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TMI Blog2010 (1) TMI 1246X X X X Extracts X X X X X X X X Extracts X X X X ..... st Appellate Court. For the sake of convenience, the Plaintiffs would be referred to as the `Appellants' and the Defendants would be referred to as `the Respondents'. 3. The case made out by the original plaintiff (since deceased) in her plaint was as follows: Shri Jai Narayan Mishra, original defendant (since deceased) made a proposal to constitute a firm for construction of a cinema theatre on the land of the original plaintiff (since deceased) and on acceptance of the said proposal by her, they executed a deed of partnership dated 26th of June, 1977. Clause 4 of the partnership deed envisaged that the plaintiff's share in the profits would be 2 annas in a rupee. The original plaintiff (since deceased) was receiving ₹ 2,000/- per month from the original defendant (since deceased) in pursuance of Clause 13, which guaranteed that the minimum profit of ₹ 2,000/- per month would be paid to her. The defendant never disclosed to the plaintiff as to what amount was due to her on settling the annual accounts of the firm. The defendant never furnished the statement of accounts to the plaintiff. He never disclosed the amount of profit payable to her towards he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The defendant had always been ready and willing to pay the amount due to the plaintiff as and when the plaintiff obtained clearance from the Income Tax Department. The plaintiff never whispered any doubt about the correctness of the accounts. The Plaintiff No.2 who is the GPA holder of the original plaintiff (since deceased) had been acting in a highly irresponsible manner detrimental to the interest of the parties. The alleged gravity of distrust is a result of the willful actions on part of the G.P.A holder of the plaintiff who sought to take advantage of the deteriorating mental and physical condition of the plaintiff. The plaintiff had not issued any notice alleging any contravention of the terms and conditions of the partnership deed and the business was made for a specific period subject to the option of the defendant. The present suit was frivolous and misconceived and therefore was liable to be dismissed with costs. 4. By the judgment and order dated 18th of January, 1999, the VIIth Senior Civil Judge, City Civil Court, Hyderabad, decreed the suit and passed a preliminary decree of dissolution and for rendition of accounts. The defendant was further directed to hand ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed 17th of October, 2001, dismissed the appeal confirming the judgment and decree of the trial court and allowed the cross objections filed by the Appellants. The issue framed by the First Appellate Court was as follows: a) Whether the plaintiffs are entitled for the dissolution of partnership firm? 8. The Appellate Court, on the question of dissolution of the partnership firm, concurred with the findings of the Trial Court, holding that since there were only two partners in the partnership firm and as one of the partner died there was no scope and possibility to continue the partnership firm. The appellate court further held that the Respondents could not rely upon clause 24 of the Partnership Deed which stipulated that after the expiry of 42 years the land as well as the building with the fixtures etc., would be vested with the original plaintiff (since deceased). 9. On the question of mismanagement of the accounts of the firm, the Appellate Court had allowed the cross objections preferred by the appellants. The respondents did not disclose the accounts and they were ignorant of the amounts and the profits to which appellants were entitled to. The respondents also did no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mismanagement on the grounds of (i) non production of the account books for the verification of the original plaintiff (since deceased); (ii) the non inclusion of the certain amounts received by way of income in the accounts, (iii) the non submission of correct accounts to the income tax department and (iv) the failure of the original defendant(since deceased) apprising the original plaintiff(since deceased) about the profits and losses of the firm. 3) The Respondents pleaded that in the event the court comes to a conclusion that the firm stood dissolved, the partnership deed was to be treated in the nature of license. The High Court held that the respondent could not deny their liability under the other terms of Partnership deed, at the same time, seeking benefit from the same. The respondents laid undue stress on Clause 20 of the partnership deed, which showed that the deed was one of partnership and that both parties had acted upon it. Once the issue of dissolution was already decided against him on the basis of Section 42 of the Act and also Clause 20, he could not urge the Court to construe the same as a license, since both these pleas were irreconcilable with each other. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ize the value of the entire building. Further, the High Court held that the appellants were entitled to have exclusive possession of the land and respondents were entitled to take away the projectors and the other machineries, the furnitures and all other items, which can be safely removed from their place and the Appellants should pay the Respondents the value of the remaining portions of the structures which could not be removed without any damage, after proper valuation of the same. As the First Appellate court held that the management of the account of the firm was not proper, with which the High Court was also in agreement, the High Court noted that the amount, if any, due to the Appellants after rendition of the account of the firm shall be determined. It was observed that the trial court also asked for rendition of accounts on the dissolution of the firm. 6) As for the rendition of accounts, the High Court concurred with the findings of the Courts below. 13. The High Court finally concluded that: The defendants are permitted to take away the machineries, the equipments, the furnitures and all other items including the material of the structure to the extent pos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... land and building shall be dealt with under Section 48 of the Act and the proceeds shall be disbursed to the two partners in accordance with the respective shares as per the partnership deed. The High Court as can be seen from the record had dismissed this plea. The Respondents have not appealed against the said finding of the High Court. That apart, when a question of law is raised on the basis of the pleadings and evidence on record which might not have been raised before the courts below, it is difficult to hold that such question of law cannot be permitted for the first time before the High Court. Therefore, we do not see how the Appellants are aggrieved by this finding of the High Court even assuming the High Court had formulated a new question of law, which was not raised before the Courts below. 18. In the case of Hardayal Gir v. Sohna Ram, [1970 (3) SCC 635], this Court had set aside the judgment of the High Court which allowed the plaintiff to raise a plea of misrepresentation, raised for the first time in the second appeal. In that case, however, the High Court held that the contract had become unenforceable on account of the plea of misrepresentation. Hence, the defe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tuted to carry out one or more adventures or undertakings, by the completion thereof; (c) by the death of a partner; and (d) by the adjudication of a partner as an insolvent. 22. Dissolution of a partnership firm on account of death of one of the partners is subject to the contract entered into by the parties. In this context, it is pertinent to refer to the terms of the deed of partnership. 23. Clause 22 of the Partnership deed reads as follows: The partnership shall be in force for a period of 42 years certain from this date and the death of any partner shall not have the effect of dissolving the firm. This clause clearly states that death of any partner shall not have the effect of dissolving the firm. However, in the facts and circumstances of the case, we are not in a position to give absolute effect to this clause of the deed of partnership. 24. The learned counsel for the Respondents contended that since the parties agreed that in spite of the death of any of the partners, the firm shall continue for 42 years irrespective of the death of the original plaintiff (since deceased). They further, argued that it clearly contemplates that the legal repre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lowing the Respondents to recover the value of the building and structures embedded to the land, from the appellants, we should examine the relevant provision of the Act and the relevant clause of the partnership deed. 28. Section 14 of the Partnership Act talks about the property of the firm. It reads as follows: Subject to contract between the partners, the property of the firm includes all property and rights and interest in property originally brought into the stock of the firm, or acquired, by purchase or otherwise, by or for the firm for the purposes and in the course of the business of the firm, and includes also the goodwill of the business. Unless the contrary intention appears, property and rights and interest in property acquired with money belonging to the firm are deemed to have been acquired for the firm. 29. In addition to this, it is necessary to examine the certain clauses of the Partnership deed, which were entered between the original plaintiff and the original defendants. Clause 24 - The Party of the Second Part hereby declares, covenants and agrees that at the end of the period of forty two (42) years, this partnership shall automatically com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e defendant started the business of a photographer and then admitted the plaintiff- a successful freelance photographer as a partner. The leasehold premises, furniture and studio belonged to the defendant. It was intended to record the terms of partnership into a formal agreement, but no terms were ever settled, except that the partners were to share the profits equally. On dissolution of the partnership it was held that no terms ought to be implied except such as were essential to business efficacy and that only consumable items of stock-in-trade were to be regarded as assets of the partnership, and the lease of the property, equipment and personal goodwill were to be treated as being the property of the partners who brought them into business. 35. The learned counsel for the Respondents contended that as per clauses 11 and 13 of the deed, the land, the building and the machinery became the property of the firm and the said property has to be treated as the property of the firm under Clause 21 and learned counsel for the respondents further submitted that as the plaintiff's share was only 2 anna as per clause 4, the value of the above properties of the firm shall be distrib ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entire asset of the firm all the partners have an interest albeit in proportion to their share and the residue, if any, after the settlement of accounts on dissolution would have to be divided among the partners in the same proportion in which they were entitled to a share in the profit... The mode of settlement of accounts set out in Section 48 clearly indicates that the partnership asset in its entirety must be converted into money from the pool disbursement has to be made... 41. In the light of the argument advanced by the learned counsel for the parties, the relevant provisions of the Act and the clauses of the deed, we do not find any infirmity in the reasoning given by the learned Judge of the High Court. It is true that there was no intention from either of the parties to treat these properties as the properties of the firm. A careful perusal of Clause 24 clearly indicates that the land as well as the building with the fixtures etc., to be vested with the original plaintiff (since deceased), after the expiry of term of 42 years. It is also true that directing the delivery of the entire property to the appellant would cause prejudice to the rights of the Respondents and ..... X X X X Extracts X X X X X X X X Extracts X X X X
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