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Shelat Brothers, a Partnership Firm of Partners (A) Nanalal Harilal Shelat, (B) Someshwar Harilal Shelat and anr. Vs. Nanalal Harilal Shelat, S/O Harilal Shelat - Court Judgment

LegalCrystal Citation
SubjectContract
CourtChennai High Court
Decided On
Reported in(1972)2MLJ315
AppellantShelat Brothers, a Partnership Firm of Partners (A) Nanalal Harilal Shelat, (B) Someshwar Harilal Sh
RespondentNanalal Harilal Shelat, S/O Harilal Shelat
Cases ReferredKrishnamachariar v. Sankara Sah
Excerpt:
- .....the partners to pay remuneration to the sons of the 2nd defendant, they will not be entitled to claim remuneration, and particularly at the rates claimed by them in the written statement. it is true that there is no basis for the claim of remuneration at rs. 300 and rs. 200 for each of this two sons. it is stated that the basis of such a claim was exhibit b-3, a letter said to have been written by the plaintiff to a third party wherein he states that he offered certain remuneration to the 2nd defendant as well as his sons, but that has not been agreed to at the time of the dissolution. i am inclined to place much reliance on exhibit b-3 and to hold that the sons of the 2nd defendant are entitled to be paid remuneration at the rates claimed in the written statement. but at the same.....
Judgment:

G. Ramanujam, J.

1. Defendants 1 and 2 are the appellants. The plaintiff and the second defendant were partners in a firm called Shelat Brothers, carrying on business in Park Town, Madras. The plaintiff is the elder brother of the 2nd defendant. It is not in dispute that the first defendant firm had the head office at Madras and a branch at Umrath. The accounts of the entire business were maintained at Madras and the 2nd defendant was in management of the business in Madras, while the plaintiff was in charge of the business of the branch office at Umrath, and this arrangement was from the year 1947. Even in the notice of dissolution given by the plaintiff under Exhibit B-1, dated 3rd June, 1960, he admits that he did not come to Madras for a period of 20 years. Therefore, there cannot be any dispute that the 2nd defendant was in sole management of the business at Madras for the last 20 years. It appears that the business at Umrath was not substantial and it is the firm at Madras which earned substantial profits. Disputes arose between the parties somewhere in the middle of 1960 and by a notice, dated 3rd June, 1960, the plaintiff wanted to get out of the partnership and by the actual notice of dissolution, Exhibit B-2, dated 7th July, 1960 he informed the 2nd defendant that he had ceased to be a partner from 1st July, I960. Subsequently the plaintiff filed the present suit for dissolution of partnership and for rendition of accounts by the 2nd defendant in respect of the partnership business. The 2nd defendant did not, in fact, resist the claim of the plaintiff for dissolution of partnership. As a matter of fact, by consent of parties, a preliminary decree for dissolution of the partnership and for rendition of accounts has been passed by the lower Court. But at that stage the claim put forward by the 2nd defendant for certain remuneration both for himself and for his two sons who were also associated with the firm's business at Madras, was left open for further consideration. The following issue was framed in relation to that dispute:

Whether the defendant and his sons are entitled to remuneration for the services rendered and if so for what period and what amount?

The claim put forward by the 2nd defendant that he is entitled to a remuneration of Rs. 500 per month and each of his two sons Rs. 300 and Rs. 200 respectively was resisted by the plaintiff. It is in respect of this dispute on the question of remuneration payable to the 2nd defendant and his sons, the above issue has been framed and was considered by the Courts below. The 2nd defendant put forward the plea that he is entitled to be paid a remuneration of Rs. 500 a month, and his two sons are entitled to be paid remuneration at the rate aforesaid on the basis of the letter Exhibit B-1, dated 3rd June, 1960 written by the plaintiff wherein, towards the end, he had stated as follows:

We hereby agree that it is our responsibility to consider the labour (pains) taken by you and your children at the time of the winding up of the firm.

The Courts below construed the said recital in Exhibit B-1 and held that it will constitute a mere proposal by the plaintiff and cannot be enforced as a binding agreement between the parties. In that view they straightaway proceeded to dismiss the 2nd defendant's claim for remuneration.

2. In this second appeal it is contended that the 2nd defendant's claim is not exclusively based on Exhibit B-1 alone as assumed by the Courts below and that Exhibit B-1 has been relied on only for the purpose of showing that the plaintiff at a stage anterior to the actual notice of dissolution expressed his willingness and stated that it was the responsibility of the firm to consider the pains taken by the 2nd defendant and his sons, and that the claim could be sustained on other basis as well. His claim was based on two other grounds also. It is urged by the Counsel that when one partner is exclusively in management of the partnership affairs, he is entitled to a reasonable remuneration even though the partnership agreement did not provide for such remuneration. Learned Counsel points out that the business of the firm in Madras was exclusively conducted by the 2nd defendant for the last 20 years and that for such exclusive management, which has resulted in the firm earning considerable profits, he should be reasonably remunerated in law, whether the plaintiff has agreed to it or not. So far as the claim for remuneration for his two sons is concerned, it is the case of the 2nd defendant that though they are not entitled to the remuneration, of Rs. 300 and Rs. 200 as claimed in the written statement, they are entitled to be paid a reasonable remuneration on the principle of quantum, meruit. In support of his contention that a partner can be paid a reasonable remuneration notwithstanding the fact that no such remuneration has been provided for in the agreement of partnership and in proper cases the Court is entitled to grant a reasonable remuneration, he relies on the following passage in page 110 of the Law of Partnership by Prem Nath Chadha:

But where, as is usually the case, a partner in breach of his duty wilfully leaves the others to carry on the partnership business unaided, they, it would seem, were, formerly, and perhaps still are, entitled to compensation for their services. Thus in Airey v. Borham 29 Beav. 620 partners had agreed to devote their whole time to the partnership business; they quarrelled, and one of them only afterwards attended to it; the partnership was ultimately dissolved, and an enquiry was directed for the purpose of ascertaining what allowance ought to be made to him for having carried on the business alone. (Vide Lindley, p. 422, 12th Edition).

He also refers to the decision in Krishnamachariar v. Sankara Sah 39 M.L.J. 257 : A.I.R. 1921 P.C. 91. In that case, as a result of one of the partners refusing and neglecting to perform the duties undertaken by him, the other partner sought dissolution and at the time of taking of accounts it was claimed that the services rendered by one of the other partners should be remunerated. The Court, while upholding the claim put forward by the person who was in management of the partnership affairs after the other partner refused and neglected to do his duty, stated thus:

But the claim of the plaintiffs for an account of the profits without a proper allowance being made for the fact that their services were deliberately withheld, is a claim which, cannot be maintained.

But I am not in a position to say that this decision helps the 2nd defendant to establish his case that he is entitled to be remunerated for the services rendered by him as a partner in the circumstances of this case. Here, it is not the case of the plaintiff refusing or neglecting to perform his duties as a partner. It is not in dispute that the plaintiff was attending to the affairs of the branch at Umrath and the mere fact that the plaintiff did not attend to the affairs of the business at Madras and that the 2nd defendant was in exclusive management of the same will not lead to the inference that the plaintiff either neglected or refused to undertake the duties of a partner. The learned Counsel however contends that even though the plaintiff might have done his duties as a partner, the work done by the 2nd defendant, which resulted in substantial profits to the partnership business, was quite disproportionately high compared with the work done by the plaintiff and that such work has to be reasonably remunerated by the Court Sitting as a Court of equity. But in this case there is no material to enable the Court to come to a conclusion with reference to the actual duties performed by each of the partners from which one could say that the work done by the 2nd defendant was substantially more than the work done by the plaintiff as a partner Merely because the business at Madras resulted in larger profits than the branch business at Umrath, it cannot be held that the 2nd defendant did substantially more work than the plaintiff who was in charge of the branch business. One other factor also has to be taken into account in this connection. The 2nd defendant states that he has been exclusively in charge of the business for the last 20 years. But it is only at the stage when talks of dissolution came, the claim for remuneration has been made. If really his services to the partnership were such as to entitle him to remuneration he would not have kept quiet without putting forward such a claim all the years. That fact also shows that the 2nd defendant did not expect any remuneration apart from his profits as a partner from the partnership business. Lindley on Partnership, Twelfth Edition, at page 422, states:

Even where the amount of the services rendered by the partners is exceedingly unequal, still, if there is no agreement that their services shall be remunerated, no charge in respect' of them can be allowed in taking the partnership accounts. In such a case a remuneration to be paid to either for personal labour exceeding that contributed by the other is considered as left to the honour of the other; and where that principle is wanting, a Court of justice cannot supply it.

The above passage shows that even in a case where the personal labour of one partner exceeded that contributed by the other, it has to be left to the honour of the other partner as to whether the partner who rendered more personal labour should be rewarded or not for such additional labour. There is no agreement between the partners as to how extra labour should be remunerated and it is not for the Court to imply such an agreement and supply the omission. I am therefore inclined to agree with the view taken by the Courts below that the 2nd defendant as a partner is not entitled to the remuneration of Rs. 500 per month, claimed by him either on the basis of the letter Exhibit B-1 or notice Exhibit B-2 or the later letter Exhibit B-3.

3. Coming to the question of remuneration payable to the 2nd defendant's sons, it is claimed by the 2nd defendant that one of his sons was associated with the conduct of the business of the firm from the year 1944, that he was not paid any remuneration upto 1947, that thereafter a sum of Rs. 50 was credited to his account as salary, and that this remuneration of Rs. 50 was slowly raised so that it reached a sum of Rs. 135 at the stage of dissolution. As regards his second son it is stated that he was associated with the affairs of the firm from the year 1946, that till 1953 he was not paid any remuneration and that in 1953 he was paid a remuneration of Rs. 50 and a certain commission on the sales canvassed by him. Both the salary and the commission are said to have been credited to his account. It is stated by the learned Counsel for the appellant that these salaries and the commission paid to the two sons had been claimed as a business expenditure before the Income-tax authorities and the same has been allowed. But this is very seriously controverted by the learned Counsel for the respondent-plaintiff. But the fact that the salries and the commission stand credited to the sons is not in dispute. The question is whether the two sons of the 2nd defendant, who have been associating with the business of the firm and rendering services to the firm all these years, should be remunerated or not. The claim of the 2nd defendant that his sons were actually doing the partnership business as employees of the firm from 1944 and 1946 does not seem to have been challenged either in the pleadings and even before the lower Court that fact does not seem to have been disputed. Even the issue framed proceeds on the basis that the sons had rendered services and the only question at issue between the parties is as to whether they are entitled to be remunerated for the services rendered. Learned Counsel for the plaintiff wanted to canvass the claim put forward by the 2nd defendant that his sons did in fact render services to the firm from 1944 and 1946. But it is not possible at this stage to question that fact, especially when both the Courts below have proceeded on the basis that the sons did in fact render services to the firm, though they have dismissed the claim for remuneration on the ground that the plaintiff did not agree for, payment of any remuneration under Exhibit B-1. Therefore it has to be taken that the sons of the 2nd defendant did in fact serve the firm from 1944 and 1946 as stated by the 2nd defendant. It is not in dispute that the sons of the 2nd defendant are not bound to render any service to the firm either on the basis of the terms of the partnership or otherwise. They are utter strangers to the firm and if their services had been requisitioned and the services were rendered not gratuitously they have to be paid a reasonable remuneration. Any remuneration which they are entitled to will have to depend on the nature of the services rendered by them and the benefit which the firm derived as a result of their services. In this case no material has been placed as to the nature of the services rendered by them. But one fact is clear that the 2nd defendant as a person in management of the firm's business at Madras, thought it proper to start one son on a salary of Rs. 50 from 1947 and another son on a salary of Rs. 50 from 1953. From this it can be inferred that the 2nd defendant treated the services rendered by his two sons prior to those years were gratuitous. As a partner in management of the business the 2nd defendant is empowered to employ such persons whose services are useful to the firm in the course of his management of the business. He has found the services of his two sons useful to the firm and he has employed them and taken advantage of their services. Therefore, though there is no order of appointment as such passed by the 2nd defendant, the fact that his sons have rendered services to the firm will entitle them to get a reasonable remuneration from the firm which they served. The mere fact that they happened to be the sons of the 2nd defendant cannot disentitle them from getting a reasonable remuneration for the services rendered by them to the firm. The learned Counsel for the plaintiff, however, contends that unless there is a specific agreement between the partners to pay remuneration to the sons of the 2nd defendant, they will not be entitled to claim remuneration, and particularly at the rates claimed by them in the written statement. It is true that there is no basis for the claim of remuneration at Rs. 300 and Rs. 200 for each of this two sons. It is stated that the basis of such a claim was Exhibit B-3, a letter said to have been written by the plaintiff to a third party wherein he states that he offered certain remuneration to the 2nd defendant as well as his sons, but that has not been agreed to at the time of the dissolution. I am inclined to place much reliance on Exhibit B-3 and to hold that the sons of the 2nd defendant are entitled to be paid remuneration at the rates claimed in the written statement. But at the same time I am not inclined to agree with the learned Counsel for the plaintiff that the two sons of the 2nd defendant who rendered services to the firm for so many years should go without any remuneration once it is found that they did in fact render services to the firm. Section 70 of the Contract Act provides that where a person lawfully does anything for another person, not intending to do so gratuitously, and such other person enjoys the benefit thereof, the latter is bound to make compensation to the former in respect of, or to restore the thing so done. In my view, therefore, whether there is an agreement to pay remuneration or not, or whether a regular appointment order issued by the 2nd defendant is available or not, the sons of the 2nd defendant who had rendered services to the firm, should have to be remunerated on the basis of the principle quantum meruit. But, as already stated, there is no material before the Court so as to find out what is the reasonable remuneration for the services rendered. The only material that is available before the Courts that the 2nd defendant himself thought a particular amount to be the proper salary for the sons and credited the salary every month after 1947 in respect of one son and after 1953 in respect of another son and that can be taken as some indication to show the reasonableness of the remuneration. Unless the second defendant himself thought the said payment as representing a proper and reasonable remuneration, he would have bargained with his partner the plaintiff for a higher amount. I therefore hold that the amounts credited to the sons of the 2nd defendant in the accounts of the firm from the years 1947 and 1953 towards salary as well as commission can be taken as a reasonable remuneration and at the final settlement of account such amounts payable to the sons of the 2ind defendant have also to be give to credit to. The Second Appeal is therefore allowed in part. There will however be no order as to costs. No leave.


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