1928 (1) TMI 4 - HC - Indian Laws

Denial in alleged new partnership - share of widow and children of deceased in the partnership firm - dissolution of partnership. Time limitation of filing suit - Held that - The dissolution of a partnership is not a rescission of a contract. There appears to be no article specifically dealing with a suit for dissolution. That being so, Article 120 would apply, thus giving a period of six years. And the starting point would be the time when the defendant refused to give the plaintiff any of the profits of the business, that is, from 1922, or at the earliest November 1921. On that basis the suit was in time. Article 106 will not apply, because there has never been a dissolution of the partnership between Amina Bi and the defendant. The latter s declaration in November 1921, could not amount to a dissolution, since he remained in possession of the firm s assets and continued to carry on its business. The District Judge further said that, as a Mahomedan widow, Amina Bi could have no share in the mill itself. I know of no authority for this proposition, which has not been supported. Aminal Bi asked only for her share of the profits for three years before the suit and in my view she is clearly entitled to that. The decree of the District Court is amended by declaring that the plaintiffs collectively are entitled to one-half of the assets of the firm at the time of the death of Masaji Hashim Acha, that the minor plaintiffs are entitled to seven-eighths of one-half of the net profits since the death of Musaji Hashim Acha, and that plaintiff 1, Amina Bi. is entitled to one-eight of one-half of the net profits since a date three years before the institution of the suit, the net profits being in each case calculated after deduction of reasonable remuneration for the defendant s management of the business; and would direct that an account be taken accordingly and a final decree passed in accordance with the account. The defendant fails in the appeal - defendant must pay the costs of the plaintiffs in both appeals and in the District Court.

Summary

Issues: Partnership agreement validity, minor's rights in partnership, misjoinder of parties, limitation period for dissolution of partnership, entitlement to profits and assets.

Partnership Agreement Validity: The plaintiffs, widow, and minor children of a deceased partner, alleged a new partnership agreement with the defendant after the partner's death. The District Judge found the new partnership valid, but the High Court disagreed. The court cited the Privy Council decision that a Mahomedan widow cannot bind minor children in a contract. The court concluded that the agreement was not a valid contract binding on the minors, making it a void agreement.

Minor's Rights in Partnership: Despite the invalidity of the partnership agreement concerning the minors, the court held that the defendant must account for one-half of the profits made and the share of assets of the firm at the partner's death. The minors' share could not be made liable for losses but was entitled to profits. The court allowed the defendant to deduct reasonable remuneration for managing the business before calculating net profits.

Misjoinder of Parties: The court dismissed the objection of misjoinder of parties, considering it a technical error not affecting the case's merits. It held that there was no misjoinder justifying interference.

Limitation Period for Dissolution of Partnership: The court disagreed with the District Judge's finding that the suit for dissolution was time-barred. It applied Article 120, providing a six-year period from the defendant's refusal to share profits, which rendered the suit timely. The court clarified that the defendant's declaration did not amount to dissolution, as he continued business operations.

Entitlement to Profits and Assets: The court amended the decree, declaring the plaintiffs entitled to assets at the partner's death and specific shares of net profits. The defendant was directed to pay costs to the plaintiffs in both appeals and the District Court. The judgment was concurred by another judge, affirming the decision.