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T. Kr. Ct. Chidambaram Chetty and ors. and K.A. Ct. Chidambaram Chetty Vs. V.R. Kr. Karuthan Chetty and ors. - Court Judgment

LegalCrystal Citation
CourtChennai
Decided On
Judge
Reported in34Ind.Cas.543
AppellantT. Kr. Ct. Chidambaram Chetty and ors. and K.A. Ct. Chidambaram Chetty
RespondentV.R. Kr. Karuthan Chetty and ors.
Cases ReferredHarrison v. Delhi and London Bank
Excerpt:
partnership - sub-partners, rights of--dissolution of partnership, suit for--sub-partners, whether necessary parties--civil procedure code (act v of 1908), order i, rule 3--contract act (ix of 1872)--partnership act (1890) (53 & 54 vic. c. 39), section 31. - - 3. it is urged next that the 8th to 10th defendants were either necessary or proper parties because multiplication of proceedings would be avoided, if the 1st plaintiff's rights or liabilities in the partnership were determined once for all in a manner which would be binding on the 8th to 10th defendants as well as on the 1st to 7th defendants, since whether or no the 8th to 10th defendants were directly-liable for any proportion of the partnership liabilities, such determination would be necessary in the adjustment between..........that they were either partners or sub-partners and that in the latter event 'after dissolving suit partnership firm accounts should be taken in the manner binding them also'. the preliminary decree passed decided that they were sub-partners and so far no objection has been taken to it. it went on, however, to direct [vide paragraphs (c)and(d)] that (1) plaintiffs, a father and his minor sons, and 1st to 7th defendants, the partners, should file accounts, and apply for the appointment of a commissioner and an account of the assets and liabilities of the firm should be taken and (2) an account should be taken as between 1st plaintiff and 8th to 10th defendants for ascertaining the amount due from the latter to the former. in appeal no. 197 of 1914 against this preliminary-decree the.....
Judgment:

Oldfield, J.

1. These appeals all raise the same question. Original Suit No. 293 of 1912 for dissolution of partnership and an account was brought against the 1st to 7th defendants as partners and against the 8th to 10th defendants on the allegation that they were either partners or sub-partners and that in the latter event 'after dissolving suit partnership firm accounts should be taken in the manner binding them also'. The preliminary decree passed decided that they were sub-partners and so far no objection has been taken to it. It went on, however, to direct [vide paragraphs (c)and(d)] that (1) plaintiffs, a father and his minor sons, and 1st to 7th defendants, the partners, should file accounts, and apply for the appointment of a Commissioner and an account of the assets and liabilities of the firm should be taken and (2) an account should be taken as between 1st plaintiff and 8th to 10th defendants for ascertaining the amount due from the latter to the former. In Appeal No. 197 of 1914 against this preliminary-decree the 8th to 10th defendants contend that the accounts of the sub-partnership should not have been dealt with in a suit relating to dissolution of the partnership. The same point is again raised with others in the remaining appeals by these defendants severally against the final decree afterwards passed, by which they were called on to contribute towards the firm's losses. The argument for the 8th to 10th defendants is shortly that, having no rights or liabilities in connection with the firm or any of its members except the 1st plaintiff, they have no concern with the taking of the account between its members and cannot be bound by it and they should, therefore, have been dismissed from the suit as soon as the decision against their position as partners was reached.

2. Treating the question first as one only of procedure, plaintiffs have contended that the frame of the suit is justified by Order I, Rule 3, of the Code of Civil Procedure, since if separate suits were brought by the 1st plaintiff against his partners and 8th to 10th defendants, the common portion of the amount of his share in the partnership would arise. But even so, the earlier portion of the rule must receive effect and it has not been shown how the right to relief alleged is in respect of or arises from the same act or transaction. What is the act or tranasaction? It is not the formation and dissolution of the sub-partnership, since they afforded no right of relief against the 1st defendant to 7th defendants; nor is it the dissolution of the partnership, since though it would entail the dissolution of the sub-partnership and confer on the plaintiffs right to relief against the 8th to 10th defendants, it had not taken place at the date of, and was in fact the object of the institution of, the suit.

3. It is urged next that the 8th to 10th defendants were either necessary or proper parties because multiplication of proceedings would be avoided, if the 1st plaintiff's rights or liabilities in the partnership were determined once for all in a manner which would be binding on the 8th to 10th defendants as well as on the 1st to 7th defendants, since whether or no the 8th to 10th defendants were directly-liable for any proportion of the partnership liabilities, such determination would be necessary in the adjustment between them and 1st plaintiff. This is not, in my opinion, sustainable. There is nothing regarding the relations between the sub-partners and partners in the Indian Contract Act. Section 31, however, of the English Partnership Act provides that the assignee of a share in a partnership is entitled 'only to receive the share of profits to which the assigning partner would otherwise be entitled, and the assignee must accept the account of profits agreed to by the partners.' The assignee is 'in case of a dissolution of the partnership...entitled to receive the share of the partnership assets to which the assigning partner is entitled as between himself and the other partners and for the purpose of ascertaining that share to an account as from the date of the dissolution.' And this may be taken as the law in India, since it is well supported by authority. In the language of the civilians, 'socii mei soctus metis socius non est' (Pothier, Partnership 391); and in Ex parte Barrow 2 Rose 252, it was held that an assignee of a share of the profits of a partner 'was no partner in that partnership; had no demand against it; had no account in it; and must be satisfied with a share of the profits given to' his assignor. See also Brown v. Be Testet (1821) Jac. 284 and Bray v. Fromont 6 Madd. 5.

4. The result is that sub-partners must ordinarily accept the account taken between the partners, but have not the right and are not subject to any duty to take part in the proceedings in which it is taken. The cases relied on by the plaintiffs do not affect this conclusion, but show only that the sub-partners are entitled in the subsequent suit for dissolution of their sub-partnership to prove that the account was taken wrongly or mala fide. Thus in Williams v. Poole 21 W.R. 252 it was no doubt, said that in any future suit relating to the assignee's rights, the account taken in the suit for dissolution of the partnership might be treated as prima facie correct, But the Court, in what was merely an obiter dictum, did not say that the previous account would be treated as absolutely correct; it referred explicitly to the assignee's right to surcharge and falsify it: and it refused to make the assignee a party to the partnership suit in which it was taken. In Watts v. Driscoll (1901) 1 Ch. 294 : 49 W.R. 146 the account between the partners was represented by a private agreement and there was no question of the taking of an account for the partnership in Court or of enabling the sub-partner to take part in any proceedings. The case assists the plaintiffs only because it recognises that the account agreed on or taken between the partners will ordinarily bind the sub-partner. It is against them inasmuch as it authorises the sub-partner to dispute such an account on the ground of mala fides. In Whetham v. Davey (1885) 30 Ch. 574 the parthership had been dissolved out of Court and it was said that, if the account was to be taken as claimed from the date of the assignment, it must in consistency go back even further. But the Court in fact declined to go back further than the dissolution and there was nothing to support the assignee's right or duty to take part in any accounting for the period prior to it. Lastly in the only Indian case cited, Harrison v. Delhi and London Bank (1882) A.W.N. 87, the Bank claiming as assignee was no doubt impleaded in proceedings for a dissolution and account. But so far as the decision was based on the Bank's obligation to account, and not on its denial of the partnership's right to the property in its possession or its allegation that its assignor, a co-defendant, could convey it on behalf of the partnership, that appears to have been on the ground that it stood in its assignor's shoes and was not merely a sub-partner or assignee from a partner. The cases, therefore, relied on by the plaintiffs in no way enable or require' sub-partners to concern themselves with the account to be taken at the dissolution of the partnership. When the law is clear it is unnecessary to consider the extent to which the lower Court's departure from it has prejudiced the 8th to 10th defendants. It may, however, be observed that the form in which its decree was framed, though appropriate as between the plaintiffs and the 1st to 7th defendants, did not recognise that the 8 th to 10th defendants had separate interests to be safeguarded. For it did not provide for their being heard when the Commissioner, who was to take the account between the plaintiffs and the 1st to 7th defendants and the 1st plaintiff and themselves, was nominated or enable them to apply for his nomination in case the plaintiffs and the 1st to 7th defendants did not do so, or give them the right to take objections to the accounts which the plaintiffs and the 1st to 7th defendants might put forward. The preliminary decree would in any case require amendment in these respects.

5. In the result, the appeals are allowed, the suit against the 8th to 10th defendants being dismissed 'with costs in both Courts and Clause (d) being expunged from the preliminary decree, the subject of Appeal No. 197 of 1914.

Srinivasa Aiyangar, J.

6. I agree and have nothing to add.


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