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Smt. Usha Gopirathnam W/O Shri Gopirathnam, Vs. Shri P.S. Ranganathan, High Clere Stud Farm and ors. - Court Judgment

LegalCrystal Citation
SubjectContract
CourtKarnataka High Court
Decided On
Case NumberRegular First Appeal No. 2096/2006
Judge
Reported in2008(3)AIRKarR291; AIR2008NOC2137; 2008AIHC2457(Kar); 2008(5)KLJ220
ActsCode of Civil Procedure (CPC) - Sections 11; Transfer of Property Act - Sections 52; Evidence Act; Indian Partnership Act, 1932 - Sections 3, 4, 5, 6, 11, 12 to 17, 24, 31, 32, 36, 42, 48, 52, 55, 63 and 69; Karnataka Stamp Act, 1957 - Sections 25, 33, 35 and 59; Partnership Act 1890 - Sections 1(1); Limitation Act, 1980
AppellantSmt. Usha Gopirathnam W/O Shri Gopirathnam,; Sanjana Rathnam D/O Shri Gopirathnam And; Devina Suresh
RespondentShri P.S. Ranganathan, High Clere Stud Farm and ors.
Appellant AdvocateT.V. Vijay Raghavan, Adv.
Respondent AdvocateYoganarasimha, Sr. Adv. for; C.M. Poonacha, Adv.
DispositionAppeal dismissed
Cases ReferredPalmer v. Moore
Excerpt:
contract - retirement of partner - appellant legal heirs of deceased - deceased was one of partner of firm having four partners - he by letter addressed to one of partners showing his 'desire' for retirement from affairs of firm - letter accepted - after demise of deceased, his legal heirs claim share of deceased as partner of firm - whether deceased continued to be partner till his death and thereby appellants entitled for shares of deceased as partners of firm? - held, deceased died after 24 years from date of expressing his desire for retirement - conduct of deceased revealed that during 24 years he did not participate in business of firm - neither he enquired about profits and losses of firm - therefore said letter of retirement can be categorized as deceased's absolute desire for.....v. jagannathan, j.1. this appeal is by the unsuccessful plaintiffs before the trial court. the suit filed by the plaintiffs for dissolution of the firm viz., m/s. high clere stud, and agricultural farm and for putting the plaintiffs in separate possession of the portion of the land to be awarded to the deceased gopirathnam and for accounts of the farm, from the data of constitution of the firm, till the date of the suit and for costs and other reliefs came to be dismissed and hence, aggrieved by the said decision of the trial court, the plaintiffs are before this court.2. the first appellant is the wife of late gopirathnam and appellants 2 and 3 are the daughters of the above said first appellant and gopirathnam. gopirathnam was one of the partners of the 4th respondent m/s. high clere.....
Judgment:

V. Jagannathan, J.

1. This appeal is by the unsuccessful plaintiffs before the trial court. The suit filed by the plaintiffs for dissolution of the firm viz., M/s. High Clere Stud, and Agricultural Farm and for putting the plaintiffs in separate possession of the portion of the land to be awarded to the deceased Gopirathnam and for accounts of the farm, from the data of constitution of the firm, till the date of the suit and for costs and other reliefs came to be dismissed and hence, aggrieved by the said decision of the trial court, the plaintiffs are before this court.

2. The first appellant is the wife of late Gopirathnam and appellants 2 and 3 are the daughters of the above said first appellant and Gopirathnam. Gopirathnam was one of the partners of the 4th respondent M/s. High Clere stud and Agricultural Farm. The other partners were the respondents 1 to 3. Respondents 5 to 7 are the purchasers of some of the suit properties.

3. A deed of partnership came into existence on 1.1.1966 and initially, the partners were, first respondent P.S. Ranganathan, deceased P.N. Gapirathanam and the second respondent F.N. Lavakumar. Gopirathnam's sister also happened to be the wife of Ranganathan. The first appellant also happened to be the daughter of first respondent's sister. The partnership was a 'partnership at will'. As far as the sharing of the profits of the partners hip firm was concerned, the deed (Ex. D-1) provided that the share of the first respondent will be 501 and that of Gopirathnam was 20% and the third partner Lavakumar (second respondent) was 15% and the share of the one Basanthkumar a minor at the time of partnership deed was 15% and as far as sharing of the loss is concerned, the percentage was 50% as far as the first respondent Ranganathan is concerned and 25% each as far as Gopirathnam and second respondent were concerned. All the above facts are not in dispute.

4. it is the case of the appellants/plaintiffs in their suit that the partnership firm was not run properly by the first respondent Ranganathan, and as the 4th respondent firm had leased a portion of the property to the firm M/s. Karnataka Dying and Processing Company a registered partnership firm, in which the first appellant is one of the partners and the said registered partnership firm had made certain investment in the leased portion of the property, and following the death of Gopirathnam, the trouble started and the first appellant had to file a suit against one Smt. Satya Ranganathan and further there was also a counter suit filed by the present first respondent-Ranganathan and all these events therefore, led the first appellant to issue notice of dissolution of the 4th respondent firm and it is the case of the plaintiff that the 4th respondent firm, therefore, stood dissolved.

5. As the said 4th respondent firm had a lucrative business and as there was lot of income from agricultural sources and the stud Farm also had race horses belonging to other owners and charged maintenance fees, in a substantial amount and it was earning huge amount. As the respondents-partners of the firm did not furnish the accounts to the first appellant and no profits were also paid to late Gopirathnam or to his wife i.e., the first appellant, these were the reasons that compelled the appellants to file the suit and seek for the following reliefs:

a) Dissolution of the firm M/s. High Court Clare Stud and Agricultural Farm.

b) To deliver and yield up by putting the plaintiff in separate possession of the portion of the land to be awarded to the share of Gopirathanam and subsequently to plaintiff No. 1.

c) To take accounts of the Farm from the date or constitution till this day and to pay the said amount for recovery of Rs. 2 lakhs and

d) For costs and such other reliefs as this Ho'ble court might deem fit in the interests of justice.

6. Another contention taken in the plaint by way of amendment, by inserting paragraph No. 5A is that though there was an order passed by the trial court on 29.10.2002 restraining the respondents 1 and 4 from alienating the plaintiffs' share, yet, respondents 1 and 4 committed violation of the said order of the trial court and executed, certain sale deeds and. also entered into a registered joint development agreement with respondents 5 to 7 and therefore, this act on the part of the respondents 1 to 4 amounted to contravening the provisions of Section 52 of the Transfer of Property Act. It is the specific case of the appellants that they are the partners of the 4th respondent firm from the date of death of Gopirathnam and they have been so treated.

7. The first defendant took up the stand before the trial court that though there is no dispute with regard to the existence of partnership between him, Gopirathnam arid Lavakumar as par the deed of partnership dated 1.1.1966 and the fourth defendant owned agricultural lands, yet, the specific case of the first defendant vas that late Gopirathnam issued a registered notice on 29.3.1973 intending to retire from the partnership of the 4th respondent and the said notice was accepted and acted upon with effect from 15.4.1973 and since the said date, Gopirathnam cussed. to be the partner of the firm and his accounts were also settled by paying him his share.

8. it is also the specific case of the 1st respondent that the appellants were never inducted as partners of the 4th respondent firm at any point time and as far as the agricultural lands are concerned, they were purchased from one Sri P.S. Devadas and the 1st respondent had sold his personal properties to develop and run the said firm, and in spite of his best efforts, the said firm did not make any profits but it had to incur huge liability to the Banks. The 1st respondent also took up the stand that the agricultural properties are his own properties and except him others have no right, title or interest in it. It is on these contentions, he sought for the dismissal of the suit as not maintainable in law. In the additional written statement filed, the 1st respondent also took up the stand that there has bean no violation of the Court orders because the appellants are not concerned with any of the properties mentioned in the suit schedule property, because by the acts of the respondents-2 and 3, the 1 respondent became the absolute owner of the suit properties.

9. The 2nd respondent so also the 4th respondent were placed exparte. But, as per the trial court's observations, almost at the end of the trial, the 2nd respondent filed his written statement after the exparte order was sat aside against him and took up the stand that no profits were paid to Gopirathnam or to the 1st appellant but at the same time, admitted that the 4th respondent firm had been dissolved in pursuance to the information given by the 1st respondent it is also stated by him that he took part in the dissolution of the firm and the 1st respondent had settled the accounts of the 1st appellant and also mentioned that as per the terms of the Dissolution Deed, the 2nd' respondent received a sum. of Re. 25.00 lakhs and balance is yet to be received by him.

10. The 3nd respondent took up more or less the same defence as taken by the 1st respondent and denied the case of the appellants and also took up the contention that the suit was not maintainable and was also barred by time. Respandents-5 to 7 who are the defendants before the trial court also filed their joint written statement virtually by adopting the stand taken by the 1st respondent. In the additional written statement, raspondents-5 to 7 also took up further stand that the question of attracting Section 52 of the Transfer of Property Act does not arise nor there has been any violation of the Court orders by the said respondents and the appellants cannot claim that they are that partners as well as legal representatives and they cannot have dual rights.

11. The above pleadings in essence, led to the following issues being framed by the trial Court:

1. Whether plaintiffs prove that they are the partners of the defendant No. 4 firm?

2. Whether plaintiffs prove that they are entitled to claim for dissolution of the firm?

3. Whether the plaintiffs prove that as partners they are entitled for the separate possession of the property belonging to the firm?

Whether plaintiffs prove that they are entitled for share in the defendant No. 4's firm/property?

4. Whether defendant Nos. 1 and 3 prove that P.N. Gopirathnam had retired in the year 1973 from the firm and the accounts ware settled on that day?

5. whether plaintiffs are entitled for relief sought?

6. What order or decree?

ADDITIONAL ISSUES

1. Whether defendant Nos. 5 to 7 proves that suit is barred by time?

2. Whether defendant Nos. 9 to 7 proves that suit is not properly valued and court, fee paid thereon is incorrect?

12. The trial court after appreciating the evidence placed by the respective sides and taking note of the decisions referred to at the Bar, answered the issue Nos. 1, 3 and 5 and additional issue No. 2 in negative and issue No. 4 and additional issue No. 1 were answered in affirmative and consequently the suit of the plaintiffs was dismissed and this has given rise to this appeal by the plaintiffs.

13. I have heard the arguments addressed by the learned senior Counsel Sri Vijayashankar, appearing for the appellants and Sri Yoganarasimha, the learned Senior Counsel appearing for the respondents-1., 4 and 7 and Sri Gururajan, the learned counsel appearing on behalf of the 2nd respondent.

14. Sri vijayshankar, the learned senior Counsel argued at great length and so also Sri Yoganarasimha, and both of them have placed reliance on several decisions of the Apex Court, this Court and also of other High Courts in support of their submissions.

15. Sri Vijayshankar, learned Senior Counsel submitted at the outset that late Gopirathnam did not retire from the partnership firm and he continued to be a partner till his death on 27.12.1997. Therefore, it was argued that Gopirathnam never retired from the firm and the document Ex. D2 upon which the respondents placed reliance cannot be treated as poof of Gopirathnam having retired from the partnership firm. Inviting my attention to the contents of the said document Ex. D-2 dated 29.3.1973, it was then submitted that all that Gopirathnam had stated in the letter vats that he 'desired' to retire from the partnership firm. Therefore, mere desire itself cannot be construed as the decision, of Gopirathnam to retire from the partnership firm. It was also contended that the signature in Ex. P-2 is not that of Gopirathnam and the trial Court committed an error in not getting the signature in Ex. D-2 being proved in accordance with the provisions of the Evidence Act.

16. The third submission made in this regard is that Ex. D-2 cannot be construed as notice to all the partners and therefore it is not a notice at all having regard to the provisions of Section 32 of the Indian Partnership Act, 1932 (for short the 'Partnership Act). In order to reinforce his submission that Gopirathnam did not retire from the firm despite the existence of Ex. D-2, the learned Senior Counsel took; me through the entire material on record. A look at the documents produced by the parties would give an indication that Gopirathnam continued to remain as one of the partners of the firm till his death. Ex. D-2, which pertains to the suit filed by the State Bank of India in O.S. No. 15/1982 is one such document. Exs.P-26 and P-27 are the loan applications submitted to the SBI for raising loan by the firm. Ex. D-12 is a letter addressed by P.S. Devdas to the Secretary of the Madras Race Club. Ex. D-15 is the legal advice given by the Advocate Sri B.N. Buchegowda. In all these documents, the name of Gopirathnam finds a mention and therefore it is submitted that these documents are sufficient proof of the fact of Gopirathnam being continued as a partner even after Ex. D-2 letter, said to have given by Gopirathnam. Referring to the suit filed by SBI (Ex. F-2) and a decree having been passed against the defendants in the said suit, it was submitted that the respondents are now estopped front contending that Gopirathnam ceased to be a partner ever since the date of issuance of the letter of retirement as per Ex. D-2 and its acceptance by the firm.

17. As far as the reply given by the 4th respondent firm to Ex. D-2 is concerned, the submission made by the learned senior Counsel is that the said reply which is dated 15.4.1973 (Ex. D-6) cannot be accepted in the eye of law because the conditions mentioned therein namely waiver of notice clause subject to other partners having no objections having not been fulfilled Ex. D-6 cannot be called as letter of acceptance of the retirement of Gopirathnam.

18. The next and the most crucial issue according to the learned senior Counsel is with regard to the interpretation of the partnership deed Ex. D-1. It is his submission that the case of the appellants is that they became the partners of the 4th respondent firm following the death of Gopirathnam and this depends entirely upon the interpretation of Clause 17 of the Partnership deed Ex. D-1. By referring to the said clause, it was submitted that, the expression 'entitled to' used in the said clause itself makes it clear that following the death of Gopirathnam, the appellants became the partners of the 4th respondent firm. Therefore, following the death of Gopirathnam, the appellants stepped into his shoes and they continued to be the partners of the firm and as there was no reconstitution or no change in the shares held by respective partners, it will have to be deemed that by virtue of Clause 17 of the Partnership Deed, the plaintiffs have become the partners of the firm. Referring to Ex. P-3, the letter addressed to the 1st appellant and the 2nd respondent, it is submitted that the said document mentions that the 1st appellant has got a role to play in spite of the auction that was sought to be conducted and in regard to which a publication has been taken out in 'Times of India'. Therefore, the reference by the 1st appellant in the said document Ex. P-3 to the role to be played by hex is also an indication of the respondents accepting the appellants as partners of the 4th respondent-firm.

19. It is the specific submission of the learned Senior Counsel that the appellants became the partners by virtue of the contract which is implied in Clause 17 of the partnership deed. Therefore, the case of the appellants is that following the death of Gopirathnam, the appellants bee ante the partners by virtue of the contract and not because of their status. Interpretation of Clause 17 of the partnership deed is therefore very crucial, is the submission made.

20. The next limb of the argument of the learned senior counsel is that no accounts of Gopirathnam was settled by the respondents and even the trial Court has given a finding to the said effect. If the accounts of Gopirathnam were not settled, it further implies that Gopirathnam had not retired from the firm till his death. As far as non-availability of books of accounts is concerned, the submission made is that the respondents cannot be permitted to urge a contrary contention because the documents produced before the trial Court particularly, the register of the Studd Book Authority of India, discloses that there was considerable income derived by the firm as it had maintained good number of race horses. The names of these horses are to be found in the said register and the earnings derived and hence it is not open to the respondents to say that insofar as settlement of accounts of Gopirathnam is concerned, no accounts are maintained by them. Exs.P-7 and P-9 are the documents referred to in this connection, in proof of the earnings from horses.

21. The next contention put forward is that during the pendency of the suit, the respondents dissolved the firm and the 1st respondent had executed sale deeds after the firm was dissolved and this act on the part of the respondents is clear violation of the order passed by the trial Court on 29.10.2002. At the same time, the said act of the respondents also attracts Section 52 of the Transfer of Property Act.

22. As far as the trial Court's judgment is concerned, the learned senior counsel submitted that the trial Court has failed to appreciate the pleadings as veil as the evidence on record in proper perspective and the trial Court also failed to give a finding on settlement of accounts. The finding that the suit was barred by limitation is also against the law and in the absence of there being positive finding that the accounts of Gopirathnam were settled, the trial Court could not have dismissed the suit of the plaintiffs. The trial court also did not take into account as to what had happened to 20% share of Gopirathnam in the partnership firm and there is no reference in the entire judgment in regard to this aspect. It is also submitted in this connection that, even the respondents have not placed any evidence to show that 20% share of Gopirathnam vas distributed among the remaining partners in proportion to their shares. As such, the oral and documentary evidence placed by the appellants and the circumstances referred to above would unerringly point towards the case of the appellants that Gopirathnam continued to remain as a partner till he died and by virtue of Clause 17 of Partnership deed, the appellants became the partners.

23. One other submission made by the learned senior counsel pertains to the stamp duty paid by the respondents in connection with the dissolution of the partnership firm on 31.1.2004 and referring to the said document and Article 40 of the Karnataka Stamp Act, 1957 (for short the 'Stamp Act'), it was submitted that the appellants have also made out a case for impounding of the said dissolution deed under Section 33(b) of the Stamp Act. By dissolving the firm the respondents have thus taken away the jurisdiction of the court.

24. In support of the above submissions, learned senior counsel placed reliance on various decisions of the Apex Court and other High Courts, which are as under:

(2003) 3 SCC 445, AIR 1991 SC 1020, AIR 1986 SC 376, AIR 1970 SC 1147, AIR 1966 SC 1300, AIR 1.363 SC 1165, AIR 1968 SC 1413, 1956 SCJ 449, AIR 1973 SC 2537, AIR 1973 MYSORE 131, AIR 1975 SC 290, (1997) 7 SCC 110, AIR 1976 A.P. 256(DB), AIR 1977 SC 2328, AIR 1990 SC 897, (2005) 5 SCC 784, AIR 1921 CAL 538, AIR 1935 LAHORE 350, AIR 1955 MORA 12, ILR 1931 KAR 1214, AIR 1969 PUNJAB & HARYANA 244.

25. Sri Yoganarasimha, the learned senior Counsel for the respondents-1, 4 to 7 referring to the partnership deed Ex. D1 submitted that a proper understanding of the partnership deed will resolve half of the dispute and legal position will resolve the other half. It is the specific contention of the learned Counsel that the Gopirathnam had retired from the partnership firm by giving a letter dated 29.3.1973 as per Ex. D-2 and it was accepted on 15.4.1973 as par Ex. D-6. The retirement letter is of the year 1973 and Gopirathnam died in the year 1997. Thus, more than 24 years lapsed between the data of the letter of retirement Ex. D-2 and death of Gopirathnam. During all these years there was no whisper by any one much less by Gopirathnam himself with regard to settlement of accounts. This long period of silence itself speaks volumes to support the case of the respondents that Gopirathnam did retire from the firm as per his desire did not take part in the business of the firm till he died. It is submitted that a careful reading of the relevant clause of the partnership deed will make it clear that, all the partners were the working partners and the provisions of the Partnership Act have been made applicable to the firm. Clauses 16, 17 and 18 of the Partnership Deed are the relevant clauses which will throw light on the controversy between the parties.

26. Referring to Clause 16 it was submitted that notice of retirement from the partnership firm was from the end of the financial year in which it was given and the financial year closes by the end of December each year.

27. Referring to the crucial Clause 17, it was contended that, the use of the expression 'entitled to' therein does not refer that the appellant becoming the partners of the firm, the moment Gopirathnam died. But, it was only a right given to the heirs of the deceased Gopirathnam to become the partners of the firm, if they wish to do so, and therefore a plain reading of the said clause does not permit one to go any further than this interpretation and it is impermissible to read into the expression 'entitled to' the meaning that 'automatically' the heirs of the deceased become the partners.

28. Referring to Clause 18, it was submitted that, the said clause totally exempts the surviving partners from rendering accounts to the legal representatives of the deceased or the out going partner and by virtue of Clause 19 of the Partnership deed, in the event of dissolution of the partnership firm, the share of a partner shall be assessed on the basis of audited statement of accounts.

29. Reference was also made to Clause 22 of the Partnership Deed to submit that, in the event of dispute between the parties regarding that interpretation of the deed, the same shall be determined under the Arbitration Act.

30. It is then submitted that the suit of the plaintiff does not confirm to the requirement of the Appendix-A of the CPC and the suit is not filed in the Performa as contained in the said Appendix. The minimum requirements of a plaint in a suit of this nature are not complied in the instant case and except saying that the suit is filed toy the appellants as partners of the firm, there is no ether details mentioned in the plaint so as to confirm to the requirements of Froforma-49 of the Appendix-A to the CPC.

31. The next submission made by the learned senior Counsel Sri. Yoganarasimha is that the relationship of partner comes into existence by virtue of contract between the parties, not by status and, inheritance of partnership is unknown to law. Therefore, unless and until the appellants are able to establish an agreement or a contract give rise to, they being the partners of the firm, the question of becoming the partners by virtue of their status does not arise. The appellants have failed to plead, the existence of a contract and therefore having regard to the nature of partnership and the provisions of the Partnership Act, particularly Section 69 of the Partnership Act, the suit itself is not maintainable, in order to drive home the point that existence of a contract is essential, learned Senior Counsel referred to various Sections of Partnership Act, namely Sections 3, 4, 5, 6, 11, 24, 32, 63 and 69. Therefore, it was submitted that, at no point of time there vas an agreement between the appellants on the one side and respondents to treat the appellants as the partners of the 4th respondent-firm.

32. Clause 17 of the Partnership deed requires something to be done by the appellants to become partners of the firm and Clause 18 of the partnership deed will become irrelevant, if the argument of the appellants' counsel that the appellants automatically become the partners of the firm has to be accepted. As far as the notice of retirement is concerned, it was submitted that notice to a partner operates as notice to the firm. As regards the desire of Gopirathnam to retire from the firm is concerned, it is submitted that, having regard to the provisions of the Evidence Act, it is not for the appellants to put themselves into the mind of Gopirsthnam to say, that Gopirathnam did not desire to retire from the firm. As far as the documents upon which the learned senior counsel for the appellants placed reliance in order to show that Gopirathnam continued as a partner till his death are concerned, the submission made is that mere filing of the bank suit and the suit having been decreed, without any contest cannot have the effect of operating as estoppel against the respondents, because no issue concerning whether Gopirathnam was a partner or not was involved in the said suit filed by the state Bank of India and no right was conceded nor any obligations were accepted by the respondents. Therefore, no help can be gained by the appellants by referring to the said Bank suit.

33. As fax as the contravention of Section 52 of the Transfer of Property Act is concerned, the submission made by the learned Senior Counsel Sri Yoga Narasimha is that the said section has no application to the case on hand and the suit properties were not the subject matter of the decision between the parties and as per the terms of the Partition Deed, it is only the book, value of the subject matter to be taken into consideration and no right to immovable property as such is directly and specifically involved. Therefore, the respondent has not violated the provisions of Section 52 of the Transfer of property Act. Nevertheless, it vas submitted that the respondents have kept a few acres of land (approximately 8 acres of land) and in the event of the appellants succeeding before this Court, the appellants claim will not be defeated.

34. As regards the valuation for the purposes of the Stamp Act is concerned, the submission made is that the appellants themselves have produced the Dissolution Deed as per Ex-P28 and even if the said document is insufficiently Stranded, it is for the respondents rather than the appellants to raise objections in this regard. Therefore, once the document is admitted, in view of the Bar contained in Section 25 of the Stamp Act Article 40(A) & (B) are inapplicable. But, only Article 40(C) is applicable and hence no defect can be found with regard to insufficiency of stamps in respect of the Dissolution Deed-Ex F29. Since the Partnership-at-will can be dissolved at any time and as the appellants themselves have issued telegraphic notice as per Ex P26 and the said notice is dated few days prior to filing of the suit, and when the appellants themselves say in the said notice that the firm stood dissolved forthwith from the date of the said notice i.e., 11.2.2000, the appellants cannot one again seek dissolution of the firm by filing the present suit. Under the circumstances, the respondents have not committed violation of any order of the trial Court and moreover there is no pleading also by the appellants in this regard and the appellants themselves have suppressed the fact of dissolution of the firm.

35. Referring to the Judgment rendered on the Bank suit is concerned, the submission made is that Section 11 of CPC, has no application and there cannot be anything like res judicata among the co-defendants. As far as the appellants right to become partners is concerned by virtue of Sections 4 & 5 of the Partnership Act, mere status of the appellants cannot enable them to become partners of the firm and if the appellants were not willing to become the partners of the firm, the same cannot be forced upon them without their consent and therefore the choice or option has to be exercised by the appellants, but this was not done in the instant case. Yet, another submission made by the learned senior counsel for the respondents is that the appellants have never raised the question of Gopirathnam. having continued as a partner during the 24 years period,, between the date of letter of retirement written by the Gopirathnam and his death. As the essential requirements of Partnership Act had not been fulfilled the trial Court has rightly dismissed the suit of the plaintiffs. No interference is therefore necessary in this appeal and he prayed for the dismissal of the appeal with costs.

36. In support of the above submissions, the learned senior counsel Sri Yoganarasimha, placed reliance on the following decisions:

1. Mulchand Naratam v. Maneckchand Harjivan 1905 Bom. L.R. (vol-III) Page 8

2. Commissioner of Income Tax, MP v. G.S. Mills : [1965]57ITR510(SC)

3. Narayanappa v. Bhaskara Krishnappa : [1966]3SCR400

4. S.K. Farthasarathy Naidu v. K. Ramanaidu : AIR2001Mad399

5. Md. Abdul Sathax v. Hafija Bibi : AIR1944Mad346

6. Ram. Sarup Gupta v. Bishun Narain Inter College and Ors. : [1987]2SCR805

7. Shashibhushan Prasad Misra (dead) and Anr. v. Babuaji Rai (dead) by his legal representatives and Ors. : [1969]2SCR971

8. Mahboob Sahab v. Syed Ismail and Ors. : AIR1995SC1205

9. Mt. Sughra and Ors. v. Babu : AIR1952All506

10. Mill Attili v. Katuri Gopalan and Anr. AIR 1939 Madras 891

11. Javer Chand and Ors. v. Pukhraj Surana : [1962]2SCR333 , and

12. Nartdlal Sohanlal Jullundur v. The Commissioner of Income-tax, Patella .

37. Sri Gururaj, learned Counsel for the second respondent,, submitted that the second respondent is aggrieved by the observations made by the trial Court in the course of its judgment while dealing with the issue relating to dissolution of the firm during the pendency of the suit and referring to the conduct of the second respondent, the trial court had observed that having bean a party to Ex. P28, the second respondent though had been placed ex-parte during mast of the trial period, filed the written statement at the last minute and therefore the said conduct of the second respondent gives the impression that he is not a man of trustworthy nature. It is this observation of the trial Court that has lad to the above submissions being made by that learned Counsel for the second respondent, and therefore the submission made is that the said observation of the trial Court against the second respondent be set aside.

38. In the light of the foregoing submissions made by the learned Senior Counsel and the learned Counsel for the second respondent, I am of the view that the entire controversy between the parties revolves upon two main factors and they are as under:

1. Whether Gopirathnam retired from the Partnership firm in view of the letter dated 29.3.1973 (as per Ex. D2) and hence ha ceased to be a partner of the fourth respondent-firm following the letter of acceptance dated 15.4.1973 as per Ex D6?

2. Whether the appellants became the partners of the firm automatically by virtue of Clause 17 of the Partnership Deed-Ex D1.

39. The answer to the other contentions raised by the learned senior counsel for the appellants depends upon the answer to the two crucial points. Therefore, I deal with the two points mentioned above at the first instance before considering the other grounds urged by the learned senior counsel far the appellants.

40. Point No. 1: It is the specific defence of the respondents 1 to 3 that Gopirathnam retired from the Partnership firm following the letter of retirement given by him as per Ex D2 and its acceptance as per Ex D6. But on the other hand, the main contention of the appellant is that Gopirathnam continued to be a partner until his death in the year 1997 and therefore letter at Ex D2 has no bearing whatsoever. The first hurdle to be crossed is with regard to the retirement of Gopi Rathnam from the firm as desired by him in his letter dated 29.3.1973. The contents of the said letter are as under:

I have arrived at this decision after much thought, I am desirous of retiring from the Partnership of High Clere stud and agricultural farm. Therefore, I would request you to kindly assess the assets and liabilities of the farm as on data arrive at a figure and kindly settle ray account. I feel that the sale proceeds of my share would go a long way to me at the moment.

41. The response to this letter, from the first respondent-Ranganathan was as per Ex D6 dated 15.4.1973 and the contents of the said letter also requires to be re-produced at this juncture and they read thus:

I am indeed sorry to note that you wish to retire from your partnership in this Stud but since you are old enough and mature enough to make your own decision in this, I do not wish to intervene and make any suggestions in this. I therefore accept your decision. Please inform the other two partners of your decision.

While on this, I reproduce hereunder extracts (from the Partnership dead) which are relevant in this case:

(Clause 16) 'A partner may retire from the Partnership on giving at least one month's notice in writing of his intention so to do, before the 31-t December of an year. Such notice shall take effect from the end of the financial year in which it is given.'

If the other partners have no objection, I am prepared to waive the notice clause and treat your withdrawal as with effect from 31.12.1972. This will be subject to legal advice of course.

(Clause 19) 'In the event of dissolution or assessment of the partnership firm for payment of any partner's share goodwill shall not be valued and the share of the partner shall be assessed on the basis of the audited statement of accounts drawn by the auditors, such share shall not include any claim to silent or open reserves, but all the movables, immovables, participations and reserves pass at their book values to the Partner or partners continuing the firm.'

As regards the statement of assets and liabilities, please feel free to call at the Stud and see the books. The statements upto 31st Dec. 1972 will be ready within a month from date.

42. It is the contention, of the learned senior Counsel Sri Vijaya Shankar that Ex D2 is not the letter of retirement given by Gopi Rathnam and stressing on the expression 'I an desirous of retiring' it is submitted that Gopi Rathnam has expressed his desire to retire from the firm, but the said desire has not been transformed or resulted into action and as such the said, letter cannot be treated as 'letter of retirement'. The attack on. ex D6, which is the reply given to ex D2 is that the said latter mentions that the notice clause can be waived if the other partners have no objection. If for a moment we were to accept the submission of learned Senior Counsel for the appellants that Ex D2 cannot be read as letter of retirement, in view of certain conditions to be fulfilled as mentioned in Ex D6, the question, that crops up immediately is, what was the conduct of Gopi Rathnam after he received Ex D6 from the first respondent? The receipt of Ex D6 by Gopi Rathnam is not in dispute. If Gopi Rathnam had only expressed his desire to retire from the partnership firm as at Ex D2 and as contended by the appellants counsel, Gopi Rathnam continued to be a partner of the firm, it was but natural to expect Gopi Rathnam to react to the contents of Ex DG. no such document is forthcoming from the appellants side to show that Gopi Rathnam at any time before his death had withdrawn the letter-Ex D2 after he received the reply from the first respondent as per Ex D6.

43. Secondly, between the date of Ex D2 and the date of death of Gopi Rathnam which was in the year 1997 more than 24 years had elapsed. If Gopi Rathnam had not retired from the partnership firm, certainly there would have been sufficient material placed by the appellants to show the profits received toy Gopi Rathnam during this entire period of 24 years. No such material is forthcoming in the instant case from the appellants side. Clause 12 of the Partnership Deed-Ex Dl mentions that the profit and loss account of the Partnership shall be drawn once in a year up to 31' December of each year and each partner is draw his share of the profits after the Profit and Loss Account has bean signed by all the parties. This is what Clause 13 says. If Gopi Rathnam had continued to remain a partner of the firm despite issuing Ex D2, there would have been documents produced by the appellants in proof of the profits drawn by the Gopi Rathnaa year after year right from 1973 till his death in 1997. The third angle is that Gopi Rathnam himself did not arise any eyebrows either with regard to profits or in respect of the accounts at any time during this long period of 24 years.

44. It is rather difficult to accept the contentions of the appellants counsel that Gopi Rathnam continued to remain as a partner till his death. I have already referred to the Partnership Dead mentioning at Clause 4 that each of the partners shall be a working partner of the firm and such being the duty cast upon each partner, Gopi Rathnam would not have remained silent if he had not been given the share of the profits during the entire period of 24 years from the data of Ex D2 and the date of his death. These factors therefore do not lend support to the submissions of the learned Senior Counsel for the appellants that Ex D2 is only a letter expressing the wish of Gopi Rathnam to retire from the Partnership and not a letter of retirement as such. The above circumstances taken together do not give room to take such a view of the matter.

45. The learned Senior Counsel for appellants also attacked Ex D2 on two more grounds. As far as requirement of notice is concerned, his submission is that the notice was given to only the first respondent-Ranganathan not to all other partners. Therefore, requirement of Section 32 of Partnership Act has not been fulfilled. No doubt, Clause-1(c) of Section 32 of the Partnership Act provides that whether a partnership is at will (as in the instant case) a partner, who is retiring has to give notice to all the partners of his intention, to retire. The said clause will have to be read with Section 24 of the Partnership Act, which is to the effect that notice to a partner, who habitually acts in the business of the firm, operates as notice to the firm. The firm obviously includes all the partners. Therefore, I do not find any defect so far as notice of retirement is concerned. In fact, Clause (c) of Section 36 makes it clear that all that law requires on the part of the retiring partner is to make his intention to retire clearly and that is what Gopi Rathnam has done in Ex D2 by expressing his intention clear in the words 'I am desirous of retiring from the partnership firm' and goes further to make it clear in letter itself that his account also be settled by assessing the Assets and Liabilities. Therefore, no infirmity can be found with regard to requirement of the notice is concerned.

46. The other submission made concerning Ex D2 is that the other partners have not expressed their concurrence with the first respondent and therefore the defect still persists. As fax as this contention is concerned, there is no material placed by the appellants to show that the other partners did object to the acceptance of ex D2 given by Gopi Rathnam to the first respondent. Therefore, the said objection also does not merit any consideration.

47. In order to buttress his argument that Gopi Rathnam did not retire from the Partnership firm till his death, the other documents referred to by learned. Senior Counsel Sri Vijaya Shankar have been referred to while dealing with this submission. The documents which have been marked as Ex D2 & Ex D6 containing the name of Gopi Rathnam in particular in the Bank suit O.S. No. 13/82 and the documents at Ex P2 to contend that the Bank filed the suit in question and in. the said suit Gopi Rathnam was shown as one of the partner and as the said suit ended in Bank's favour and it was not open to the respondents to contend that the Gopi Rathnam was not a partner. As far as this submission is concerned, what is not in dispute is that the said Bank: suit was decided without any contest in the sense though Gopi Rathnam vas shown as one of the defendants in the said suit, as it was an ex-parte decree passed in favour of the Bank, there was no occasion to consider the question of Gopi Rathnam being a partner of the firm. No issues were considered nor any rights as between the defendants came for the adjudication in the said suit. Therefore, mere mention of the name Gopi Rathnam as one of the defendant in the said suit itself does not conclusively establish the fact of Gopi Rathnam continuing as a partner even after he issued the letter as par Ex D2.

48. In this connection, it is appropriate to refer to the proposition of law laid down by the Apex Court in the case of shashibhushan Prasad Misra (dead) and Anr. v. Babuaji Rai (dead) by his legal representatives and Ors. reported in AIR 1970 SC 909 while dealing with the issue as to whether the suit lands belonged to the deity, the Court observed that since this question was not finally decided between deity and other contesting defendants in appeal, in the absence of any decision by High court on merits on this question, there was no final decision against the deity and thus there was no question of res judicata between the co-defendants.

49. In the instant case also, the issue relating to Gopi Rathnam continuing as a partner of the firm even after Ex D2, was not involved in the said Bank suit nor was any finding given in the said suit that Gopi Rathnam continued as a partner notwithstanding Ex D2 given by him. Therefore, the question of Res judicata operating between the defendants in the said suit O.S. No. 15/82 (Ex P2) does not arise.

50. In another decision bearing on the point under discussion, the Apex court in the case of Mahboob Sahab v. Syed Ismail and Ors. reported in AIR 1935 SC 1205 has held thus:

For application of the doctrine of res judicata between co-defendants four conditions must be satisfied. namely, that (1) there must be a conflict of interest between the defendants concerned: (2) it must be necessary to decide the conflict in order to give the reliefs which the plaintiff claims: (3) the question between the defendants must have been finally decided: and (4) the co-defendants were necessary or proper parties in the former suit. in other words, if a plaintiff cannot get at his right without trying and deciding a case between co-defendants, the court will try and decide the case, and the co-defendants will be bound by the decree. But if the relief given to the plaintiff does not require or involve a decision of any case between co-defendants, the co-defendants will not be bound as between each other.

51. In the light of the aforesaid observations of the Apex Court, in the instant case, the conditions mentioned hereinabove for the application of Doctrine of Res judicata have not bean satisfied. Therefore, I am unable to agree with the said contention to put forward by the learned Senior Counsel for the appellants that the Bank suit filed and the decree passed therein, operates as Res judicata or for that totter as estoppel by judgment.

52. As far as the other documents referred to by the learned Senior Counsel for the appellants are concerned, Ex P26 and Ex P27 are the loan application forms and the said documents are dated 15.5.1975 and likewise in the legal advice given by Advocate Huchchegowda also, there is mention of the name of Gopi Rathnam.

53. It is the case of the respondents that these loan applications were signed by the first respondent at the instance of P.S. Devadas to whom the firm had owed money, in order to secure the loan from the Bank and hence said documents were executed. No doubt, while looking at the said loan application forms as well as the legal opinion given by Huchchegowda, the Junior to Sri P.S. Devadas, the name of Gopi Rathnam is mentioned. But, mere mention of the name of Gopi Rathnam in the said documents itself will not be a sufficient in order to arrive at the conclusion that the Gopi Rathnam continued to remain as a partner till his death. Therefore the appellants have not bean able to show by placing convincing material, that Gopi Rathnam continued to exercise his powers as a working partner throughout the period from the date of his retirement letter till his death.

54. Likewise mere mention of the name of Gopi Rathnam in the documents in the register of the Stud Book Authority of India are by themselves alone will not be sufficient proof of or positive indication of Gopi Rathnam continuing to remain as a partner till his death. One other reason for not accepting the argument of learned Senior Counsel for the appellants in this regard is that the first appellant examined as PW-1 in the course of her cross-examination has stated that the firm was earning profit of around 50 lakhs per year right from 1973 onwards. Having said that the first appellant has not supported the said statement by placing income tax returns to show that Gopi Rathnam was getting his share of the said profits right from 1973, till his death. At the cost of repetition, it has to be mentioned that if the firm had earned income right from 1.973 onwards, either Gopirathnam would not have kept quite till his death to claim his share of the profits or for that matter there would not have been any necessity for the appellants to seek loan from the Bank to pay the amount due by it to P.S. Devadas.

55. Therefore, on the basis of certain documents, which have been referred to by learned senior Counsel, wherein, the name of Gopi Rathnam has been shown, it is not permissible to implicitly draw the conclusion that Gopi Rathnam continued as partner till his death.

56. On weighing the evidence placed by the parties and applying the standard of preponderance of probabilities it cannot be said that the facts and circumstances as existing in the instant case gives rise to draw the inference that Gopi Rathnam continued to remain as a partner till his death. Therefore, the finding of the trial Court that by virtue of Ex D2, Gopi Rathnam had ceased to be the partner of the firm from 31.12.1972 as mentioned in Ex D6 and the conduct of the parties, in particular that of Gopi Rathnam himself, supports the said conclusion reached and as such the said finding of the trial Court cannot be termed as either perverse or for that matter contrary to the material placed by the parties.

57. Point No. 2: It is the firm stand of the appellants that following the death of Gopi Rathnam in the year 1997, the appellants became the partners by virtue of Clause 17 of the Partnership Deed. The expression 'entitled to' is the main bone of contention, in as much as the interpretation of this expression will decide as to whether the appellants became the partners of the firm automatically following the death of Gopi Rathnam or something else was to be done on their part in order to become the partners of the firm.' This takes us to Clause 17 itself of the Partnership Deed-Ex D1 which reads thus:

17. The partnership firm shall not be dissolved by the death or insolvency of any one or more of the partners. The heirs or representatives in interest of such dead partners shall be entitled to be partners in the firm. The assessment of the share of such partner shall be on the basis of the audited statement of accounts for the year ending 31st December previous to such death or insolvency.

58. The contention of learned Senior Counsel Sri Vijaya Shankar is that the expression ''entitled to' will have to be construed as a contractual term implicit in the said Clause 17 and therefore the appellants are by the said contractual term, the partners of the firm. He also referred to the definition of the term 'entitled to' as found in P Ramanatha Aiyar Concise Law Dictionary, Third Edition, Reprint 2006. The word entitled to' is explained in the said Dictionary as to mean 'to give a claim, right, or title to; to give a right to demand or receive; to furnish with grounds for claiming.' Therefore, referring to the aforesaid meaning given to the word 'entitled to', it is submitted that the said expression in Clause 17 will have to be read as to mean the heirs or representatives of deceased Gopi Rathnam have come as partners in place of Gopi Rathnam. The expression entitled to' will have to be read in the context in which it is used and also having regard to the spirit of the Partnership agreement between the parties, in this connection, learned senior counsel also referred to the position in law with regard to interpretation of deeds and other instruments and drew my attention to Halsbury's Laws of England, Fourth Edition, Volume 12, wherein, at page 610, it is observed thus:

1475. Effect of express provision. An express provision in an instrument excludes any stipulation, which would otherwise be implied with regard to the same subject matter. The rule is expressed in the maxim expressum facet cessare taciturn, and is based upon the presumption that the parties, having expressed some, have expressed all that conditions by which they intend to be bound under the instrument in respect of the particular subject matter.

59. The decisions referred to in this connection by the learned Senior are to the following effect. In the case of Haramohan Poddar v. Sudarson Poddar reported in AIR 1921 Calcutta 538, it has been observed that partners may accordingly agree that on the death of any of them, his nominee or legal representative shall toe entitled to take its place. Whether in a particular case there has or has not been such an agreement, may be proved by an express declaration to that effect or may be determined from the conduct of the parties.

60. in another case reported in AIR 1938 Lahore 350 in the case of Punjab & Sind. Bank Ltd., v. Kishen Singh Ghulab Singh and Ors., it has been held that the intention to continue the business in Partnership with the legal representatives may be gathered from the conduct of the parties. The decision in the case of M.O.H Uduraan and Ors. v. M.O.H Asluni : AIR1991SC1020 , he has referred to points out that it is a settled cannon of construction that:

A contract of partnership must toe read as a whole and the intention of the parties must be gathered from the language used in the contract by-adopting harmonious construction of all the clauses contained therein. The cardinal principle is to ascertain the intention of the parties to the contract through the word they have used, which are key to open the mind of the makers, it is seldom that any technical ox pedantic rule of construction can be brought to bear on their construction. The guiding rule really is to ascertain the natural and ordinary sensible meaning to the language through which the parties have expressed themselves, unless the meaning Leads to absurdity.

61. Reference was also made to the observation of the Apex Court in the case of Smt. Saroj Aggarwal v. Commissioner of Income-tax, U.P. AIR 1996 SC 376 to submit that succession does not remain in vacuum and it is possible by circumstantial evidence into establish that there was a binding obligation for the other partners to take the deceased partners wife or heirs as partners and there was right of the deceased partner's wife to join the partnership firm. Attention was also drawn to the following observations of the Apex Court in the said case:

Too hyper technical or legalistic approach should be avoided in looking at a provision which must be equitably interpreted and justly administerad. It is true that there must be succession by inheritance. But it is possible in a particular case without any express provision either in the dead or in writing to infer from the conduct of the parties that there was succession, and if such a view is possible inspite of the absence of express provision, in our opinion such an inference could be and should be drawn courts should, whenever possible, unless prevented by the express language of any section or compelling circumstances of any particular case, make a benevolent and justice oriented inference. Facts must be viewed in the social milieu of a country.

62. Referring to the above observations of the Apex Court, the learned Senior Counsel argued that even in the instant case Clause 17 of the Partnership Dead will have to be so interpreted and the expression 'entitled to' will have to be read as to mean the appellants automatically coming into the Partnership following the death of Gopi Rathnam.

63. The next decision referred to by the learned senior counsel for the appellant is P. Ananda Rao v. G. Raja Rao AIR 1976 AP 256 [DB]. Referring to the observations made in paragraph No. 5 of the aforesaid, decision, it is submitted that it is open to the surviving partner to enter into a new partnership with the heir of the deceased partner and an agreement to this effect can be implied from the circumstances namely that the business of partnership was being carried on by such heir and the other remaining partner. In the vary same paragraph No. 5 the Division Bench, has also observed that if there are only two partners and one of them dies, there is no partnership for a third party to be introduced and an. agreement between the two partners on the death of any one of thorn that his legal hair or nominee would, take place of the deceased partner, will not have the effect of automatically making such heir or nominee a partner of the firm. The court also observed that it is, however, open to the surviving partner to enter into a new partnership with the hair of the deceased partner, but that would constitute a partnership.

64. Before I answer the said contention of the learned senior counsel for the appellant with regard to his submission concerning the meaning of the term 'entitled to' and heir of deceased partner coming into the partnership by virtue of views or the expression 'entitled to' in Clause 17 of the dead of partnership Ex. D-1, it has to be mentioned at the very outset at this juncture that the above argument of the learned senior counsel proceeds on the basis that Gopirathnam did not retire from the partnership till his death. be this Court has given its finding on point No. 1 to the effect that Gopirathnam ceased to be a partner following his letter of retirement having been accepted by the first respondent, the appreciation of the contention put forward, therefore, will have to be on the basis of the contention of the appellants' counsel that Gopirathnam did not retire till his death.

65. In other words, if the finding on point No. 1 is taken into consideration, then the question of the heir or representative of the deceased partner entitled to be partners in the firm cannot arise. Therefore, proceeding on the premise that Gopirathnam continued to be a partner till his death, one will have to interpret the Clause 17 keeping in view the above decision cited, by the learned senior counsel Sri. Vijaya Shankar.

66. Prior to the analysis of the expression, 'entitled to', it is necessary to refer to the relevant provisions of the Partnership Act so as to knew as to what the law says on the concept of partnership.

67. Section 4 of the Partnership Act defines, that a partnership is the relation between persons who have agreed to share the profits of a business carried on by all or any of them acting for all and goes on to further explain the term partners as the persons who have entered into partnership with one another and the said parsons individually are called as partners. Section 6 of the Act dealing with the mode of determining existence of partnership provides that in determining whether a group of persons is or is not a firm, or whether a parson is or is not a partner in a firm, regard shall be had to the real relation between the parties, as shown by all relevant facts taken together. Explanation 1 to Section 6 clarifies that sharing of profits or of gross returns dose not of itself make such persons partners. Apart from the above sections of the Partnership Act, a careful perusal of the rest of the provisions of the Act also make it clear that Sections 12 to 17 and 31 uses the expression 'subject to contract between the partners'. Section 48 refers to settlement between the partners is a matter to be considered in settling the accounts of a firm after dissolution. The term 'contract' also finds a place in Sections 52 and 55, and finally Section 69 of the Act makes it further clear that the basis for enforcement of any right to sue must be traced to a contract. In the other Sections of the Act, the term agreement' is mentioned in place of 'contract'.

68 'Lindley on the Law of Partnership is a classical work: on the subject and has been treated as an authoritative treatise on the law of partnership. The learned author dealing with the definition of partnership in chapter 2 of his work (15th Edition 1984) says thus:

'Section 1(1) of the Partnership Act 1890 provides as follows:

Partnership is the relation which subsists between, parsons carrying on a business in common with a view of profit.

From this statutory definition it appears that there are at least three essential elements to every partnership, namely, (1) a business, (2) two or more parsons carrying on the business in common, and (3) a profit motive on the part of those persons.

69. At page 16 of the same work, it is further explained by the learned author thus:

Partnership a contractual relationship.

Partnership, though often called a contract, is a relation resulting from & contract. The statutory definition does not state from what the relation arises, but that an agreement, express or implied, is the source of the relation vas clearly established before the Act and may be inferred from its provisions.

70. The definitions given by the other authors are also culled out in the very same chapter under the heading 'Collection of other definitions' and under that, the definition given in the Indian Partnership Act, 1932 (based on the partnership Act 1890) is also included and the definitions as given by Frederick Pollock and watson are as under:

Pollock: Partnership is the relation which subsists between parsons who have agreed to sham the profits of a business carried on by all or any of them, on behalf of all of them.

Watson: Partnership is a voluntary contract between two or more persons for joining together their money, goods, labour and. skill, or either or all of them, upon an agreement that the gain or loss shall be divided proportionally between them, and having for its object the advancement and protection of fair and open trade.

71. The cumulative effect of the above provisions of the Partnership Act as well as the definition of Partnership is that, existence of a contract is a sine-quo-nozi of the relationship of partnership. such a contract can be either expressed or implied. Therefore, the fundamental question that now arises is, as to whether Clause 17 of the deed of partnership Ex. D-1 establishes the existence of the element of contract between the appellants and the respondents 1 to 3.

72. I now deal with the expression 'entitle to'. in the work, concise Law Dictionary of P. Ramanatha Iyex (3rd Edition 2006) the word 'entitled' has been explained to mean thus:

Entitle: To give & claim, right, or title to; to give a right to demand or receive; to furnish with grounds for claiming.

73. The word, 'entitle' is explained thus in the book 'Family word Finder' (Reader's digest a family guide to English words, their meanings, synonyms and antonyms):

Entitle: This coupon entitles you to a free dancing. Lesson give the right to, authorise, qualify, make eligible, allow permit.

74. The Apex court also had an occasion to deal with the term entitled' in the case of Asgar S. Patil v. Union of India : [2000]244ITR713(SC) of the judgment, Supreme Court has observed that the word 'entitle' means 'to give a claim, right, or title top to give a right to demand or receive, to furnish with grounds for claiming' (the law of Lexon A. Ramanatha Iyer (2nd Edition 642)

75. Therefore, I am. of the considered opinion that the word 'entitled to' means giving a person, a right to claim or to receive. To draw an analogy from the legal profession itself, a parson enrolled as an advocate with the Bar Council, is entitled to practice lave. That does not mean that every person qualified to be a lawyer and. enrolled with the Bar Council must and should practice law. The word 'entitled to' therefore, gives the option to the parson to choose a the practice law or not. The same analogy can be extended even to the other fields like medicine etc. Hence, the submission that the word expression 'entitled to' should be construed as to mean in the instant case 'in place of Gopirathnam' is unacceptable. Having said thus about the expression 'entitled to' even the two decisions upon which, learned senior counsel Sri. Vijayashankar, has relied, also cannot be of any assistance to support his argument. insofar as the decision of the Apex Court in the case of Saroj Aggarwal v. I.T. Commissioner : [1985]156ITR497(SC) is concerned, though learned senior Counsel referred to paragraphs 5, 6, 17, 19, 25 and 26 to fortify his submissions, what is to be not lost sight of is, the relevant clause of the partnership dead that was considered in the said case. Clause 7 of the deed of partnership has been culled out at page 379 and it reads thus:

(7) That partnership shall not dissolve on the death of a partner. The legal representative of the deceased shall came in his place as a partner.

76. It is in the context of the above Clause 7 that the Apex court expressed its views in the matter. Ho such expression is found in Clause 17 of the deed of partnership Ex. D1 with which we are concerned in this case.

77. Secondly, even the proposition of law referred to by the learned senior counsel as laid down by the Division Bench of the Andhra Pradesh High court in P. Ananda. Rao v. G. Raja Rao's case also makes it clear that it is open to the surviving partner to enter into a partnership with the heir of the deceased partner, but that would constitute a new partnership. In other words, even this decision lays down that it is only after the heir of the deceased exercises his or her option to become a partner, that the surviving partners, can enter into partnership with such a heir and that would constitute new partnership. The question as to whether fallowing the death of a partner, the partnership continues to exist or whether a vacuum is created was also considered by the Apex court in the case of Commissioner of Income Tax v. G.S. Mills AIR 1366 SC 24. Having considered Sections 31 and 42(c) of the Partnership Act, the Apex Court answered the question concerning the heir of the deceased automatically becoming the partner of the firm or not, in paragraphs 7 and 8 which read thus:

(7) There is a fallacy in this argument. Partnership, under Section 4 of the Partnership Act is the relation between persons who have agreed to share the profits of a business carried on by all or any of them acting for all. Section 5 of the said Act says that the relation of partnership arises from contract and not from status. The fundamental principle of partnership, therefore, is that the relation of partnership arises out of contract and (not) out of status. To accept the argument of the learned Counsel is to negative the basic principle of law of partnership. Section 42 can be interpreted without doing violence either to the language used or to the said basic principle. Section 42(c) of the Partnership Act can appropriately be applied to a partnership where there are more than two partners. If one of them, dies, the firm is dissolved; but if there is a contract to the contrary, the surviving partners will continue the firm. On the other hand, if one of the two partners of a firm dies, the firm automatically comes to an end and thereafter there is no partnership for a third party to be introduced therein and, therefore, there is no scope for applying Clause (c) of Section 42 to Such a (situation, it may be that pursuant to the wishes or the directions of the deceased partner the surviving partner may enter into a new partnership with the heir of the deceased partner, but that would. constitute a new partnership. In this light Section 31 of the Partnership Act falls in line with Section 42 thereof. That section only recognises the validity of a contract between the partners to introduce a third party without the consent of all the existing partners; it presupposes the subsistence of a partnership; it does not apply to a partnership of two partners which is dissolved by the death of one of them, for in that event there is no partnership at all for any new partner to be inducted into it without the consent of others.

(9) There is a conflict of judicial decisions on this question. The decisions of the Allahabad High court in Ram Kumar v. Kishori Lal AIR 1946 All 239, is not of any practical help to decide the present case. There, from the conduct of the surviving partner and the hairs of the deceased partner after the: death of the said partner, the contract between the original partners that the partnership should not be dissolved on the death of any of them was inferred. Though the partnership there was only between two partners, the question of the inapplicability of Section 42(c) of the Partnership Act to such a partnership was neither raised nor decided therein. The same criticism applies to the decision of the Nagpur High Court in Chainkaran Sidhakaran v. Radhakisan Vishwanath AIR 1956 Nag. 46. This question was directly raised and clearly answered toy a Division. Bench of the Allahabad High court in Mt. sughra v. Babu : AIR1952All506 , against the legality of such a term of a contract of partnership consisting of only two partners. Agarwala, J., neatly stated the principle thus:

In the case of a partnership consisting of only two partners no partnership remains on the death of one of them and therefore, it is a contradiction in terms to say that there can be a contract between two partners to the effect that on the death of one of them the partnership will not be dissolved but will continue.... Partnership is not a matter of status, it is a matter of contract. No heir can be said to become a partner with another person without his own consent, express or implied.

This view accords with that expressed by us earlier. In Narayan v. Umaval AIR 1939 Mad 283 at p. 284, Ramachandra Iyer J., as be than was, said much to the same effect when he observed thus:.if one of the partners died, there will not be any partnership existing to which the legal representatives of the deceased partner could be taken in. In such a case, the partnership would come to an and by the death of one of the two partners, and if the legal representatives of the deceased partner joins in the business later, it should be referable to a new partnership between them.

But Chatterjee J., in Hansraj Manot v. Goraknath Pandey 66 Cal. WN 262 at p. 264, stuck a different note. His reasons for the contrary view are expressed thus:

Here the contract that has bean referred to is the contract between the two partners Gorak Nath and Champala.... Therefore, it cannot be said that the contract ceased to have effect because a partner died. The contract was there. There vas no new contract with the hairs and there was no question of 9 new contract with the heirs because of the original contract, and by virtue of the original contract the heirs become partners as soon as one of the partners died.... As soon as there is the death, the heirs become the partners automatically without any agreement between the original partners by virtue of the original agreement between the partners while they were surviving. There is no question of interregnum. As soon as the death occurs, the right of somebody else occurs. The question of interregnum does not arise. The heirs become partners not because of a contract, between the heirs on the one hand and the other partners on the other but because of the contract between the original partners of the firm.' with great respect to the learned Judge, we find it difficult to appreciate the said reasons. The Learned Judge seems to suggest that by reason of the contract between the original partners, the heirs of the deceased partner enter the field simultaneously with the removal by death of the other partner from the partnership. This implies that personality of the deceased partner projects into that of his heirs, with the result that there is a continuity of the partnership without any interregnum. There is no support either on authority or on principle for such a legal position. In law and in fact there is an interregnum between the death of one and the succession to him. ire accept the view of the Allahabad and Madras High Court and reject the view expressed by Nagpur and Calcutta High Court.

78. Therefore, the argument that there is continuity in the partnership without any vacuum being created in view of Clause 17 of the deed of partnership Ex. D-1 cannot be accepted and for the very same reason, the popular saying 'the king is dead, long live the king' has no application to the case on hand, particularly, in the light of the proposition of the law laid down by the Apex Court in the aforementioned Commissioner of I.T. v. G.S. mills' case.

79. In Santiranjan Das Gupta v. Messrs. Dasuram Murzamull AIR 1373 SC 48 the Apex Court has held that where there is no written down partnership contract and no terms and conditions of oral partnership and no bank account of partnership are to be found, no inference can be drawn as to the existence of partnership. Unless the heir or representative of the deceased exercises his or her option pursuant to the use of expression entitled to, it cannot be said that such a course of action can be forced upon the hair or legal representative of the deceased. For this proposition, the decision reported in the case of Emani Satyanarayanamurthi, Manager of Sree Bala Tripura Sundari Rice Mill Attill v. Katuri Gopalan and Anr. AIR 1939 Madras 891 is a case in point. His Lordship Wadsworth, dealing the a case involving a firm incurring loss, observed that in a suit filed, a covenant by a deceased partner binding his executors; cannot be enforced. it was observed that a covenant by a deceased partner binding his heir or representatives to continue the partnership cannot be specifically, enforced against the hair or representatives and the affect of the death of the partner coupled with the refusal of the hair or representatives to continue the partnership will toe the dissolution of the firm.

80. The 1st appellant happens to be a partner in another firm, namely M/s Vigneswara Karnataka Dyeing and Processing Company and therefore it cannot be said that she is a lay parson not knowing the rights and duties of a partner in the course of her evidence, PW-1 herself has admitted that she is fully aware of Clause (17) of the partnership dead Ex. D1 but did not exercise her option to become a partner of the firm following the death of Gopirathnam. Under the said circumstances and also keeping in view the aforesaid law laid down by the Apex court and other courts, in my view the expression 'entitled to' are used in Clause 17 of Ex. D1 cannot be construed as to mean 'coming in place of Gopirathnam', The second point under consideration therefore stands answered accordingly.

81. As far as the other contentions put forth by the learned senior counsel are concerned, with regard to-non furnishing of the accounts and the reference made to the observations of the trial court that no books of accounts were placed in proof of having settled the accounts of Gopirathnam are concerned, DW-1 in the course of his evidence has stated that account of Gopirathnam was settled by paying Rs. 20,000/- and this evidence of DW-1 has not been proved to be a false one. In other words, the appellants do not daisy the fact of the 1st respondent having paid Gopirathnam the above said amount soon after the acceptance of the letter of retirement given by Gopirathnam. The Trial Judge has observed in the course of his judgment that the accounts of Gopirathnam were settled long back though no documents were produced by the respondents. It has to be kept in mind that the settlement of the amount following the retirement of Gopirathnam took place almost 27 years back prior to the date of filing of the suit. Whether the appellants can now be permitted to urge at this point of time that the accounts of Gopirathnam was not settled, is the question.

82. The submission of the learned senior counsel for the appellant that accounts of Gopirathnam was not settled and therefore there was no retirement of Gopirathnam for said reason, also cannot be accepted. Gopirathnam himself never ever complained about non settlement of his accounts at any point of time between 1973 and 1997 i.e. for almost 24 years. If the accounts had not been settled as contended now by the appellants, it is unnatural to expect Gapirathnam to remain without raising his voice against the other partners.

83. Laches therefore cannot be permitted to open a transaction that was closed long ago. In this connection I am again tempted to go back to rely on the law of Partnership by Lindley. Dealing with the issue concerning settlement of account and laches, the learned author has this to say:

Laches a bar to relief in equity:

Independently of the Limitation Act 1980 a plaintiff may be precluded fry his own laches from obtaining equitable relief. Laches presupposes not only lapse of time, but also the existence of circumstances which render it unjust to give relief to the plaintiff; and unless reasonable vigilance is shown in the prosecution of a claim to equitable relief, the court, acting on the maxim vigilantibus non dormientibus subveniunt leges, will decline to interfere. But where partner has acted in an underhand fashion the court may be unwilling to give any credence to an allegation of laches made by such partner against his copartners.

Laches in a suit for an account:

In the early case of Sherman v. Sherman two persons had dealings as merchants; one of them died; his widow filed a bill for an account, but although the statute of Limitations did not apply, the bill was dismissed, on the ground that many years had elapsed since the dealings in question had taken place, and the deceased had allowed any claims he might have had to slumber. Again, where an account has been rendered, and has been acquiesced in, unless fraud be proved, a court will not re-open it, although the account may be shown to be erroneous, and although, no final settlement was ever come to. The same principle is acted on in taking accounts; for charges long improperly made and acquiesced in, or long omitted to be made, and known so to be, are regarded, in the absence of fraud, as having been made or omitted by agreement, and the question of mistake will not be gone into.

84. In this case as already mentioned by me, Gopirathnam himself never complained about accounts, at any time before his death after he retired from the firm on his own violation, and coupled with that, there was also a long lapse of 24 years. The appellants now make a claim for accounts. Therefore, as the learned author Lindley puts it:

It need, however, scarcely be observed that positive evidence of abandonment, in addition to the negative evidence derived from mere lapse of time, during which nothing has been done by the plaintiff, greatly improves the position of his opponent.

85. Yet, another factor to be considered in the light of the evidence adduced by the parties is that the appellants themselves have produced the loan application forms to show that the firm was not doing well financially. There is also evidence of DW-1 that the said firm continued to suffer and F.S. Devdas was demanding huge amount towards purchase of agricultural land from him and in. this connection Devdas also filed criminal cases and there was also a debt recovery proceedings initiated to bring agricultural land for being sold in. auction. All these factors and events says BW-1, led Gopirathnam to take his hands off the partnership firm by giving letter of retirement as per Ex. D2 and the 1st respondent had to face all these crisis and had to ensure that the ship was safely taken out of the troubled waters. Therefore, when the situation improved and calm was restored, the appellants now cannot ask for rendering of the accounts of late Gopirathnam. in other words, it is not possible for the appellants to ask for the profits when Gopirathnam himself withdrew from the business of the firm after the troublesome crisis to which the firm vas exposed to.

86. The learned author Lindley's observations again requires to be noticed:

A fortiori, if a partner formally withdraws from an adventure when its prospects are bad he will be unable to claim, a share of the profits resulting from it if it ultimately proves to be profitable.

87. He cites the decision in Palmer v. Moore (1900) A.C. 293 by stating that 'a written notice, by a joint holder of a gold mining lease to his co-lessees that ha was unable to contribute to the joint expanses and that they might do as they liked with the lease was held to be an abandonment of his beneficial interest therein, and the subsequent working of the mine by on a of such co-lessees out of his own resources was held to be an acceptance of such abandonment '.

88. In the instant case also the evidence of DW-1 and the conduct of Gopirathnam gives rise to the inference that Gopirathnam left the ship which was rocking at one point of time, and when the ship started to sail in clear waters, the appellants open their eyes. For the aforesaid reasons, the finding of the trial court that the appellants have failed to make out a case for accounts, due to laches on their part and long delay therefore cannot be termed as a perverse finding either on facts or in law.

89. The next contention that needs to be considered is with regard to contravention of the provision of Section 52 of the Transfer of Property Act by respondents 1 to 3. It was argued by the senior counsel Sri. Vijayshankar that during the pendency of the suit the respondent went ahead by making absolute sale deed in respect of soma of the suit items and also entered into joint agreement with the respondents 5 to 7 and therefore the transactions are hit by Section 52 of the Transfer of Property Act. we doubt, on the face of it and in view of the documents having been produced by the appellants before the trial court that during the pendency of the suit, respondents 1 to 3 entered into several agreements, the said events gives the impression that there is violation of provisions of Section 52 of the Transfer of Property Act, on a close look at the facts and circumstances of the case in the light of various clauses contained in the Partnership Deed Ex. D1 does not give rise to any such contravention by the respondents 1 to 3. First of all, to attract Section 52 of the Transfer of Property Act, it has to be established that any right to the immoveable property is directly and specifically in question in the suit and once the said element is satisfied, then the property cannot be transferred during the pendency of the suit. Here we are dealing with a case for dissolution of the firm and to deliver the accounts of the firm and also to deliver the yield by putting the appellants in separate possession of the portion of the land awarded to the share of Gopirathnam. Clauses (18) and Clause (19) of the Partnership Deed Ex. D1 read as under:

18. Neither the partnership nor any of the surviving or continuing partners shall be liable to account to the representatives of the deceased or the outgoing partner for the profits, nor shall they be liable to pay any profits after such date as the latter have ceased to be partners, whether such profits are attributable to their share of the property or not.

19. In the event of dissolution of assessment of the partnership firm for payment of any partner's share, goodwill shall not be valued and the share of the partner shall be assessed on the basis of the audited statement of accounts drawn by the partnership's auditors, such share shall not include any claim to silent or open reserves but all the moveables, immoveables, participations and reserves pass at their book values to the partner or partners continuing the firm.

90. From the above two clauses it becomes clear that the share of the partner shall be assessed on the book value of the partner. In other words, it is the value of the property in question that will be taken into consideration for settling the accounts of the partner. Therefore, even if the appellants were to succeed all that they would be entitled to will be to take value of the properties and not to the property as such. Therefore, as the agricultural Land is not directly and specifically in question in the suit, I am of the view that there is no contravention of Section 52 of the Transfer of Property Act.

91. The next limb of argument to be considered at this stage is with, regard to violation of the Karnataka Stamp Act by the respondents 1 to 3. The 2nd and 3rd respondents who are the surviving partners, dissolved the firm and EX. P29 is the copy of the Dissolution Deed. Referring to the stamp duty paid on the said deed Ex. P28 having regard to the property mentioned therein in the said document, it is contended that there has been violation of Article 40 of the Karnataka stamp Act. My attention was drawn to Clause (c) of Article 40 to contend that the duty payable is the same as is applicable in respect of Article 20 i.e. the market value of the property and whereas the duty paid was Rs. 500/- and therefore there is contravention of the said provisions and hence there is a case made out for impounding the said document Ex. P29 pursuant to the powers conferred by the same Act itself in Section 33 of the stamp Act.

92. This submission is sought to be repelled by the learned senior counsel Sri. Yoganarasimha for respondents by contending that the duty has been paid in accordance with the Article 40 Sub-clause (b) of Clause (c). Clause (c) is applicable only where the property which belonged to one partner or partners when the partnership commenced is distributed or allotted or given to another partner ox partners. The situation in the instant case does not squarely fall within the ambit of Clause (c) of Article 40 and secondly as has been submitted by the learned senior counsel for the respondent, Ex. P29 is the document produced by the appellants themselves in the course of their evidence and therefore the question of raising objections that the said document is not duly stamped does not arise.

93. Once the document is admitted in evidence and the said document EX. P28 has been brought on record by the appellants themselves, by virtue of Section 35 of the Karnataka Stamp Act 1957, where an instrument has been admitted in evidence, such admission shall not be called in question at any stage of the same suit or proceeding on the ground that the instrument has not been duly stamped. This bar is subject to Section 59 of the Stamp Act which deals with revision of certain decisions of courts regarding the sufficiency of stamps. Therefore, in view of the above said bar provided under Section 35 of the stamp Act and also having regard to Article 40(c)(b), it cannot be said in the instant case that the document Ex. P28 is not sufficiently stamped and therefore no case has been made out for impounding the said document.

94. As fax as the other decisions referred to by the learned senior Counsel Sri. Vijayashankar are concerned, the proposition of law laid down are well settled in as much as the best evidence has to be placed on record and in respect of proof of signature,. same has to be done in accordance with the provisions of the Evidence Act and at the same time, failure to produce the document for possession will lead to adverse inference being drawn and that the court has got the power to compare the disputed signatures with the admitted signatures and normally in cases of slightest doubt, the matter has to be left to the wisdom, of the experts and as far as the rules of interpretation are concerned, explicit words cannot he interpreted out of context.

95. All these decisions referred to by the learned senior counsel for the appellants, cannot in my opinion coma to the aid so as to advance the case of the appellants any further. As regards the reasons given toy the trial court, while answering all the issues framed by it are concerned, the Trial Judge, in my opinion, has considered the evidence, both oral and documentary in the light of the pleadings of the partial and also has taken into consideration the conduct of the parties and the other facts and circumstances of the case and therefore I do not find any erroneous finding having bean recorded by the trial court while appreciating the evidence on record nor can it toe said that it erred in applying the propositions of law.

96. Hour I turn to the argument addressed by the learned Counsel for the 2nd respondent. He submits that the Trial judge has made an adverse remark; on the 2nd respondent by observing in the course of his judgment that the 2nd respondent is not a man of trustworthy nature. As far as the said observation is concerned, I have carefully gone through the reasons assigned by the Trial Judger particularly para.30 of the judgment. It is not in dispute that the 2nd respondent did not file his written statement during the early stages of the suit and waited almost till the end and only after the evidence was given by the 1st respondent, that the 2nd respondent came up with an application and filed his written statement and admitted the claim of the appellants. Secondly, as the trial court has rightly observed, the 2nd respondent himself was a party to the Dissolution Deed EX. P23 and received Rs. 25 lakhs and the balance of Rs. 25 lakhs has to be paid to him. Thus, he joined hands with the other respondents in executing the deed of dissolution as per EX. P29. it is not open to the 2nd respondent to turn the table around, to say that the appellants have made out a case.

97. In other words, the 2nd respondent accepted the fact of, accounts of Gopirathnam having been settled long back and therefore joins with the other respondents in executing the Dissolution Deed as per Ex. P28. But when the suit had reached ultimate stage, 2nd respondent takes up the reverse stand that account of the appellants was not settled. It is therefore no wonder that the Trial Judge had no other alternative but to express his views about the conduct of such a person and. therefore the observation of the Trial Judge that the 2nd respondent is not a man of trustworthy cannot be said to be a faulty one from the above angles. The submission made in this regard by the learned Counsel for the 2nd respondent therefore requires to be noticed only to be rejected.

98. The last word in the matter has not been said. No doubt, I have answered two main points for consideration against the appellants. Nevertheless there is one aspect of the mutter which requires to be considered in the light of the submissions by the learned Counsel Sri. Vijayashankar and that pertains to the respondents 1 to 3 violating the orders of the trial court during the pendency of the suit. It is brought to my notice by the learned senior counsel for the appellants that on 29.10.02 the trial court passed an order directing the respondents 1 to 3 not to alienate the share of the appellants in the suit property. The joint development agreement entered into between the 1st respondent and respondents 5 to 7 is produced at EX. P29. The said document makes it clear that the properties mentioned in the Schedule A, B, C, D and E were the subject matter of the joint development agreement.

99. Though the learned senior counsel for the respondents 1 to 3 fairly submitted that a portion of the property has bean earmarked pending the outcome of the decision by this Court in this appeal and in this connection the order passed by this Court in M.F.A. 7258/05, 7259/09 on 10.2.06 was also referred to and though it is contended that even after the joint development agreement Ex. P29, still soma portion of the land is retained and the entire land belonging to the firm was not sold or subjected to the joint development agreement, in my view at this stage enough material is not there to find out as to what is the extant of land held by the 4th respondent firm and out of it what extent of land has been the subject matter of various sale deeds and joint development agreement and hence it is not possible to pin down with mathematical accuracy as to whether the entire share of Gopirathnam if he was entitled in law had been alienated or not.

100. Nevertheless there is sufficient force in the submission made by the learned senior counsel that do spit a the order passed by the trial court not to alienate, the respondents 1 to 3 have gone on to disrespect the said order of the trial court. I am therefore of the view that the appellants have made out a case a for them to proceed against the respondents 1 to 3 for the acts of the respondents violating the orders of the trial court so far as the alienation is concerned.

101. The same cannot be said in respect of the dissolution of the firm during the pendency of the suit because as pointed out by the learned senior counsel for the respondents, the appellants themselves have issued telegram as par Ex. P6 indicating the dissolution of the firm and as such, the effect of Ex. P6 is that the firm dissolved even prior to filing of the suit itself and therefore the question of the appellants once again asking the relief for the dissolution of the firm from the court does not arise. However, as already indicated by ma, in so far as the alienation of the property is concerned, the submission made by the learned Counsel for the appellants has to be accepted.

102. In the result and for the aforesaid reasons I pass the following:

ORDER

The appeal is dismissed. The appellants however are at liberty to proceed against the respondents 1 to 3 and take necessary steps if they so desire in connection with the respondents 1 to 3 violating the orders of the Trial Court during the pendancy of the suit in so far as the alienation is concerned, in the circumstances of the case, no costs.


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