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Ganesh Chandra Mukherji Vs. Gopal Chandra Hazra - Court Judgment

LegalCrystal Citation
SubjectCommercial
CourtKolkata High Court
Decided On
Case NumberA.F.O.O. No. 156 of 1976
Judge
Reported inAIR1976Cal459
ActsPartnership Act, 1932 - Sections 33(1) and 46
AppellantGanesh Chandra Mukherji
RespondentGopal Chandra Hazra
Appellant AdvocateRanjit Kumar Banerji, ;Abhijit Kumar Banerji and ;Ashoke Kumar Banerji, Advs.
Respondent AdvocateKalipada Sinha, ;Parimal Das, ;Sudhansu Nath Ganguli and ;Kumud Ranjan Purkait, Advs.
DispositionAppeal allowed
Cases ReferredT. Krishnaswamy Chetty v. G. Thangavelu Chetty
Excerpt:
- b.c. ray, j.1. this is an appealat the instance of the defendants against the judgment and order no. 58 datedjuly 18, 1975, passed by the subordinate judge, 4th court, at alipore in title suit no. 15 of 1974 allowing the plaintiff's application for appointment of a receiver.2. the plaintiff sri gopal chandra hazra instituted a suit being title suit no. 15 of 1974 in the 4th court of subordinate judge at alipore for a decree for dissolution of partnership executed and registered on 4th september, 1964 as well as for dissolution of the second partnership registered on 4th october, 1969. and for accounts of the partnership business and for appointment of a receiver.3. in the said suit the plaintiff filed an application for appointment of a receiver stating inter alia that the plaintiff and.....
Judgment:

B.C. Ray, J.

1. This is an appealat the instance of the defendants against the Judgment and order No. 58 datedJuly 18, 1975, passed by the Subordinate Judge, 4th Court, at Alipore in Title Suit No. 15 of 1974 allowing the plaintiff's application for appointment of a receiver.

2. The plaintiff Sri Gopal Chandra Hazra instituted a suit being Title Suit No. 15 of 1974 in the 4th Court of Subordinate Judge at Alipore for a decree for dissolution of partnership executed and registered on 4th September, 1964 as well as for dissolution of the second partnership registered on 4th October, 1969. and for accounts of the partnership business and for appointment of a receiver.

3. In the said suit the plaintiff filed an application for appointment of a receiver stating inter alia that the plaintiff and the defendants Nos. 1 to 3 who were at one time employees of Patterson Engineering Co. (India) Private Ltd. constituted a partnership business under the name and style of 'Pearl Filter Enterprises'. The partnership deed was executed by them and the same was registered on September 12, 1964, with the Registrar of Firms. The firm carried on the business of water purification, engineering and all sorts of contracts in connection with filtered water supply and at the time it had its place of business at 14-D, Shankar Bose Road, Calcutta-27. Subsequently the place of business of the film was shifted to 87 Chowringhee Road, Calcutta-20.

4. The partnership was a partnership at will and the share of each partner was one fourth in the business of firm. Each of the partners contributed Rs. 2,500/- towards capital of the firm. There was a provision in the partnership deed that the defendant No. 2, Sri Kalicharan Sharma would be deemed as Managing Partner and he would be entitled to first ten per cent, of total net profit subject to revision depending on the volume of business. The partnership firm carried on the business in this way till the end of December, 1968. The plaintiff repeatedly requested the defendants to show him the accounts relating to the partnership business during the period from August 20, 1964 to December 31, 1968, but the defendants did not render any accounts of the business to him though the deed provided for inspection and check up of the accounts by every partner.

5. The defendants who are in majority conceived a device to start the partnership afresh in the same name and style purporting to commence from 1stJanuary, 1969 without the partnership, registered in 1964, dissolved and in pursuance of their design the defendants induced the plaintiff to execute a fresh partnership deed along with the defendants on 9th of June. 1969, for the same purpose and the said partnership was registered with the Registrar of Firms on 4th October, 1969. The business of the firm was carried on the basis of this 2nd partnership agreement. But the defendants failed and neglected to show the plaintiff the accounts of the business for the period from August 20, 1964 to December 31, 19R8 and to make adjustment of accounts. The plaintiff's further allegation is that the accounts are not properly maintained. The defendants withdrew huge sums of money for their personal use and benefit and grossly mismanaged the affairs of the partnership business. It was also alleged that the defendants in collaboration with the employees of the firm refused the plaintiff inspection of the books of accounts and other works of the partnership firm. On repeated requests by the plaintiff a general meeting was convened on 6th January, 1971, at 1 p.m. for discussion of the affairs of the partnership business. The plaintiff by his two letters dated 5th January, 1971 and 6th January, 1971 requested for inclusion of certain items in the agenda of the said meeting. The said meeting commenced and the plaintiff and the defendants attended. But as pre-arranged amongst the defendants the meeting was abruptly stopped as some of the defendants left the meeting on the pretext of some engagement.

6. The plaintiff, on 14th of May, 1971, in order to safeguard his own interest and in the interest of partnership, sent letters to the banks concerned not to honour the cheques presented to them if the plaintiff was not found to be one of the signatories to the cheques.

7. On 10th of June, 1971, the plaintiff received a notice dated 8th June, 1971, from the defendants proposing to hold a meeting of the partners on 12th June. 1971, for consideration of certain agenda. In the said notice however tbe defendants, it was submitted, with ulterior motive did not mention the hour of the meeting.

8. The plaintiff reached the place of the meeting on that day at 10 a.m. and came back after waiting there in vain for more than an hour as none of the defendants was present at that time and no meeting was held. The plaintiff in-formed the defendants about this by letters on that very day i.e., 12th June, 1971.

9. The plaintiff received a letter dated 12th June, 1971, with a copy of the resolution of the meeting held on 12th June, 1971 from the defendants. It was decided in the said resolution that the plaintiff be compelled to retire as partner of the firm. The defendants, however, cancelled the notice of the meeting dated 8th June, 1971, as well as the resolution dated 12th June, 1971, passed in the said meeting. The plaintiff received a letter dated 14th June, 1971, from the defendants intimating that he had been retired from the partnership firm with effect from 14th June, 1971, AS a partner. It has been submitted that the defendants have no right to expel him from the partnership. Moreover, the said resolution was passed mala fide and not in good faith and before passing the same the plaintiff was not given any opportunity of being heard in the meeting.

10. After the alleged retirementof the plaintiff from the partnership the defendants have brought into being another partnership amongst themselves under the same name and style for carrying on the same business. The plaintiff tried to refer the matter to arbitration but the defendants rejected his proposal on giving out that the plaintiff was not a partner of the said business. The defendants also caused a notification to be published in the Calcutta Gazette stating that the plaintiff had been retired as a partner of the firm. It has been submitted that the said notification is malicious, motivated and of no legal effect and so not binding on the plaintiff. The plaintiff has submitted that the partnership business of 1971 is nothing but a continuation of the 2nd partnership and the first partnership. The plaintiff in order to dissolve the partnership firm issued notices dated 14th July, 1971, on the defendants. The partnership has been carried on with the assets of the first and second partnership and the accounts of the first and second partnership have not been settled.

11. It has been submitted that there is reasonable apprehension that the property, assets and income of the partnership business at the hands of the defendants are in danger of being wasted, misused and dissipated and as such a receiver should be appointed immediately for taking possession, custody andmanagement of the said partnership business and its assets and income during the pendency of the suit.

12. The defendants filed an objection to plaintiff's petition for appointment of receiver stating inter alia that the plaintiff was in charge of the accounts of the partnership business and as such he was conversant with, the accounts of the business. The plaintiff always tried to seize upper hand in the firm and held designs to control the entire business. The plaintiff being a law graduate, the first and second partnership deeds were drafted by his friends according to his advice. The plaintiff advised the defendants not to dissolve the first partnership. The defendants always depended on the plaintiff in legal matters and they always abided by the suggestions and instructions of the plaintiff. Though in charge of accounts he did not prepare the accounts properly and he did not attend office regularly. It was due to his default in preparation of accounts, the Returns before the Income-tax and Sales Tax authorities could be filed with great difficulty in time. The plaintiff's activities always created obstacles in the daily work of the partnership firm. He always kept money with him and accordingly the firm could not run properly. The plaintiff having the charge of accounts and the account books and papers, counterfoils of cheques were in his custody. The plaintiff was always aware of the profits of the partnership business. In fact, till the partnership of 1969, there were hardly any profits and most of the income was appropriated towards development of and/or towards expenses of running and organising the business. The plaintiff drew his monthly allowance of Rs. 700/- on May 12, 1971 and on May 14, 1971 he wrote to the Banks to stop payment of cheques of the firm without prior intimation to other partners unless the cheques bore his signature. These acts of the plaintiff were detrimental to the partnership business and so the defendants were compelled to retire him from the partnership after giving notice by passing a resolution to that effect on June 12, 1971. The said resolution was, however, cancelled and another resolution was passed in the meeting held on 14th June. 1971 retiring him from the partnership business in accordance with Clause 17 of the Partnership Deed of 1969. Thereafter a new partnership was executed and registered by the defendants in 1971 for the purpose of carrying on the business. Thepartnership of 1969 has thus been dissolved and as such it is neither just nor convenient that a receiver should be appointed immediately for taking possession, custody and management of the partnership property, its assets and income as the plaintiff has no concern with the present partnership business.

13. An affidavit-in-reply was filed on behalf of the petitioner reiterating the statements and allegations made in the petition. It has also been denied that the application was a belated one and the same was barred by principles of waiver, estoppel and acquiescence.

14. On July 18, 1975, the learned Subordinate Judge, 4th Court, Alipore, by Order 'No. 58 held that the resolution expelling the plaintiff from partnership was made not in good faith by the defendants. The learned Subordinate Judge further held that the partnership of 1971 was being carried on with the assets of the second partnership and the accounts of the second partnership were not settled. The plaintiff has right and interest in the properties of the partnership of 1971. Sri Ramendra Nath Ghose, Advocate was appointed receiver and he was directed to take charge of the partnership firm 'Pearl Filter Enterprises'. The receiver has also been directed not to allow the plaintiff to enter into the office of the business nor to interfere with any function of the firm. The receiver will operate all the bank accounts of the firm on behalf of all the partners and the defendants are permitted to run the business.

15. It is against this judgment and order this appeal has been preferred.

16. Mr. Ranjit Kumar Banerjee, learned Advocate appearing on behalf of the appellants has submitted that the partnership at will entered into between the plaintiff and the defendant Nos. 1 to 3 stood dissolved and the defendants appellants have constituted a new partnership by executing and registering a partnership deed on 18th of June, 1971. The present partnership business is carried on by the defendants appellants on the basis of this new partnership. The plaintiff is not a partner in respect of this partnership business and as such there is no question of appointment of a receiver in respect of this partnership business. It has further been submitted by Mr. Banerjee that the plaintiff himself by serving notice on July 14, 1971, dissolved the partnership business.

17. Mr. Banerjee has also submitted that the plaintiff has been retired as partner of the partnership firm named and styled as 'Pearl Engineering enterprises' in accordance with the terms of Clause 17 of the partnership deed executed by the plaintiff and the defendants in 1969 by unanimous resolution of the defendants appellants passed at a meeting held on 14th of June, 1971. The plaintiff, therefore, ceased to be a partner of the said business on and from 14th of June, 1971, after passing of the said resolution. The defendants appellants issued a notice to the plaintiff respondent requesting him to withdraw the letter sent by him to the banks of the firm asking them not to encash cheques unless the same bore his signature as the said letter purported to paralyse the working of the firm. The plaintiff respondent was also asked to explain why such letter was issued by him to the banks without prior information to them. It has also been submitted that the notice dated 8th June, 1971, convening a meeting of the partners on 12th June, 1971, for considering certain agenda was sent to the plaintiff and after due consideration of the entire matter a unanimous resolution was passed by all the partners present to the effect that the plaintiff be compelled to retire 33 a partner of the firm 'Pearl Filter Enterprises' as his acts amounted to misconduct. The said resolution was, however, cancelled and on 14-6-1971 another resolution was passed unanimously retiring the plaintiff as partner from the said partnership firm. It has therefore been submitted that the said resolution was passed bona fide after due service of notice on the plaintiff and as such the said resolution is legal, valid and binding upon the plaintiff. Mr. Banerjee has next submitted that the plaintiff though compulsorily retired from the partnership business on 14th July, 1971, brought the present action as late as on 3rd of March, 1974 and filed this application for appointment of receiver. It has been further submitted that on the basis of the plaintiff's letter the accounts of the partnership firm in the banks had been frozen and the business came to a standstill. It Is with great difficulty the defendants after constituting a new partnership in 1971 have been running the partnership business and as soon as the said partnership business became a good profit earning concern, the plaintiff in order to have his share of the profits of the business brought this action and filed, thisapplication for appointment of a receiver. It has been submitted that the plaintiff having acquiesced in the partnership business being carried on with the assets against his own alleged right cannot now come to court for a receiver and the application should be dismissed on the ground of unusual laches and delay.

18. It has lastly been contended by Mr. Banerjee that the partnership business has been dissolved and as such the plaintiff is no longer a partner of the new partnership firm which is carrying on the business. In the circumstances there cannot be any appointment of a receiver. The plaintiff can, at best, claim his share of the profits or interest in respect of his share of the property of the firm as there has been no accounting of the partnership business after dissolution ot the partnership. In this case it has been submitted that considerable sum of money amounting to Rs. 52,000/- more or less is lying frozen in the different banks in the name of the partnership firm and the said amount is quite sufficient to meet up the amounts that will be payable to the share of the plaintiff after accounting. As such there is no apprehension that the plaintiff would sustain any loss if no receiver is appointed.

19. Mr. Kalipada Sinha, learned Advocate appearing on behalf of the respondents has submitted that the instant action being a partnership action and the reliefs claimed being one for dissolution of partnership and for accounts it is a fit case for appointment of receiver in order to preserve the assets of the partnership so that the plaintiff will not be deprived of having the decree that will be passed satisfied. Mr. Sinha has also submitted that the plaintiff repeatedly requested for rendering accounts for the period from 20th August, 1964 to 31st December, 1968, but the same was not done nor the said accounts were shown to the plaintiff. Moreover, the defendants have illegally expelled the plaintiff from the partnership and as such there is every apprehension of the partnership assets being lost or dissipated if a receiver be not appointed in respect of the assets and business of the partnership firm. Mr. Sinha has next submitted that though the plaintiff has been compulsorily expelled from the partnership firm yet there has been no accounting of the partnership business and the partnership business is being run with the assets of the previous partnership. The plaintiff, it is therefore submitted, is entitled toeither a share of the profits accrued to the partnership in proportion to his share in the property of the partnership or at his option he is entitled to get interest in respect of the share of the assets of the partnership business as provided in Section 37 of the partnership Act and Section 88 of the Indian Trusts Act,

20. It has also been submitted by Mr. Sinha, learned Advocate that the alleged notice for retirement of the plaintiff was not issued in good faith and the alleged resolution was passed in the meeting dated 14th July, 1971, without observing the rules of natural justice and as such the said resolution is not legal and valid one and so is not binding on the plaintiff.

21. It appears that the plaintiff and the defendants 1 to 3 constituted a partnership business under the name and style of 'Pearl Filter Enterprises' and a partnership deed was executed and registered by them on September 4, 1964. The said deed was registered with the Registrar of Firms on September 12, 1964. The partnership business was carried on on the basis of the said partnership deed till June 8, 1969, and on June 9, 1969, the second partnership deed was executed and registered on almost the same terms and conditions and for the same purpose by the plaintiff and the defendants for carrying on the business under the same name and style only the provision for payment of 10 per cent, of net profit to defendant No. 2 was not made. Clause 17 of the said deed of partnership runs as follows:

'That if the majority partners found that any existing partner is doing any misconduct or any irregularities in carrying out his duties, for the said firm, then the other partners by taking unanimous decision can compel him to retire and in such case the retiring partner cannot pray or apply for any further reconsideration whatsoever.'

The plaintiff, it appears, withdrew his monthly allowance of Rs. 700/- on May 12, 1971 and on May 14, 1971, sent letters to the banks of the partnership firm to stop payment of cheques of the firm unless those cheques bore the signature of the plaintiff. It appears that on the basis of the said letter the State Bank of India as well as the National Grindlays Bank Ltd., by letters intimated the partnership firm that they would not be able to honour the cheques unless the samewere signed by the plaintiff and thus stepped payment on cheques issued by the partnership firm. The defendants on 2nd June, 1971, sent a notice to the plaintiff intimating him that in view of his letter to the banks dated 14th of May, 1971, payments have been stopped and he was requested to intimate them the reasons for issuing such letters to the banks which has totally dislocated the business of the firm and has led to the closure of the business. The plaintiff was also asked either to withdraw the letter sent to the banks or to justify his action within three days from the date of the receipt of this notice. No reply was given to the said notice by the plaintiff. The defendants, thereafter, sent a notice dated 8th of June, 1971, intimating the plaintiff that a meeting of the partners will be held on 12th of June, 1971, at the office of the partnership firm at 87, Chowringhee Road, for considering the agenda. In the said notice, however, the hour of the meeting was not mentioned and as such it has been stated by the plaintiff that he went on that day to the place of the meeting at 10 a. m. and waited there for over an hour but as- none of the defendants was present there he left the place of meeting. It appears that the plaintiff was served with a copy of the resolution passed in the said meeting whereby he was compulsorily retired as partner from the said partnership firm on the ground of his misconduct as well as gross irregularities in carrying out his duties of the firm and his action paralysed the working of the firm and damaged the fair name of the firm. The said resolution was passed unanimously retiring him in accordance with Clause 17 of the Partnership deed. It also appears that the said resolution was subsequently cancelled and another resolution was passed unanimously at the meeting of the partners held on 14th of June, 1971, retiring the plaintiff as partner from the said partnership business on and from the said date. It is thus evident from the notice Annexure-P dated 2nd June, 1971, that the plaintiff was asked to show cause. Moreover, the plaintiff was also given notice of the meeting of the partners wherein the resolution retiring him from the partnership was unanimously passed. The said resolution, it appears, has been made quite in conformity with the provisions o Clause 17 of the partnership deed executed and registered in 1969 and as such there is no infirmity or fraud or mala fide in the said resolution which willrender it illegal, invalid or in any way unenforceable. Under Section 33 of the Partnership Act, 1932 (Act 9 of 1932) it has been expressly provided that a partner may be expelled from a firm in the exercise of good faith of powers conferred by contract between the. partners. The argument that the said resolution was not made in good faith and no opportunity of hearing was given to the plaintiff prior to the passing of the said resolution is wholly unsustainable as I have already stated that the notice to show cause was duly given to the plaintiff. The resolution was passed by the partners unanimously at a meeting. The said partners cannot be said to constitute a judicial or quasi-judicial tribunal and as such the question of observance of the rules of natural justice cannot and does not arise under any circumstance,

22. 'Subject to the terms of the partnership agreement, where there is power to expel for misconduct the delinquent partner is not entitled to prior notice of the grounds of complaint or to an opportunity of hearing for explaining his conduct, unless the other partners are tribunal to decide whether an event has happened justifying his expulsion'. (Lindlay on Partnership, i3th Edition page 445). In : AIR1954Pat53 , Ram Narayan v. Kashinath Jagnarain, it has been observed that Section 33 of the Partnership Act only applies where the power of expulsion has been reserved in the articles of partnership and where the power has been exercised in good faith by all the partners whose concurrence might be necessary under the articles of partnership.

23. In (1910) 1 Ch D 495, Green v. Howell the fact in short was that in the deed of partnership there was a provision that in the event of either partner committing any breach of the partnership of articles or any other flagrant breach of his duties as a partner, the other partner might by notice in writing terminate the partnership, provided that if any question should arise whether a case had happened to authorise the exercise of his power it should be determined by arbitration, if the offending partner so requested in writing within a given time. Under this clause one partner, without any preliminary warning to his co-partner, served him with a notice ol dissolution on the ground that he had committed breaches of certain specified articles and had also committed a flag-rant breach of his duties as a partner. It was held that in the absence of mala fides, it was not a condition precedent to the validity of the notice that the partner serving the notice should before serving it disclose to his co-partner the causes of complaint against him or give him an opportunity of being heard in his defence, and that the notice was valid.

24. With regard to the submission that the plaintiff is entitled to his share of the profit accrued to the partnership firm in proportion to his share of his property of the firm even though he ceased to be a partner inasmuch as after the dissolution of the partnership firm the defendants who constitute the new partnership have been carrying on the business of the firm with the property of the first and second partnership it appears that the earlier partnership business which was carried on till 8th of June, 1971, by the plaintiffs and defendants came to an end on 14th of June, 1971. It also appears that the plaintiff himself served notices on 14th of July, 1971, on all the defendants dissolving the partnership business. Hence the partnership which was a partnership at will stood dissolved in accordance with the provisions of Section 43 of the Partnership Act, 1932, by the issuance of notice by the plaintiff to that effect. It is apparent that in spite of the dissolution of the partnership there has been no accounting of the partnership business carried on till the date of dissolution. It is also apparent that the accounts of the partnership business had been frozen on the basis of the letter dated 14th of May, 1971, issued by the plaintiff to the State Bank of India as well as the National & Grindlays Bank Ltd., and a sum of over Rs. 52,000/- is lying frozen in the said accounts. It has been contended on behalf of the defendants appellants that after the freezing of the accounts of the partnership firm the new partnership was formed by them excluding the plaintiff and the partnership business is being run with their own funds. It is not possible to decide at this stage whether the present partnership business is being carried on with the funds exclusively supplied by the defendants or not. It is clear that there has been no accounting of the 1st and 2nd partnership business that was carried on till the constitution of the new partnership firm by the defendants on June 9, 1971. Moreover, it appears fiom Clause 3 of the deed of partnership dated 18th of June, 1971, that the capitalof each partner shall be such as will stand to their credit in the books of the firm as on the 14th day of June, 1971. This suggests that the new partnership business is carried on with the assets of the previous partnership and the plaintiff is, therefore, entitled to a share of the profits or at his option to interest at the rate of 6 per cent, per annum on the amount of his share in the property of the firm in accordance with the provisions of Section 37 of the Partnership Act, 1932, This is of course a tentative finding and is subject to final decision of the suit on merits. In : AIR1954Pat53 , Ram Narayan v. Kashinath Jagnarain, it has been observed that there exists a fiduciary relationship between the surviving partner and his former partner or the representative of that former partner. The relationship is a fiduciary relationship and in a matter of this description the authorities establish that equity will never permit the person standing in that relationship to another person to trade with the property of that other person for his own profit. He must hold the profit he is making in trust for the owner of the property, the use of which produced the profit. This principle is also recognised in Section 88 of The Indian Trust Act. In AIR 1929 Mad 456, P.M. Ramkrishna Ayyar v. P. Mathusami Ayyar it has been observed that the retiring partner can, in the absence of as agreement to the contrary, claim not only interest but at his option either a share of the profits of the business which was continued with his assets or interest on the amount of his share of the partnership assets.

25. The next question that comes up for consideration is whether in these circumstances it is just and proper to appoint a receiver in respect of the partnership business as well as its assets during the pendency of the suit. It has been urged that the action being a partnerhip action and the relief claimed is one for dissolution of the partnership and for accounting a receiver should be appointed in order to protect and preserve the subject-matter of the lis from being lost or damaged or in any way dissipated. In the application for appointment of re-'ceiver the plaintiff has alleged that the defendants 1 to 3 did not render accounts of the partnership business for the period from 20-8-1964 to 31-12-1968 nor he was shown the accounts of the said business for the said period and as such he was deprived of his due share of the profits oi the said business. It has also beenalleged that by letters dated 5th of January, 1971 and 6th of January, 1971, he brought this matter to the notice of the defendants and requested them to include it as one of the items in the agenda of the meeting of the partners to be held on 6th of January, 1971. It also appears that on 14th of May, 1971, the plaintiff sent letters to the defendants appellants alleging that they had not shown him the accounts of the aforesaid period and that large sums of money had been drawn by them from the fund of the partnership business for their own use. As such there is reasonable apprehension that the property, assets and income of the partnership business at the hands of the defendants are in danger of being wasted, misused and to prevent this a receiver needs to be appointed to take charge of the same during the pendency of the suit. It has been stated in paragraph 7 (m) of the petition of objection filed by the defendants that the plaintiff became so overbearing and conducted himself in such a high-handed manner that the meeting could not consider all the matters of the agenda though it sat for nearly two and a half hours. There is no denial to this statement in the affidavit-in-reply filed by the plaintiff on June 19, 1974. It also appears that the plaintiff drew his monthly remuneration as usual on 12th May, 1971 and on 14th May, 1971, he sent letters to the State Bank of India as well as to other banks of the partnership firm instructing them to stop payment on cheques issued by the firm unless those cheques bore his signature. The plaintiff on the same day issued letters to the defendants alleging that he was not shown the accounts of the period from 20-8-1964 to 31-12-1968. The plaintiff who is a law graduate was undoubtedly in charge of the accounts of the said partnership business as will be evident from his letter dated January 15, 1969, addressed to Ramier Subbarayan, the defendant No, 3 and the books of accounts and cash book and other papers of the partnership business were under his custody. Moreover, it appears from the letter dated 14fh of June, 1971, that certain books of accounts were lying in his custody. The allegation of misconduct on the part of the defendants in carrying on the partnership business was made only on 14th of May, 1971, when the said letter stopping payment on cheques issued by the partnership firm were sent to the different banks. It also appears from the 1st and 2nd partnership deed executed in1964 and in 1969 respectively that the plaintiff contributed a sum of Rs. 2,500/-only towards capital. It also appears from the petition of objection filed by the defendant to the application for appointment of receiver that till the partnership of 1969 there was hardly any profits and most of the income of the partnership business was appropriated towards development and/or towards expense of running and organising the said business. It has also been stated that the plaintiff being in charge of the accounts a? also of finance were fully aware of this position.

26. The court will not as a matter of course appoint receiver of the partnership assets even where a case for dissolution has been made. The very basis of a partnership contract being the mutual confidence reposed in each other by the parties, the court will not appoint a receiver unless some special grounds for its interference is established (Kerr on Receivers, page 68).

27. In this case the partnership business stood dissolved and the defendants have been carrying on the partnership business after constituting a new partnership amongst themselves. The plaintiff is not a partner of the new partnership business run on the basis of the partnership agreement made in June, 1971. As such there is no question of dissolution or winding up of this partnership business. Moreover, it is evident that a sum of Rs. 52,000/- more or less has been lying frozen in the different banks in the name of the partnership. The said sum is quite sufficient to meet up the payments that will have to be made to the plaintiff after accounting of the previous partnership business. Furthermore, the appointment of a receiver over a running partnership business will tend to hamper the smooth running of the said business and thus ultimately may destroy the business itself. In : AIR1955Mad430 , T. Krishnaswamy Chetty v. G. Thangavelu Chetty, it has been observed that there are five principles which may be described as 'Panch Sadachar' for exercising equity jurisdiction in appointing receiver:--

(a) The appointment of a receiver pending a suit is a matter resting in the discretion of the Court. The discretion is not arbitrary or absolute but is a sound and judicial discretion to be exercised for the purpose of permitting the ends of justice and protecting the rights of allparties interested in the controversy taking into consideration of all the circumstances of the case.

(b) The Court should not appoint a receiver except upon proof by plaintiff that prima facie he has a very excellent chance of succeeding in the suit.

(c) The plaintiff must show some immediate danger or loss or emergency demanding immediate action and of his own right he must be reasonably clear and free from doubt.

(d) An order appointing a Receiver will not be made where it has the effect of depriving a defendant of a 'de facto' possession since that might cause irreparable wrong.

(e) The court will look to the conduct of the party who makes the application for appointment of a Receiver and will usually refuse to interfere unless his conduct has been free from blame.

In this case, as I have already held, there is no apprehension of the assets ond/or income of the partnership business being dissipated by the partners nor there is any room for doubt that the decree that will be passed in the suit cannot be satisfied from out of the money lying frozen in the different accounts of the partnership firm in the banks. Hence, it is just and proper that no receiver should be appointed over the running partnership business during the pendency of the suit.

28. The prayer for appointment of a receiver is also liable to be rejected on the ground of laches and delay in bringing this action and in making this application for appointment of a receiver. The partnership of 1969 was admittedly dissolved by the plaintiff under Section 43 of the Partnership Act on 14th of July, 1971. Moreover, the plaintiff was retired from the partnership in accordance with the terms of the deed of partnership on and from 14th June, 1971, and the instant action was brought on 4th March, 1974, and the application for appointment of Receiver was made thereafter. 'Woodroffe' in his book 'Law Relating To Receivers' at page 29 has observed:-- 'As in the case of injunctions, the court will always look to the conduct of the party who makes the application for a receiver and will not interfere unless his conduct has been free from blame; and parties who have acquiesced in property being enjoyed against their own alleged rights cannot come to the court for this form of relief.'

29. The plaintiff in spite of his, compulsory retirement from the partnership as early as on l4th of May, 1971, and in spite of his issuance of the notice of the dissolution of the partnership at will under Section 43 of the Partnership Act on 14-7-1971 waited for about three years and allowed the other partners to carry on the partnership business with great difficulty inasmuch as the funds of then partnership firm lying in the different banks were frozen owing to the instructions issued by the plaintiff. It was only after the new partnership business run by defendants 1 to 3 has become a very profitable concern that the plaintiff has come forward with the instant suit and the instant application for appointment of a receiver. Hence on the ground of this unnecessary laches and delay in bringing the action the prayer for appointment of a receiver is liable to be rejected.

30. For the reasons aforesaid the contentions raised on behalf of the appellant having succeeded this appeal is allowed. The judgment and order No. 58 dated 18th July, 1975, passed by the Subordinate Judge, 4th Court, Alipore, is hereby set aside. The appellants shall not withdraw or in any manner deal with the sums of money lying frozen in the State Bank of India and in the National and Grindlays Bank Limited in the name of the former partnership firm 'Pearl Filter Enterprises'1 of which the plaintiff was a partner till the decision of the said suit. In the facts and circumstances of the case there will be no order as to costs. Let the suit be disposed of expeditiously.

N.C. Mukherji, J.

31. I agree.


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