In W. Krishnamachariar and another v. A. Sankara Sah, AIR 1921 Privy Council 91, it was held that refusal and neglect on the part of any one partner to perform the duties undertaken by him would give to any other partner the right to apply for dissolution or without legal proceedings the partnership could by agreement be dissolved.
7. In any case, settlement of accounts between the partners is not the necessary ingredient for dissolution of the firm nor the continuance of the accounts in the firm's name with the Banks after dissolution was of any consequence as held by the learned single Judge. This is quite evident when it has been provided in Section 43 of the Indian Partnership Act that the partnership at will may be dissolved by giving notice in writing of his intention to dissolve the firm. At that time, the question of settlement of accounts etc. does not arise. Rather the accounts will have to be settled after dissolution of the firm for which the suit could be brought for rendition of accounts within three years under Article 5 of the Limitation Act from the date of dissolution. Having failed to file the suit within three years thereof, it was clearly barred by time.
Punjab-Haryana High Court
Harish Kumar vs Bachan Lal And Others on 19 September, 1990
Equivalent citations: AIR 1991 P H 130, (1991) 99 PLR 188
Bench: J Gupta, R Mongia
1. This appeal has been filed by the defendant against whom the suit for rendition of accounts was dismissed by the trial Court but was decreed in appeal by the learned sigle Judge.
2. The facts, in brief, are that the parties entered into a partnership business at Barnala under the name M/s. Mehar Chand Bachan Lal and a regular partnership deed was executed between them on 30-3-1954. The business was carried on by them in equal shares in the assets and it was a partnership at will and any party could retire from it on giving one month's notice in writing and on the retirement of any of the parties, the partnership would be deemed to have dissolved. Both the parties were liable in respect of the liabilities and entitled to the assets of the partnership in accordance with their shares. It is the common case of the parties that firm worked up to 18-7-1971 and after that it did not do any business. According to the plaintiff, the firm was maintaining regular books of accounts and it was alleged that the defendant was in possession of the same. Since the partnership was at will and it was not carrying on any business, the plaintiff deemed it proper not to continue the partnership and served a notice dated 7-4-1974 under registered A. D. cover on the defendant for dissolution of the firm, informing that he did not want to continue the said firm and that he be deemed to be not partner w.e.f. 10-7-1974 and firm be treated as dissolved from that date. He further requested the defendant to settle all the accounts of the firm and whatever amount is found due to him after rendition of accounts, he is entitled to interest thereon at the rate of 12% per annum. This suit for rendition of accounts was filed on 23rd August, 1974.
3. In the written statement filed on behalf of the defendant, it was pleaded that suit was barred by time. The partnership between the parties was admitted but was alleged that since the partnership was at will and it was not carrying on any business since 18-7-1971, it was ultimately dissolved on that date. It was denied that the parties were entitled to interest on the amount due to them from the partnership at the rate of 12% per annum. It was maintained that books have been taken away by the plaintiff along with the cash of the firm. The plaintiff started his own business from 18-7-1971 in the name of M/s. Bachan lal Anand Kumar in separate premises and on the same day, the defendant also started his new business in the name of M/s. Mehar Chand Om Parkash. Both the parties started new accounts books for their respective firms. The plaintiff also got a new telephone connection. With the dissolution of the firm on 18-7-1971, the plaintiff ceased to take any interest in the same. He further pleaded that the firm was assessed to income-tax for the business up to 18-7-1971 and both the parties paid income-tax equally from their separate accounts, which shows that partnership business was dissolved on 18-7-1971. After framing issues and allowing the parties to lead . evidence, the trial Court found that the plaintiff was entitled to interest at the rate of 12% per annum on the amount, if any, due to him on rendition of accounts. It was also held that books of accounts of the firm were with the defendant and his allegation that the plaintiff had taken away the same was without any basis. It was, therefore, concluded that primarily the defendant is accounting party but in the case of rendition of accounts of the partnership, every partner is an accounting party. Most material issues Nos. 3 and 3-A were decided in favour of defendant and against the plaintiff. It was held thereunder that conduct of the parties shows that the partnership between them stood dissolved on 18-7-1971 and dissolution of the partnership on 10-7-1974 by notice issued by the plaintiff was of no consequence. Since partnership was held to have been dissolved on 18-7-1971, suit filed on 23-8-1974 was held to be barred by time under Article 5 of the Indian Limitation Act. Consequently, plaintiffs suit for rendition of accounts was dismissed. In appeal learned single Judge reversed the finding of the trial Court on Material issues Nos. 3 and 3-A and came to the conclusion that partnership was dissolved on 10-7-1974 and therefore, the suit was within time. According to the learned single Judge, neither any occasion nor any event occurred for dissolution of the partnership prior to 10th July, 1974 by any of the modes provided in the Indian Partnership Act. As a result of this finding, plaintiff's suit was decreed and a preliminary decree was passed in favour of the plaintiff and against the defendant for rendition of accounts.
4. Learned counsel for the defendant-appellant submitted that whole approach of the learned single Judge in this behalf was wholly wrong and illegal. The trial Court rightly concluded the partnership stood dissolved on 18-7-1971 but said finding has been reversed in appeal arbitrarily. According to the learned counsel, if the firm stood dissolved on 18-7-1971, the suit filed on 23rd August, 1974 was barred by time. It was maintained that though cessation of partnership business ipso facto does not amount to dissolution but in the present case taking into consideration all the facts and circumstances as enumerated by the trial Court, such as (i) that partnership concern did not work or conduct any business after 18-7-1971, (ii) that plaintiff took on rent a separate shop and started his own business and then got a separate telephone connection and never visited after 18-7-1971 the place where the partnership concern M/s. Mehar Chand Bachan Lal used to conduct its business. Not only that even the defendant -- Bachan La! also started his separate business in the name of M/s. Bachan Lal Anand Kumar; (iii) that dissolution of the firm of M/ s. Mehar Chand Bachan Lal was also recognized by the Income-tax Officer vide order Exhibit P-I. The income-tax due from the said firm was paid half and half by both the parties; (iv) that after 18-7-1971 separate income-tax returns were filed separately by both the parties for their separate business, as is evident from Exhibit D-l to D-3; (v) that no transaction whatsoever took place on behalf of the firm after 18th July, 1971. The payment by cheques Exhibits PW 8/1 and PW 8/2 received by the plaintiff in July and August, 1971 was of no consequence; (vi) that no settlement of accounts as such took place between the parties after 18-7-1971 but from the evidence it is evident that while leaving the partnership business the plaintiff took away the entire cash with him and there were two weighing machines with the firm, which were divided on 18-7-1971 and each partner took one machine; (vii) there was no allegation on behalf of the plaintiff that there were any outstanding in the name of the firm after it ceased to transact business on 18-7-1971; (viii) the old concern M/s. Mehar Chand Bachan Lal had telephone facility in their premises in the name of their firm and said telephone is now being used by the defendant and the bills, for the same were being paid by him out of the money of new defendant's concern as is evident from the statement of Mehar Chand, DW3 and Exhibits DW5/1 and DW5/2, and therefrom it was rightly held that the firm stood dissolved on 18-7-1971. In support of his contentions, he referred to Amir Chand v. Jawahir Mal, AIR 1916 Lahore 410; Moung Tha Huyin v. Mah Thein Myah, ILR 28 Calcutta 53 (Privy Council); Sm. Lilabati Rana v. Lalit Mohan Dey, AIR 1952 Cal 499 and Srinivasalu Naidu v. Ramakrishana Naidu, AIR 1933 Madras 353 (2). On the other hand, learned counsel for the plaintiff-respondent submitted that from the facts and circumstances of the case, inference drawn by the learned single Judge was that there was no dissolution of the firm on 18-7-1971 as held by the trial Court and this being a finding of fact should not be interfered in this Letter Patent Appeal. In any case, argued the learned counsel, if two views are possible, the same should not be interfered with in this Letter Patent Appeal. He also maintained that the defendant has been held to be an accounting party and therefore, he should not raise any objection for rendering the accounts. He also argued that since the partnership was at will, it could only be dissolved by giving a notice as contemplated under Section 43 of the Indian Partnership Act.
5. After hearing the learned counsel for the parties and going through the case law cited at the bar, we are of the considered view that in view of the facts as found by the trial Court, which could not be controverted on behalf of the plaintiff, the inference drawn by learned single Judge was wrong and not according to law. It is the common case of the parties that cessation of the partnership business ipso facto does not amount to dissolution but dissolution may be inferred from the circumstances. It was held in AIR 1933 Madras 353 (supra) that partnership is not dissolved merely because it is closed but it must be dissolved in one way or the other recognized by the law. Dissolution of the partnership at will can be inferred from the circumstances of the case. Section 40 of the Indian Partnership Act contemplates that a firm may be dissolved with the consent of all the partners or in accordance with a contract between the partners. That being so, it cannot be successfully argued that the firm could only be dissolved by issuing a notice as provided under Section 43 of the ibid Act. There are other modes of the dissolution also provided under the Act and one of the modes provided is under Section 43 of the Act. Where a firm has been dissolved with the consent of all the partners or not, will be a question of fact in each case to be decided on the circumstances brought on record. In the present case, the facts brought on record as reproduced earlier as found by the trial Court and not controverted by the plaintiff, it is quite evident that the firm was dissolved on 18th July, 1971 and the parties had started their separate business after that. It was held in AIR 1916 (Lahore) 410 (supra) that 'in the case of a partnership at will, the intention to dissolve may be inferred from circumstances showing that a partner has in fact abandoned his interest in the concern'. It was also held therein that 'once it is held that the partnership came to an end long before three years prior to the date of institution of the suit for rendition of accounts, the suit did not lie and the suit was barred by time.'
6. Apart from that 'Partnership', as defined in Section 4 of the Indian Partnership Act, means that it is the relation between persons who have agreed to share the profit of a business carried on by all or any of them acting for all. Section 39 of the Indian. Partnership Act provides that the dissolution of partnership between alt the partners of a firm is called the dissolution of the firm. Thus dissolution means coming to an end the relation between the partners who have agreed to share the profits of a business carried on by all or any of them. This relation to share the profits of the business of the firm M/s. Mehar Chand Bachan Lal came to an end on 18-7-1971 when the partners decided not to transact the business of the firm from 18-7-1971. It is true that in the law of partnership, stoppage of the partnership business is one thing and dissolution of partnership is quite another. Carrying on business is, no doubt, the purpose of partnership, and discontinuance of business ordinarily puts an end to the main partnership activity but it does not, by itself, severe the legal relationship between the partners. Indeed, there are, cases where, even after dissolution, the business may be carried on, if only for the purpose of the mere beneficial winding up of the affairs of the partnership. However, in the case of a partnership at will, the intention to dissolve may be inferred from circumstances showing that one of the partners had abandoned his interest in the concern as held in Official Receiver, Insolvent's Estate, Lahore and another v. Din Mohammad, AIR 1934 Lahore
557. In W. Krishnamachariar and another v. A. Sankara Sah, AIR 1921 Privy Council 91, it was held that refusal and neglect on the part of any one partner to perform the duties undertaken by him would give to any other partner the right to apply for dissolution or without legal proceedings the partnership could by agreement be dissolved.
7. In any case, settlement of accounts between the partners is not the necessary ingredient for dissolution of the firm nor the continuance of the accounts in the firm's name with the Banks after dissolution was of any consequence as held by the learned single Judge. This is quite evident when it has been provided in Section 43 of the Indian Partnership Act that the partnership at will may be dissolved by giving notice in writing of his intention to dissolve the firm. At that time, the question of settlement of accounts etc. does not arise. Rather the accounts will have to be settled after dissolution of the firm for which the suit could be brought for rendition of accounts within three years under Article 5 of the Limitation Act from the date of dissolution. Having failed to file the suit within three years thereof, it was clearly barred by time.
8. As a result of the above discussion, this appeal succeeds. The judgment and decree passed by the learned single Judge are set aside and that of the trial Court dismissing the suit of the plaintiff are restored with costs.
9. Appeal allowed.
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