in an immovable property and which is of a non-testamentary character would fall within Clause (b) of Section 17(1) of the Registration Act, and, therefore, it must be held to be compulsorily registrable. The cases relied on by learned counsel for the respondent namely Venkataratnam v. Subba Rao, AIR 1926 Mad 1040 and A. Narayanappa v. Krishtappa, AIR 1959 Andh Pra 380 (FB), are cases where a partner had by a release deed relinquished his share in the partnership property, and it was held therein that such a deed is not compulsorily registrable. These are entirely distinguishable on facts and afford no parallel to the case before me. Reference may be made in support of the view which I have felt persuaded to accept to Kanhaiyalal v. Jerome D'Costa, (S) AIR 1955 Nag 302 (FB).

9. Now, it was not disputed before me that the registration of the document in question should have been made in the office of the Sub-Registrar at Kekri as the entire property was situate at Para which, was within his sub-district within the meaning of Section 28 of the Registration Act. No part of the property was situate within the sub-district of Ajmer, and, therefore, the Sub-Registrar of Ajmer had no jurisdiction to register this document at Ajmer and the registration was void. In other words, the document must be considered not to have been registered at all and is, therefore, inadmissible in evidence. See Harendra Lal Roy Choudhuri v. Hari Dasi Debi, 41 Ind App 110 : (AIR 1914 PC 67). I hold accordingly.

10. The next question is whether on the finding at which I have arrived in concurrence with that of the learned Additional District Judge, it has to be held in the circumstances of this case, and despite the recital contained in Ex. 1, that the terms and conditions mentioned in the earlier document (that is Ex. 3) in as far as the parties agreed to bind themselves by them cannot be looked at to determine their rights and obligations. I have adverted to above that it was specifically mentioned in Ex. 1 that apart from the terms which were mentioned in particular in Ex. 1, the parties would be governed by the terms and conditions mentioned in Ex. 3. The contention is that Ex. 3 is inadmissible in evidence, therefore, cannot be looked at at all, in spite of this recital.

11. I have given this question my most careful and anxious consideration, and on the whole, I do not feel disposed to accept it as sound. The' chief reason which has induced me to come to this conclusion is that even though the terms and conditions mentioned in Ex. 3 cannot be looked at because that document is inadmissible, and that would undoubtedly have been the position if the matter rested at that and was not advanced any further; the position here is that certain terms and conditions which were mentioned in Ex. 3 were, as it were, made part and parcel of Ex. 1, the document which was subsequently registered and which is properly receivable in evidence. And that being so, I do not sec any valid reason why these terms and conditions cannot be read as part of the subsequent document in so far as they were so made.

12. The nearest case to which my attention has been drawn in this connection is reported as Mitchell v. Mathura Dass, 12 Ind App 150 (PC). The facts of this ease were as follows : A executed a deed of conveyance in favour of B in 1873. The deed required registration under the Registration Act but was not registered. Subsequently A executed another document confirming the first deed. The first deed was set out in a Schedule as part of the second document, and the latter was registered. It was held by the High Court that the true document of title was the conveyance of 1873 but it was not registered, and, therefore, inadmissible in evidence and so the expedient of the confirmation bond had to be resorted to and that an attempt to defeat the provisions of the registration law should not be permitted to succeed and that to allow such a transaction to pass as legitimate would be to throw the door open to the very mischief at which this branch of legislation was aimed. Their Lordships of the Privy Council repelled this argument and held that the second deed of conveyance, being registered, was a valid conveyance of the property.

13. Learned counsel for the appellant sought to distinguish this case on the submission that the first document was put as a schedule to the second document which was not the case here. That, in my opinion, however, is a distinction without any difference, the reason being that it was clearly mentioned in the second document that the parties shall be bound by the conditions stated in the partnership deed dated the 27th April, 1946, henceforth also. This they obviously did as it seems they did not want to repeat all over again what had been stated already in the first deed of partnership which unfortunately has turned out to be inadmissible in evidence owing to defect of registration. It is clear under the circumstances that all those terms in so far as they were not inconsistent with the second deed of partnership were made part and parcel of it even if they were not mentioned in extenso therein and the parties had accepted that they would be governed by them.

14. Looking at the matter from another angle, I have no hesitation in holding that the parties were rightly and fully governable by the partnership deed of 1949 and they cannot be allowed to get out of it, this document being a properly registered one and having been duly proved. Therefore, to give effect to the plea raised by learned counsel would obviously lead to the conclusion, as if they were not bound by some of the terms and conditions referred to therein, which terms and conditions were not in so many words mentioned therein but which had been set forth in the earlier document and which had been unmistakably adopted by them under the revised agreement. This revised agreement altered some of the terms which had been agreed to between the parties under Ex. 3. Nevertheless, the new deed unquestionably establishes the partnership between the parties and the shares to which they would be entitled. Further, it was clearly accepted in this subsequent document that upto 31st December, 1948, accounts had been gone into and the loss had been worked out and it amounted to Rs. 33704/8/9 and that every attempt should be made to recoup this loss first and until that was done, the parties were not to draw any profits which the partnership might make. Under these circumstances to allow the defendant to deny the validity of the terms contained in Ex. 3 in so far as they had been incorporated in Ex. 1, to all intents and purposes, would, in my judgment, be permitting him to approbate and reprobate or to blow hot and cold in the same breath and such an attitude he should not be allowed to adopt.

15. The correct position, therefore, seems to me to be that although the terms and conditions mentioned in Ex. 3 cannot be looked at by force of that document, by itself, there can be no valid objection to their being taken into account in so far as they stand adopted by, and made part and parcel of the second document which was a duly registered one and which was perfectly admissible in evidence and was duly proved. If I might put the whole thing in a slightly different way, what I should like to say is that the terms and conditions mentioned in Ex. 3 in so far as they are relevant for the purposes of this litigation stand on a two-fold support; and if one of these two supports crumbles down, there is no reason why they should not be considered to remain alive and intact on the other support, which is a good OE sound one. In this view of the matter, my conclusion is that the contention of learned counsel for the defendant appellant that the terms and conditions mentioned in Ex. 3 cannot be looked at at all is without any force and must be repelled. I hold accordingly.

16. This brings us to the next contention which was sought to be raised for the first time in this Court by means of an application filed on the 25th March, 1963. The contention is that the partnership agreement with which we are concerned in this case was absolutely void being against public policy inasmuch as no approval of the Government was taken by the parties to enter into partnership with respect to a mining lease of which the defendant appellant alone was a lessee and a licensee from the Government. It is contended by learned counsel for the appellant that this is a pure question of law, and, therefore, should be allowed to be raised. This contention in my opinion is obviously devoid of substance. For, the question which is sought to be raised is without any doubt a mixed question of law and fact. The first question is whether the appellant alone was the lessee or the licensee from the Government with respect to the mining lease in question. This point has never been made the subject-matter of any investigation in the Courts below and cannot be decided without a proper inquiry. Upon that would depend the further question whether sanction of the Government to the entering into of the partnership between the parties was necessary and further whether such sanction was or was not obtained. All these are questions of fact. It may be pointed out in this connection that this appeal was filed before this Court in 1956, and for the first time an application seeking to raise this new ground was made in March, 1963. Under the circumstances, I am definitely of the opinion that the point should not and cannot be allowed to be raised for the first time at this stage of the appeal.

17. The next question to consider is whether the present suit for dissolution of partnership is bad because it discloses no cause of action. It is argued that this was a partnership for a fixed term of 20 years and that the present parties had definitely agreed to continue the partnership under the deed of 1949 (Ex. 1) and so a suit for dissolution of it was ill-conceived and not maintainable. It may be stated in this connection that this point was not raised in the Courts below, nor has it been raised in the grounds of appeal filed in the first instance or even as amended. Learned counsel in appellate Courts cannot be allowed to extend the scope of an appeal merely because they are able to find fresh grounds, as time goes on, on which they can attack the judgments of the Courts below. If that is permitted, there would be no limit to the legitimate bounds of litigation,

18. Apart from that, however, I should like to point out that there is no force in this plea on the merits either. It is true that this was a partnership for a fixed term of 20 years as provided in the deed of 1946. But according to the allegations made by the plaintiff which have never been specifically controverted, it was running at a loss right from its commencement. One of the partners withdrew after some time. The other two partners who are parties to this suit continued the partnership. They continued it for a period of about two years before the present suit was brought on the 20th January, 1951. The case of the plaintiff is that the partnership was running in losses and that the various proposals made by him to the defendant to mitigate these losses did not find an appropriate response from him, and, therefore, it was impossible for him to continue the partnership. The question is whether the plaintiff could have asked for dissolution of partnership and rendition of accounts in these circumstances. Reference may be made in this connection to Section 44 of the Partnership Act and Clauses (f) and (g) thereof. Clause (f) relates to a contingency where the business of the firm cannot be carried on save at a loss and Clause (g) relates to any other ground which renders it just and equitable that the firm should be dissolved. It seems to me, having regard to the fortunes of this partnership that the plaintiff's case does fall within one or both of these clauses. It has been aptly held that a partner's claim to a decree for dissolution rests in its origin not on contract but on his inherent right to invoke the Court's protection on equitable grounds in spite of the terms in which the rights and obligations of the partners might have been defined by the partnership contract. The Court has of course a discretion in a matter like this; but that discretion cannot be fettered by any rigid rules and must depend on the facts and circumstances of each case. A partnership is always established in order to attain a given objective. When it becomes no longer possible to attain that objective with which the partnership was started, then I have no hesitation in saying that a case is made out for dissolution which may be the only remedy under the circumstances. See Jennings v. Baddeley, (1856) 3 K. and J. 78, Baring v. Dix, (1786) 1 Cox. Eq. Cas 213 and Bailey v. Ford, (1843) 13 Sim 495.

19. In the view of the matter I take I am clearly of opinion that there is no force in this objection either.

20. Although all the objections referred to above which have been raised on behalf of the defendant appellant fail it must be pointed out that the preliminary decree passed by the Courts below is far from satisfactory. Firstly, it does not mention the shares of the parties. -In the second place, it does not fix the date of dissolution and in the third place it does not give any direction as to who is to render the accounts and how. It seems that the Courts below have not cared to look at the provisions contained in Rule 15 of Order 20 of the Code of Civil Procedure. This rule reads as follows :

'Decree in suit for dissolution of partnership.-- Where a suit is for the dissolution of a partnership, or the taking of partnership accounts, the Court, before, passing a final decree, may pass a preliminary decree declaring the proportionate shares of the parties, fixing the day on which the partnership shall stand dissolved or be deemed to have been dissolved, and directing such accounts to be taken, and other acts to be done, as it thinks fit.'

The decree passed by the Courts below, therefore, requires to be amended in all these respects. It is, therefore, declared that the proportionate shares of the parties in the partnership will be ten annas for the plaintiff and six annas for the defendant in a rupee. It is further declared that this partnership shall stand dissolved with effect from the date of the preliminary decree, and it is ordered that all the accounts shall be produced before the Commissioner to be appointed by the trial Court by the plaintiff as well as by the defendant as the case may be. It is further ordered that the following account shall be taken: (1) an account of the credits, property and effects now belonging to the said partnership; (2) an account of the debts and liabilities of the said partnership; and (3) an account of all dealings and transactions between the plaintiff and the defendant not disturbing any subsequent settled accounts; And it is ordered that the goodwill of the business heretofore carried on by the plaintiff and defendant and the stock-in-trade be sold on the premises and that the Commissioner may on the application of any of the parties fix a reserved bidding for all or any of the lots at such sale and that either of the parties will be at liberty to bid at the sale. And it is further ordered that the above accounts be taken and all the other acts required to be done be completed within three months from today or within such time as may be extended by the trial Court and the Commissioner do certify the result of the accounts and that all other acts are completed and have his certificate in that behalf ready for the inspection of the parties at the end of the period pointed out above and thereafter the case shall be fixed for making a final decree in due course.

21. The result is that this appeal fails in substance in the light of the observations made above and is hereby dismissed with costs.


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