IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 21.06.2010 C O R A M THE HONOURABLE MR.JUSTICE P.R.SHIVAKUMAR A.S.No.749 of 2002 and Cross Objection No.35/2003 1.Ponnusamy 2.Ramachandran @ Ramasamy 3.Avinasi Gounder ... Appellants/Defendants Vs. K.K.Subramaniam ... Respondent/Plaintiff Apeal suit filed under Order XLI Rule 1 and Section 96 of the Civil Procedure Code as against the judgment and decree of the learned Additional District Judge (Fast Track Court II), Gobichettipalayam dated 19.09.2002 made in O.S.No.5 of 2001. For Appellants : Mr.R.T.Doraisamy For Respondents : Mr.T.Murugamanickam Cross Objection No.35 of 2003 K.K.Subramaniam .. Cross Objector/Respondent Vs. 1.Ponnusamy 2.Ramasamy @ Ramachandran 3.Avinasi Gounder .. Respondents/Appellants Coss Objection iled under Order XLI Rule 22 CPC as against the judgment and decree of the learned Additional District Judge (Fast Track Court II), Gobichettipalayam dated 19.09.2002 made in O.S.No.5 of 2001. For Cross Objector : Mr.T.Murugamanickam For Respondents : Mr.R.T.Doraisamy https://hcservices.ecourts.gov.in/hcservices/ J U D G M E N T This appeal and cross objection have been filed against the judgment and decree of the trial court, namely the court of the Additional District Judge (Fast Track Court II), Gopichettipalayam dated 19.09.2002 made in O.S.No.5/2001 on the file of the said court. The defendants 1 to 3 in the original suit are the appellants herein. The suit was filed by the respondent herein for a perpetual injunction restraining the appellants/defendants from running the rice and oil mill, which had been run as a partnership business, the subject matter of the suit and for settlement of accounts and distribution of assets of the partnership to the partners. The suit was partly allowed in respect of the second prayer, namely settlement of accounts and distribution of the assets of the partnership to the partners. A preliminary decree to that effect declaring the entitlement of the respondent/plaintiff to 50% of the assets of the partnership was granted. However, the suit was dismissed so far as the relief of permanent injunction sought for in the plaint is concerned. As against the preliminary decree directing settlement of accounts and payment of 50% of the assets of the partnership to the respondent/plaintiff, the appellants/defendants have preferred the appeal. As against the other part of the decree of the trial court dismissing the suit in respect of the relief of permanent injunction, the respondent/plaintiff has preferred the Cross Objection No.35/2003. 2. The case of the respondent/cross objector/plaintiff, as per the contents of the plaint, in brief, can be stated thus:- The appellants 1 and 2/defendants 1 and 2 are the sons of the third appellant/third defendant. The third appellant/third defendant was the manager of the joint family consisting of the three appellants till a partition took place among them on 06.09.1984. In 1974 itself, the third appellant/third defendant, as the joint family manager entered into an oral partnership agreement with the respondent/plaintiff for jointly constructing and running a rice mill. The respondent/plaintiff contributed a sum of Rs.1,00,000/- and the third appellant/third defendant as the kartha of the joint family contributed one lakh for the construction of the rice mill. The said rice mill was named as Sri Vijayalakshmi Rice and Oil Mill. License was obtained jointly in the names of the respondent/plaintiff and the third appellant/third defendant. The income derived from the mill was shared between the partners. After a partition took place in the family of the defendants in 1984, the first appellant/first defendant purchased the shares of the other two appellants, namely appellants 2 and 3/defendants 2 and 3 in the rice mill and after such purchase the first defendant became entitled to the half share of their family in the rice mill and thus both the first appellant/first defendant and the respondent/plaintiff alone continued the partnership https://hcservices.ecourts.gov.in/hcservices/ business as partner. After such purchase of the shares of the other appellants/other defendants was paid by the first appellant/first defendant, in February 1998 the first appellant/first defendant due to misunderstanding locked the rice mill and stopped the business, pursuant to which the respondent/plaintiff had to issue a notice dated 26.03.1998 dissolving the partnership with effect from 01.04.1998. The said notice was received by the first appellant/first defendant and the first appellant/first defendant issued a reply notice dated 11.04.1998 questioning the respondent's/plaintiff's right to dissolve the partnership and also denying his half share in the site on which the rice mill stands. The reasons assigned in the reply notice for not running the rice mill are false. The first appellant/first defendant, who was running the rice mill has to account for all the incomes received by him. Denying the title of the respondent/plaintiff to an undivided extent of 13 17/54 cents in the land over which the rice mill building was constructed, the appellants/defendants had filed a suit in O.S.No.119/1998 on the file of the Sub-court, Gobichettipalayam and obtained an ex-parte order of interim injunction on 17.06.1998 and with the strength of the said order, the first appellant/first defendant with the help of the other appellants/other defendants has been running the rice mill and appropriating the entire income for himself. The first appellant/first defendant is not entitled to run the rice mill after the partnership was dissolved by the notice issued by the respondent/plaintiff. Therefore, the first appellant/first defendant, who is running the rice mill, despite the objection and protest raised by the respondent/plaintiff is also liable to render accounts for the income derived from the rice mill. The respondent/plaintiff is also entitled for settlement of accounts and on such settlement, distribution of 50% of the assets of the partnership to him. Hence the suit for the above said reliefs of injunction and settlement of accounts and distribution of assets. 3. A written statement was filed by the first appellant and the same was adopted by the appellants 2 and 3 and all the three appellants resisted the suit based on the averments contained in the said written statement, which in brief, are as follows:- i) The respondent/plaintiff is the son of the maternal uncle of the first appellant/first defendant and thus he is a close relative of the appellants/defendants. When the first appellant/first defendant wanted the respondent/plaintiff to join as a partner in the rice mill proposed to be started, the respondent/plaintiff demanded conveyance of an immovable property in his favour to enable him to join as a partner in the proposed rice mill. Hence a sham and nominal sale deed was executed and registered on 04.07.1974 in respect of an undivided extent of 13 17/54 cents in old Survey No.144A and new Survey No.15/7 in Irugalur village, Gobichettipalayam Taluk in favour of the respondent/plaintiff. As the said sale was sham and nominal, no consideration was received from him and the title and possession of https://hcservices.ecourts.gov.in/hcservices/ the property continued to rest with the appellants/defendants. The original sale deed was also not handed over to the respondent/plaintiff and the same was retained by the third appellant/third defendant. Patta had been issued in the name of the third appellant/third defendant. Since the sale was sham and nominal, the respondent/plaintiff did not take steps to get the patta transferred in his name. However, the rice mill building, machineries and other affixtures alone were used as properties of the partnership firm having the appellants/defendants and the respondent/plaintiff as partners. In the rice mill alone, excluding the land on which the rice mill has been built, the respondent/plaintiff had got a common half share, whereas the appellants/defendants were jointly entitled to the other half. By a partition deed dated 06.09.1984, appellants/defendants divided the 3/6 share in the building, machineries, electricity service connection and license of the rice mill alone among themselves and each one of them was allotted 1/6 share. On 05.09.1984, the appellants 2 and 3/defendants 2 and 3 conveyed their shares in the rice mill in favour of the first appellant/first defendant under a registered sale deed and thereafter the first appellant became entitled to the entire half share held by the family of the appellants/defendants. Thus the first appellant/first defendant and the respondent/plaintiff became equal partners in respect of the rice mill business excluding the land over which the rice mill was constructed. ii) It is incorrect to state that the respondent/plaintiff contributed Rs.1,00,000/-, whereas the third appellant/third defendant, as kartha of the family consisting of the appellants/defendants contributed Rs.1,00,000/- for the above said business. On the other hand, there was a specific understanding that the respondent/plaintiff should invest Rs.75,000/- and third appellant representing the joint family consisting of the appellants should invest Rs.75,000/-. Thus, the respondent/plaintiff and the first defendant as kartha of the family of the appellants/defendants contributed Rs.75,000/- each making the total share capital Rs.1,50,000/-. It was also the understanding that the profit shall be shared between the respondent/plaintiff and the appellants/defendants in the ratio of 50:50. It was also a specific understanding between the parties that the respondent/plaintiff would not have any right in the rice mill and he would not claim any right under the sale deed dated 04.07.1974. The parties also orally agreed that in case of arisal of any problem in running the rice mill or if the plaintiff expresses his unwillingness to continue to run the rice mill, then he should opt out of the partnership after getting his share in the market value of the building and machineries and retire from the partnership. It was also the specific understanding that the plaintiff shall not claim any share in the land. The necessary building for the mill was constructed and the machineries were erected in 1976 and the mill was started functioning in 1977 after obtaining necessary license jointly in the names of the third https://hcservices.ecourts.gov.in/hcservices/ appellant/third defendant and the respondent/ plaintiff. Till January 1998, the mill was running profitably and the profit was shared as per the above mentioned understanding. iii) While so, in or about January 1998 when the officials of the Tamil Nadu Government wanted to construct a water tank near the rice mill, the first appellant/first defendant and the respondent/plaintiff initially expressed no objection for putting up a water tank. However, subsequently the respondent/plaintiff raised objection and prevented the officials from putting up a water tank near the rice mill. The propriety of the said act of the respondent/plaintiff was questioned by the first appellant/first defendant, pursuant to which he got a grudge against the appellants/defendants and proclaimed that he would see how the first appellant/first defendant would run the mill. In the above said background of facts, in February 1998, when the first appellant/first defendant was away from the mill, the respondent/plaintiff high-handedly entered into the mill premises and started dismantling the compressor and motors. While he was in the process of thus dismantling the machineries, the wife of the first appellant/first defendant intercepted and thwarted the attempt made by the respondent/plaintiff to dismantle and remove the compressors and motors. Pursuant to the said occurrence, without putting any lock, the first appellant/first defendant kept the rice mill idle without running it. Under such circumstances, the electricity charges from January 1998 to April 1998 became due. When the respondent/plaintiff was asked to pay 50% of the electricity consumption charges, he refused to pay the same. Hence the production in the rice mill was stopped resulting in loss. With the intention of avoiding further loss, the first appellant/first defendant paid a sum of Rs.15,000/- to the Electricity Board towards the arrears of electricity consumption charges of the mill, obtained re-connection on 18.06.1998 and thereafter started running the mill once again. The market value of the machineries in the rice mill shall be Rs.1,00,000/-. The building, excluding the land, is worth Rs.50,000/-. Thus the respondent/plaintiff shall be entitled to get Rs.75,000/- alone as his half share in the value of the machineries and building of the rice mill. Also, according to the oral understanding between the parties, the respondent/plaintiff is legally bound to release all his rights and interest in the rice mill after getting a sum of Rs.75,000/-. iv) The suit mill was not started as a partnership business. Therefore, the claim of the respondent/plaintiff that the partnership was dissolved by issuing a notice deserves to be rejected as untenable. As per the oral agreement, the amount payable to the respondent/plaintiff, namely Rs.75,000/- has been paid into the court on 11.08.1998 after getting the order of the court. On such payment, the oral agreement between the respondent/plaintiff and the appellants should be construed to have been brought to an end. The respondent/plaintiff cannot seek any https://hcservices.ecourts.gov.in/hcservices/ relief under the provisions of the Indian Partnership Act against the appellants/defendants since the business was not carried on as a partnership business incorporating the provisions of Indian Partnership Act. The respondent/plaintiff shall also be not entitled to the relief of injunction sought for in the plaint. As the mill is being run by the first appellant/first defendant, in case the respondent/plaintiff is held entitled to claim his rights as a partner, he can be compensated by money for his exclusion from the management. The respondent/plaintiff, in his notice dated 26.03.1998 has named the arbitrators of his choice. Similarly the appellants/defendants have also named the arbitrators of their choice. Without seeking to have the dispute resolved by arbitration, the respondent/plaintiff has approached the court with unclean hands. The suit has become infructuous pursuant to the deposit of a sum of Rs.75,000/- by the appellants/defendants to the credit of the suit. The suit has been filed with a malafide intention of extracting money from the appellants/defendants and hence the same is liable to be dismissed. There is no cause of action for the suit and the one cited in the plaint is also false. Only an extent of 30 x 37 sq.ft. of land is occupied by the building and rice mill. Instead of showing the said extent alone as the property of the partnership firm, the respondent/plaintiff has shown the entire extent of 0.11.00 hectares comprised in Survey No.15/7 in the description of property. Therefore, the description of the property is not proper. Even in respect of the above said 30 x 37 sq.ft. of land over which the building of the mill stands, the respondent/plaintiff does not have any share as the same belonged to the appellants/defendants and now belongs to the first appellant/first defendant. The suit is also barred under Section 69 of the Indian Partnership Act. For all the above said reasons, the suit should be dismissed with costs. 4. Based on the above said pleadings, the trial court framed the following issues:- i)Whether the sale deed dated 04.07.1974 in the name of the plaintif is not legally valid and hence he cannot claim any right in the suit property based on the same? ii)Whether the prayer for the relief of permanent injunction in respect of the suit property described as the mill situated in the dry land comprised in Survey No.15/7 having an extent of 0.11.0 hectare is legally sustainable? Whether the plaintiff is entitled to the relief of permanent injunction? iii)Whether the description of property found in the plaint schedule is correct? iv)Whether the suit of the plaintiff is not maintainable for want of a prayer for declaration in respect of the suit property and whether the suit should be dismissed in-limini on the said ground? https://hcservices.ecourts.gov.in/hcservices/ v)Whether the plaintiff is not entitled to seek any relief in the suit under Indian Partnership Act? vi)Whether the suit is liable to be dismissed on the ground that the plaintiff has not chosen to state in the plaint that the issues were agreed to be resolved by resorting to arbitration? vii)Is it correct to state that there is no cause of action for the suit? viii)To what relief the plaintiff is entitled? 5. One witness was examined as P.W.1 and 29 documents were marked as Exs.A1 to A29 on the side of the respondent/cross objector/plaintiff. Two witnesses were examined as D.Ws.1 and 2 and four documents were marked as Exs.B1 to B4 on the side of the appellants/defendants. The learned trial judge, after hearing the arguments advanced on either side considered the pleadings made by the parties and the evidence, both oral and documentary, adduced on either side. Upon such consideration, the learned trial judge decreed the suit in part and granted a preliminary decree for settlement of accounts and distribution of the assets of Sri Vijayalakshmi Rice and Oil Mill described as the suit property in the plaint schedule and dismissed the suit so far as the prayer for injunction restraining the appellants/ defendants from running the rice mill. As against the preliminary decree for settlement of accounts and distribution of assets of the mill, the appellants/defendants 1 to 3 have come forward with A.S.No.749/2002 on various grounds set out in the memorandum of appeal. The respondent/cross objector/plaintiff has filed Cross Objection No.35/2003 questioning the correctness of that part of the decree passed by the trial court dismissing the suit in respect of the prayer for injunction restraining the defendants from running a rice mill on various grounds set out in the memorandum of cross objection. 6. The arguments advanced by Mr.R.T.Doraisamy, learned counsel for the appellants and by Mr.T.Murugamanickam, learned counsel for the respondent/cross objector were heard. The entire materials available on record were also perused. 7. The following are the points that arise for determination in the appeal and the cross objection:- i)Whether the respondent/cross objector/plaintiff does not have any share in the land over which the rice and oil mill has been put up? ii)Whether the description of property furnished in the plaint is not correct? https://hcservices.ecourts.gov.in/hcservices/ iii)Whether the suit is barred by section 69 of the Indian Partnership Act, 1932? iv)Whether the respondent/cross objector/plaintiff is entitled to the relief of rendition of accounts and distribution of the assets of the partnership firm? v)Whether the respondent/cross objector/plaintiff is entitled to the relief of injunction restraining the appellants/defendants from running the rice mill in the name of the partnership firm before winding up of the same is completed? vi)To what relief the parties are entitled? 8. The defendants 1 to 3 in the suit are the appellants herein. The sole plaintiff in the suit is the respondent in the appeal and the cross objector in the Cross Objection. The suit was filed seeking a relief of injunction restraining the appellants/defendants from running the rice mill described as suit property in the plaint schedule and for the relief of settlement of accounts and distribution of the assets of the said rice mill. The said prayers have been made based on the plaint averments that the rice mill business was started and run as a partnership business in the building constructed and machineries erected using the share capital raised by the contribution of Rs.1,00,000/- by the respondent/plaintiff and Rs.1,00,000/- by the third appellant as the kartha of the family consisting of the appellants 1 to 3 making the total share capital of the money invested by them to Rs.2,00,000/-; that the mill was constructed and run on a land, of which the respondent/plaintiff and the appellants were the co- owners; that the respondent/plaintiff was entitled to a common half share in the land comprised in new survey No.15/7 having an extent of 0.11.0 hectare over which the mill stands and that as per the agreement between the parties, he was entitled to a share of 50% not only in the profit and loss but also in the assets of partnership business. The prayer for the reliefs of injunction and settlement of accounts and distribution of the assets of the partnership concerned, has been made on the strength of the plea that the partnership was at will and the same was dissolved by the respondent/plaintiff by exercising his option to dissolve the same with effect from 01.04.1998 by serving a notice dated 26.03.1998 on the appellants/defendants. The appellants/defendants would admit the fact that the rice mill business was run jointly by the respondent/plaintiff and the third appellant/third defendant on behalf of the jointly family of which he was the kartha, both of them contributing equal amount towards the share capital; that the profit earned in the business was agreed to be shared between them in the ratio of 50:50 and that after 1984 when there was a partition in the family of the appellants/defendants and the shares of appellants 2 and 3 / defendants 2 and 3 were purchased by the first appellant/first defendant the first appellant became entitled https://hcservices.ecourts.gov.in/hcservices/ to half share in the rice mill and the other half share remained with the respondent/plaintiff. However, they have come forward with a novel plea that there was neither a partnership agreement and nor a partnership business and that hence the suit filed by the respondent/plaintiff is not maintainable. It is their further contention that though the respondent/plaintiff has got a common half share in the building, machineries and electric connection of the suit rice mill, he does not have any share in the land over which the mill situates. 9. The respondent/plaintiff claims to be a joint owner, entitled to half share in the land comprised in survey No.15/7 having an extent of 0.11.0 hectare by virtue of a sale deed dated 04.07.1974. Admittedly, a larger extent comprised in old survey No.144A in Irugalur village, Gobichettipalayam Taluk belonged to the appellants/defendants as their joint family property and subsequently, 0.11.0 hecares out of the same was assigned separate new survey No.15/7 and that a sale deed dated 04.07.1974 purporting to convey an undivided 13 17/54 cents was executed in favour of the respondent/plaintiff. The appellants/defendants have admitted the execution of the said sale deed by the first appellant/first defendant and by the third appellant/third defendant for himself and as guardian of the second appellant/second defendant, who was a minor on the date of the execution of the said sale deed. But they have come forward with a plea that the said sale was not a genuine one and on the other hand, the same was executed as a sham and nominal deed, without any intention of effecting a transfer of title under the said document. The land also has been shown to be the part and parcel of the suit property as per the plaint schedule. Point No.iii 10. It is also the contention of the appellants/defendants that since there was no written partnership deed and since the partnership was not a registered one, the suit by the respondent/plaintiff claiming to be a partner of the partnership business shall not be maintainable, as the same is barred by section 69 of the Indian Partnership Act. Therefore, the first and foremost question that arises for determination in this case is "whether the suit filed by the respondent/plaintiff for injunction and for settlement of accounts and distribution of assets of the partnership business on the strength of his pleading that the partnership was dissolved by issuing a notice is barred by section 69 of the Indian Partnership Act?". 11. For a better appreciation Section 69 of the Indian Partnership Act, 1932, dealing with the fact of non-registration, is reproduced here under. 69.Effect of non-registration – (1) No suit to enforce a right arising from a contract or conferred https://hcservices.ecourts.gov.in/hcservices/ by this Act shall be instituted in any Court by or on behalf of any person suing as a partner in a firm against the firm or any person alleged to be or to have been a partner in the firm unless the firm is registered and the person suing is or has been shown in the Register of Firms as a partner in the firm. (2) No suit to enforce a right arising from a contract shall be instituted in any Court by or on behalf of a firm against any third party unless the firm is registered and the persons suing are or have been shown in the Register of Firms as partners in the firm. (3) The provisions of sub-sections (1) and (2) shall apply also to a claim of set-off or other proceeding to enforce a right arising from a contract, but