Kundanmal and Another vs Madan Gopal

Manohar Pershad, J.—This revision on behalf of the Defendants arises out of a suit filed by the Plaintiff-Respondent for the recovery of Rs. 810-0-0. This suit of the Plaintiff has been decreed by the Small Causes Court, Hyderabad. The case of the Plaintiff was that there was a partnership between the parties relating to a Ration shop; that due to some disputes between the partners in respect of the profits, the matter was referred to arbitration; that the arbitrators gave an award; that the award was filed in court; that in the said proceedings parties came to a compromise and according to para 2 of the compromise the Plaintiff was entitled to Rs. 50/- per month by way of profits from the Defendants till the time they remained in possession of the Ration shop; that when the Plaintiff made a demand of the monthly instalment, the Defendants have refused to pay the same.

The Defendants admitted the partnership as also the award and the compromise aforesaid but averred that on 18-11-1952 they had served a notice on the Plaintiff that thenceforward he would not be entitled to any profits as controls had been removed and as they were not running the shop. Roth parties produced evidence and the court below on the evidence led decreed the suit having held that no partnership subsisted between the parties and that Section 69 was not applicable to the case.

In this revision the first argument advanced is that the court below has erred in coming to the conclusion that partnership did not exist. He contends that as the Plaintiff was entitled to get Rs. 50/- by way of profits, that is sufficient to come to the conclusion that he was a partner and that partnership continued.

The second argument advanced is that when the Defendants had given a notice to the Plaintiff that from December 1952 he would not be entitled to any profits as there was no longer any control and they were not running the shop, the Plaintiff was not entitled to any amount from them from that period. The third argument is that Section 69, Partnership Act is a bar to the present suit.

In order to appreciate the arguments of the learned advocates a reference to the definition of the word ''partnership'' is necessary. Section 4 defines a Partnership in the following words:

Partnership is the relation between persons who have agreed, to share the profits of a business carried on by all or any of them acting for all.

There are three elements necessary to constitute a partnership there, must be an agreement; that agreement must be to share the profits of the business and lastly the business must be carried on by all or any of them acting for all. In para 2 of the compromise it is stated that the Plaintiff would be entitled to Rs. 50/- per month by way of profits and in paras 3 and 4 it is stated that the Plaintiff would not be responsible for the carrying on of the business and would not share any profits or losses.

To my mind the agreement to share the profits of a business is an essential element of a partnership and it is open to partners to agree to share the profits in any way they like. They may agree either to share the profits in specific proportions or specific sums. There is nothing to stop a partner from agreeing to receive a fixed annual or monthly amount "by way of profits" irrespective of whether profits are earned or not.

As pointed out earlier, the Plaintiff is given a fixed amount "by way of profits". There is also a condition that he would be entitled to this amount so long as the Defendants ran the shop. The fact that the Plaintiff was given Rs. 50/- per month till the Defendants ran the shop is sufficient to hold that the Defendants van the shop acting for themselves and the Plaintiff. It would therefore appear from this that all the ingredients to constitute a partnership are present in this case and therefore it would not be correct to say that there was no partnership at all after 9th Shehrewar 1358F.

It is true that originally the Plaintiff was responsible for both profits and losses and for the management of the business but by the agreement of 0th Shehrewar 1358F, the Plaintiff limited his responsibility and also rest satisfied to receive only a monthly amount "by way of profits" without reference to the profits and losses.

The learned advocate for the Respondent at first put forward the argument that the partnership itself had terminated but later on conceded that it did subsist. It is therefore unnecessary to go into a detailed discussion of this point. In the result 1 do not agree with the opinion of the court below that the partnership ended with the agreement on 9th Shehrewar 1358F.

The next question that falls for consideration is whether the Plaintiff can file a suit for the recovery of the profits having regard to Section 69, Partnership Act. Section 69 of the Act in my opinion does not apply to the facts of the case as the Plaintiff has based his claim on the compromise of 9th Shehrewar 1358F., and not on the basis of the claim arising out of the original partnership. I agree with the opinion of the court below that Section 69 of the Act in these circumstances has no application to the facts of the present case.

It is next argued that the Plaintiff is not entitled to get the amount of profits from December 1952 onwards. In this contention also I see no force. Para 2 of the compromise enjoins that the Plaintiff would be entitled to receive a fixed sum of Rs. 50/- per month by way of profits as long as the Defendants retained the ration shop in their possession. It is admitted by the Defendants that the ration shop was actually closed in the month of May 1953.

The Plaintiff too has in his deposition stated that the shop was closed in the month of May 1953. What the Defendants say is that as the control was removed in the month of November 1952 and they were unable to continue the shop, they served a notice on the Plaintiff stating that he would not be entitled to any profits in future and that in case he wanted to run the shop, he could do so. In other words what they say is that the shop was virtually closed in the month of December 1952 and not in May 1953.

There is, however, no evidence to that effect. Even Defendant 1 who has come into the witness- box has not in clear terms so stated. In the absence of such evidence and the fact that the ration shop was actually closed down by the Department in the month of May 1953 I cannot come to the conclusion that the shop closed in December 1952. The result is that the Plaintiff would be entitled to recover the amount till May 1953.

The last contention of the Petitioners is that the court below has awarded interest on this amount although there was no agreement regarding interest. So it is urged that the Plaintiff is not entitled to any interest. In this argument I do find sufficient force. The amount claimed by the Plaintiff is amount of the profits and admittedly there is no agreement to pay interest on that amount. In view of this I cannot understand how the Plaintiff can be given a decree for that amount.

The petition in revision, is, therefore, partly allowed, Plaintiff''s suit is decreed to the extent of Rs. 810-0-0 and the claim for interest is dismissed. Having regard to the facts of the case, I pass no order as to costs in this Court.