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Ramaswami Pillai and ors. Vs. V.R.M.K. Muthukaruppan Chetty and ors. - Court Judgment

LegalCrystal Citation
SubjectContract
CourtChennai
Decided On
Reported inAIR1925Mad737; (1925)48MLJ444
AppellantRamaswami Pillai and ors.
RespondentV.R.M.K. Muthukaruppan Chetty and ors.
Cases ReferredBedford v. Brutton
Excerpt:
.....far as item 2 is concerned, this is clearly wrong, for it represents the amount of drawings by the deceased partner, drawings which he was entitled to make, for as a partner he was entitled to use as much of the partnership money as would represent his share of the profits. and i may say here that, if really the money was not credited to the partnership at all, it is extraordinary that muthuvairava pillai should have shown the repayment of the money in the partnership accounts, thus clearly proving his own misappropriation. for it may well be that, if accounts are taken amounts will be found due by the partnership to the deceased which must be set off against the items now claimed separately. in my opinion justice cannot be effectively done here without taking a regular partnership..........hindu family. the suit is to recover certain sums of money due to the partnership firm by the deceased partner, and in the original plaint there were four such items. the first and the third are said to be sums borrowed by the deceased on his own account and repaid out of partnership money; the second item is the amount said to have been overdrawn by the deceased and therefore due to the firm; the fourth item is also an amount relating to his drawings on account of his salary less the profit which is due to him.2. the accounts of the partnership, which became dissolved by the death of muthuvairava pillai, have never been taken and, consequently, the defendants pleaded that this suit was not maintainable, as plaintiffs were not suing for an account. subsequently, the plaintiffs.....
Judgment:

Phillips, J.

1. Plaintiffs and one Muthuvairava Pillai were partners in a business carried on in Erode and other places. The 1st defendant is father of the late Muthuvairava Pillai, defendants 2 and 3 are his sons and 4th defendant is his brother's widow. Plaintiffs have brought this suit against the defendants as legal representatives of the deceased Muthuvairava Pillai alleging that the latter and the defendants were members of a joint Hindu family. The suit is to recover certain sums of money due to the partnership firm by the deceased partner, and in the original plaint there were four such items. The first and the third are said to be sums borrowed by the deceased on his own account and repaid out of partnership money; the second item is the amount said to have been overdrawn by the deceased and therefore due to the firm; the fourth item is also an amount relating to his drawings on account of his salary less the profit which is due to him.

2. The accounts of the partnership, which became dissolved by the death of Muthuvairava Pillai, have never been taken and, consequently, the defendants pleaded that this suit was not maintainable, as plaintiffs were not suing for an account. Subsequently, the plaintiffs withdrew their claim to the fourth item on the ground that that item was disputed and was based on a different cause of action to the other three. Defendants again opposed this amendment and repeated their plea that the suit should be for the taking of accounts. This item which has been withdrawn would, to a certain extent, necessitate taking of an account in order to ascertain whether the amount credited to the deceased as his share of the profits was correct; but nevertheless the Subordinate Judge allowed the amendment and proceeded to trial holding that the suit is maintainable. After taking evidence on the merits of the case he has decreed plaintiffs' suit in respect of the three items which still remained in the plaint. The defendants now appeal and again plead that the suit as framed is not maintainable, and this has been argued as a preliminary point without going into the merits of the case.

3. It was a very well-established rule in English Law that Courts would not interfere between one partner and another unless it was for the purpose of dissolving the partnership or, if it was dissolved, of finally winding up its affairs. This rule has in later years been considerably relaxed because it was found to work hardship in certain cases and in the result Courts have interfered in order to prevent a partner deriving advantage from his own misconduct and have not insisted on the other partners submitting either to continuance of the wrong or to a dissolution; but the reason for the relaxation of the rule has been explained in Lord Lindley on Partnership. 8th Edition, page 630 as follows : 'The first question (namely, when can an action be maintained between partners without taking a general account of all the partnership dealings and transactions) can only be answered generally by saying that each case must depend upon its own circumstances and upon whether justice can really be done without taking such an account.' In the present case, the defendants state that an account should have been taken in order that the amount due by, or to, Muthuvairava Pillai might be finally determined. Plaintiffs answer to this is that they are not asking for the taking of accounts because the items specified by them as being due by the deceased are moneys which were not brought into the partnership accounts but were taken by the deceased for his own purposes. So far as item 2 is concerned, this is clearly wrong, for it represents the amount of drawings by the deceased partner, drawings which he was entitled to make, for as a partner he was entitled to use as much of the partnership money as would represent his share of the profits. Similarly, as regards the other two items, I do not think that they can be treated as sums of money entirely unconnected with the partnership business. They represent two sums of Rs. 10,000 and Rs. 3,000 respectively, borrowed by the deceased in the name of the partnership, and the repayment of these loans is shown in the partnership accounts. The question whether the firm received the benefit of these two sums of money is one which has to be determined on a consideration of the evidence; and I may say here that, if really the money was not credited to the partnership at all, it is extraordinary that Muthuvairava Pillai should have shown the repayment of the money in the partnership accounts, thus clearly proving his own misappropriation. However that may be, I. think that these items cannot be treated separately from the partnership business and I do not think that the cases relied upon by the respondents are any authority to the contrary, i. e., Cross v. Cheshire 7 Ex R 43, Smith v. Barrow 100 ER 256 : 2 TR 476, Bedford v. Brutton 131 ER 1171 : 1 Bing NC 399 and Ex parte Younge 13 RR 135 ]. In the first of these cases [Cross v. Cheshire 7 Ex R 43 ] the suit was held to be maintainable because it was for an amount which had been decreed against the partnership in respect of the private debt of one of the partners; the second case [Smith v. Barrow 100 ER 256 : 2 TR 476 : ] is somewhat similar, for it was a suit by one partner against another to recover his own money which had by mistake been put into the partnership funds. Again in Bedford v. Brutton 131 ER 1171 : 1 Bing NC 399 a member of a company was allowed to sue for rent due to himself personally as against the trustees for the company. The fourth case [in Ex parte Younge (4)] does not refer to a suit but to Bankruptcy proceedings. In Smith v. Barrow 100 ER 256 : 2 TR 476 the suit was allowed, but with regard to the further claim for a sum of 30 which was due to the partnership, it was held that the action could not be maintained. In Bedford v. Brutton 131 ER 1171 : 1 Bing NC 399 it was pointed out by Tindal, C. J., that if the action were virtually and substantially an action on covenant, brought by the assignees of one partner, who has become bankrupt, against three of his partners, to recover damages against them, to which the plaintiff himself must be contributory if he succeeds, the action would not be maintainable. And we may observe that in all these cases the principle is that, where justice requires that all the dealings of the partnership should be finally determined, the Courts will not allow a partial account to be taken but that when the basis of the claim is unconnected with the partnership business, or is only very remotely connected therewith, an action is maintainable, when no injustice is caused by dealing with this one claim separately. As instances of the former class of case I may refer to Lakshmana Chetty v. Nagappa Chetty (1917) 34 MLJ 408, Annamalai Chetty v. Annamalai Chetty (1919) 10 LW 67 and Godhanram v. Jaharmull Puglia ILR (1912) C 335 and to Karri Venkata Reddy v. Kollu Nurasayya ILR (1908) M 76 : 19 MLJ 10 and Sunkara Ratha Doss v. Epari Kopilo 49 IndCas 191 as instances of the latter. As pointed out in Lindley on Partnership, each case must depend on its own special circumstances and upon whether justice can be done without taking an account.

4. In the present suit, the defendants have no personal knowledge of the transactions and business of the partnership, but they are entitled to have all the questions at issue determined by taking of accounts; for it may well be that, if accounts are taken amounts will be found due by the partnership to the deceased which must be set off against the items now claimed separately. It is possible also that in addition to the items claimed separately, plaintiffs may be entitled to recover a further amount; in either case, justice will not be done between all the parties unless their claims are determined by final settlement of accounts. Even if the items claimed by plaintiffs were really items criminally misappropriated by the deceased, their action would be an action in tort and they would only have the right to recover any damages for which the deceased is liable out of his assets in the hands of the defendants. If, on the other hand, some money is due by the firm to the deceased, the defendants are entitled to have the benefit of that amount. It is impossible therefore to do justice to all the parties without taking a final account of the partnership.

5. Plaintiffs have definitely, and somewhat obstinately, declined to alter their suit into one for taking of accounts and have proceeded to trial on the basis that this was not necessary. During the hearing of the appeal, however, Mr. A. Krishna-swami Aiyar for the plaintiffs made a request that the amendment of the plaint may now be allowed for apparently plaintiffs are afraid that a suit for account would now be barred by limitation. Inasmuch as the plaintiffs have established their claim in the Lower Court to certain items I think it is equitable that an account should be taken but as they obstinately refused to make any such amendment of their plaint in the earlier stages of the trial, they arc responsible for all the costs that have hitherto been incurred. I would therefore allow the amendment to be made on condition that plaintiffs pay all the defendants' costs of the original trial and in this Court within two months. If that is done, the suit will be remanded for fresh disposal after amendment of the plaint but in default the suit will be dismissed with costs throughout.

Odgers, J.

6. The facts have been fully set out by my learned brother. I agree, but I will add a few words on my view of the legal point which has been raised, viz., whether the Subordinate Judge was right in his view that the adjudication of the three items claimed in the suit does not necessitate a taking of the entire accounts of the partnership. In considering this question it is important to remember that the partnership during the subsistence of which the various acts alleged against Muthuvairava Pillai took place was dissolved before suit by his death. There is also no question that if a partnership account were taken certain amounts would be found due to the deceased partner, Muthuvairava Pillai who had 1/16th or 1/17th share in the partnership and who would not be liable to his partners in any event for more than 15/16 or 16/17ths of the amounts in question. The present defendants arc the father, sons, and brother's widow of Muthuvairava Pillai. The rule laid down in Karri Venkata Reddi v. Kollu Narasayya ILR (1908) M 76 : 19 MLJ 10 is that the Court is to determine under what circumstances it would be equitable to order a partial account and that if the account sought for does not involve the taking of a general account the Court will as a rule give the relief asked for and will refuse to interfere only in those cases in which a partial account would work injustice to the other partner. In Lakshmana Chetti v. Nagappa Chetti (1917) 34 MLJ 408 it was said the plaintiff was practically suing himself and his partner and that as he sought to establish liability against the defendants on the basis of accounts and had not asked for them the suit would not lie. In Godhanram v. Jaharmull Puglia ILR (1912) C 335 in a suit by a principal against an agent it was held that plaintiff could not be permitted to select capriciously a single transaction and claim the fruits thereof without the adjustment of the rights and liabilities of the parties in relation' to other transactions. Lord Lindley in his work on Partnership (8th Edition), p. 539, says that the old rule was that the Court would not decree a partnership account unless a dissolution was sought on the ground that formerly Courts of Equity were adverse to any interference between one partner and another. This rule has been however relaxed in more modern practice when justice demands the Courts' intervention to prevent some definite wrong or redress some particular grievance. The Courts will not now, if it is possible to avoid it, allow a partner to derive advantage from his own misconduct by compelling his co-partner to submit either to a continued wrong or to a dissolution. It is argued for the respondent that the present case comes within the modern rule of exceptions, which rule, be it noted, is expressly said to be designed to prevent the necessity of suing for a dissolution. Here dissolution has already taken place. The cases cited by Mr. A. Krishnaswami Aiyar for the respondents are the following: Cross v. Cheshire 7 Ex R 43, Smith v. Barrow 100 ER 256 : 2 TR 476, Ex parte Younge 13 RR 135 and Bedford v. Brutton 131 ER 1171 : 1 Bing NC 399. In Cross v. Cheshire 7 Ex R 43 it was held that if one of the partners is called upon by the act of the other to pay his private debt, the former may recover the money so paid by an assumpsit for money paid to the use of the other, as the defaulter had admitted that the debt was his own and not connected with the partnership accounts. (The italics are mine.)

7. In Smith v. Barrow 100 ER 256 : 2 TR 476 it was held that where money was wrongly carried to the partnership accounts when it was really received by one partner for the separate use of the other, an action may be maintained. This is the converse case to Cross v. Cheshire 7 Ex R 43.

8. Ex parte Younge 13 RR 135 was the case of one partner abstracting the joint property of the partnership by fraud. it was held that the partnership might prove against his separate estate for that wrong. The case was in bankruptcy. Bedford v. Brutton 131 ER 1171 : 1 Bing NC 399 proceeded on the express terms of the deed and can have no bearing on the present case.

9. The English cases quoted all refer to subsisting partnerships and as stated form exceptions to the general rule in order to preserve the partnership and prevent dissolution. In my opinion they do not apply to the present case. In my opinion justice cannot be effectively done here without taking a regular partnership account which moreover will be essential at some time or another. It is therefore clear to me that the Subordinate Judge ought to have held the suit not maintainable without a prayer for an account. A fresh suit for that purpose would now be barred under Article 106, Limitation Act, as Muthuvairava Pillai died in 1919. The plaintiffs had two opportunities of amending their plaint and did not take advantage of either. I think, under the circumstances, though I feel it is an indulgence, that on condition that they pay all the costs incurred up to date, they may be allowed to amend at this stage. I agree with the order proposed as to the conditions under which amendment should be allowed.


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