Madras High Court
R. SADASIVAM,V. RAMASWAMI
V.S.Kothandapani Naidu - Appellant
Versus
P.Venkatachala Gounder - Respondent
Decided On : 03/11/1971
PARTNERSHIP - DISSOLUTION - SUIT FOR ACCOUNTS - MAINTAINABILITY - PARTNERSHIP NOT ILLEGAL - BENAMI PARTNERSHIP - RECOGNIZED - PARTNERSHIP ACT, 1932 - MOTOR VEHICLES ACT, 1939.
Fact of the Case:
Plaintiff filed a suit for dissolution of partnership and taking of accounts. The defendants contended that the partnership was illegal as the permits for the lorries used in the business were not in the names of all the partners. The trial court dismissed the suit holding that the partnership was illegal. On appeal, the High Court reversed the finding of the trial court and held that the partnership was not illegal and that the suit was maintainable.
Finding of the Court:
The High Court held that the partnership was not illegal merely because the permits for the lorries used in the business were not in the names of all the partners. The court relied on the Supreme Court decision in Viswanatha Pillai v. Shaomugham Pillai, AIR 1969 SC 493, which held that there was nothing in the Motor Vehicles Act, 1939, which expressly or by implication bars benami transactions or persons owning buses benami and applying for permits on that basis.
Issues: Whether the partnership was illegal as the permits for the lorries used in the business were not in the names of all the partners.
Ratio Decidendi: The court held that the partnership was not illegal merely because the permits for the lorries used in the business were not in the names of all the partners. The court relied on the Supreme Court decision in Viswanatha Pillai v. Shaomugham Pillai, AIR 1969 SC 493, which held that there was nothing in the Motor Vehicles Act, 1939, which expressly or by implication bars benami transactions or persons owning buses benami and applying for permits on that basis.
Final Decision: The High Court allowed the appeal and reversed the finding of the trial court. The court held that the partnership was not illegal and that the suit was maintainable. The court directed that a preliminary decree be passed for taking of accounts of the dissolved suit partnership.
V. RAMASWAMI, J.:- The plaintiff is the appellant. He filed O.S. No.99 of 1960 on the file of the learned Subordinate fudge of Cuddalore praying for a preliminary decree for taking accounts of a dissolved partnership, to appoint a duly qualified auditor as Commissioner to take charge of the accounts, and to pass a decree in favour of the plaintiff for the amount found due to him, or in the alternative to pass a decree in favour of the plaintiff for the amounts advanced by him to the defendants for the business with interest at 6 per cent. per annum from the date of plaint and for costs.
2. The plaintiff's case was this. The plaintiff is a landlord residing in Uyyakondravi village. Defendants 1 and 2 were his close friends. They were doing jewellery mart and shroff business at Vridhachalam. The third defendant is the undivided brother of the first defendant. The fourth defendant is the undivided brother's son of the second defendant. The second defendant is the son-in-law of the first defendant.
3. About the end of 1956 defendants 1 and 2 persuaded the plaintiff to agree to commence and conduct a lorry service business and motor workshop in partnership with them, each of them contributing an initial capital of Rs.25,000. Defendants 1 and 2 further represented that they would themselves conduct and manage the business and maintain regular accounts, and pay the plaintiff one third share of the profits of the business. The plaintiff agreed to enter into the partnership and paid Rupees 26500 in three instalments as his contribution of the initial capital as required by the defendants 1 and 2. The plaintiff is not aware whether the defendants 1 and 2 also contributed the same initial capital. He trusted defendants 1 and 2 so much that he did not acquaint himself as to how the business was being conducted. At the commencement of the lorry service, four lorries were purchased from "Sri Kamakshiamma Bus service", Vridhachalam for the the partnership. As defendants 1 and 2 were each having independent jewellery mart shop and shroff business at Vridhaehalam in their names, they had one lorry registered in the name of the third defendant (brother of the first defendant), two lorries in the name of the 4th defendant (brother's son of the 2nd defendant) and one lorry in the name of the plaintiff. Though the lorries were thus registered in the names of the 3rd and 4th defendants and the plaintiff they really belonged to and were the assets of the said partnership firm. For the same reason the accounts of the business was mentioned under the vilasam of S.K.K. representing the initials of persons in whose names the lorries had been registered.
4. The lorry service and the motor workshop were commenced on 1st January 1957 and as stated supra the first defendant was managing the said partnership business. Account books were maintained by him written by the clerk appointed by him therefor and by a clerk employed in his own jewellery mart. Lorries were put on service on 1st January 1957. This went on till 15-2-1958.
5. On 15-2-1958 the second defendant took over the management and control of the lorry service business and motor workshop and changed the name into "Rajendran" and "Dhanalakshmi" Motor workshop respectively. "Rajendran" being his son's name and "Dhanalakshmi Motor Workshop" being derived from his jewellery mart "Dhanalakshmi Jewellery mart." The name "Dhanalakshmi Motor Works" was subsequently changed into "Mani Motor Works". The second defendant was conducting the plaint partnership business and Maintaining the accounts of the partnership. He was in management of the two businesses till about 30-9-1958. The plaintiff did not know anything about the nature and extent of the earnings in the lorry business, nor did he draw any amount, nor did he look into the accounts of the business. He bona fide believed that the defendants were conducting and managing the business properly and to the benefit of all the parties. As the plaintiff
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