THE HON'BLE SRI JUSTICE P.S.NARAYANA Second Appeal No.399 of 2009 30th April, 2010 Between :- Mohammed Abdul Saleem .. Appellant And Mohammed Shafiuddin & another ..Respondents THE HON'BLE SRI JUSTICE P.S.NARAYANA Second Appeal No.399 of 2009 JUDGMENT:- Heard Sri P.Narsing Rao, the learned Counsel representing the appellant-plaintiff and Sri D.Bhaskar Reddy, the Counsel representing respondents-defendants. On 1-5-2009, the following order was made by this Court:- “Having regard to the substantial question of law viz., Whether the appellate court is justified in reversing the well considered Judgment of trial Court on the ground that Ex.B.2 dissolve Ex.B.1 when the partnership business is being carried on in continuation of Ex.B.1 and when Section 17 of the Indian Partnership Act clearly specifies the mutual rights and duties of the partnership in the reconstituted firm remains same as they were immediately before the change, as far as may be,? Admit.” 2. Sri P.Narsing Rao, the learned Counsel representing the appellant-plaintiff had taken this Court through the findings recorded by the learned Senior Civil Judge, Suryapet, in O.S.No.25/99 and also the findings recorded by the learned III-Addl. District Judge, Nalgonda at Suryapet in A.S.No.16/2006 and would maintain that the reversal made by the appellate court is definitely unsustainable. The mere fact that Ex.B.2 was not pleaded would not seriously alter the situation especially in the light of the clear language of Section 17 of the Indian Partnership Act, 1932 (hereinafter, in short, referred to as ‘the Act’ for the purpose of convenience). The learned Counsel pointed out to the substantial question of law on the strength of which the Second Appeal had been admitted and also further pointed out to the under- noted substantial questions of law and would maintain that these being the other substantial questions of law involved in the present Second Appeal, these questions also may be considered and the said questions pointed out by the learned Counsel read as hereunder:- 1) Whether the appellate court is justified in ignoring the rights and claims of the plaintiff/appellant in the partnership business, when he admittedly invested his contribution not only by way of cash and also the land purchased by him along defendants No.1 and 2 as one of the partners under Ex.B.1 and Ex.B.2? 2) Whether the appellate court is justified to refuse the rights and claims of the plaintiff, when admitted the partnership firm is still subsisting and the business is carried on by the agent of 1st defendant contrary to the terms and conditions of the partnership deed under Ex.B.1 and Ex.B.2? 3) Whether the appellate court is justified in reversing the well considered Judgment of the trial Court on the ground that unless one Mr.Bachi Reddy, the agent of the 1st defendant is shown as one of the defendant the plaintiff-appellant cannot seek rendition of account? 4) Whether the finding of the appellate court with regard to the dissolution of partnership is correct in the absence of any pleadings or evidence let in by the parties and admittedly it is not the case of the partners that the suit partnership firm is not in existence? While further elaborating his submissions, the Counsel also had drawn the attention of this Court to Section 100 of the Code of Civil Procedure (hereinafter, in short, referred to as ‘the Code’ for the purpose of convenience) and would maintain that in the light of the fact that this is a reversing Judgment even the evidence may be re-appreciated by this Court to arrive at the correct conclusion. The learned Counsel also would further maintain that the fact that the plaintiff was shown as the Managing Partner under Ex.B.2 also would not seriously alter the situation for the reason that the very relief prayed for is the dissolution of firm and rendition of accounts. While rendering the accounts in a dissolved firm, while working out, it may be that at certain times, the plaintiff also may be liable to pay certain amounts to the defendants or equally the defendants, the other partners, may liable to pay the amounts. When that being so, even if a decree is made, no prejudice would be caused and hence this aspect was lost sight of by the appellate court and erroneously the well-considered Judgment and Decree of the trial Court had been reversed by the appellate court. The Counsel also had drawn the attention of this Court to the relevant portions of the evidence available on record. 3. Sri R.Bhaskar Redy, the learned Counsel representing the respondents-defendants had taken this Court through several admissions made by P.W.1 and would maintain that in the light of the admissions made by P.W.1, it cannot be said that the findings recorded by the appellate court are in any way erroneous. While further elaborating his submissions, the learned Counsel would maintain that the appellant-plaintiff had not pleaded about Ex.B.2 at all and it is pertinent to note that by virtue of Ex.B.2, the very plaintiff became the Managing Partner and in such a case, the plaintiff alone is liable to render the accounts being the Managing Partner and this aspect was totally suppressed and as though the rights to be worked out on the strength of Ex.B.1, the suit had been instituted and in the light of the suppression of the said material fact, since the plaintiff had not approached the Court with clean hands, the findings record by the appellate court are well justified. Even otherwise, the learned Counsel pointed out that after a long lapse of time, the suit had been thought of for reasons best known to the appellant-plaintiff. The learned Counsel specifically pointed out to the relevant findings which had been recorded by the appellate court and would maintain that the appellate court as the final Court of fact appreciated the oral and documentary evidence available on record in elaboration and arrived at the correct conclusion and hence the Second Appeal to be dismissed. 4. Heard the Counsel on record, perused the evidence available on record, the findings recorded by the Court of first instance and also the findings recorded by the appellate court as well. 5. The parties hereinafter would be referred to as plaintiff and defendants as shown in O.S.No.25/99 on the file of the Senior Civil Judge, Suryapet, for the purpose of convenience. 6. The suit was filed for dissolution of partnership and rendition of accounts. It was pleaded that the plaintiff and both the defendants jointly constituted a partnership firm under the name and style of M/s.Brezel Associates, Durajpally, Chivvemla Mandal on 2-4-90 to carry on the business of construction and Road Mental Industry Contracts (civil) and entered into partnership deed. Wherein the terms and conditions are set forth. As per the said terms, the parties shall have 33.3% share and shall have to invest equal amounts and share the profits and loss equally. The defendant No.1 shall be the Managing Partner of the said firm and entitled to carry on the partnership business and also authorized to operate bank accounts on behalf of the firm and that accounts of the firm close annually by 31st March every year and none of the partners without written consent of other partners shall assign, mortgage or charge his share in the assets of the firm. The original deed of partnership is in the custody of defendant No.1 being the Managing Partner of suit firm. Before the floating of said partnership business the plaintiff and both the defendants have individually purchased the lands totally Ac.0.38 gts out of Sy.No.19 and 20 situated at Durajpally village of Chhvvemla mandal. The said land also brought into partnership pool as additional investment and that the plaintiff and both the defendants invested Rs.2,50,000/- each per head and that said partnership business was running since 1990 profitably and that defendant No.1 has not discharged his duties as per the letter and spirit of partnership deed with the malicious intention to cause heavy loss to the plaintiff and that the defendant No.1 in collusion with defendant No.2 who is his younger brother bent upon to act for his selfish ends and belied the hopes of the plaintiff and that when the plaintiff approached D.1 to furnish accounts of the said firm, he bluntly refused to do so and on the other hand surprisingly a person by name Bachi Reddy posing himself as agent of D.1 gave reckless and irresponsible answers and also claimed to have purchased the partnership interest of D.2 and the alleged purchase is nothing but flagrant violation of terms of partnership deed and that the defendants in collusion with Bachi Reddy have established another plant quite adjacent to suit firm with a malicious intention to cause heavy loss to the plaintiff and that acts of defendants are detrimental to the interest of suit firm and more particularly to the plaintiff and that the defendants have willingly failed to inform or acquaint with important and material facts resorting to several omissions and commissions and that plaintiff time and again made his best attempts through arbitrators for amicable settlement but in vain. The plaintiff vexed with the non-cooperative attitude of the defendants felt that continuance of partnership with the defendants was no longer safe, as such got issued a legal notice dt.28-12-99 and that defendants gave reply with all false and frivolous grounds. Surprisingly, it is alleged that the plaintiff himself was the Managing Partner of the suit firm and that he has derelicted his duties and that the defendants were forced to shoulder the management through an agent Bachi Reddy and that contribution of the plaintiff towards the said firm was nil. There is no iota in the said allegations. Even after legal notice and reply by the defendants, the plaintiff and common well-wishers made concerted attempts till one week for peaceful way out but in vain. 7. The 1st defendant filed written statement through his G.P.A.Holder and had taken a stand that the suit itself is not maintainable since the plaintiff himself was the Managing Partner of M/s.Bazel Associates as per the partnership deed entered into by the parties. So the question of dissolution of partnership firm and rendition of accounts is not maintainable. As a matter of fact, the partnership deed dt.2-4-90 was not at all acted upon. As such the present suit filed based upon the said partnership deed dt.2-4-90 is untenable in the eye of law. It is further contended that on behalf of defendant No.1 that as per the alleged partnership deed Mr.Md.Shafiuddin – D.1 was made as Managing Partner and his brother Md.RaziuddinAhmed has only invested all the requisite amounts for the partnership and purchased the machinery and assets and that said partnership deed dt.2-4-90 was cancelled and not acted upon as the first defendant and second defendant were working abroad and subsequent to the cancellation, a fresh partnership was entered into on 1-4-91 and it was agreed that the plaintiff shall be the Managing Partner of the firm and that defendants empowered the plaintiff to conduct the business of partnership by devoting substantial portion of time and energy and that the plaintiff also agreed not to enter into any such partnership business or to start any business of his own without consent of the defendants. The said condition was imposed for the reason that the defendants were not experienced and have no knowledge of this kind of business activity and that the defendants totally relied upon the plaintiff and entrusted the business of partnership and that plaintiff assured both the defendants that he will take care of entire business and look after day to day activities by investing amounts sincerely but the plaintiff never adhered to the terms and conditions of partnership nor contributed the amount towards his capital and that plaintiff himself violated the terms of partnership deed dt.1-4-91. The plaintiff in gross violation of partnership agreement had established his own business and right from 1-4-91 the plaintiff did not carry on the partnership business deliberately and without any information to the other partners and that during those days the plaintiff came to Cuddapah and a place near Goa and where he was busy with the construction activity of M/s.Nagarjuna Construction Company and its subsidiaries and that the plaintiff has not contributed his share of amount by way of capital or any other mode. Therefore he could not claim himself to be a partner and that suit lacks bona fides and that the plaintiff has no right to question or demand for accounts from Bachi Reddy, GPA Holder of defendant No.1 as the said GPA was executed only to assist the Managing Partner of firm at the instance of plaintiff. The defendant No.1 further contended that the partnership agreement contemplates reference to the disputes to an Arbitration in accordance with the provisions of Arbitration and Conciliation Act of 1996 and that the defendant No.1 is ready to submit for arbitration and that the defendant also filed an interlocutory application for the said purpose and the same is pending before the Court and that filing of written statement is without prejudice to the right to proceed with the arbitration and cannot be construed as submission to the Court proceedings. The plaintiff never contributed single pie towards his capital or purchased any property for furtherance of partnership business i.e., working capital. Therefore he cannot be termed as a partner of the firm and that suit is not in time and barred by limitation and that this Court has no jurisdiction to entertain the present suit and dismiss the suit. 8. The 2nd defendant had not chosen to contest the matter. 9. On the strength of these pleadings, the following issues were settled:- 1) Whether the suit is maintainable in view of Arbitration agreement? 2) Whether the partnership deed dt.2-4-1990 is in force and binding on the partners? 3) Whether the partnership dt.1-4-1991 suspended the partnership dee4d dt.2-4-1990? 4) Whether the petitioner is a partner? If so, what is contribution towards his share or capital? 5) Whether the plaintiff is entitled to seek the relief of dissolution and rendition of accounts as prayed for? 6) Whether the plaintiff is entitled to costs? 7) To what relief? 10. The plaintiff examined himself as P.W.1 and Ex.A.1 to Ex.A.7 were marked and the 1st defendant himself was examined as D.W.1 and Ex.B.1 to Ex.B.4 were marked. 11. Before the Court of first instance, on behalf of the plaintiff written arguments also had been submitted. The trial Court, on appreciation of evidence available on record, came to the conclusion that the plaintiff is entitled to the reliefs of dissolution of partnership and rendition of accounts as prayed for and accordingly a Preliminary Decree was passed. Aggrieved by the same, the matter was carried by way of Appeal by the defendants – A.S.No.16/2006 on the file of the II-Additional District Judge, Nalgonda at Suryapet. The appellate court after referring to the respective pleadings of the parties and the issues settled by the trial Court and the evidence available on record and the grounds raised in the Memorandum of Grounds of Appeal, formulated the following points for consideration at para 8:- 1) Whether the plaintiff is entitled to seek dissolution of firm and rendition of accounts? 2) Whether the defendants are liable to render the accounts? 3) Whether the partnership deed, dt.2-4-90 is in force? 4) Whether the partnership deed, dt.1-4-91 suspended the partnership deed, dt.2-4-1990? 5) Whether the suit is maintainable in view of arbitration agreement? 6) Whether there are any grounds to interfere with the Judgment of the trial Court? 7) To what relief? 12. The appellate court recorded reasons commencing from paras 9 to 21 and came to the conclusion that the Judgment and Decree of the Court of first instance are unsustainable and accordingly allowed the appeal with costs dismissing the suit of the plaintiff with costs. Aggrieved by the same, the present Second Appeal had been preferred. 13. The substantial question of law on the strength of which the Second Appeal had been admitted also had been specified above. The other substantial questions of law pointed out by Sri Narsinga Rao also had been referred to supra. It is no doubt true that after recording reasons, this Court may permit the other substantial questions of law as well to be considered if this Court is satisfied that those questions also need further consideration. But, this Court after thoroughly going through the other substantial questions of law is of the opinion that these are predominantly questions of fact and these cannot be said to be substantial questions of law within the meaning of Section 100 of the Code. Section 100 of the Code reads as hereunder:- “Second Appeal:- (1) Save as otherwise expressly provided in the body of this Code or by any other law for the time being in force, an appeal shall lie to the High Court from every decree passed in appeal by any Court subordinate to the High Court, if the High Court is satisfied that the case involves a substantial question of law. (2) An appeal may lie under this Section from an appellate Decree passed ex parte. (3) In an appeal under this Section, the memorandum of appeal shall precisely state the substantial question of law involved in the appeal. (4) Where the High Court is satisfied that a substantial question of law is involved in any case, it shall formulate that question. (5) The appeal shall be heard on the question so formulated and the respondent shall, at the hearing of the appeal, be allowed to argue that the case does not involve such question: Provided that nothing in this sub-Section shall be deemed to take away or abridge the power of the Court to hear, for reasons to be recorded, the appeal on any other substantial question of law, not formulated by it, if it is satisfied that the case involves such question.” 14. Before taking up further discussion, it may be essential to have a glance at Section 17 of the Act which reads as hereunder:- “Rights and duties of partners:- Subject to contract between the partners – (a) after a change in the firm:- where a change occurs in the constitution of a firm, the mutual rights and duties of the partners in the reconstituted firm remain the same as they were immediately before the change, as far as may be; (b) after the expiry order the term of the firm, and :- where a firm constituted for a fixed term continues to carry on business after the expiry of that term, the mutual rights and duties of the partners remain the same as they were before the expiry, so far as they may be consistent with the incidents of partnership at will; and (c)where additional undertakings are carried out:- where a firm constituted to carry out one or more adventures or undertakings carries out other adventures or undertakings, the mutual rights and duties of the partners in respect of the other adventures or undertakings are the same as those in respect of the original adventures or undertakings.” 15. Emphasis had been laid on where a change occurs in the constitution of a firm, the mutual rights and duties of the partners in the reconstituted firm remain the same as they were immediately before the change, as far as may be. 16. The appellate court appreciated the evidence of P.W.1 and also D.W.1 and Ex.A.1 – copy of notice; Ex.A.2 – Application for registration for issuance of sales tax certificate; Ex.A.3 – Certificate of registration; Ex.A.4 – Certificate of registration changed in the name of V.Bachi Reddy; Ex.A.5 – Letter from V.Bachi Reddy to ACTO, Suryapet, dt.3- 12-2004; Ex.A.6 – Duplicate of certificate of registration dt.9-12-2004; Ex.A.7 – Letter from the General Manager, District Industries Centre, Nalgonda, dt.1-12-2005 and also Ex.B.1 – Original partnership deed dt.2-4-1990; Ex.B.2 – 2nd partnership deed dt.1-4-91; Ex.B.3 – Original GPA executed by D.1 in favour of Bachi Reddy, dt.13-5-91; Ex.B.4 – Reply notice and recorded findings. It is needless to say that the appellate court is the final fact finding Court, however, when the Decree and Judgment of the Court of first instance had been reversed by the appellate court, in a Second Appeal normally this Court to be cautious to examine the matter. The relevant portions of the evidence of P.W.1 specifically had been pointed out and the admissions made by him also had been pointed out. It is pertinent to note that the specific case of the 1st defendant is that the partnership deed dt.2-4-90 was cancelled and a 2nd partnership deed was executed on 1-4-1991 and in terms of 2nd partnership deed, the plaintiff himself became the managing partner of the firm. It is needless to say that these were marked as Ex.B.1 and Ex.B.2. 17. The specific case of the plaintiff is that the 1st defendant is the Managing Partner of the firm and he has to maintain the accounts and he is liable to render the accounts. The contents of Ex.B.4 also had been considered P.W.1 in cross-examination deposed “on the basis of two partnership deeds, I filed the present suit. According to the 1st partnership deed, D.1 was the managing partner of the firm and as per the 2nd partnership deed, I am the Managing Partner of the firm. After the establishment of the partnership firm, I maintained the accounts upto 1990-91. Thereafter, the GPA holder of D.1 maintained the accounts and his name is Basi Reddy. D.1 at present is residing at Hyderabad and whereas D.2 is residing at abroad. It is also not true to suggest that I have not invested any amount in the partnership firm and that I have not contributed any amount for the purchase of the land and machinery and that I violated the terms of the partnership and that I am not competent to file the present suit since I myself maintained the accounts.” This witness also deposed “Ex.B.1 is the original partnership deed dt.2-4-90 entered into by myself and D.1 and D.2. As per Ex.B.1 the name of the firm is ‘Bezel Associates’. As per clause-C of Ex.B.1 each partner is to contribute Rs.1,00,000/-. I invested an amount of Rs.1,00,000/- as particular the terms of Ex.B.1 by way of cash in piecemeal as per the business requirements. As on the date of Ex.B.1, I have not paid the amount of my share. Prior to Ex.B.1, we purchased the crusher and land. As per Ex.B.1, D.1 was the managing partner of business. After Ex.B.1, we did the business to some extent. The partnership deed is still in continuation. My chief examination affidavit was prepared as per my instructions. A subsequent partnership deed was executed in the year 1991 because D.1 Shafiuddin refused to act as a Managing Partner. As per my instructions, the plaint was drafted. There is no averment in the plaint that D.1 – Mohd.Shafiuddin refused to act a Managing Partner and therefore another partnership deed is entered into on 1-4-91. The said subsequent partnership deed is in continuation of Ex.B.1. It is not true to suggest that in view of execution of subsequent deed of partnership dt.1-4-91, Ex.B.1 has no value. As per the 2nd partnership deed I was made to act as Managing Partner. Ex.B.2 is the 2nd partnership deed dt.1-4-91. The accounts were settled by March, 1991. There is no any recital or any averment in Ex.B.2 that I along with D.1 and D.2 invested the amounts because it is only in continuation of Ex.B.1. It is not true to suggest that as per clause-5 of the Ex.B.2, I have not invested any amount and only D.1 and D.2 invested the amounts. I have not issued any notice or questioned D.1 and D.2 for not entering my share of investment in Ex.B.2. As a Managing Partner I did business. I maintained the accounts only for the month of April, 1991. I cannot produce the original accounts pertaining to the month of April, 1991