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Babu Alias Govinddoss Krishnadoss Vs. Gokuldoss Govardhandoss and ors. - Court Judgment

LegalCrystal Citation
SubjectContract;Civil
CourtChennai
Decided On
Reported in(1929)57MLJ404
AppellantBabu Alias Govinddoss Krishnadoss
RespondentGokuldoss Govardhandoss and ors.
Excerpt:
.....business was carried on in this way for several years till gokul-das failed in trade and was adjudged an insolvent in 1924. the assets of the partnership at the death of krishnadas consisted inter alia of many items of valuable immoveable property worth some lakhs and gokuldas, it is alleged, mortgaged several of them for debts borrowed in the course of the trade which he subsequently carried on for his own benefit. the contention put forward is, that, under the law, the partnership property has first to be applied in discharge of the firm's debts and when that is done and the surplus is ascertained, each of the partners has a right, which cannot be defeated, to receive his share out of the surplus assets. the plaintiff concedes that this rule is qualified to this extent,..........the assets, fulfil the existing obligations, pay off the debts and ascertain the extent of the surplus property remaining, that became divisible between the partners. the plaintiff and gokul would be the joint owners of that residue and in what shares they owned it would depend upon the state of the account between the partners inter se. this is the course clearly indicated by the law and if this course had been followed, rights of third parties would not have come into existence conflicting with the plaintiff's rights and the surplus to the extent of his share would have been at his disposal. but, instead of following this course, gokul (this is not disputed) continued and carried on the business--not with a view to wind it up and bring it to a speedy close--but conducted the trade.....
Judgment:

Venkatasubba Rao, J.

1. By my preliminary judgment, dated the 2nd May, 1928, I declared that the plaintiff was entitled to have an account taken of the affairs of the partnership as on the date of the death of his father, namely, the 13th August, 1908. After making that declaration, without forthwith referring the case to the Official Referee, I granted an adjournment at the request of the 6th defendant's counsel, who wanted time to consider his position in regard to his filing an appeal from my judgment. I understand that no appeal has been filed and I am now asked to deal with certain questions of accountability arising between the parties. The plaintiff's right would arise only if it be found that some amount is due to him; but all parties have desired me to first deal with these questions even before the accounts are taken. That means, of course, that the parties believe that the accounts, if gone into, will disclose that a substantial sum is due to the plaintiff. It is on this hypothesis that I am now dealing with the questions raised.

2. For ready reference, I reproduce a part of the pedigree set forth in my preliminary judgment.

Muralidas, diet 24th Govardhandas, died

April, 1907. Married 26th September, 1909.

Yasodabai or Married Kammubai,

Jessubai or Jessu. D. 5. Died January,

| 1926.

| |

Putlibai alias Krishnadoss. Gokuldas, 1st Dwarakadas, 2nd

Nani or Nanu. Born 16th May, defendant. defendant. Horn

Married 1884. Married Born 6th April, 12th November,

Laldas. Radhabai, 1885. Married 1891. Died 14th

| 4th defendant. Gangabai. January, 1925.

| | Md. Jamnabai.

| | |

Jayakrihna, Babu alias Ramdas, 3rd

died young. Govindas. defendant.

Born 18th Born 9th August,

November, 1907. 1914.

Plaintiff.

3. I have held that the partnership consisted of Muralidas, Govardhandas, Krishnadas and Gokuldas. Murali died in 1907, Krishnadas, the plaintiff's father, in 1908 and Govardhan in 1909. Gokuldas, the 1st defendant, became the surviving partner, who, without winding up the affairs of the dissolved firm, continued the business employing its assets. This has given rise to the questions that have now been argued before me.

4. There can be no doubt as regards the true legal position of Gokuldas as the surviving partner of the firm. The plaintiff was, at his father's death, an infant about nine months old and, when Govardhan died, had not completed his second year. On him devolved the interest of Krishnadas in the partnership. It was the duty of Gokul to have wound up the dissolved partnership and for that purpose, if necessary, he was entitled to carry on and continue the business. He was under a duty to realize the assets, fulfil the existing obligations, pay off the debts and ascertain the extent of the surplus property remaining, that became divisible between the partners. The plaintiff and Gokul would be the joint owners of that residue and in what shares they owned it would depend upon the state of the account between the partners inter se. This is the course clearly indicated by the law and if this course had been followed, rights of third parties would not have come into existence conflicting with the plaintiff's rights and the surplus to the extent of his share would have been at his disposal. But, instead of following this course, Gokul (this is not disputed) continued and carried on the business--not with a view to wind it up and bring it to a speedy close--but conducted the trade as an ordinary trader would, incurring new obligations and entering into fresh transactions. An extensive business was carried on in this way for several years till Gokul-das failed in trade and was adjudged an insolvent in 1924. The assets of the partnership at the death of Krishnadas consisted inter alia of many items of valuable immoveable property worth some lakhs and Gokuldas, it is alleged, mortgaged several of them for debts borrowed in the course of the trade which he subsequently carried on for his own benefit. For the plaintiff it is contended, that he is entitled to proceed against what was at the dissolution, the property of the firm and recover out of it, his share, when that is determined. The contention put forward is, that, under the law, the partnership property has first to be applied in discharge of the firm's debts and when that is done and the surplus is ascertained, each of the partners has a right, which cannot be defeated, to receive his share out of the surplus assets. The plaintiff's position may be thus stated: as the surviving partner Gokul had certain powers; those powers were in a sense plenary, that is to say, he could validly sell or mortgage the properties of the dissolved firm, provided (the proviso is important) the acts done were in the course of, or for the winding up of, the partnership. The plaintiff concedes that this rule is qualified to this extent, namely, that if third parties dealt with Gokul in the reasonable belief that a given sale or mortgage was necessary for the proper winding up, the title such third parties acquired would not be defeated, although in point of fact, there was absence of necessity, or the money raised was misapplied. The plaintiff contends that, if, after paying off partnership debts and after making due provision in favour of transactions of the kind mentioned' above, there remains a surplus, he is entitled as the representative of the deceased partner, to proceed against that surplus, for recovering in specie, what may be found to be his share. To this, the answer of the Official Assignee is, that what is due to the plaintiff is a debt pure and simple due from Gokul, that the former can recover that debt out of the estate of Gokul, just in the same manner as any other creditor can. In other words, he contends that the plaintiff has no special rights over and above any ordinary creditor of Gokul and that he (the plaintiff) ranking as such creditor, is at liberty, if he chooses, to prove his debt in insolvency and receive a dividend out of the bankrupt's estate. This is the contention put forward on behalf of unsecured creditors by the Official Assignee. Then as regards secured creditors, they maintain that in law, the right of the surviving partner to deal with partnership property is, that of an unqualified owner and whatever right the plaintiff may have against Gokul, that right cannot defeat the interest created in the property by the latter in their favour. These are the points on which I am now asked to give my decision. This part of the ease has been fully argued by Mr. S. Duraiswami Aiyar for the plaintiff and by Sir C.P. Ramaswami Aiyar, as well as the Advocate-General, for the defence. The contentions seem, in my opinion, to involve points which are fairly simple.


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