IN THE HIGH COURT OF GUJARAT AT AHMEDABAD. APPEAL FROM ORDER No. 132 OF 1994 WITH CIVIL APPLICATION No. 1562 OF 1994 AND APPEAL FROM ORDER No. 331 OF 1994 WITH CIVIL APPLICATION No. 4182 OF 1994 AND APPEAL FROM ORDER No. 311 OF 1994 WITH CIVIL APPLICATION No. 3927 OF 1994 For Approval and Signature: Hon'ble MR.JUSTICE M.S. SHAH. ============================================================ 1. Whether Reporters of Local Papers may be allowed to see the judgements? 2. To be referred to the Reporter or not? 3. Whether Their Lordships wish to see the fair copy of the judgement? 4. Whether this case involves a substantial question of law as to the interpretation of the Constitution of India, 1950 of any Order made thereunder? 5. Whether it is to be circulated to the Civil Judge? -------------------------------------------------------------- Mr S.B. Vakil for the appellants. Mr D.D. Vyas for the respondents. CORAM : MR.JUSTICE M.S. SHAH Date of decision: 30/09/97 CAV JUDGEMENT All these appeals arise from the interlocutory orders passed by the learned Civil Judge (Senior Division), Surat in Special Civil Suit No. 167 of 1992. Since the properties which are the subject matter of all the three appeals are the same and the parties are the same, with consent of the learned counsel for the parties, all the three appeals and the Civil Applications therein are heard together for final disposal and are accordingly being disposed of by this common judgment and order. BASIC FACTS : 2. Plaintiff No. 1 (respondent No. 1 in A.O. No. 132 of 1994), who is the brother of defendants Nos. 2 to 5, has filed the present suit alleging that all the defendant firms (Nos. 1 and 6 to 11) are joint Hindu family firms, but for the purpose of income-tax they were constituted as partnership firms (except defendant No. 1 - a Private Limited Company) and that the plaintiff has filed the present suit for dissolution of these firms and for accounts and for getting his 20% share in the assets and profits thereof. Plaintiff No. 1 is one of the five brothers. Plaintiff No. 2 is the wife of plaintiff No. 1. Defendant no. 14 is the son of the plaintiffs. The defendant - firms including defendant No. 1 Company are engaged in the business of processing textiles and other connected business activities. The other defendants are the remaining four brothers of plaintiff No. 1 and various business firms. According to the plaintiffs, the defendant - firms were dissolved on September 6, 1990 and in any case, the plaintiffs were entitled to have the firms dissolved with effect from the date of filing of the suit. 3. Appeal From Order No. 132 of 1994 is filed by original defendant Nos. 1 to 13 and 15 to 22 for challenging the order dated March 5, 1994 below interim injunction application Exh. 5 in the present suit, by which the trial Court has restrained the defendants from using all the properties, machineries, trade name and goodwill as mentioned in the Schedules to the plaint. In the aforesaid Appeal From Order, the appellants have also filed Civil Application No. 1562 of 1994 wherein this Court, while issuing notice on the Appeal and the said stay application, passed an ad-interim order dated May 3, 1994 staying the order passed by the trial Court. The said ad-interim stay has been continued from time to time and is operative at present. 4. After the aforesaid stay order was passed by this Court, the said appellants, i.e. defendant Nos. 1 to 13 and 15 to 22, filed application Exh. 65 before the trial Court praying for an interim injunction against the plaintiffs and defendant No. 14 (plaintiffs' son) from entering into the business premises of the defendant - firms and also from obstructing the defendants in day to day routine working of defendant - firms and further praying that the plaintiffs and Defendant No. 14 be restrained from dispossessing the defendants. 5. The trial Court has allowed the said application (Exh. 65) by an order dated September 6, 1994 and restrained the plaintiffs and defendant No. 14 from entering into the business premises of the partnership firms and from obstructing the defendants in day to day routine work of defendant Nos. 1 company and defendant Nos. 6 to 11 firms and also from dispossessing the defendants without following due process of law. The said order is made to be operative till the disposal of Civil Application No. 1562 of 1994 pending before this Court. Although the said order is apparently in favour of original Defendant No. 1 to 13 and 15 to 22, Appeal From Order No. 332 of 1994 is filed by them with a prayer that the aforesaid order dated September 6, 1994 ought to have been made operative by the trial Court till disposal of the suit and not merely till disposal of Civil Application No. 1562 of 1994 presently pending before this Court. 6. Substantially aggrieved by the above order dated September 6, 1994, the original plaintiffs have filed Appeal From Order No. 311 of 1994 contending that since the plaintiffs have 20% share in the partnership firms, the trial Court ought not to have passed any order restraining the plaintiffs from entering into the business premises of the partnership firms and taking part in the management of the said firms. No ad-interim stay has been granted in Civil Application No. 3927 of 1994 in the aforesaid appeal filed by the plaintiffs and therefore, the said interim order passed by the trial Court on September 6, 1994 below application Exh. 65 continues to operate. SUBMISSIONS ON BEHALF OF APPELLANT - DEFENDANTS : 7. Mr S.B. Vakil, learned counsel for the appellants (original defendant Nos. 1 to 13 and 15 to 22, i.e. all the defendants except defendant Nos. 14 who happens to be the son of the plaintiffs) has assailed the interim order dated March 5, 1994 passed by the trial Court below interim injunction application Exh. 5 on various grounds. However, at the outset his grievance was that the trial Court had passed the order under appeal without hearing the defendants. If the defendants had been given such opportunity, they would have filed further affidavits and produced some documents on the controversy sought to be raised by the plaintiffs on merits. Mr Vakil has then urged the following grounds on merits of the order dated March 5, 1994 :- (I) The plaintiffs' reliefs in the suit are based on the allegation that all the defendant firms are joint Hindu family firms, but for the purpose of income-tax they were made as partnership firms. However, the entire base of the suit is untenable in view of the following submissions :- (a) Except their own bare word, the plaintiffs have not led any evidence to show that the defendant firms are joint Hindu family firms. (b) The plaintiffs have not produced any partnership deed nor have they relied upon any terms and conditions of partnership for asserting their 20% share in the suit properties. (c) The plaintiffs have merely alleged that the defendant - firms and defendant No. 1 Company are formal, not real, but they have not even alleged that even plaintiff No. 1 is a partner in any genuine partnership firm. (II) Even the plaintiffs' own case is that the suit firms are joint Hindu family firms, but for the purpose of income-tax they are treated as partnership firms. The very base of the plaintiff's suit is thus founded on allegation of illegality and therefore, the doctrine of pari delicto would apply and on this ground also the plaintiff cannot get any relief from the Court. (III) The plea that the defendant - firms are joint family firms is contradictory and inconsistent with the plea for enforcement of rights under the Partnership Act. (IV) Without prejudice to the above, the plaintiffs cannot file one suit for dissolution of all the partnership firms. (V) The order passed by the trial Court is a blanket order restraining the defendants from using all the properties whether business properties or residential properties. An injunction of such magnitude and sweep could not have been given even at the final hearing of the suit, much less at the interim stage. (VI) Once the trial Court granted the interim injunction against user of the suit properties and did not grant interim injunction against transfer of the suit properties, although prayed for by the plaintiffs, it would not be open to this Court to grant any interim injunction against transfer of the suit properties while setting aside the order of injunction against user of the suit properties and that such order cannot be passed even under the provisions of Order 41, Rule 33 of the Code of Civil Procedure. 8. As far as Appeal From Order No. 331 of 1994 is concerned, Mr Vakil submitted that since the plaintiffs were acting contrary to the interest of the defendant firms, the trial Court had rightly passed the interim injunction order dated September 6, 1994 restraining the plaintiffs and defendant No. 14 (plaintiffs' son) from entering the properties of the defendant firms and from interfering with the defendants in running business of the said firms and from dispossessing the defendants except in accordance with law. However, the said interim injunction orders were required to be made operative till disposal of the suit and there was no need to restrict their operation till disposal of Civil Application No. 1562 of 1994 which is pending before this Court. SUBMISSIONS ON BEHALF OF PLAINTIFFS : 9. On the other hand, Mr D.D. Vyas, learned counsel for original plaintiffs (the respondents in the aforesaid 2 appeals and appellants in Appeal From Order No. 311 of 1994) has submitted that both the sides were fully heard by the trial Court before passing the order below interim injunction application Exh. 5 and supported the order dated March 5, 1994 passed by the trial Court below the interim injunction application. He has assailed the order of the trial Court dated September 6, 1994 below application Exh. 65. The submissions made by Mr Vyas are as under :- (i) The document called Lavadnamu (document referring the disputes between the parties to arbitration herein after referred to as "reference to arbitration") signed by all the five brothers on November 8, 1990 shows that the disputes between the parties about the suit properties were referred to arbitration. In the said document, it was clearly mentioned that all the five brothers i.e. defendant Nos. 2, 3, 4, 5 and plaintiff No. 1 were partners in one firm or the other being defendant No. 1 Company and defendant Nos. 6, 7, 8 and 9 and that all these firms and the private limited Company are interconnected as the five brothers are partners in one or the other firm. The defendants had tried to procure a back dated award in the aforesaid proceedings after expiry of the time limit stipulated for making the award and after filing of the present suit. The fact, however, remains that the defendants have admitted as recently as on November 8, 1990 (before the filing of the present suit in 1992) that plaintiff No. 1 is a partner in the defendant firms. Plaintiff No. 2 is the wife of plaintiff No. 1 and defendant No. 14 is the son of the plaintiffs. Thus, the plaintiffs have share or interest in the joint family firms which are being treated as partnership firms and the trial Court has rightly proceeded on that basis. Even in respect of defendant no. 1 Company, it is open to the Court to lift its corporate veil as it is basically a family concern. (ii) Under Section 53 of the Partnership Act, after a firm is dissolved, every partner may restrain any other partner from using any property of the firm for his own benefit, until the affairs of the firm have been completely wound up. In this view of the matter, the trial Court had rightly passed the order of interim injunction for restraining the defendants from using the suit properties of the defendant - firms. The plaintiffs however concede that during pendency of the suit the defendants may be permitted to make use of the residential premises on condition that they do not transfer the same. (iii) This Court can, in exercise of powers under Order 41, Rule 33 of Code of Civil Procedure Code, grant further reliefs to the plaintiffs to restrain the defendants from transferring the suit properties. (iv) Once plaintiff No. 1 is treated as a partner of the defendant - firms and as one of the five brothers, he is having 20% share in the assets as well as profits of the defendant - firms, the Court erred in passing the order dated September 6, 1994 restraining the plaintiffs from entering the properties of the defendant - firms and from participating in the management of the said firms and from enjoying the common possession of the suit properties. (v) On the one hand, the interim injunction dated March 5, 1994 passed by the trial Court for restraining the defendants from using the suit properties is stayed by this Court by an ad-interim order and the defendants are merrily using the suit properties and getting all the profits of the defendant firms for their own personal benefits and on the other hand the plaintiffs are neither permitted to participate in the running of the business of the defendant firms nor are the plaintiffs being paid any amount by the defendants ever since September, 1990. The disposal of the suit is bound to take some time, but the plaintiffs cannot be deprived of their right to get the profits of the defendant firms and to participate in the management of business of the defendant - firms. ALLEGATION OF ABSENCE OF HEARING BEFORE TRIAL COURT : 10. So far as the grievance made by the learned counsel for the defendants regarding absence of hearing before the trial Court is concerned, affidavits have been filed by the learned advocates who had argued the interim injunction application before the trial Court. While the learned advocates for the defendants have said that they were not heard, the learned advocate for the plaintiffs has filed an affidavit stating that the learned advocates for all the parties were heard. Rojkam of the suit proceedings has also been perused. The rojkam shows that on December 28, 1993 the advocates for the parties were present and the arguments of the learned advocate for the defendants were heard on application Exh. 5 (interim injunction application) and the hearing was adjourned to January 4, 1994 for the arguments on behalf of the plaintiffs on application Exh. 5 and also certain other applications. It appears that the matter was posted on certain dates in January, 1994, but ultimately on March, 19, 1994, the trial Court heard the arguments of the learned advocate for the plaintiffs on application Exh. 5 and the matter was thereafter adjourned to March 22, 1994 for hearing the reply on behalf of the defendants on application Exh. 5 and also for hearing of certain other applications. On March 22 the matter was adjourned to March 25 and then to March 29. Finally, the rojkam for March 29, 1994 shows that the learned advocate for the parties were present and the trial Court heard the arguments on application Exh. 5 and the matter was adjourned to April 5, 1994 for pronouncement of order below application Exh. 5 and for hearing of certain other applications. The order was pronounced on April 5, 1994. It appears from the rojkam that the arguments of both the sides were heard on interim injunction application Exh. 5. The version of the learned advocate for the plaintiffs before the trial Court is that the defendants were heard on application Exh. 5 (interim injunction application) first on December 28, 1993 as they insisted that the matter be heard, when the learned advocate for the plaintiffs was busy in other Courts. Thereafter, the arguments of the learned advocate for the plaintiffs were heard on March 19, 1994 and on March 29, 1994, the trial Court heard the learned advocates for both the sides on interim injunction application. On the other hand, the version of the learned advocate for the defendants before the trial Court is that on December 28, 1994, the trial Court heard the arguments on behalf of the defendants on certain other applications and not on interim injunction application Exh. 5 and that the reply of the defendants came to be filed on January 27, 1994 and thereafter they were not heard. Going by the rojkam, it prima facie appears that on March 25, 1994 the Court posted the matter for hearing the reply arguments on behalf of the defendants to March 29, 1994 and on that day the trial Court did hear the learned advocates for the parties. In view of the aforesaid controversy, however, this Court conveyed to the learned counsel appearing for the parties here that full opportunity will be given to both the learned counsel to argue at length on merits of the question of interim relief which should operate during pendency of the suit. The learned counsel for the parties have availed of this opportunity by addressing this Court at length in different sittings spread over about 10 days. This Court, therefore, proceeds to deal with the contentions of the parties on merits. CONTENTION I: 11. The defendants have contended that the plaintiffs have not made out any case for grant of any interim injunction, because the plaintiffs have not led any evidence to show that they have any share or interest in the defendant firms. In support of the said contention, they have also relied upon the decisions in the case of Kshetra Mohan V. E.P.T. Commr., AIR 1953 SC 516, Bacha F. Guzdar V. Commr. of I.T., Bombay and Champaran Cane Concern V. State of Bihar, AIR 1963 SC 1737. However, it is not necessary to refer to the said decisions in view of peculiar facts of this case in as much as the Lavadnamu (Reference to arbitration) dated November 8, 1990 signed by all the five brothers clearly states that all the five brothers are having share in one firm or another being defendant No. 1 Company and defendant Nos. 6 to 9 partnership firms and that the arbitrators were appointed to resolve disputes between the parties and that the arbitrators will take into account the books of accounts of defendant No. 1 Company and the other firms and will take decision about partition of assets/distribution of the profits. The defendants having relied upon the said reference to arbitration, no further evidence was required to be led by the plaintiffs in support of the foundation of the plaintiffs' case. 12. Of course, there are subsequent disputes about the award purported to have been signed by the arbitrators on December 31, 1991 which, according to the plaintiffs, was signed and given by the arbitrators not only after expiry of the time limit (31.12.1991) stipulated by the parties for giving the award, but also after filing of the present suit on March 25, 1992 and after service of the summons in the present suit on the defendants who, according to the plaintiffs, were in collusion with the arbitrators and procured the award on April 8, 1992, but the arbitrators antedated the award by putting the date as "31.12.1991" and, therefore, the award was never communicated to the plaintiffs or the defendants prior to April, 1992. These controversies are already subject matter of Civil Misc. Application No. 26 of 1992. Reference is made to the aforesaid arbitration proceedings merely for the limited purpose of referring to the reference to arbitration dated November 8, 1990 which shows that plaintiff No. 1 was admitted to be a partner/shareholder in the defendant - firms especially defendant No. 1 Company and defendants No. 6 to 9 firms. CONTENTION II :- 13. The contention of Mr Vakil that the plaintiffs are not entitled to any relief as they have themselves made an illegality the foundation of their application is misconceived. The plaintiffs have alleged in the application that although the defendant firms are joint family firms, they are constituted as partnership firms for income-tax purpose. As is well known businessmen do resort to tax planning for the purpose of reducing their tax liabilities and such tax avoidance cannot be treated as illegal though tax evasion is certainly illegal. It may be that as regards tax avoidance, there are two schools of thought on the question whether such tax avoidance should be discouraged or not, but it is not necessary to enter into that controversy for the purpose of the present proceedings. The plaintiffs cannot be denied any interim relief on application of principle of pari delicto as contended by the learned counsel for the defendants, for there is no illegality in the first place. CONTENTION III : 14. Mr Vakil also contended that on the one hand the plaintiffs have claimed that the defendant - firms are joint family firms and on the other hand the plaintiffs are claiming relief under the Partnership Act and that they are thus taking up inconsistent plea which is not permissible. For this purpose, Mr Vakil has relied on the decision in the case of Om Prakash Vs. Ram Kumar, AIR 1991 SC 409. The ratio of the said decision is not of any assistance to the defendants as the Supreme Court observed in that case that a party cannot be granted a relief which is not claimed, if the circumstances of the case are such that the granting of such relief would result in serious prejudice to the interested party and deprive him of the valuable rights under the statute. In an action by the landlord the tenant is expected to defend only the claim made against him and if a cause of action arises to the landlord on the basis of the plea set up by the tenant in such action, it is necessary that the landlord seeks to enforce that cause of action in the same proceedings by suit by amendment or by separate proceedings to entitle the landlord to relief on the basis of such cause of action. The principle that the Court is to mould the relief taking into consideration subsequent events is not applicable in such cases. In the instant case, obviously the plaintiffs are not claiming any interim relief on the basis of any plea being set up by the defendants which is more of denial than any positive plea. Mr Vyas has rightly relied on the decision of the Supreme Court in the case of Firm Srinivas Ram Vs. Mahabir Prasad, AIR 1951 SC 177 wherein it is held that the plaintiff is entitled to take up inconsistent pleas. CONTENTION IV : 15. As far as the contention that the present suit is not maintainable as it is filed with a prayer for dissolution of firms for which different suits should have been filed against different firms, the provisions of Order 1, Rules 3, 4 and 5 CPC are required to be noted. Rule 3 provides that all persons may be joined in one suit as defendants where, if separate suits were brought against such persons, any common question of law or fact would arise. Rule 5 provides that it shall not be necessary that every defendant shall be interested as to all the reliefs claimed in any suit against him. Similarly, Rule 4 provides that judgment may be given without any amendment against such one or more of the defendants as may be found to be liable, according to their respective liabilities. In view of the nature of the subject matter of the suit and the controversy between the parties, it is clear that common questions of law and fact have arisen between the parties and the contents