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Shyam Sundar Shaw Vs. Netai Chand Shaw - Court Judgment

LegalCrystal Citation
SubjectCommercial
CourtKolkata High Court
Decided On
Case NumberA.F.A.D. No. 706 of 1974
Judge
Reported inAIR1986Cal230
ActsRegistration Act, 1908 - Section 17; ;Contract Act, 1872 - Section 23; ;Constitution of India - Article 299; ;Code of Civil Procedure (CPC) , 1908 - Section 100; ;Partnership Act, 1932 - Section 59
AppellantShyam Sundar Shaw
RespondentNetai Chand Shaw
Appellant AdvocateArabinda Ghosh and ;Archana Manna, Advs.
Respondent AdvocateTarun Chatterjee and ;Ashok Kumar Ghosh, Advs.
DispositionAppeal dismissed
Cases ReferredCalcutta v. Juggilal Kamalapat
Excerpt:
- .....was opposed to public policy and against the law. it was also contended that the sale of the share of a partner in the partnership business without any registered document was invalid and ineffective and accordingly the plaintiff could not acquire any share in the partnership business by the alleged sale of the share of mrs. farquher without any registered document. it was also denied by the defendant that he committed any misconduct in connection with the affairs of the partnership business. according to the defendant, the plaintiff was not entitled to get any relief in the present suit. 4. the learned munsif on consideration of the evidence and all relevant facts and circumstances found that the plaintiff became the partner in the partnership business under the style of mrs......
Judgment:

Sukumar Chakravarty, J.

1. This second appeal is directed against the judgment and decree passed by the learned Additional District Judge, 2nd Court, Midnapore, in other (sic) Appeal No. 320 of 1971, confirming the judgment and decree passed by the learned Munsif, 2nd Court, Midnapore, in Title Suit No. 93 of 1970.

2. The plaintiff filed the suit for dissolution of partnership and for accounts. It was the case of the plaintiff in brief that the partnership business was run under the style of Mrs. Farquhar alone and that on 10-7-62 Mrs. Farquhar accepted the defendant Shyam Sundar Shaw as 8 as partner in her business with effect from June 1962 on the defendant's payment of Rs. 6000/- only towards capital. Mrs. Farquhar from time to time took loans from the plaintiff and the total amount of such loan stood at Rs. 6000/-. Mrs. Farquhar took the aforesaid loan with an intention to sell her share in the partnership business to the plaintiff provided she would fail to repay the loan. Mrs. Farquhar finally decided to leave India for settling permanently in England and on 25-3-63 a bond with regard to the loan amount of Rs. 6000/- and agreement for sale of the 8 as share of Mrs. Farquhar to the plaintiff in case of her failure to repay the loan were executed between the plaintiff and Mrs. Farquhar in presence of the defendant who put his signature in the aforesaid document. The defendant also on the same date wrote a letter to the plaintiff accepting him as a partner in the partnership business. Mrs. Farquhar also executed the power of attorney in favour of the defendant on the same day. All the documents were executed in the office of the Solicitors G. C. Mitra. In the agreement for sale Mrs. Farquhar agreed to sell her half share in the partnership business to the plaintiff by the 30th of November 1965 in case of her failure to repay the loan of Rs. 6000/- to the plaintiff by the date. It was also agreed in the said deed of agreement for sale that the plaintiff was to get the amount of profits in the share of Mrs. Farquhar as interest on the said sum of Rs. 6000/- till either the said amount of Rs. 6000/- is repaid or the sale of her share took place in pursuance of the said agreement for sale. In the bond executed on the same date i.e. 25-3-63 it was recited that Mrs. Farquhar agreed either to repay the said sum of Rs. 6000/- to the plaintiff by 30th November 1965 or to convey her share in the partnership business to the plaintiff on or before the said date of 30th November 1965. It was further stipulated in the said agreement that all the profits in her share in the partnership business since the 1st day of March 1963 were to be credited to the plaintiff by way of interest for the said sum of Rs. 6000/-. By the letter written by the defendant to the plaintiff on the same day, the defendant accepted the plaintiff as a partner in the partnership business in place of Mrs. Farquhar and the defendant further acknowledged to have received a sum of Rs. 7536/- from the plaintiff in addition to the sum of Rs. 6000/- which was advanced by the plaintiff to Mrs. Farquhar. It was further stipulated in the said letter that till the full repayment of the sum of Rs. 7536/- the defendant would not take any share of the profits in the partnership business but would take Rs. 100/- only per month for his maintainance on loan account. In the deed of agreement for sale a reference was made with regard to the agreement dated 15-2-63 between the partners of the firm Mrs. Farquher's Bakery and the Railway Administration on the basis of which the partnership firm agreed to supply breads and confectionary to the Railway Administration for three years up to 30-11-65 and the said agreement also recited that the partners would not allow any person to be interested in the partnership business during the continuance of the said agreement between the partners and the Railway Administration without the consent of the Railway Administration. Mrs. Farquher left for England and decided to permanently settle there. Mrs. Farquher decided also not to repay the loan of Rs. 60007- taken from the plaintiff and accordingly decided to sell her share in the partnership business to the plaintiff before 30-11-65 and accordingly by a letter dated 8-10-65 Mrs. Farquher sold her half share in the partnership business to the plaintiff and revoked the power of attorney already executed by her in favour of the defendant to look after partnership business on her behalf. The plaintiff became the partner on the basis of the sale of the share of Mrs. Farquher in the partnership business as per the letter dated 8-10-65. The plaintiff and the defendant were running the partnership business and opened their joint account with the United Bank of India at its Kharagpur Branch. The defendant subsequently opened a hotel at Midnapore under the style as 'Farquher Hotel and Restaurant' with the assets of the partnership business without the consent of the plaintiff and the defendant illegally opened also an account in the name of the partnership firm in the United Industrial Bank and was operating the said account alone in violation of the partnership agreement. The defendant did not repay also the amount of Rs. 75367- received from the plaintiff and by his misconduct in the affairs of the partnership business tried to deprive the plaintiff of the profits of the partnership business. The plaintiff found it impossible to continue the partnership business any longer along with the defendant. As all his amicable attempts to settle the dispute between the two partners failed the plaintiff brought the suit for the relief as claimed.

3. The defendant contested the suit after filing the written statement. The defendant denied the allegations of the plaintiff and denied also that the plaintiff became a partner in the partnership business under the style Mrs. Farquher's Bakery by his alleged purchase of the share of Mrs. Farquher. It was contended that under the terms of the partnership agreement between the defendant and Mrs. Farquher, Mrs, Farquher could not legally transfer her share in the partnership business to any person without the consent of the defendant who was a partner along with Mrs. Farquher in the partnership business. According to the defendant, the sum of Rs. 6000/- was taken by Mrs. Farquher from the plaintiff from time to time by way of loan and it was agreed that the said loan was to be paid from the partnership business and for this purpose Mrs. Farquher executed the power of attorney in favour of the defendant on 25-3-63. The defendant denied that the plaintiff gave any amount of Rs. 7536/- to the defendant in excess of the amount of Rs. 6000/- advanced by the plaintiff to Mrs. Farquher. It was also contended that the defendant did not know English well and that without understanding the purport of the documents which were executed in the office of the Solicitors on 25-3-63 the defendant put his signature on the documents and on a letter purported to have been written to him by the plaintiff. The defendant contended also that during the continuance of the agreement dated 15-2-63 between the partnership firm and the Railway Administration the partners of the firm M/s. Farquher's Bakery were prohibited not to allow any person to be interested in the partnership business without the consent of the Railway Administration and that accordingly any agreement for sale of the share of Mrs. Farquher to any outsider without the consent of the Railway Administration was hit by Section 23 of the Indian Contract Act as such agreement was opposed to public policy and against the law. It was also contended that the sale of the share of a partner in the partnership business without any registered document was invalid and ineffective and accordingly the plaintiff could not acquire any share in the partnership business by the alleged sale of the share of Mrs. Farquher without any registered document. It was also denied by the defendant that he committed any misconduct in connection with the affairs of the partnership business. According to the defendant, the plaintiff was not entitled to get any relief in the present suit.

4. The learned Munsif on consideration of the evidence and all relevant facts and circumstances found that the plaintiff became the partner in the partnership business under the style of Mrs. Farquher's Bakery on the basis of Mrs. Farquher's sale of her share to the plaintiff when Mrs. Farquher sold her such share on the basis of her letter dated 8-10-65 from England expressing therein definitely that she would not repay the loan of Rs. 6000/-taken by her from the plaintiff. The learned Munsif found also by the construction of the documents like the agreement for sale, exhibit 1, the bond, exhibit 2, the defendant's letter to the plaintiff, exhibit 5 and Mrs. Farquher's letter dated 8-10-65 to the plaintiff, exhibit 5(a) that the plaintiff purchased the share of Mrs. Farquher in the partnership business with the consent of the defendant. The learned Munsif found also that neither the deed of agreement of sale, exhibit 1, nor the sale itself of Mrs. Farquher's share in the partnership business to the plaintiff was hit by Section 23 of the Indian Contract Act as neither of them was opposed to any public policy or against any law. The learned Munsif found also that the sale of the share of a partner in the partnership business does not require any registered deed as the share of the partner in the assets of the partnership business is a movable property. The learned Munsif found also that the defendant knowing full well the contents of the documents because of his knowledge in English put his signatures on the documents in question and wrote also the letter, exhibit 5, to the plaintiff. The learned Munsif found also that because of the misconduct of the defendant in running the partnership business and because of the defendant's denial of the plaintiff's right in the partnership business as a partner the plaintiff was entitled to bring a suit for dissolution of the partnership and accounts and was entitled to gel the relief. On such aforesaid findings, the learned Munsif passed the judgment and decree in favour of the plaintiff.

5. On appeal, the learned Additional District Judge concurred with the findings of the learned Munsif and confirmed the judgment and decree as passed by the learned Munsif.

6. Being aggrieved, the defendant has preferred this second appeal on the grounds that the learned Additional District Judge committed mistake in law in confirming the judgment and decree passed by the learned Munsif.

7. Mr. Arabinda Ghosh appearing on behalf of the appellant defendant has submitted that the learned Additional District Judge has committed mistake in law in confirming the judgment and decree of the learned Munsif and he has attacked the judgment of the learned Additional District Judge on three grounds :-- (1) that by wrong construction of the documents, exhibits 1, 2, 5 and 5(a), both the courts below arrived at the finding that the plaintiff became the partner in the partnership business under the name and style of 'Mrs. Farquher's Bakery' by his purchase of the share of the partner Mrs. Farquher with the consent of the other partner, the defendant; (2) that the transfer of the share of a partner in the partnership business with its assets which included also immovable property is compulsorily registrable to be legally effective and (3) that the agreement for sale, Exhibit 1 in respect of the share of the partner Mrs. Farquher being opposed to public policy and being against the law was hit by Section 23 of the Contract Act because of the continuing contract between the partnership firm and the Union of India (Railway Administration) which was in force up to 30-11-65 and which prevented the partners of the firm Mrs. Farquher Bakery from allowing any person to be interested in the partnership business without the consent of the Railway Administration during continuance of the said agreement. According to Mr. Ghosh as the agreement between the firm Mrs. Farquher's Bakery and the Union of India (Railway Administration) was executed in the manner as prescribed under Article 299 of the Constitution of India, the agreement for sale (Ext. 1) and the so-called sale of the share of Mrs. Farquher to the plaintiff during the continuance of the agreement between the firm and the Union of India without the consent of the Union of India (Railway Administration) was against the law and opposed to public policy. In support of his such submission Mr. Ghosh has referred to the decision in the case of Sudhansu Kanta v. Manindra Nath reported in : AIR1965Pat144 .

8. Mr. Tarun Chatterjee appearing on behalf of the respondent plaintiff has submitted that both the courts below on due consideration and appreciation of the relevant documents, arrived at the concurrent findings that the plaintiff purchased the share of the partner Mrs. Farquher in the partnership business and became the partner with the consent of the other partner viz. the defendant and that this concurrent finding of fact of both the courts below cannot be interfered with in this second appeal. Mr. Chatterjee has submitted also that the concurrent finding of fact with regard to the defendant's misconduct in the affairs of the partnership business also cannot be interfered with in the second appeal. Mr. Chatterjee has submitted also that the share of the partner in the partnership firm being the movable property can be legally transferred without the registered documents, and that both the courts below held so in their judgments. In support of his such submission Mr. Chatterjee has relied on the decision in the case of Ratan Lal v. Purshottam Harit reported in : [1974]3SCR109 and also in the case of Commr. of Income-tax, West Bengal, Calcutta v. Juggilal Kamalapat reported in : [1967]63ITR292(SC) . Mr. Chatterjee has further submitted that the agreement for sale (Ext.1) between the plaintiff and Mrs. Farquher with the consent of the defendant and the sale of Mrs. Farquher's share to the plaintiff accordingly with the consent of the defendant are not opposed to any public policy and not against any statute of law and that accordingly they are not hit by Section 23 of the Contract Act. Mr. Chatterjee has further submitted that on misconception of the facts and law, Mr. Ghosh, the learned counsel for the appellant has relied on the decision reported in : AIR1965Pat144 which is not at all applicable under the present facts and circumstances of the case.

9. Admittedly the business under the name and style of 'Mrs. Farquher's Bakery' became the partnership business of Mrs. Farquher and the defendant Shyam Sundar Shaw in equal share by virtue of the partnership deed dated 10-7-62 (Ext. B). There is no dispute to the fact that Mrs. Farquher from time to time took loans from the plaintiff at the instance and on the introduction of the defendant being the plaintiff's close relation and that the total amount of the loans taken from the plaintiff stood at Rs. 6000/-. It is also the undisputed fact that on 25-3-63 four, documents, namely, exhibits 1, 2, 5 and A were executed amongst the plaintiff, Mrs. Farquher and the defendant in the office of the Solicitor G. C. Mitter & Co. at Calcutta. Out of those four documents exhibit 1 is the deed of agreement for sale of the share of Mrs. Farquher in the partnership business to the plaintiff in case Mrs. Farquher fails to repay the loan of Rs. 6000/- to the plaintiff by 30-11-65. That deed of agreement or sale (Ex. 11 was executed between the plaintiff and Mrs. Farquher and the defendant also signed the same perhaps as a witness. The said agreement for sale (Ext. 1) made the reference to the agreement dated 15-2-63 between the partners of the firm Mrs. Farquher's Bakery and the President of India representing the Union of India (Railway Administration) whereby the partners agreed to supply bread and confectionery for three years up to 30-11-65 to the Railway Administration and agreed also not to allow any person to be interested in the said agreement without the consent of the Railway Administration. A bond (Ext. 1) was executed between the plaintiff and Mrs. Farquher and the defendant also signed the same. The bond (Ext. 2) stipulated that Mrs. Farquher was to repay the loan of Rs. 6000/- to the plaintiff from whom the loan was taken by 30-11-65 or to transfer her share in the partnership business in favour of the plaintiff in full discharge of the claim of Rs. 6000/- and it was also stipulated in the bond that the plaintiff would be entitled to recover the income of the partnership business in accordance with the share of Mrs. Farquher from 1-3-63 till 30-11-65. Exhibit 5 is the letter written on 25-3-63 by the defendant to the plaintiff, admitting the plaintiff as the partner of the partnership firm, although the actual sale of the share of Mrs. Farquher in favour of the plaintiff did not materialise on that date. The letter (Ext. 5) spelt out that the plaintiff agreed to purchase the share of Mrs. Farquher for Rs. 60007- already advanced by the plaintiff to Mrs. Farquher and that the plaintiff advanced further sum of Rs, 7536/-also to the partnership business and that the defendant agreed to pay the same out of the profits of the partnership business and that the defendant would take only Rs. 100/- per month from the partnership business for the maintenance on loan account till the payment of the said sum of Rs. 7536/-, so that their contribution in the partnership business might be equal. Exhibit A is the power of attorney executed by Mrs. Farquher in favour of the defendant on the same date, namely, 25-3-63 authorising the defendant to conduct the partnership business as the attorney of the partner Mrs. Farquher.

10. Sometime after the execution of the aforesaid four documents, Mrs. Farquher left for England and therefrom she wrote the letter dated 8-10-65 (Ext. 5(a)) to the plaintiff. That letter was signed by her in presence of the Notary Public on 8-10-65. By the said letter (Ext. 5(a)) on making a reference to the advance of Rs. 6000/- by the plaintiff to Mrs. Farquher in lieu of purchase of her share in the partnership business, and also to the agreement for sale which was to mature only in case of Mrs. Farquher's failure to repay the loan before 30-11-65, Mrs. Farquher expressed her desire not to return to India any more and not to wait till November 1965 for sale of her share in the partnership business to the plaintiff as she would not repay the loan, and accordingly by the said letter dated 8-10-65 sold her share in the partnership business to the plaintiff for Rs. 6000/- which was already advanced to her by the plaintiff. There is no dispute to the fact also that Mrs. Farquher revoked the power of attorney already executed by her in favour of the defendant.

11. As Mr. Ghosh learned counsel for the appellant defendant has made the submission that both the Courts below committed mistake in law by a misconstruction of the documents already mentioned above, I have considered the recitals of the documents to see that whether both the courts below properly constructed the aforesaid documents and I find with reference to the recitals in the aforesaid documents that both the courts below on right construction of the aforesaid documents, arrived at the concurrent findings that Mrs. Farquher sold her share in the partnership business to the plaintiff on 8-10-65 on the basis of her letter of the said date (Ext. 5(a)) with the prior knowledge and consent of the defendant and that the defendant accepted the plaintiff as the partner, the moment the plaintiff acquired the half share of Mrs. Farquher in the partnership business.

12. The submission of Mr. Ghosh, leared counsel for the appellant defendant, that the transfer of the share of Mrs. Farquher in the partnership business being made not by the registered deed, is invalid in the eye of law, is not sustainable. It is the settled principle of law that the share of a partner in the partnership business is moveable property and the transfer of the same does not require any registered deed to become valid and effective. In the case reported in : [1974]3SCR109 , it has been held as follows : -- 'It is well settled now that the share of a partner in the assets of the partnership which has also immovable properties, is movable property and the assignment of the share does not require registration under Section 17 of the Registration Act'. The aforesaid principle of law has also been laid down in the case reported in : [1967]63ITR292(SC) . Both the courts below accordingly rightly held that the plaintiff acquired the share of Mrs. Farquher on the basis of her sale as per her letter dated 8-10-65 (Ext. 5(a)).

13. The last point in the submission of Mr. Ghosh is that the agreement for sale (Ext. 1) executed between the plaintiff and Mrs. Farquher with the consent of the defendant but without the consent of the Railway Administration with whom the partnership firm 'Mrs. Farquher's Bakery' entered into an agreement to supply bread and confectionary up to 30-11-65, and the sale of Mrs. Farquher's share to the plaintiff on 8-10-65 pursuant to the said agreement for sale (Ext. 1), being opposed to public policy and against the law, is void being hit by Section 23 of the Contract Act. There is no dispute to the legal position that any contract or agreement between the parties being opposed to public policy or being against any law or statute is void and it has been so provided in Section 23 of the Contract Act. Both the courts below have found that the agreement for sale (Ext. 1) is not opposed to any public policy. I also hold so. It was recited in the agreement for sale (Ext 1) that in case of Mrs. Farquher's failure to repay the loan by 30-11-65, the agreement for sale would rather ripen into sale and the said agreement for sale (Ext. 1) made also the reference of the agreement dated 15-2-63 between the partnership firm and the Railway Administration wherein it was recited that the partners agreed not to allow any person to be interested in the agreement dated 15-2-63 without the consent of the Railway Administration. According to Mr. Ghosh, the introduction of the plaintiff as a partner on the basis of the letter dated 8-10-65 without the consent of the Railway Administration during the continuance of the agreement dated 15-2-63 is against the law because the agreement dated 15-2-63 between the partnership firm Mrs. Farquher's Bakery and the President of India (Railway Administration) was executed in terms of Article 299 of the Constitution of India. According,to Mr. Chatterjee, learned counsel for the respondent- plaintiff, Mr. Ghosh has made such submissions on misconception of law and Article 299 of the Constitution of India. Article 299 provides that all contracts made in exercise of the executive power of the Union or of a State shall be expressed to be made by the President or by the Governor of the State, as the case may be, and all such contracts and all assurances of property made in exercise of that power shall be executed on behalf of the President or the Governor by such person and in such manner as he may direct or authorise. So neither the agreement for sale (Ext. 1) nor the letter dated 8-10-65 (Ext. 5(a)) on the basis of which the sale of the share of Mrs. Farquher took place on 8-10-65 is against any statute. The decision in the case reported in : AIR1965Pat144 does riot help Mr. Ghosh in any way. In that case mining lease was transferred in violation of the law as enjoined in Rule 37 of the Mining Concession Rules 1960 made under Section 13 of the Mines and Minerals (Regulation and Development) Act, 1957, which prohibits any transfer of mining lease which includes a sublease or any right, title and interest therein to any person without the previous consent of the State Governor in writing. In the instant case there is no statutory prohibition to the transfer of the share of a partner in the partnership business. It appears that Mr. Ghosh on misappreciation of the law discussed in the decision in the case reported in : AIR1965Pat144 , has made a reference of that decision in the instant case, although that decision is not applicable to the present case. Both the courts below rightly held that the agreement for sale (Ext. 1) or sale as per Exhibit 5(u) dining the continuance of the agreement dated 15-2-63 between the partnership firm and the Union of India (Railway Administration) in violation of any terms of that agreement dated 15-2-63 may legally enable the Railway Administration to cancel the said contract dated 15-2-63 and claim compensation but the agreement for sale (Ext. 1) or sale itself by the letter (Ext. 5(a)) is not void being hit by Section 23 of the Indian Contract Act which has got no application in the instant case.

14. Both the courts below, found that the defendant's misconduct in running the partnership business and the defendant's denial of the plaintiffs partnership right were sufficient for the plaintif to demand dissolution of the partnership business and accounts. The said concurrent findings of fact by both the courts below cannot be interfered with in this second appeal.

15. In view of what has been stated above, I find that the learned Additional District Judge has not committed any mistake in law i : confirming the judgment and decree of the learned Munsif.

16. In the result, this second appeal is dismissed on contest and the judgment and decree passed by the learned Additional District Judge are confirmed. I make no order as to costs in this appeal.

17. The learned counsel for the appellant orally prays for leave to appeal to the SupremeCourt. The prayer is refused.


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