1956 Supreme(AP) 81
Andhra Pradesh High Court
Aluri Appamma - Appellant
Versus
Balaji Lal Lala - Respondent
Decided On : 03-07-56
A partner cannot maintain a suit for dissolution of a partnership of which he is not a member.
Headnote:
PARTNERSHIP - DISSOLUTION - SUIT FOR - VALUATION OF ASSETS - MACHINERY - FAILURE TO VALUE - FRESH SUIT FOR SHARE OF MACHINERY - MAINTAINABILITY - LIMITATION ACT, 1908, ART. 106.
Fact of the Case:
Plaintiff filed a suit for dissolution of partnership and taking of accounts. The court passed a preliminary decree and a final decree, leaving the plaintiff's right to a share of the machinery to be adjudicated in a fresh suit. The plaintiff did not appeal against this decision. Later, he filed a fresh suit for dissolution of the new partnership and for accounts.
Finding of the Court:
The court held that the plaintiff could not maintain a suit for dissolution of the new partnership as he was not a partner. He should have worked out his rights in the previous suit for dissolution of the old partnership. The court also held that the plaintiff's suit for the value of his share of the machinery was barred by limitation.
Issues: Whether the plaintiff could maintain a suit for dissolution of the new partnership of which he was not a member?
Ratio Decidendi: A partner cannot maintain a suit for dissolution of a partnership of which he is not a member. A partner's right to a share of the partnership assets can only be adjudicated in a suit for dissolution of partnership and taking of accounts. If a suit for dissolution of partnership and taking of accounts has been decided, a partner's share to an asset of the partnership can only be recovered in exceptional cases, such as when an item to the credit of the partnership was forgotten or treated as valueless and later becomes of value.
Final Decision: The court allowed the second appeal and restored the decree of the trial court.
( 1 ) DEFENDANTS 1, 2 and 5 are the appellants in this Second Appeal. The suit was filed by the plaintiff for dissolution of partnership and for taking of accounts. The case of the plaintiff is that he, Alluri Punnayya, defendants 2 to 5 and some others entered into a partnership for working a ground-nut factory under the name and style of Sri Anjaneya Ground-nut Factory. Out of a total of 10 1/8 shares, the plaintiff had 1 1/2 shares in the firm. He filed O. S. No. 67 of 1938 on the file of the Court of the District Munsif, Guntur, for dissolution of the firm of " sri Anjaneya Ground-nut factory and for rendition of accounts. There was a preliminary decree in that suit on 27th March, 1942, followed by a final decree, dated 24th April, 1944. Before the passing of the preliminary decree, the factory together with the machinery was purchased by the 5th defendant who, in his turn, sold it to the 8th defendant. The purchasers, viz. , defendants 5 and 8, were impleaded as parties to O. S. No. 57 of 1938 in the same rank in which they have now been impleaded in the present suit. The defendants 1, 2, 5 and 8 along with others formed a new partnership called Jayalakshmi Ground-nut Factory and have been working this factory with the machinery purchased by the defendants 5 and 8 from the Sri Anjaneya Ground-nut Factory. Before the new partnership began to work, the 8th defendant gave a notice Exhibit P-1, dated 24th November, 1938, to the plaintiff either asking him to join the new partnership or for his valuing the machinery and taking his share of the price of the machinery. The plaintiff did not intimate to the defendants that he was going to be a partner of the new firm. Though a commissioner was appointed in O. S. No. 57 of 1938 to value the partnership assets, the commissioner expressed his inability to arrive at a satisfactory valuation of the machinery. The Court, instead of taking steps to have a fresh commissioner appointed or having the machinery valued by a competent appraiser passed a final decree adjusting the rights of the partners leaving the plaintiff s right to a share of the machinery to be adjudicated in a fresh suit. The Court also further went on to observe that it might be that the plaintiff was a partner of the new firm of Jayalakshmi Factory though that was not his case. This was an extremely unsatisfactory form of disposal of O. S. No. 57 of 1938. In a. suit for dissolution of the partnership, the partnership assets have to be valued, the accounts of the partnership have to be taken, the liabilities of the partnership have to be ascertained, their discharge has to be provided for and the balance of the partnership assets should be directed to be divided between the partners according to their shares. This however was not done and the plaintiff was directed to a separate suit. This direction was wholly erroneous in law and should have been appealed against by the plaintiff. Unfortunately, he was not properly advised and he left the matters there.
( 2 ) ON 26th January, 1946, he brought the present suit for dissolution of the new partnership of Jayalakshmi Ground-nut Factory impleading the partners of that partnership as defendants to the suit. He was not a partner of the new firm and being a stranger to the partnership, he could not have sued for its dissolution or for accounts. He should have worked out his rights in O. S. No. 57 of 1938, and the rule of law is stated thus by the Judicial Committee in Gopala Chetty v. Vijayaraghavachariar,. (1922) 43 M. L. J. 305 : L. R. 49 I. A. 181 : I. L. R. 45 Mad. 378 (P. C. ). at page 389 :"if a partnership has been dissolved and the accounts have been wound up and each partner has paid what he has to contribute to the debts of the partnership and received his share of the profits, the mutual rights and obligations having been thus all discharged, and then it turns out afterwards that there was some item to the credit of the partnership which was either forgotten or treat
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