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PUNJAB & HARYANA HIGH COURT
Tek Chand, J.
Mansha Ram
Versus
Tej Bhan
Second Appeal No. 472 of 1956,
Decided On : FEBRUARY 18, 1957
PARTNERSHIP - DISSOLUTION - ACCOUNTING - PROFITS - SHARE - UTILIZATION OF FIRM'S ASSETS - SECTION 37 OF THE INDIAN PARTNERSHIP ACT, 1932 - APPLICABILITY - FIDUCIARY DUTY - ACCOUNTABILITY FOR PROFITS.
Fact of the Case:
Plaintiff Mansa Ram and defendant Tej Bhan entered into an oral partnership agreement to carry on the business of supplying bajri to the Public Works Department. The partnership was styled as Messrs. Mansa Ram Tej Bhan. Plaintiff alleged that the share of the parties in the profit and loss of the firm was to be borne equally despite the difference in the capital contribution. The partnership functioned at Mubarikpur and Chandigarh and the supply of bajri was from the bed of river Ghaggar. Plaintiff contended that the defendant being invalid could not personally work in the partnership business and did not provide for the service of a representative on his behalf. Defendant denied the allegations and claimed that the share in profit and loss had been agreed to be in proportion to the investment, i.e., three to one and that the stamp paper for drafting the partnership agreement was purchased in Dehra Dun in the Month of June 1952, but it could not be drafted as the plaintiff stated that it had been lost. Plaintiff sent a notice to the defendant on 11th March, 1953, complaining that the latter did not attend to the business on account of being invalid, that he had removed the account books and other records of the firm and had stopped operation of the accounts in the Banks. On 20th April, 1953, the present suit was instituted by the plaintiff for dissolution of partnership and rendition of accounts.
Finding of the Court:
The trial Court held that the partnership between the parties was at will and stood dissolved on 7th April, 1953. It also came to the conclusion that the firm Mansa Ram and Sons had no capital of its own and had carried on its work with the assets of the firm Mansa Ram Tej Bhan. The constitution of firm Mansa Ram and Sons was a device on the part of Mansa Ram, to pocket the entire income of firm Mansa Ram Tej Bhan for himself. It held, that under Section 37 of the Indian Partnership Act, the defendant was entitled at his option to such share of the profits made since 7th of April, 1953, as might be attributed to the use of the defendants share of the property of the firm, or to interest at six per cent per annum to be calculated on his investment. The appellate court upheld the findings of the trial court.
Issues: 1. Whether the partnership of the firm Mansa Ram Tej Bhan is liable to be dissolved for the reasons given in the plaint? 2. What are the shares of the parties in profits and losses of the partnership?
Ratio Decidendi: 1. Section 37 of the Indian Partnership Act, 1932 applies to the present case where one partner (Mansa Ram) carried on the business of the firm with the property of the firm without any final settlement of accounts as between the parties long after his having given notice terminating partnership. 2. The defendant (Tej Bhan) is entitled to exercise his option, after the accounts have been rendered, and to claim such share of the profits made by Mansa Ram after 7th April, 1954, the date when notice dissolving the partnership was given, as may be attributable to the use of Tej Bhans share of the property of the firm, and in the alternative, to interest at the rate of six per cent per annum on the amount of his share in the firms property. 3. The partners stand in a fiduciary relation to one another and in such a case equity will never permit the surviving partner to trade, or to utilize the property of the other for his exclusive personal profit. If he makes a profit, it must be paid over to the owner of the property, the use of which produced the profit. 4. In the absence of any proof as to the respective shares of the parties in profits and losses, the Court held that their share shall be equal.
Final Decision: The plaintiff's appeal was dismissed with costs. The defendant's cross-objections were also dismissed.
Tek Chand, J.
1. This regular second appeal presented by the plaintiff arises out of preliminary decree for dissolution of partnership and rendition of accounts passed by the trial Court and affirmed by the Senior Sub Judge, Ambala, on appeal.
2. Plaintiff Mansa Ram alleges that in June 1952 he and defendant Tej Bhan orally entered into a partnership, the object of which was to carry on the business of supplying bajri, ballast, shingle and stone-boulders etc., to the Public Works Department. The partnership was styled as Messrs. Mansa Ram Tej Bhan, 4, Rajas Road, Dehra Dun, and the business done, was of tendering and executing contracts for supply of bajri to various branches of the P. W. D. The defendant invested Rs. 13000/- as his contribution and the plaintiffs investment amounted to Rs. 4,000/- only. Plaintiff contended that the share of the parties in the profit and loss of the firm was to be borne by the parties equally despite the difference in the capital contribution. The partnership functioned at Mubarikpur and Chandigarh and the supply of bajri was from the bed of river Ghaggar. The plaintiff alleged that the defendant being invalid could not personally work in the partnership business and did not provide for the service of a representative on his behalf. For the supply of bajri a tender was given by the parties firm on 10th June 1952 which was accepted by the P. W. D. Punjab on 16th June, 1952. This business con-tinned till 27th January, 1953 for about eight months. The terms of the partnership not having been reduced to writing, disputes arose regarding its conditions. It is stated that on 26th November, 1953, there was a meeting of the partners at Dehra Dun but as their differences could not be amicably settled, the defendant on 27th of February 1953 visited the work at Chandigarh, and in the absence of the plaintiff and his son Dr. Sat Parkash, removed the account books and relevant papers relating to the business of the firm on the pretence that he wanted to go through them. On 27th of Feb. 1953 by letter P.W.2/1 addressed to the Punjab National Bank, Kalka, the defendant instructed the Bank not to allow any withdrawals from the current account of the firm till further instructions. Instructions to similar effect were sent to the Imperial Bank, Ambala City, by letter PW/1 dated 27th February 1953, and also to the Imperial Bank Hissar, by letter PW/1 dated 19th of March, 1953. A recriminatory correspondence was also exchanged between the parties. On 11th of March, 1953, a notice was sent on behalf of the plaintiff to the defendant, complaining that the latter did not attend to the business on account of being invalid, that he had removed the account books and other records of the firm and had stopped operation of the accounts in the Banks. Plaintiffs counsel in Ex. P. 1 also wrote "You are further informed that my client is continuing the supplies to the department; in spite of all your obstruction, and shall continue to do so, unless some legal difficulties arise on account of your illegal action, for which you alone shall be responsible and you are informed that ray client shall be entitled to be compensated for working the contract without your co-operation." Ex. P/3 is the reply sent on behalf of the defendant to the plaintiff, stating inter alia, that the share in profit and loss had been agreed to be in proportion to the investment, i. e., three to one and that the stamp paper for drafting the partnership agreement was purchased in Dehra Dun in the Month of June 1952, but it could not be drafted as the plaintiff stated that it had been lost. It was denied, that the working had not been attended to personally by the defendant, owing to his ill health. The defendant accused the plaintiff of having resiled from the original terms, and for insisting upon new terms, which were not acceptable to the defendant. The defendant in the end stated, that he was not willing to work with the plaintiff in partners
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