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K.V. Santhanakrishna Naidu and anr. Vs. K.S. Chellappa Aiyar - Court Judgment

LegalCrystal Citation
SubjectContract
CourtChennai
Decided On
Reported inAIR1927Mad650
AppellantK.V. Santhanakrishna Naidu and anr.
RespondentK.S. Chellappa Aiyar
Cases ReferredKrishnamachariar v. Sankara Sah A. I. R.
Excerpt:
- - it seems to be on the face of it a penal clause which was not apparently intended to be enforced but was held in terrorem over the heads of the parties so that they may not fail to carry out the terms of the contract; that being so, this suit is clearly by two partners against 3rd partner for damages for breach of certain covenants in the partnership deed, namely, his covenant that he would continue to act on we stage for three years. 76 is of a very exceptional nature and cannot in any way be said to cover the present case. this they have failed to do......the defendant were partners in a partnership concern a suit for damages alone without a suit for general accounts was not maintainable. that would be a valid plea to take, for no suit can ordinarily be maintained by one partner against the other partners for partial accounts without suing for a dissolution of partnership and for general accounts, for it will lead to unnecessary multiplicity of suits. there are no doubt some special exceptions to that general rule. the answer of the plaintiffs in this case is that they are entitled to maintain the suit because the defendant having refused to perform his part of the contract of partnership, has ceased to be a partner and therefore this suit should be looked upon not as a suit between partners but as a suit by two persons against a.....
Judgment:

Krishnan, J.

1. This is an appeal from the judgment of the learned Chief Justice of this High Court sitting on the Original Side. A suit was brought by two persons who were carrying on a dramatic company business in Madras against one Chellappier who was also a partner of theirs in that business. Of the three persons the 1st plaintiff was the manager of the business, the 2nd plaintiff and his brother, the defendant, were both of them actors. They entered into partnership for the period of three years from 1919 to 1922. One of the conditions of the partnership was that the defendant should continue as a member for the period of three years and continue to act for the company. A clause was put into the partnership deed Ex. B which runs as follows:

Should any of us three go away from our company within the period mentioned above, he shall not only lose all the rights which he may be entitled to in respect of the said company but also be liable to pay damages which may be claimed by the others.

2. The plaintiffs allege that the defendant did not present himself for performance on the stage and that he refused to carry out his term of the contract namely to continue to perform for three years and so he is liable in damages which they assess at about Rupees 57,000. Now among the various pleas raised it is sufficient to notice one as the case proceeded on that one plea alone and that is the plea raised in the 1st issue:--'Is the plaintiffs' suit as framed not maintainable?' The plea of the defendant was that as the plaintiffs and the defendant were partners in a partnership concern a suit for damages alone without a suit for general accounts was not maintainable. That would be a valid plea to take, for no suit can ordinarily be maintained by one partner against the other partners for partial accounts without suing for a dissolution of partnership and for general accounts, for it will lead to unnecessary multiplicity of suits. There are no doubt some special exceptions to that general rule. The answer of the plaintiffs in this case is that they are entitled to maintain the suit because the defendant having refused to perform his part of the contract of partnership, has ceased to be a partner and therefore this suit should be looked upon not as a suit between partners but as a suit by two persons against a stranger. This argument does not seem to be correct. In the plaint there is no allegation that the defendant ceased to be a partner. On the other hand the plaint proceeds on the footing that the defendant committed a breach of the contract and therefore has become liable in damages without saying anything about the forfeiture of the defendant's rights in the partnership business.

3. The learned vakil for the appellant contends that on the construction of the first clause of Ex. B above referred to the defendant has forfeited his rights in the company and therefore has ceased to be a partner. Such a plea has apparently advisedly not been put in the plaint itself for there are difficulties in the way of supporting that plea. In the first place there is no allegation in the plaint that the defendant separated from the plaintiffs which act is necessary for Clause 1 of Ex. B to apply. His merely staying away from acting will not amount to a separation. In the second place it is very deubtful whether the forfeiture clause can be given effect to at all. It seems to be on the face of it a penal clause which was not apparently intended to be enforced but was held in terrorem over the heads of the parties so that they may not fail to carry out the terms of the contract; to give effect to it would mean that if the defendant had acted for two years and 11 months and 29 days and did not act for one day then there should be a forfeiture of all his rights which would not have been intended by the parties. It follows therefore that we must proceed in dealing with this case as if the defendant continued as a partner. That being so, this suit is clearly by two partners against 3rd partner for damages for breach of certain covenants in the partnership deed, namely, his covenant that he would continue to act on we stage for three years. In such a case as that there is no difficulty whatever in bringing a suit for general accounts and debiting the defaulting partner with any loss that might have been incurred by his action, in the general account. Such was the case which their Lordships of the Privy Council had to deal with in Krishnamachariar v. Sankara Sah A. I. R. 1921 P. C. 91 (P. C.) But that does not justify a suit being brought for damages alone against the partner. In fact if the suit for damages alone regarding one item is allowed to be maintained, then it may be that a partner may be decreed to pay a sum of money whereas when the general accounts are taken and the whole profits ascertained payment may be due to him. It is to avoid such difficulty and to avoid multiplicity of suits it is insisted that a suit between partners should be a suit for general accounts.

4. The learned vakil for the appellant has relied upon Karri Venkata Reddi v. Kollu Narasayya [1909] 32 Mad. 76 There although there were two partners, the arrangement was that one partner was to supply the capital and the other was to manage the business and if in the course of such management he got cheques he was to hand them over to the first partner. It is because he did not so hand over one cheque that the suit was brought. In such a case as that where the payment must all go to the capitalist partner there is no difficulty in allowing a suit to be brought for one cheque, for the general account would not in any way result in favour of the managing partner. The principle stated there is:

In regard to suit by one partner against another for partial account, the general rule as applied in India is that if the account is sought in respect of a matter which though arising out of the partnership business and connected with it does not involve the taking of general accounts the Court will as a rule give the relief applied for.

5. But that is only as an exception, for the rule is that as between partners ordinarily no suit will lie except one for general account. In these circumstances we must hold that the learned Chief Justice was right in the view he took on the pleadings before him. He was asked that the suit may be converted into a suit for general accounts; but the application seems to have been made to the learned Chief Justice apparently at a very late stage and the Chief Justice refused that application in the exercise of his discretion. It is too late to allow an amendment as our interference now will surely interfere with the rights of the parties regarding the plea of limitation. I do not think it right to grant any such amendment now and in fact no application was formally made for amendment to us. In those circumstances I dismiss the appeal with costs.

Odgers, J.

6. I agree. It seems to me that in the plaint there is no allegation that this partnership has come to an end. There is certainly no prayer for dissolution or the taking of accounts. Clause 1 of of Ex. B has been strongly urged upon upon us and it is contended that the defendant by his conduct in refusing to act in this Sabha in September 1919, thereby subjected himself to the consequences of 'separating himself from the company' as set out in Clause 1 of Ex. B. I agree with the contention of the learned Advocate for the respondents that 'separating himself' means renouncing his connexion with the company as partner and that I think was never done, so that, the question merely resolves itself into whether this suit by two partners against another is maintainable in view of the general rule of law. Such a suit is not maintainable except in very special circumstances because the partners would be referred to a suit for general accounts, when all these matters would be taken into consideration and debited or credited on the one side or the other. That after all seems to be the proper and equitable way of dealing with these matters because as pointed out by my learned brother in his judgment just delivered, various inconveniences and in fact injustices might arise by the adoption of any other method. I agree with him that the case relied on by the appellant Karri Venkata Reddi v. Kallu Narsayya [1909] 32 Mad. 76 is of a very exceptional nature and cannot in any way be said to cover the present case. This seems to me to be very similar to a case dealt with by their Lordships of the Privy Council in Krishnamachariar v. Sankara Sah A. I. R. 1921 P. C. 91.

7. With regard to the application for amendment it seems to me that if we grant it at this stage we might deprive the respondent of the plea of limitation and it can hardly be said that a refusal to allow the amendment at this stage is an injustice to the appellants who must have known that the issue as to the maintainability of the suit raised in March 1923 was liable to be found against them. They however took no steps in the meanwhile to amend the plaint. Even after the judgment of the learned Chief Justice it appears that they would have been in time had they then filed a suit in a proper form for general account. This they have failed to do. I therefore think that they deserve no sympathy from us and the application for amendment at this stage must be refused. The appeal fails and is dismissed with costs.


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