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2017 Supreme(Mad) 1184
IN THE HIGH COURT OF JUDICATURE AT MADRAS
P. KALAIYARASAN, J.
S.P. Muthiah - Plaintiff
Vs.
R. Ethiraju - Defendant
C.S.No.878 of 2007
Decided On : 06-06-2017
For the Plaintiff : Mr. K.V. Sundararajan.
For the Defendants : Mr. M. Balasubramanian.
The judgment establishes the legal requirements for a partnership under the Indian Partnership Act and the entitlement to dissolution and rendition of accounts under the Act.
Headnote:
Partnership Agreement - Dissolution of Partnership Firm - Indian Partnership Act, 1932 - Section 69, Section 4, Section 44
Fact of the Case:
The plaintiff and defendant entered into a partnership agreement for construction activity. Dispute arose over profit sharing and construction costs. Plaintiff sought dissolution of partnership, rendition of accounts, and permanent injunction.
Finding of the Court:
The court found that the agreement satisfied the legal requirements of a partnership under Section 4 of the Indian Partnership Act. The defendant breached the agreement by not following the terms related to profit sharing and decision-making. The court held in favor of the plaintiff for dissolution of the partnership and rendition of accounts, but rejected the permanent injunction.
Issues: 1. Entitlement to dissolution of Partnership Firm 2. Entitlement to rendition of account and recovery of amount due 3. Entitlement to permanent injunction 4. Validity of the partnership agreement
Ratio Decidendi: The court applied Section 4 and Section 44 of the Indian Partnership Act to determine the validity of the partnership agreement and the entitlement to dissolution and rendition of accounts.
Final Decision: The court partly allowed the suit, granting dissolution of the partnership, rendition of accounts, and 50% of profits to the plaintiff, while dismissing the claim for permanent injunction.
This suit is for the dissolution of the partnership firm carried on by the plaintiff and defendant under Partnership Deed, dated 13.12.2001, for rendition of accounts and for permanent injunction.
2. The plaint averments are as follows :
(i) The plaintiff and defendant entered into a partnership agreement, dated 13.12.2001 in respect of carrying out construction activity in premises bearing Nos.13 and 15, Poes 3rd Street, Teynampet, Chennai-18. As per the agreement, the plaintiff invested a sum of Rs.15,37,000/-. The profit and loss has to be shared at the rate of 50:50 basis. The defendant has to take care of the construction work and he should ensure that the cost of construction should not exceed Rs.500/- per sq.ft. The planning permission and other statutory permission and connections like TNEB, Metro water, Sewerage Board have to be taken care by the defendant. Though the defendant was authorised to negotiate and arrive at the sale price, the same has to be finalised only after the confirmation and acceptance by the plaintiff.
(ii) The defendant had completed the construction and sold the constructed flats to various third parties over a period of time. Even as late as July 2015, some flats were sold to the third parties. The defendant though made huge profits in the transaction has paid only a sum of Rs.15,00,000/- to the plaintiff till now. But the due towards plaintiff's profit would be easily more than Rs.60,00,000/-. Hence, the plaintiff will be entitled to Rs.45,00,000/-.
(iii) The plaintiff was constrained to send a legal notice dated 30.04.2006 calling upon the defendant to render full accounts, but there was no response. Therefore, the present suit has been filed.
3. The averments in the written statement are as follows :
(i) The plaintiff paid a sum of Rs.15,37,000/- to the defendant by way of temporary financial arrangement as a hand loan. The plaintiff obtained signature of the defendant in the prepared finance agreement and it is a shame and nominal and it had never been acted upon as a partnership agreement. The plaintiff realised a total sum of Rs.17,30,000/- on various dates from 24.08.2002 to 30.12.2003 from the defendant. The agreement dated 13.12.2001 does not mention any partnership or about the commencement of the business, place of business, details of financial year etc.
(ii) The defendant had constructed the total area of 14000 sq.ft in the said property, out of which 700 sq.ft were handed over to the land owners’ family. The construction cost at the rate of 500 per sq.ft came to Rs.35,00,000/-. The defendant paid a sum of Rs.3,60,000/- in a period of three years to three owners of the land by way of rental amounts at the rate of 12,000/- per month. He also paid a sum of Rs.15,00,000/- to the land owners by way of non-refundable amount besides 50% constructed area in lieu of 50% UDS of land given to defendant by the land owners. The defendant also spent a sum of Rs.5,00,000/- towards EB expenses for erecting a separate transformer, metro water and sewerage lines, C.M.D.A etc., In all a sum of Rs.23,60,000/- has been spent by the defendant and he sustained loss in the project to the tune of Rs.8,60,000/-. The plaintiff had no right or locus standi to speak about the profit and loss accounts of the project especially when there is no partnership firm in the true sense. The partnership firm is not made party in the suit for the relief of dissolution. There is no cause of action for the above suit. The present suit is filed nearly three years after the plaintiff realised the entire amount due to him. Therefore, the suit is to be dismissed.
4. On perusal of the pleadings of the parties, the following issues have been framed for trial :
1. Whether the plaintiff is entitled to the relief of dissolution of Partnership Firm as prayed for ?
2. Whether the plaintiff is entitled to rendition of account as prayed for and for recovery of the amount found due to the plaintiff with interest at the rate of 18% p.a.
