N. R. KAPUR vs MURLI DHAR KAPUR - 1944 Supreme(SC) 10

Headnote Court Copy Facts Arguments Court observation Judicial Analysis Case Map Category Hierarchy Table of Content

1944 Supreme(SC) 10

PRIVY COUNCIL [ON APPEAL FROM THEEAST INDIES]
LORD THANKERTON, LORD WRIGHT AND SIR MADHAVAN NAIR.
N. R. KAPUR - Appellant
Versus
MURLI DHAR KAPUR - Respondents
On appeal from the High Court at Lahore.
Decided On : May. 17. 1944

Important Points

The court held that ordinary accounting disputes in partnership dissolutions are questions of fact, not principle, and are therefore not proper subject-matter for appeal to the highest court. Additionally, clear terms in a partnership deed regarding the assumption of liabilities are binding.

Subject

Civil Law - Partnership Law

Headnote

(A) Partnership Law - Construction of Partnership Deed - Dissolution and Accounts - Where a partnership deed provides that the stock and liabilities of a running concern are deemed to be the stock and liabilities of the new partnership, the construction of such a clause is a matter of interpretation of the deed. If the phraseology is clear, the court will not admit a contrary view.

(B) Appeal - Scope and Subject Matter - Questions of Fact vs. Questions of Principle - Disputes concerning ordinary items of accounting in the taking of partnership accounts upon dissolution, such as the inclusion or exclusion of specific payments or the liability of a partner to account for sums collected from debtors, are questions of fact and not questions of principle. Such matters do not constitute proper subject-matter for appeal to the highest appellate authority.

Facts of the case:
A suit was brought for the dissolution of a partnership and for accounts. The partnership had been established via a deed where a new partner joined an existing running concern, with the agreement that the stock and liabilities of the existing firm would be assumed by the new partnership. After a trial court decree was varied by an appellate court, an appeal was filed challenging the construction of the deed regarding outstandings and the treatment of several specific accounting entries.

Findings of Court:
The court found that the appellate court had correctly construed the partnership deed. The remaining challenges related to specific payments and credits were determined to be ordinary accounting items and pure questions of fact.

Issues: Whether the appellate court misconstrued the partnership deed regarding the takeover of outstandings and whether disputes over specific accounting entries presented a question of principle sufficient to justify an appeal to the highest appellate authority.

Ratio Decidendi: The court ruled that clear language in a partnership deed regarding the assumption of liabilities is binding. Furthermore, typical accounting disputes in partnership dissolutions are questions of fact rather than principle and are therefore not suitable for appeal to the highest court.

Result: Appeal dismissed with costs.

Legal Category Hierarchy

Advocates:
Solicitors for appellant: T. L. Wilson & Co.
Solicitors for first respondent: Barrow, Rogers & Nevill.

Judgement

Appeal (No. 12 of 1943) from a decree of the High Court (May 9, 1940), which varied a decree of the Subordinate judge of Delhi (April 28, 1938).

The suit which gave rise to this appeal was brought by the first respondent against the second respondent and the appellant for dissolution of partnership and for accounts. On December 3, 1929, a deed of partnership was executed by the first and second respondents and the wife of the appellant. The business of the partnership was described as that of " hosiers, milliners, dressmakers, tailors and outfitters, etc." and was to begin from November 1, 1929, and " should continue unless otherwise determined by the mutual " agreement of the partners or by operation of law." The partnership deed provided " (5) The capital of the partnership shall consist of Rs. 90,000 to be subscribed by the " partners in equal shares .... (7) The net profits of the " business shall be divided in equal shares between the " partners .... (10) That it is understood that the third “partner enters into partnership with the first and second " partner in the present running concern. The third partner " does not in any way stand responsible for any profit or loss “shown by the firm up to the date of the third partner joining " the firm. The stock and liabilities (excluding the loss) of " the present firm shall

Law. Rep. 71 Ind. App. 149 ( 1943- 1944)

N. R. Kapur V. Murli Dhar Kapur 52

be deemed to be the stock and liabilities " of the partnership entered into by this agreement. The " stock shall be taken at its cost."

On July 13, 1934, the first respondent instituted the suit out of which this appeal arose against the second respondent and the appellant, who, it was alleged, had become partner in the name of his wife, for dissolution of partnership and for accounts. The Subordinate judge directed that a preliminary decree for dissolution of partnership should be passed, and he ordered accounts to be taken. On April 28, 1938, he delivered judgment accepting the accounting Commissioners final report, and passed a decree in accordance therewith for Rs. 12,418-15-9 in favour of the first respondent and for Rs. 5,107-7—1 in favour of the appellant against the second respondent. On appeal from that decree the High Court (Dalip Singh and Sale JJ.) varied the trial judges decree and directed a decree for Rs. 22,206—9-11 to be passed against the appellant and for Rs. 21,921-3-10 against the second respondent, with future simple interest at 3½ per cent, per annum from the date of the decree until realization.

From that decree the appellant now appealed, and the reasons in his printed case included the following

" (2) Because the judges of the High Court have misconstrued the terms of the partnership deed ....

" (3) Because the judges of the High Court were wrong in "holding that the outstandings of the old partnership were “taken over by the new partnership.

" (7) Because the judges of the High Court were wrong in " holding that the following payments were properly made " by the first respondent; none of these items were due from " the partnership [there followed a list of four payments, amounting in all to Rs. 5.323-15-0.]

" (8) Because the sum of Rs. 2,400 having been admittedly " collected from the firm of Aux Elegantes, by the partner " R. N. Kapur, the judges of the High Court were wrong in " making the appellant liable for that sum.

" (9) Because the appellant should have been credited by " the judges of the High Court with the sum of Rs. 2,293 " admittedly paid by him to Ram Kishan, a creditor of the " partnership."

1944. May 17. Rewcastle K.C. and Wallach for the appellant.

Sir Thomas Strangman K.C. and Khambatta for the first respondent, by way of preliminary objection, contended that the questions raised in this appeal were not questions which ought to be made the subject-matter of an appeal to His Majesty in Council, and referred to Lala Hakim Rai v. Lala Ganga Ram (P. C. App. No. 81 of 1939 (See Pract