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PulIn Bihari Roy and ors. Vs. Mahendra Chandraghosal and ors. - Court Judgment

LegalCrystal Citation
Decided On
Reported inAIR1921Cal722,67Ind.Cas.10
AppellantPulIn Bihari Roy and ors.
RespondentMahendra Chandraghosal and ors.
Cases ReferredHem Chandra v. Kali Prosanna Bhaduri
civil procedure code (act v of 1808), section 151, order xli, rules 20 and 38, order xxx, rule 1(2) - appellate court--respondent, addition of--suit by or against a firm in the firm-name--names of partners disclosed--death of a partner--legal representative, whether must be added as party--determination of partnership--notice--continuance of partnership--presumption--partner carrying on business of same nature without consent of other partners--contract act (ix of 1872), sections 257 and 258--obligation of partner to render true accounts--notice to produce accounts--non-compliance--presumption--evidence act (i of 1872) sections 66, 114(g) and 164. - .....radhaballabh saha; the third party defendants are members of a firm named gangadas seal. in the salt business, the rays claim a five-annas nine-pies share, the ghosals four-annas share, the sahas four annas six-pies share and the seals one-anna nina-pies share, the business was managed by the different sets of partners during the four quarters of the year by turns, namely, the ghosals during the first quarter, the seals during the second quarter, the sahas during the third quarter and the rays during the fourth quarter. the partnership of s started in 1306 b.e. for the purpose of importing salt from foreign ports and selling it in chittagong. the rays had a firm in calcutta which ordinarily purchased salt for the joint business, and the purchase money had to be paid by the defendant.....

1. This is an appeal by the plaintiffs in a suit for recovery of money due on adjustment of accounts upon dissolution of a partnership business, called the Joint Salt Bond Business, and carried on by them and the three sets of defendants at Sadarghat, Chittagong. The plaintiffs constitute a firm styled Krishnadas Sanatan Brojendra Kumar Ray. The first party defendants are members of a firm known as Krishna Kumar Ghosal; the second party defendants are members of a firm styled Ramkamal Radhaballabh Saha; the third party defendants are members of a firm named Gangadas Seal. In the salt business, the Rays claim a five-annas nine-pies share, the Ghosals four-annas share, the Sahas four annas six-pies share and the Seals one-anna nina-pies share, The business was managed by the different sets of partners during the four quarters of the year by turns, namely, the Ghosals during the first quarter, the Seals during the second quarter, the Sahas during the third quarter and the Rays during the fourth quarter. The partnership of s started in 1306 B.E. for the purpose of importing salt from foreign ports and selling it in Chittagong. The Rays had a firm in Calcutta which ordinarily purchased salt for the joint business, and the purchase money had to be paid by the defendant partners to them at Chittagong, If there was delay in payment on the part of any set of partners, it became liable to the set which made the payment on its behalf. There was a bock kept called the order-book in which the price for sale of salt as fixed by the partners from time to time was recorded, Each set of partners could sell as much salt as it liked cut of the joint stock, but was liable for the excess taken by it over that due for its share to the get or sets of partners who might have taken less than a proportionate share. There used to be a periodical adjustment of accounts generally at the end of each quarter which is described in these proceedings as a Bantan. The term, literally signifies division. The Bantan, it is said, was intended to remove inequalities in the appropriation of salt by the partners and to settle the amount of money due among the partners inter se by reason of such inequality. In addition to the Bantan, there was a Nikash which was intended to be held annually, but in fact took place at irregular intervals. The term Nikash signifies final adjustment of accounts, and one of the points in controversy in the Court below was how far a Bantan might be treated as a final-settlement the business was carried on in this manner, according to the plaintiffs, to the end of 1320 B.E. and they claim accounts from 26th Sraban 1320 up to 30th Chaitra, 1320, as according to them the Bantan had taken place for the antecedent period. The defendants urged, on the other hand, that the Nikash which alone constitutes final account, had not been held for the period subsequent to 1316 B.E. and that the partnership did not terminate till the end of 1321 B.E. the defendants consequently claimed that accounts might be taken for the entire period between the commencement of 1317 B.E. and the termination of 1321 B.E. the Subordinate Judge has given effect to the contention of the defendants in this respect. To appreciate the fall significance of the claim of the defendants that accounts might be taken for the longer instead of the shorter period, it is essential to bear in mind that some of the plaintiffs had, during the year 1321 B.E. if not also during 1320 B. E., engaged in another salt business, and the question consequently arose whether they had rendered themselves liable to account to their partners for the profits of such separate business. The plaintiffs retorted that other partners had acted in a similar manner, specially, with respect to salt imported in S.S. Baron Balfour. The Subordinate Judge has held that the partners who had engaged in rival salt business before the dissolution of the partnership were liable to render mutual accounts. The plaintiffs have appealed against the decree of the Subordinate Judge and have assailed his decision upon every material point. The grounds which emerge for consideration may, however, be concisely enumerated, namely, first, that the Bantans which covered the period up to 25th Sraban 1320 B.E. were final adjustments and could not be re-opened; secondly, that the salt bond business was dissolved at the end of 1320 B.E. and not at the end of 1321 B. E; thirdly, that even if the partnership business be not deemed to have been dissolved at the end of 1320 B. E., each partner was entitled to have separate dealings in salt and could not be tailed upon to account for the profits of such transactions; fourthly, that if such separate dealings in salt were improper, the defendants could at most get compensation to the extent of Rs. 5,000; fifthly, that the Court should not, at this stage, have gone into the question of the custody of the account-books, and that, in any event, the investigation has been inadequate and the conclusion incorrect.

2. Before we deal with these grounds, it is necessary to refer to a preliminary objection to the competency of the appeal. In the plaint, although the suit was described as a suit by a firm against three other firms--each of them partners in the salt business--the names of the members of the firms were disclosed. During the pendency of the appeal, Brajendra Kumar Ray, one of the members of the plaintiff firm, died on the 20th Jane 1920. On the 3rd January 1921, the three sons of the deceased applied as his legal representatives to be added as parties appellants. This application, made under Order XXX, Rule 4(2)(a), Civil Procedure Code, was opposed on the ground that it was barred by limitation under Article 176 of the Schedule to the Limitation Act, which provides that an application under the Code of Civil Procedure to have the legal representatives of a deceased plaintiff or a deceased appellant made a party must be made within six months from the date of the death of the deceased plaintiff or appellant. This period of six months, it may be noted, has been reduced by Act XXVI of 1920 which received the assent of the Governor General on the 2nd September 1920 and came into force on the 1st January 1921; that, however, did not affect the position of the parties. The petitioners contended that they were entitled to apply within three years under Article 181. We hold that the application was governed by Article 176 and that as no satisfactory reasons had been assigned for the delay, the application must be dismissed. This order was made on the 21st June 1921; three days later, the surviving appellants applied to the Court to add as respondents to the appeal the legal representatives of the deceased co-appellant, who had, through their remissness, failed to join as appellants within the prescribed time. The surviving appellants urged that they should not be made to suffer by reason of a default on the part of the legal representatives of the deceased co-appellant and that the Court should, under Order XLI, Rule 20, Order XLI, Rule 33, or, if, neither of there rules was considered applicable, in the exercise of its inherent power recognised in Section 151, add as respondents to the appeal the representatives of the deceased, so that no exception might be taken that the appeal was not properly constituted. We granted this application, because apart from all questions as to the scope of Order XLI, Rule 20 and Order XLI, Rule 33, the Court has inherent power to add a respondent to the appeal in the events which had happened; Hemangini Debi v. Haridas Banerjee 43 Ind. Cas. 398 : 3 P.L.J. 409 : (1918) Pat. 276 : 5 P.L.W. 216, Lakhmichand v. Kachubhai 11 Ind. Cas. 559 : 35 B. 393 : 13 Bom. L.R. 517. The objection taken by the respondents that the appeal had ceased to be properly constituted by reason of the death of one of the appellants and the failure of his legal representatives to join as co-appellants within the time allowed by law, thus became unsubstantial. No doubt, as pointed oat by the Judicial Committee in Raj Chunder Sen v. Ganga Das Seal 31 C. 487 : 1 A.L.J. 145 : 8 C.W.N. 442 : 31 I.A. 71 : 14 M.L.J. 147 : 8 Sar. P.C.J. 623, a suit to take the accounts and wind up the affairs of a partnership cannot proceed in the absence of one of the partners, or, in the event of his death pendente lite, in the absence of his legal representative. It may also be conceded that when an appeal has abated in part in respect of the heirs of a deceased appellant, the result of such abatement may be to make the appeal an imperfectly constituted appeal which the Court cannot proceed to hear; this depends upon the nature and scope of the suit; Kali Dayal v. Nagendra Nath 54 Ind. Cas. 822: 240. W.N. 44 : 30 C.L.J. 217, In the present case, however, no such difficulty arises, as all the parties interested are now before the Court either as appellants or as respondents. Apart from this, there is considerable force in the contention of the appellants that the addition of the representatives of the deceased was unnecessary, inasmuch as the suit as framed was a suit of the description contemplated by Order XXX of the Code of Civil Procedure. Such a suit may be brought by or against a firm in the firm-name even though the firm may have been dissolved before the date of the suit, provided the cause of action arose before the date of dissolution; Davis v. Morris (1883) 10 Q.B.D. 436 : 52 L.J.Q.B. 401 : 31 W.R. 749, Wenham, In re, Battams, Ex parte (1900) 2 Q.B. 698 : 69 L.J.Q.B. 803 : 83; L.T. 94 : 48 W.R. 626 : 7 Manson 309. This may be done, notwithstanding the position that a firm is tot recognised as an artificial or juristic person: Corbett, Ex parte Shand, In re (1880) 14 Ch. D. 122 at p. 126 : 49 L.J. Bk. 74 : 42 L.T. 164 : 28 W.R. 569, Ellis v. Wadeson (1899) 1 Q.B. 714 68 L.J.Q.B. 604 : 80 L.T. 508 : 47 W.R. 420 : 15 T.L.R. 274, Sadler v. Whiteman (1910) 1 K.B. 86 : 79 L.J.K.B. 786 : 102 L.T. 472 : 26 T.L.R. 372 : 54 S.J. 375 affirmed in Whiteman v. Sadler (1910) A.C. 614: 79 L.J.K.B. 1050 : 103 L.J.T. 296 : 17 Manson 296 : 54 S.J. 718 : 28 T.L.R. 655 end cited in Rex v. Holden (1912) 1 K.B. 483 at p. 487 : 81 L.J.K.B. 327: 106 L.T. 305 : 76 J.P. 143 : 22 Cox C.C. 727 : 56 S.J. 188 : 28 T.L.R. 173. The proceedings in a suit so brought continue in the name of the firm, even though the names of the partners are disclosed; Order XXX, Rule 2, Civil Procedure Code, The case before us is not that of a suit brought in the names of particular individuals., as in Monmohan Pandey v. Bidhu Bhuson Roy 48 Ind. Cas. 309 : 28 C.L.J. 268, but rather that of a suit brought in the firm name, as in Bal Kissen v. Kanhya Lal 21 Ind. Cas. 509 : 17 C.L.J. 648. From this standpoint, no valid objection could be taken to the competence of the appeal, even if the representatives of the deceased were not added as parties. In our opinion, the preliminary objection cannot be sustained and the appellants are entitled to our judgment on the matters in controversy.

3. As regards the first ground, we are of opinion that the accounts must be taken, notwithstanding the Bantans which have taken place as found by the Subordinate Judge, The Subordinate Judge has correctly held that there were two sets of accounts taken, the Bantan and the Nikash. The scope and object of the two were not identical, as is clear from the samples of the Bantan and the Nikash which have been produced. The Banian was an adjustment of the dues of the partners inter re on account of the inequality in the proportion of salt taken by each set of partners on their own account for sale by them to their own customers as opposed to joint sale of salt by the joint firm, Such an adjustment would show what quantity of salt had been taken by each set of partners and how much money would have to be contributed by one set to another on account of inequality in the appropriation, On the other hand, the Nikash at the end of the year would show the outstanding balance from customers of the joint business and expenditure of all descriptions incurred during the year. Opportunity would, no doubt, be taken on the occasion of this yearly settlement of accounts, to rectify the errors, if any, in the Bantan, which would, prima facie, form the basis of the annual account. Bat there has apparently been some misapprehension as to the true relation of a Bantan to a Nikash. One extreme view is that the Bantan may be entirely ignored and the Nikash taken irrespective thereof. The opposite extreme view is that the Bantan is absolutely conclusive and that its accuracy cannot be challenged at the time of the Nikash. Neither of these views can clearly be supported. The Bantan was regularly taken in the presence of the parties or the representatives, though its scope was limited. Consequently, if its accuracy is challenged at the time of the Nikash, the burden lies upon the party who assails it to establish the alleged error. The elementary principle that an account once taken in the presence of the parties interested and acquiesced in by them will not be lightly re-opened must plainly be applied to a Bantan; (sic) v. Wallace 5 M.I.A. 372 : 8 Moo. P C. 378 : 1 Eq. Rep. 809 : 1 Sar. P.C.J. 453 : 18 E.R. 936 : 14 E.R. 144 : 97 R.R. 62, Mohesh Chandra Basu v. Radha Kishore Bhattacharjee 12 C.W.N. 28 : 6 C.L.J. 580, Gokul Krishna Das v. Shashi Mukhi Dasi 13 Ind. Cas. 23 : 15 C.L.J. 204 : 16 C.W.N. 99, Magniram v. Laxminarayan 32 B. 353 : 10 Bom. L.R. 281, Jehangir Cowasjee, v. Hope Mills Limited 2 Ind. Cas. 204 : 33 B. 216 : 10 Bom. L.R. 488. Subject to this reservation, the Bantan cannot be treated as a conclusive answer to the claim for accounts for any period. This, however, does not, as the Subordinate Judge has correctly held, affect the decree in the former suit brought by the Rays against the Seals and finally decided by this Court on the 4th December 1919. That decree confirmed the decision of the primary Court, and, though conclusive between those parties, expressly left unaffected all matters outside the scope of the accounts comprised in that litigation. The direction given by the Subordinate Judge in this respect is not open to criticism.

4. As regards the second ground, the evidence is conclusive that the salt bond business was not dissolved at the end of 1329 B. E., but continued till the end of 1821 B.E. The case for the plaintiffs is that the dissolution was effected by the retirement of Jogendrakrishna and Nilkrishna, two of the members of the plaintiff firm, from the salt business at the end of 1320 B.E. Now, it is well-settled that where no fixed term has been agreed upon for the duration of a partnership, any partner may determine the partnership at any time on giving notice of his intention so to do to all the other partners; Crawsh y v. Maule (1818) 1 Swanston 495 at p.608 : 36 E.R. 479 : 1 Wils. 181 : 18 R. R.126, But the dissolution takes place as from the date of the communication of the notice: Mellersh v. Keen (1859) 27 Beav. 236 : 122 R.R. 390 : 54 E.R. 92, Tasted in the light of this principle, the case for the plaintiff firm completely collapses. In the matter of the alleged dissolution by retirement, the parties acted in the most unbusiness like way imaginable. The obvious course was to communicate their intention to dissolve the partnership in writing to the other partners. It is not necessary to consider whether notice to the defendant firms would have been sufficient or whether notice to each individual member of each of the firms concerned was essential. No written notice was in fact given, and the oral evidence of verbal intimation to some of the persons interested is of the vaguest description. On the other hand, the evidence discloses that the persons who intended to retire from the business did in fact continue to take salt from the business and to associate otherwise with its work. In such circumstances, a presumption may legitimately be drawn in favour of the continuance of the partnership; Parsons v. Hayward (1862) 4 DeG F. & J. 474 : 135 R.R. 219 : 31 L.J. Ch. 666 : 8 Jur. (N.S.) 924 : 6 L.T. (N.S.) 623 : 10 W.R. 654 : 45 E.R. 1267, King v. Chuck (1853) 17 Beav. 325 : 99 R.R. 169 : 51 E.R. 1059. There is, in our opinion no reasonable doubt as to the soundness of the conclusion of the Subordinate Judge that there was no effective dissolution of the firm at the end of 1320 B.E. and that it was continued till the end of 1321 B.E. In such a contingency, it was not only open to the Court but incumbent upon it, to direct the accounts to be taken for a longer period than that mentioned in the plaint. The accounts in a suit of this description have to be taken for the benefit of all the persons concerned; the scope and extent of such accounts must be determined by the Court on the true state of facts disclosed in the evidence and cannot be restricted to the limited measure of relief claimed by the plaintiff on inaccurate allegations.

5. As regards the third and fourth grounds, we have been invited to hold that each partner was entitled to have separate dealings in salt and could not be called upon to account for the profits of such transactions for the benefit of all the partners of the original business. This contention is opposed to the elementary rule that if a partner, without the consent of the other partners, tarries on any business of the same nature as, and competing with, that of the firm, he must account for and pay over to the firm all profits made by him in such business, and be must also make compensation to the firm for any loss occasioned thereby. This obligation is formulated in Section 259 of the Indian Contract Act and has long been recognised as a fundamental rule in the law of partnership: Aas v. Benham (1891) 2 Ch. 244 : 65 L.T. 25, Trimble v. Goldberg (1908) A.C. 494 : 75 L.J.P.C. 92 : 93 L.T. 163 : 22 T.L.R. 717, Glamington v. Thwaites (1823) 1 Sim. & St. 121 : 1 L.J. Ch. 118 : 24 R.R. 153 : 57 E.R. 50. The rule is not applicable to a really different business, though the same knowledge and information may be useful in both. In the case before us, however, there is no doubt as to the true nature of the separate business carried on by some of the members of the salt bond partnership. The evidence makes it abundantly clear that the separate transactions were of precisely the same nature as the business carried on by the partnership and that there was thus a breach of duty of the partners concerned not to carry on like business in the same field of competition, the correctness of the view taken by the Subordinate Judge cannot be successfully questioned. We may add in this connection that it was faintly suggested that the sum recoverable on account of this breach of obligation was limited by agreement to Rs. 5,000. The agreement, however, does not admit of such a construction; the sum of Rs. 5,000 mentioned therein was prescribed as a penalty and does not absolve the parties in default from the obligation to account for all the profits made in such business.

6. As regards the fifth ground, it has been urged that the Court should not, at the preliminary stage, have gone into the question of the custody of the account books, that the investigation has, at any rate, been inadequate and that the conclusion is not supported by the evidence. We are of opinion that this contention should prevail. Session 257 of the Indian Contract Act makes it obligatory upon each partner to render true accounts and full information of all things affecting the partnership to any partner or his legal representatives. The occasion in this case will, however, arise after the preliminary decree is made At that stage each partner should be served with the notice contemplated by Section 66 of the Indian Evidence Act to produce such accounts and papers as may be in his custody if he omits to produce the books and the books are proved to be at the time in his custody or under his control, the presumption recognised in Illustration (g) to Section 114 of the Indian Evidence Act may be applied, namely, that evidence which could be and is not produced has been withheld because, if produced, it would be unfavourable to the parson who withholds it; Hem Chandra v. Kali Prosanna Bhaduri 30 C. 1033 : 8 C.W.N. 1 : 30. I.A. 177 : 8 Sur. P.C.J. 529 (P.C.), In such circumstances, secondary evidence will become admissible, and the party who has withheld the document will not be able to use the original document as evidence at a later stage without the consent of the other party or the order of the Court, as provided in Section 134 of the Indian Evidence Act. The procedure as to notice was not followed in the Court below, and it has transpired that some of the account-books namely, the books of 1318 B. E., 1319 B.E. and one of the books of 1320 B.E. were, at the time the plaintiffs were sailed upon to produce them, actually in this Court in the records of the appeal preferred in the previous suit brought by the Rays against the Such, These books appear to have been subsequently returned to the plaintiffs, and they Save expressed their readiness to produce them whenever called upon. In these circumstances, we are of opinion that the finding in the judgment of the Subordinate Judge relating to the custody of the account books should be expunged and that the direction in the decree based thereon should be omitted. When the enquiry is undertaken by the Commissioner, proper orders as to the production of account books and other papers by all the partners will be given by the Subordinate Judge on the lines indicates above.

7. The result is that this appeal is allowed in part and the decree of the Subordinate Judge modified is two respects, namely, first, as to the use to be made of the Bantan when the accounts are taken, and, secondly, as to the omission of the order for production of account books; subject to these variations, the decree of the Subordinate Judge will stand confirmed. The appellants will pay the respondents their costs in this appeal, but such costs will include only half the hearing fee, as the objection to the competence of the appeal has not been sustained and the decree of the Court below has not been affirmed in its entirety.

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