Amounts owed by one partner to the firm can only be settled upon the dissolution of the partnership and are not barred by limitation until a suit for dissolution of partnership and rendition of account is barred.

JAGAT NARAYAN, C.J. : This is an appeal by one of the plaintiffs against a final decree in a suit for dissolution of partnership and rendition of accounts.

2. The partnership business was commeneed on 14-10-44 under an oral agreement and on 5-1-1945 a partnership deed was executed. Jugalkishore was the financing partner and Hari Narain and Makhanlal were the working partners. The shares of Jugal Kishore and Hari Narain were 3/8 each and of Makhanlal 1/4 in the partnership.

3. A sum of Rs. 19,336.65 was owed by Hari Narain to the partnership as he had taken away this sum from time to time out of the partnership money. The trial Court held that this amount was barred by limitation. Against this finding the present appeal has been filed.

4. We are satisfied that the view taken by the trial Court is erroneous. In Halsbury's Laws of England, (Vol. 22 at page 70) the position with regard to partners is stated in the following terms :

"Partners are not, as regards partnership dealings, considered as debtor and creditor inter se until the concern is wound up or until there is a binding settement of the accounts. It follows that one partner has no right of action against another for the balance owing to him until after final settlement of the accounts; but a partner may have a right of action against another for a debt which is independent of the partnership accounts."

5. As no one can owe money to himself, it was held that no debt could exist between any member of a firm and the firm itself; and although Courts of equity, in winding up the concerns of a firm, treated the firm as the debtor or creditor of its members, as the case might be, yet this was only for purpose of bookkeeping and in order to arrive at the net balance to be paid to or by each of the partners on the ultimate settlement of their accounts.

6. Such amounts owed by one partner to the firm can only be settled when the settlement of account of the firm takes place on the dissolution of the partnership and they never get barred by limitation so long as a suit for dissolution of partnership and rendition of account is not barred. The sum of Rs. 19,336.65 is therefore recoverable from Hari Narain.

7. The learned counsel for Jugal Kishore appellant has not been able to show any law or authority which entitles the appellant to get interest on the amount upto the date of the final decree. He is entitled to get future interest on the amount found due against Hari Narain. Makhanlal will also be entitled to future interest on the amount found due in his favour.

8. The final accounting is as follows :-

Capital invested by Jugal Kishore Rs, 42856.68. Amount received by him under the trial Court's decree out of the assets of the Firm

41228.72 Loss under the trial Court's decree 1627.96 Amount recoverable from Hari Narain by the Firm 19336.65

9. Out of this amount, a sum of Rs. 1627.96 will first be paid to Jugal Kishore as his capital. This leaves a profit of Rs. 17708.69. The shares of the partners in this profit are as follows:-

Jugal Kishore ... 6,640.77

Hari Narain ... 6,640.77

Makhan Lal ... 4,427.15

10. Jugal Kishore is thus entitled to recover Rs. 8,268.73 from Hari Narain and Makhan Lal is entitled to recover Rs. 4,427.15 from Hari Narain together with interest at 6% per annum simple from 31-1-1962 till the date of realisation. Jugal Kishore is also entitled to recover half the cost of this appeal from Hari Narain.

11. The appeal is accordingly allowed in part and the final decree passed by the trial Court is modified in the above terms.

12. The cross-objection filed by Hari Narain is dismissed in default with costs.