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Bombay High CourtIndian Cases

Rasilaben Kantilal Kansara (Smt) vs Amratlal Babubhai Kocha And Ors. on 12 October 1987

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Bombay High Court
Rasilaben Kantilal Kansara (Smt) vs Amratlal Babubhai Kocha And Ors. on 12 October, 1987
Equivalent citations: 1987(3)BOMCR620
JUDGMENT

M.L. Pendse, J.

1. This is an appeal preferred by the original plaintiff against the order dated November 28, 1985 passed by the learned Single Judge on Notice of Motion No. 938 of 1985 dismissing the motion and declining to appoint Court Receiver of the partnership assets. The facts which gave rise to the impugned order are as follows :

2. One Babubhai Narottamdas was trading in the name and style of “Babubhai Narottamdas & Co.” from the year 1947 onwards. The business carried on was of manufacturing Chlorination Plants and Railway Overhead traction equipments. On October 22, 1968, a deed of partnership was executed between Babubhai Narottamdas, his wife Jaskoreben and sons Amratlal, Dharamdas, Vasudev, Madhusudan and Rameshchandra and Smt. Rasilaben the present plaintiff, who is the wife of Kantilal son of Babubhai Narottamdas. The firm was duly registered with the Registrar of Firms. Babubhai died on July 23, 1970 and the firm was re-constituted by the remaining partners. On August 21, 1972, Madhusudan retired from the firm and the firm was again reconstituted by the remaining partners. On September 18, 1979, Jaskoreben, the widow of Babubhai died and Dharmadas, one of the son of Babubhai retired from the firm. The remaining partners thereupon constituted a fresh partnership and the partnership deed was executed on April 5, 1980. Smt. Rasilaben, who is a widow, was given 24.25% share in the profits and losses of the firm. After the constitution of the firm on December 28, 1980, the partners filed a statement before the Registrar of Firms in the prescribed form provided under section 58 of the Indian Partnership Act and the Registrar duly registered the firm on March 2, 1981. On October 8, 1984 the plaintiff served a telegraphic notice on the defendants dissolving the firm and the notice was received by the defendants on the next day. The defendants, instead of replying to the notice, treated the notice as if the plaintiff had retire from the firm and the remaining partners i.e. the defendants took over all the assets for their own benefits. Thereafter the defendants sent a reply informing the plaintiff that the notice of dissolution served by her been treated by the defendants as the intention of the plaintiff to retired from the above firm. The defendants did not offer a single farthing to the plaintiff towards her share on the alleged date of retirement.

3. The plaintiff thereupon instituted Suit No. 1228 of 1985 in this Court on May 3, 1985 for a declaration that the partnership firm is dissolved by notice dated October 9, 1984 and the plaintiff is entitled to a share of 24.25% in the business and in the assets inclusive of properties of the firm. The plaintiff sought for the consequential relief on the basis of the dissolution of the firm. The plaintiff also took out Notice of Motion No. 938 of 1985 for interim relief including appointment of Court Receiver as the Receiver of all the assets of the partnership firm. The motion was resisted by the defendants claiming that the partnership was not a partnership at will and under Clause 2 of the partnership deed, it was open for the plaintiff to retire from the firm but she had no right to dissolve the firm. The defendants claimed that the plaintiff having retired from the firm by serving notice of dissolution, the plaintiff cannot apply for appointment of Court Receiver as Receiver of the assets of the firm. The defendants further claimed that the partnership business is a running business and there are number of contracts of considerable value and, therefore, it would not be appropriate to appoint Court Receiver. The learned Judge accepted the contention and declined to appoint Receiver but merely restrained the defendants by an order of injunction from parting with possession or creating third party rights in respect of properties at items Nos. 1 to 9 in paragraph 11 of the plaint. The order of the learned Single Judge is under challenge.

4. Mr. Shah, learned Counsel appearing on behalf of the appellant original plaintiff, submitted that the learned Single Judge was in error in not appointing Court Receiver on the facts and circumstances of the case. The learned Counsel urged that the contention that the partnership was not a partnership at will is not correct. It was further contended that even assuming that the plaintiff was not entitled to dissolve the firm, then the defendants could not have treated the plaintiff on having retired on receipt of notice of dissolution. Mr. Shah submitted that even assuming that the plaintiff had retired from the firm, it is not permissible for the defendants to carry on the business by using the share due to the plaintiff on the date of retirement. Mr. Dhanuka, learned Counsel appearing on behalf of the respondents-original defendants, on the other hand, submitted that the partnership between the parties not being at will and the only right of the plaintiff was to retire from the plaintiff, the learned Judge was right in not appointing the Receiver. Mr. Dhanuka submitted that this is not a just and convenient case where appointment of Receiver is called for. According to Mr. Dhanuka, as the partnership firm had several contracts from Government and other Semi-Government bodies, it would not be equitable to appoint Receiver as it is likely to hamper the business of the firm which is carried on a large scale.

5. In view of the rival contentions, the first question which is required to be considered is whether the partnership was one at will and can be dissolved by the plaintiff by service of notice of dissolution. Section 7 of the Indian Partnerships Act provides that where no provision is made by contract between the partners for the duration of their partnership, or for the determination of their partnership, then partnership is “partnership-at-will”. The partnership agreement between the parties is in writing and strong reliance is placed on behalf of the defendants on Clause 12 of the partnership deed April 5, 1980. Clause 12 of the partnership deed reads as under :—

“If any partner/partners desire to retire from the firm, he can retire from the firm by giving three months notice in writing to other partners, but he has no right to dissolve the firm. After retirement or death of any of the partners/his/her share will have to be finalised as under :
Partners will get as tax their share the value of the assets (moveable, immoveable) as per market rate. After finalisation of the account the payment should be made in six months period by instalments.”
Relying on this clause, it was contended that there was a prohibition for any of the partners to dissolve the firm and the only right to retire from the firm can be exercised by giving three months’ notice in writing. Mr. Shah controverted the submission on behalf of the defendants by pointing out that while registering the firm, the partners have stated that the partnership is one at will and, therefore, it is not permissible for the defendants to fall back upon Clause 12 of the partnership deed. To appreciate the submission of the learned Counsel, it is necessary to make reference to the some of the provisions of the Partnership Act. Section 58 of the Indian Partnership Act demands that the registration of a firm may be effected at any time by sending a statement in the prescribed from to the Registrar of Firms. The statement shall state : (a) the firm name, (b) the place or principal place of business of the firm, (c) the names of any other places where the firm carries on business, (d) the date when each partner jointed the firm, (e) the names in full and permanent address of the partners, and (f) the duration of the firm. The statement is required to be signed by all the partners and also verify the same in the manner prescribed. Section 68 of the Indian Partnership Act provides :

“Any statement, intimation or notice recorded or note in the Register of Firms shall, as against any person by whom or on whose behalf such statement, intimation, or notice was signed, be conclusive proof of any fact therein stated.”
Relying on rule of evidence prescribed under section 68 of the Indian Partnership Act, it was urged on behalf of the plaintiff that it is not permissible for the defendants to claim that Clause 12 should be given effect to in the face of statements made to the Registrar by all the partners while registering the firm. We have perused the copy of the application for registration of the firm filed by all the partners and in answer to Clause (f) which demands the partners to state the duration of the firm, the partners have stated that the partnership is at will. All the partners have duly signed the application and have made the requisite declaration. Mr. Dhanuka did not dispute the fact that the statement was made while registering the firm, but tried to explain the statement made to the Registrar by saying that it was a mistake made by Mr. Desai, the Chartered Accountant and referred us to the affidavit filed by Mr. Harshad Desai on July 19, 1985. The Chartered Accountant deposed that in anticipation of filing of the form for registration, the partners were requested to sign the form in blank and hand over the same to Mr. Desai. Mr. Desai claims that he gave it to the clerk for typing out and in the routine manner, the clerk had typed out the form inter alia mentioning that the partnership was at will. Mr. Desai further stated that he regrets that a mistake has crept in mentioning the partnership as at will. Mr. Desai has not bothered to state as to when the mistake was detected. We are not prepared to express at this stage whether the statement of Mr. Desai should be accepted or otherwise and we leave it for decision at the stage of trial when the evidence would be recorded. At present we will proceed on the basis that the statement duly signed by the partners was forwarded to the Registrar mentioning that the partnership was one at will.

6. Mr. Dhanuka submitted that section 68 of the Indian Partnership Act is merely a rule of evidence and it is not conclusive but it is open for the parties challenging the statement to rebut the correctness of the same. The learned Counsel referred to the provisions of section 64 of the Indian Partnership Act which enable the Registrar to rectify any mistake in order to bring the entry in the Register of Firm in conformity with the documents relating to the firm. The power undoubtedly is conferred on the Registrar to rectify the mistake, but neither the plaintiff, nor the defendants have at any stage suggested to the Registrar to rectify the mistake. It is not as the matter of right that the Registrar would correct the entry because one of the parties claimed that the mistake has been committed. In our judgment, it is difficult to construe provisions of section 68 of the Indian Partnership Act as merely a rule of evidence which is rebuttable because the power has been conferred on the Registrar to rectify the mistake. Mr. Dhanuka then submitted that section 68 prescribes that any fact stated in the statement shall be conclusive proof but the question as to whether a partnership is at will or not is not a matter of fact, but is a matter of law and has to be determined by the Civil Courts irrespective of provisions of section 68 of the Indian Partnership Act. We are unable to see any merit in this submission because section 68 of the Indian Partnership Act unequivocally provides that any fact stated in the statement made to the Registrar be conclusive proof. Now, whether a partnership is at will or not is also a fact on which statement was required to be made by a partner while registering the firm and, therefore, it is futile to suggest that whatever may be the statement made before the Registrar, it is open for the defendant to ignore it and call upon the Court to determine the nature of the partnership by reference to the deed of partnership. Mr. Dhanuka referred to the decision of the Supreme Court in the case of Karumuthu Thiagarajan Chettiar and another v. E.N. Muthappa Chettiar, where the Supreme Court was considering what is the duration of the partnership firm from the terms of the deed of partnership. The Supreme Court observed that the intention of the partners and the surrounding circumstances would be relevant factors in determining the tenure of the partnership firm. This judgment is of no assistance to the defendants because the Supreme Court was not considering the question as to what is the effect of statements made by the partners to the Registrar and impact of provisions of section 68 of the Act. It cannot be debated that when there are conflicting or ambiguous terms in regard to the duration of the firm in the deed of partnership, the Court must ascertain the intention of the parties that it is a far cry to suggest that in fact of section 68 of the Act, the Court should ignore the rule of evidence and proceed to determine whether a partnership is at will or not by looking to the documents. The Supreme Court in judgment in the case of Smt. Somawanti and others v. The State of Punjab and others, while considering the meaning of expression “conclusive proof and conclusive evidence” observed:

“Since evidence means and includes all statements which the Court permits or requires to be made when the law says that a particular kind of evidence would be conclusive as to the existence of a particular fact it implies that the fact can be proved either by that evidence or by some other evidence which the Court permits or requires to be advanced. Where such other evidence is adduced it would be open to the Court to consider whether, upon that evidence, the fact exists or not. Where, on the other hand, evidence which is made conclusive is adduced, the Court has no option but to hold that the fact exists. Statutes may use the expression ‘conclusive proof’ where the object is to make a fact non-justiciable. But the legislature may use some other expression such as conclusive evidence ‘for achieving the same result. There is thus no difference between the effect of the expression ‘conclusive evidence’ from that of ‘conclusive proof’, the aim of both being the giye finality to the establishment of the existence of a fact from the proof of another.”
Mr. Dhanuka referred us to the decision in the case of Firm Hat Ram Padam Chand v. Firm Subhag Chand Rikhab Das and others, reported in A.I.R. 1941 oudh 376 to urge that the provisions of section 68 of the Partnership Act are subject to rule of rebuttal. We are afraid we cannot accede to the submission and we do not accept the correctness of the observation made by Oudh High Court. Mr. Dhanuka then submitted that provisions of section 68 of the Indian Partnership Act should be limited its application to third parties and should not be considered while examining the rights of the partners in the suit. It is not possible to read such restriction in the section as the would amount to adding a rider to the statutory provisions. Mr. Dhanuka relied upon the decision of the Division Bench of this Court in the case of N.R. Wadia and co. v. Commissioner of Income-tax, Bombay City I, reported in 39 Income Tax Reports. 754. Before the Division Bench, it was contended on behalf of the Revenue that a partnership firm was registered under the Partnership Act and statements made while registering the firm are conclusive proof of facts stated therein. The Division Bench observed that section 68 of the Partnership Act does provide that any statement of fact made to the Registrar would be the conclusive proof but the provisions relating to registration of firms cannot be pitchforced into cases arising under the Indian Income-tax Act. The Division Bench held that the provisions of section 68 of the Act are not determinative of any question as to the existence of a partnership which may arise under the Income tax Act and certainly not conclusive of the existence of a partnership as a matter of law in any matter to be dealt with under fiscal enactment. The Division Bench further observed that the entries in the Register of Firms can be conclusive proof of any facts stated in the Register and the conclusiveness of the entries is only for the purposes to be gathered from section 69 of the Act. The Division Bench then observed:

“It is when a suit is filed to enforce a right arising from a contract by or on behalf of a firm against any third party that the presence or absence of registration can have bearing and meaning.”
It is obvious that the decision of the Division Bench instead of supporting goes contrary to what was claimed by Mr. Dhanuka.

7. Mr. Dhanuka then submitted that as there is doubt as to whether Clause 12 of the deed of partnership should prevail upon provisions of section 68 of the Partnership Act, this is not a fit case for appointment of Court Receiver. We fail to see any merit in the submission because, in our judgment, there is no doubt as to what should prevail. Mr. Dhanuka then urged that the defendants hold 75% share in the firm and are carrying on business for over several years, while the plaintiff was a sleeping partner. It was claimed that the firm has received several orders between October 1984 and till today and these orders are received from the Government and Semi-Government authorities and appointment of Court Receiver would cause immense hardship to the defendants. It was also claimed that a rival claim and for the contract for which the defendants had applied has set up the plaintiff as the plaintiff’s son is working with the rival contractor. We fail to see any merit in the alleged claim of Mr. Dhanuka that equity disentitles the plaintiffs from seeking appointment of Receiver. On the other hand, we are satisfied that the equity is loaded in favour of the plaintiff and the defendants are trying to somehow exclude her from the advantage of partnership by raising frivolous pleas. In the first instance, the plaintiff gave notice of dissolution and if the defendants desire to assert that the plaintiff has no right to dissolve the firm then the defendants could not have treated the notice as amounting to retirement of the plaintiff from the firm. The plaintiff had never offered to retire. Even assuming that the defendants misconstrued the notice as one of retirement, the defendants never offered a single farthing to the plaintiff towards her share on the date of retirement. It is not the claim of the defendants that the plaintiff was not entitled to receive any share in the firm and when specifically asked why the defendants did not offer the share, the learned Counsel has no answer. The plaintiff is admittedly holding 24.25% share in the partnership assets and the assets being very large, it is not permissible for the defendants to carry on business of partnership by using the interest of the plaintiff. The defendants have merrily carried on business by using the assets and the interest of the plaintiff in the partnership firm and, in our judgment, in case the Receiver is not appointed that would cause untold hardship to the interest of the plaintiff. The business is of securing contracts from various authorities and from what has been stated by Mr. Dhanuka, the contracts value runs over Crores of Rupees. It is impossible in these circumstances to permit the defendants to carry on business by use of the share of the plaintiff. Mr. Dhanuka submitted that instead of appointment of Receiver the defendants can be put on any other conditions. We are afraid, we cannot accede to the submission because once the plaintiff is kept out of the business and the defendants are allowed to use the share of the plaintiff then it would be impossible at the end of the trial to determine what profits were made by the defendants during the interregnum. Mr. Dhanuka referred us to the decisions reported in 1975(1) Weekly Law Reports 1587 Sobell v. Boston and others, 1936(3) All England Law Reports 823 Abbott v. Abbott, and Ganesh Chandra Mukherji v. Gopal Chandra Hazra, but in our judgment, these decisions do not assist the defendants in claiming that the Receiver should not be appointed. It is undoubtedly true that the Court would not appoint Receiver in every dispute between the partners, but the Court would certainly not refrain from exercising jurisdiction when the majority partners are trying to defeat the claim of a minority partner. The fear or the apprehension expressed by Mr. Dhanuka about the closure of business is unfounded because even though the Receiver is appointed, we are going to directed Receiver to permit the defendants to carry on business as the agent of the Receiver.

8. Mr. Dhanuka submitted that even if Receiver is appointed as Receiver of the assets of the firm, appointment of Receiver should not be made in respect of flat in the building known as “Sea-Gull Apartments” at 24, Bhulabhai Desai Road, and flat in the building known as “Bharat Apartments” situate at Gandhidham Road, Juhu, because these properties are purchased by the defendants out of their private funds. There is dispute as to whether the properties were purchased out of the partnership assets or the private funds and till that dispute is settled at the hearing of the suit, it is necessary to appoint Court Receiver even in respect of these properties. The plaintiff is in occupation of premises known as ‘Narottam Niwas situate at 308, Tardeo Road, Nanachowk, which is also a partnerships asset. Though we are appointing Receiver in respect of all the residential premises, we are directing the Receiver not to dispossess any of the parties in possession of the premises, but to continue them as the agent of the Court Receiver without any security or payment of compensation. Mr. Dhanuka is right in his submission that in prayer (a) of the Notice of Motion, Receiver is sought in respect of motor-cars and the telephones and it is not proper to appoint Receiver in respect of these movables. We find considerable merit in the submission of Mr. Dhanuka as the cars and the telephones are used by the parties for their private purpose.

9. Accordingly, appeal is allowed and the impugned order dated November 28, 1985 is set aside and Notice of Motion No. 938 of 1985 is made absolute in terms of prayer (a), but it is made clear that the Receiver shall not take possession of the motor-cars and the telephones referred to in that prayer. The Receiver shall also not dispossess any person found in possession of the flat in the building known as “Sea-Gull Apartments” and flat in building known as “Bharat Apartments”, but shall permit the parties in occupation to remain in occupation as the agent of the Court Receiver without any security or compensation. As regards property at Narottam Niwas’, the plaintiff who is in occupation of part of the premises shall not be dispossessed, but the Court Receiver shall permit her to remain in occupation as the agent of the Court Receiver without any security or compensation. The Receiver shall recover rent from the tenants and occupiers of the remaining property.

The receiver not to sell any of the properties. The Receiver to take possession forthwith but may permit the defendants to carry on business till defendants execute documents accepting the conditions imposed by the Receiver.

Mr. Dhanuka, at this stage, applies for stay of order of appointment of Receiver. Prayer refused. Receiver to act on minutes.

In the circumstances of the case, there will be no order as to costs.