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Mohammed Kamil and ors. Vs. Haji Hedayetulla - Court Judgment

LegalCrystal Citation
Decided On
Reported in90Ind.Cas.492
AppellantMohammed Kamil and ors.
RespondentHaji Hedayetulla
receiver, remuneration of - partnership--partner, whether can carry on business privately--liability to account for profits of business carried on privately. - .....for partition of partnership properties and for accounts. a preliminary decree was passed by the learned judge directing accounts to be taken from the 11th october 1913 up to the 3rd august 1915, and declaring the shares of the plaintiffs and the defendants therein as being a half and half respectively. on appeal preferred by the plaintiffs a direction was inserted in the decree by this court that the accounts were to be taken of the business also from the 3rd august 1915 to the date of the final decree and making all just allowance including fair remuneration to be allowed in favour of the defendant for managing the business and that the profits for that period will be divided in the same shares as mentioned before. the decree passed on appeal as aforesaid was carried on appeal to the.....

Mukherji, J.

1. This is an appeal preferred by the plaintiffs from a final decree passed by the District Judge of Birbhum in a suit for dissolution of partnership, for partition of partnership properties and for accounts. A preliminary decree was passed by the learned Judge directing accounts to be taken from the 11th October 1913 up to the 3rd August 1915, and declaring the shares of the plaintiffs and the defendants therein as being a half and half respectively. On appeal preferred by the plaintiffs a direction was inserted in the decree by this Court that the accounts were to be taken of the business also from the 3rd August 1915 to the date of the final decree and making all just allowance including fair remuneration to be allowed in favour of the defendant for managing the business and that the profits for that period will be divided in the same shares as mentioned before. The decree passed on appeal as aforesaid was carried on appeal to the Privy Council, but the said appeal was dismissed. In accordance with the aforesaid directions the usual investigations were held and the final decree that was ultimately passed is the subject-matter of this appeal.

2. The first ground urged on behalf of the appellants is that in calculating the profits of the business for the period from the 3rd August 1915 to the date of the final decree no remuneration should have been allowed to the defendant for the period during which he acted as Receiver appointed by the Court in respect of the partnership, and further that for such period for which he may be allowed remuneration, what has been awarded to him is excessive. As regards the first branch of this contention the position is this: The defendant was appointed Receiver on the 23rd September 1916 on the principle that 'if the Court on being applied to for the appointment of a Receiver thinks that a proper case for such appointment is made, and the party actually carrying on the business has not been guilty of misconduct so as to render it unsafe to trust him, the Court generally appoints him Receiver without a salary'. The learned District Judge found that the defendant was not guilty of any act of bad faith and was actually carrying on the business and being of opinion that the business would suffer if a stranger were appointed on a fixed remuneration, appointed the defendant as Receiver without remuneration as he was willing to act on that condition. The defendant deposited Rs. 5,000 as security and accepted the appointment. It is said that as the defendant consented to act as Receiver without remuneration he should get no allowance for managing the business. It appears, however, that the learned Judge did not pass any order interfering with the management of the business and the business continued to be carried on as before by the defendant. The terms of the defendant's appointment as Receiver limited his acts as such to the keeping of the assets and profits and accounts of the business and submitting proper accounts thereof. By consenting to act as Receiver without remuneration, the defendant did not forego his right to such remuneration as he would be entitled to for managing and carrying on the business. Moreover, this objection, if it had any substance, would have been put forward when this Court expressly directed by its decree dated the 27th January 1921 that the defendant should get all just allowance including fair remuneration for managing the business. It should be remembered that at that date the defendant had been acting as Receiver for about 15 months. The second branch of this contention rests upon the statement made by the defendant in his written statement that if Fazil, the father of the minor plaintiffs, or the defendant would personally conduct the business of the shop, the condition was that he would get Rs. 10 as diet money and expenditure, and also upon the evidence of the defendant to the same effect. In support of this contention reference is also made to the defendant's evidence that after the death of Fazil the shop was in charge of one Abdul Rauf who used to get Rs. 55 or Rs. 60 a month as salary. The arrangement between the two brothers which obtained at a time when they jointly worked for the business, or the salary paid to a servant for doing the ordinary works in a shop can hardly be a criterion for determining the amount of remuneration that should be allowed to a surviving partner who employs all his energy, skill and experience for carrying it on. The Commissioners fixed his remuneration at 25 per cent. of the profits; the learned Judge has increased it to 6-annas in the rupee. The reason given by him for the variation is that when the shop was originally started the capitalist partner used to get at first 4 annas in the rupee and afterwards 3 annas in the rupee and the minor plaintiffs, after the death of Fazil, were more or less in the position of capitalist partners. While on the one hand the reasons given for departing from the conclusions of the Commissioners may not be very cogent, on the other hand it cannot be said that the variation is an altogether unreasonable one. The remuneration as allowed by the learned Judge works out at the rate, roughly of Rs. 150 a month, which cannot, in the circumstances of the case, be considered as altogether unreasonable or excessive.

3. The next ground of objection is to the effect that the assessment of profits has not been made on the basis of or in proportion to the assets which the respective parties had in the partnership in the different years. It is pointed out that the defendant withdrew from time to time large sums of money and on some occasions his withdrawal had the effect of taking out of the partnership all the assets that he had put in. This argument is based upon an examination of the statement of profits as made by the Commissioners and dated the 9th and 14th May 1922. It is true that at first sight an inspection of the statements leads to the same conclusion. On a close examination of them, however, it is clear that if the profits and respective shares of the parties therein are taken into account, the withdrawals made by the defendant were well within the amounts which would be due to him as profits, and that at no time would the amount of money belonging to the defendant and available to the partnership be less than the money which the minor plaintiffs had in the partnership. The learned Judge has been at great pains to demonstrate it in his judgment and he has made the calculations up to a certain point. The respondent has pursued the calculations up to the date of the final decree, and we are satisfied that the conclusion is correct. In fact, as the learned Judge has pointed out in his judgment, this argument though originally pressed, was ultimately abandoned as the calculations showed that the plaintiffs were at a disadvantage as a result thereof.

5. The third contention put forward on behalf of the appellant is to the effect that the defendant was carrying on other and rival businesses to the prejudice of the partnership in suit, and that the profits of those concerns should have been taken into account. The precise nature of this objection as formulated before the learned Judge was that these businesses were started by means of the monies belonging to the partnership and the plaintiffs, therefore, are entitled to a share in the profits of these businesses as well. In this Court the objection has been slightly varied, and it has been urged that the defendant, without the consent of the other partners, carried on businesses of the same nature and competing with that of the firm, and must, therefore, account for and pay over to the firm all profits made by him in such businesses and he must also make compensation to the firm for any loss occasioned thereby. The argument is founded upon the evidence that out of the withdrawals made by the defendant, loans were given by him to persons, some of whom are his close relations, a son and a nephew for carrying on businesses of a similar nature and one of these businesses was located in the town of Suri itself where the partnership business in suit was carried on, Now this objection in this latter form was not put forward at any of the earlier stage of the suit, and it is clear from the order of this Court passed on the 8th August 1921 on the application made by the plaintiffs for further directions that it was in the contemplation of the Court that 'there may be some controversy as to whether a particular business has or has not been carried on with money which would have belonged to Fazil if accounts had been taken on the 3rd August 1915'. Upon the finding of the learned Judge that the withdrawals made by the defendant were well within the amount of profits which accrued to the defendant's share--a finding which we endorse--no question can rise as to the monies lent as aforesaid belonging to Fazil's share, assuming that Fazil was alive at the dates of these loans. The controversy contemplated by this Court's order referred to above cannot, therefore arise. As to the other contention noted above there are no materials upon which it may be held that the other businesses were businesses of a rival or competing nature or were such as would justify accounts being taken of their profits in determining the rights and liabilities of this partnership. The defendant was not cross-examined as to these matters when he was in the witness-box. After his evidence was completed the plaintiffs applied on the 20th July 1921 for directing the Commissioner to take the accounts of the different businesses mentioned therein. It was not possible for the learned Judge to accede to the prayer at that stage as nothing had been established till then which would justify the assumption that the defendant was liable to account to the plaintiffs for the profits of those businesses. The defendant was examined before the Commissioners in October 1921 and his cross-examination after a certain stage appears to have been given up. Thereafter, towards the end of December 1921 an attempt was made by the plaintiffs to get the defendant into the witness-box again in order to cross-examine him further, but it failed. Judging from the various orders that were passed in respect of this matter, it cannot be said that the plaintiffs were entitled to have a further opportunity of cross-examining the defendant. In our opinion, there are no materials on the record upon which we can reasonably hold that the profits of those other businesses should be taken into account in determining the liabilities under the partnership.

6. The mere facts that there were similar businesses in which the defendant was interested is not enough to justify the profits of those businesses being brought into the accounting. Unless expressly restricted by agreement, a partner may carry on another business privately, so long as it does not compete with and is not connected with the business of the firm and so long as he does not represent it to be the business of the firm. He is not bound to account for the profits of a non-competing business, even though he may be enabled to push the private trade better than would otherwise be the case, by reason of his connection with the firm.

7. The next objection relates to certain items in the accounts which are referred to in objections Nos. 5, 6, 9, 12,17, 20 and 21 as set out in the Report of the Commissioner dated the 9th July 1919. The plaintiff's objection which is common to all these items is that these items have been entered in the accounts as being monies taken by the defendant or his officer Abdul Rauf to Calcutta for the purchase of goods but no vouchers or details are forthcoming as to the goods purchased out of those monies. The explanation offered by the defendants as to these items generally is that both the partners had implicit confidence in each other and that though some notes of such purchases were kept they are not exhaustive. This explanation has been accepted by the learned Judge; and in view of the fact that during the period under account Fazil also took from time to time about Rs. 48,000 to Calcutta for purchasing goods for the shop and in no case detailed or full accounts of the purchases made by him are to be found in the books, the explanation, in our opinion, has been rightly accepted. As to the last of the aforesaid items the further objection of the plaintiffs is directed to the amount of Rs. 750 which, according to the Commissioner, would be due to the credit of the plaintiffs as the result of a double entry incorrectly made, but which has been disallowed by the learned Judge. The learned Judge has gone very fully into the matter, and the respondent has satisfied us that the learned Judge is right in his conclusion that having regard to the manner in which the accounts used to be kept the fact of a double entry, if any, does not matter, for Fazil was well enough at the time to know and see what money was actually in the shop at the time.

8. The last objection of the defendants is directed against the order passed by the learned Judge as regards the costs. The order of the learned Judge proceeds on the basis that the plaintiffs need not have instituted the suit, that the objections preferred by them were altogether frivolous and that they protracted the proceedings before the Commissioners and unnecessarily delayed matters challenging every explanation and statement of the defendant and putting him to strict proof thereof and thereby causing him extreme inconvenience, harassment and pecuniary loss. We have considered the matter very carefully and we share in the view taken by the learned Judge of the plaintiffs' conduct in connection with the suit. We think if the plaintiffs had exhibited a little more of the spirit of tolerance, a good deal of the proceedings could easily have been avoided. We do not agree with the appellant's contention that a suit was absolutely necessary merely because there was no adjustment of accounts before the death of Fazil. Those responsible for the institution of the suit could very well have inspected the accounts, of which the defendant does not appear to have made any secret at any time, and if they had done so, this litigation perhaps would not have been necessary. The conduct of the respondent in depositing in 1916 an amount of Rs. 8,200 for the benefit of the minor plaintiffs is certainly praiseworthy, and we are not satisfied that there was at any time a refusal or failure on his part to disclose the accounts, such accounts as he had of the business, for the inspection of the plaintiffs.

9. The grounds urged in support of this appeal all fail, and the appeal, therefore, must be dismissed with costs.

Walmsley, J.

10. I agree.

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