Appeal No 375 of 1956
Appeal from the judgment and decree dated July 27 1953 of the Madras High Court in A section No 623 of 1949
A V Viswanatha Sastri and section Venkata Krishnan for the appellants
M C Setalvad Attorney General for India R Ganapathy Iyer and G Gopalakrishnan for the respondent
February 27
The Judgment of the Court was delivered by WANCHOO J
This is an appeal on a certificate granted by the Madras High Court
The brief facts necessary for present purposes are these The present suit was brought by Muthappa Chettiar hereinafter referred to as the respondent against K Thiagarajan Chettiar hereinafter called the appellant and the Saroja Mills Ltd
In 1939 these two persons thought of doing business jointly by securing managing agencies of some mills
In that connection they carried on negotiations with two mills namely Rajendra Mills Limited Salem and the Saroja Mills Limited Coimbatore hereinafter called the Mills
The managing agency of the Mills was with the Cotton Corporation Limited
On October 4 1939 the said Corporation transferred and assigned its rights to the appellant and the respondent under the name of Muthappa and Co
On November 15 1939 the Mills at an extraordinary general meeting of the shareholders accepted Muthappa and Co as the managing agents and made the necessary changes in the Articles of Association
Later the appellant and the respondent obtained the managing agency of the Rajendra Mills Limited Salem
The managing agents of this mill were Salem Balasubramaniam and Co Ltd Muthappa and Co purchased all the shares of the Salem Balasubramaniam and Co and thereafter carried on the business of the managing agency of this mill in the name of Salem Balasubramaniam and Co Ltd In November 1940 the appellant and the respondent entered into a written partnership agreement with respect to 1001 the managing agency business of the two mills
We shall consider the terms of this agreement later and all that we need say at this stage is that turns were fixed for the appellant and respondent to look after the actual management of the two mills and the appellant s turn was the first and he therefore came into actual control of the two mills
Soon after however disputes arose between the appellant and the respondent with respect to the managing agency of the Rajendra Mills Limited which resulted in various suits being filed between the partners to which we shall refer later
Eventually on March 4 1943 the appellant gave notice to the respondent terminating the partnership considering it as a partnership at will
This was followed by the directors of the Mills terminating the managing agency of Muthappa and Co on the ground that company had ceased to exist and also on the ground that quarrels between the partners of the firm were not conducive to good management of the Mills
This was notified to the respondent on March 22 1943
This action of the directors was approved in a meeting of the shareholders of the Mills on September 29 1943 and necessary modifications were again made in the Articles of Association
In between on April 17 1943 the respondent had filed a suit for a declaration that Muthappa and Co continued to be the managing agents of the Mills and for obtaining possession of the office of managing agents for himself or along with the appellant and also for a permanent injunction restraining the Mills from appointing any other managing agents
This suit was dismissed by the trial court on the ground that it was not maintainable under section 69 of the Indian Partnership Act No IX of 1932 hereinafter called the Act though the trial court gave findings on other issues also
The respon dent went up in appeal to the Madras High Court against the decree in that suit
This appeal was dismissed on July 8 1948 as the High Court held that the finding of the subordinate judge that the suit was not maintainable under section 69 of the Act was correct
The High Court however made it clear that it was 1002 expressing no opinion on the correctness or otherwise of the other findings recorded by the subordinate Judge
While this appeal was pending the respondent brought the present suit on February 28 1946
In this suit he prayed for dissolving the firm Muthappa and Co for accounts and for damages against the appellant and the Mills
The main contention of the respondent in the suit was that the alleged dissolution of partnership by the appellant and the removal of Muthappa and Co from the managing agency of the Mills were part of a scheme of fraud conceived by the Appellant which was actively connived at by the mills in order to defeat and defraud the respondent of his legitimate dues and his right to continue and act as the managing agent of the Mills
The damages claimed were estimated at the figure of five lacs of rupees to be recovered from both the appellant and the Mills or from either of them
In the alternative the respondent claimed that even if Muthappa and Co had been removed validly from the managing agency on September 29 1943 he was entitled to account from the appellant from November 15 1939 to September 29 1943
The suit was resisted by both the appellant and the Mills and their case was that the partnership was one at will and therefore Was validly terminated by the appellant by notice
It Was further contended that in any case the Mills were within their rights in terminating the managing agency of Muthappa and Co as that firm had ceased to exist and there were interminable disputes between the partners
Fraud and collusion were denied and it was alleged that it was the respondent s conduct which compelled the appellant to give notice of termination of partnership and the Mills to terminate the managing agency
The Mills took a further plea namely that so far as they were concerned the suit was barred under section 69 of the Act
The trial court held that the firm of Muthappa and Co as a partnership at will and therefore was legally dissolved by the appellant by giving notice dated March 4 1943
It further held that no case of fraud 1003 had proved and that the termination of the managing agency was legal
As to the Mills the trial court held that the suit against them was barred under section 69 of the Act
In consequence the suit against the Mills was dismissed in toto and the prayer for damages was also rejected
The trial court however directed the appellant to account for the profits earned from the inception of the partnership business till March 4 1943 when the partnership was terminated by the appellant by notice
Thereupon the respondent went up in appeal to the High Court
The High Court held that the suit against the Mills was barred under section 69 of the Act though it was made clear that if there were assets of the partnership firm in possession of the Mills the respondent would be entitled to recover them
The High Court however ordered the Mills to bear their own costs in both the courts on the ground that the Mills were guilty of fraud
As to the case against the appellant the High Court held that the partnership was
not a partnership at will and therefore it could not be dissolved by notice by the appellant
It further held that the appellant fraudulently and in collusion with the Mills purported to dissolve the partnership by issuing an illegal notice and to have the managing agency terminated by the Mills and in consequence the termination of the managing agency was illegal
On the view therefore that the partnership as well as the managing agency continued and on a review of the circumstances the High Court held that this was a fit case for dissolving the partnership and fixed March 10 1949 which was the date of the decree of the trial court as the date from which the partnership would be dissolved
Consequently it modified the decree of the trial court and passed a preliminary decree for accounts against the appellant in respect of the firm Muthappa and Co from November 15 1939 to March 10 1949 and added that the respondent could also recover any amount found due to him on taking accounts against the partnership assets if any in the hands of the Mills
The appellant thou applied for a certificate to 1004 appeal to this Court which was granted and that is how the matter has come up before us
The first question therefore that arises for our deter mination is whether the partnership in this case is a partnership at will and it is necessary to refer to the terms of the partnership agreement to determine this question
After reciting that the management of the
Mills was being carried on in the name and style of Muthappa and Company and of the Rajendra Mills Limited in the name and style of Salem Balasubramaniam and Co Limited the partnership agreement goes on to say that the partners shall get in equal shares the salary commission profit etc
 that may be realised from the aforesaid managing agencies
It provides for carrying on the management in rotation once in four years the appellant to manage for the first four years and thereafter the respondent to manage for the next four years and in the same way thereafter
It further provides that the partners and their heirs and those getting their rights shall carry on the management in rotation
The accounts were to be made once in every year after the closing of the yearly accounts of the two mills
There were then provisions as to borrowing with which we are not con cerned
The agreement further provides that in case either partner thinks of relinquishing his right of management under the agreement it shall be surrendered to the other partner only but shall not be transferred or sold to any other person whatever
Finally it is provided that the two partners shall carry on the affairs of the firm by rotation once in four years and the income realised thereby shall be divided year after year and the partners and their heirs shall get the same in equal shares and thus carry on the partnership management
The contention on behalf of the appellant is that as this partnership does not fall under section 8 of the Act and is not within the two exceptions under section 7 it is a partnership at will
Section 7 provides that where no provision is made by contract between the partners for the duration of the partnership or for the determination of the partnership the partnership is partnership at will
Section 8 provides that a person may 1005 become a partner with another person in particular adventures or undertakings
Section 43 provides that where the partnership is at will the firm may be dissolved by any partner giving notice in writing to all the other partners of his intention to dissolve the firm
On the other hand if the partnership is not at will a 42 applies and is in these terms Subject to contract between the partners a firm is dissolved a if constituted for a fixed term by the expiry of that term b if constituted to carry out one or more adventures or undertakings by the completion thereof c by the death of a partner and d by the adjudication of a partner as an insolvent
 Section 44 provides for dissolution by the court
The High Court was of the view that looking to the terms of the partnership it could not be held to be a partnership at will and that under section 7 it will be a case of a partnership the duration of which as well as the determination of which were fixed
The High Court was further of the view that section 8 of the Act would also apply to the partnership in question as the evidence showed that the partners had entered into partnership in order to carry on the business of managing agency of the two mills and such business was an under taking As we read the terms of the agreement it seems to us clear that the intention could not be to create a partnership at will
The partners contemplated that the management would be carried on in rotation between them in four yearly periods
It was also contemplated that the heirs of the partners would also carry on the management in rotation
Considering this provision as well as the nature of the business of partnership it could not be contemplated that the partnership could be brought to an end by notice by either partner
The intention obviously was to have a partnership of some duration though the duration was not expressly fixed in the agreement
Now section 7 contemplates two exceptions to a partnership at will
1006 The first exception is where there is a provision in the contract for the duration of partnership the second exception is where there is provision for the determination of the partnership
In either of these cases the partnership is not at will
The duration of a partnership may be expressly provided for in the contract but even where there is no express provision courts have held that the partnership will not be at will if the duration can be implied
See Halsbury s Laws of England Third Edition Vol 28 p 502 para
964 where it is said that where there is no express agreement to continue a partnership for a definite period there may be an implied agreement to do so
In Crawshay vs Maule 1 the same principle was laid down in these words at p 483  The general rules of partnership are well settled
Where no term is expressly limited for its duration and there is nothing in the contract to fix it the partnership may be terminated at a moment s notice by either party
Without doubt in the absence of express there may be an implied contract as to the duration of a partnership The same principle in our opinion applies to a case of determination
The contract may expressly contain that the partnership will determine in certain circumstances but even if there is no such express term an implied term as to when the partnership will determine may be found in the contract
What we have therefore to see is whether in the present case it is possible to infer from the contract of partnership whether there was an implied term as to its duration or at any rate an implied term as to when it will determine
It is clear from the terms of the contract of partnership that it was entered into for the purpose of carrying on managing agency business
Further the term relating to turns of the two partners in the actual management and the further term that these turns will go on even in the case of their heirs in our opinion clearly suggest that the duration of the partnership would be the same as the duration of the managing agency
We cannot agree that this means that the partnership 1  483 1007 would become permanent
In any case even if there is some doubt as to whether the terms of this contract implied any duration of the partnership there can in our opinion be no doubt that the terms do imply a determination of the partnership when the managing agency agreement comes to an end
It is clear that  the partnership was for the sole business of carrying on the managing agency and therefore by necessary implication it must follow that the partnership would determine when the managing agency determines
Therefore on the terms of the contract in this case even if there is some doubt whether any duration is implied there can be no doubt that this contract implies that the partnership will determine when the managing agency terminates
In this view the partnership will not be a partnership at will as section 7 of the Act makes it clear that a partnership in which there is a term as to its determination is not a partnership at will
Our attention was drawn in this connection to a term in the contract which lays down that either partner may withdraw from the partner
ship by relinquishing his right of management to the other partner
That however does not make the partnership a partnership at will for the essence of a partnership at will is that it is open to either partner to dissolve the partnership by giving notice
Relinquishment of one partner s interest in favour of the other which is provided in this contract is a very different matter
It is true that in this particular case there were only two partners and the partnership will come to an end as soon as one partner relinquishes his right in favour of the other
That however is a fortuitous circumstance for if for example there had been four partners in this case and one of them relinquished his right in favour of the other partners the partnership would not come to an end
That clearly shows that a term as to relinquishment of a partner s interest in favour of another would not make the partnership one at will
We may in this connection refer to Abbott vs Abbott 1
That was a case where there were more than two partners and it was 1 1008 provided that the retirement of a partner would not terminate the partnership and there was an option for the purchase of the retiring partner s share by other partners
It was held that in the circumstances the partnership was not at will and it was pointed out that only when all the partners except one retired that the partnership would come to an end because there could not be a partnership with only one partner
We are therefore in agreement with the High Court that the contract in this case disclosed a partnership the determination of which is implied namely the termination of the managing agency and therefore under section 7 of the Act it is not a partnership at will
In the circumstances it is unnecessary to consider whether the case will also come under section 8 of the Act
The next question that arises is whether the managing agency has been terminated legally  for if that is so the partnership would also be determined
This takes us to the history of the relations between the partners after the partnership came into existence
It seems that disputes arose between the partners some time in 1941 in connection with the Rajendra Mills Limited which was one of the mills included in the managing agency business
The respondent filed a suit on March 4 1942 against the appellant and Salem Balasubramaniam and Co Limited with respect to the allotment of shares in the managing agency company On March 11 1942 the respondent filed another suit this time on the basis of debentures which he hold against the Mills praying for a decree against the Mills with respect to the debenture amount
 On June 17 1942 the respondent filed a third suit with respect to the Rajendra Mills Limited for a declaration that the respondent was a partner owning half share in the managing agency of the Rajendra mills Limited  On the same day the respondent filed a fourth suit against the appellant his son and Salem Balasubramaniam and Co Limited with respect to certain actions taken by the managing agency company
On July 15 1942 the appellant filed a counter suit against the respondent and the managing agency company relating to the Rajendra Mills Limited for a 1009 declaration that the respondent had no interest in the managing agency company and for further reliefs
There is no doubt therefore that the relations between the partners were very strained in 1942
The respondent admitted in his statement that from the end of 1941 there was enmity between him and the appellant and there were vital differences between them and litigation was going on though he said that in spite of the enmity he was willing to co operate with the appellant if the amount of which he had been defrauded were paid to him on accounting
So far as the litigation with respect to the Rajendra Mills Limited was concerned the respondent lost and it was held that he had withdrawn from the partnership of the managing agency company with respect to that mill
As to the suit on debentures the money was deposited in court and the dispute was only about costs
That matter also went up to the High Court and finally the High Court refused to allow costs to the respondent
It was in this strained atmosphere between the partners that the appellant gave notice dated March 4 1943 terminating the partnership with respect to the Mills considering it as a partnership at will
We have however held that the partnership was not a partnership at will and the notice given by the appellant could not therefore terminate it legally
But the question still remains whether the managing agency of the Mills was terminated legally  for if that was so the partnership would also come to an end on the date the managing agency was terminated in view of what we have held above
The High Court has examined the circumstances in this connection and has come to the conclusion that the appellant fraudulently and collusively with the Mills got the managing agency terminated and therefore the termination of the managing agency was illegal
We are unable to agree with this view of the High Court
It is therefore necessary to examine the circumstances in which the termination came about
The appellant sent a copy of his notice dated March 4 1943 terminating the partnership to the Mills also
The respondent sent a reply to this notice in which he claimed that the partnership was 1010 not at will and the appellant was not entitled to terminate it and a copy of this reply was also sent to the Mills on March 16 1943
On March 22 1943 the directors of the Mills held a meeting
In that meeting the directors decided that as the partners of Muthappa and Company were unable to get on in harmony with each other and were involved in litigation and several suits were going on between them and on account of their differences the work of the Mills was suffering and was likely to suffer and also because Muthappa and Company had ceased to exist and had lost its right of management and was no longer in a position to manage the Mills it became necessary to appoint other managing agents
Thus by this resolution the managing agency of Muthappa and Company was terminated for two reasons 1 that there were differences between the partners of the managing agency company and the work of the Mills was suffering and was likely to suffer and 2 that Muthappa and Company had come to an end and therefore had lost its right of management
It appears that before this resolution was passed the appellant had been purchasing shares of the Mills in the market and had acquired a controlling interest therein
The High Court therefore thought that the hidden hand of the appellant was visible behind this resolution of the directors of the Mills the more so as the appellant s son was nominated by the same resolution to administer the whole affairs of the Mills subject to the control and direction of the board of directors till such time as suitable managing agents were appointed
This action of the board of directors was confirmed at a general meeting of the shareholders on September 29 1943
The High Court thought that as the appellant had acquired a controlling interest in the Mills he was behind the resolution of the directors of March 22 1943 and the resolution of the general meeting of the shareholders of September 29 1943
It may be that the appellant having acquired a controlling interest in the Mills had a good deal to do with the resolutions but that in our opinion would not necessarily make his 1011 conduct fraudulent and the termination of the managing agency agreement illegal
It is not in dispute that there was no agreement between the partners that either of them would not purchase shares of the Mills in open market
We do not therefore see anything improper in the conduct of the appellant when he purchased the shares of the Mills in open market and managed to acquire the controlling interest therein
The appellant obviously had two capacities in one capacity he was a partner of the respondent in the managing agency business in the other capacity he was a large shareholder of the Mills and as such shareholder it was certainly his interest to see that the interest of the Mills did not suffer
The crucial question therefore is whether the action taken by the Mills by the two resolutions is such as would be taken by any prudent company when faced with the situation with which the Mills was faced in the present case
There can in our opinion be no doubt that any company when faced with a situation in which the Mills was in this case and finding that the two partners of its managing agency firm were fighting tooth and nail and there was no love lost between them and also finding that the interest of the Mills was suffering and was likely to suffer because of the bad blood between the two partners of the managing agency was bound to take steps to protect its own interests
The fact that the major shareholder in the Mills also happened to be a partner in the managing agency would not disentitle him from acting in the interest of the Mills as a major shareholder
We may in this connection refer to Morarji Goculdas and Co vs Sholapur Spinning and Weaving Co Ltd and Others1
In that case a question arose whether the termination of the managing agency agreement was illegal on the ground of misconduct
It was found in that case that there were quarrels between the partners of the managing agency firm of such a nature and duration as to impair seriously their capacity to discharge their duty to the company as managing agents and to affect prejudicially the interests of the company
It was held that  1 129 1012  In each case the question must be whether the misconduct proved or reasonably apprehended has such a direct bearing on the employer s business or on the discharge by the employee of that part of the employer s business in which he is employed as to seriously affect or to threaten to seriously affect the employer s business or the employee s efficient discharge of his duty to his employer
 If on the facts and circumstances of the case it was so the termination of the managing agency would be justified
In the present case there can be no doubt that the quarrels between the two partners of the managing agency firm were so serious and of such duration as to impair their capacity to discharge their duty to the Mills as managing agents and to affect the interests of the Mills prejudicially
Therefore if the directors of the Mills came to that conclusion it is in our opinion not correct to say that conclusion was arrived at fraudulently simply because a major shareholder happened to be the appellant
We may in this connection refer to the observations of Younger LJ in Commissioners of Inland Revenue vs Sansom 1   No doubt there are amongst such companies as amongst any other kind of association blacksheep but in my judgment such terms of reproach as I have alluded to should be strictly reserved for those of them and of their directors who are shown to deserve condemnation and I am quite satisfied that the indiscriminate use of such terms has not infrequently led to results which were unfortunate and unjust and in my judgment this is no case for their use
 These remarks are in our opinion apposite in the present context
It is true that the appellant had a hand as a major shareholder in the two resolutions and this was never hidden but it is equally true that in the circumstances then existing any prudent board of directors and any body of shareholders interested in a company would act in the manner in which the board of directors and the shareholders of the Mills 1  514 1013 acted in the present case
We cannot therefore agree with the High Court that this is a case where the board of directors and the shareholders acted fraudulently in collusion with the appellant for we cannot forget that the appellant as a major shareholder of the Mills could legitimately act to protect them and the action taken was such as any board of directors and any body of shareholders would bona fide take
In the circumstances we are of opinion that the resolution of the board of directors terminating the managing agency agreement confirmed by the general meeting of the shareholders did legally terminate the managing agency between the Mills and Muthappa and Company
It is true that in these resolutions a second reason was given for the termination viz that Muthappa and Co had come to an end because of the notice of March 4
That legal position is in our view incorrect but that apart there were otherwise sufficient reasons for the Mills to terminate the managing agency in the circumstances with which it was faced
The next question that arises is as to when the managing agency can be said to have been terminated ie whether on March 22 1943 or on September 29 1943
Now under s87 Bfof the Indian Companies Act No VII of 1913 which was then in force the appointment of a managing agent the removal of a managing agent and any variation of a managing agent s contract of management shall Dot be valid unless approved by the company by a resolution at a general meeting of the company
This provision clearly shows that a managing agent may be appointed and removed by the board of directors though such appointment and removal is subject to the approval by the company by a resolution at a general meeting of the company
We agree with the High Court that when the company at its general meeting approves of an appointment or of a removal the approval takes effect from the date of the appointment or removal by the board of directors
On this view therefore when the general meeting in this case approved the action of the board of directors the removal became valid and came into effect from March 22 1943
1014 Therefore the managing agency agreement in this case was validly terminated on March 22 1943
As we have already held that there was an implied term in the contract of partnership that it will determine when the managing agency agreement with the Mills terminates the partnership in the present case must under the contract be deemed to have determined on March 22 1943
Therefore the respondent will be entitled to an account only from November 15 1939 to March 22 1943
The learned Attorney General however referred us to sections 9 10 and 13f of the Act and his contention was that
the appellant must account for all the profits made by him out of the managing agency business even after March 22 1943
Unders10 every partner has to indemnify the firm for any loss caused to it by his fraud in the conduct of the business of the firm and under section 13f a partner has to indemnify the firm for any loss caused to it by his wilful neglect in the conduct of the business of the firm
In the first place such a case was not made out in the plaint by the respondent in the second place we are of opinion that sections 10 and 13f have no application to the facts of the present case
We therefore reject this contention
That leaves the question of costs
So far as Saroja Mills Limited are concerned we are of opinion that they are entitled to their costs throughout from the respondent as their action in terminating the managing agency has been held by us to be legal and valid
As to Thiagarajan Chettiar we are of opinion that in the circumstances of this case the order of the subordinate judge that Muthappa Chettiar respondent and Thiagarajan Chettiar appellant should bear their own costs is just and we order them to bear their own costs throughout
We therefore allow the appeal in part and order that accounts will be taken from November 15 1939
to March 22 1943 as between Thiagarajan Chettiar and Muthappa Chettiar
The respondent will pay the costs of Saroja Mills Limited throughout but Muthappa Chettiar and Thiagarajan Chettiar will bear their own costs throughout
Appeal allowed in part


Summary:
One Viswanatha Iyer who had two minor daughters but no male issue treated his brother Seetharama Iyer s son the appel lant as a foster son and before his death made a will by which he left the management of his properties to his brother and provided that as soon as his minor daughters attained majority Seetharama should give them each one Veli of nanja land and one Veli of punja land in vattam No 149 in village Nagampadi and should give possession of the remaining property to the appellant on his attaining majority
The daughters after attaining majority claimed possession of their land alleging that they were entitled under the will to select their respective one Veli of nanja land and one Veli of punja land out of the land in Vattam 149
A suit filed by the daughters on that allegation was decreed by the trial court and the decree was affirmed by the High Court holding that the English rule of benevolent construction that a legatee has a right to choose in such circumstances applied to India and that on the construction of the will in this case the right to choose was in the legatees and not in Seetharama
Held that section 89 of the  which lays down that a will or bequest not expressive of any definite intention is void for uncertainty applies only to those cases where a will is so indefinite that it is not possible to give any definite intention to it at all but there may be wills which use words which are not so uncertain that a definite intention cannot be ascribed to the testator under those words and it is to meet such cases that the English rule of selection by legatees was evolved
This rule of benevolent construction which is based on common sense and by which wills not quite uncertain can be made certain cannot be called an artificial rule and there is no reason why it should not be extended to India in appropriate cases
Narayanasami Gramani vs Periathambi Gramani 1895 ILR  approved
Bharadwaja Mudaliar vs Kolandavelu Mudaliar 1915 29 MLJ 717 discussed
Hobson vs Blackburn    Peck vs Halsey  1726 2 P Wms 387  Tapley vs Eagleton  Duckmanton vs Duckmanton  1860 5 H  N 220 and Knapton vs Hindle  referred to
975 Asten vs Asten and Bishop vs Holt  held inapplicable
The gift in the present case was not void for uncertainty within the meaning of section 89 of the Succession Act for it could be made certain by the selection of the daughters
The testator had clearly indicated what he intended his daughters to get but the difficulty arose because the area of the vattam was more than what was given to the daughters it must be held in the circumstances of the case that the testator intended that each daughter would select the land devised out of the vattam
There were no words in the will from which it could be inferred that Seetharama was nominated by the testator to make the selection