P.B.Suresh Kumar, J.
RFA No.529 of 2006 is by the plaintiff and RFA No.29 of 2007 is by the legal representatives of the defendant in O.S.No.30 of 1998 on the file of the Court of the Subordinate Judge, Manjeri.
2. The suit, O.S.No.30 of 1998 was one instituted for a declaration that the partnership by name and style “Blue Metal” stood dissolved with effect from 26.12.1997, for account of the profits derived from the business until its dissolution, partition of the assets of the firm and for a perpetual injunction restraining the defendant and his men from entering the plaint schedule premises and for other incidental reliefs.
3. One Vayalil Mohammed Haji took on lease from the plaintiff 79 cents from out of the plaint schedule property for the purpose of establishing a metal crusher unit. Ext.B1 dated 28.8.1992 is the lease deed. It stipulates a term of 25 years and the monthly rent payable by the lessee is Rs.1,000/-.
After establishing the metal crusher unit in the plaint schedule property, on 5.10.1996, Vayalil Mohammed Haji entered into Ext.A2 partnership with the plaintiff, by name and style “Blue Metal.” Vayalil Mohammed Haji retired from the partnership on 22.11.1996, as per Ext.A3 deed, after transferring his rights in the partnership to the defendant. Thereupon, the plaintiff and the defendant entered into Ext.A4 partnership dated 22.11.1996. The defendant paid a sum of Rs.3,00,000/- to Vayalil Mohammed Haji. A security was also given to Vayalil Mohammed Haji by the defendant for the loan availed by him from the State Bank of Travancore to be repaid by the partnership. On 24.12.1997, the plaintiff issued Ext.A7 notice of dissolution of the partnership to the defendant. Notice proceeded on the footing that the partnership was one at will. The defendant replied Ext.A7 by Ext.A8 dated 3.1.1998, taking the stand that the partnership was not one at will and it could not be dissolved. It is thereupon, the suit was filed on the basis that the partnership was one at will.
4. The defendant filed a written statement in the suit contending that there was no investment in the business by the plaintiff; that there was no partnership and that in any event, the partnership was not one at will.
5. The trial court, as per judgment and decree dated 4/12/1999, held that the partnership was one at will and accordingly, passed a preliminary decree declaring that the partnership, 'Blue Metal' stood dissolved with effect from 26.7.1997, as claimed by the plaintiff. In the preliminary decree, it was directed that the liabilities of the firm and the rights and liabilities of the partners shall be determined in the final decree proceedings.
6. The plaintiff preferred A.S.No.132/2000 and the defendant preferred A.S.No.203/2000 before this Court against the decree and judgment of the trial court dated 4/12/1999. The defendant died pending the said appeals and his legal representatives thereupon came on record. As per judgment dated 28/9/2001, this Court set aside the decree and judgment of the trial court dated 4.12.1999, holding that the question whether the partnership was one at will or not has to be considered afresh by the trial court and accordingly, remitted the matter to the trial court for fresh disposal. After the remand, though the trial court found that the partnership was not one at will, a preliminary decree dated 15.1.2003 was passed for dissolution of the firm, invoking Section 44(g) of the Indian Partnership Act, 1932 ('the Act', for short).
7. Aggrieved by the decree and judgment dated 15/1/2003, the legal representatives of the defendant preferred A.S.No.203/2003 before this Court. The plaintiff preferred a Memorandum of Cross Objection in the said appeal, challenging the findings rendered by the trial court against her in the judgment impugned in the appeal. In the said appeal, this Court took the view that the pleadings of the plaintiff were not sufficient for the Court to invoke the provisions of section 44(g) the Act. Consequently, the matter was again remitted to the trial court for fresh disposal after affording the plaintiff an opportunity to amend the pleadings.
8. After the remand, the plaint was amended and the following paragraphs were added in the plaint as paragraphs 13A, 13B and 13C :
“13(A) The contention raised by the defendants that there is no partnership the deed of partnership is only a sham one, the business belongs exclusively to the deceased first defendant that he has taken the land on lease and is doing a proprietary business are all false and the contention raised by the defendants coupled with the fact that the plaintiff was kept out of the business and the profits being appropriated by the defendants evinces the defendants conduct that he is acting against the interest of the firm and has prejudiced the carrying of business by the firm and also resulted in loss of confidence between the partners. No accounts are so far furnished.
(B) The bank loan availed in the name of the firm is not so far discharged even though large profit is there for the firm. This is done willfully for limited purpose of contending that it is not ripe to wind up/dissolve. The second defendant is not claiming title to the business as a legal heir of deceased first defendant but claims only as a transferee and this also amounts as a ground for dissolution.
(C) Due to aforesaid reasons and other circumstances, it is impossible to continue the partnership any further. Apart from this from the date of death of the first defendant and the transfer of his rights in favour of second defendant the partnership has dissolved automatically. So even if the court ultimately finds that the partnership is not one at will, the plaintiff pray that this court may be pleased to pass a decree in favour of the plaintiff dissolving the partnership- Blue metals from the date of notice i.e. 24.12.1997 or as on any other date the court feels correct to dissolve.”
9. After the plaintiff amended her pleadings, the issues formulated for trial were re-cast and reconsidered by the trial court. On a reconsideration of the facts and evidence, the court found that the defendants are not permitting the plaintiff to participate in the business of the firm; that the firm is running on profit and that no amount was ever paid by the defendants to the plaintiff towards the profit. The trial court also found that the stand taken by the original defendant and the additional defendants in the written statements and the stand taken by the second defendant as DW1 that there was no partnership at all alone is sufficient to come to the conclusion that the confidence between the partners was lost and it is, therefore, just and equitable to dissolve the firm. On the said findings, the trial court found that the plaintiff is entitled to a decree for dissolution of the firm under Sections 44(c), 44(d) and 44(g) of the Act. Accordingly, the court below passed the impugned decree declaring that the partnership “Blue Metal” stood dissolved with effect from 11.2.1998 and directing that the assets and profits of the firm shall be worked out and decided in the final decree proceedings.
10. The challenge in the appeal preferred by the legal representatives of the defendant is against the decree dissolving the firm and the challenge in the appeal preferred by the plaintiff is against the decree to the extent it disallows the decree for prohibitory injunction sought for by her.
11. Before dealing with the contentions raised by the parties in the appeals, a few developments that took place during the pendency of these appeals need to be stated. As per order in R.F.A.No.529 of 2006 dated 12.2.2007, the right to conduct the metal crusher unit was put in auction between the parties and the plaintiff became successful in the auction by offering a sum of Rs.16,00,000/- per year. Consequently, as per order dated 22.2.2007, the plaintiff was permitted to run the metal crusher unit on payment to the defendants, their share of the bid amount and the said arrangement is continuing even now. The plaintiff did not pay in full the amounts payable by her to the defendants in terms of the interim order referred to above and the sum of Rs.19,37,110/- was in arrears. Consequently, as per order on I.A.No.1981 of 2013 in R.F.A.No.529 of 2006 dated 8.8.2014, this Court directed the plaintiff to deposit the sum of Rs.20,00,000/- before the court below in ten equal monthly instalments, starting from 18.9.2014. It was made clear in the said order that in addition to the said payment, the usual monthly instalments should also be paid. It was submitted by the learned counsel for the plaintiff that the amounts directed to be paid as per the interim order dated 8.8.2014 is being deposited before the court below and the said submission was not disputed by the learned counsel for the defendants. In so far as the plaintiff is running the metal crusher unit based on the interim order passed by this Court, the appeal preferred by her against the impugned decree has practically become infructuous.
12. Coming to the appeal preferred by the legal representatives of the defendant, the argument advanced by their learned counsel was that in so far as the firm is running a profitable business, it cannot be dissolved by the court invoking the power under Section 44(g) of the Act, for, the dissolution would result in the destruction of the business of the firm. According to him, in a case of this nature, the court should permit anyone of the partners to run the business of the firm on behalf of other partners also. The learned counsel relied on the decision in N. Satyanarayana Murthy and others v.
M. Venkata Bala Krishnamurthy (AIR 1989 A.P. 167) and contended that though there is a wide power under Section 44 (g) of the Act, while exercising the equitable jurisdiction to dissolve a firm, the court has to consider whether the firm can be allowed to subsist in the interest of the partner who wants the business to continue, without jeopardising the rights of the partner who wants to dissolve the firm. He also contended that the court should be circumspect and take into account all the facts and circumstances and should mould the relief on the exigencies available on the facts of the case. He further contended that Sections 44(c) and 44(d) may not have any application at all to the facts of this case as the plaintiff has not sought dissolution of the firm on the grounds enumerated in the said sections.
13. Per contra, the learned Senior counsel for the plaintiff, relying on the decision of the Apex Court in V.H. Patel & Company and others v. Hirubhai Himabhai Patel and others (2000(4) SCC 368) contended that, if the conduct of the parties is destructive of mutual confidence, the same would give rise to a ground for dissolution of a partnership. Section 44 of the Indian Partnership Act, 1932 reads thus:
“S.44. Dissolution by the court -- At the suit of a partner, the court may dissolve a firm on any of the following grounds, namely:--
(a)xxxxxxxxxxxxx (b)xxxxxxxxxxxxx
(c) that a partner, other than the partner suing, is guilty of conduct which is likely to affect prejudicially the carrying on of the business, regard being had to the nature of the business.
(d) that a partner, other than the partner suing, willfully or persistently commits breach of agreements relating to the management of the affairs of the firms or the conduct of its business or otherwise so conducts himself in matters relating to the business that it is not reasonably practicable for the other partners to carry on the business in partnership with him.
(e) xxxxxxxxxxxxxxx (f)xxxxxxxxxxxxxxxx (g) on any other ground which renders it just and equitable that the firm should be dissolved.”
True, the plaintiff has no specific case in the plaint that the defendants are guilty of conduct which is likely to affect prejudicially the carrying on of the business of the firm and therefore, the learned counsel for the defendants is right in his submission that on the facts of the case, the plaintiff is not entitled to a decree dissolving the firm under Section 44(c) of the Act. If a partner conducts himself in matters relating to the business in such a fashion that it is not reasonably practicable for the other partners to carry on the business in partnership with him, Section 44(d) of the Act is attracted. The very case pleaded by the plaintiff is that she is kept out of the business by the defendants and the profit of the firm is being appropriated by the defendants. The court below found on the facts that the firm is running the business on profit and that the plaintiff was not given any participation at all in the business. The court also found that the profit of the firm is never shared with the plaintiff, even though the business is admittedly being carried on in her property. It is thus evident that Section 44(d) is attracted and we find no infirmity in the finding rendered by the court below in that regard.
14. Section 44(g) of the Act, confers power on the court to order dissolution of a firm on any ground other than what is provided for in Sections 44(a) to 44(f), which renders it just and equitable that the firm should be dissolved. In the context of the similar provision in the English Partnership Act, 1890, in Lindley on the Law of Partnership (15th Edition), the learned author has summarised the law thus:
“Although the clause which gives this power comes after a number of particular instances in which a dissolution may be ordered, it is not to be limited in its application to cases ejusdem generis to those mentioned in the previous parts of the section. The court ought not to fetter itself by any rigid rules; and any case in which it is no longer reasonably practicable to attain the object with a view to which the partnership was entered into or to carry out the partnership contract according to its terms will, it is apprehended, be within this section. Though the provisions in the articles of partnership will not bind the court in the exercise of its discretion it will nevertheless take them into consideration.”
It is thus clear that if the court is satisfied that on account of the conduct of the partners or otherwise, it is not reasonably practicable to attain the object for which the partnership was entered into or to carry out the partnership contract according to the terms, it is just and equitable to wind up the firm.
15. The Apex Court, in the decision relied on by the learned Senior Counsel for the plaintiff, also took the view that if the conduct of a partner is destructive of mutual trust and confidence, the same can give rise to a ground for dissolution of the partnership. Paragraph 11 of the said judgment reads thus :
“A contention had been raised before us that the arbitrator has no power to dissolve a partnership firm, especially on the ground that such dissolution is based on a ground or any other ground which renders it just and equitable to dissolve and that is the power of the court. It was pointed out that mere strained relationship between the partners would not be enough to dissolve a partnership. It is not necessary for us to examine this contention in this case when the partners sought for dissolution of the partnership on various grounds enumerated in Section 44(c) to (f) (sic) may also be sufficient and may not be necessary to invoke the inherent jurisdiction of a court such as dissolution is just and equitable. If there has been breach of agreement and conduct is destructive of mutual confidence certainly such conduct can give rise to a ground for dissolution of the partnership. While mere disagreement or quarrel arising from impropriety of partners is not sufficient ground for dissolution, interference should not be refused where it is shown to the satisfaction of the adjudicating authority that the conduct of a partner has been such that it is not reasonably practicable for other partners to carry on the business in partnership. For instance, dissolution should be ordered if it is shown that the conduct of a partner has resulted in destruction of mutual trust or confidence which is the very basis for proper conduct of partnership. It is not necessary for us to go into or seek for an explanation of the reasons which may have induced the disputes between the partners. Dissolution will arise where it appears that the state of feelings and conduct of the partners have been such that business cannot be continued with advantage to either party.”
It was also held by the Apex Court in the said case that it is not necessary in such cases for the court to go into or seek for an explanation of the reason which may have induced the disputes between the partners and the dissolution has to follow where it appears to the court that the state of feelings and conduct of the partners have been such that the business cannot be continued with advantage to either party. It is thus clear that loss of mutual trust and confidence is a ground for dissolution of a firm coming within the scope of Section 44(g) of the Act.
16. The fact that a partnership was constituted between the plaintiff and the original defendant by virtue of Ext.A4 deed of partnership is not disputed. It is also not disputed that despite Ext.A4 deed of partnership, the original defendant as also his legal representatives have denied the existence of a partnership with the plaintiff in the written statements filed in the suit. It is further not disputed that the second defendant as DW1 has denied the existence of the partnership in his deposition before the court below. It is thus evident that it is a case where the mutual trust and confidence between the partners is lost. In view of the findings rendered by the court below that the firm is running the business on profits; that the plaintiff was not given any participation in the business and that the profit of the firm is never shared with the plaintiff, it is also evident that the object for which the partnership was entered into could not be attained and that the business of the firm was not being carried on as per the terms of the partnership contract. We are, therefore, satisfied that this is a case where the plaintiff is entitled to a decree for dissolution of the firm under Section 45(g) of the Act also.
17. The records in the appeals indicate that on various occasions, this Court had attempted a settlement between the partners. Unfortunately, the parties could not arrive at a settlement at all for the purpose of continuing the business of the firm. It is true that while exercising the equitable jurisdiction of the court under Section 44(g) of the Act, the court has to consider the question whether the firm can be allowed to subsist in the interest of the partners who do not want the firm to be dissolved, without jeopardising the rights of the partners who want the firm to be dissolved. In this case, the plaintiff does not want the business to continue. In so far as there are only two partners in the firm and the business is being carried on in the property of the plaintiff, we do not think that we can permit the defendants to continue the business, especially when the mutual trust and confidence is lost. In the said factual scenario, the decision in N. Satyanarayana Murthy (supra) may not have any application.
18. In the result, the appeals are dismissed.
However, it is clarified that in view of the interim order passed by this Court dated 08.08.2014, the plaintiff will be entitled to initiate proceedings for the passing of the final decree only on payment in full of the amount of Rs.20,00,000/- directed to be paid as per the said order. The parties are at liberty to move the court below for appropriate further orders for the conduct of the business of the firm till the final decree is passed and for other matters.
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P.N.RAVINDRAN, JUDGE.
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P.B.SURESH KUMAR, JUDGE.
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