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T. Pr. Sm. Somasundaram Chettiar Vs. V. Rm. Sevugan Chettiar and anr. - Court Judgment

LegalCrystal Citation
SubjectContract
CourtChennai
Decided On
Reported inAIR1940Mad505
AppellantT. Pr. Sm. Somasundaram Chettiar
RespondentV. Rm. Sevugan Chettiar and anr.
Excerpt:
- .....by a notice ex. a, dated 27th may 1927.2. in pursuance of the direction given in the preliminary decree accounts were taken by a commissioner and after deciding some of the objections raised in connexion with the commissioner's report the lower court has passed a decree directing defendant 1 to pay into court a sum of rs. 41,532-4-6 with further interest and directing the said sum to be disbursed in the manner provided for in the later clauses in the decree. it is against this decree that defendant 1 has appealed. though a number of items in the account were objected to in the memorandum of appeal, only two points have been pressed before us. respondent 2 who was defendant 2 has filed a memorandum of objections taking exception to the lower court's decision as regards one of the items.....
Judgment:

1. This is an appeal by defendant 1 against the final decree in a suit for the taking of the accounts of a partnership business carried on in Mandalay under the V. B.M. Vilasam in which the parties to the suit were partners. The plaintiff and defendant 2 are the sons of one Ramanathan Chetti and both of them together are entitled to a half share in the profits of the business. Defendant 1 is Ramanath's sister's son and had also married Ramanatha's wife's sister. He was entitled to the other half share of the profits. But it is admitted that Ramanatha alone contributed capital to the business and that Ramanatha was entitled to take interest in respect of that capital. The firm was dissolved by a notice Ex. A, dated 27th May 1927.

2. In pursuance of the direction given in the preliminary decree accounts were taken by a commissioner and after deciding some of the objections raised in connexion with the commissioner's report the lower Court has passed a decree directing defendant 1 to pay into Court a sum of Rs. 41,532-4-6 with further interest and directing the said sum to be disbursed in the manner provided for in the later clauses in the decree. It is against this decree that defendant 1 has appealed. Though a number of items in the account were objected to in the memorandum of appeal, only two points have been pressed before us. Respondent 2 who was defendant 2 has filed a memorandum of objections taking exception to the lower Court's decision as regards one of the items in dispute between the parties. (After discussing the facts of the case, their Lordships proceeded.) The only other point argued in the appeal relates to the calculation of interest, in taking the accounts between the parties.

3. Mr. Krishnaswami Iyer contends that in respect of capital contributed by Ramanatha he would have been entitled to interest only if and when profits had been made and in any event only up to the date of the dissolution of the partnership and that the lower Court was not justified in crediting the respondents with interest on this capital amount throughout the accounting period. This question has not been dealt with in the lower Court and we gather from an order of the lower Court dated 27th February 1933 that when the question was brought forward before the learned Subordinate Judge before he had delivered the judgment, he dismissed it on the ground that the petition raising it was premature. This order is scarcely intelligible. But we see no objection to deal with the question on its merits now. Mr. Krishnaswami Iyer seems to us to be right in both his contentions on this question of interest. As observed in Lindley on Partnership, at p. 465 of Edn. 10, the right to interest on capital contributed by one of the partners even when there is a stipulation for payment of such interest ordinarily ceases at the date of dissolution and in the taking of accounts between the parties no interest under this head should be allowed in respondent's favour after 27th May 1927. We also agree with him that interest on capital is payable only out of profits. We are informed by him that according to the commissioner's report there has been only a loss and no profits throughout the account taking period. This is not conceded by the other side and as the question has not been examined by the lower Court, we are not able to come to one conclusion or the other, on the materials now before us. We can therefore only indicate the principle and send the case back to the lower Court for determination of this question.

4. Mr. Ramaswami Iyer on behalf of the respondents contended that the admission contained in Somasundara's notice Ex. A is wide enough to cover an agreement to pay interest whether profits were made or not. That does not seem to us to be a correct reading of Ex. A. The words used are that Ramanatha was entitled to take interest. This naturally suggests that he was to take it out of the gross income, i.e., as a deduction from the gross income before profits divisible between the partners could be ascertained. It seems to us only reason, able that when the non-contributing partner is not to be personally liable for the capital contributed by the other partner in the event of loss, he equally could not be liable for interest on such capital in the event of loss. It is only out of the profits, if any, of the business that the capital contributing partner could be expected to take his stipulated interest. This seems to be the principle adopted by the Indian Legislature in Section 13(c) of the Indian Partnership Act and by Parliament in Section 24, Clause 4 of the English Partnership Act. The law may recognise an exception to this rule where the contract expressly provides for payment of interest regardless of profits but as already stated we are unable to read Ex. A as evidencing any such express contract and there is no other evidence in favour of any such express contract. To this extent the appeal is allowed; as the parties are not able to agree upon the necessary alterations in the figures, the case must go back to the lower Court for revising the accounts in the light of the above directions as regards the calculation of interest. In other respects the decree of the lower Court is confirmed. There will be no order as to costs in the memorandum of objections. In the appeal the appellant will pay the respondents' costs - one set only.


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