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1915 Supreme(SC) 1
PRIVY COUNCIL [ON APPEAL FROM THEEAST INDIES]
LORD DUNEDIN, LORD SUMNER, SIR JOHN EDGE, AND MR. AMEER ALI.
AHMED MUSAJI SALEJI - Appellant
Versus
HASHIM EBRAHIM SALEJI - Respondents
On Appeal from the High Court in Bengal.
Decided On : Dec. 2, 1914; Jan, 19. 1915.
Solicitors for appellants:Barton, Yeates & Fart. Solicitors for respondents: Watkins & Hunter.
A preliminary decree settling essential rights, such as partnership dissolution, cannot be challenged in a final appeal if not previously appealed under Section 97 of the CPC. Additionally, a partner retaining assets for personal use after dissolution is liable to pay interest, regardless of fraud or pleadings.
Headnote:(A) Code of Civil Procedure, 1908 - Section 2(2) and Section 97 - Preliminary decree - Definition and effect - Whether an adjudication declaring a partnership dissolved and referring inquiries to a referee constitutes a decree - An adjudication that declares a partnership dissolved and settles rights between the parties, serving as the foundation for all subsequent accounts and proceedings, is a decree. It does not cease to be a decree simply because a subordinate part of it could have been made separately as an order.
(B) Code of Civil Procedure, 1908 - Section 97 - Bar on questioning preliminary decree - Where an adjudication is a preliminary decree, any party precluded from appealing against it cannot dispute its correctness in an appeal against the final decree.
(C) Partnership Law - Dissolution - Retained assets - Interest - Liability of a partner who retains partnership assets after dissolution and uses them for personal benefit to pay interest to the partnership - It is well settled that when a partner retains assets after dissolution and trades with them for their own benefit, the other partners have an election to have the retained assets paid to the partnership with interest. This right exists independently of fraud, misconduct, or whether interest was specifically claimed in the pleadings.
Facts of the case:
A suit was instituted for the taking of partnership accounts following the dissolution of a firm. The trial court declared the partnership dissolved and referred two inquiries to a referee: first, to determine which partners were entitled to share in the assets and goodwill, and second, to take an account of the dealings with the partnership assets. This adjudication was not appealed. The referee's report indicated that certain partners had retained considerable sums of partnership assets and used them to continue the business for their own benefit. The trial court ordered these partners to bring the amounts into court with interest. The partners appealed, contending that the initial referral to the referee was without jurisdiction and that interest should not have been awarded.
Findings of Court:
The court found that the initial adjudication was a decree because it settled the rights of the parties regarding the dissolution, which was the essential foundation for the entire determination. Consequently, the appellants were precluded under Section 97 of the Code of Civil Procedure from challenging that decree in the final appeal. Regarding the interest, the court found that the conduct of the partners in retaining assets for personal benefit fell within the established legal principle that such assets must be accounted for with interest, regardless of fraud.
Issues: (1) Whether the trial court's adjudication declaring the partnership dissolved and referring inquiries to a referee was a "decree" or an "order" under the Code of Civil Procedure, 1908; (2) Whether the parties were precluded under Section 97 of the Code from disputing the correctness of said adjudication in a subsequent appeal; and (3) Whether interest is payable on partnership assets retained and used by a partner for personal benefit after dissolution.
Ratio Decidendi: An adjudication that conclusively determines the rights of the parties in essential matters and forms the basis for subsequent proceedings is a decree. Under Section 97 of the Code of Civil Procedure, 1908, a preliminary decree that is not appealed cannot be questioned in an appeal against the final decree. Furthermore, a partner who retains partnership assets after dissolution and applies them for personal benefit is liable to pay interest on those assets, a right that exists independently of fraud or specific claims in the pleadings.
Result: Appeal dismissed with costs.
Legal Category Hierarchy
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practice and procedure
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civil procedure
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decrees and orders
- preliminary decrees
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decrees and orders
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civil procedure
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commercial law
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partnership law
- dissolution of partnership
- settlement of accounts
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partnership law
Judgement
Appeal from a judgment and decree of the High Court in its appellate jurisdiction (September 1, 1913) affirming, with a slight variation, a judgment and decree of Fletcher J. (April 22, 1912).
The suit was instituted in the High Court by the first respondent as one of the sons and executor of Ebrahim Soleman Saleji, deceased, against the appellants and the other respondents, claiming (inter alia) an account of the dealings and assets of the firm of Ebrahim Soleman and Co., in which his deceased father had been a partner. The partnership had been dissolved by arrangement between the partners on and from July 1, 1907, and the suit was commenced in June, 1908. On August 30, 1909, the trial judge, Fletcher J., declared that the partnership was dissolved and " ordered and decreed " that the matter be referred to the assistant referee of the Court, (1.) to inquire who were the partners who were entitled to share in the assets and goodwill, and (2.) to take an account of the dealings of the parties with the assets of the partnership business. This " order and decree" was not appealed from, and an inquiry accordingly took place. The report of the assistant referee showed, inter alia, that the appellants were retaining in their hands considerable sums forming part of the assets of the partnership, and had used them in continuing the business for their own benefit.
The learned judge dismissed certain exceptions to the report filed by the appellants and made a decree that they should bring into Court the amounts for which they were severally found liable to the partnership with interest at 6 per cent, per annum from July 1, 1907, the date of the dissolution.
The appellants appealed to the High Court in its appellate jurisdiction, contending, inter alia, that the decree or order of Fletcher J. of August 30, 1909, was wrongly made, in so far as it referred to the assistant referee the question as to who were the partners, and further that they should not have been ordered to pay interest.
The High Court, by its judgment delivered on September 1, 1913, slightly reduced the amount payable by the appellants by way of principal, but in other respects affirmed the decree. The learned judges held that the appellants, not having appealed against the decree or order of August 30, 1909, were precluded from disputing its correctness.
Sir R. Finlay, K.C., Dunne, and B. N. Bose, for the appellants. The trial judge had no jurisdiction to refer to the assistant referee the question as to who were the partners entitled to the assets and goodwill of the firm. Under the Code of Civil Procedure, 1908, Order xxv r. 15, it was only the taking of the accounts which could be referred. So far as the question as to who were the partners was referred the adjudication of August 30,] 909, was not a " preliminary decree " within s. 97 of the Code of Civil Procedure, 1908, since it was not a " decree " within the definition in s. 2, sub-s. 2, of that Code; there was no controversy as to the firm being dissolved. It was an order from which there was no right of appeal and which could only be questioned upon appeal from the final decree. [ Khadem Hossein v. Emdad Hossein (( 1901) I. L. R. 29 Calc. 758.) and Code of Civil Procedure, 1908, s. 104, sub-s. 1 (i.), were referred to.] The appellants should not have been ordered to pay interest. Interest was not claimed by the plaint and the facts did not establish any case of fraud. [Interest Act (XXXII. of 1839), s. 1 ; 3 & 4 Will. 4, c. 42, ss. 28 and 29; Bullen and Leake, 2nd ed., pp. 51 and 52; London, Chatham and Dover Up. Co. v. South Eastern Ry. Co. ([ 1893] A. C. 409.); and Johnson v. Rex ([ 1904] A. C. 817.) were referred to.]
LORD DUNEDIN. Their Lordships are of opinion that the appellants are precluded by s. 97 of the Code of Civil Procedure, 1908, from disputing the correctness of the decree of August 30 1899 ; the reasons will be given later.
Upjohn, K.C., Cozens-Hardy, K.C., and Lowndes, for the resp
