Case: Mohatta Brothers Vs. Bharat Suryodaya Mills Co. Ltd., Ahmedabad

find that in the statement of accounts of the plaintiff-firm it is Shashi Kumar and not Satyavati who is shown to have 4 Annas share in the plaintiff-firm. Entries show that Shashi Kumar shared the profits as well as the losses in that proportion. The significant thing which emerges from the account books is that Satyavati was not shown as the person entitled to 4 Annas share in the partnership firm.Soon after the present suit had been filed, on application filed on behalf of the defendants under order XXX, Rule 2 of the Code of Civil Procedure, names of the partners of the plaintiff-firm were declared on behalf of the plaintiff-firm. In the declaration the name of Satyavati was not mentioned as one of the partners of the plaintiff firm. The question as to who should share the profits of the plaintiff-firm and should be otherwise entitled to its assets is essentially a matter for the partners of the plaintiff-firm. The facts of the case disclose that the partners of the plaintiff-firm have agreed between themselves that so far as the 4 Annas share in the profits and assets of the plaintiff-firm are concerned, it would be Shashi Kumar who would be entitled to the same. That position is also accepted by Satyavati in the applications in connection with the registration of the firm to the income-tax authorities. It would, in our opinion, be a wholly untenable plea for the defendant from whom money is claimed, to urge that even though Satyavati as well as the other partners claim that it is not she but her son Shashi Kumar who is entitled to 4 Annas share in the partnership, the court should hold that it is Satyavati who is entitled to that share. The distinction between a plaintiff-firm and a defendant-firm in the above context should not be lost sight of. So far as a defendant-firm against whom a suit for recovery of money has been filed is concerned, it would be open to the plaintiff to prove that a person is a partner of the defendant firm despite the denial of that fact by that person as well as the other partners of the defendant-firm. The reason fo r that is that a creditor of a defendant-firm can, except in some cases to which it is not necessary to refer, also proceed against the personal assets of each and every partner. Such a consideration does not hold good when the dispute relates to t he question as to who are the partners of the plaintiff-firm.It has been mentioned above that Shivratan stated in the course of his deposition that partnership deed dated October 24, 1949 had not been acted upon. This statement is against the pecuniary interest of Shivratan. It is plain that if Satyavati were a partner of the plaintiff-firm, Shivratan and other partners would have to bear losses to the extent of 12 Annas in a rupee. As against that, if Shashi Kumar be en titled to share profits to the extent of 4 Annas in a rupee and be not liable for the losses, in such an event Shivratan and other partners A would have to bear the losses to the full extent of 16 Annas in a rupee. If despite that fact, Shivratan has deposed that Satayvati did not be come a partner of the plaintiff-firm and the deed of partnership dated October 24, 1949 was not acted upon, his statement in this respect should not, in our view, be rejected, especially when there is over r whelming documentary evidence which lends support to the above statement.12. The entire course of dealings shows that despite the execution of the deed of partnership dated October 24, 1949, the said partnership deed was not acted upon and t he relations between the partners of the - plaintiff-firm continued to be governed by the deed - of partnership dated May 19, 1949 according to which it was not Satyavati but her son Shashi Kumar who was entitled to four Annas share in the partnership. The question, to which a reference has been made in the course of arguments, as to when it was decided not to act upon the deed of partnership dated October 24, 1949 is hardly of much importance, the material thing is that the said deed w as not given effect to or acted upon by the parties concerned. The firm which came into existence as per deed of partnership dated May 19, 1949 was admittedly registered under the Indian Partnership Act and its partners were shown in the Register of Firms.Looking to all the facts we are of the opinion that the trial court took a correct view of the matter in so far as it held that Satyavati had not become a partner of the plaintiff-firm and that the deed of partner ship dated October 24, 1949 had not been acted upon. The High Court, in our opinion, was in error in reversing that finding of the trial court. In view of this conclusion of ours, it is not necessary to go into the legal question as to, what should be the proper const ruction of section 69(2) of the Indian Partnership Act. Learned counsel for the parties are agreed that such question would arise only in case we had marked the finding of the High Court that Satyavati had become a partner of the plaintiff-firm and that the deed of partnership dated October 24, 1949 had been acted upon.13. The High Court did not deal with the merits of the cross-appeals filed by the parties in view of its finding on the point as to whether Satyavati had become partner of the plaintiff-firm and the construction it placed upon section 69(2) of the Indian Partnership Act. In the light of the conclusion we have arrived at, it becomes essential to remand the matter to the High Court so that the cross appeals filed by the parties may be disposed of on merits.

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

Explanation:
1[ds]The facts of the case disclose that the partners of the plaintiff-firm have agreed between themselves that so far as the 4 Annas share in the profits and assets of the plaintiff-firm are concerned, it would be Shashi Kumar who would be entitled to the same. That position is also accepted by Satyavati in the applications in connection with the registration of the firm to the income-tax authorities. It would, in our opinion, be a wholly untenable plea for the defendant from whom money is claimed, to urge that even though Satyavati as well as the other partners claim that it is not she but her son Shashi Kumar who is entitled to 4 Annas share in the partnership, the court should hold that it is Satyavati who is entitled to that share. The distinction between a plaintiff-firm and a defendant-firm in the above context should not be lost sight of. So far as a defendant-firm against whom a suit for recovery of money has been filed is concerned, it would be open to the plaintiff to prove that a person is a partner of the defendant firm despite the denial of that fact by that person as well as the other partners of the defendant-firm. The reason fo r that is that a creditor of a defendant-firm can, except in some cases to which it is not necessary to refer, also proceed against the personal assets of each and every partner. Such a consideration does not hold good when the dispute relates to t he question as to who are the partners of the plaintiff-firm.It has been mentioned above that Shivratan stated in the course of his deposition that partnership deed dated October 24, 1949 had not been acted upon. This statement is against the pecuniary interest of Shivratan. It is plain that if Satyavati were a partner of the plaintiff-firm, Shivratan and other partners would have to bear losses to the extent of 12 Annas in a rupee. As against that, if Shashi Kumar be en titled to share profits to the extent of 4 Annas in a rupee and be not liable for the losses, in such an event Shivratan and other partners A would have to bear the losses to the full extent of 16 Annas in a rupee. If despite that fact, Shivratan has deposed that Satayvati did not be come a partner of the plaintiff-firm and the deed of partnership dated October 24, 1949 was not acted upon, his statement in this respect should not, in our view, be rejected, especially when there is over r whelming documentary evidence which lends support to the aboveentire course of dealings shows that despite the execution of the deed of partnership dated October 24, 1949, the said partnership deed was not acted upon and t he relations between the partners of the - plaintiff-firm continued to be governed by the deed - of partnership dated May 19, 1949 according to which it was not Satyavati but her son Shashi Kumar who was entitled to four Annas share in the partnership. The question, to which a reference has been made in the course of arguments, as to when it was decided not to act upon the deed of partnership dated October 24, 1949 is hardly of much importance, the material thing is that the said deed w as not given effect to or acted upon by the parties concerned. The firm which came into existence as per deed of partnership dated May 19, 1949 was admittedly registered under the Indian Partnership Act and its partners were shown in the Register of Firms.Looking to all the facts we are of the opinion that the trial court took a correct view of the matter in so far as it held that Satyavati had not become a partner of the plaintiff-firm and that the deed of partner ship dated October 24, 1949 had not been acted upon. The High Court, in our opinion, was in error in reversing that finding of the trial court. In view of this conclusion of ours, it is not necessary to go into the legal question as to, what should be the proper const ruction of section 69(2) of the Indian Partnership Act. Learned counsel for the parties are agreed that such question would arise only in case we had marked the finding of the High Court that Satyavati had become a partner of the plaintiff-firm and that the deed of partnership dated October 24, 1949 had been actedHigh Court did not deal with the merits of the cross-appeals filed by the parties in view of its finding on the point as to whether Satyavati had become partner of the plaintiff-firm and the construction it placed upon section 69(2) of the Indian Partnership Act. In the light of the conclusion we have arrived at, it becomes essential to remand the matter to the High Court so that the cross appeals filed by the parties may be disposed of on merits.