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Judgment
S.R. Singharavelu, J.—This application is filed by the applicant/plaintiff to appoint a Receiver to manage the affairs of the Chennai, Madurai,
Kovai and Pondicherry editions of the DHINAMALAR Newspaper.
The averments found in the affidavit of applicant/plaintiff are as follows:
Plaintiff is a partnership concern comprised of five partners, who are the parties to the suit. The firm is the owner of Tamil Newspaper
DHINAMALAR, which is published from the year 1951. The firm was constituted in the year 1961. After the demise of the founder and father of
partners the late T.V. Ramasubbiar, the partnership was reconstituted on 23.03.1997; according to which, each of the partners had an equal share
in the firm owning and controlling the said newspaper. Consequent upon the attempt made by respondents 1 and to exclude the applicant, a rift
arose and respondents 1 and 2 clandestinely supported the cause of a rival Tamil daily KAALAI MALAR, which was commenced by the sons
and daughters-in-law of respondents 1 and 2. The applicant/plaintiff along with respondents 3 and 4 filed a suit in C.S. No. 524 and 594 of 1999
before this Court and obtained an order of interim injunction. Respondents 1 and 2 preferred an appeal in O.S.A. No. 199 to 207 of 1999,
whereupon the applicant preferred S.L.P.(Civil) Nos. 5894-5902 of 2000 before the Apex Court, which remitted the matter to the lower court for
conduct of trial.
In the meantime, the said daughters-in-law of respondents 1 and 2 had commenced a newspaper in the name and style of KAALAI KATHIR
with the support of respondents 1 and 2. At the meeting of the partners in 1983, it was resolved that the first respondent would administer the
group advertising of the applicant''s newspaper while the third respondent would inter alia take over the charge and control of all financial and
income tax matters of the applicant firm. But respondents 1 and 2 joined together and started nursing the rival newspaper of KAALAI KATHIR
and commenced victimising persons loyal to applicant. Ultimately, respondents 1 and 2 commenced a separate group advertisement office in
respect of the editions under their administration exclusively and excluded the other three partners of the firm, contrary to the Partnership Deed and
law with the motive of enhancing their income and stifle the remaining partners. As the 1st and 2nd respondents were in control of prime editions
with large circulation like Madras, Coimbatore, Pondy and Madurai, started isolating other partners of the firm. They were consistently passing off
news, manpower and materials to the rival newspaper to the detriment of other partners managing Erode., Salem editions at one hand and Trichy,
Tirunelveli, Vellore and Nagarcoil at the other hand and to cripple the circulation in the other editions. Lose was caused to the firm, besides
siphoning off profits by the act of respondents 1 and 2 in nursing rival newspaper. Discounts announced for KAALAI KATHIR beyond the
regulated 15% is causing loss amounting to more than Rs. 20 lakhs each month for the partnership firm.
The third respondent and others filed a suit in C.S. No. 689 of 2001 for a declaration that the plaintiff is entitled as an Income Tax Assessee to
have the advance income tax remitted monthly from the income of the plaintiffs'' group advertising account maintained by the defendants and for
injunction. The Auditor Mr. Mari Muthu has submitted his Audit Observations dated 30.03.2005 in respect of the Audit Year ended 31.03.2002.
Respondents 1 and 2 acted against the terms of the partnership deed. So, it has become imperative that the meeting of partners are conducted to
decide on the illegal acts and actions by respondents 1 and 2, who have no right to continue in the partnership inasmuch as the expulsion is implied
in the partnership deed itself. For all these reasons, it is just and necessary to appoint a Party Receiver/Receivers to manage the editions of
DHINAMALAR newspaper i.e., Chennai, Madurai, Coimbatore, Pondy and account for the same periodically to this Court.
Counter filed by respondents 1 and 2, which contained the following; The suit filed by a single partner out of five representing the firm is hot
maintainable. The suit cannot be filed by a partner for the purpose of calling a meeting of the partners and to deal with a particular resolution. The
applicant/plaintiff suppressed the fact that from 1999-2000 onwards, an arrangement was entered into between partners by which the partners
have agreed that each partner would look after two specified editions out of ten editions. The applicant is looking after Salem and Erode editions;
respondents 1 and 2 are looking after Chennai, Pondicherry, Madurai and Coimbatore; third respondent is looking after Tirunelveli and Nagercoil
editions and the 4th respondent is looking after Vellore and Trichy editions.
While so the third respondent filed C.S. No. 526 of 2002 before this Court praying that no other partner shall interfere with the sole
management of the Centres at Nagercoil and Tirunelvei. The same was decreed on the undertaking of the third respondent that the loss that may
occur to the firm would be to the account of his share in the firm. These respondents filed C.S. No. 711 of 2002 for mandatory injunction for
production of books and details of account of the firm from the year 1999. Respondents 3. and 4 filed C.S. No. 689 of 2001 for declaration that
the firm is entitled as an Income Tax Assessee to have the Advance Income Tax remitted monthly from the income of the Firm''s Group
Advertising account maintained by the defendants and consequential mandatory injunction and permanent injunction. Plaintiff also filed O.A.Nos.
715 and 716 of 2001 for interim relief and the said suit is pending though the applications have been dismissed. The applicant is not justified in
making wild allegations about respondents 1 and 2 for having shown some discounts. These respondents are not siphoning off funds and they are
not nurturing vested interest. These respondents have equal stakes in the partnership firm and could not be said that they would act detrimental to
the interest of the firm. It is conceded that the major editions are under the control of respondents 1 and 2 and they are major revenue earners and
they are not siphoning off the profits. All other allegations in the affidavit of the applicant are denied.
The applicant is not interested in the growth of DHINAMALAR. The applicant is not fit to adjust with other partners. He used to have bouts of
rage and anger and will use abusive languages. He is more interested to run hip. finance company called Sapthagiri Finance. Without informing
these respondents, the applicant had started Salem edition and he has purchased new rotary machine costing more than Rs. one crore. For all
these reasons, the application to appoint a receiver is to be dismissed.
The third respondent filed his counter contending that each time when the meeting of the partners was convened, respondents 1 and 2 would
throw tantrums and dislodge the peaceful meeting. Respondents 1 and 2 are nurturing the rival newspaper commenced by their sons and
daughters-in-law. They are consciously abetting in the destruction from within of the other editions of DHINAMALAR other than those in their
care to reduce and erode the capital and thereby to purchase the weaker editions by driving these editions into a fiscal whirlpool, To take the
matter to the extent of appointing a receiver when specialised information and knowledge are required to govern the running of the newspaper
industry would be damaging to the plaintiff firm.
The 4th respondent filed a counter alleging that the application is not maintainable under law and on facts. There is no provision contemplated
under law to appoint a party as receiver. The applicant cannot be appointed as a receiver. He is already managing two editions Erode and Salem.
He is running Sapthagiri Finance with its ten branches all over Tamil Nadu. The business of running the daily newspaper involves active
management of the partner. The business involves managing of various departments such as advertisement department, editorial, marketing, sales,
circulation, procurement department and also engineering department. The applicant, who is already occupied in the finance business will not be in
a position to effectively manage the four editions. There is no instant danger to the property or business of the partnership firm. Therefore, the
application has to be dismissed.
In the rejoinder, the applicant/plaintiff averred the following:
Although there was a consensus arrived at that 3/4th of the income tax shall be paid by respondents 1 and 2, they have not made payment even
though the other partners have complied with their duty in payment of 1/4th of income tax. Thus, the partnership firm was put in difficulty by
respondents 1 and 2. By virtue of the Auditor''s report, the misuse of the funds of the partnership by respondents 1 and 2 for the promotion of
KAALAI KATHIR and K.L. Radio was brought out. K.L. Radio was owned by 2nd respondent. 2nd respondent wanted his two sons to have
the two good editions to manage. His one son is managing Madurai edition and 2nd respondent started a new edition at Coimbatore and gave it to
the son. It is not only that the applicant started business but also the respondents to do so. The applicant has started business only recently and it is
a Public Limited Company, professionally managed by retired Senior Bank Managers, requiring no time of this applicant. The respondents are
doing business exclusively spending their time there. 1st respondent is running a dairy business at Pondicherry. He spends most of his time there.
2nd respondent is running magazine since last 20 years. By misusing partnership firm, he is collecting advertisement from Mumbai, Delhi and other
Metropolitan cities. He has already started Catering Technology Institution, Similarly, respondents 3 and 4 also have set up their own business
spending time thereon. Respondents 1 and 2 wanted to capture the entire management of DINA MALAR and indicated that the applicant and 3rd
respondent shall transfer their 1/5th share in the firm at a throw away price. The bank loan obtained by applicant and respondents 3 and 4 also
was paid by them with great difficulty and the other two partners refused to even sign the papers in that regard. There was dropping of sales of
DINA MALAR because of the action of respondents 1 and 2. 1st respondent suddenly stopped sending news service and wanted to choke
Erode and Salem editions. In order to avoid that dropping circulation, the applicant had no alternative but to reduce a price. The other objections
raised in the rejoinder are connected to the diversion of funds by respondents to KAALAI KATHIR, which have been mentioned even in the
affidavit filed along with the application itself.
The partnership firm called DINA MALAR originally was constituted in the year 1961 as a proprietary concern and it was later on converted
into a partnership firm on 23.03.1997. According to which, each of the five partners had equal share in the firm owning and controlling the said
newspaper. 1st and 2nd respondents were in control of prime edition with large circulation like Madras, Coimbatore,. Pondicherry and Madurai
and the other areas allotted to the other partners are among Erode, Salem, Trichy, Tirunelveli Vellore, Nagercoil, etc. The partnership was one at
will. The capital of the firm was borne out by all the partners and any further increase contemplated by all the partners may equally be contributed
by way of transfer from their respective shares. Each partner was entitled to receive an interest of 15% per annum on the amounts to their credit in
the current account. It was also agreed that the profit and the loss of the firm shall be determined after charging all expenses and outgoing including
interest, depreciation, pension payable to the widow of Founder, salaries and allowances to partners etc. The provisions of Indian partnership Act
were agreed to generally apply unless specifically excepted by the said partnership. Thus, the five partners, namely, parties to the suit have been
allotted with editions at various places in Tamil Nadu. Other conditions were also prescribed in the Deed of Partnership itself.
The petitioner/plaintiff has filed the suit with the following reliefrs:
(i) Mandatory injunction for holding a meeting of the partners to decide on the question of expulsion of 1st and 2nd defendants from the firm.
(ii) Permanent injunction restraining 1st and 2nd defendants from in any manner disposing of or encumbering any property of the firm. (iii) Directing
the 1 st and 2nd defendants to render accounts for Chennai, Madurai, Pondicherry and Kovai editions of the DINA MALAR newspaper for the
accounting year 2000-2001 to current date, including the advertisement revenue details where the discounts were offered to advertisers for
combination of advertisements in KAALAI KATHIR newspaper and the Chennai, Madurai, Pondicherry, Coimbatore editions of DINA
MALAR.
As the firm can be represented by one partner on behalf of the firm and as per Order 30 Rule 1 and 9 of C.P.C. the suit is submitted to be
maintainable. In this regard., the observation made in Ramlal Kanhaiyalal Somani a partnership firm Vs. Ajit Kumar Chatterjee and Others, at page
374 and those found in Purushottam Umedbhai and Co. Vs. Manilal and Sons, were also relied upon. The gist of the contention made therein is
that the firm can be represented by anyone of its partners.
The partners are also joint promisors u/s 43 of the Indian Contract Act and so, rights of partners inter se can be decided by the Civil Court.
Sections 9 to 15 of the Partnership Act. also provide enforcement of civil right of partners. So, the suit is prima facie maintainable.
As per the Partnership Act and the Deed of Partnership in this case, every partner is an equal partner and is entitled to take part in the conduct
of the business; there is also mutual rights and liabilities provided u/s 13 of the Act; and a partner has to act in good faith and keep the trust
reposed by the other partners,
As per the terms of the Partnership Deed, each partner is allotted with separate areas in control of the edition published thereunder besides
other allocation of administration work regarding advertisement and tax; and while plaintiff was allotted with the area of Salem and Erode and
respondents 1 and 2 were given the areas of Madras, Madurai, Coimbatore. and Pondicherry.
The grievance of the other partners is that respondents 1 and 2 are given important editions in prime cities covering major portion of business;
but having agreed so, they cannot now go back from it. The reality is not because of the importance of the areas the plaintiff is aggrieved; but only
because of the alleged attempt on the part of respondents 1 and 2 in siphoning the amount of the firm by misusing the resources of the firm for the
improvement of their own journal named KAALAI KATHIR.
18 In fact, it is admitted that originally in the name of daughters-in-law of respondents 1 and 2., a journal by name KAALAI MALAR was
founded and the allegations were that resources of the firm including the men and material was misused for that purpose. The plaintiff along with
defendants 3 and 4 resisted it and filed C.S.524 and 594 of 19 9.9 on the file of this Court and obtained an order of interim injunction restraining
such rival newspaper from using the name KAALAI MALAR, Defendants preferred an appeal in O.S.A. No. 199 to 207 of 1999,. wherein the
Division Bench of this Court reversed the order of injunction absolute. So, plaintiff preferred SLP No. 5894 - 5902 of 2000 and the order of
Division Bench was sought to be stayed but the Apex Court had remitted the matter to the lower Court for conduct of trial. But in the meantime,
the daughters-in-law of respondents 1 and 2 had commenced a Tamil newspaper under the name and style of KAALAI KATHIR having obtained
name clearance from the Registrar of Newspapers, India for commencement of the said newspaper under the aegis of respondents 1 and 2.
True it is, that no partner can be forbidden from doing their own independent profession. It is also equally true that even the plaintiff has started
a financial Public Limited Company in the name Sapthagiri Finance, But the applicant contended that it required no time of him and not even
resources of plaintiff firm and that it was professionally managed by retired Senior Bank Managers. 2nd respondent was also said to have running
some magazine since last 20 years; besides another firm called K.L. Radio. Thus, there is no impediment for the partners to run their own separate
business. But when once the said private business misused the firm and its resources for the upliftment of their independent business, then it may
cause harm to the interest of the firm and consequently and necessarily upon the rights of the partners. If there is a private business contrary to the
firm''s business, then there may not be any chance for siphoning the funds or utilising the resources of the firm for the betterment of the said
individual business. But when a newspaper very much similar to that of plaintiff''s firm is run by the family members of respondents 1 and 2, it is
possible and probable for misusing the plaintiff''s firm''s resources and. to enrich oneself at the cost of the other partners. It is such an allegation that
is made against respondents 1 and 2 inasmuch as they do run a daily newspaper called KAALAI KATHIR in the name of their family members. It
is further alleged that advertisements are also collected from Mumbai, Delhi and other Metropolitan cities for the plaintiff firm and are actually taken
into KAALAI KATHIR, the family business of respondents 1 and 2, and thus amount was said to have been siphoned off. Plaintiff firm also
produced such documents in that connection.
Even though it was repudiated by respondents 1 and 2 that they have not siphoned off any amount from the plaintiff''s firm, nor did they divert
any funds from this firm to their private business called KAALAI KATHIR, the fact that they had run that newspaper called KAALAI KATHIR is
in a way admitted. It is common knowledge that while the person entrusted with running of a particular magazine, if starts another similar daily
magazine, then the care and concentration would naturally be more upon his individual business than that of the partnership; because the profit that
comes from the individual business will go exclusively to the family which runs it; whereas the profit of the plaintiff''s firm is expected to be
distributed among the five partners.
Learned Counsel for the plaintiff also submitted that the audit report also indicated the fall in circulation and profit of the plaintiff firm
immediately after the launching of KAALAI KATHIR by the family of defendants 1 and 2. In these circumstances. Thus, there is a prima facie
case made out that the private business run by respondents 1 and 2 similar to that of the plaintiff''s firm, causes hardship and disadvantage to the
running of the plaintiff''s firm. Therefore, the other allegation that respondents 1 and 2 may require the other partners to initially get isolated which
may pave way for purchase of the latexes share in plaintiff''s firm for a compoundable price, may become probable.
It is under such circumstance, the other partner may try to expel respondents 1 and 2, who were acting against the interest'' of the plaintiff firm.
But, as submitted by the learned Counsel for defendants 1 and 2. Section 33 of the Partnership Act is an impediment for such expulsion because
as per that provision, a partner may not be expelled from a firm by any majority of the partners,. except in the exercise in good faith of powers
conferred by contract between'' the partners. But it has been clarified in Ramnarayan v. Kashinath AIR 1954 PATNA 53 that it does not apply to
the case of expulsion of a partner in direct breach of the contract of partnership. When the contract provided a particular mode of distribution of
profits of the plaintiff firm among the partners, endeavour to siphon off the funds may only amount to the breach of contract and therefore, even if
there is any clause or no clause in the contract for expulsion of a partner from the firm, it can be so done as per the observation made in the above
cited case law. Therefore, to say that the prayer for expulsion is not maintainable, cannot be accepted.
The whole allegation of the plaintiff is that defendants 1 and 2 always prevent a meeting to be conducted, so as to expel them. Such expulsion
of defendants 1 and 2on the ground that they do make a change in the nature business by their alleged attempt to siphon off the amount and to
misuse the resources of the plaintiff firm into their own business, is also possible by virtue of Section 12(c) of the Partnership Act, which would
provide that any difference arising as to ordinary matters connected with the business may be decided by a majority of partners; but no change
may be made in the nature of the business without the consent of all the partners. Under the given circumstances the issue of alleged diversion of
funds and its consequences could be decided by the majority of the partners by convening the meeting of the partners. But defendants 1 and 2
prevent it and therefore the suit was filed for other reliefs including injunction. At the most, plaintiff may devolve upon seeking a decree at least for
convening a meeting for deciding other ordinary issues.
The learned Counsel for the defendants pointed out Clause 16 of the Partnership Deed and submitted that some partners alone cannot
encumber any property of the firm and therefore, there is no need for injunction restraining defendants from encumbering the property.
Inasmuch as prima facie case is in favour of the plaintiff and against defendants 1 and 2 that the latter make endeavour to misuse the resources
of the plaintiff firm for their rival business KAALAI KAFHIR, there will be deprivation of profit from the partner and the firm and thus, an indirect
way of siphoning off the funds of the plaintiff firm would amount to creation of encumbrance. Therefore, the injunction also may prima facie survive,
subject to result of trial.
Further, according to Clause 26 of the Partnership Deed, the provisions of the Partnership Act will apply and therefore,. Section 12(c) of the
Partnership Act and Clause 16 of the partnership Deed may go in favour of the plaintiff in maintaining his claim for expulsion of defendants 1 and 2
and for injunction from encumbering the property,
So far what was dealt with was only about the prima facie case in order to appreciate the necessity for appointment of a Receiver. During the
trial, upon evidence, new findings may be given. So, the observation made above regarding the prima facie case inter se parties will be applicable
and useful only to dispose of this application for appointment of Receiver. Thus, the act of respondents 1 and 2 in using men, material, resources of
the partnership firm for the improvement of KAALAI KATHIR, a rival firm promoted by defendants 1 and 2 and owned by their daughters-in-law
at the expenses and detriment and loss of profit to the firm and siphoning off funds of the firm is prima facie clear. The audit report of the statutory
auditor firm also is alleged as going in support of the plaintiff. Proof of publications of the same news in KAALAI KATHIR may show tha the
operation of plaintiff''s firm in gathering news was used without any expenses by the KAALAI KATHIR and that discounts have been given for
joint advertisement for KAALAI KATHTR and DINA MALAR so that the profit of DINA MALAR has been brought down and loss is caused
to it after using its goodwill, circulation and the machineries. It was further alleged that recent advertisement of DINAMALAR for sale of the
machineries at Madras by defendants 1 and 2 may show that they are taking active steps to promote the rival newspaper at the detriment of other
partners. It the therefore, plaintiff wants to appoint a Receiver in the extraordinary circumstances to safeguard the business, of the plaintiff firm.
In this connection, the following are found in LINDLAY ON PARTNERSHIP 1984 EDITION 4th EDITION:
No partner may be allowed to benefit himself at the expense of the firm.
Good faith requires that a partner shall not obtain a private advantage at the expense of the firm. He is bound in all transactions affecting the
partnership, to do his best for the common body, and to share with his co-partners any benefit which he may have been able to obtain from other
people and in which the firm is in honour and conscience entitled to participate; Semper enim non id quod privatim interest unius ex sociis servari
solet, sed quod societati expedit (The invariable practice being not to have regard to the private interest of one of the partneres but to the
advantage of the firm).
In KERR ON RECEIVER, 15th EDITION 1972.it is found as follow:
Misconduct of partner : The ground on which the court is most commonly asked to appoint a receiver is where, by them is conduct of a partner,
his right of personal intervention in the partnership affairs has been forfeited, and the partnership funds are in danger of being lost...
The appointment will be made where a partner has so misconducted himself as to show that he is no longer to be trusted;as, for example, if one
partner colludes with the debtors of the firm, and allows them to delay paying their debts, or if he is carrying on a separate trade on his own
account with the partnership property,...
Partner excluded from management. There is a case for a receiver, even though there be no misconduct endangering the partnership assets, if one
partner excludes another partner from the management of the partnership affairs....
Coming to the circumstances in which a partner ca be appointed, it is mentioned therein that if one partner excludes another, Receiver may be
appointed. Receiver could be appointed even if the partnership firm is dissolved. In case if the partnership business is subsisting, special reasons
should be adduced for appointment of receiver; but it cannot be said that without dissolution, no receiver could be appointed.
The five principles which were mentioned as norms for appointment of receiver were found in T. Krishnaswamy Chetty Vs. C. Thangavelu
Chetty and Others, and they are as follows:
(1) The appointment of a receiver pending a suit is a matter resting in the discretion of the Court.
(2) The Court should not appoint a receiver except upon proof by the plaintiff that prima facie he has a very excellent chance of succeeding in the
suit.
(3) Not only must the plaintiff show a case of adverse and conflicting claims to property, but, he must show some emergency or danger or loss
demanding immediate action and of his own right he must be reasonably clear and free from doubt. The element of danger is an important
consideration.
(4) An order appointing a receiver will not be made where it has the effect of depriving a defendant of a ''de facto'' possession since that might
cause irreparable wrong. It would be different where the property is shown to be ''in medio'', that is to say, in the enjoyment of no one, and
(5) The Court, on the application made for the appointment of a receiver, looks to the conduct of the party who makes the application and will
usually refuse to interfere unless his conduct has been free from blame.
The appointment of a receiver is recognised as one of the harshest remedies which the law provides for the enforcement of rights and is
allowable only in extreme cases and in circumstances where the interest of the person seeking the appointment of a receiver is exposed to manifest
peril.
It was also found in Abani Kumar Mukherjee and Others Vs. Nand Kishore and Others, that
Normally in a running partnership business, more so when expertise is required anyone of the partners should be considered for appointment as
a receiver....
There appear to be no compelling circumstances in the facts and circumstances of this case to let a stranger take over the business of the
partnership concern... But the appointment of a receiver cannot be a permanent measure.
From the foregoing provisions, it is clear that appointment of receiver is necessary only till the case is disposed of after full trial, which will be
by a period of six months. Written statement shall be filed within three weeks.
MR.Justice P. Baskaran (Retd.,) is appointed as Receiver. His remuneration of RsV25,000/- per month will be borne by the applicant firm.
Report including accounts will be periodically filed once in two months. Application is ordered accordingly.