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Vali Venkataswami and ors. Vs. Gannabathulla Venkataswami - Court Judgment

LegalCrystal Citation
SubjectCommercial
CourtChennai High Court
Decided On
Case NumberSecond Appeal No. 1834 of 1950
Judge
Reported inAIR1954Mad9; (1953)2MLJ396
ActsCode of Civil Procedure (CPC) , 1908 - Sections 100 and 101 - Order 41, Rule 31; Partnership Act, 1932 - Sections 11 and 44
AppellantVali Venkataswami and ors.
RespondentGannabathulla Venkataswami
Appellant AdvocateSankara Sastry, ;T. Veerabadrayya and ;P. Ramachandra Rao, Advs.
Respondent AdvocateD. Narasaraju and ;K.B. Krishnamurthy, Advs.
DispositionAppeal dismissed
Cases ReferredGowasjee Nanabhoy v. Lallbhoy Vullubhoy
Excerpt:
.....right conferred by section 44 - section 44 not made subject to contract between parties and gives right to partners to seek assistance of court to have partnership dissolved on grounds specified - section 11 makes contract between parties subject to provisions of act and section 44 being one of provisions of act contract undoubtedly subject to right under section 44 - as per provisions of act clause in partnership deed would not affect in any manner right of partner to institute suit for dissolution provided grounds enumerated in section 44 exist. - - i am therefore satisfied that the conclusion of the courts below that this partnership should not be allowed to go on and must be dissolved is perfectly justified on the evidence and the material placed before the courts below. in..........decree for dissolution of a partnership between the plaintiff andthe defendants.2. under a deed of partnership dated 24-1-1948 ex. b. 4, the plaintiff and defendants entered into a partnership to erect, establish and run a cinema in the site which was obtained on lease. the share of the plaintiff in the partnership was four annas, defendant 1 four annas, defendants 3 and 4 four annas, defendant 2 three annas and defendant 5 one anna. the deed of partnership constituted defendant 1 the managing partner, who has to look after the erection of the cinema) and also after it was completed to run the business. the present suit for dissolution was instituted by the plaintiff on 10-1-1949 before the construction of the building was completed and the cinema was opened. in fact, the cinema.....
Judgment:

Satyanarayana Rao, J.

1. This is an appeal against the decision of the District Judge, West Godavari, confirming the preliminary decree for dissolution of a partnership between the plaintiff andthe defendants.

2. Under a deed of partnership dated 24-1-1948 Ex. B. 4, the plaintiff and defendants entered into a partnership to erect, establish and run a cinema in the site which was obtained on lease. The share of the plaintiff in the partnership was four annas, defendant 1 four annas, defendants 3 and 4 four annas, defendant 2 three annas and defendant 5 one anna. The deed of partnership constituted defendant 1 the Managing partner, who has to look after the erection of the cinema) and also after it was completed to run the business. The present suit for dissolution was instituted by the plaintiff on 10-1-1949 before the construction of the building was completed and the cinema was opened. In fact, the cinema began to work actually from 5-6-1949. The grounds on which the plaintiff seeks dissolution are contained in paras 6 and 7 of the plaint.

The main charges were firstly that the Managing partner, contrary to the provisions in the partnership deed, retained in his hands more than Rs. 200/- in cash, secondly that no meeting was ever held after the deed of partnership was executed on 24-1-1948, thirdly that in spite of repeated requests of the plaintiff, defendant 1 refused to show him the accounts, and fourthly that there was no resolution as required by the deed of partnership en thequestion whether the cinema was to be leasedor the cinema was to be worked personally by the partners. The defendants, of course, denied these and also raised various contentions regarding the maintainability of the suit.

3. Four issues were framed in the suit and the main questions in controversy between the partners are covered by issues 2 and 3. It was contended that as the business was to be carried on for a fixed period of ten years, the plaintiff was pot entitled to claim dissolution and that, in any event, if he was entitled to go out of the partnership, his only remedy was to sell his -share at a valuation as specified in Clause 22 of the partnership deed; in other words, that he was not entitled to take advantage of Section 44, Partnership Act and claim dissolution through court. These contentions were overruled by the trial Court and it was found that the grounds on which the plaintiff came toCourt were established.

It was also further found that there were several acts of malfeasance and misfeasance after the business was started, since the institution of the suit. A decree for dissolution was granted by the learned Subordinate Judge. This decision was confirmed on appeal by the learned District Judge and his conclusions are contained in para 33 of his judgment and he found that the allegations in the plaint regarding malfeasance and misfeasance of the managing partner were sufficiently established and that all the partners acted contrary to the terms of the deed of partnership. Unfortunately, both the Courts have not kept the distinction between the grounds of dissolution upon which the plaintiff came to Court and the conduct of the partners since the institution of the suit and this has led to some confusion. The learned appellate Judge instead of discussing each point separately and recording his finding, has merely adopted the easier method of stating that he agrees with the conclusions of the learned Subordinate Judge contained in paras 13 to 19. This sort of disposal, no doubt, is not very satisfactory but on that ground I am not inclined to reverse the decision of the lower appellate Court as it is an affirming judgment.

4. Mr. Narasaraju, the learned advocate for the respondent, has drawn my attention to the evidence in support of the grounds on which the plaintiff came to Court seeking the aid of the Court for dissolving the partnership. I am therefore satisfied that the conclusion of the Courts below that this partnership should not be allowed to go on and must be dissolved is perfectly justified on the evidence and the material placed before the Courts below. It is also amply clear that the confidence between the partners i.e., the plaintiff on the one hand and defendants on the other, which is the fundamental basis of a contract of partnership and for the successful carrying on the business has been lost. Lindley on Partnership at p. 69 summarises the legal position thus:

'It may, however, be usefully observed here that keeping erroneous accounts and not entering receipts, refusal to meet on matters of business, continued quarrelling, and such a state of animosity as precludes all reasonable hope of reconciliation and friendly co-operation, have been held sufficient to justify a dissolution. It is not necessary, in order to induce the Court to interfere, to show personal rudeness on the part of one partner to the other, or even any gross misconduct as a partner. All that is necessary is to satisfy the Court that it is impossible for the partners to place that confidence in each other who has a right to expect and that such impossibility has not been caused by the person seeking to take advantage of it.'

5. Most of these grounds, it has been found, exist in the present case and I think the Courts below were justified in directing dissolution of the partnership.

6. The only contention, which requires consideration, is the existence of Clause 22 of the partnership agreement which provides that 'if any partner is not willing to continue as partner in the said cinema, he should transfer and sell his share of the amount credited in his account towards capital of the cinema to all other partners or to some of them or to one of them but he has no right to sell the same to outsiders.' This clause, it is contended, is a bar to the maintainability of the suit as the right to institute a suit for dissolution under Section 44, Partnership Act is excluded by the clause. Reliance was placed in support of this position on a decision of the Allahabad High Court in-- 'Smt. Dropadi v. Bankey Lal : AIR1939All548 . Under Section 11, Partnership Act, the mutual rights and duties of the partners of a firm are to be determined by the contract between the parties and such contract may be express or implied. But this is however made subject to the provisions of the Act.

Assuming for a moment that Clause 22 of the partnership deed amounts to a contract to the contrary, the question is whether it is open to the partners to contract out of the right conferred by Section 44. Section 44, it may be observed is not made subject to the contract between the parties and gives a right to the partner to seek the assistance of a court to have a partnership dissolved on grounds specified in the section. Section 11 makes the contract between the parties subject to the provisions of| the Act, and Section 44 being one of the provisions of the Act, the contract is undoubtedly Subject to the right under Section 44. Section 11 therefore does not override the provisions of Section 44. In the Act itself whenever the Legislature intended that the right conferred under a particular section is to be subject to the contract between the partners, it has expressly stated so, for example, Sections 12 to 17 and Section 42. On a plain reading therefore of the provisions of the Act, it seems to me clear that the clause in the partnership deed would not affect in any manner the right of the partner to institute a suit for dissolution provided the grounds enumerated in Section 44 exist. Under the provisions contained in the Contract Act, Section 252 was not made subject to the provisions of the Chapter relating to the partnership and Section 254 provided for dissolution through Court. It has been held by the Judicial Committee under the old provisions 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 may have been regulated and denned by the partnership contract. Vide -- 'Rehmatunnissa Begum v. Price', AIR 1917 PC 116 (B). On this principle, it was held in that case that notwithstanding that the clause in the partnership deed provided a particular duration for the continuance of the partnership, it was open to a partner to institute a suit for dissolution if he brought himself under the provisions of Section 254, Contract Act. It is no doubt true that in the earlier decision --'Gowasjee Nanabhoy v. Lallbhoy Vullubhoy', 1 Bom 468 (PC) (C) also a decision of the Judicial Committee, which was decided however without reference to the provisions of the Act, there is an observation at page 474 which seems to suggest that it was open to the partners to relinquish the right, which they would have of applying to the Court for winding upthe business, if it could not be carried on at a profit.

But the provisions of the Partnership Act tinder which the present case has to be decided make it clear that the contractual rights are subject to the statutory right under Section 44 of the Act. In : AIR1939All548 , it was held that

'the partner's right to sue for dissolution of partnership may be controlled or negatived by the terms of the agreement among the partners and the Court may, in view of the terms of the agreement and of other remedies provided therein like retirement or sale of his share or settlement of disputes by arbitration refuse to entertain a partner's suit for dissolution, although the grounds alleged may come within Section 44, Partnership Act.'

I understand this means that unless it is expressly so stated in the Act, the contract would prevail and if the contract negatives the right, a party cannot invoke the aid of Section 44. In ordinary parlance, the expression 'subject to the provisions of this Act' in my opinion mean that the contract, which is the basis for the rights of the partners, 'inter se' and which regulates such rights must yield to any right which is conferred by any of the provisions of the Act unless that right itself is made subject to a contract to the contrary. With great respect to the learned Judges in the Allahabad case, therefore, I am unable to accept the interpretation placed by them on the expression. The decision of the Judicial Committee in AIR 1917 PC 116 (B) was explained away by the learned Judges on the ground that the facts were different. But the principle enunciated by the Judicial Committee in my opinion is clear and unambiguous. It is to the effect that the right to seek dissolution through Court is not based on contract but is based on statute, and therefore, the contract cannot override the right conferred by the statute.

I am unable therefore with great deference to explain away the decision in AIR 1917 PC 116 (B) in the manner in which it was got over by the learned Judge of the Allahabad High Court. The Partnership Act, if any, has made the position clearer than under the Contract Act, Ss. 252 and 254 which were the sections which were considered by the Judicial Committee in AIR 1917 PC 116 (B). The expression subject to the provisions of this Act' did not occur in Section 252, Contract Act. In my opinion therefore when the Legislature enacted Section 11 it must have been aware of the decision in AIR 1917 PC. 116 (B) and must have deliberately introduced the expression 'subject to the provisions of the Act' with a view to make it clear that the right under Section 44 cannot be taken away by the contract between the partners. In my opinion, therefore, the contention urged on behalf of the appellants that the suit is not maintainable by reason of the existence of Clause 22 of the partnership deed cannot be accepted.

7. The learned Subordinate Judge has directed the receiver to sell the superstructure by holding the sale only between the partners and this direction was modified by the District Judge by adding a condition that bidding should start from Rs. 1,40,000 as the defendants were willing to adopt that valuation as the basis for bidding. There is no necessity to alter the direction of the Courts below in the matter of the sale of the superstructure.

8. It is however represented on behalf of the appellants that by reason of some arrangement come to while the appeal was pending in this Court, defendant 1, the managing partner has been running the cinema and not the Receiver and that the same should be allowed to continue until the sale of the superstructure by the receiver. To this course, the learned advocate for the respondent has no objection. But he apprehends that if the sale drags on for a longer time, that would enable the defendants to continue in management for a longer time. I think this apprehension can be met by directing the receiver to carry on the sale immediately even if the Court is closed and make everything ready for confirmation of the sale by the time the Sub-Court opens after the summer recess.

9. In the result the decision of the lowerCourt is confirmed and the second appeal isdismissed with costs. No leave.


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