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Siddavarupu Ramalinga Reddy Vs. Rachaputi Ramalingam Setty and anr. - Court Judgment

LegalCrystal Citation
SubjectTrusts and Societies;Contract
CourtChennai
Decided On
Reported inAIR1938Mad929; (1938)2MLJ790
AppellantSiddavarupu Ramalinga Reddy
RespondentRachaputi Ramalingam Setty and anr.
Cases ReferredWatson and Company v. Ramchand Dutt and Section
Excerpt:
- - for one reason or another, it was not possible for some years to work this mine to the best advantage, and, in december, 1928, p. k-2) as well in his pleadings and evidence in these suits, it was the 1st defendant's case (a) that even in may, 1929, the plaintiff represented to the 1st defendant that the landlords would grant a renewal or at least an extension of the term of the first lease and it was on this understanding and by reason of that representation that the 1st defendant entered into the partnership with the plaintiff; we are not therefore satisfied that the terms of ex. 11. while we are satisfied that rami reddi did compete with the plaintiff in connection with the lease of june, 1930, it is not easy to decide what exact part the 1st defendant took in that connection. we.....varadachariar, j.1. these appeals may conveniently be dealt with together, as was done in the court below. in may, 1929, the appellant, who was the first defendant in both the suits, became a partner with the plaintiff in a mica mining business which the latter had been carrying on for some years. when the plaintiff started that business in 1924, he had two partners, namely, the second defendant, who was entitled to a four annas share and p.w. 3 who was entitled to a six annas share. the second defendant was only a working partner while plaintiff and p.w. 3 were the capitalist partners. among the lands which they took on lease for the purpose of opening mica mines in connection with that business, was a block of land obtained under ex. b for a term of five years from 7th october, 1925. on.....
Judgment:

Varadachariar, J.

1. These appeals may conveniently be dealt with together, as was done in the Court below. In May, 1929, the appellant, who was the first defendant in both the suits, became a partner with the plaintiff in a mica mining business which the latter had been carrying on for some years. When the plaintiff started that business in 1924, he had two partners, namely, the second defendant, who was entitled to a four annas share and P.W. 3 who was entitled to a six annas share. The second defendant was only a working partner while plaintiff and P.W. 3 were the capitalist partners. Among the lands which they took on lease for the purpose of opening mica mines in connection with that business, was a block of land obtained under Ex. B for a term of five years from 7th October, 1925. On a portion of the land covered by this lease, they had opened a mine which they named The Nityakalyani Mine. For one reason or another, it was not possible for some years to work this mine to the best advantage, and, in December, 1928, P.W. 3 left the concern, assigning his six annas share (by Ex. D) to the plaintiff. The parties have put forward different versions as to the reasons that led to the plaintiff and the first defendant becoming partners in 1929. It is no doubt noteworthy that under this arrangement the first defendant agreed to advance the whole capital required for the working of the mine and to repay the moneys which the plaintiff has so far invested. But we agree with the lower Court that the arrangement was not the result of any financial difficulties of the plaintiff. This question does not however seem to us to be one of much importance, except as bearing upon a suggestion of the first defendant that he accepted such an onerous obligation only because it was represented to him at the time and he was led to expect that the lease under Ex. B would be renewed or extended and that the partnership, business would be continued even for a further term. When the first defendant became a partner, the second defendant sank into the position of a person remunerated by a share of the profits, it being expressly provided in Ex. M that he should not be liable for losses.

2. On 10th June, 1930, the plaintiff obtained (under Ex. E) a fresh lease of most of the lands covered by Ex. B, for a term of 10 years commencing from the date of the termination of the lease under Ex. B. One of the principal questions for decision in the appeals is whether the defendants are entitled to claim an interest in this new lease. In August and September, 1930, the position was left hazy, each party suspecting the other and neither of them taking up a definite position. Early in October, 1930, the plaintiff sent a notice (Ex. K) to the first defendant asserting that the new lease was his own and asking him to come and settle the accounts of the partnership which according to the plaintiff was terminating on 6th October, 1930, with the termination of the lease under Ex. B. By his reply (Ex. K-2) the first defendant denied that the partnership was to come to an end on 6th October, 1930, and claimed that the lease under Ex. E should be treated as one acquired for the benefit of the partnership. As the plaintiff disputed this claim, the first defendant refused to agree to a settlement of the accounts of the partnership and on the night of 6th October, 1930, obstructed the plaintiff from working the mine by using the boiler which they had theretofore been using. The plaintiff sought the aid of the Magisterial authorities; but as they passed an emergent order restraining both parties from using the boiler or working the mine for a period of two months, the plaintiff instituted two suits on 24th November, 1930, O.S. No. 67 of 1930 (out of which A.S. No. 197 of 1935 arises) for the taking of the accounts of the partnership on the footing that it had come to an end by efflux of time on 6th October, 1930 and O.S. No. 68 of 1930 (out of which A.S. No. 310 of 1934 arises) for a declaration that the defendants were not entitled to claim any interest in the new lease-Ex. E and for an injunction restraining them from interfering with the plaintiff's working of the mine. He also claimed damages in respect of the loss sustained by reason of the 1st defendant's obstruction.

3. The 1st defendant denied that the partnership between him and the plaintiff had come to an end on 6-10-1930. He had however no objection to the Court declaring the partnership dissolved, if accounts were to be taken on the footing that the new lease also formed part of the assets of the partnership. He disputed the plaintiff's claim to damages and also contended that the amount claimed was excessive. The 2nd defendant had entered into a partnership arrangement with the plaintiff in respect of the new lease on 27th September, 1930 (Ex. J.) But, for some reason, he seems to have taken sides with the 1st defendant when the disputes between the plaintiff and the 1st defendant commenced. He accordingly filed written statements supporting the 1st defendant in his main contentions. The learned Subordinate Judge held that the partnership between the plaintiff and the defendants terminated by efflux of time on 6th October, 1930 and that the defendants were not entitled to the benefit of the new lease obtained by the plaintiff under Ex. E. He accordingly directed accounts to be taken in O.S. No. 67 of 1930 in the terms asked for by the plaintiff. In O.S. No. 68 of 1930 he gave the declaration and the injunction prayed for; he also directed the 1st defendant to pay damages to the plaintiff at the rate of Rs. 1,500 per mensem from 7th October, 1930 to 17th April, 1931, when the plaintiff was enabled to work the mine in consequence of his appointment as receiver. Against the decrees passed in the above terms, the 1st defendant has preferred these appeals.

4. The only point raised in A.S. No. 197 of 1935 is, that the Court below should have directed accounts to be taken on the footing that the lease under Ex, E formed part of the partnership assets. As this question arises for decision even in A.S. No. 310 of 1934, the decision on that point in A.S. No. 310 of 1934 will govern A.S. No. 197 of 1935 also. The learned Advocate-General, who appeared for the appellant, criticised some portions of the lower Court's judgment dealing with the defendant's version as to what happened when the partnership under Ex. M was entered into and when the new lease under Ex. E was obtained. But, as he did not seriously question the conclusions reached by the Court below on these points and as we are in substantial agreement with those conclusions, it will be sufficient to deal briefly with this part of the case.

5. In the reply notice (Ex. K-2) as well in his pleadings and evidence in these suits, it was the 1st defendant's case (a) that even in May, 1929, the plaintiff represented to the 1st defendant that the landlords would grant a renewal or at least an extension of the term of the first lease and it was on this understanding and by reason of that representation that the 1st defendant entered into the partnership with the plaintiff; (b) that sometime before the middle of 1930 there was an arrangement between the parties that in the new lease to be obtained they should have the same rights as in the old; (c) that in the matter of obtaining the new lease, the plaintiff negotiated on behalf of all the old partners; and (d) that when on the 9th June, 1930, the 1st defendant went to the lessor's house, the plaintiff sent him away saying that in connection with the new lease he would conduct himself as before and thus prevented the 1st defendant from competing for the new lease. The plaintiff denied these allegations. We agree with the Court below that on these points the plaintiff's case is substantially true.

6. It is significant that no reference is made in Ex. M to the contingency of a renewal of the lease or of the extension of its termor to any other lease being taken - and in this respect it is in marked contrast with Ex. A. There can be little doubt even on the 1st,defendant's own evidence, that if the business was to be continued after the termination of Ex. B, he expected this to be done on revised terms, especially in the matter of 'advances' (referred to by the witness as 'Pettubadi'). The 1st defendant's conduct in connection with Ex. Y is also significant. In respect of contracts of sale with the Madras Mica Company, the practice was to enter into annual contracts; but Ex. Y was expressly limited to a period of about 2 months ending with 6th October, 1930. The contemporaneous letter Ex. GG explains the reason for this course to be that the partnership was to expire on the 6th October, 1930. On the same date as Ex. Y, the plaintiff entered into another contract (Ex. Z) for sale of mica to the same company for one year commencing from 7th October, 1930 and Ex. GG states that the plaintiff and the 2nd defendant were the only two people interested in this new contract. The 1st defendant is of course not a party to Exs. Z and GG; but these documents (read with the evidence of P.W. 7) are important as showing that plaintiff never concealed his ideas or intentions in the matter and it is difficult to believe that the 1st defendant would not have become aware of them about this time. Even ignoring Exs. Z and GG, the 1st defendant is not able to explain why (consistently with his hypothesis) Ex. Y came to be limited to the period ending -with 6th October, 1930. We are not prepared to accept his story that the matter of the contract Ex. Y was not talked over between the partners beforehand and that it was only when he signed Ex. Y that he noticed the limitation of the period to 6th October, 1930. The 2nd defendant deposes that it was talked over beforehand; and though no question was put to the plaintiff on this point, we accept the statement of the 2nd defendant as according with the probabilities. It must be remembered in this connection, that the 1st defendant admits that as early as on the 11th June he became aware of the new lease having been obtained by the plaintiff. If, as he says, it was the original understanding or at least the arrangement in June, 1930, that even after 6th October, 1930, the partnership business should be continued, it is difficult to believe that the 1st defendant would have agreed to or acquiesced in the course adopted by the plaintiff in connection with Exs. Y and Z.

7. Read in the light of the above considerations, Ex. H dated 4th August, 1930, is also instructive. The first defendant refers therein to 'doubts' arising in his mind and asks the 2nd defendant whether anything has been mooted in respect of the 2nd defendant's share in the new lease. He adds.

Let things take their own course in future. Within these two months please see that as much quantity as possible is extracted.

8. This doubt and query and the further suggestion are more consistent with the hypothesis that between June and August, 1930, the 1st defendant was only expecting that the plaintiff would moot the subject of a new contract of partnership in connection with the work to be done under the new lease than with the view that he believed that he had an interest as of right or by virtue of the old partnership in the new lease or in the business to be done under it.

9. The oral evidence as to the events that happened in connection with the obtaining of the new lease is not very satisfactory and we are constrained to say that the whole truth has not been disclosed. We are not prepared to believe the 1st defendant's version as to what happened on the morning of the 9th June, in the lessors' house. We are also not prepared to believe that there was no real competition in the matter, on behalf of Rami Reddi. It is difficult to believe that Narasa Reddi and Mr. Sivaramiah (a leading Vakil) would have come to the house of the lessors on the 9th morning on behalf of Rami Reddi, if the latter had no serious proposal to make. Nor are we convinced as to the truth of the story (though it is spoken to by P.W. 6) that when the lessors went to Mr. Sivaramiah's house that afternoon, Rami Reddi who had admittedly come there had no serious proposal to make. Even if we accept Rami Reddi's version that he did not proceed further because of his fear of a dispute with the plaintiff, it is sufficient to show that Rami Reddi did compete or intended to compete up to a particular stage.

10. We are not much impressed with the argument of the learned Advocate-General that the terms of Ex. E are less onerous to the lessee than those proposed in the draft of the 7th (Ex. O) and that accordingly there could have been no competition from others between the 7th and the 10th. The amount payable is no doubt reduced from 12 thousand to 10 thousand, but unlike Ex. O, Ex. E makes the whole amount payable by 7th April, 1932 and does not give the lessee the option of throwing up the lease at the end of 5 years so as to avoid liability for one half of the rent. It must also be noted that Ex. E excludes all lands fit for cultivation and as explained by the plaintiff it is on this very ground that one of the lessors refused to complete Ex. O. We are not therefore satisfied that the terms of Ex. E are less onerous than those in Ex. O.

11. While we are satisfied that Rami Reddi did compete with the plaintiff in connection with the lease of June, 1930, it is not easy to decide what exact part the 1st defendant took in that connection. We are on the whole inclined to agree with the lower Court that the 1st defendant must have been acting with Rami Reddi and his friends. It is clear from the evidence that the 1st defendant and Rami Reddi were on very friendly terms and were jointly interested in several concerns. It is also clear that on several occasions the plaintiff had reason to suspect that the 1st defendant was siding with Rami Reddi in the disputes between the plaintiff and Rami Reddi arising out of the business of the Lakshmiprasanna Mines which Rami Reddi and the plaintiff owned in common. While it may not be that there was serious estrangement between the plaintiff and the 1st defendant on this score before the beginning of 1930, it seems reasonably certain that after April-May, 1930, the relations were not by any means so cordial as to lead the plaintiff to desire the continuance of further business relations with the 1st defendant after the termination of the existing partnership. We have already stated it as our conclusion that we are not satisfied that the plaintiff agreed to or did in fact negotiate the new lease on behalf of the 1st defendant also. If in these circumstances the 1st defendant was not merely aware of the attempts of various parties to get a new lease of what he knew to be a profitable mine but did in fact go to the lessors' house on the 9th June, it seems to us more likely that he was co-operating with Rami Reddi's party and expected the matter to be talked over in Mr. Sivaramiah's house that afternoon. Before leaving this part of the case, we may note that certain letters relied upon by the 1st defendant as bearing on some of the questions of fact above discussed were rejected by the lower Court as not reliable and the learned Advocate-General has not asked us to consider those letters.

12. Before us, the appellant's claim was mainly supported on the ground that, independently of any contract or understanding between the parties and apart from any proof of misconduct of the plaintiff or improper use of his position in connection with the procuring of the new lease, the 1st defendant was entitled to the benefit of the new lease on the principle of equity embodied in Section 88 of the Indian Trusts Act. Founding himself on an observation of Warrington, J., in Bevan v. Webb (1905) 1 Ch. 620 and on certain remarks of Lord Lindley in his treatise on the Law of Partnership, the learned Advocate-General contended that when part of the assets of a firm consists of leasehold premises one partner cannot take a new lease of those premises and then insist on keeping that for his own benefit.'

13. He also relied on the statement of the law in Halsbury's Laws of England (2nd Ed., Vol. 24, Title 'Partnership', Section 863). On the other side, it was maintained that the rule of equity was not 'absolute' in the sense contended for on behalf of the appellant, that the equities depended on the facts and circumstances of each case and that a person claiming such equities must (in the terms of Section 88 of the Trusts Act) show either that one of the partners has 'availed himself of his character' to gain an advantage or that the partner has gained an advantage of entering into a transaction in which 'his own interests are or may be adverse' to those of the other partners. The learned Counsel for the plaintiff contended that properly understood, the English authorities are not at variance with the rule embodied in Section 88 - which leaves the question to be decided on the circumstances of each case; but he added that even if they should be found to lay down a stricter rule, this Court has only to apply the law as laid down-in the Indian Trusts Act Hasanali v. Esmailji : (1907)9BOMLR606 .

14. It may be conceded that as regards renewals obtained by 'trustees', the principle of equity in favour of the cestui que trust was laid down in unqualified terms in Keech v. Sandford (Wh. & Tud. leading cases) and the rule has ever since been adhered to. It is also true that in some of the authorities dealing with partners, the equity in favour of coparceners is considered to rest on an extension of the principle of Keech v. Sandford, and it has been sometime stated in unqualified terms. But in view of the fuller discussion of the question by the Court of Appeal in In re Biss : Biss v. Biss (1903) 2 Ch. 40 and by Parker, J. (as he then was) in Griffith v. Owen (1907) 1 Ch. 195 it does not seem to us right to take observations in any single case as an exhaustive statement of the rule or divorce such observations from the circumstances of the particular case. In Clegg v. Edmondson (1857) 8 De G.M. & G. 787 : 44 E.R. 593 which Lord Lindley regards as important in that it shows that the equity is not confined to cases where the partner acts clandestinely, Turner, L.J., observed that the authorities do not warrant the position

that in no case can a partner during the continuance of a partnership contract for a new lease to be granted to himself, of property which is in lease to the partnership, without the new lease being held to be subject to trusts for the benefit of the partnership.

15. The learned Lord Justice added:

In order to give validity to such a transaction all the parties ought to be placed upon an equal footing.

16. Note also the observation of Sir William Grant in Featherstonhaugh v. Fenwick (1810) 17 Ves. Jun. 298 : 34 E.R. 115 on the renewing partners placing the other partner 'on equal terms with them'). This way of stating the rule was evidently due to the fact that Turner, L.J., took the principle of the decision in such cases to be 'the confidence which subsists between partners' and Sir William Grant laid stress on the unfair advantage which any other view would give to the partner who had obtained the renewal.

17. But another principle of decision which has been emphasised in some cases is that one put by Knight Bruce, L.J., in the course of the argument in Clegg v. Edmondson (1897) 8 De G.M. & G. 787 : 44 E.R. 593 in the following words:

Does not the application of the rule depend on this--who were entitled to the interests the existence of which gave facilities for obtaining a new lease.

18. In the application of this latter principle, something amounting to a presumption of law seems to have grown up in England - at first applied to cases where the lease was renewable by contract or custom but later extended even to leases not so renewable - that the renewal was obtained only because of the old lease. This conception was in Rakestraw v. Brewer (1728) 2 P.Wms. 511 : 24 E.R. 839 embodied in the phrase as to 'coming from the-same root.' In Clegg v. Fishwick (1849) 1 Madc. & G. 294 : 41 E.R. 1278 the Lord Chancellor observed:

The old lease was the foundation of the new lease, the tenant-right of renewal arising out of the old lease giving the partners the benefit of this new lease; at least the law assumes it to be so.

(The italics are ours).

19. In Clements v. Hall (1857) 2 De G & J. 173 : 44 E.R. 954 Turner, L.J., himself referred to the renewed interest becoming subject to the quasi-trust because the quasi-trust attaching to the possession of the surviving partner 'draws with it the benefit resulting from the possession' held by the surviving partner. In In re Biss : Biss v. Biss (1903) 2 Ch. 40 Collins, M.R., stated the foundation of some of these cases to be the theory that

A renewal must be looked on as an accretion to or graft upon the original term arising out of the goodwill or quasi-tenant right annexed thereto.

20. How this presumption or theory came to be applied even to cases where the original lease itself gave no right to renewal (by contract or custom) is explained in Ashburner's Principles of Equity (2nd Edition, p. 309). Adverting to the former custom among large landholders or ecclesiastical bodies, the learned author observes:

The owners of such a lease had no legal claim to a renewal but they had a hope, or expectation of it, derived from and based upon their ownership of the original lease

and it is added in the foot-note that 'this hope or expectation was sometimes described as a tenant-right' {see the distinction between college leases and private leases adverted to by Warrington, J., in Bevan v. Webb (1905) 1 Ch. 620 . The distinction made in the English cases see Bevan v. Webb (1905) 1 Ch. 620 between 'renewals' and 'purchases of the reversion' shows that it is not merely the 'incapacity' arising from fiduciary position but also I the presumption above referred to that accounts for the terms in which the rule as to renewals obtained by one of the partners has been stated in most of the English cases. See observation of Romer, L.J., and argument of Counsel in In re Biss : Biss v. Biss (1903) 2 Ch. 40 .

21. The question was discussed at some length before the Court of Appeal in In re Biss : Biss v. Biss (1903) 2 Ch. 40 in connection with the claim of certain tenants in common (including an infant) to a renewal obtained by another tenant in common. Collins, M.R., divided the cases into those where

the presumption of personal incapacity to retain the benefit is one of law and cannot be rebutted.

and those which rest on the presumption that:

A renewal must be looked on as an accretion to or graft upon the original term arising out of the goodwill or quasi-tenant right annexed thereto.

22. Referring to mortgagees, joint tenants and partners, the Master of the Rolls observed that in their case 'there is no presumption of law but at most a rebuttable presumption of fact' and he referred with evident approval to Nesbitt v. Tredennick (1808) 12 R.R. 1 - a mortgagee's case - where Lord Manners held that there was no basis for the presumption or in any event it was rebutted. On p. 58, he added that where a person is not

under a personal incapacity to take a benefit, he is entitled to show that the renewal was not in fact an accretion to the original term.

23. Romer, L.J., referred (on p. 60) to 'dicta of judges' and 'statements in text-books' which might lead to the

supposition that if any person only partly interested in an old lease obtains from the lessor a renewal he must be held a constructive trustee of the new lease.

and added that 'the authorities when examined carefully do not support any such general proposition'. He groups in different categories, the cases where the renewal has been held to be in trust for others, and refers in particular to the instances where on grounds of 'public policy' the person obtaining the renewal is not allowed to rebut the presumption that in obtaining the renewal he acted in the interests of all persons interested in the old lease. Where the person obtaining the renewal has not clearly occupied a fiduciary position, the learned Lord justice stated the result of the authorities to be

that a person renewing is only held to be a constructive trustee of the renewed lease, if in respect of the old lease he occupied some special position and owed by virtue of that position a duty towards the other persons interested.

24. Dealing with partners, he observed (on p. 61) that a partner

clearly owes a duty to his co-partners not to acquire any special advantage over them by reason of his position.

and if by virtue of his position a partner obtained a renewed lease 'he will be held to have acquired it on behalf of all the partners'. Romer, L.J., then goes on to quote (without disapproval) the observations of Turner, L.J. in Clegg v. Edmondson (1857) 8 De G.M. & G. 787 : 44 E.R. 593 (already extracted).

25. In Griffith v. Owen (1907) 1 Ch. 195 Parker, J. (as he then was) clarified the position under the K English authorities. 'The principle of Keech v. Sandford,' he observed:

depends partly on the nature of leasehold property and partly on some fiduciary relationship or duty existing on the part of the person whom it is sought to declare a trustee towards the persons who seek to have the trust declared.

26. As regards the 'personal incapacity' of the person obtaining the renewal to keep the benefit for himself, he distinguished between the cases where he is allowed and those in which he is not allowed

to show that in spite of the nature of the property, there is in the particular circumstances nothing inequitable in his claiming the renewed lease for his own benefit.

27. After referring to the judgment of Collins, M.R. in In re Biss : Biss v. Biss (1903) 2 Ch. 40 the learned Judge added that

when once the fiduciary relationship or duty is established on the part of the person obtaining the renewal, the onus of proving that there is nothing inequitable in his claiming to retain the benefit for himself rests with him.

28. The implication of this judgment clearly is that except in the case of trustees, there is no irrebuttable presumption in support of the equity Babani Soiroo v. Dulba Govind : AIR1932Bom240 . It only remains to refer to Trimble v. Goldberg (1906) A.C. 494 as establishing that the equity arising from the fiduciary obligation or duty, subsisting between partners cannot be extended to cover every transaction entered into by one of them merely on the ground that there is some connection between the partnership and the transaction complained of; it must be shown that the transaction was 'within the scope of the partnership' or

part of the business of the partnership or an undertaking in rivalry with the partnership or indeed connected with it in any proper sense.

29. On a review of the relevant English authorities it seems to us that the. Statute law in India has not substantially deviated from the rules of the English law, though here and there some slight differences may result from the way in which particular cases have been dealt with in the Indian enactments. It will be noticed that some cases of constructive trusts have been provided for in Section 88 while other cases have been dealt with in Section 90 of the Trusts Act. While acquisitions by mortgagees have generally been dealt with in Section 90 of the Trusts Act, one special class of acquisitions, namely, renewals of leases by mortgagees has been provided for in Section 64 of the Transfer of Property Act, which gives the mortgagor the benefit of the new lease 'in the absence of a contract by him to the contrary'. (See also illustration (d) to Section 3 of the Specific Relief Act.) As regards renewals obtained by a tenant'for life', illustration (a) toS. 90 of the Trusts Act provides in unqualified terms that the person so renewing 'holds the renewed lease for the benefit of all those interested in the old lease'. It is not clear whether it was the deliberate policy of the Legislature to enact an 'irrebuttable' presumption or rule of law in the case of tenants for life; if it was, it must be attributed to the adoption of the special principle stated in In re Biss : Biss v. Biss (1903) 2 Ch. 40 that tenants for life 'can take only what the will or settlement under which they make title gives them... and that their rights to such accretion are those which they have in the term and no greater and terminate with their life'. In the case of partners, the Indian Legislature has nowhere indicated an intention to enact an absolute rule of law or an irrebuttable presumption in respect of renewals obtained by one of them. It is not without significance that illustrations (d) and (e) to Section 88 refer only to cases where the partner uses funds belonging to the partnership or clandestinely stipulates for a personal benefit in a transaction negotiated by him on behalf of himself and his co-partners. Similarly, illustrations (a) and (b) to Section 258 of the Contract Act only referred to cases in which the partner acted without the knowledge of his co-partners or obtained a secret commission. It may be, as observed in Lindley on Partnership, that the clandestine character of the transaction was 'not an essential feature' of the decisions in Featherstonhaugh v. Fenwick (1810) 17 Ves. Jun. 298 : 34 E.R. 115 and Clegg v. Fishwick (1849) 1 Mac. & G. 294 : 41 E.R. 1278, but as pointed out in Nagendrabala Dasi v. Dinanath Mahish the circumstance of concealment is material as leading to the inference that the partner was 'taking advantage' of his position. Even the Indian partnership Act of 1932 has not enacted or adopted any irrebuttable presumption in respect of renewals of leases by a co-partner. The decisions of the Judicial Committee in Raja Kishendatt Ram v. Raja Mumtaz Ali Khan (before the Trusts Act) and in Sorabjee v. Dwarkadas Ranchhoddas (1932) 63 M.L.J. 116 : L.R. 59 IndAp 366 (P.C.) show that except in cases otherwise specially provided for by statute, a constructive trust can be held to arise only if the conditions of Section 88 or 90 of the Trusts Act are satisfied.

30. Dealing with the first part of Section 88, the learned Advocate-General argued that in applying it to cases of renewals of leases, we must in the light of the English authorities at least raise a presumption that in obtaining the renewal the partner 'availed himself of his character' or of the advantage of the old lease. It is difficult to say that in the circumstances existing in this country, a general presumption to the above effect will be justified in cases where the lease is not renewable by contract or custom. We do not however pause to consider this point further because the facts in the present case are sufficient to rebut such presumption if any. The evidence shows that far from imagining that the old lease gave the plaintiff any particular claim for a renewal, the landlords started negotiations with one Venkatakrishnayya for a new lease. Even after the plaintiff approached them for a new lease, they had no hesitation in entertaining Rami Reddi's offer to negotiate for a lease for himself. Though we have no satisfactory evidence as to the terms offered by the competitors or as to* the reason for their failure to secure the lease, the evidence establishes that it is not any consideration arising out of the old lease that enabled the plaintiff to obtain a new lease. The plaintiff asserts and P.W. 6 admits that the plaintiff asked for the new lease for himself and was given the same accordingly. The negotiations were carried on by the plaintiff openly and no advantage was clandestinely obtained. The learned Advocate-General suggested that the plaintiff must be regarded as the 'managing partner' and the observations in Clegg v. Edmondson (1857) 8 De G.M. & G. 787 : 44 E.R. 593 as to the position of a managing partner should be held applicable here. This suggestion is opposed to the provision in Ex. M vesting the management jointly in the plaintiff and the first defendant; and there is nothing in the evidence to suggest that the plaintiff took a more prominent or important part than the first defendant in the management of the affairs of the partnership.

31. An attempt was made to argue that the admitted user for the new patta (obtained by the plaintiff from Government on 13th July, 1930) of the deposit of Rs. 500 which had been made under the former lease amounted to the plaintiff availing himself of the advantage of his old position. This seems to us an unsubstantial or far fetched argument. For one thing, such user in July 1930 cannot affect the character of new lease obtained in June. The former deposit was made long before the first defendant became a partner. It is true that this sum is included in the amount of Rs. 20,862-8-1 mentioned in Ex. M but there is no reason to suppose that it forms part of the Rs. 6,645-4-7 agreed to be advanced by the first defendant under Ex. M rather than of the sum of Rs. 14,217-3-6 which the parties expected the plaintiff to receive from the sale proceeds of stock already consigned. According to the terms of Ex. M, the 1st defendant must be held to have advanced the sum of Rs. 6,000 and odd under the arrangement that it was to be treated as his 'capital' for the Nityakalyani mine and he cannot say that the particular sum of Rs. 500 deposited with the Government long before he became a partner was an amount in which he had an interest. In this view, it is unnecessary to consider whether the last entry in Ex. R whereby the plaintiff 'debited' himself with the sum of Rs. 500 was properly or improperly made.

32. In the alternative, the learned Advocate-General contended that this case fell under the 2nd part of Section 88 and the plaintiff entered into the new lease in 'circumstances in which his interests are or may be adverse' to those of his co-partner the 1st defendant. In this connection there was some discussion as to the 'scope' of the partnership under Ex. M as Mr. Srinivasa Aiyangar relied on Trimble v. Goldberg (1906) A.C. 494 as indicating the test to be applied in determining whether in obtaining the renewal the plaintiff adopted a course in which his duty and his interest came into conflict. In the lower Court, the question was dealt with as one relating to the duration of the partnership (see issue No. 3 in O.S. 67) and the learned Judge held it 'to be likely that the parties intended that the partnership should continue so long as the lease (under Ex. B) endures.' Even looking at the question as one relating to the 'scope' of the partnership, we think the same must be the answer. Ex. M specifically refers to the old lease and nowhere refers to new leases being taken (unlike Ex. A). The provision about the 1st defendant making all the advances required is certainly onerous and one-sided and is more intelligible on the hypothesis that the parties contemplated the arrangement to be a short and temporary one. The 1st defendant's evidence clearly implies that in the new arrangement which he expected to be come to between himself and the plaintiff this clause about pettubadi required revision. The case is more analogous to what are referred to as partnerships in particular ventures than to an indefinite partnership for a general business which is sought to be limited merely on the ground that the premises where the business was to be carried on had been taken on lease for a particular period of time. In this view, we see nothing to suggest that in the matter of the new lease, the plaintiff placed himself in a position of conflict of duty and interest. In the case of a partnership at will or for an indefinite term, it is possible to conceive of such a conflict as a partner may be tempted to give notice of dissolution with the very object of retaining for himself the benefit of a new lease which he hoped to or was trying to obtain see Neilson v. Mossend Iron Co (1886) 11 A.C. 298 . That is not the position here. It must be added that the evidence in this case establishes that the plaintiff and the 1st defendant and other businessmen engaged in mica mining in the locality were in the habit of being interested in competing concerns even while they were partners in one concern or another; as this course must be deemed to have been followed with the knowledge and consent of each other, it cannot be suggested that the mere fact of the plaintiff obtaining a new lease before the partnership under Ex. M has come to an end was itself a breach of his duty as partner. Nor can it be said that in omitting to take the 1st defendant as a partner in the hew lease the plaintiff acted unfairly towards him, when it is remembered that by that time the relations between the parties had ceased to be cordial and they had lost confidence in each other. When it is remembered that even prior to June 1930 the plaintiff had had occasions to feel that the 1st defendant was taking sides with Rami Reddi, he cannot be criticised for cutting himself away from the 1st defendant when the latter's conduct during the negotiations leading up to the new lease was calculated - as it certainly was - to lead the plaintiff to think that the 1st defendant had definitely thrown in his lot with Rami Reddi.

33. We accordingly agree with the lower Court that the 1st defendant is not entitled to claim an interest in the new lease under Ex. E or to insist that it should be treated as part of the assets of the old partnership. The 2nd defendant has not appealed against the decree of the lower Court; it is unnecessary to deal with his case separately. As desired by Mr. Duraiswami Aiyar we wish to make it clear that this litigation is not concerned with the rights of the 2nd defendant under Ex. J and this judgment does not therefore deal with those rights or with the plaintiff's contentions in respect of them. The lower Court has given an additional reason (in para. 27 of its judgment) for holding against the 1st defendant, namely, that he did not assert any claim to the new lease till 6th October, 1930 and that the principle of the decision in Clegg v. Edmondson (1857) 8 De. G.M. & 787 : 44 E.R. 593 accordingly applied. We think it right to say that if on the general question we had come to a conclusion in the first defendant's favour, we should have hesitated to concur in the finding that the 1st defendant had lost his rights by his laches. The new lease was to come Into effect only on 7th October, 1930 and the appellant who asserted his right even before that date cannot be said to have waited with a view to see whether the new venture turned out to be profitable or not.

34. It only remains to note a contention based by Mr. Srinivasa Aiyangar on the non-registration of Ex. M. He argued that by reason of the non-registration of Ex. M, the old lease never became the property of the partnership consisting of the plaintiff and the 1st defendant and that no constructive trust can attach to the new lease except when the former lease was shown to be the 'property' of the firm, In the view we have taken on the main question, it is unnecessary to express any opinion on this contention or examine the answers urged by the learned Advocate-General on the strength of the admissions in the pleadings and the theory of part-performance.

35. With reference to the claim for damages in O.S. No. 68, it was contended on behalf of the appellant (i) that the plaintiff was not entitled to any damages; (ii) that the amount awarded was excessive; and (iii) that in any event no damages ought to have been awarded except for the period of two months during which the plaintiff was prevented from working the mine by reason of the magisterial order passed in consequence of the appellant's obstruction. In support of the 1st contention it was urged that the 1st defendant did not prevent the working of the mine but only the working of the boiler and this he was entitled to do, as the boiler was the common property of the partners. There is not much substance in this contention. It is not disputed that the obstruction caused by the 1st defendant to the working of the boiler effectually prevented the working of the mine and it has not been suggested that within the period in question, it would have been possible for the plaintiff to have made other arrangements for the proper working of the mine. As regards the claim of common ownership of the boiler, Mr. Srinivasa Aiyangar reiterated his answer that on account of the non-registration of Ex. M the boiler which originally belonged to the plaintiff did not become the property of the partnership, because as a 'fixture' its transfer must be held to be governed by the rules applicable to the transfer of 'immovable property'. As we are of opinion that even on the assumption of common ownership of the boiler, the 1st defendant's conduct was not justified, we do not think it necessary to deal with this argument of Mr. Srinivasa Aiyangar. It is no doubt recognised in Section 53 of the Partnership Act that even after dissolution, any partner may restrain any other partner from using any of the property of the firm for his own benefit until the affairs of the firm have been completely wound up. Here the plaintiff invited the 1st defendant by the registered notice Ex. K (dated 2nd October) 1930, to come and settle the accounts but the 1st defendant would not agree to do so. To permit the 1st defendant in such circumstances to rely on Section 53 will amount to allowing him to take advantage of his own wrong. If he chose to take the law into his own hands he must, it seems to us, do so at his peril. But for the provision in Section 53, the plaintiff even as a common owner was entitled to use the property subject to accounting to his co-owner for his share of the profits made by the use of the common property see Watson and Company v. Ramchand Dutt and Section 37 of the Partnership Act). We accordingly hold that the obstruction caused by the 1st defendant was unlawful and entitled the plaintiff to claim damages.

36. As regards the quantum of damages, the learned Advocate-General is not right in his contention that the lower Court has ignored the fact that the mica is still in the mine. It has assessed damages only with reference to the loss of profits. The plaintiff had only a limited term under the new lease and his profits will depend on what use he is able to make of the mine within that period. If for part of that period he is prevented from working the mine, he is entitled to complain that his probable profits have been diminished to that extent. As regards the rate, we see no reason to think that the lower Court has fallen into an error. It has taken into account all the available information and the first defendant offered no evidence to the contrary in this matter. Nor do we see any reason to limit the award of damages to a period of two months, merely on the ground that the magisterial order extended only to two months. The plaintiff filed his suit within that period and though the petition for appointment of a Receiver was filed only on 16th December, 1930, the attitude taken up by the 1st defendant in connection with that petition does not suggest that he would have peacefully allowed the plaintiff to work the mine if he had attempted to do so on the expiry of the magisterial order. We do not think it was the plaintiff's duty to invite the trouble from the 1st defendant by attempting to start work on the mine before the Court authorised him to do so.

37. The plaintiff has filed a Memorandum of Objections in A.S. No. 310 of 1934, claiming a higher amount by way of damages; but this has not been pressed. In the result, the appeals and the Memorandum of Objections are dismissed. In A.S. No. 310 of 1934, the appellant will pay the 1st respondent's costs. In A.S. No. 197 of 1935 the appellant will pay the costs of printing incurred by the 1st respondent and the costs of purchasing the printed papers; otherwise in the appeal and in the Memorandum of Objections in A.S. No. 310 of 1934, there will be no order as to costs. In A.S. No. 310 of 1934, we allow to the 1st respondent a second set of fees, under the latter part of Rule 46.

38. These Appeals and Memorandum of Objections having been set down to be spoken to this day the Court made the addition noted above by an asterisk.


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