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1988 Supreme(P&H) 412

PUNJAB & HARYANA HIGH COURT
Naresh Chander Jain, J.
S.Harbajan Singh
Versus
Faquir Chand
Civil Revision No. 3268 of 1987,
Decided On : SEPTEMBER 12, 1988

The essential ingredients of a valid partnership must be expressly mentioned in the partnership deed. If one or the other ingredient is missing, it can be proved by leading oral evidence or spelt out from other clauses of the deed.

Headnote:

PARTNERSHIP - VALIDITY - ESSENTIAL INGREDIENTS - MENTION IN PARTNERSHIP DEED - ORAL EVIDENCE - INFERENCE FROM OTHER CLAUSES - AGENCY - CONDUCT OF BUSINESS.

Fact of the Case:

Tenant-petitioner challenged the legality of the order of the Appellate Authority evicting him from the demised premises on the ground of subletting. The Rent Controller held that subletting was not proved and that petitioner No. 1 is a partner of petitioner No. 2. The Appellate Authority held the partnership deed to be a sham transaction and that there was no stipulation in the deed as to which of the partners shall run the business, hence subletting was proved.

Finding of the Court:

The court held that the three essential ingredients of a valid partnership must be expressly mentioned in the partnership deed. If one or the other ingredient is missing, it can be proved by leading oral evidence or spelt out from other clauses of the deed. A clause authorizing each partner to operate bank accounts does not necessarily mean that the business is to be conducted by all the partners.

Issues: 1. Whether all three ingredients of a valid partnership must be expressly mentioned in the partnership deed? 2. If one or the other ingredient is missing, can the same be proved by leading oral evidence or spelt out from other clauses of the deed? 3. Can a clause authorizing each partner to operate bank accounts mean in law that the business is to be conducted by all the partners?

Ratio Decidendi: The court relied on the provisions of Section 4 of the Indian Partnership Act, 1932, which sets out the essential ingredients of a valid partnership. The court also considered the judgments in Mangat Ram v. Om Parkash, Meenakshi Achi and another v. P.S.M. Subramanian Chettiar and others, Kastur Chand v. Gujjar Mal and others, and M/s Kishore Brothers (Regd.) and another v. Sushila Devi.

Final Decision: The court directed the office to place the papers of the case before the Chief Justice to obtain orders for constituting a Larger Bench to decide the legal questions raised in the case.

Judgment

Naresh Chander Jain, J.

1. Tenant-petitioner No. 1 in this revision petition has challenged the legality and validity of the order of the Appellate Authority by which he has been ordered to be evicted from the demised premises on the ground of subletting the same in favour of M/s Karan Enterprises, petitioner No. 2. The learned Rent Controller held that the case of subletting was not proved and that petitioner No. 1 is a partner of petitioner No. 2. The Appellate Authority apart from advancing other reasoning has held the partnership deed Exhibit Rule 3 to be a sham transaction by placing reliance upon Mangat Ram v. Om Parkash, 1962 PLR 30, Meenakshi Achi and another v. P.S.M. Subramanian Chettiar and others, AIR 1957 Madras 8, Kastur Chand v. Gujjar Mal and others, 1977(2) RCR 436, and M/s Kishore Brothers (Regd.) and another v. Sushila Devi, 1980(2) RLR 665. In the ultimate conclusion, the learned Appellate Authority has held that there was no stipulation in the partnership deed Exhibit R.3 as to which of the partners shall run the business and, therefore, since one of the three ingredients of Section 4 of the Indian Partnerships Act is missing, subletting is proved.

2. Shri V.K. Bali, Senior Advocate, learned counsel for the petitioner-tenant has argued that it is not necessary that all the legal requirements for constituting a valid partnership must be present in the partnership deed and that if one or the other ingredient is missing, the same can be proved by leading oral evidence or it can be called or inferred from other clauses of the partnership deed such as the clause authorising all the partners to operate banks account and the facts and circumstances of the case. On the other hand, Mr. M.L. Sarin, Senior Advocate, learned counsel for the respondent-landlord while countering the contention raised by the learned counsel for the petitioners has submitted that all three ingredients of Section 4 of the Indian Partnership Act, 1932 i.e. (i) the partnership must be result of an agreement between several persons, (ii) the agreement must be to share the profits and losses of a business and (iii) the business must be carried on by all or any one of them acting for all, must be present in the partnership deed. Since in Exhibit R.3-the partnership deed, there was no stipulation as to who would carry on the business, the partnership deed Exhibit R.3 must be held to be taken, ingenuine and sham transaction. The learned counsel goes on to argue that the ingredients of agency through whom the partnership business has to be carried on, being missing in the present case, the Appellate Authority was quite right in holding that the existence of a valid partnership is not proved.

3. After giving my thoughtful consideration to the entire matter, I am of the opinion that before going into the other reasoning advanced by the Appellate Authority, it is necessary to settle legae questions which arise in this case and which, in my opinion, did not either specifically arise in the judicial pronouncements cited at the Bar or there is some differences between the ratio of law laid down in two judicial pronouncements which is being noticed herein. In Mangat Rams case (supra) the Honble Judge after noticing the three essential ingredients of partnership held that on the facts of that case it was not possible to spell out from the deed of partnership the basic requirement that the business must be carried on by all or any of the partners acting for all and, therefore, subletting was proved. In M/s Kishore Brothers case (supra) the specific question which arises in the present case did not arise at all therein. In Kastur Chands case (supra) this Honble Court after partnership deed held that the basic infirmity in the partnership deed was that there was no provision as to which of the partners shall carry on the business and, therefore, it was held that no partnership existed as the basic requirement was missing. This case, although, is to t




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