Kodendera K. Uthaiah (D) By Lr vs P.M. Medappa .

The respondent was the plaintiff in O.S. No. 42/1991, seeking dissolution of the partnership firm and rendition of accounts. The suit was decreed in part, holding that the legal heirs of the deceased partner, were entitled to 1/4 th share to be quantified in terms of Clause 14 of the partnership deed. R.F.A. No. 231/1996 preferred by the plaintiff, against grant of Digitally signed by partial relief, was allowed on 08.02.2006 directing dissolution NEETU KHAJURIA Date: 2017.10.05 17:42:52 IST Reason: of the firm and settlement of accounts “as of date”. Aggrieved, 1 the defendant has preferred the present appeal. The parties, for convenience, shall be referred to by their respective positions in the suit.

2. The facts, in brevity are, that the father of the plaintiff i.e. P.M. Medappa, along with three others constituted a registered partnership firm, M/s. Rums & Co. The partnership deed dated 27.01.1971, in Clause 14, stipulated that in the event of death of a partner, the remaining partners shall have the option to give a written notice within three months of the death, to the legal heirs of the deceased partner, for purchase of the shares of the deceased. The purchase price was to be the amount of the share of the deceased as determined at the last annual general accounts, inclusive of interest @ 10% per annum, upto the date of purchase. P.M. Medappa was deceased on 27.07.1990. The surviving partners, defendants 1 to 3, gave notice on 15.10.1990 in terms thereof to the plaintiff and defendants 4 to 9, being the legal heirs of the deceased partner.

3. The plaintiff preferred O.S. No. 42/1991 seeking dissolution of the firm and rendition of accounts, alleging refusal of the remaining partners to pay the legal heirs of the deceased partner, the due share under Clause 14. The suit was decreed in part by the Civil Judge on 03.01.1996 holding that the plaintiff and defendants 4 to 9 as legal heirs of the deceased partner, were entitled to 1/4 th share to be worked out on basis of the last annual general accounts, together with interest @ 10% per annum from the date of death till the date of decree. Aggrieved by the grant of partial relief, the plaintiff preferred R.F.A. No. 231/1996. The High Court, by the impugned order, held that the notice dated 15.10.1990 had not been served on all the legal heirs of the deceased partner. Clause 14 therefore never became operational, directing dissolution of the firm and settlement of accounts “as of date” entitling the legal heirs to 1/4th share in the assets and profits of the firm with interest @ 6% per annum till settlement. Liberty was further granted to seek appointment of a receiver 3 to take care and manage the assets of the partnership firm pending finalisation of settlement of accounts.

12. It is not the case of the appellant that the Income-Tax Returns of the Partnership firm were not filed within statutory time. If the returns were so filed, naturally the share of the deceased partner payable under Clause 14 till his demise on 27.07.1990 posed no difficulty for payment. The plea that in view of the pending litigation the dues were not paid is unacceptable and not bonafide. The legal heirs of the deceased partner are, therefore, held entitled to 1/4 th share with 10% interest per annum from 27.07.1990 till the date of purchase.

13. The finding that Clause 14 of the partnership deed was not complied with and, therefore, never became operational is 10 held to be unsustainable and is set aside. The consequential direction for dissolution and settlement of accounts “as of date” for that reason, is also set aside. The legal heirs are held not to be entitled to any share in the profits after 27.07.1990. The liberty to move for appointment of receiver to take care and manage the assets of the partnership firm pending finalisation of accounts and settlement calls for no interference. The plaintiff is permitted to withdraw the deposit made before this court after due furnishing of proof of identity. The said amount shall be adjusted against the final dues found payable to the legal heirs after settlement of accounts.

14. The appeal is allowed, but only to the extent indicated.