Shelat Brothers and Others vs Nanalal Harilal Shelat

Ramanujam, J.—Defendants 1 and 2 are the appellants. The plaintiff and the second defendant were partners in a firm called Shelat Bros.,

carrying on business in Park Town, Madras. The plaintiff is the elder brother of the second defendant. It is not in dispute that the first defendant

firm had the head office at Madras and a branch at Umrath. The accounts of the entire business were maintained at Madras and the second

defendant was in management of the business in Madras, while the plaintiff was in charge of the business of the branch office at Umrath, and this

arrangement was from the year 1947. Even in the notice of dissolution given by the plaintiff under Ex. B-1 dated 3-6-1960, he admits that he did

not come to Madras for a period of 20 years. Therefore, there cannot be any dispute that the second defendant was in sole management of the

business at Madras for the last twenty years. It appears that the business at Umrath was not substantial and it is the firm at Madras which earned

sufficient profits. Disputes arose between the parties somewhere in the middle of 1960 and by a notice dated 3-6-1960 the plaintiff wanted to get

out of the partnership and by the actual notice of dissolution Ex. B-2 dated 7-7-1960 he informed the second defendant that he has ceased to be a

partner from 1-7-1960. Subsequently the plaintiff filed the present suit for dissolution of partnership and for rendition of accounts by the second

defendant in respect of the partnership business. The second defendant did not, in fact, resist the claim of the plaintiff for dissolution of partnership.

As a matter of fact, by consent of parties, a preliminary decree for dissolution of the partnership and for rendition of accounts has been passed by

the lower court. But at that stage the claim put forward by the second defendant for certain remuneration both for himself and for his two sons who

were also associated with the firm''s business at Madras, was left open for further consideration. The following issue was framed in relation to that

dispute:

Whether the defendant and his sons are entitled to remuneration for the services rendered and if so far what period and what amount?

The claim put forward by the second defendant that he is entitled to a remuneration of Rs. 500/- per month and each of his two sons Rs. 300/- and

Rs. 200/- respectively was resisted by the plaintiff. It is in respect of this dispute on the question of remuneration payable to the second defendant

and his sons, the above issue has been framed and was considered by the courts below. The second defendant put forward the plea that he is

entitled to be paid a remuneration of Rs. 500/- a month and his two sons are entitled to be paid remuneration at the rate aforesaid on the basis of

the letter Ex. B-1 dated 3-6-1960 written by the plaintiff wherein, towards the end, he had stated as follows:--

We hereby agree that it is our responsibility to consider the labour (pains) taken by you and your children at the time of the winding up of the

firm.

The courts below construed the said recital in Ex. B-1 and held that it will constitute a mere proposal by the plaintiff and cannot be enforced as a

binding agreement between the parties. In that view they straightway proceeded to dismiss the second defendant''s claim for remuneration.

In this second appeal it is contended that the second defendant''s claim is not exclusively based on Ex. B-1 alone, as assumed by the courts

below and that Ex. B-1 has been relied on only for the purpose of showing that the plaintiff at a stage anterior to the actual notice of dissolution,

expressed his willingness to consider and stated that it was the responsibility of the firm to consider the pains taken by the second defendant and

his sons, and that the claim could be sustained on other basis as well. His claim was based on two other grounds also. It is urged by the counsel

that when one partner is exclusively in management of the partnership affairs, he is entitled to a reasonable remuneration even though the

partnership agreement did not provide for such remuneration. Learned counsel points out that the business of the firm in Madras was exclusively

conducted by the second defendant for the last 20 years and that for such exclusive management, which has resulted in the firm earning

considerable profits, he should be reasonably remunerated in law, whether the plaintiff has agreed to it or not. So far as the claim for remuneration

for his two sons is concerned, it is the case of the second defendant that though they are not entitled to the remuneration notwithstanding the fact

that no such remuneration of Rs. 300/- and Rs. 200/- as claimed in the written statement, they are entitled to be paid a reasonable remuneration on

the principle of quantum meruit (sic). In support of his contention that a partner can be paid a reasonable remuneration which has been provided

for in the agreement of partnership and in proper cases the court is entitled to grant a reasonable remuneration, he relies on the following passage in

page l10 of the Law of Partnership by Prem Nath Chadha:

But where, as is usually the case, it is the duty of each partner to attend to the partnership business, and one partner in breach of his duty wilfully

leaves the others to carry on the partnership business unaided, they, it would seem, were formerly, and perhaps still are, entitled to compensation

for their services. Thus in Airey v. Borham, (1861) 29 Beav 620, two partners had agreed to devote their whole time to the partnership business;

they quarrelled, and one of them only afterwards attended to it; the partnership was ultimately dissolved, and an enquiry was directed for the

purpose of ascertaining what allowance ought to be made to him for having carried on the business alone (vide Lindley p. 422, 12th Edn).

He also refers to the decision in AIR 1921 91 (Privy Council) . In that case, as a result of one of the partners refusing and neglecting to perform

the duties undertaken by him, the other partner sought dissolution and at the time of taking of accounts it was claimed that the services rendered by

one of the other partners should be remunerated. The court, while upholding the claim put forward by the person who was in management of the

partnership affairs after the other partner refused and neglected to do his duty, stated thus:

But the claim of the plaintiffs for an account of the profits without a proper allowance being made for the fact that their services were deliberately

withheld, is a claim which cannot be maintained.

But I am not in a position to say that this decision helps the second defendant to establish his case that he is entitled to be remunerated for the

services rendered by him as a partner in the circumstances of this case. Here, it is not the case of the plaintiff refusing or neglecting to perform his

duties as a partner. It is not in dispute that the plaintiff was attending to the affairs of the branch at Umrath and the mere fact that the plaintiff did not

attend to the affairs of the business at Madras and that the second defendant was in exclusive management of the same will not lead to the

inference that the plaintiff either neglected or refused to undertake the duties of a partner. The learned counsel, however, contends that even though

the plaintiff might have done his duties as a partner, the work done by the second defendant, which resulted in substantial profits to the partnership

business, was quite disproportionately high compared with the work done by the plaintiff and that such work has to be reasonably remunerated by

the court sitting as a court of equity.

But in this case there is no material to enable the court to come to a conclusion with reference to the actual duties performed by each of the

partners from which one could say that the work done by the second defendant was substantially more than the work done by the plaintiff as a

partner. Merely because the business at Madras resulted in larger profits than the branch business at Umrath, it cannot be held that the second

defendant did substantially more work than the plaintiff who was in charge of the branch business. One other factor also has to be taken into

account in this connection. The second defendant states that he has been exclusively in charges of the business for the last 20 years. But it is only at

the stage when talks of dissolution came, the claim for remuneration has been made. If really his services to the partnership were such as to entitle

him to remuneration he would not have kept quiet without putting forward such a claim all these years. That fact also shows that the second

defendant did not expect any remuneration apart from his profits as a partner from the partnership business.

Lindley on Partnership, 12th Edn. at page 422, states-

Even where the amount of the services rendered by the partners is exceedingly unequal, still, if there is no agreement that their services shall be

remunerated, no charge in respect of them can be allowed in taking the partnership accounts. In such case a remuneration to be paid to either for

personal labour exceeding that contributed by the other is considered as left to the honour of the others, and where that principle is wanting, a

court of justice cannot supply it.

The above passage shows that even in a case where the personal labour of one partner exceeded that contributed by the order, it has to be left to

the honour of the other partner as to whether the partner who rendered more personal labour should be rewarded or not for such additional

labour. There is no agreement between the partners as to how extra labour should be remunerated and it is not for the court to imply such an

agreement and supply the omission. I am therefore inclined to agree with the view taken by the courts below that the second defendant as a partner

is not entitled to the remuneration of Rupees 500/- per month claimed by him either on the basis of the letter Ex. B-1 or notice Ex. B-2 or the letter

Ex. B-3.

Coming to the question of remuneration payable to the second defendant''s sons, it is claimed by the second defendant that one of his sons was

associated with the conduct of the business of the firm from the year 1944, that he was not paid any remuneration upto 1947, that thereafter a sum

of Rs. 50/- was credited to his account as salary, and that his remuneration of Rs. 50/- was slowly raised so that it reached a sum of Rs. 135/- at

the state of dissolution. As regards his second son it is stated that he was associated with the affairs of the firm from the year 1946, that till 1953 he

was not paid any remuneration and that in 1963 he was paid a remuneration of Rs. 50/- and a certain commission on the sales canvassed by him.

Both the salary and the commission are said to have been credited to his account. It is stated by the learned counsel for the appellant that these

salaries and the commission paid to the two sons had been claimed as a business expenditure before the Income Tax Authorities and the same has

been allowed. But this is very seriously controverted by the learned Counsel for the respondent plantiff. But the fact that the salaries and the

commission stand credited to the sons is not in dispute. The question is whether the two sons of the second defendant, who have been associating

with the business of the firm and rendering services to the firm all these years, should be remunerated or not.

The claim of the second defendant that his sons were actually doing the partnership business as employees of firm from 1944 and 1946 does not

seem to have been challenged either in the pleadings and even before the lower Court that fact does not seem to have been disputed. Even the

issue framed proceeds on the basis that the sons had rendered services and the only question at issue between the parties is as to whether they are

entitled to be remunerated for the services rendered. Learned Counsel for the plaintiff wanted to canvass the claim put forward by the second

defendant that his sons did in fact render services to the firm from 1944 and 1946. But it is not possible at this stage to question that fact, especially

when both the courts below have proceeded on the basis that the sons did in fact render services to the firm, though they have dismissed the claim

for remuneration on the ground that the plaintiff did not agree for payment of any remuneration under Ex. B-1. Therefore it has to be taken that the

sons of the second defendant did in fact serve the firm from 1944 and 1946 as stated by the second defendant. It is not in dispute that the sons of

the second defendant are not bound to render any service to the firm either on the basis of the terms of the partnership or otherwise. They are utter

strangers to the firm and if their services had been requisitioned and the services were rendered not gratuitously they have to be paid a reasonable

remuneration. Any remuneration which they are entitled will have to depend on the nature of the services rendered by them and the benefit which

the firm derived as a result of their services. In this case no material has been placed as to the nature of the services rendered by them. But one fact

is clear that the second defendant as a person in management of the firm''s business at Madras, thought it proper to start one son on a salary of

Rupees 50 from 1947 and another son on a salary of Rs. 50 from 1953.

From this it can be inferred that the second defendant treated the services rendered by his two sons prior to those years were gratuitous. As a

partner in management of the business the second defendant is empowered to employ such persons whose services are useful to the firm in the

course of his management of the business. He has found the services of his two sons useful to the firm and he has employed them and taken

advantage of their services. Therefore, though there is no order of appointment as such passed by the second defendant, the fact that his sons have

rendered services to the firm will entitle them to get a reasonable remuneration from the firm which they served. The mere fact that they happened

to be the sons of the second defendant cannot disentitle them from getting a reasonable remuneration for the services rendered by them to the firm.

The learned counsel for the plaintiff, however, contends that unless there is a specific agreement between the partners to pay remuneration to the

sons of the second defendant, they will not be entitled to claim remuneration, and particularly at the rates claimed by them in the written statement.

It is true that there is no basis for the claim of remuneration at Rs. 300/- and Rupees 200/- for each of his two sons. It is stated that the basis of

such a claim was Ex. B-3, a letter said to have been written by the plaintiff to a third party wherein he states that he offered certain remuneration to

the second defendant as well as his sons; but that has not been agreed to at the time of the dissolution. I am inclined to place much reliance on Ex.

B-3 and to hold that the sons of the second defendant are entitled to be paid remuneration at the rates claimed in the written statement. But at the

same time I am not inclined to agree with the learned Counsel for the plaintiff that the two sons of the second defendant who rendered services to

the firm for so many years should go without any remuneration once it is found that they did in fact render services to the firm. Section 70 of the

Contract Act provides that where a person lawfully does anything for another person, not intending to do so gratuitously, and such other person

enjoys the benefit thereof, the latter is bound to make compensation to the former in respect of, or to restore the thing so done.

In my view, therefore, whether there is an agreement to pay remuneration or not, or whether a regular appointment order issued by the second

defendant is available or not, the sons of the second defendant who had rendered services to the firm should have to be remunerated on the basis

of the principle of quantum meruit. But, as already stated, there is no material before the court so as to find out what is the reasonable remuneration

for the services rendered. The only material that is available before court is that the second defendant himself thought a particular amount to be the

paper salary for the sons and credited the salary every month after 1947 in respect of one son and after 1953 in respect of another son and that

can be taken as some indication to show the reasonableness of the remuneration. Unless the second defendant himself thought the said payment as

representing a proper and reasonable remuneration, he would have bargained with his partner the plaintiff for a higher amount therefore hold that

the amounts credited to the sons of the second defendant in the accounts of the firm from the years 1947 and 1953 towards salary as well as

commission can be taken as a reasonable remuneration and at the final settlement of account such amounts payable to the sons of the second

defendant have also to be given credit to. The second appeal is therefore allowed in part. There will however be no order as to costs. No leave.

Appeal allowed.