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1962 Supreme(MP) 51
High Court Of Madhya Pradesh
Shiv Dayal, J.
VENKATLAL BALDEOJI MAHAJAN - Appellant
Versus
KANHIYALAL JANKIDAS - Respondents
Second Appeal 91 Of 1961
Decided On : 03/30/1962
Bhagwan Swaroop, PATANKAR
The principle of laches is not applicable to a case where the Court has to determine the legal rights of a party.
Headnote:
PARTNERSHIP - DISSOLUTION - LIMITATION - LACHES - ADMISSION - EVIDENCE ACT, SECTION 21 - PARTNERSHIP ACT, SECTION 40 - LIMITATION ACT, ARTICLE 106, 120 - ABANDONMENT - BURDEN OF PROOF.
Fact of the Case:
Plaintiff Venkat Lal filed a suit for dissolution of partnership and accounts against defendant Kanhaiyalal and others. The trial court passed a preliminary decree for dissolution, but the first appellate court reversed it on grounds of limitation and laches.
Finding of the Court:
The High Court held that the suit was within the limitation period and that the plaintiff had not abandoned his rights in the partnership. The court found that the defendant's admission in a previous statement that he was in possession of the factory in the capacity of a partner was admissible in evidence and that the defendant had not explained it away.
Issues: 1. Whether the suit was barred by limitation? 2. Whether the plaintiff was guilty of laches? 3. Whether the defendant had abandoned his rights in the partnership?
Ratio Decidendi: 1. The starting point of limitation for a suit for taking accounts is the dissolution of the partnership (Art. 106). For a suit to dissolve an existing partnership, in the absence of any specific Article, the residuary Article 120 applies. The suit was instituted within six years from the date of the defendant's admission that he was in possession of the factory as a partner, so it was within limitation. 2. The principle of laches, which is based on the equitable doctrine, is not applicable to a case where the Court has to determine the legal rights of a party. An objection as to delay or laches does not avail the defendant when a legal relief is sought against him except as a circumstance to show abandonment. 3. Abandonment of a partnership is a matter of inference to be drawn from the facts of each case. Here, it was a mutual arrangement to allow one of the partners to work the business on behalf of all. It cannot, therefore, be said that the other partners abandoned their right.
Final Decision: The appeal was allowed, the judgment and decree of the first appellate court were set aside, and those of the trial judge were restored.
( 1 ) THIS second appeal arises out of a suit for dissolution of partnership and accounts. The trial Judge passed a preliminary decree to that effect, but the first appellate Court has reversed it on the ground that the suit is barred by time and also there have been laches on the part of the plaintiff.
( 2 ) VENKAT La! plaintiff, Kanhaiyalal s/o Jankidaa defendant No. 1 and two others, namely, Hiralal and Ramlal were the original partners of Shri Niwas Gopal Cotton ginning Factory, Soyat, under a registered agreement 9s ' partnership dated august 14, 1929. The last mentioned two partners, Hiralal and Ramlal having died, their heirs are defendants Nos. 2 to 12 in this suit which was instituted by Venkat lal on June 27, 1952. Kanhaiyalal s/o Jankidas is the only contesting defendant. He resisted the suit on the ground that since Samvat year 1990 he alone is in possession of the business. Ha also contended that the deed of 14-8-29 was not a partnership deed and, even if it was, the partnership was dissolved on the death of ramlal. Moreover, during the period of his long possession he constructed buildings, laid gardens and worked the factory without any interference or intervention by any of the defendants so that they were estopped by conduct and were guilty of laches.
( 3 ) BEFORE me the nature of the deed of 14-8-29 has not been disputed. It is undoubtedly a deed creating partnership. Further, it contains a clause that on the death of any of the initial partners his heirs would automatically become partners in the firm. The limited question in this appeal is whether the plaintiffs suit has been rightly dismissed because of the first defendant's long possession for about 19 years. The learned Judge of the first appellate Court applying the principle of laches and also Article 120 of the Limitation Act, computed the period of limitation from 1933, and non-suited the plaintiff. ( 4 ) PRIOR to the present litigation a suit had been Instituted against Venkatlal by hiralal and others (Civil Original No. 106 of Samvat 2000) in City Sub Judge's court Ujjain in which Kanhaiyalal s/o Jankidas (who will hereinafter be referred to as Kanhaiyatal) was examined as a witness on September 17, 1946, on which date the deposition remained unccncluded and was resumed on October 14, 1946. In his deposition Kanhaiyalal stated that there were five partners in the Soyat ginning Factory; his share was of 3 annas, Venkatlal's 3 annas, Baldeoji laxmi narayan's 3 annas, Hiraial's 3 annas and Ramlal's 4 annas; that Venkat Lal agreed to run the business for five years. But since he could not carry it on successfully the contract was cancelled after one year; that the factory was then given on lease for one year to him (Kanhaiyalal) in Samvat year 1990 and he worked the mill successfully; that in this arrangement if there was much damage it was for the firm to repair it but if the damage was not much it was for the lessee to make the repairs; trial he was entrusted with the management of the factory by all the partners; that he worked in the capacity of a partner ("apne pantidar hone ki haisiat se kiya tha"); that since Samvat 1990 the factory was in his possession that he was not the manager but a partner ("main manager nahin hun Bhagidar hun. . . . . kisi ne nahin smbhala is se mere pas bhagidar ki haisiat se hai. . . "); and that he was entitled to the share of -/3/- in the profit or loss on accounts being taken (Sare jin ka hisab hokar mujhe 3 anna ki raqam milna hai")
( 5 ) THE above statement of Kanhiayalal leaves no manner of doubt that he was entrusted with the business qua partner and this arrangement was made with the consent of all the partners. It is, therefore, impossible to hold that the possession of the defendant was unlawful from its inception. It is also absolutely clear from his statement that Kanhaiyalal was all along treating the factory as a partnership concern and his own capacity as that of a partner. This was the posi
