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Rangasami Gounder Vs. K.R. Easwaramurthi Goundan and ors. - Court Judgment

LegalCrystal Citation
SubjectProperty
CourtChennai High Court
Decided On
Case NumberSecond Appeal Nos. 1254 and 1439 of 1960
Judge
Reported inAIR1967Mad437
ActsPartnership Act - Sections 4; Code of Civil Procedure (CPC), 1908 - Sections 66
AppellantRangasami Gounder
RespondentK.R. Easwaramurthi Goundan and ors.
Cases ReferredLatchumanan Chettiar v. Veerappa Chettiar
Excerpt:
partnership act (ix of 1932), section 4--essentials of partnership--agreement to purchase in court-auction property--whether partnership for single venture--code of civil procedure (act v of 1908) section 66(1)--scope--court-auction purchase--claim for partition of property purchased by benami purchaser--claim barred;the plaintiff (first respondent herein) filed a suit for partition of a half-share in two items of immovable properties which the first defendant had purchased in court-auction in execution of a money decree obtained by a firm of which he was a partner. the basis of the plaintiff's claim was two oral agreements entered into before the purchase with the first defendant by which a partnership was constituted between them for a single venture of purchasing properties with the..........by him were to bid and purchase in court auction as the agent of the partnership.the court auction purchase was on 8th january 1941, on a bid by the first defendant. the sale was confirmed on 17th february 1941, in his favour. as it was apprehended apparently that there might be difficulty in getting possession and there would be litigation in that connection, the second agreement between the plaintiff and the first defendant representing his firm, it was claimed, provided that the first defendant and his firm were to be in charge of the litigation, either pending or expected, that the plaintiff was to bear half the litigation expenses and half of the value of encumbrances cleared, which might be found to be existing on the properties and that "the plaintiff and the firm are to.....
Judgment:
(1) The 21st defendant is the appellant in the first of these second appeals and the other is by the third defendant. The suit was brought by the first respondent for partition of a half share in two items of immovable properties which the first defendant had purchased in court auction in execution of a money decree obtained by a firm of which he was a partner.

The basis of the plaintiff's claim was two agreements, both oral, the first entered into in about January 1941 and the other in about March of the same year, with the first defendant. The plaintiff claimed that the first agreement brought into existence a partnership for the single purpose of purchasing the properties in court auction with the stipulation that the plaintiff and the firm were to equally contribute towards the purchase and have equal shares in them when purchased. It was also understood, according to the plaintiff, that the first defendant or persons duly authorised by him were to bid and purchase in court auction as the agent of the partnership.

The court auction purchase was on 8th January 1941, on a bid by the first defendant. The sale was confirmed on 17th February 1941, in his favour. As it was apprehended apparently that there might be difficulty in getting possession and there would be litigation in that connection, the second agreement between the plaintiff and the first defendant representing his firm, it was claimed, provided that the first defendant and his firm were to be in charge of the litigation, either pending or expected, that the plaintiff was to bear half the litigation expenses and half of the value of encumbrances cleared, which might be found to be existing on the properties and that "the plaintiff and the firm are to divide the properties after all the litigations were over and a proper sale deed was to be executed in the plaintiff's favour thereafter".

The plaintiff in the main prayed for partition by metes and bounds and separate possession of his share out of the suit items, and in the alternative for directing the defendants to execute a sale in favour of the plaintiff in respect of his share and for division and separate possession thereof to him. The suit was resisted by the third-defendant, who was also one of the partners of the decree-holder firm. He denied the oral agreements, their validity and the liability of the firm in respect of them.

The Courts below have found that the agreements pleaded by the plaintiff were true, that he had contributed his share due thereunder and that actually the amounts paid by him were duly credited in the account books of the firm of the third defendant. They have also found that the agreements were valid and binding on the firm and constituted the plaintiff and the firm into a firm of partnership for a single venture of purchasing the two items of properties in court auction. It appears, though no defence was raised in the written statement based on S. 66. C.P. Code, it was permitted to be argued with the result that both the courts have found that it does not bar the plaintiff from getting his relief of partition. This is on the view that the purchase was by one of the partners of the firm for the benefit of it, the firm brought into existence by the two oral agreements. They accordingly concurred in granting a decree for partition as prayed for by the plaintiff. The 21st defendant purchased the entire suit properties from the third defendant. Both of them being aggrieved, they have come up to this court in second appeals.

(2) The substantial contention for the appellants is based on Sec. 66, C.P. Code Mr. Mohan, for one of the appellants, urges that the plaintiff's prayer for partition presupposes that he has title vested in him to the two items to the extent of his share and that this means that his claim for partition, was or should be taken to be, necessarily based on the court auction purchase as regards his half share made by the first defendant benami for him. It seems to me that this contention is well founded.

The courts below, as I said got over S. 66 C. P.C. on the view that the two agreements brought about a firm of partnership for the purpose of a single venture, namely, purchase at the court auction. The courts below, as learned counsel for the contesting respondent before this court, relied on Viswanath Dhondiraj v. Pandharinath Ganesh, ILR 50 Bom 600=(AIR 1926 Bom 525). That was, on facts, no doubt similar to the one before us. There, a house was sold by auction in execution of a decree and the first defendant in the suit for partition was the certified purchaser. Half of the purchase money was supplied by the plaintiff in that suit. Having done that, he brought the suit claiming to recover half of the house by partition. The suit was dismissed in view of S. 66, C. P.C. A Division Bench of the Bombay High Court reversed that decision and held that the case was one of partnership in a single transaction in which the plaintiff and the defendant agreed to unite their funds for the purpose of purchasing the property and that there was no intention of a secret purchase by one person in the name of another so as to bring the case within the scope of that section.

It is well settled now that if a partner purchases property at a court auction utilising the funds of the firm, the purchase may be taken to be on behalf of the firm and to such a case S. 66(1) will have no application. To that extent, ILR 50 Bom 600=(AIR 1926 Bom 525) is clearly an authority. But the question whether where two persons join and provide funds for purchase of a property at a court auction under an agreement, they constitute a firm of partnership for a single venture was not specifically considered in the Bombay case, but as it seems to me it was assumed that the partnership in the venture was in the nature of a firm of partnership within the meaning of the Partnership Act.

S. 4 of that Act defines a partnership as the relation between persons who have agreed to share the profits of a business carried on by all or any of them acting for all. It is manifest therefore that it is not any combination of two or more persons for any purpose that will constitute a partnership within the definition. To have that character, the combination or association of persons must be the result of an agreement to share the profits of a business. What is essential to invest the combination or association with the character of a partnership is that it must be for the purpose of carrying on a business. The word business is of course of a wide connotation. But for the purpose of the definition it is used in the sense of trade or commerce. It may be that to constitute business there need not be a series of transactions of a commercial character. Even a single transaction may constitute business, but only if it carries with it intrinsically the quality of trade or commerce or business. When two or more persons join to purchase immovable properties without anything more, as I consider, it will not be appropriate to regard the transaction as of a commercial character. It may be of that character if facts show that the persons who join for the purpose of purchasing immovable property, did so with the intention of selling them with a view to make profits after developing or preparing the same to realise a profit.

There is no evidence in the instant case that the plaintiff and the first defendant entered into the two agreements with a view to make any profit. Much less is there any indication that the transaction of court auction purchase was intended by them to be of a commercial nature. this point of view entirely escaped the attention of the courts below, I am of the view therefore, that their finding that by their agreements the plaintiff and the first defendant brought into existence the relationship between them of partners and a firm of partnership in the sense of Sec 4 of the Partnership Act cannot be accepted.

(3) Section 66, C.P.C prohibits any claim based on a court auction purchase being benami. The whole policy behind the section is to avoid secret purchases or manipulated deal, smacking of fraud or which will be prejudicial to a decree-holder by the judgment debtor attempting to get at the property through a benami purchase for him Sub-sec (1) of S. 66 forges an absolute ban against a plaintiff basing his title on the ground that the purchase at a court auction sale by a third party was on his behalf. This ban in my view is not merely confined to a plaintiff claiming the entirety of the property covered by the court auction purchase but also any part of it. On principle there appears to be no difference between the two cases, for even where the plaintiff claims that half of the property covered by the auction purchase was purchased benami for him, he has necessarily to rely on the sale certificate issued in favour of the actual purchaser. That is what is hit by S. 66.

This view of mine has the support of Bishan Dayal v. Kesho Prasad, AIR 1937 All 176. In that case the plaintiff sued for possession of a half share of a certain property in which the defendant was the certified purchaser at an auction sale in execution of some other person's decree. The plaintiff's allegation was that the bid at the auction was made by the defendant on behalf of both the plaintiff and the defendant and the plaintiff was accordingly the owner of half the property. The parties were not members of a joint Hindu family or of a partnership firm. The Allahabad High Court held that the suit was barred by S. 66 C.P.C.

Sulaiman C.J. and Bajpai J. repelled a contention to the contrary and held that it was immaterial whether the property in suit was the entire property which was purchased, or whether it was part of a lot so purchased and whether the plaintiff claimed the whole of it or only a share of it. The learned Judges observed.

"The substantial thing to consider is that the defendant, who is resisting the claim, claims title to the property under a purchase certified by the court, and if the property in dispute is part of the property so purchased the latter is protected. We see no reason why a distinction should be drawn between the cases where the whole of the property purchased is claimed, and where the plaintiff says that he purchased only a share in the property mentioned in the sale certificate. In either case the defendant claims title under a purchase certified by the court and the claim comes within the mischief of S. 66. There is authority for the view that no such distinction should be introduced into the section".

In making these observations the learned Judges were weighed by the consideration that if such an evasion were allowed, the result would be that all that could be necessary for a plaintiff to succeed would be to give up a negligible fraction of the property and put forward a claim to the bulk or to exclude a part of the property purchased from the claim put forward in the suit.

This view was affirmed by the Privy Council in Bishun Dayal v. Kesho Prasad, AIR 1940 PC 202. The Privy Council in disposing of the appeal expressed itself in these terms; Where the only case pleaded by the plaintiff was that the person through whom he claimed derived his right to half of the village from the auction purchase having been made in part on his behalf by the auction purchaser, the claim was barred by S. 66 inasmuch as no case independent of auction purchase was put forward in the plaint.

Mr. Desikan, learned counsel for the first respondent however invited my attention to the decision in Venkatappa v. Jalayya, ILR 42 Mad 615=(AIR 1919 Mad 94)(FB) which in my opinion is of no assistance to him. In that case, the claim was based on an agreement to sell which was subsequent to the auction purchase and it was held that the suit for specific performance of that agreement was not barred by S. 66.

Latchumanan Chettiar v. Veerappa Chettiar, 1955-2 Mad LJ 460=(AIR 1956 Mad 10), was a case of two decree-holders each of whom interested in realising the decree in his favour and therefore interested in the court auction of the properties of the judgment debtor. They had agreed among themselves that the property purchased by each of them in execution of their relative decrees should be divided among themselves in certain shares proportionate to their decrees in execution of which the properties were sold. Krishnaswami Nayudu J. was of the view that the suit for partition brought by one of the decree-holders against the other was not barred by S. 66. The basis of the decision lay in the recognition that the plaintiff in that case had certainly an interest to the extent of getting his decree satisfied out of the sale proceeds and that it was therefore not a case of plaintiff's claim being based merely on an agreement and solely for the reason that the purchase by the defendant was benami for him, though in respect of a share in the properties.

(4) As already observed by me, the plaintiff's prayer for partition pre-supposes a title in himself to the share he claimed in the suit properties and this title could only rest on the certified purchase made at court auction by the first defendant. His claim for partition could have no other basis. In the circumstances, therefore, the court auction purchaser could certainly defend his title under the protection afforded to him by S. 66 C. P.C.

(5) But that does not dispose of the suit, for the plaintiff asked for an alternate relief, namely, specific performance of the agreement subsequent to the auction purchase, to sell his share to him and for partition and separate possession of that share. Evidently, on the view the courts below took on the first prayer, they did not think it necessary to deal with the alternative prayer for specific performance. But it is now necessary in view of my judgment for the courts below to consider the alternative prayer and decide the same. On this aspect of the matter, I should like to make no comment or observation, except to say that the suit will be restored to the file of the trial court for disposal on the alternative prayer. In doing so, the trial court will proceed upon the footing that the findings of facts as to the truth and binding character of the agreements in so far as they related to the first prayer are left untouched by the judgment of this court and remain in force. The validity of the agreement subsequent to the auction purchase may be open for consideration by the trial court in the context of the alternative prayer for specific performance and partition on that footing.

(6) The second appeals are allowed, the judgments and decrees of both the courts below are set aside and the suit is remitted to the trial court for disposal as already directed. The costs of these appeals as sell as the appeals in the lower appellate court will abide the result of the suit. The court fee paid on the memorandum of second appeal will be refunded. No leave.


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