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Laxmibai and anr. Vs. Roshan Lal - Court Judgment

LegalCrystal Citation
SubjectCivil
CourtRajasthan High Court
Decided On
Case NumberSecond Appeal No. 566 of 1964
Judge
Reported inAIR1972Raj288; 1971(4)WLN103
ActsCode of Civil Procedure (CPC) , 1908 - Sections 100 to 101; Partnership Act, 1932 - Sections 4
AppellantLaxmibai and anr.
RespondentRoshan Lal
Appellant Advocate H.M. Parekh, Adv.
Respondent Advocate M.C. Bhandari, Adv.
DispositionAppeal dismissed
Cases Referred and R. B. Eskrigge and Co. v. Monks
Excerpt:
.....any substantial reason to reject the testimony of these witnesses regarding the oral agreement of partnership alleged to have taken place between roshanlal and laxminarain on 23-6-1956, more so, when both the courts below have accepted this testimony.;in the building contract for which the partnership is alleged to have been formed in the present case roshanlal could and did act at an agent for the other partner laxminarain. the element of agency is implicit in such a partnership and no specific objection as to the lack of it has been raised by the defendant either in his written statement or in the course of evidence.;the existence of the partnership as alleged by the plaintiff is fully established. - - it was alleged that contract for construction of selavi railway station and staff..........the suit was resisted by the defendant mainly on the ground that no oral agreement of the alleged partnership between the parties ever took place. the defendant pleaded that he alone had taken the said contract and the plaintiff had agreed to finance him in this contract. in other words it was pleaded that there was only a relation of debtor and creditor between the defendant and the plaintiff. the defendant's case is that the plaintiff was employed by him to look after the work on his behalf on payment of a lump sum of rs. 150/-. alternatively, the defendant also pleaded that in case the plaintiff succeeded in proving the alleged partnership the same was illegal and void being in contravention of the general conditions* of contracts laid down by the western railway. 4. after.....
Judgment:

C.M. Lodha, J.

1. The respondent Ro-shanlal filed a suit in the Court of Mun-siff, Abu Road against Laxminarain for dissolution of partnership and rendition of accounts.

2. It may be mentioned here that Laxminarain died during the pendency of this appeal and is now represented by his widow Smt. Laxmi Bai and his son Madan-lal, who have been substituted as appellants in his place.

3. Roshanlal's case was that he and Laxminarain entered into a partnership orally at Abu Road on 23-6-1956 for taking building contract from the Western Railway, and it was agreed that the partnership business would be carried in the name of Laxminarain Rama Nand in which name the defendant had already taken contracts as an approved contractor of the Western Railway. The terms of the contract of partnership are alleged to be that both the partners would share profits and losses half to half and would get interest on the amount invested by them in the partnership business at the rate of 6% per annum. It was alleged that contract for construction of Selavi Railway Station and staff quarters as well as for construction of Dam near Kivarli was taken by the firm and on the completion of the contract the defendant Laxminarain withdrew the amount of the bills submitted by the firm, but did not render accounts of the partnership business to the plaintiff. It was stated that contract for no other construction was taken. The plaintiffs case is that he served a notice on the defendant Laxmi Narain to render accounts but the latter neither gaveany reply nor rendered the accounts. Consequently, the present suit was filed on 24-9-1960 for dissolution of the partnership and for rendition of accounts. The suit was resisted by the defendant mainly on the ground that no oral agreement of the alleged partnership between the parties ever took place. The defendant pleaded that he alone had taken the said contract and the plaintiff had agreed to finance him in this contract. In other words it was pleaded that there was only a relation of debtor and creditor between the defendant and the plaintiff. The defendant's case is that the plaintiff was employed by him to look after the work on his behalf on payment of a lump sum of Rs. 150/-. Alternatively, the defendant also pleaded that in case the plaintiff succeeded in proving the alleged partnership the same was illegal and void being in contravention of the General Conditions* of contracts laid down by the Western Railway.

4. After recording the evidence produced by the parties the learned Mun-siff by his judgment dated 14-1-1964 granted a preliminary decree for rendition of accounts against the defendant. He held that the partnership as alleged by the plaintiff between the plaintiff and the defendant was proved and that each of them had half share in the profits and losses of this partnership. He further held that the partnership shall be deemed to have been dissolved on 6-7-1959. He appointed Shri Chunnilal Gandhi, Advocate as Commissioner to go into the accounts and submit his report.

5. Aggrieved by the judgment and Secree by the trial Court defendant Laxmi-narain filed an appeal in the Court of District Judge, Pali, who affirmed the decree by the trial Court and dismissed the appeal. The defendant, therefore, came in second appeal to this Court and, as already stated above, since he died during the pendency of this appeal, his widow and son, who have been brought on the record as appellants in his place have prosecuted the appeal.

6. The only point for decision in this case is whether the finding arrived at by the Courts below that a partnership came into existence by an oral agreement between Roshan Lal and Laxminarain is correct?

7. Learned counsel for the appellants has strenuously urged that the question whether the partnership is proved is a mixed question of fact and law which can be examined in second appeal. In support of his contention he has relied upon Chi-manram v. Jayantilal, AIR 1939 Bom 411 and Champaran Cane Concern v. State of Bihar, AIR 1963 SC 1737. On the other hand learned counsel for the respondent has urged that the finding arrived at by the Courts below that the agreement of partnership is proved is one of fact and isnot vitiated by erroneous application of any principle of law and consequently the same cannot be interfered with in second appeal. In support of his contention he has relied upon Santokh Singh v. Siri Ram Singh, AIR 1963 Puiij 95; Manbharibai v. B. R. Mill, AIR 1956 Nag 225 and Firm T. K. Somayya v. Commr., E. P. Tax, AIR 1956 Hyd 87.

8. I do not consider it necessary to refer to other cases in view of the pronouncement of their Lordships of the Supreme Court on this point in AIR 1963 SC 1737. Their Lordships have observed as follows :--

'Now, partnership or no partnership is ordinarily a question of fact, but we agree with learned counsel for the assessee that it is a mixed question of fact and law in the sense that if the authorities, who have to ascertain questions of fact apply a wrong principle of law in instructing themselves as to what they have to find, then their finding of fact is not conclusive because they have done it according to wrong principles (see Morden Rigg and Co., and R. B. Eskrigge and Co. v. Monks, (1923) 8 Tax Cas 450 at p. 464).' Thus in a case like the present it is trie application of legal principles in the process of reaching the conclusion which affords a justification for interference with that conclusion on second appeal, and if there is no such error in applying the true legal principles, then, there is no scope for interference by the Court of second appeal. It is, therefore, necessary to examine whether the finding arrived at by the Courts below regarding the existence of the alleged partnership is vitiated by an error of law because unless there is an error of law in arriving at the conclusion on a mixed question of fact and law the conclusion based upon evidentiary facts cannot be challenged in second appeal.

9. Learned counsel for the appellants urged that there must be three elements present before any relation which may be termed as 'partnership' can come into existence:

(i) there must be an agreement entered into by all the persons concerned,

(ii) the agreement must be to share the profits of a business, and

(iii) the business must be carried on by all or any of the persons concerned acting for all, i. e. there must be facts or circumstance from which it can be inferred that each of the persons alleged to be partners was the agent, real or implied of another.

While pointing out the principal differences between co-owner and partnership their Lordships of the Supreme Court in AJR 1963 SC 1737, held that partnership is necessarily the result of an agreement and that it necessarily involves community of profit or of loss. It was also observed that a partner cannot without the consent of other partners transfer his interest etc. toa stranger and lastly it was pointed out that in a partnership each partner acts for all, that is, a relation of agency between the various partners must be established. It is true that a contract merely to take a share of profits does not necessarily lead to an inference of partnership. A loan to a person engaged in any trade upon a contract with such person that the latter shall receive interest and also a share of the profits does not of itself constitute the latter a partner. It is also true that the mere use of the word 'partner' or 'partnership' in an agreement does not necessarily show that there was a partnership. The parties may call themselves partners but if it appears that one party is to do nothing more than advance money to toe other and is to be paid along with interest by a share of the profits, they cannot be treated as partners, but must be treated only as creditor and debtor.

10. Learned counsel for the appellants strenuously urged that in the first place no agreement to share profits and losses has been proved and that in any case in his submission the existence of the essential element of agency has not been established. He has been at pains to show that the plaintiff merely agreed to finance the contract taken by the defendant Lax-minarain in his own name and there was only a relationship of creditor and debtor between the parties.

11. Admittedly there is no instrument of partnership in the present case. However, that is not material. Lindley on Partnership, Twelfth Edition says atpage 124:

'As partnerships, even for long terms of years, very often exist in this country without any written agreement, the absence of direct documentary evidence of any agreement for a partnership is entitled to very little weight. As between the alleged partners themselves the evidence relied on, where no written agreement is forthcoming, is their conduct, the mode in which they have dealt with each other, and the mode in which each has, with the knowledge of the other, dealt with other people. This can be shown by books of accounts, by the testimony of clerks, agents, and other persons, by letters and admissions, and, in short, by any of the modes by which facts can be established.'

12. The direct evidence regarding the agreement of partnership between the parties consists of the statements of P. W. 1 Roshanlal and P. W. 8 Joharimal, who is the brother of the plaintiff Roshanlal. Roshanlal has stated that the agreement between him and Laxminarain took place on 23-6-1956 and the share of each of the two partners was fixed as half to half, and it was further agreed that interest at 6% per annum would be paid on investment made by each partner in the partnership busi-ness. To the same effect is the statement of P. W. 8 Joharimal, who deposes to have been present at the time of the talk be-tween Roshanlal and Laxminarain. Joharimal is, no doubt, a close relation of the plaintiff, but relationship by itself is no ground for rejecting his testimony. He further states that the account Ex. 7 has been signed by him on behalf of the plaintiff Roshanlal and that the account Ex. 6 was signed by Laxminarain in his presence. He has further stated that the account books in which the accounts Ex. 6 and Ex. 7 are contained pertain to the partnership accounts. The criticism advanced by the learned counsel with respect to the evidence of these two witnesses is that they do not state in so many words that there was an agreement to share the profits and losses and that Joharimal admits that no deed of partnership was written and that he had no authority to sign the account on behalf of his brother Roshanlal.

13. I have carefully gone through the statements of these witnesses and do not find any substance in the criticism advanced by the learned counsel for the appellants. By stating that each partner had half share in the partnership business the witnesses clearly conveyed nothing else but that they agreed to share profits and losses half to half, I do not find any substantial reason to reject the testimony of these witnesses regarding the oral agreement of partnership alleged to have taken place between Roshanlal and Laxminarain on 23-6-1956, more so, when both the Courts below have accepted this testimony.

14. Learned counsel for the appellants has urged with great emphasis that there is complete absence of the element of agency in the alleged partnership business between Roshanlal and Laxminarain. It is contended that according to the 'General Conditions' of contracts given by the Western Railway the contractor could not assign, sublet or transfer his interest in the contract and that Roshanlal could not have represented the contractor's interest before the Railway. This circumstance, according to the learned counsel, disproves the existence of the element of agency so essential for the purpose of constituting partnership. I may, here, make it clear that the learned counsel expressly stated that it was. not his argument that the alleged partnership was in any way illegal or was hit on account of the 'General Conditions' laid down by the Western Railway in granting such contracts.

15. It may be observed that in the written statement filed by the defendant it has been admitted that the plaintiff Roshanlal used to look after the work in connection with the construction and he was agreed to be paid a lump sum of Rupees 150/-. The defendant has failed to substantiate that any remuneration had been fixed for the services rendered by theplaintiff in connection with the contract. The fact that the plaintiff used to participate in the construction work stands proved by the evidence of P. W. 10 Munshilal and P. W. 5 Jas Bhai. P. W. 5 Jas Bhai wanted to take a sub-contract and had a talk with Laxminarain as well as Roshanlal in this connection though he was not successful in getting the sub-contract, as the rates offered to him did not suit him. P. W. 10 Munshilal states that he wanted some Tagaris' for which he approached Shri Joharimal brother of Roshanlal who wrote a slip addressed to the shop of Laxminarain asking Laxminarain to give the share of Laxminarain's Tagaris' to him. It further appears from the reply filed by Laxminarain to the interrogatories submitted by Roshanlal that all the account books pertaining to the contract in question had been handed over to Roshanlal. It may be that according to the Rules and practice in vogue in the Western Railway no other person except the person in whose name the contract was given may be able to deal with the Railway but nevertheless from the facts and circumstances put on the record I have come to the conclusion that in the Building Contract for which the partnership is alleged to have been formed in the present case Roshanlal could and did act as an agent for the other partner Laxminarain. The element of agency is implicit in such a partnership and no specific objection as to the lack of it has been raised by the defendant either in his written statement or in the course of evidence. On the other hand, involvement and participation of Roshanlal in the building work for which the contract had been taken by Laxminarain is admitted even by the defendant though he has tried to give a different colour to the same by stating that Roshanlal was engaged to look after the work in lieu of a lump sum payment of Rs. 150/- and he has also admitted that the work was mainly financed by Roshanlal.

16. In order to substantiate his contention that the relationship between the parties was that of creditor and debtor, learned counsel for the appellants laid great stress on the promissory note Ex. 3, admittedly executed by Madanlal son of Laxminarain on bealf of Laxminarain Ra-manand in favour of Roshanlal. It is argued that if it is a question of advancing money for partnership business, there was no occasion for Madanlal to have executed a promissory note in favour of the plaintiff. The argument on the face of it is, no doubt, attractive but on a close examination I find that it is devoid of substance. It is mentioned in the promissory note itself that the amount of Rs. 2500/- was taken from Roshanlal for the purpose of . making a deposit in the partnership contract of Kivarii work. Again it is not without significance that the rate of interest mentioned in the promissory note is nil.

The explanation submitted by the learned counsel for the respondent for obtaining this promissory note from Mandanlal is that the contract in connection with which the partnership had been formed was taken up sometime in December, 1956 and the amount of Rs. 2500/- evidenced by the promissory note Ex. 3 for the purpose of deposit was advanced on 4-8-1956 and with a view to evidence this advance towards the partnership business that the promissory note was obtained. The explanation appears to be plausible.

17. Besides the oral evidence produced by the plaintiff to prove the agreement of partnership, the plaintiff also placed a few other circumstances on the record to corroborate the fact about the existence of partnership. P. W. 3 Bhag-wandas and P. W. 4 Bhabootmal state that they had been approached by Roshanlal and Laxminarain to mediate between them to settle the accounts of partnership business of the parties. P. W. 6 Kanakram, who used to bring sand and concrete in connection with the construction work has also corroborated the fact of the existence of partnership between the parties. P W. 9 Devi Shankar, who was a clerk in the Divisional Office of the Western Railway further states that Madanlal on behall of his father Laxminarain and Chhangalal on behalf of his uncle Roshanlal used to come to him for settlement of the bills in connection with the construction work, and that on enquiry from Madanlal, he came to know that Laxminarain and Roshanlal had both shares in this work. Laxminarain has admitted in his statement as D. W 1 that his son Madanlal used to work in connection with this contract on his behalf It is surprising that Laxminarain does not corroborate the theory of advance of Rupees 2500/- as loan by Roshanlal towards the construction work undertaken by him. and he expresses complete ignorance about it. It is further clear from the statement of Laxminarain that Madanlal used to represent him in every way in connection with the contracts of Salavi Railway Station and Kivarli Dam.

18. There is yet another circumstance going against the defendant and it is this that the plaintiff admittedly gave him a notice for rendition of accounts before filing the present suit but the defendant did not give any reply to it.

19. The evidence which I have referred to above in brief has been carefully considered by the learned District Judge, who after a thorough discussion of the same has concurred in the conclusion arrived at by the trial Court that the existence of the partnership as alleged by the plaintiff is fully established and the learn-ed counsel for the appellants has failed to show how the inference drawn by the Courts below as to the existence of partner-ship between the parties is vitiated by application of any erroneous principle of law.

20. The result is that I do not see any force in this appeal and hereby dismiss it. However, in the circumstances of the case I make no order as to costs.


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