Suit for dissolution are accounts barred.

The appellant herein is Sri Murugan Oil Industries, Private, Limited, by its Managing Agent, Kolandaiappan, defendant in O.S. No. 291 of 1958 on the file of the District Munsif, Karur. The suit was filed by two partners of a firm, for dissolution and rendition of accounts against the third partner. The trial Court decreed the suit, and this was confirmed by the lower appellate Court. Defendants appeal. The prior circumstances necessary for a consideration of this Second Appeal are the following:

On 4th February, 1955, a deed of partnership was entered into between (1) A. T. V. Suryanarayana Chettiar, (2) A. T. V. Ramachandran Chettiar and (3) M. Kolandaiappan, Managing Agent, Sri Murugan Oil Industries, Limited for and on behalf of the said company. The agreement went on to recite that Kolandaiappan who is the proprietor of another company, M. Kolandiappan 8 Company, conducted and managed in his capacity as managing agent, the Sri Murugan Oil Industries, Limited. In the course of the management of the latter company, it was found that there were no proper facilities for the conduct of the business, and in accordance with the resolution of the Managing Committee of the said Murugan Oil Industries, Limited, dated 10th October, 1954, and for the efficient conduct of the business, Kolandaiappan had, on behalf of the above company decided to form a partnership with individuals 1 and 2. The terms and conditions were (1) the partnership should be conducted under the name and style of Adi Venkatarama Chettiar Sons 8 Co., (2) individuals Nos. 1 and 2 will contribute Rs. 3,000 each to the capital and individual No. 3, that is, Kolandaiappan, will contribute Rs. 3,000, (3) individual No. 3 is prohibited from borrowing any amount from outsiders. (4) individual No. 3 had no right to conduct any business separately either on behalf of the mill (Sri Murugan Oil Industries, Limited) or on behalf of Adi Venkatarama Chettiar Sons 8 Co., (5) Kolandaiappan was required to keep regular accounts and manage without any remarks. If any breach of rules or regulations were found in connection with the management of Murugan Oil Industries, Kolandaiappan will be responsible for the same, (6) in respect of the above business, Kolandaiappan will credit in the accounts a sum of Rs. 150 towards share of profits, of Sri Murugan Oil Industries, Limited, (7) So long as the partnership trade is in existence the buildings, etc., belonging to Murugan Oil Industries and used by the suit partnership shall not be alienated by individual No. 3 to any third person, (8) In respect of profits, individual No. 1 will be entitled to four annas, individual No. 2 will be entitled to four annas and the other eight annas should be taken by individual No. 3 for and on behalf of Sri Murugan Oil Industries, Limited.

The above specific recitals in the partnership agreement are important for the consideration of the principal question of law urged for determination in the Second Appeal. The defendant urged that the suit partnership was illegal because it contravened section 4 (2) of the Indian Companies Act, 1913, which corresponds to section 11 (2) of the Indian Companies Act, 1956. Section 11 (2) of the Indian Companies Act, 1956, reads:

“No company, association or partnership consisting of more than 20 persons shall be formed for the purpose of carrying on any other business that has for its object the acquisition of gain by the Company, association or partnership, or by individual members thereof, unless it is registered as a company under this Act, or is formed in pursuance of some other Indian law.”

It is not in dispute that the corresponding section in force prior to the Companies Act, 1956, section 4 of the Act (VII of 1913), contained identically similar terms. In the present case, it is common ground that the Murugan Oil Industries (Private) Limited, had more than 20 shareholders. The defendants therefore urged that when Murugan Oil Industries entered into the suit par