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Mohammad Abdul Sathar Baig and ors. Vs. Hafija Bibi and ors. - Court Judgment

LegalCrystal Citation
Decided On
Reported inAIR1944Mad346
AppellantMohammad Abdul Sathar Baig and ors.
RespondentHafija Bibi and ors.
Cases ReferredRobley v. Brooke
.....there nothing in the decree to indicate that it was set aside only as against defendant 3, but, as the learned subordinate judge points out, the share of defendant 3 cannot be determined unless the share of yusuf is clearly settled which again cannot be done unless the suit as a whole is reopened......his younger brothers. defendants i and 5 are the wives of mohammed ismail.2. the three brothers, yusuf, ismail and gaffur were together carrying on a business in the manufacture and sale of beedies. from the profits of the business several immovable properties were purchased. they were treated as part of the assets of the business. on 22nd january 1926, gaffur, the youngest of the brothers, left the business receiving for his share cash and property of the total value of rs. 6000. the arrangement come to by the partners at the time is evidenced by a deed of release, ex. a, executed by gaffur in favour of his brothers. it is said that there was a counter part of this release, but it has not been produced. this deed of release contains the statement that it was yusuf who began the.....

Krishnaswami Ayyangar, J.

1. This is an appeal from the decree of the Subordinate Judge of Guntur in a suit instituted by the two sons and three daughters of a deceased Mahomedan Yusuf Baig, for a partition and recovery of their shares in the estate left by him. Yusuf Baig died on 3rd December 1927. Defendant 1 is his widow and she is the mother of the plaintiff. Defendants 2 and 3, Mohamed Ismail and Mohamed Gaffur, are his younger brothers. Defendants i and 5 are the wives of Mohammed Ismail.

2. The three brothers, Yusuf, Ismail and Gaffur were together carrying on a business in the manufacture and sale of beedies. From the profits of the business several immovable properties were purchased. They were treated as part of the assets of the business. On 22nd January 1926, Gaffur, the youngest of the brothers, left the business receiving for his share cash and property of the total value of Rs. 6000. The arrangement come to by the partners at the time is evidenced by a deed of release, Ex. A, executed by Gaffur in favour of his brothers. It is said that there was a counter part of this release, but it has not been produced. This deed of release contains the statement that it was Yusuf who began the business and subsequently took his two brothers into it out of brotherly affection and for business purposes and it goes on to state:

But as we (Ismail and Gafiur) requested Mohammed Yusuf Baig Sahib to give me and Mohamed Ismail Sahib some share in all those properties and in the business, he agreed to it out of affection and gratitude towards us and the following are the particulars of the shares which he and we got settled. It was settled that Mohamed Ismail Baig should have one share and that I (Gaflur) should have one share.

These recitals show that in the business so far carried on Yusuf was entitled to a half share and his two younger brothers were each entitled to an one-fourth share. The business was continued by Yusuf and Ismail and other properties were purchased from the profits earned. The death of Yusuf on 3rd December 1927, brought about a dissolution of the partnership, but nonetheless, Ismail carried on the business but in his own name utilising the entire assets as they stood at the time of Yusuf's death. The partnership was not wound up and the share of Yusuf was not ascertained and paid to the heirs of the deceased. Before proceeding further, it may also be mentioned that a trade mark known as the 'Turkey Topee' distinguished the beedies manufactured by the partnership and was largely used on the beedies and the wrappers containing them.

3. Although defendant 3 Gaffur is not among the legal heirs of the deceased Yusuf, his father and mother were and they were together entitled to an one-third share. By a deed of assignment dated 18th January 1928, executed by his father and mother, defendant 3 Gaffur acquired their one-third share in the estate of the deceased. Defendant 2 Ismail claimed that he was entitled to a half share in the business carried on by him along with Yusuf since the date of the release deed refer-red to above. In the course of his evidence in the Court below, he stated that the shares mentioned in the deed of release were not correct but that they were so mentioned because Yusuf wanted to cut defendant 3 out with a smaller share. In fact he stated:

Yusuf said that unless I pretended that I agreed to one-fourth share defendant 3 would create troubles. So, I agreed. Defendant 3 took his share and separated.

His case really is that throughout, both before and after the deed of release, Yusuf and he had an equal share in the business and in the property acquired out of the profits earned. The plaintiffs and defendant 3 contended that the shares of Yusuf and Ismail were in the proportion of 2:1 and this question formed the main point of contest between the parties. The learned Subordinate Judge has held that Yusuf was entitled to a half share while his two brothers were entitled to a one-fourth share each in the business which was carried on till 22nd January 1925, when the release deed came to be executed but that in the partnership assets and the business carried on from that date till the death of Yusuf, Yusuf and Ismail were entitled to a half share each. He rightly dismissed as worthless the oral evidence of defendants 2 and 3 on the points. They are the only persons who were in a position to speak to the shares. The shares mentioned in the deed of release had no doubt reference to the partnership that was carried on till 22nd January 1925, but the provision is undoubtedly a circumstance of great importance in deciding the shares in the business continued after that date. The learned Subordinate Judge however discounted the evidentiary value of this circumstance on the ground that the release was brought about mainly for the purpose of meeting the claim of respondent 3 and not for the purpose of determining the shares between Yusuf and defendant 2 and it cannot therefore be safely relied upon for the purpose of ascertaining the shares of the partners in the subsequent business. He appears to have been influenced by the fact that there was no conclusive evidence to show that defendant 2 had expressly agreed to take a third share only in the properties and in the profits of the business and that being so, he must be held to have possessed an equal share with Yusuf. After giving our best consideration to the point we find ourselves unable to accept the conclusion of the learned Judge as correct.

4. As we have already indicated, the Subordinate Judge has refused to accept the evidence of defendant 2 that he was entitled to a half share in the business from its very commencement. Indeed, there is every reason to think that it was Yusuf the eldest of the three brothers who was the founder of the business and who marketed the beedies manufactured by him under the trade mark ' Turkey Topee '. There is nothing in his claiming and being given a larger share, namely, a half as against a quarter of each of his two younger brothers. The explanation of defendant 2 that the shares mentioned in the release deed were a mere pretext for reducing the share of defendant 3 cannot be accepted as true. If then the shares of Yusuf and defendant 2 were 2:1 in the old partnership, we find it difficult to accept the case of defendant 2 that there was a change and that the shares in the subsequent business were to be equal. There is no special agreement proved between the partners regarding the alleged change of shares, nor is there any reason adduced for holding that there was any material change of circumstances leading to the inference that a change of shares was intended or agreed. The interest of Yusuf in the assets embarked in the business continued to be two as before as against the one of Ismail. There is no evidence again to suggest that Ismail had since acquired or employed any special skill in the manufacture of beedies, nor is he shown to have devoted any more labour than before. It is however contended that there is an overriding presumption that where a business is carried on by partners their shares are equal, even though their capitals are unequal. That may ordinarily be so in the absence of a definition of shares in a partnership business. But here we have a business which admittedly commenced with shares unequal and this circumstances is in our opinion of material value in deciding the shares of the partners in the subsequent business carried on by them after the retirement of defendant 3. At page 424 in Lindley on Partnership (10th edition) the following statement of law occurs:

Moreover, if an agreement for inequality clearly at one time existed, no presumption of any alteration in this respect will arise from the mere fact that some of the original members have retired. In the absence of evidence to the contrary, the inference is that the shares of the retiring members have been taken by the continuing partners in the proportions in which these last were originally interested in the concern.

The learned author cites Robley v. Brooke (1827) 7 Bligh 90 in support of the proposition. In that case there were two partners Robley and Anderdon in a partnership brought into existence in 1802. The share of Robley was three-fourths and Anderdon's one-fourth. Robley had a sub-partner Brooke, who was to have a fourth share in the partnership, which was to come out of the three-fourths belonging to Robley. In other words, as between Robley and Brooke their shares were as 2:1. It was a term of the partnership that in case of the death of Anderdon his share should be divided so as to give Robley two-thirds and Brooke one-third of the whole business. In March 1804 Anderdon retired from the partnership and there was in consequence a dissolution of the firm. Anderdon was paid out of the moneys in the business two sums of 2668-12-5 and 2500, and it was agreed that all the property of the partnership should belong absolutely to Robley and Brooke. There was no specification then made as to the proportion in which they were to hold their shares or interest in the partnership assets. On the death of Robley in 1821 disputes arose between the representatives of Robley on the one hand and Brooke on the other on two points, namely, (1) their shares in the partnership, and (2) their shares in a mortgage security acquired in June 1804. These disputes were brought before the Court of Chancery in a bill filed by Brooke and a cross bill by the representatives of Robley. The Vice-chancellor (Shadwell) who tried both the causes held that the purchase of the mortgage security was a separate venture of the individual partners independent of the partnership, that they were interested in and entitled to it in equal shares, but as regards the shares of the partners, he decided that Robley was entitled to five-eighths and Brooke to three-eighths on the footing that the one-fourth share of Anderdon must be deemed to two partners notwithstanding that their shares were in proportion of 2:1. An appeal wag preferred by the representatives of Robley and it was heard by the Lord Chancellor Brougham and Lord Plunket who delivered separate but concurring judgments holding in reversal of the Vice-Chancellor's decision (1) that the acquisition of the mortgage security was a partnership transaction and not an independent venture; and (2) that the shares of the partners Robley and Brooke were 2 : l in the business carried on after the retirement of Anderdon as before. The decision on the latter point which is the only one material for the present purpose is contained in the following observations of the Lord Chancellor:

First, the whole profit and loss account is to be divided among the three partners; two shares to Mr. Robley, one share to Mr. Brooke. That was prior to Mr. Anderdon's leaving the firm. Now, looking at the transactions as they pass, who pays for Mr. Anderdon's shares? The 2500 and 2668-12s-5d. come out of the whole concern, and therefore Mr. Anderdon's share was purchased in the proportion of two-thirds and one-third, two-thirds by Mr. Robley, and one-third by Mr. Brooke. Whatever was due upon Mr. Anderdon's share, comes out of the same fund, and is borne in the same proportions. Then look at the sixth article, which provides that in the event of Mr. Anderdon dying, the whole is to be divided in these proportions of two-thirds and one-third. The event contemplated (the death of Mr. Anderdon) being provided for in this way, raises a very strong probability that in the same way an event not provided for, a causes omissus that of Mr. Anderdon retiring and not dying should be provided for in like manner, unless proof to the contrary could be shown. This consideration would be enough to throw the onus of proof on the other side, which onus has not been discharged, and without that evidence to bear me out, I must draw an inference from the facts opposed to that come to by the Vice Chancellor.

Of the two grounds on which the decision proceeded, the first one is of material importance in the present case. Emphasis is laid on the circumstance that the money required for paying off the retiring partner was provided by the partners not in equal shares but from the partnership funds which they admittedly held in the proportion of 2 : 1. This is precisely the position here. What was paid to Gaffur was undoubtedly paid out of the common assets of the partnership in which Yusuf had a half share as against the one-fourth share held by Ismail. The result of the transaction was that Gaffur's share became merged in the partnership and must be held i to have been distributed in the proportion of two-thirds and one-third. Of course, it was open to the partners to enter into a special agreement with reference to the shares in which the future business was to be carried on; but no such agreement has been proved. In support of the contention that the shares of Yusuf and Ismail were equal in the business that was carried on after 3rd December 1927, the respondent's learned advocate has relied upon two documents, namely, Ex. l-A and Ex. R. Exhibit l-A is the written statement filed by defendant l, the mother of the plaintiffs, in O.S. No. 15 of 1928 instituted by Ismail for setting aside the deed of release Ex. A executed by Gaffur on 22nd January 1925. Defendant 2 and the heirs of Yusuf were made party defendants to the suit and they all filed a common written statement in which the widow of Yusuf, defendant l in the present suit as guardian of her minor children, the present plaintiffs, stated that in the business carried on subsequent to the deed of release Yusuf Baig had a half share and Ismail a similar half share. We are not satisfied that this statement was consciously made by her with a knowledge of its implications. She was a pardanashin and it is probable that she was acting under the instructions of Ismail himself at the time. However that may be, her admission cannot bind the present plaintiffs. Exhibit R is a razinama petition on which the compromise decree of 11th October 1935 was passed. This will be referred in some detail later. The only plaintiff who had attained majority at the time was plaintiff l, the other plaintiffs being minors. Remembering that plaintiff 1 could have had no knowledge of the true state of affairs, we are not disposed to attach any value to the admission contained in Ex. R. more especially as he might have been induced to join it and agreed to the shares as fixed therein by what has been previously stated in Ex. l-A. In these circumstances no importance can be attached to these documents. The judgment of the learned Subordinate Judge shows that he is not prepared to place any great value upon these documents independently considered. On the whole we are of opinion that the share of Yusuf in the business continued after the retirement of Gaffur has not been proved to be different from what it was before, that is to say, his share was two as against one of Ismail.

4. The next point pressed by the appellant is that the learned Subordinate Judge erred in declining to recognise the right of the heirs of Yusuf to a share in the value of the goodwill and the 'Turkey Topee' a mark under which the beedies had been manufactured and sold. It is proved that after the death of Yusuf, Ismail continued the business in the same place, with the same assets, and with the old constituents. The old mark, namely, 'Turkey Topee' mark was also used both on the beedies and the wrappers manufactured and sold by Ismail but with this difference; whereas in the old business and in the trade mark, the names of both the partners, Yusuf and Ismail, appeared, in the business carried on by the latter the name of Yusuf was dropped out. The business itself was conducted in the name of Ismail alone.

5. Though the term 'goodwill' can hardly be said to have any precise signification, there can be no doubt, as stated by Lindley, that:

It is generally used to denote the benefit arising from connexion and reputation; and its value is what can be got for the chance of being able to keep that connexion and improve it. Upon the sale of an established business its goodwill may have a marketable value, whether the business is that of a professional man or of any, other person, but whether or not the goodwill has a saleable value is a question of fact to be determined in each case. But it is plain that goodwill has no meaning except in connexion with a continuing business; it may have no value except in connexion with a particular house, and may be so inseparably connected with it as to pass with it under a will or deed without being specially mentoned. (Lindley on Partnership, Edn. 10, page 523).

6. On the principle just mentioned we have little doubt that the partnership in question had a goodwill and possessed a saleable value as an asset of the partnership, Nor is there any doubt that Ismail managed to obtain the benefit of that goodwill for the business that he carried on after the death of Yusuf. By the decree passed by the Subordinate Judge the plaintiffs have been given a share in the profits and properties acquired out of the business carried on by Ismail using the goodwill and the Topee mark of the old partnership. The only question is whether the heirs of Yusuf are now entitled to demand the sale of the goodwill and the 'Turkey Topee' mark inseparably connected with it. Whatever the ancient view might have been, it is now settled that the goodwill of a business is an asset like any other asset and the representatives of a deceased partner are entitled to a share in it. Indeed as Romer J. points out in David and Mathews In re (1899) 1 ch. 378, the goodwill of the business would be an asset, and might well be the most valuable asset of the partnership and the executors of a deceased partner in the absence of a special provision in the partnership contract would be entitled to require that the goodwill be sold together with the other assets for the purposes of division between the executors and the surviving partner. If action be taken in time, the surviving partner could be restrained by an injunction from appropriating the goodwill or in any way rendering it less valuable. In the case cited it is clearly laid down that:

If, then, it is not permissible for a surviving partner to appropriate to himself the goodwill of the partnership business, it follows that he ought not to do so, and in case of necessity would be restrained by the Court, pending a sale of the goodwill for the benefit of the partnership, from doing any act in excess of his rights which if not stopped, would enable him to obtain the goodwill or any part of it.

In the present case it is abundantly clear that the goodwill has been fully appropriated by Ismail with all the advantages flowing from the old business connexions and the 'Turkey Topee' mark. It is therefore impracticable to direct a sale of the goodwill which has now ceased to exist after all these years. So far as the trade mark is concerned, it is inseparably connected with the goodwill and cannot be assigned to or apportioned among the persons who are not entitled to the business concerned in the goods for which it has been used. It may be that the 'Turkey Topee' trade mark has a saleable value on account of the reputation it has in the market, but it cannot be sold independently of the business. That being so, the only way to do justice between the parties is to direct a valuation of the trade mark to be made by a Commissioner appointed for the purpose and give to the heirs of Yusuf their shares in the value to be arrived at. The value to be ascertained is the value as at present. A direction to this effect shall be inserted in the decree. It is, of course, to be understood that Ismail is entitled to carry on the business in his own name with the right of using the 'Turkey Topee' mark in the business.

7. It only remains to consider the objection of respondent 2 Ismail's advocate that the decree of the Court below should not be disturbed except in so far as defendant 3 Gaffur is concerned. To appreciate the point, it is necessary to refer to a few facts. There was a compromise of the suit as between all the parties except Ismail and a petition I.A. No. 1555 of 1935 was filed for a decree being passed in terms of the compromise. On 11th October 1935 the Subordinate Judge decreed the suit in terms of the compromise so far as the parties thereto were concerned and as against Ismail defendant 3 who did not join the compromise the Court proceeded ex parte and as the plaintiffs were willing to have a decree against him in terms of the compromise, a decree in those terms was passed against him as well. On 9th November 1985 defendant 3 applied to the Court for having the ex parte decree set aside and an order as prayed was made on 13th February 1937. The question is as to whether the entire decree so far as the other parties to the compromise was set aside by the order or only so much of it as was against defendant 3. Looking at the language of the order, it seems to us that the intention of the Court was to set aside the decree as a whole which it has undoubtedly the power to do. Not only is there nothing in the decree to indicate that it was set aside only as against defendant 3, but, as the learned Subordinate Judge points out, the share of defendant 3 cannot be determined unless the share of Yusuf is clearly settled which again cannot be done unless the suit as a whole is reopened. The terms of the compromise also show that the arrangements made by it proceeded on the footing that all the heirs including defendant 3 who had purchased the shares of Yusuf's parents were to be bound and have their rights governed by the compromise. In other words, it was the substratum of the compromise that defendant 3 should be equally bound by it and it cannot in its nature be set aside as against him without being set aside against the actual parties to the compromise. In the result the decree of the Court below should be modified in the manner indicated above. Appellants l, 4 and 5 are entitled to their costs throughout from respondent 2.

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