Omana vs Raveendran

Rajasekharan, J.—Plaintiffs in a suit for declaration of shares in the firm, rendition of accounts, evolving a scheme and consequential reliefs are the appellants.

One Neelakantan and Krishnan-two brothers-acquired the plaint schedule land and started a tile factory there in 1950. They invested in equal shares and they were sharing the profits equally. On 9-3-1957 Neelakantan died. Karthiyayani, plaintiffs 1, 3 and 4 and the defendants are the widow and children of Neelakantan. On 12-8-1957, the widow and children of Neelakantan and Krishnan together intered into a partnership agreement (Ext. A1) stipulating the terms and conditions under which the business is to begun. The business was being carried on under the provisions of Ext. A1 and share of profits taken by the parties, krishnan was to be the manager during his life time as per the terms of Ext. A1. Krishnan died leaving behind his widow Ammakunju and son Sugathaon. They, on 28-12-1981 assigned (Ext. A2) their share in the partnership business in favour of defendants 2 and 3. Subsequent to that, on 26-4-1983. plaintiffs 1, 3 and 4 took assignment (Ext. A3) of the shares of Karthiyayani and Mohanan--the widow and one of the sons of deceased Neelakantan. On the plea that the business is being mismanaged and assets misappropriated by the second defendant, the suit has been instituted for a declaration of the plaintiffs shares and other reliefs as mentioned earlier. The plaintiffs have another claim that Ext. A2 taken by defendants 2 and 3 enures to the benefit of the firm and so, the plaintiffs 1, 3 and 4 are claiming 3/7 share in the partnership business. They want to get the accounts rendered and a scheme evolved for the proper running of the firm in future.

Defendants 2 and 3 contest the case and according to their contentions, the suit is not maintainable by virtue of S.69 of the Indian Partnership Act, that Ext. A2 enures to the benefit of defendants 2 and 3 alone, that there is no mismanagement and that the plaintiffs are not entitled to any reliefs payed for.

Necessary issues arising out of the pleadings were raised by the trial court. The trial court held that the suit is hit by S.69(1) of the Indian Partnership Act and accordingly, the plaintiffs were not suited. The court further held that Ext.s A2 and A3 are valid transfers of shares and by those transfers the assignees have obtained the rights of the assignors. Then the court proceeded to render a finding regarding the shares to which the parties are entitled.

The judgment and decree are challenged by the plaintiffs and according to them, the suit should have been decreed and their shares declared as 3/7.

The Learned Counsel for the appellants on Smt. Rampa Devi and Others Vs. Bishambhar Nath Puri and Others, in support of his proposition that at least the second prayer in the suit namely rendition of accounts should have been granted, because as regards that the suit is maintainable. A reading of the head notes of the decision may lead to think that the decision was to the effect that a suit for rendition of accounts by one or some of the partners of an unregistered firm against the firm or other partners is maintainable.

That was a case where the accounts were sought to be rendered and in the alternative prayed for the dissolution of the firm. It was such a suit, that the court held maintainable. There-was an unregistered partnership firm and some of the. partners made an application under S. 20 of the Arbitration act for appointment of an arbitrator in terms of the arbitration agreement contained in the deed of partnership. That application was rejected for the reason that the firm was not registered and S.69 bars the relief. It was subsequent to that the said suit was filed for accounts and in the alternative for dissolution of the firm and accounts. The facts of that case have no bearing with the facts of the suit at hand and that decision has no application.

Various High Courts as well as the Supreme Court of India have uniformly held that it is a contention precedent that the firm should be a registered one for instituting a suit to enforce a right arising from a contract or conferred by the Partnership Act by on behalf of any person suing as a partner in the firm against the firm of any person alleged to be or to have been a partner in the firm.

Sub-section (3) of S.69 of the Act saves some categories of suits by partners of an unregistered firm. Clause (a) of sub- section 3 of S.69 says that provisions of sub-sections (1) and (2) (which bar the suits by an unregistered firm or partners of an unregistered firm) shall not affect the enforcement of any right or power to release the property of a dissolved firm

S.T. Desai on The Law of Partnership in India, sixth Edition says about S.69 of the Indian partnership Act:-

The section enacts provisions which are express and mandatory and it is the paramount duty of the judicial interpreter to give full effect to the language used by the law-maker.

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The mischief primarily intended to be prevented by the mandatory provisions of this section was the hardship and difficulty to which third parties dealing with a firm were subjected in the matter of proving as to who were the persons carrying on the business of that firm as partners. As to the provisions affecting partners themselves it seems clear that the main object and intention of the Legislature was to prevent a partners from enforching his claims against his fellow partners if the firm was not registered and to compel in such a case dissolution of the firm by laying down that the Court will entertain suits between partners relating to partnership business only where dissolution and account and winding up of the affairs of an already dissolved firms is sought.

So, the legal position is that a suit by a partner/partners of an unregistered firm against the firm of fellow partners for accounts without a prayer for dissolution of the firm is not maintainable. The trial court has rightly held that the suit is not maintainable. No interference is called for.

Even though the trial Court has held that the suit is not maintainable incidentally it has quantified the shares of the partners. The Learned Counsel appearing for the appellants would submit that this in future, in a properly instituted suit, may stand in the way of the plaintiffs in claiming their legitimate share of 3/7 in the partnership assets. According to the Learned Counsel Ext. A2 is incompetent for the reason that as per the provisions of Ext. A1, a partner who does not want to continue in the partnership has to give notice to all the partners intimating the intention to retire and has to wait for six months for getting the share due to him after assessing the assets and liabilities of the firm. Only if within six months, that particular partner is not paid he becomes entitled to transfer his rights in the partnership. According to the counsel, before Ext.A 2 no notice was given to all the other parties and so, Ext. A2 was an incompetent transaction. Learned Counsel for the respondents would submit that Ext. A3 in favour of the plaintiffs also stands on the same footing as Ext. A2. Whatever that be, those are matters to be agitated and decided in a properly instituted suit. In this suit, which is hit by S.69 of the Act it was not necessary to ascertain or declare the shares of the respective parties. So the question as to the due shares of the partners of the firm is left open to be decided in a properly instituted suit.