Case: Saligram Ruplal Khanna &amp; Anr Vs. Kanwar Rajnath

of the fixed period of partnership has been proved on the record.30. Reference has also been made on behalf of the appellants to the consent given by the respondent on behalf of SAMCO on November 13, 1957, to the award of Rs. 18,00,000/- by Mr. Morarji Desai in favour of the Custodian against SAMCO. It is urged that this document would go to show that the firm of SAMCO had not been dissolved before that date. We are unable to agree. The arbitration proceedings had been started as a result of application under Section 20 of the Arbitration Act filed on April 21, 1955, when SAMCO was in existence and was a running concern. The arbitration proceedings related to a claim of the Custodian of Rs. 30,00,000/- on account of the price of stocks of raw material, stores and other moveables as well as about the arrears of rent. Counter-claim had also been made by SAMCO against the Custodian for a sum of Rs. 17,67,080/- as per written statement dated December 18, 1956 filed in arbitration proceedings. The consent which was given by the respondent on November 13, 1957 was with a view to get the dispute between SAMCO with the Custodian finally settled. This was a necessary step for the purpose of winding up the affairs of SAMCO and to complete transaction of arbitration proceedings which had been begun but remained unfinished at the time of dissolution. According to Sec. 47 of the Indian Partnership Act, after the dissolution of a firm the authority of each partner to bind the firm, and the other mutual rights and obligations of the partners, continue notwithstanding the dissolution, so far as may be necessary to wind up the affairs of the firm and to complete transactions begun but unfinished at the time of the dissolution, but not otherwise. The word "transaction" in Section 47 refers not merely to commercial transaction of purchase and sale but would include also all other matters relating to the affairs of the partnership. The completion of a transaction would cover also the taking of necessary steps in connection with the adjudication of a dispute to which a firm before its dissolution is a party. The legal position in this respect has been stated on page 251 of Lindley on Partnership (Thirteenth Edition) as under:Notwithstanding a dissolution each partner can pay, or receive payment of, a partnership debt; for it is clearly settled that payment by one of several joint debtors, or to one of several joint creditors, extinguishes the debt irrespective of any question of partnership. So, again, it has been held that a continuing or surviving partner may issue a bankruptcy notice in the firm name in respect of a judgment obtained before the dissolution, and the notice to him of the dishonour of a bill of exchange is sufficient, and that he can withdraw a deposit or sell the partnership assets, or pledge them for the purpose of completing a transaction already commenced, or securing a debt already incurred, or the overdraft on the partnership current account at the bank.The proposition, in our opinion, cannot be disputed that after dissolution, the partnership subsists merely for the purpose of completing pending transactions, winding up the business, and adjusting the rights of the partners; and for these purposes, and these only, the authority, rights, and obligations of the partners continue (see page 573 of Halsburys Laws of England Third Edition Vol. 28). We would, therefore, hold that the consent given by the respondent on November 13, 1957, to the award of Mr. Desai would not detract from the conclusion that the firm of the parties stood dissolved on the expiry of the fixed period of partnership, viz., August 30, 1957.31. The proposition of law referred to by Mr,. Desai that a dissolution does not necessarily follow because a partnership has ceased to do business would not be of any material help to the appellants because we are not basing our conclusion of the dissolution of the firm of the parties upon the fact that the partnership had ceased to do business. On the contrary, we have arrived at the above conclusion in accordance with the principle of law that a firm constituted for a fixed term shall stand dissolved, in the absence of a contract to the contrary, on the expiry of that term. Likewise, the appellants can derive no help from the decision of the Judicial Committee in Sathappa Chetty v. S. N. Subramanyan Chetty, AIR 1927 PC 70 . The said case did not relate to a firm constituted for a fixed term and no question arose in that case of a firm dissolving on the expiry of the fixed term of partnership.32. Our attention has also been invited to the correspondence between the first appellant and the respondent during the period from June to September, 1957. These letters reveal that the first appellant entertained hopes and expectations of deriving some benefit in case the respondent succeeded in acquiring the Ambernath Mills. The exact nature of the benefit was not, however, specified in the letters. The respondent in his replies while not belying those hopes and expectations took care not to make any commitment. After, however, the respondent succeeded in acquiring the mills, there developed a coolness in his attitude towards the first appellant. This circumstance must necessarily have caused disappointment and disillusionment to the first appellant. The respondent, is seems, kept some kind of carrot dangling before the first appellant during the delicate stage of his negotiations with the Government for the acquisition of the mills lest the first appellant did something to sabotage those efforts. After acquisition of the mills by the respondent, his attitude changed and he gave a cold rebuff to the first appellant. The above conduct of the respondent may have a bearing on the question of the award of costs, but it cannot affect our decision on the point as to whether the suit is within limitation or not.

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]The main burden of the arguments of Mr. Desai, however, has been that the appellants were entitled to the accounts of the partnership which admittedly existed between the parties as per partnership agreements dated August 30, 1952 and February 24, 1954. According to Mr. Desai, there had been no dissolution of the firm of the parties prior to the institution of the suit and the appellants suit for rendition of accounts was not barred by limitation. The High Court, it is urged, was in error in holding to the contrary. The above contentions have been controverted by Mr. Cooper on behalf of the respondent and, in our opinion, are notthis connection we find that no case of such an implied agreement was set up in the trial Court, either in the plaint or otherwise, nor was such a case set up in appeal before the Division Bench. What was actually contended was that the agreement was for acquiring the mills as an asset of the partnership. The above stand of the appellants could plainly be not accepted when one keeps in view the agreement of lease dated August 30, 1952, as well as other documents on record. The said agreement of lease shows that Ambernath Mills would become the absolute property not only of the appellants and the respondent but of all persons who were to be associated with the lessees in the ownership of the proprietary interest in proportion to the total compensation payable to each of them. The agreement of lease further contemplated that the lessee rights of the two appellants and the respondent were to be distinct from the proprietary interest in the demised premises and that the lessees were at liberty, in spite of the transfer of proprietary interest, to continue the lease for the unexpired residue of the term on the terms and conditions of the lease and payment of rent prescribed thereunder. The respondent submitted representation on August 9, 1954, on behalf of SAMCO to the Custodian for the restart of the mills and along with it the respondent sent copies of letter of authority and particulars of verified claims of 30 displaced persons. It is implicit in the representation that in case Ambernath Mills was transferred, the same would vest in all the 30 displaced persons whose claims were submitted.21. There are two documents which run counter to the stand taken on behalf of the appellants in this Court that there was an implied agreement that in case the respondent acquired the ownership of the mills, the mills would be worked by the respondent in partnership with the appellants. One of those documents is agreement dated September 20, 1957, which was signed by the first appellant and the respondent a day before the respondent executed bond in favour of that appellant in view of the fact that the first appellant agreed to have his claim compensation amounting to Rs. 6,994/- adjusted towards the price of Ambernath Mills. It was stated in the agreement dated September 20, 1957, that the respondent was contemplating the formation of a joint stock company to own, run and manage the mills and it was agreed between the parties that in the event of such company being formed, the first appellant would have the option to purchase shares of the said company to the extent of 50 per cent of the amount of the adjusted claim compensation. In case the option was exercised in favour of the purchase of the shares of the company, the respondent was to ensure that the said shares would be allotted to the first appellant at par. It was further agreed that if the shares applied for or any proportion thereof were not allotted to the first appellant by the said company, the respondent would not in any way be liable to the first appellant on that account. In the bond the respondent agreed to pay to the first appellant interest at the rate of 6 per cent on the amount of compensation from the date of the adjustment of the first appellants claim compensation. Had the first appellant any interest in the Ambernath Mills which were being acquired by the respondent, there could arise no occasion for the execution of the agreement dated September 20, 1957 and the bond dated September 21, 1957. All that was agreed by the respondent in those two documents was that in case he promoted a company for owning, running and managing the Ambernath Mills, the first appellant would get a share of the value of half of his claim compensation of 6,994/-. The said amount when compared to the price of Ambernath Mills was wholly insignificant. No question could arise for the respondent borrowing money from the first appellant for payment of price of the mills, in case the acquisition of the mills was for the benefit of the respondent as well as the appellant. It may also be stated that the interest on account of the above compensation was duly paid by the respondent to the first appellant.So far as the question is concerned as to whether the claim for rendition of accounts was within time, we find that according to Clause 16 of the partnership deed dated August 30, 1952 the period of partnership was fixed at five years, being the period of the lease. Clause 17 of the deed of partnership dated February 24, 1954 provided that the "period of partnership shall be the outstanding period of such lease". The possession of Ambernath Mills under the agreement of lease was delivered on August 31, 1952. The period of five years of the lease was thus to expire on August 30, 1957.As the partnership was for a fixed period, the firm would in normal course dissolve on the expiry of the period of five years on August 30, 1957.No agreement between the partners to keep the firm in existence after the expiry of the fixed term of five years has been proved. According to Section 42 of the Indian Partnership Act, subject to contract between the partners a firm isif constituted for a fixed term, by the expiry of thatthe firm is constituted to carry out one or more adventures or undertakings, the firm, subject to a contract between the partners, would be dissolved by the completion of the adventures or undertakings. Clauses (c) and (d) deal with dissolution of firm on death of a partner of his being adjudicated insolvent.View was expressed by the learned trial Judge that the firm of SAMCO stood dissolved on May 25, 1954, when the lease was canceled. Another date of dissolution, according to the learned Judge, could be January 14, 1957, when the suit filed by the partners of that firm against the Custodian and the Central Government for permanent injunction was finally dismissed by the High Court.The appellate bench expressed the view that the firm of SAMCO stood dissolved on November 10, 1955, when the Supreme Court dismissed the appeal regarding the validity of notice. It is, in our opinion, not necessary to dilate upon this aspect of the matter because in any case there can be no manner of doubt that the firm of SAMCO got dissolved and was not subsisting after 30-8-1957 which was the date on which the period of five years for which the partnership had been formed came to an end. The question as to whether the firm got dissolved earlier than August 30, 1957 is purely academic than August 30, 1957 is purely academic and is not of much significance, because in any event in the absence of a contract to the contrary there could be no survival of the firm after August 30, 1957, when the period of partnership expired. Calculating the period of limitation even from that date, the suit for rendition of accounts brought by the appellants on December 20, 1960, was barred by limitation. It is not disputed that the period of limitation for such a suit is three years from the date of dissolution.w was expressed by the learned trial Judge that the firm of SAMCO stood dissolved on May 25, 1954, when the lease was canceled. Another date of dissolution, according to the learned Judge, could be January 14, 1957, when the suit filed by the partners of that firm against the Custodian and the Central Government for permanent injunction was finally dismissed by the High Court.The appellate bench expressed the view that the firm of SAMCO stood dissolved on November 10, 1955, when the Supreme Court dismissed the appeal regarding the validity of notice. It is, in our opinion, not necessary to dilate upon this aspect of the matter because in any case there can be no manner of doubt that the firm of SAMCO got dissolved and was not subsisting after 30-8-1957 which was the date on which the period of five years for which the partnership had been formed came to an end. The question as to whether the firm got dissolved earlier than August 30, 1957 is purely academic than August 30, 1957 is purely academic and is not of much significance, because in any event in the absence of a contract to the contrary there could be no survival of the firm after August 30, 1957, when the period of partnership expired. Calculating the period of limitation even from that date, the suit for rendition of accounts brought by the appellants on December 20, 1960, was barred by limitation. It is not disputed that the period of limitation for such a suit is three years from the date of dissolution.Our attention has also been invited to the correspondence between the first appellant and the respondent during the period from June to September, 1957. These letters reveal that the first appellant entertained hopes and expectations of deriving some benefit in case the respondent succeeded in acquiring the Ambernath Mills. The exact nature of the benefit was not, however, specified in the letters. The respondent in his replies while not belying those hopes and expectations took care not to make any commitment. After, however, the respondent succeeded in acquiring the mills, there developed a coolness in his attitude towards the first appellant. This circumstance must necessarily have caused disappointment and disillusionment to the first appellant. The respondent, is seems, kept some kind of carrot dangling before the first appellant during the delicate stage of his negotiations with the Government for the acquisition of the mills lest the first appellant did something to sabotage those efforts. After acquisition of the mills by the respondent, his attitude changed and he gave a cold rebuff to the first appellant. The above conduct of the respondent may have a bearing on the question of the award of costs, but it cannot affect our decision on the point as to whether the suit is within limitation or not.