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TMI Blog1974 (5) TMI 118X X X X Extracts X X X X X X X X Extracts X X X X ..... er was a silk mill and the third was an oil and leather cloth factory with land, bungalows and shawls attached thereto. In addition to that, there was a bobbin factory at Taradeo with offices at Bombay, Ahmedabad and other places. For the sake of convenience the above property may be described, as it was done in the High Court, as Ambernath Mills . Although the case involves a tangled skein of facts, the points which survive for determination in appeal are rather simple. The Ambernath Mills originally belonged to a company called Ahmed Abdul Karim Bros. Private Ltd. The mills were declared to be, evacuee property in September 1951 and the Custodian took over the management of the mills in pursuance of the provisions of the Administration of Evacuee Property Act, 1950. It was then decided that the mills should be managed by displaced persons who had been industrialists in Pakistan. A private limited company was formed of 31 persons for taking over the management of the mills. ₹ 25,000 were contributed by each one of those persons in that connection. The appellants and the respondent too were members of the company. Appellant No. 1 and the respondent had migrated at the tim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The sale was to be completed within a period of three months from the date of the agreement. The lessees were authorised to take as partner one or more displaced persons who had filed claims under the Displaced Persons Claims Act, 1950 subject to the prior approval of the Government. The agreement also contained a provision for reference of any dispute arising out of the agreement of lease to arbitrators chosen by the parties by mutual consent. The annual rent payable by the lessees was fixed at ₹ 6,00,000 payable in four quarterly instalments of Rs, 1,50000 each on or before 30th day of each quarter. The lessees also undertook to deposit or furnish bank guarantee in the, sum of ₹ 7.00,000 as security for the payment of the value of raw material, unsold finished goods,, stores. spare parts and other articles. Clauses 17 to 21 of the agreement of lease read as under : 17. It is agreed between the Lessor and the Lessees that when the entire claims of the lessees filed by them under the Displaced Persons Claims Act, 1950, for all their pro- perties are determined and the compensation payable to them by the Government of India is ascertained, the market value of the ent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd the said demised premises shall then become the absolute property of the Lessees and others thus associated in proportion to the total compensation payable to each as finally determined. 21.The lease to be granted pursuance hereto shall be liable to determination earlier on the settlement of the claims of the Lessees and the allotment and transfer of the full proprietary interest in the demised premises as provided in clauses 17 to 20 hereof; provided that if the value of the full proprietary interest in the demised premises exceeds the amount of compensation payable to the Lessees and part of such proprietary interest is allotted to other persons as pro- vided in clause 20 hereof, the Lessees shall be at liberty to continue the lease for the unexpired residue of the term on the terms and conditions and yearly rent prescribed here- under, the yearly rent being adjusted proportionately to the extent of the proprietary interest allotted and transferred to the Lessees. According to the partnership agreement executed by the two appellants and the respondent on August 30, 1952, each partner had agreed to contribute a capital of ₹ 1,00,000. The amount of ₹ 25,000 al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to deposit or furnish bank guarantee for the amount of ₹ 7,00,000. A writ petition was thereupon filed by, the partnership on February 16, 1954 in the Bombay High Court for quashing the notice issued by the Custodian. In the meantime, the second appellant sent letter dated February 8, 1954 to the respondent suggesting that his share in the partnership be reduced to 1 anna in a rupee or to such other fraction as the respondent thought fit. A similar letter was addressed by the first appellant. On February 24, 1954 the parties entered into a second agree- ment of partnership. It was agreed in the new partnership agreement that the share of the first appellant would be 3 annas and that of the second appellant 1 anna in a rupee. The respondent was to have the remaining 12 annas share. It was also agreed that the two appellants would not have the right, title and interest in the name, capital, assets and goodwill of the partnership. It was provided that the new partnership would be deemed to have been formed as from October 1, 1953. Accounts for the period from August 30, 1952 to September 30, 1953 were to be made up on the basis of the partnership agreement dated August 30, 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court in respect of the Custodian s notice for cancellation of the lease, the Ambernath Mills should not be sold. On July 7, 1955 the partnership submitted a tender for the purchase of the mills in accordance with the Government advertisement. The offer was for an aggregate amount of ₹ 55,55,555. On October 14, 1955 the partnership made another offer to purchase the mills for an aggregate amount of ₹ 75,00,000 on terms and conditions to be mutually agreed upon. The offer of October 14, 1955 Was made after the last date for the receipt of tenders. The appeal referred to above filed by the partnership in this Court against the judgment of the Bombay High Court was dismissed by this Court on November 10, 1955 vide reported case Rai Bahadur Kanwar Raj Nath Ors. v. Pramod C. Bhatt, Custodian of Evacuee Property([1955] 2 S.C.R. 977). This Court held that the Custodian had the power of cancelling the lease under section 12 of the Administration of Evacuee Property Act and that the notice issued by the Custodian was valid. This Court, however, left open the question whether the partnership had any right to purchase the mills under the agreement of lease. Notice under sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... paid either in cash or by adjustment of net compensation payable to the respondent or to other displaced persons who might assign their verified claim in favour of the respondent. A further sum of ₹ 28,00,000 was to be paid within three months from the date of the agreement either in cash or by adjustment of the net compensation payable to displaced persons who assigned their verified claims in favour of the respondent. The balance of ₹ 20,11,00,0 was to be paid in seven equal installments. It was provided that if the respondent failed to pay the amount of ₹ 28,00,000 within three months from the date of agreement the earnest money of ₹ 2,00,000 paid by him was to be forfeited. In addition to the above, the respondent undertook to mortgage the mills for a sum not exceeding ₹ 30,00,000 to secure the payment of such amount as SAMCO might be found liable to pay to the Custodian in respect of the claim referred to arbitration. On September 20, 1957 the first appellant executed an agreement for the transfer of his compensation claim amounting to ₹ 6,994. The amount was to be repaid to the first appellant within three years with interest at the rate o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x years since June 30, 1954. On May 7, 1960 the respondent sent a circular letter to all displaced persons whose compensation claim had been transferred to him informing them that possession of the mills had been handed over to him by the Central Government. They were also informed that statement of their accounts was being prepared. One such letter was sent to the first appellant. He also received a statement of account and in September 1960 a cheque for ₹ 204 was sent to him by way of interest. On October 7, 1960 the first appellant sent a letter to the respondent complaining that his property had been attached in execution of a decree for ₹ 271.44 which had been obtained by a creditor against SAMCO. In this letter the first appellant hinted that he was a partner of the respondent. The respondent in response sent to the first appellant a cheque for ₹ 271.44. It is also stated that the respondent informed the first appellant on telephone that he did not regard the latter as his partner. On December 20, 1960 the two appellants filed the present suit. It was alleged in the plaint that after the termination of the agreement of lease by the Custodian on May 25, 19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated that the first appellant was aware that Ambernath Mills were being acquired by the respondent for himself alone. The respondent denied that he ever told the first appellant that the amount of earnest money of ₹ 2,00,000 for the purchase of the Ambernath Mills had been paid out of funds belonging to the partnership. Allegation was also made by the respondent that the first appellant had requested that he might be given, some benefit in the nature of appointment or agency in the business of Ambernath Mills. The claim of the appellant for rendition of the accounts was stated to be barred by, limitation. In an affidavit filed on January 11, 1961 the respondent stated that in case it was held that there was an oral agreement of partnership between the parties, the same should be taken to have been dissolved. Learned trial judge held that the appellants had failed to prove that there was an oral agreement between the parties on or about May 25, 1954. It was further held that there was no agreement, express or implied, to form a partnership for acquiring the mills and for carrying on the business thereon. The appellants were held not entitled to have the mills treated as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... judges held that the partnership had been dissolved at the latest on November 10, 1955 when all the attempts of the partners to get the Custodian s order dated May 25, 1954 set aside came to an end with the decision of the Supreme Court. The present suit for rendition of accounts brought on December 20, 1960 more than three years after the date of the dissolution of the partnership was held to be barred by limitation. In the result the appeal was dismissed. In appeal before us Mr. S.T. Desai on behalf of the appellants has frankly, conceded that he is not in a position to challenge the concurrent findings of the trial judge and the appellate bench that the appellants had failed to prove that on May 25, 1954 the parties had expressly agreed to continue the partnership for acquiring the mills and ,exploiting them. Although Mr. Desai indicated at the commencement of the arguments that he would challenge the finding of the appellate bench that the rights acquired by the respondent as per agreement dated August 14, 1957 with the President and the subsequent Presidential grant are impressed with trust in favour of the partnership under section 88 of the Indian Trusts Act, no arguments w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... emises 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, There are two documents which run counter to the stand taken oil 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 cla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s that of the respondent and the first appellant was no more in picture. The above letter shows that the first appellant repudiated his liability for the payment of the sales tax by disclaiming his connection with the ,business in question. Our attention has been invited by Mr. Desai to the following observations contained in the judgment of the appellate bench : There is no dispute between the parties that the partners met on 25th May 1954, after the Custodian s order terminating the Agreement of lease and decided that they should try to have the Custodian s order set aside by pursuing the appeal in the Supreme Court as well as by making representations to the Ministry of Rehabilitation in the Central Government. It is also not disputed that either on 25th May 1954 or soon thereafter the parties decided that they should also try to acquire the proprietary interests in the Mills by relying on clauses 17 to 21 of the Agreement. of- Lease. What is disputed is whether it was agreed between the parties that, after acquiring the proprietary interest in the Mills, the business of the Mills should be carried on in partnership between the parties. It is the defendant s case that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 or his being ,adjudicated insolvent. It was indicated in the agreement of partnership that the period of partnership had been fixed at five years because that was the period ,of the lease of Ambernath Mills. The, lease, however, ran into rough weather. On February 12, 1954 the Custodian served notice on the respondent and the two appellants to show cause why the agreement of lease should not be cancelled in accordance with the terms of that agreement on account of the breach of conditions in the matter of payment of instalment of rent and the failure of the respondent and the appellants to deposit or furnish bank guarantee for the amount of ₹ 7,00,000. The respondent and the appellants challenged the validity of the above notice by means of a writ petition and, though they succeeded before a single judge, the appellate bench of the Bombay High Court upheld the validity of the notice. On May 25, 1954 the Custodian cancelled the lease of Ambernath Mills and on June 30, 1954 got possession of the mills. The respondent and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 August 30, 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 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 limi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. go, 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 that notice to him of the d ..... X X X X Extracts X X X X X X X X Extracts X X X X
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