1993 (12) TMI 197 - HC - Companies Law

Issues Involved:
1. Dissolution of the partnership firm.
2. Settlement of accounts and execution of a dissolution deed.
3. Petitioner's entitlement to share in profits.
4. Issuance of legal notices and their implications.
5. Allegations of prevention from participating in business and inspecting books.
6. Application of Section 50 read with Section 16 of the Indian Partnership Act, 1932.
7. Limitation period for filing the company petition.
8. Just and equitable grounds for winding up the firm.

Detailed Analysis:

1. Dissolution of the Partnership Firm:
The petitioner argued that the partnership firm, Hotel Dwaraka, was dissolved upon the death of her father on October 2, 1985, or alternatively on March 9, 1988, upon the death of her brother. The respondents contended that a fresh deed of partnership was executed on October 14, 1985, reconstituting the firm, and the petitioner expressed unwillingness to continue as a partner. The court found that the partnership deed dated April 14, 1984, ceased to exist after the death of B. Sitarama Rao, but the respondents failed to produce evidence of the alleged new partnership deed.

2. Settlement of Accounts and Execution of a Dissolution Deed:
The petitioner claimed that respondents failed to settle accounts and execute a dissolution deed after the firm was dissolved. The respondents argued that the petitioner's account was already settled, citing payments made towards her share of profits and income tax. The court noted inconsistencies in the petitioner's statements regarding the settlement of accounts, particularly for the financial year ending March 31, 1986.

3. Petitioner's Entitlement to Share in Profits:
The petitioner sought her share in the profits from the date of the partnership's constitution up to the present. The respondents provided details of payments made towards her share of profit and income tax, arguing that her claims were false and time-barred. The court observed that the petitioner accepted the accounts for the period ending March 31, 1985, but disputed the accounts for the subsequent year.

4. Issuance of Legal Notices and Their Implications:
The petitioner issued legal notices dated July 5, 1988, and October 10, 1988, demanding settlement of accounts. The respondents did not respond to these notices. The court noted that the petitioner's claims remained unaddressed by the respondents, contributing to the petitioner's argument for winding up the firm.

5. Allegations of Prevention from Participating in Business and Inspecting Books:
The petitioner alleged that respondents prevented her from participating in the business and inspecting the books of account. The court found that the petitioner was not actively involved in the business and relied on her father's management of her share of profits and tax returns.

6. Application of Section 50 read with Section 16 of the Indian Partnership Act, 1932:
The petitioner contended that respondents were liable to account for the business conducted after the firm's dissolution under Section 50 read with Section 16 of the Indian Partnership Act, 1932. The court held that this liability arises in winding-up proceedings and does not constitute a separate cause of action for winding up the firm under Section 583(4) of the Companies Act, 1956.

7. Limitation Period for Filing the Company Petition:
The court determined that the Limitation Act, 1963, applies to petitions under the Companies Act, 1956. The right to apply for winding up accrued on October 2, 1985, and the petition filed on February 28, 1990, was beyond the three-year limitation period prescribed by Article 137 of the Limitation Act, 1963. Consequently, the petition was time-barred.

8. Just and Equitable Grounds for Winding Up the Firm:
The petitioner argued that it was just and equitable to wind up the firm due to the respondents' conduct. The court found that the petitioner failed to make a clear case for non-settlement of accounts and that her claims were inconsistent and time-barred. Therefore, the court did not find sufficient grounds to wind up the firm under Section 583(4)(c) of the Companies Act, 1956.

Conclusion:
The court dismissed the company petition on the grounds that it was barred by time and the petitioner failed to substantiate her claims regarding the non-settlement of accounts and entitlement to profits. The petitioner's arguments under Section 50 read with Section 16 of the Indian Partnership Act, 1932, were found to be applicable only in winding-up proceedings and not as a separate cause for action. The court did not find just and equitable grounds to wind up the firm.

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