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Judgment
O.A. No. 230 of 1993 was filed by the plaintiff in C.S. No. 468 of 1992 and interim order was passed by the learned judge on 30.3.1993 to
the following effect:
Heard Mr. M. Venkatachalapathy, learned counsel appearing for the applicant and Mr. V.S. Subramanian for Respondent. There will be an
interim injunction restraining the reconstituted firm from functioning under the name and style of M/s. Fraser & Rose, until further orders. Counter
filed. For enquiry post the matter to next week"".
It is against the said interim order, the defendants have filed O.S.A. No. 49 of 1993. The interim order passed by the learned Judge was
suspended as per order in C.M.P. No. 4847 of 1993. The plaintiff filed an application for early posting of the O.S.A., and as per our order dated
16.11.1994, we have withdrawn O.A. No. 230 of 1993 for being beard along with O.S.A. No. 49 of 1993. Accordingly, both O.A. No. 230 of
1993 and O.S.A.49/93 were heard together. In our order dated 16.11.1994, we have stated the reason for withdrawing O.A. No. 230 of 1993.
We have heard the entire matter after obtaining the consent of the teamed counsel appearing on both sides.
The reference to the parties in this case is as that in the Original Suit.
Plaintiff filed the above suit for dissolution of partnership dated 10.5.1989. The partnership came into force on 1.4.1989, and as per clause 2 of
the deed, it is to continue for a period of four years from 1.4.1989 till 31.3.1993. In the suit, the plaintiff has sought the following, reliefs:-
. . .directing dissolution of the partnership firm M/s. Fraser & Ross, Chartered Accountants, the 1st defendant herein as and from this date:
directing the accounts of the partnership business of the 1st defendant may be taken out by the court as and from 1.4.1989:
directing the assets of the Ist defendant firm may be realised and further directing that each party to pay into Court any balance due from him upon
such partnership accounts and the debts and liabilities of the said partnership may be discharged:
directing the costs of the suit may be paid out of the partnership assets of the 1st defendant firm and that any balance remaining of such assets, after
such payment and discharge and the payment of the said costs may be divided between the plaintiff and defendants 2 to 12 according to the terms
of the said partnership deed or that if the said assets shall prove insufficient, the plaintiff and defendants 2 to 12 may be ordered to contribute in
such proportions as shall be just to a fund to be raised for the payment and discharge of such debts and liabilities and costs;
directing the appointment of a Receiver o maintain and to run the 1st defendant firm for such period as this Hon''ble Court may deem fit and
necessary;
Ordering the permanent injunction restraining the first defendant from retaining, receiving, disposing of, or otherwise dealing with the property and
effects of the partnership under the name and style of Messrs. Fraser & Ross, Chartered Accountants"";
The plaintiff has valued the suit for the relief of dissolution of the 1st defendant-firm at Rs. 2,83,407/-. According to the plaintiff, the firm of
which he is also a partner is carrying on professional activities of Chartered Accountants. According to its terms and conditions, the duration of the
firm is four years from 1.4.1989, and there is no automatic dissolution on the death of any of the partners, or expiry of the term of the partnership,
or on the retirement of any of the partners. It is further provided that on the expiry of the term or on the retirement of any of the partners, the firm
shall not be dissolved or deemed to he dissolved, but shall be reconstituted and the firm so reconstituted shall alone be entitled to continue to carry
on the professional firm in the name and style of Fraser & Ross. Various other conditions are also provided therein. It is stated that no partner shall
continue as a partner of the firm after his/her completion of 65 years of age; or if prior to his/her completing 65 years of age he/she becomes
incapable of, giving or devoting reasonable or proper attention to, the partnership firm for a continuous period of 365 days for reasons of ill-health
or physical incapacity occasioned by any reason whatsoever, or engaging himself/herself in any other gainful employment involving physical
exertion, which condition is to be duly certified by a medical practitioner nominated by the partners of the firm. It is further provided that if a
partner attains the age of 65 during the currency of this or in succeeding partnership, he/she shall retire on the last day of the accounting year of the
firm during which he/she attains the age of 65. The remuneration payable to each partner is also provided in clause 6 of the agreement. The profit
and loss to be shared by the partners is provided in clause 7. In clause 9, it is also provided that proper books of account shall be kept by the firm
and entries made therein of all partnership dealings, and such books, with all files and other documents and things belonging for or concerning the
partnership shall be kept at the office of the partnership in Madras and each partner shall have access to them and be entitled to copy and take any
extract from them at his/her will and pleasure. Clause 10 provides that the accounts of the partnership shall be closed on the thirty-first day of
March each year and a balance-sheet and profit and loss account of the firm made up and signed by each partner and after signature each partner
shall be entitled to keep one copy of the said balance sheet and profit and loss account and shall be bound by such accounts. It is further provided
that in case if there is any manifest error found therein by any partner and signified to the other partners in writing within six months after the same
shall have been so signed, such error shall be rectified. Clause 10(a) provides for the contingencies consequent on the death, or retirement, or
expulsion of a partner. Clause 10(b) says that in the case of an outgoing partner, the provisions that are made consequent on the death, or
retirement, or expulsion of a partner, shall apply. Clause 18 provides for an arbitration in case of any dispute, either during the currency'' of the
partnership or afterwards.
The plaintiff alleges that the accounts of the partnership are not being maintained properly. According to the plaintiff, the accounts are being
maintained by the second defendant, being the Senior Partner. The practice that was prevalent with reference to the account books was that they
were kept under the custody of the Senior Partner (second defendant). According to the plaintiff, the accounts of the first defendant-firm for the
period from 1.6.1987 to 31.3.1989, 1989-90, 1990 and 1991 were not properly submitted to the plaintiff, and there was no rendition of
accounts, nor submission of balance-sheet and profit and loss account for the year 1990-91. The plaintiff says that with respect to the previous
two years, the plaintiff objected to certain entries and consequently refused to sign the account. The repeated requests of the plaintiff for rendition
of proper accounts and perusal of account books to the second defendant were of no avail. Demands were also made by various letters,
requesting for perusal of accounts and, also for copies of certain documents. They were not responded by the 2nd defendant. According to the
plaintiff, there is a variation in the accounts thereby giving rise to a suspicion that there is siphoning of the funds by the second defendant, belonging
to the partnership firm, to the detriment of the partners. The plaintiff states that on a quick perusal of records, namely, computerised general ledger
for the year 1990-91, the plaintiff noticed a Startling difference of Rs. 4-1/4 lakhs in the private ledger control account as on 31.3.1991 between
the computerised general ledger account and the general ledger trial balance. He further alleges than under these circumstances, disputes have
arisen between him and the second defendant. The other partners are only silent spectators without any involvement. According to the plaintiff, it
has become impossible for him to continue as a partner, according to the terms. Even though there is an arbitration clause, since the second
defendant has not responded properly, it must be deemed that the defendants have given a go by to the said clause, and the plaintiff is entitled to
maintain the suit. It is on the said allegation, he has asked for the reliefs extracted above.
The term of the partnership as per Clause 2 is to expire on 31.3.1993. The second defendant issued notice to the partners expressing an
mention to hold a meeting on 21.3.1993, for the purpose of reconstituting the firm. The plaintiff, therefore, filed O.A. No. 230 of 1993 to restrain
the second defendant from proceeding further by convening a meeting of the partners on 21.3.1993 or on any subsequent date, and further
restraining him from reconstituting the firm pending disposal of the suit. No order were passed on the above Application, but a counter-affidavit
was filed by the second defendant on 18.3.93. Since there was no interim order, a meeting was convened on 21.3.1993, for which notice was also
given to the plaintiff. The firm was reconstituted as per the said meeting, in which the plaintiff was not included. Hence, he filed O.A.230 of 1993
for an injunction to restrain the first defendant-firm as reconstituted as per meeting held on 21.3.1993 from functioning under the name and style of
Messrs. Fraser & Ross, pending disposal of the Civil Suit. For the said Application, the second defendant filed this counter affidavit on 30.3.1993,
disputing the right of the plaintiff to get an injunction.
In the counter-affidavit, it is stated that the Application itself is not maintainable, since there as an arbitration clause, and the defendants have
already filed an Application as O.A. 3187 of 1992 for staying the entire proceedings. In the counter affidavit, it is further stated that the first
defendant-firm was established in the year 1907 and was being reconstituted from time to time on the expiry of the period fixed in the partnership
deed or on the retirement of the partners or on the induction of new partners. The partners of the first defendant firm are generally the Audit
Managers who are working in the firm for several years. The current deed of partnership dated 10.5.1989 is for the period commencing from
1.4.1989 to 31.3.1993. The partnership deed itself specifically provides the period of the partnership. The first defendant firm is Statutory
Auditors for large number of companies under the provisions of the Companies Act, for auditing the accounts and in fact the first defendant-firm is
Statutory Auditor for about 200 companies. The audit was to be conducted for the accounting year ending 31st March 1993, and the audit work
is a continuing process and has to be continued from time to time. The first defendant-firm has already commenced the work relating to the
verification of inventories, cash, etc. during the last week of March 1993 and the work was to be continued in April 1993 and, therefore, the firm
was to be in existence as on the first day of financial year to carry out these jobs. It is further alleged in the counter-affidavit that in vies of the
professional work carried on by the first defendant-firm, the continuity of the firm has to be ensured and with this end in view, clause 4 of the
partnership deed specifically provides the manner in which the firm will have to be continued. It further provides that even the death of any partner
shall not dissolve the partnership and that on the expiry of the term of the partnership or on the retirement or death of any one of the partners, the
firm shall not be dissolved or deemed to be dissolved, but shall be reconstituted and the firm so reconstituted shall alone be entitled to continue to
carry on the professional work in the name of the first defendant. It is further alleged that two of the partners were to retire on 31.3.1993 since
they attained the age of superannuation. In view of the said clause also, the firm had to be reconstituted. The first defendant-firm trains persons
under the Chartered Accountancy Regulations, 1949 and as on date they have about 120 articles clerks who would be qualifying for Chartered
Accountancy Course and they have to undergo a continuous period of 3 years of statutory training without any interruptions under the firm. It is
further alleged that the suit filed by the plaintiff which is one for dissolution cannot be maintained since it is for a fixed term and since the plaintiff has
filed the suit before the expiry of the term. No ground has been made out for dissolution of the first defendant-firm, any no cause of action has
arisen to the plaintiff for filing the suit. It is further stated in the counter affidavit that there cannot be a dissolution of the first defendant-firm, and, on
expiry of the term fixed or on retirement or induction of new partners, there could be only reconstitution of the firm and the partnership deed further
specifically provides that none of the partners who retire or who go out of the firm would be entitled to any claim for revaluation of the goodwill
and the goodwill shall be taken at the value paid for by him and credited to his capital account as recorded in the books and the above provision
will be contract to the contrary. The second defendant has also stated that the plaintiff has not specified the errors in the accounts as provided
under clause 10 of the agreement even though he had sufficient opportunity to look into the accounts. Before filing the suit, the plaintiff had perused
the accounts on various dates, and he could have specified the defects if any, in the accounts. The allegation against the second defendant and also
the allegations regarding the meting held on 21.3.1993 are also denied/The second defendant has stated that he is not disqualified from occupying
the Chair at the meeting, and that he occupied the Chair only at the request of the other partners. Even the plaintiff did not object to the same. The
allegation that there was an under-taking before Court that the plaintiff also will be included in the reconstituted firm is denied. He stated that the
firm will be reconstituted as the term of the partnership was ending on 31.3.1993, and some partners were retiring on their attaining the age of
superannuation. According to the second defendant, all the other partners agreed with the need for reconstitution in view of the attitude of the
plaintiff as they felt that it would be impossible to carry on the firm with the plaintiff.
The plaintiff has not signed form No. 12 of the income tax Act, which should have been done, and his conduct in not signing the same is likely to
make the first defendant-firm incur a loss of nearly Rs. 20 lakhs. The minutes of the meeting dated 21.3.1993 were recorded properly. There is no
hatred towards the plaintiff, and the meeting held on 21.3.93 was not an attempt to wreak vengeance on the plaintiff. The accounts were properly
perused by the plaintiff, and there is no manifest error in the accounts as stated by the plaintiff. The attitude of the plaintiff in the meeting was such
that he refused to give his consent for the reconstitution. In the meeting, he told the other partners that he is against the reconstitution, and that he
would express his views only after he consults his advocate. The said conduct of the plaintiff was against the interest of the firm, especially in view
of the urgency of the matter. All the other partners were against the plaintiffs conduct and they wanted that the plaintiff should not be included in the
firm. The resolutions were put to vote and were passed with great majority. Along with the counter, the second defendant has also filed the true
copy of Minutes. According to the second defendant, the conduct of the plaintiff is such that he is holding the other partners in ransom and is
causing obstruction to the smooth functioning of the firm. The plaintiff has no prima facie case and the balance of convenience is also only in favour
of the defendants. He prayed that the injunction petition should be dismissed with costs of the defendant.
Even though a counter was filed before the date of pasting and it was brought to the notice of the learned Judge, the impugned order was
passed granting an injunction restraining the reconstituted firm from functioning under the name and style of M/s. Fraser & Ross, until further
orders.
In the Appeal preferred against the interim order, the learned counsel for the appellant has raised various grounds challenging its correctness.
The main ground of challenge is that even though the counter was filed, he was not heard, and the plaintiff has no case for getting an injunction. The
learned Judge has not considered the case on merits, and the irreparable injury that is likely to be caused in view of the injunction is also brought to
light.
As stated earlier, along with the O.S.A., the defendants filed a C.M.P. also to stay the order, and the same was granted. By virtue of the
interim order, the defendants were allowed to do the business under the original name, namely, Messrs. Fraser & Ross. The plaintiff filed a petition
before this Court praying that the order may be vacated. When the said Application came up for hearing, there was a suggestion from the Court,
taking into consideration the interests of both parties, to settle the matter outside the Court. A memorandum of consent was prepared at the behest
of the Court. A copy of the same was given to the plaintiff. He had some objections, and the Court itself made certain corrections in the draft
memorandum of consent. After incorporating the corrections, the draft was given to the plaintiff and the case was posted to another date. On the
adjourned date, there was no representation on behalf of the plaintiff. The draft compromise was also not brought back to the Court and it was
assumed that the plaintiff was not willing for the settlement. The matter was adjourned after confirming the earlier order in the C.M.P.
The plaintiff thereafter filed an application for fixing an early date for the hearing of the Appeal. It is under these circumstances, the Appeal has
come up before us, and as stated earlier, we have withdrawn the O.A. itself for being heard along with the O.S.A..
The only question that has to be considered in this case is, whether the plaintiff is entitled to get an injunction restraining the defendants from
making use of the firm''s name, namely, Messrs. Fraser & Ross, on the basis of the reconstitution.
After hearing the learned counsel appearing on both sides, we are of the view that the plaintiff is not entitled to get an injunction as prayed for,
for more reasons than one.
It is settled law that the grant of injunction is a discretionary relief. The exercise thereof is subject to the Court satisfying that (1) there is a
serious disputed question to be tried in the suit and that, on the facts before the Court, there is probability of his being entitled to the relief asked for
by the plaintiff/defendant; (2)The Court''s interference is necessary to protect the party from the species of injury. In other words, irreparable injury
or damage would ensue before the legal right would be established at trial; and (3) that the comparative hardship or mischief or inconvenience
which is likely to occur from withholding the injunction will be greater than that would be likely to arise from granting it. The burden is on the
plaintiff to prove by evidence aliunde by affidavit or otherwise that there is ""a prima facie case"" in his favour which needs adjudication at the trial.
The existence of the prima facie right and infraction of the enjoyment of his property or the right is a condition for the grant of temporary injunction.
Prima facie case is not to be confused with prima facie title which has to be established, on evidence at the trail. Only prima facie case is a
substantial question raised, bona fide, which needs investigation and a decision on merits. Satisfaction that there is a prima facie case by itself is not
sufficient to grant injunction. The Court further has to satisfy that noninterference by the Court would result in ""irreparable injury"" to the party
seeking relief and that there is no other remedy available to the party except one to grant injunction and he needs protection from the consequence
of apprehended injury or dispossession. Irreparable injury, however, does not mean that there must be no physical possibility of repairing the
injury, but means only that the injury must be a material one, namely one that cannot be adequately compensated by way of damages. The third
condition also is that ""the balance of convenience'' must be in favour of granting injunction. The Court while granting or refusing to grant injunction
should exercise sound judicial discretion to find the amount of substantial mischief or injury which is likely to be caused to the parties, if the
injunction is refused and compare it with that which is likely to be caused to the other side if the injunction is granted. It was so held in the decision
reported in AIR 1993 S.C. 276 (Dalpat Kumar v. Brahlad Singh).
In AIR 1988 Allahabad 154 (Kusuma Gupta v. Sarla Devi), their Lordships held that merely because a suit is filed for dissolution of
partnership a temporary injunction cannot be claimed as of right. In the said decision, it was held as follows:-
A temporary injunction cannot be claimed as a mutter of right upon the dissolution of partnership, where the rights of the parties can be fully
protected without it. In each case, before granting temporary injunction, therefore, the Court will have to address itself to the issue of balance of
convenience and irreparable injury judged in the totality of the facts obtaining in the case. The injunction which is incorporated in S. 53 of the
Partnership Act is based on the principle that the partners intending to continue business should not do anything which might impede the winding up
of the partnership business. The basic idea is to preserve the distributable assets of the firm pending the winding up of the affairs, and to ensure that
some irreparable injury to the partners applying for the aid of S. 53 may not be caused to them while the winding up of the partnership business is
pending or will necessarily involve enquiry into the question whether the interest of the plaintiff is likely to be jeopardised beyond repair or
compensation if temporary injunction is refused. These observations must be read in the context of the grant of temporary injunction and not the
grant of injunction under S. 53 as a final relief upon the plaintiffs establishing the ingredients, thereof. It will, therefore, be an error to suppose that
as soon as a plaintiff brings; a suit for dissolution of a partnership firm and accounting, temporary injunction should be granted as a matter of course
without regard to the consideration on the question of prima facie case, balance of convenience and irreparable injury"".
It is on the above legal principles, we have to decide whether the plaintiff is entitled to the discretionary relief.
It is the case of the plaintiff that after dissolution and till the firm is wound up, he is also entitled to make use of the firm''s name, and if the firm''s
name is made use of by the defendants, that will put him to great disadvantage. For the said purpose, he relies on Section 50 of the Partnership
Act. Section 50 in turn refers to Section 16 of the Partnership Act. Section 16 states that subject to contract between the partners, (a) if a partner
derives any profit for himself from any transaction of the firm, or from the use of the property or business connection of firm or the firm name, he
shall account for that profit and pay it to the firm; (b) If a partner carries on any business of the same nature as and competing with that of the firm,
he shall account for and pay to the firm all profits made by him in that business. Section 50 says that subject to contract between the partners, the
provisions of clause (a) of Section 16 shall apply to transactions by any surviving partner or by the representatives of a deceased partner
,undertaken after the firm is dissolved on account of the death of a partner and before its affairs have been completely wound up: (Proviso
omitted). Relying on these two provisions and also relying on the decision reported in A.I.R.. 1973 S.C. 2572 Sohanlal v. Amin Chand & Sons), it
is argued that the firm''s name is goodwill and that is a property belonging to the firm. It is a common property and nobody can claim it as an
exclusive property. So long as the goodwill; and the properties are not properly accounted, the defendants cannot make use of the firm name as
their absolute property. In the decision cited supra, the facts are: A notice of dissolution was given by one of the partners. The remaining two
partners continued to use the trade name and the trademark which exclusively belonged to the firm, to the exclusion of the person who issued the
notice. The two partners treated the trade mark as well as the trade name as their exclusive property. It was held in that case that the person who
issued the notice is also entitled to a share in the assets of the partnership and that is not the exclusive property of the other partners, the injunction
granted against the partner who issued the notice, restraining him from making use of the trade mark was vacated by the Supreme Court. It was
held that he is also entitled to make use of the trade mark so long as it is a common properly. The said decision has no application to the facts of
this case. Both Sections 16 and 50 of the Partnership Act are subject to a contract to the contrary. Further, Section 53 of the Partnership Act
reads thus:-
After a firm is dissolved, every partner or his representative may, in the absence of a contract between the partners to the contrary, restrain any
other partner or his representative from carrying on a similar business in the firm name or from using any of the property of the firm for his own
benefit, until the affairs of the firm have been completely wound up
(Proviso omitted)
This section allows the defendant also to make use of the firm name for his own use. If it is subject to a contrary contract, we have to only go
through the deed of partnership to which the plaintiff is also a signatory. This section gives a right to every partner or his representatives to restrain
any other partner or representative from carrying on a similar business in the firm name or from using any of the property of the firm for his own
benefit until affairs of the firm have been completely wound up. The provisions of this section are subject to a contract between the parties. The
Section does not prohibit the use of the property of the firm by a partner, or by tire representative of a partner absolutely but only for a limited
purpose, namely, for his own benefit, and until the affairs of the firm have been completely wound up. There is a third qualification, viz., that the
proposition holds good only in the absence of a contract to the contrary. The Section prohibits such use whether the use is made directly or
indirectly. The rule is founded on the principle that the property of the firm is the property of all the partners, and continues to remain so until a final
winding up, and it can be held and used only on account of and for the common benefit of all the partners. It is not open to a partner to say that
during the period between the dissolution and the final winding up of the affairs of a firm he should be at liberty to use the property of the firm for
his own benefit, subject to the right of the other partners to receive a share of the profits made by the use. He cannot claim to use the properly of
the firm in such manner and on such terms. He can do so only (a) by the leave of the Court, or (b) by the agreement of the partners.
In the case on hand, clause 4 of the partnership deed reads thus:-
The death of any partner shall not dissolve the partnership as to the other partners. On expiry of the term of this partnership or on the retirement of
any of the partners pursuant to clause 5 of this agreement or on the death or expulsion of any partner, the firm shall not be dissolved but shall be
reconstituted and the firm so reconstituted shall alone be entitled to continue to carry on the professional firm in the name and style of FRASER &
ROSS"".
(emphasis supplied)
When it is specifically provided that the reconstituted firm shall carry on the professional activities in the firm name and style, namely, Fraser &
Ross, the plaintiff cannot object to the same. At the most, the plaintiff can only ask for a share in the value of the goodwill of which he was a
partner at the time of its dissolution. Clause 10(b) of the Deed, also provides for the settlement between partners regarding ''goodwill''. Clause
10(b) of the Deed says that for settlement of partners accounts, goodwill of the firm shall not be revalued and shall be taken at the value paid for
by him/her and credited to his/her Capital Account as recorded on the books. The method of valuation having been provided, the plaintiff cannot
even object to the mode of valuation regarding to good will. On the ground that the plaintiff was aggrieved by the reconstitution of the firm and the
continuing of the business of the firm under the name and style of Messrs. Fraser & Ross, the plaintiff cannot ask for an injunction as prayed for.
On merits also, the plaintiff is not entitled to get an order of injunction.
As per the Deed of Partnership, there are 11 partners. Clause 5(b) provides that no partner shall continue as a partner of the firm after his/her
completion of 65 years of age; or if prior to his/her completing 65 of age he/she becomes'' incapable of, giving or devoting reasonable or proper
attention to the partnership firm for a continuous period of 365 days for reasons of ill-health or physical incapacity occasioned by any reason
whatsoever, or engaging himself/herself in any other gainful employment involving physical exertion, which condition is to be duly certified by a
medical practitioner nominated by the partners of the firms, whichever event occurs earlier. If a partner attains the age of 65 during the currency of
the present or succeeding partnership ,he/she shall retire on the last day of the accounting year of the firm during which he/she attains the age of 65.
In this case, defendants 3 and 5 have attained the age 65 before 31.3.1993. Naturally, they cannot continue as partners when the term of the firm
expires. If the firm were to continue the business, it has to be reconstituted. For that reason also, the plaintiff cannot object to the reconstitution of
the firm.
Various reasons are also made mention of by the plaintiff for getting an injunction. When he filed O.A.200 of 1993, no order was passed
thereon, and the defendants were entitled to hold the meeting on 21.3.1993. The second defendant has filed the Minutes of the meeting. The
meeting was held after notice to the plaintiff, and he also attended the same. A reading of the Minutes will show that the plaintiff alone objected to
the reconstitution. The main reason for his objection was, the pendency of the suit. We also find from the Minutes that all the other partners, agreed
for the reconstitution, and, in view of the conduct of the plaintiff, his participation in the future conduct of the firm was objected. So, excluding him,
the firm was reconstituted as per the deed dated 21.3.1993, which came into force on 1.4.1993.
In this connection, it may also be noted that it is the main duty of the firm to audit the accounts of various companies, and their dealings are not
with an individual partner, but with the firm as a whole. When third party interests are also affected, the Court will be reluctant in granting
injunction. Merely because there is a dispute between the partners inter se, that will not entitle one partner to get injunction against the conduct of
the business. In the counter affidavit, the second defendant has stated that the plaintiff''s attempt is to hold the other partners to ransom to have the
dissolution of the firm effected. The said conduct of the plaintiff cannot be said to be bona fide.
Lindley on the Law of Partnership 14th Edition (at pages 581 and 582) has stated thus:-
These authorities show that where a partnership is not determinable at will, those partners who are desirous of carrying on the business in the
proper way will be protected by the Court from the unwarranted acts Of a co-partner, whose only object may be to force the others to submit to
him or to agree 10 a dissolution"".
Certain subsequent events also compel us to hold that the conduct of the plaintiff is not [bona fide.
On 25.10.1993, the plaintiff filed C.A.929 of 1994 for the following direction:-
Why this Hon''ble Court should not be pleased to direct the defendants/respondents to disburse payments to the plaintiff/applicant at an early date
pending disposal of C.S. No. 468 of 1992.
A counter was filed on 3.3.1994. While that Application was pending, the income tax authorities were pressing the Firm that unless Form No. 12
is sent by all the partners, the return filed by it cannot be accepted as one filed by a registered firm. The defendants wanted the plaintiff to send
Form No. 12, so that they can submit the same to the income tax Officer, as otherwise, according to them, the return will be taken only as one
filed by an Association of persons, and there will be a heavy loss to the extent of more than Rs. 20 lakhs. We find that all the partners were
requesting the plaintiff that he must send Form No. 12. The Plaintiff replied that he will not do so unless his demands are complied with. Hence, the
defendants filed Application No. 4004 of 1994 on 19.7.1994. A learned Judge of this Court passed an Order on 22.7.1994 as follows;-
Heard Mr. V.S. Subramanian for the applicants/defendants and Mr. V. Rangabashyam for the respondent/plaintiff.
The respondent is directed to sign Form No. 12, which has been signed by the other partners, and also sign a true copy of the partnership deed
signed as ''true copy'' by the other partners and file the same with the Department as true copy thereof. The respondent will produce the balance
sheet for both the years and also ascertain the amount payable to the plaintiff by the partners. The plaintiff/respondent will inform the 1st defendant/
1st respondent firm in regard to the compliance of the above by letter. On production of the balance sheet, further direction will be given to the
defendants for payment out. Call on 1.8.1994
After the passing of that order, the plaintiff filed Application No. 4223 of 1994 to review the order. On the said Application, an order was passed
on 4.8.1994 by the learned single Judge. It reads as follows:-
Heard Mr. A.I. Somayaji, Senior Advocate for applicant and Mr. V.S. Subramaniam for the respondents. By my order dated 22.7.1994, I
directed the plaintiff Mr. P.S. Swaminathan, to sign Form No. 12, which has been signed by the other partners, and also sign a true copy of the
partnership deed signed as ''true copy'' by the other partners and file the same with the Department as true copy thereof. Mr. V.S. Subramanian,
learned counsel for the defendant as under taken by him earlier on behalf of the defendants, will pay the amount payable to the plaintiff by way of
his share as found in the books of accounts regularly maintained by the partnership firm. The amount will be paid by CHEQUE to the plaintiff
immediately on his signing Form No. 12 and signing of the partnership deed as a true copy. The receipt of the cheque and the signing of the form
and the partnership deed, are without prejudice to his rights and contentions in the main suit. The plaintiff will sign the partnership deed and Form
No. 12 without putting any date. Because of signing of the Form 12 and the partnership deed, if any liability of tax arises at a later stage, the same
shall not be claimed by the defendants from the plaintiff.
Post on 8.8.1994 for reporting compliance and also for the production of the cheque. The defendants shall also refund the amount, by way of
cheque to the plaintiff lying to his credit. On receipt of both the cheques in Court, the plaintiff will return the key of the cabin, the car and the
telephone. The plaintiff will give a letter to the firm surrendering the telephone"".
After the order dated 4.8.1994 was complied with, a final order was passed by the learned Judge on 10.8.1994, which reads as follows:-
Pursuant to my order dated 4.8.1994, the respondents have issued cheque in favour of P.S. Swaminathan, applicant, for a sum of Rs. 4,87,026-
41 by a cheque bearing No. 115191, Indian Bank, North Usman Road Branch, T. Nagar, Madras, dated 5.8.1994, being the balance in capital
account of Rs. 1,80,000/- and the balance in current account of Rs. 3.07,026-41, in all amounting to Rs. 4,87,026-41. The plaintiff-P.S.
Swaminathan has signed the receipt in Court and the receipt is handed over to the counsel for the respondents. However, the receipt is issued
without prejudice to the claims and contentions raised in the main suit now pending in this Court and without prejudice to the plaintiffs right to claim
interest and the goodwill on the abovesaid amount. It is for both parties so establish their claim in the suit. As undertaken, the plaintiff has to-day
handed over the key of the cabin, the car and the R.C.book. The plaintiff has also signed the letter addressed to the Commercial Manager,
Madras Telephone, Madras South, requesting them to shift the telephone No. 4911094 from his residence to the place instructed by Messrs.
Fraser & Ross. Chartered Accountants, Madras. The plaintiff has no objection for shifting the same and a letter to that effect was signed by him
and the same is handed over to the counsel for the respondents, the key of the Car is also delivered in Court. The respondents may depute any of
his representatives to the residence of the applicant plaintiff and take delivery of the car either today or tomorrow, the application is ordered
accordingly. Post the suit C.S. No. 468 of 1992 on 12.8.1994 for reporting settlement"".
It is clear from the above orders that the plaintiff has received his share of the capital asset and also the share of profits. Regarding the share of
profits, the plaintiff has his own expectations and he is claiming more. It is without prejudice to his claim in the share of profits, the learned Judge
has passed the orders dated 4.8.1994 and 10.8.1994. As on date, the plaintiff has received his share in the firm and nothing more remains to be
paid as per the interim Application. The question whether he is entitled to get anything more is a matter to be decided in the suit, after deciding
whether the provisions of the Arbitration Act apply to the facts of this case. In view of the facts set out above, we are of the view that the
injunction sought for, if granted, will seriously prejudice the right of the defendants in the conduct of their business. The balance of convenience is
also in favour of the defendants.
We may also say that the plaintiff has not approached the Court with clean hands. One of the main reasons for seeking the grant of injunction is
that the defendants are not maintaining proper accounts. According to him, the second defendant is syphoning off the funds, and that he (plaintiff) is
not allowed to peruse the accounts. We may say that the Application is lacking in good faith and he has come to Court with false allegations.
For the purpose of proving that the defendants are not properly Maintaining accounts, he has relied on a deposit of Rs. 25,00,000/- on
5.7.1989 in S.B. Account No. 8765 of Indian Bank, North Usman Road, Madras. A reading of the cheque reveals that it is Savings Bank
Account in the name of the second defendant and ten others on behalf of Messrs. Fraser & Ross. It is alleged by the plaintiff that it is secret
account which is not disclosed to him and other partners and that he is also excluded from that account. This is the only piece of evidence that is
disclosed before this Court as regards the allegation relating to falsification of accounts. We may say that the said allegation by the plaintiff is
without basis. The learned counsel for the defendants has brought to our notice the full details of S.B.Account No. 8765. The said account was
opened by the second defendant along With all the other partners on 28.7.1984. At the time, there were only 11 partners including, the plaintiff. A
copy of the letter dated 30.7.1984, written to the said Bank is also produced before us. It contains the list of partners of the firm, who hold the
funds on behalf of the firm, and the names of the partners who are authorised to operate the above Savings Bank Account. We find that the
plaintiff is also shown as one of the partners of the firm and one of the account- holders in the said letter. He is the fifth party to the account. So,
the plaintiffs allegation that he was not aware of the Account falls to the ground. Then we are concerned only with the amount deposited on
5.7.1989. In the balance-sheet as on 31.5.86 and 87, the Savings Bank Account with Indian Bank, North Usman Road Branch is also made
mention of. That balance-sheet is also signed by the plaintiff. Then, the other question is, whether the sum of Rs. 25,00,000/- deposited in the
Savings Bank Account is properly accounted and whether it is a secret Account.
It is not disputed that the first defendant firm are the Auditors'' for Messrs. Perkins Engines Group Limited, Peterborough, England. There was
some dispute regarding their income tax assessment and the same was being routed through the first defendant- As per the final orders of the
income tax Appellate Tribunal, an amount of Rs. 29,90,644/- was directed to be refunded to the Company. Out of the said amount, an amount of
Rs. 4,90,644/- was retained by the 1st defendant-Firm for its fee and services and the balance of Rs. 25 lakhs Was sent to the client. The amount
of Rs. 25 lakhs represents that amount. It is not an amount belonging to the firm, but to its client. The learned counsel for the defendants has also
brought to our notice the Indian Bank pass book of that Number. We have verified the Original of the same. We find that the allegation of the
plaintiff that the said sum of Rs. 25 lakhs deposited is unaccounted is false. Again, the trial balance for the months of March 1989, March 1990,
March 1991 and March 1992 were also produced before us. The corresponding entries in the passbook were also perused by us. We find that
the entire amount as seen in the pass book is entered in the accounts of the Firm, and the trial balance is also signed by the plaintiff. When this was
brought to the notice of the plaintiff, he stated that he is not aware as to the persons in whose names the Account has been opened and who are all
operating it. The said statement of the plaintiff also cannot be correct. For, he has admitted that he has signed the balance-sheet of 1986-87 also.
The balance-sheet includes the Savings Bank Account of the Indian Bank, North Usman Road Branch. When such a reckless allegation is made
against a reputed Firm for the personal gain of the plaintiff, it shows his bad faith, and it demonstrates only his intention to harm the reputation of the
firm and also to see somehow or other that the business of the Firm is affected. As stated earlier, the contention of the defendants is that the
plaintiff wants to hold the defendants to ransom for achieving his purpose. We find that such a contention of the defendants is correct. Knowing
that the Savings Bank Account stands in his name also, and also after having signed the balance-sheet for consecutive years, the plaintiff should not
have made such an allegation that there is falsification of accounts, and that the sum of Rs. 25,00,000/- is not represented in the Accounts. The
said conduct also shows that the plaintiff is not entitled to equitable relief which he has sought for.
Taking into consideration all the above facts, we are of the view that the plaintiff is not entitled to the interim relief, and hence the injunction
application is liable to be dismissed with costs. Accordingly, we dismiss O.A. No. 230 of 1993 in C.S. No. 468 of 1992 with costs. Counsel fee
Rs. 3,000/-. Since we have dismissed the Injunction Application on merits, the question whether the Appeal filed by the defendants against the
interim order is maintainable or not, does not arise for consideration, and the question becomes merely academic. Hence we dismissed the Appeal
as infructuous, with no order as to costs.