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P.M. Ramakrishna Aiyar Vs. P. Muthuswami Aiyar and ors. - Court Judgment

LegalCrystal Citation
SubjectCivil
CourtChennai
Decided On
Reported in121Ind.Cas.609; (1929)56MLJ657
AppellantP.M. Ramakrishna Aiyar
RespondentP. Muthuswami Aiyar and ors.
Cases ReferredDewar v. Maitland
Excerpt:
- - 5. it seems therefore to be very clearly established that when a partner retires from a business which is not wound up but is continued by the surviving partners, he is entitled to a share in the profits which have been obtained by the use of his share in the partnership assets. the term 'partnership assets' must be deemed to include the good-will of the business, for the plaintiff is entitled to a share in the good-will as well as to a share in the actual assets of the business. there is no corresponding provision in the indian contract act,.but it is contended that section 42 of the english act merely enacted what had prior to that act been held to be the law in a long series of decisions of the courts of equity and that the same rule has also been held to be applicable to.....phillips, j.1. plaintiff and defendants 2 and 3 are the sons of the 1st defendant. they conducted a partnership business, at first in conjunction with the 4th defendant, and subsequently as a family partnership consisting of themselves alone. misunderstandings arose in 1920 and plaintiff refused to continue in the business and finally expressed his determination to become separated in status and to dissolve the partnership. it has been found in the lower court that this separation in status and the dissolution of partnership took place on the 31st december, 1921, and this is not now disputed. the plaintiff's suit is for the recovery of his share in the family property and in the partnership assets. he has obtained a decree for one-fourth share in the partnership assets as they stood on.....
Judgment:

Phillips, J.

1. Plaintiff and defendants 2 and 3 are the sons of the 1st defendant. They conducted a partnership business, at first in conjunction with the 4th defendant, and subsequently as a family partnership consisting of themselves alone. Misunderstandings arose in 1920 and plaintiff refused to continue in the business and finally expressed his determination to become separated in status and to dissolve the partnership. It has been found in the Lower Court that this separation in status and the dissolution of partnership took place on the 31st December, 1921, and this is not now disputed. The plaintiff's suit is for the recovery of his share in the family property and in the partnership assets. He has obtained a decree for one-fourth share in the partnership assets as they stood on the 31st December, 1921 and for one-fourth share of the immoveable and moveable properties belonging to the family. So far as his share of the partnership assets is concerned, he has been awarded interest at 6 per cent. on the amount due to him from the 31st December, 1921 till delivery.

2. The plaintiff now appeals and objects to the decree on the ground that he is entitled not only to interest on his share but also in the alternative to a share of the profits which have been obtained by the use of his share. It is not disputed that since 1921 defendants 1 to 3 have continued to carry on the same business as was carried on before that date by them in conjunction with the plaintiff. The plaintiff's claim to share in the profits earned since he left the business is based on Section 88 of the Trusts Act. Illustration (f) to that section runs as follows:

A and B are partners. A dies. B instead of winding up the affairs of the partnership, retains all the assets in the business. B must account to A's legal representative for the profits arising from A's share of the capital.

3. In a case of this Court reported in Hajee Summar Sait v. Mahomed Husshun Sait (1916) 4 L.W. 521 a Divisional Bench held that this illustration went beyond the law in India, the main ground of this decision being that the surviving partners did not stand in a fiduciary relation to the retiring partner or his representative. No reference was made in that case to the decision of the Privy Council in a similar case (Bhagwandas v. Rivett-Carnac (1898) L.R. 26 IndAp 32 at 37 : I.L.R. 23 B. 544) where we find at page 550:

It seems to their Lordships that the proper order will be to direct an account to be taken of the partnership dealings and transactions, to inquire what was due to the estate of Hemabai in respect of her share at the time of her death, and how the amount due to her estate has been dealt with, and, if it appears that such amount, or any part thereof, has been employed in the business continued by the surviving partners, to direct the accounts of such business to be taken.

4. This principle has been subsequently repeated in Haji Hedayetulla v. Mahomed Kamil (1923) 19 L.W. 425 where it was held that the representatives of the deceased partner were entitled to the same share as the partners would have taken if the partnership had not been dissolved. The same principle is laid down by statute in English Law, i.e., Section 42 of the Partnership Act, 1890, and the question has been considered at great length in Hugh Stevenson & Sons v. Aktiengesellschaft (1918) A.C. 239 where the contention that the surviving partners do not stand in a fiduciary relation to a retiring partner or to the representatives of a deceased partner is very emphatically negatived and it was held that Section 42 of the Partnership Act, 1890, only gave effect to what was the law then existing. This proposition is discussed in Lindley on Partnership, 9th edition, page 707 et seq.

On the other hand, to limit the compensation to interest (at the accustomed rate) would frequently enable the wrongdoer to profit by his own wrong, and be an inadequate compensation to the owner. It may, therefore, be necessary to give the owner the profits made by the trader by the use of the property in question, after making the trader all just-allowances, including a fair remuneration for his trouble. To do so may moreover be justified upon the ground that the profits are accretions to the property which has yielded them and ought to belong to the owner of such property, in accordance with the maxim, accessorium sequitur suum principale.

5. It seems therefore to be very clearly established that when a partner retires from a business which is not wound up but is continued by the surviving partners, he is entitled to a share in the profits which have been obtained by the use of his share in the partnership assets. It is not necessary that the whole of the partnership assets should be used in making the subsequent profit, for if any portion of the assets are so used, the retiring partner, who has a share in every portion of the partnership assets, is entitled to a similar share in the profits, if any portion of those assets has been utilised in making the profits. This is laid down by Romer, J., in a very recent case in Manley v. Sartori (1927) 1 Ch. 157. It is often difficult to ascertain the exact share in the profits which should be awarded as Lord Lindley pointed out (at p. 710), and it may therefore be more proper in such cases to award interest on the share of the assets at the date of the dissolution.

6. That the law is as set out above is not seriously disputed by Mr. Varadachariar for the respondents, but he contends that the plaintiff has not claimed such a remedy in his plaint and he must be deemed to have elected to seek his remedy in the shape of interest and to have given up his claim to a share in subsequent profits. Naturally the plaint does not specifically claim this share in subsequent profits, for, at the time it was drafted, the plaintiff could not know that the other partners would not at once make over to him his proper share, nor that they would continue the business, but there is nothing in the plaint which goes to show that the plaintiff relinquished any right to subsequent profits which he has in law. In fact at the trial when it was clear that the business had continued for some considerable period after the dissolution, his claim to these profits was strongly asserted but negatived by the Subordinate Judge for the reasons given in paragraphs 34 and 35 of his judgment in which he refers to the weight of authorities negativing such a right.

7. Inasmuch as the suit partnership was a family business, the matter might be deemed to be somewhat more complicated as it is difficult to ascertain what are the partnership assets as distinguished from the joint family properties, but this point is not of very much weight, for, even under Section 95 of the Trusts Act, the same principle is prescribed with reference to joint owners of property and it has always been held in the case of a joint Hindu family that the manager, after the date of division in status, is under an obligation to account for his management of the whole of the family property, he being co-owner in possession of the property of the separated member of the family. Cf. Watson & Co. v. Ramchund Dutt and Sri Ranga Thathachariar v. Srinivasa Thathachariar : AIR1927Mad801 .

8. A long argument has been addressed to us relating to the conduct of the respective parties but that is really immaterial, except possibly in the awarding of costs, when we have to determine what are their legal rights and it is not seriously disputed now that the plaintiff has a right in law to claim a share in the subsequent profits of the partnership.

9. The enquiry that will now be made is an examination of the accounts of the business not only up to the 31st December, 1921, but up to the date of this decree. In taking this account, the defendants will be entitled to be credited with a sum sufficient to recompense them for the skill and labour employed in the conduct of the business since 1921 and it will also be open to them to prove that any portion of the profits was obtained not by reason of the use of the partnership assets but in some other manner. The term 'partnership assets' must be deemed to include the good-will of the business, for the plaintiff is entitled to a share in the good-will as well as to a share in the actual assets of the business.

10. The contention of Mr. Varadachariar that plaintiff has elected to receive interest rather than share in future profits must be negatived, for a person cannot elect between two things unless he is in a position to know what those two things are and can make a voluntary choice between them. In the present case, the plaintiff is not therefore bound to make his election until the share of the profits that would fall to him has been ascertained. If the subsequent business ended in a loss, the plaintiff would be entitled to claim the assets due to him at dissolution together with subsequent interest and therefore his final election must be postponed until the accounts have been taken.

11. The next point on which the appeal has been argued relates to the family moveables. The plaintiff claimed certain items in his plaint, some of which were admitted and others denied. The Subordinate Judge has held that the plaintiff has not proved the existence of those that he claims and therefore he was only entitled to a share in those admitted by the defendants. It: appears that the plaintiff has tried to secure the appointment of a receiver in this suit, and that when that was disallowed, he applied for a commissioner to take an inventory of the moveables, which was also disallowed. When the plaintiff was in the witness-box, his pleader made a statement that oral evidence as to moveables would not be adduced and that the plaintiff would rely on what could be shown from the accounts when they were examined to ascertain the partnership assets. This statement was apparently accepted by the Court and consequently no oral evidence was let in. In these circumstances and in view of the fact that the plaintiff had been out of possession of the family moveables, he ought to be allowed an opportunity of proving what moveables existed by reference to the family and partnership accounts and this must be done in the taking of the accounts.

12. The third point relates to the mesne profits from the immoveable property. A sum of Rs. 1,250 was deposited by the defendants in respect of the first year's profits but this was done in order to avoid the appointment of a receiver and cannot be treated as an admission that Rs. 1,250 was the actual amount of mesne profits in that year. The actual amount must be ascertained by reference to the accounts and the various payments made by defendants must be set off against that amount and the plaintiff awarded his share accordingly.

13. This appeal must, therefore, be allowed and the Lower Court's decree modified in accordance with the above judgment. The third defendant has not opposed this appeal and therefore defendants 1 and 2 will pay plaintiff's costs of the appeal. The Sub-Judge will take steps to secure the accounts from defendants as soon as possible and then proceed to appoint a commissioner for their examination.

Thinuvenkatachariar, J.

14. This appeal arises out of a suit brought by the appellant for the partition of family properties belonging to him and defendants 1 to 3. The 1st defendant is the plaintiff's father and defendants 2 and 3 are his (plaintiff's) brothers. It has been found by the Lower Court that the family continued undivided in status till the 31st December, 1921, on which date the plaintiff became divided in status and in estate from the other members of the family. This finding is not questioned before us. The family besides owning considerable immoveable and moveable properties was also carrying on trade from a very long time and on the date when the plaintiff separated from the family and became divided in status the family was carrying on a business in salt at Tuticorin in the name of R. M. Muthuswami Aiyar & Sons, and among the properties sought to be divided are the assets of that family trade. The plaintiff in his plaint says that he is no longer willing to carry on that business as a family concern and that it is therefore just and necessary to dissolve the firm as from the date of the plaint and ascertain the net profits available for distribution between him and the defendants 1 to 3. The plaint was filed on the 9th February, 1922. The defendants 1 to 3 in their written statement pleaded that

plaintiff severed his connection from the business in Arpisi, 1096 and from the family on the 1st Margali, 1096. Since then he became a divided member. Plaintiff is not therefore entitled to the benefits of nor is he liable to the obligations under any contracts entered into since he left the business.

15. With reference to this plea the fourth issue in the case was framed in the following terms : 'Whether plaintiff has no interest in the firm of R. M. Muthuswami Aiyar & Sons after he became divided in status from defendants 1 to 3,' that is, after the 31st December, 1921. It is admitted that even after the plaintiff had separated from the family and became divided in status the other members of the family continued to carry on the business in salt and it was still being carried on when the suit came on for trial about four years after its institution.

16. At the trial the plaintiff claimed that though the family partnership stood dissolved, so far as he is concerned, on the 31st December, 1921 and he is entitled to his share of the assets of the business as it stood on that date, he is also entitled to a share of the profits earned by the business continued by defendants 1 to 3 subsequent to his separation therefrom.

17. Defendants 1 to 3 denied the plaintiff's claim to a share in these profits and contended that he can be awarded only interest on the amount found due to him on the date his connection with the firm ceased. This was one of the main questions raised at the trial. On that question the Subordinate Judge finds that plaintiff became divided in status and in estate on the 31st December, 1921, and that he had no interest in the firm of R.M.M. & Sons continued by defendants 1 to 3 after the said date; and that he would be entitled to the money value of his share in the said firm as it stood on the said date together with interest thereon at 6 per cent. per annum.

18. The main question argued before us in this appeal is that the plaintiff's claim to a share in the profits of the business carried on by defendants 1 to 3 subsequent to the 31st December, 1921 should have been allowed. It is contended on behalf of the appellant that when a partner retires and the business of the firm is thereafter carried on by the other members of the firm with its capital or assets without any final settlement of accounts as between them and the outgoing partner, then he, in the absence of any agreement to the contrary, is entitled at his option either to claim a share of the profits made with the use of his share of the partnership assets since the dissolution of the firm by his retirement or to interest on the amount of his share in the partnership as it stood on the date of its dissolution. That is the rule enacted in Section 42 of the English Partnership Act. There is no corresponding provision in the Indian Contract Act,...but it is contended that Section 42 of the English Act merely enacted what had prior to that Act been held to be the law in a long series of decisions of the Courts of Equity and that the same rule has also been held to be applicable to partnerships in this country, as a rule of justice, equity and good conscience. The appellant's advocate relies also on Sections 88, 90 and 95 of the Indian Trusts Act in support of the same contention. Section 88 says (to quote only the relevant portion):

Where a trustee, executor, partner, agent, director of a Company, legal adviser or other person bound in a fiduciary character to protect the interests of another person, by availing himself of his character, gains for himself any pecuniary advantage...he must hold for the benefit of such other person the advantage so gained.

19. Illustration (f) to that section is particularly relied on and it runs as follows:

A and B are partners. A dies. B instead of winding up the affairs of the partnership, retains all the assets in the business. B must account to A's legal representative for the profits arising from A's share of the capital.

20. Section 90 enacts:

Where a co-owner by availing himself of his position as such, gains an advantage in derogation of the rights of the other persons interested in the property, he must hold, for the benefit of all persons so interested, the advantage so gained but subject to re-payment by such persons of their due share of the expenses properly incurred, and to an indemnity by the same persons against the liabilities properly contracted in gaining such advantage.

21. Lastly Section 95 says:

The person holding property in accordance with any of the preceding sections of this Chapter must, so far as may be, perform the same duties, and is subject, so far as may be, to the same liabilities and disabilities, as if he were a trustee of the property for the person for whose benefit he holds it:

Provided that where he rightfully cultivates the property 01 employs it in trade or business, he is entitled to reasonable remuneration for his trouble, skill and loss of time in such cultivation or employment.

22. It is argued that these provisions recognise the same equity which was recognised by the earlier English decisions which have since been embodied in Section 42 of the English Partnership Act and that upon the facts of the present case the plaintiff is entitled to claim a share of the profits by reason of defendants 1 to 3 having used his share of the assets in carrying on the business subsequent to 31st December, 1921. In support of this contention the decisions of the Privy Council in Bhagwandas v. Rivett-Carnac and Haji Hedayetulla v. Mahomed Kamil (1923) 19 L.W. 425 are relied on. In both those cases the partnership was dissolved by the death of one of the partners and thereafter the business was continued by the surviving partner or partners with the assets of the dissolved firm and their Lordships held that the legal representatives of the deceased partner were entitled not only to an account to be taken of the partnership dealings and transactions to ascertain what was due to the estate of the deceased partner in respect of his share at the time of his death, but also to an enquiry as to how the amount due to the deceased partner's estate has been dealt with by the surviving partners subsequently and if it appears that such amount or any part thereof has been employed in the business continued by the surviving partners, to direct an account of such a business to be taken. In Bhagwandas v. Rivett-Carnac their Lordships also recognise the right of the legal representative of the deceased partner to elect either for the profits so ascertained or for interest and he may exercise that option after the accounts for the subsequent period are taken and the result ascertained. In that case the legal representative of the deceased partner was a minor on whose behalf the suit was filed by the Administrator-General to whom the letters of administration were granted for the estate of the deceased.

23. In Haji Hedayetulla v. Mahomed Kamil (1923) 19 L.W. 425, which was an appeal from Mahomed Kamel v. Haji Hedayetulla I.L.R. (1921) C. 906, a business was carried on by two persons in partnership. On the death of one of them named Fazil the partnership became dissolved but the surviving partner continued the business with the assets of the firm. In a suit brought against him by the legal representatives of the deceased partner for accounts being taken the Calcutta High Court held that he was liable to give to the representatives of Fazil a share of the profits of the business which may have accrued subsequent to his death up to the date when the final decree is made, all just allowance including fair remuneration to be allowed in favour of the defendant for managing the business and further ordering that the plaintiffs as representatives of Fazil will be entitled to the same share as he would have taken if the partnership had not been dissolved and the profits will be assessed on the basis of what may be found due to him on the date of his death. This decree was affirmed by the Privy Council. In this case the only question raised appears to have been whether the accounts should be taken only up to the period of dissolution of the partnership by the death of Fazil or up to the date of final decree. No question appears to have been raised as to whether Fazil's legal representatives could claim only interest on his share of the assets as it stood on the date of the dissolution. The only other decision of the Privy Council which has been referred to in the arguments is the case in Ahmed Musaji Saleji v. Hashim Ebrahim Saleji . In this case after the dissolution of a partnership by the retirement of a partner the other partners continued the business of the firm using its assets for that purpose. In a suit brought against them by the legal representatives of the retired partner (who subsequently died) they were ordered by the Trial Judge, Fletcher, J., to account for such assets with interest thereon from the date of dissolution. That decree was on appeal affirmed by Sir Lawrence Jenkins, C.J. and Woodroffe, J., who observed that Fletcher, J., had a discretion to allow interest and that having regard to the conduct of the appellant and the circumstances under which their liability arose that discretion ought not to be interfered with. In the appeal to the Privy Council preferred against that decree the Counsel for the appellants contended that in such a case interest should not be awarded unless fraud on the part of the partner who continued the business was found. The respondent's Counsel in meeting that objection contended that the right to interest depended on the law of the Equity Courts that where after a partnership has been dissolved a partner continuing the business takes the assets of the partnership and trades with them, the other partners have a right to elect whether they will have a share of the profits made or interest on the amounts taken. He further contended that the discretion of the Court was properly exercised by decreeing interest in that case. With reference to these contentions Lord Sumner in delivering the judgment of their Lordships dismissing the appeal observed as follows:

It is well settled that in certain cases, when on the dissolution of a firm one of the partners retains assets of the firm in his hands without any settlement of accounts and applies them in continuing the business for his own benefit, he may be ordered to account for these assets with interest thereon, and this apart from fraud or misconduct in the nature of fraud.

24. It seems to me upon a careful consideration of the report of this case that the plaintiffs made no alternative claim therein either for a share of the profits or for interest as the Court may think fit to allow; but that they elected to have interest on the amount due to the retired partner and that the only question decided was that they were entitled to interest as claimed. In this view Mr. Justice Seshagiri Aiyar's observation in Hajee Summar Salt v. Mahomed Husshum Sait (1916) 4 L.W. 521 that this case is authority for the proposition that in such cases the Courts have a discretion whether to allow to the retiring partner or to the representatives of the deceased partner a share of the profits or only interest seems to be not warranted. If the decision in Ahmed Musaji Saleji v. Hashim Ebrahim Saleji is to be so understood it would be in conflict with their Lordships' previous decision in Bhagwandas v. Rivett-Carnac wherein it is clearly recognised that the plaintiff has an option to claim either profits or interest as in Section 42 of the English Partnership Act. Neither in Ahmed Musaji Saleji v. Hashim Ebrahim Saleji in which interest was awarded, nor in Haji Hedayetulla v. Mahomed Kamil (1923) 19 L.W. 425 where profits were awarded, was the question of the plaintiff's option to claim either of the alternative reliefs considered as it was in Bhagwandas v. Rivett-Carnac and the only legitimate inference to be drawn therefrom is that in both those cases the plaintiffs definitely elected for one of those reliefs in the plaint and the Court therefore had only to consider the right of the plaintiff to that relief. The further observation made by Seshagiri Aiyar, J., in the same case that illustration (f) to Section 88 goes further than the operative portion of the section seems to me to be also not well founded. The section says (to quote only so much of it as is relevant) that:

Where a partner or other person bound in a fiduciary character to protect the interests of another person, by availing himself of his character, gains for himself any pecuniary advantage, he must hold for the benefit of such other person the advantage so gained.

25. It may be that there may be no fiduciary relationship between the surviving partner and the legal representatives of the deceased partner (which is a question on which opinion is divided). But the partner, in continuing the trade with the assets of the dissolved partnership, certainly avails himself of the opportunity he had as a partner in possession of the assets and that is sufficient to bring him within the operative part of the section. The words in the section 'or other person bound in a fiduciary character to protect the interests of any other person' have to be construed not as referring to a trustee, executor, partner, agent, director of a company or legal adviser who are expressly mentioned in the section as holding a fiduciary character but to bring in any other person not coming within those categories who is bound to protect the interests of any other person. Under illustration (f), as in Section 48 of the English Partnership Act, the liability of the surviving partner who continues the business is based on his using the assets of the old firm for that purpose. Partners being co-owners of all the partnership assets including its goodwill, the partner who continues the business after the death or retirement of the co-partner with the assets of the firm will, under Sections 90 and 95 of the Trusts Act, be accountable to the retired partner or to the legal representatives of the deceased partner for the profits made by him by such user of the common property, subject to a fair allowance being made to him for his labour and skill and to the other provisions in his favour contained in those sections. Indeed having regard to the ground on which liability of the partner continuing the business is based, the right to claim profits would seem to be rather the primary right, and the right to claim interest the alternative right, the option to choose between them being given to the partner or his representative whose property has been so used without his authority.

26. The Subordinate Judge in support of his conclusion that the plaintiff is not entitled to claim a share in the profits of the business which was continued by defendants 1 to 3 after the date of the dissolution relies on Hajee Summar Sait v. Mahomed Husshum Sait (1916) 4 L.W. 521 and also on Section 241 of the Contract Act which according to him supports the view that whatever is due to an outgoing partner or to the representative of the deceased partner is a debt and nothing else than an ordinary debt accruing on the date of the dissolution. Section 241 has to be read with Section 240 and when so read, it has no application whatever to the present case. The effect of Section 241 is merely to provide that a retiring partner, by leaving his property to be used in the business after his retirement, does not become a partner as regards the business which is continued after his retirement, but is merely in the position of a lender to the business within the meaning of Section 240. The question as to what right he can claim, by reason of such user of the property when there has been no agreement regarding it, is a question which is not touched by Section 241. Upon the authorities already referred to there can be hardly any doubt that the retiring partner can, in the absence of any agreement to the contrary, claim at his option either a share of the profits of the business which was continued with his assets or interest on the amount of his share of the partnership assets.

27. This proposition is hardly disputed by the learned advocate for defendants 1 to 3, but he contends firstly that they made no use of plaintiff's share of the assets of the business in continuing the business after the date of the dissolution and that therefore the foundation of plaintiff's claim to share in the profits fails, and secondly that the plaintiff by his conduct prior to the suit and in his plaint has elected to forego any share in the profits of the business. It is argued that if defendants 1 to 3 did not actually use more than their three-fourth share of the assets of the business in continuing the same after dissolution, they cannot be held liable to the plaintiff for the profits they may have made after dissolution. This argument ignores the rights of the plaintiff with regard to the common assets of the business. Until those assets are divided and his share given to him, he is a tenant-in-common with them in respect of the whole assets and even though only a portion of the assets may be used in the new business the assets so used is the common property of all the co-sharers including the plaintiff and he will be entitled to claim a share of the profits by such user. This contention is therefore untenable. I may, however, add that it is not open to the plaintiff in making the election to claim a share of the profits with regard to a portion of the assets and claim interest with regard to the rest. He . must choose between the alternative reliefs with regard to the entire assets as a whole. In the present case the continuance of the family business by defendants 1 to 3 cannot per se be regarded as wrongful merely because one member of the family who was entitled to a fourth share in it chooses to break off suddenly. To discontinue a long-standing business suddenly in which a large amount of capital has been embarked may result in heavy loss to the other members of the family and there can be no objection to their continuing the business on their behalf and at their risk, and their doing so will in no way prejudice the plaintiffs rights to have accounts taken of the dissolved partnership as it stood at the date of the dissolution. He has a further right to claim at his option either his share of the profits which were earned by the employment of his share of the assets in the new business or interest on the amount due to him at the date of' the dissolution. If he elects to claim profits it will have to be ascertained what profits are attributable to his share of the assets employed by defendants 1 to 3 in continuing the business and what allowances should be made in their favour as provided in Section 95 of the Trusts Act.

28. As regards the further contention that the plaintiff has in fact elected against claiming a share of the profits, our attention was drawn to the following statement in paragraph 13 of the plaint:

Under the circumstances, the plaintiff is not willing to continue the business any longer as a family concern and he has reasonable grounds to fear that want of mutual confidence cannot but lead to loss. It is therefore just and necessary to dissolve this new firm and ascertain the net assets available for distribution between the plaintiff and defendants 1 to 3.;

and also to prayer (e) which runs as follows:

That the family trade as now carried on be dissolved as from this date. That accounts of the profits accrued up to date be taken and direct defendants 1 to 3 to pay one-fourth share of the ascertained profits.

29. This suit was filed on the 9th February, 1922, within a comparatively short time after the date of the dissolution and when the plaintiff would not know whether defendants 1 to 3 will immediately wind up the business or continue the same on their behalf. The contingency for making an election as between the alternative reliefs had not then happened. It is argued that the plaintiff's statement in paragraph 13 that continuing the business in the circumstances cannot but lead to loss shows a definite election on his part not to have any concern in the profits or loss of the business after his retirement therefrom. But it seems to me that all that the plaintiff says therein is that he is not willing to continue the business any longer as a family concern, as owing to want of confidence between himself and the other members of the family co-operation between them is not possible and the business conducted without it must result in loss. The prayer (e) also does not take the matter any further. At the trial of the case, which took place about four years after the date of the plaint, during which time the business had been conducted by defendants 1 to 3, the plaintiff elected to claim a share of the profits. That is quite clear from the judgment of the Lower Court which refers to the rival contentions put forward by both the parties on this question. In the appeal before us the plaintiff has definitely elected to ask for a share of the profits; grounds Nos. 2 to 7 of the Memorandum of Appeal relate to this question but it will be sufficient to refer to ground No. 5 which runs as follows:

In any event, the Court below ought to have held that the plaintiff has a right to elect whether he will take a share of the profits made, or have interest on the property retained in the business by the defendants and that the plaintiff has elected to ask for a share of the profits.

30. The position taken here is quite clear and unambiguous. That a person who has an option to elect between two alternative claims or reliefs cannot be required to elect without a clear knowledge of the respective claims, between which he has to elect, is clear law. (See Halsbury's Laws of England, Vol. 13, page 124, paragraph 141). The learned author therein says:

Hence he is entitled to be allowed time to consider as to his election and if necessary election will he postponed till the accounts of the property concerned have been taken. Election made before the party has had an opportunity of ascertaining his rights and the value of them or under a mistake as to matters on which those rights depend will not be binding; though if election has once been deliberately made, the persons claiming under the electing party are bound thereby without distinct evidence being given that he was aware of his rights.

31. The accounts of the business carried on by defendants 1 to 3 have not yet been taken and it was quite open to the plaintiff to put off his election until the result of the taking of the accounts is known. He could do so under the authority of Bhagwandas v. Rivett-Carnac but nevertheless the plaintiff has in his Memorandum of Appeal chosen to elect to claim a share of the profits, in the belief, no doubt, upon such knowledge as he may possess, that it will be much more advantageous to him than to claim interest on the amount due to him on the date of the dissolution. It seems to me that the present case falls within the last proposition stated in the paragraph cited above from Halsbury's Laws of England. In support of that proposition the learned author cites the case in Dewar v. Maitland (1866) L.R. 2 Eq. 834. In that case the law on this point is stated as follows:

There is no doubt that before the heir was put to election he is entitled to know everything which concerns the situation and value of the property in respect of which he may be required to make the election. But there is no authority for the proposition that where the heir has chosen deliberately to confirm a devise of land, which, without his confirmation, would be invalid, there must be distinct evidence of his knowledge of his rights. Although a Court compels persons to elect yet election itself is a voluntary act.

32. I have referred to this point because Mr. Krishnaswami Aiyar in his argument in reply contended that he has not yet made any definite election and that even if he has made it is not binding upon him and that if the taking of the accounts of the new business is less favourable to him than claiming interest he still can elect to claim interest. I should be very loath to allow the plaintiff to go back upon an election which I think he has deliberately made but for the special circumstances of this case. The plaintiff applied for the appointment of a Receiver and for the production of the accounts of the new business and both those reliefs have on the objection of defendants 1 to 3 been withheld from him so far. He had therefore to form an opinion on that question on other and much less satisfactory materials, and perhaps also he was not advised that he can put off his election till his accounts were looked into. Having regard to the conduct of the defendants in this case in withholding from the plaintiff the information which he was entitled to, I am not prepared to hold the plaintiff finally bound by the election he has already made. I am therefore of opinion that the contention of the appellant on this question must be allowed in its entirety. Two other questions were argued before us and on these questions I agree with the observations of my learned brother whose judgment I have had the advantage of perusing and having nothing to add thereto, I agree also in the order proposed by him.


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