IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE THOMAS P.JOSEPH FRIDAY, THE 16TH OCTOBER 2009 / 24TH ASWINA 1931 SA.NO. 158 OF 1999(B) ----------------------------------- AS.19/1994 OF DISTRICT COURT, ALAPPUZHA OS.118/1990 OF ADDL.SUB COURT, ALAPPUZHA .................... APPELLANT(S) -APPELLANT - DEFENDANT: ------------------------------------------------------ K.A. GEORGE, KANIYIL CHIRAYIL HOUSE, ZILLA COURT WARD, ALAPPUZHA. BY ADV. SRI.P.S.KRISHNA PILLAI RESPONDENT(S) – RESPONDENT - PLAINTIFF: ---------------------------------------------------------- K.J. VARGHESE, S/O. JOSEPH, CHETHUKUNNEL HOUSE, OPPOSITE K.S.R.T.C. BUS STAND, ZILLA COURT WARD, ALAPPUZHA. ADV. SRI.C.S.NARAYANAN SRI.PIRAPPANCODE V.S.SUDHIR FOR R1 THIS SECOND APPEAL HAVING BEEN FINALLY HEARD ON 16/10/2009, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: THOMAS P.JOSEPH, J. = = = = = = = = = = = = = = = = = = = = = = = = S.A. NO.158 of 1999 = = = = = = = = = = = = = = = = = = = = = = = = = Dated this the 16th day of October, 2009 J U D G M E N T --------------------- Appellant is a turner and respondent is a motor mechanic. For quite sometime from 1977-78 onwards they were engaged in joint labour at Alappuzha. While so, on 19.1.1989 respondent issued Ext.A10, notice claiming that himself and appellant were engaged in joint labour as partners under the name and style “St.Antony’s Engineering Works” expressing his intention to dissolve the partnership and demanding settlement of accounts and his share of profits. That was replied by the appellant as per Ext.A11, denying that there was any such partnership and claimed that respondent was only an employee and worked under him on monthly salary basis. Respondent approached the trial court and instituted O.S. No.118 of 1990 for dissolution of partnership, settlement of accounts and for other reliefs. A preliminary decree was passed in favour of the respondent. Appellant challenged that judgment and preliminary decree in the first appellate court. Learned District Judge considered the appeal (A.S. No.19 of 1994), found no reason to disagree with the findings entered by the learned Sub Judge and confirmed the judgment S.A. NO.158 of 1998 -: 2 :- and decree. That judgment and decree of the first appellate court are under challenge in this Second Appeal at the instance of appellant. 2. Following substantial questions of law are framed: (i) Did not the first appellate court go wrong on the pleadings and evidence before it in finding in favour of partnership between appellant and respondent? (ii) Were not courts below wrong in treating evidence against appellant for allegedly withholding account books and other documents pertaining to the business? (iii) Were not courts below wrong in holding that the property acquired by the appellant as per Ext.B1 is the acquisition by or on behalf of the partnership? 3. Facts necessary for consideration of the above substantial questions of law are: According to respondent himself and appellant started the partnership in the year 1976 in the name and style “St.Antony’s Engineering Works”. Following that, in the year 1977 a shed was put up in about 4 and odd cents taken on rent from its owner, Francis Kurian on lease arrangement paying Rs.1,000/- each by way of advance rent. Appellant and respondent contributed equally S.A. NO.158 of 1998 -: 3 :- to the capital of the firm (Rs.30,000/-). As per the agreement between parties respondent was taking Rs.1,500/- per month. They carried on the business until June, 1987 when respondent fell ill. While so, respondent learnt that appellant, in violation of the terms of the partnership and in breach of trust which respondent had reposed in him, acquired the 4 and odd cents of land where they were engaged in the business in his name utilizing funds of the partnership. Thereon respondent issued Ext.A10, notice to which appellant issued Ext.A11, reply. Appellant denied that there was any such partnership between him and respondent. He contended that alleged firm is a concern belonging to him exclusively. He had taken the land where the concern was running on ground rent from its owner and on 1.3.1985 he purchased that property using his funds as per Ext.B1, assignment deed. Respondent was working under him as his employee on a monthly salary of Rs.1,000/-. It is contended by learned counsel that there is no evidence to show that there was any such partnership between appellant and respondent. According to learned counsel there must be an agreement between the parties to form the partnership, they should have worked in partnership and there should have been an agreement to share profits. Learned counsel placed reliance on the decisions in Debi Prasad v. Jai Ram Dass (AIR S.A. NO.158 of 1998 -: 4 :- 1952 Punjab 284); M.P. Davis v. AG. I.T. Commn. (AIR 1959 SC 719); Rangasami Goundar v. K.R. Easwaramurthi Goundan (AIR 1967 Madras 437); Raghunath sabu v. Trinath Dass (AIR 1985 Orissa 8) and S.K. Parthasarathy Naidu v. K. Rama Naidu (AIR 2001 Madras 399). Learned counsel further contends that the mere fact that some of the documents happened to be in the name of respondent is not by itself sufficient to reach the conclusion that any partnership was formed. Counsel also referred me to the evidence of respondent as P.W.1 that even according to him he was taking Rs.1,500/- per month by way of salary, though an attempt was made to correct that statement in re- examination. According to the learned counsel at any rate Ext.B1 is an acquisition made by the appellant utilizing his own funds and hence that cannot be brought into partnership to be treated as property of partnership. Learned counsel for respondent referred me to the evidence on record and contended that courts below on the oral and documentary evidence concluded in favour of the partnership. It is also the contention of learned counsel for respondent that so far as Ext.B1 is concerned, the plea, evidence let in by the appellant and the recitals in Ext.B1 are diametrically opposite, indicate fraudulent intention of appellant to get Ext.B1 executed in his name and evidence S.A. NO.158 of 1998 -: 5 :- on record show that appellant had no funds other than what he got from the partnership business. 4. Question whether there was a partnership or not is a mixed question of fact and law. As stated in the authorities referred supra and relied on by learned counsel for appellant to sustain a suit on the strength of partnership the necessary requirements to be established are: (i) There must be an agreement entered into by all the partners concerned; (ii) The agreement must be to share the profits of the business and (iii) The business must be carried on by all or any one of the person concerned acting for all. The above elements may appeared to be overlapping but they are nevertheless distinct. My endeavour is to find whether finding of the courts below is based on the evidence and whether evidence on record satisfied the above requirements. 5. Though learned counsel for appellant has referred me to the plaint and contended that there is no allegation of agreement S.A. NO.158 of 1998 -: 6 :- between appellant and respondent to form partnership and that necessary ingredients are not pleaded, I am afraid, that contention cannot be accepted. Reading the averments in the plaint as a whole it is revealed that according to respondent, himself and appellant formed a partnership necessarily for which an agreement between them was entered into. Partnership worked for quite sometime and respondent was ‘taking’ Rs.1,500/- per month. The word ‘taking’ as distinguished from the word ‘receiving’ indicates that according to respondent he had the authority or right to take a portion of the income from the partnership business. Going by the averments in the plaint I am inclined to agree with the learned counsel for respondent that necessary requirements to constitute partnership have been pleaded in the plaint. 6. Now I shall come to the evidence on record. Respondent has given evidence as P.W1 and claimed in support of the partnership. He stated that he was ‘taking’ Rs.1,500/- per month as per the agreement. In cross-examination he was asked what amount he had got, whether it was by way of share of profits. He answered in the negative. In re-examination he was asked by counsel in what capacity he was ‘taking’ Rs.1,500/- per month, whether it was by way of share of profits or by way of salary. He stated that it was taken by way of share of profits. Contra evidence is given by appellant as D.W.1. He S.A. NO.158 of 1998 -: 7 :- claimed that respondent joined him as his employee on a monthly salary of Rs.1,000/- and accordingly he has been paying the salary. But he conceded that he had no document to show that respondent was his employee or any amount was paid to him by way of salary. 7. Now I shall refer to the documentary evidence produced by either side. Exhibit A1 is the copy of sanction order dated 11.8.1977 issued by the Commissioner of local Municipality in the name of appellant and respondent permitting construction of the workshop based on application dated 4.8.1977. Exhibit A2 is the proceedings dated 24.1.1978 of the Commissioner of Municipality also issued in the name of appellant and respondent permitting them to install an electric motor in the workshop. That sanction was based on application dated 22.9.1977. Exhibit A3 is the order dated 13.4.1978 of the Assistant Engineer, issued in the name of respondent alone permitting service connection with two motors for the purpose of running the workshop. That sanction was based on the applications of respondent for allocation of power made on 20.5.1977 and 6.4.1978. Exhibit A4 is the proceedings dated 24.1.1978 of the Commissioner of Municipality in favour of appellant and respondent permitting them to install electric motor. Exhibit A5 is summons dated 4.4.1983 issued to the appellant and respondent from the court of learned Judicial Second Class Magistrate, Alappauzha in C.C. No.405 of S.A. NO.158 of 1998 -: 8 :- 1983 directing appellant and respondent to appear in that court to answer charge under Section 355 read with 284 of the Kerala Municipalities Act for running the workshop without obtaining licence. Exhibit A6 is the plan submitted by the respondent before the local authority for approval and permit for construction of the workshop. Approval is granted on 10/8 (obviously of the year 1977). That approval is in favour of respondent alone. Exhibit A7 is the receipt for payment of licence fee on 22.9.1979 in the name of respondent for installation of electric motor. Exhibit A8 is the receipt dated 1.4.1978 in favour of respondent for payment of Rs.200/- to the Kerala State Electricity Board as deposit for electric connection. Exhibit A9 dated 12.4.1978 shows that appellant and plaintiff were made liable to pay tax for the workshop. Exhibit A9(a) is the notice to appellant and respondent inviting objection from them for fixation of tax. Exhibit A12 is the invitation typewritten in island letter for the inaugural function of the workshop. Exhibit A12, however is disputed by the appellant and there is no acceptable evidence as to when Ext.A12 was prepared. On the other hand appellant relied on Exts.B1 to B4. Exhibit B1 as aforesaid is assignment deed dated 1.3.1985 in favour of appellant whereby receiving a sum of Rs.10,000/- as per an agreement 7 years back, owner of 4 and odd cents where the workshop is functioning assigned that property in favour of appellant. S.A. NO.158 of 1998 -: 9 :- Exhibit B2 is a receipt dated 26.6.1992 in the name of appellant for payment of revenue for the property covered by Ext.B1. Exhibit B3 is a receipt dated 4.8.1987 for payment of profession tax issued in favour of appellant. Exhibits B3 to B3(c) are receipts dated 14.10.1990 and 26.9.1989 for payment of lab fee or licence fee as the case may be in the name of appellant. Exhibit B4 dated 23.9.1989 is the notice from the Municipality issued to the appellant for running a business without licence. 8. I have referred to the evidence let in by the parties. Then the question is whether the courts below were justified in holding in favour of partnership based on the above evidence. Appellant when examined as D.W.1 stated that he started the workshop in the year 1976 taking the land on ground rent from Francis Kurian who assigned the land to him under Ext.B1. He would say that Rs.2,000/- was paid as advance rent. Version of appellant that he started business in the year 1976 cannot be accepted for a moment since it is seen that it is only during 1977-78 that sanction from local authority for putting up the shed and electric connection was obtained. It is also not the case of appellant that respondent had joined him in the year 1976 or 1977. If that be so, there is no acceptable explanation for the appellant how in Exts.A1 to A4 name of respondent figured. I do not forget that appellant has a case that he has studied only upto 2nd standard and he S.A. NO.158 of 1998 -: 10 :- happened to sign the application prepared by the respondent. But at least after 1977-78 when Exts.A1 to A4 were received, appellant should have been aware that those documents are obtained or issued in the name of himself and respondent and he should have been on his guard and ascertained how name of respondent also figured in those documents. There is no case or evidence that until appellant sent Ext.A11 reply on 27.1.1989, any action was taken by the appellant in that regard. On the other hand it is not disputed that both were engaged in joint labour until according to the respondent he fell ill in June, 1987. Approval of the plan for construction of the shed was obtained in the name of respondent as seen from Ext.A2. It is difficult to believe version of appellant that respondent had no say in the business. It is also difficult to accept his version that respondent was mere his employee. Appellant was not able to produce any evidence except his own oral assertion that respondent was only an employee of him. There is no document to show that any salary was paid to respondent. As per the provisions of Shops and Commercial Establishments Act, every employer is required to maintain register in Form A or B indicating the number of employees he has employed. Assuming that version of appellant that respondent was his employee is correct he was required to maintain register in Form A or B. There is no case or evidence in that line. S.A. NO.158 of 1998 -: 11 :- 9. On the other hand there is evidence of respondent that he was a partner in the joint effort between him and appellant. He has also given evidence in that line as P.W1. Exhibits A1 to A5 support that version of respondent. Exhibit A5 shows that summons was issued to appellant and respondent to answer the charge being engaged in business without licence. Necessarily, authorities concerned must have given report to the court about the appellant and respondent being engaged in joint business without licence. If respondent were only an employee there was no occasion for the authorities concerned to make any report based on which respondent was also charged for the offence under Section 355 read with 284 of the Kerala Municipalities Act. There is no case for the appellant that he was unaware of Ext.A5. There is also no case for him that he had contested the proceeding referred to in Ext.A5 stating that respondent had no role in the business. In these circumstances contention of appellant that respondent is only his employee is difficult to accept. 10. It is not as if a partnership could be formed only by a written agreement. Agreement to form partnership may be oral. What is required is not conclusive proof but only preponderance of probability. Courts below considered the oral and documentary evidence and found that the preponderance of probability is in favour of the case of respondent that he was a partner along with the S.A. NO.158 of 1998 -: 12 :- appellant. That finding being on a consideration of the oral and documentary evidence I do not find reason to interfere with the same as no substantial question of law is involved. 11. Then the next question is whether the acquisition allegedly made by appellant as per Ext.B1 can be treated as property of partnership. Exhibit B1, assignment deed dated 1.3.1985 is evidently in the name of appellant alone but it states that consideration of Rs.10,000/- for the sale was received by the assignor 7 years back (land was taken on rent sometime in the year 1978) as per an agreement with the appellant. According to the appellant as pleaded in the written statement and as per his evidence land where the shed was constructed was taken on ground rent though he would claim that he was paying rent. There is no such recital in Ext.B1. On the other hand, Ext.B1 states about the appellant paying Rs.10,000/- 7 years before Ext.B1. There is no case or evidence for the appellant in that line. Appellant admitted that the only income he had is from the workshop. He claimed that he obtained consideration for the purchase of Ext.B1 property from his father. But that is not pleaded in the written statement nor is there any evidence. It is not disputed that acquisition as per Ext.B1 was for the purpose of business. It is true that respondent was not able to produce direct evidence to show that acquisition was making use of the funds of partnership. But I S.A. NO.158 of 1998 -: 13 :- stated that even as per version of appellant he had no income other than what he was getting from the workshop. 12. Section 14 of the Indian Partnership Act reads, “14. The property of the firm.- Subject to contract between the partners, the property of the firm includes all property and rights and interests in property originally brought into the stock of the firm, or, acquired, by purchase or otherwise, by or for the firm, or for the purposes and in the course of the business of the firm, and includes also the goodwill of the business. Unless the contrary intention appears, property and rights and interests in property acquired with money belonging to the firm are deemed to have been acquired for the firm”. 13. Respondent has a case that appellant has withheld production of account books. But appellant would say that while respondent took away the rest of the documents (which respondent has produced in the trial court) he had also taken away the account books. Either way account books are not before the court whatever be the reason thereof. I stated that acquisition as per Ext.B1 was for S.A. NO.158 of 1998 -: 14 :- the purpose of business as found by the courts below. Considering the fact that even according to the appellant he had no income other than what he was getting from the business and considering the fact that appellant was not able to prove that he got funds for purchase of Ext.B1 property from his father, along with the fact that Ext.B1 contains untrue recitals as to passing of consideration vis-a-vis evidence let in by the appellant preponderance of probability is that acquisition was with the funds of partnership and that at any rate property was brought into partnership for its purposes. Viewed in that line I do not find reason to interfere with the finding of courts below that acquisition was making use of funds of partnership. On going through the evidence, judgment under challenge and on hearing learned counsel, I find no reason to interfere with the concurrent finding entered by the courts below. Substantial questions of law framed are answered accordingly. Second Appeal fails. It is dismissed without any order as to costs. Civil Miscellaneous Petition No.1433 of 1999 shall stand dismissed. THOMAS P.JOSEPH, JUDGE. vsv S.A. NO.158 of 1998 -: 15 :- THOMAS P.JOSEPH, J. =================== S.A. NO. 158 of 1999 =================== J U D G M E N T 16TH OCTOBER, 2009