# [1985] Supp. 3 S.C.R. 169

- **Citation:** [1985] Supp. 3 S.C.R. 169
- **Court:** Supreme Court of India
- **Decided:** 1985-09-30
- **Bench:** P.N. BHAGIATl, Amarendra Nath Sen, o.P. MADON
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/1985-supp-3-s-c-r-169-9035
- **Pages:** 40

## Headnote

B
Joint family property, character of -
When it changes -
Whether by an unilateral act it is open to any member of the
joint family to convert any joint family property into his
personal property - Partnership firm formed out of joint family
funds and managing agency agreement entered into by such a
c
partnership firm with another company -
Commission received by
the co-sharers of the joint family in terms of the managing
agency agreement and the remuneration received by them as the
managing director treated as the joint family property for all
purposes - Whether one of the co-sharers by a simple letter claim
the commission remuneration received by . him as his personal
o
property · till the joint family is disrupted -
Position of
managing director and the managing agent, explained.
One Pandarinath Martand Sulakhe
died leaving behind him
his sons Vishwanath, Gopal, Govind and Bhagwant and conaiderable
properties. Vishwanath died in 1910 leaving behind his so11
E
llattatraya, Govind, one of the brothers who constituted a joint
family after the death of their father Pandarinath Sulakhe,
separated from the joint family in 1914 taking his share of the
family properties. However, the other two brothers along with the
son of Vishwanath continued to remain joint and lived as members
of the joint family till 8.12.1941 on which date Bhsgwsnt
intimated llattatraya son of Vishwanath his intention to cause
F
severance of the joint family status.
Prior to it, in the year 1922, a Public Limited Comapny
named Lokmanya Mills Ltd. was intended to be floated and with
that in view Dattatraya and Bhsgwant entered into a partnership
under the name and style of M/s. Sulakhe and Co. with four
G
outsiders, as per the Partnership Agreement dated 3rd January,
1923. The said Partnership Firm Sulakhe and Co. entered into a
Managing Agency agreement on 5.2.1923 with the said Lokmanya
Mills Company Ltd. The said agreement was to expire after 35
years. The mill actually went into production in the year 1938.
On the basis of the managing agency agreement between the company
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SUPREME COURT REPORTS
[1985] 5UPP.3 s.c.R.
A
and the firm Sulakhe & Co,, Dattatraya acted as the managing
agent upto 1935 and thereafter Bhagwant became the managing
agent. After Bhagwant's appointment as managing agent, Dattatraya
was appointed as the Director of the company.
At the time when the company was incorporated and its
B
articles were adopted and also at the time when the comapny
entered into tha managing agency agreement with Sulakhe and Co.
and when the deed of partnership of the firm was executed
Bhagwant and Dattatraya teing members of the joint family, all
the 325 shares which was initially purcnased in the company - 200
in the name of Dattatraya and 125 in the name of Bhagwant - plus
the 83 further shares - 79 in the name of Bhagwant and 4 in the
~
name of Gopal - were paid for by the joint family out of the
joint family funds. Therefore, the entire amount of remuneration
which was received by Dati:atraya and Bhagwant not only on account
of their shares of coumission under the managing agency agreement
on the basis of the partnership deed but also on account of the
Director's fees paid to them and also on account of the salary
paid to Dattatraya who acted as the managing agent of the company
D till 1935, was treated as joint family property. Even after
Bhagwant took over as the managing agent in 1935, the position
continued to be the same and the remuneration received by him
formed part of the joint family income till the dispute raised by
him by his letter dated 15th July, 1941. All monies received by
Bhagwant and Dattatraya from the company were not only treated as
E
joint family property, but also were so entered in the books of
account of joint family and were so shown in the income tax
returns.
However by his letter dated 15th July, 1941 Bhagwant
informed Dattatraya that the remuneration received by him as the
F
managing agent of the company on the basis of th

## Text

_Characters 0–39,952 of 96,508. This is a partial read: ask again with offset=39952 for what follows._

169
llllAQIANT P, SULAKllE
A
V•
DlGAllllAR GOPAL SULAKllE AND ORS.
SEPTEMBER 30, 1985
[P.N. BHAGIATl, c.J., .AMARENDRA NATH SEN AND o.P. MADON, JJ.]
B
Joint family property, character of -
When it changes -
Whether by an unilateral act it is open to any member of the
joint family to convert any joint family property into his
personal property - Partnership firm formed out of joint family
funds and managing agency agreement entered into by such a
c
partnership firm with another company -
Commission received by
the co-sharers of the joint family in terms of the managing
agency agreement and the remuneration received by them as the
managing director treated as the joint family property for all
purposes - Whether one of the co-sharers by a simple letter claim
the commission remuneration received by . him as his personal
o
property · till the joint family is disrupted -
Position of
managing director and the managing agent, explained.
One Pandarinath Martand Sulakhe
died leaving behind him
his sons Vishwanath, Gopal, Govind and Bhagwant and conaiderable
properties. Vishwanath died in 1910 leaving behind his so11
E
llattatraya, Govind, one of the brothers who constituted a joint
family after the death of their father Pandarinath Sulakhe,
separated from the joint family in 1914 taking his share of the
family properties. However, the other two brothers along with the
son of Vishwanath continued to remain joint and lived as members
of the joint family till 8.12.1941 on which date Bhsgwsnt
intimated llattatraya son of Vishwanath his intention to cause
F
severance of the joint family status.
Prior to it, in the year 1922, a Public Limited Comapny
named Lokmanya Mills Ltd. was intended to be floated and with
that in view Dattatraya and Bhsgwant entered into a partnership
under the name and style of M/s. Sulakhe and Co. with four
G
outsiders, as per the Partnership Agreement dated 3rd January,
1923. The said Partnership Firm Sulakhe and Co. entered into a
Managing Agency agreement on 5.2.1923 with the said Lokmanya
Mills Company Ltd. The said agreement was to expire after 35
years. The mill actually went into production in the year 1938.
On the basis of the managing agency agreement between the company
H
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SUPREME COURT REPORTS
[1985] 5UPP.3 s.c.R.
A
and the firm Sulakhe & Co,, Dattatraya acted as the managing
agent upto 1935 and thereafter Bhagwant became the managing
agent. After Bhagwant's appointment as managing agent, Dattatraya
was appointed as the Director of the company.
At the time when the company was incorporated and its
B
articles were adopted and also at the time when the comapny
entered into tha managing agency agreement with Sulakhe and Co.
and when the deed of partnership of the firm was executed
Bhagwant and Dattatraya teing members of the joint family, all
the 325 shares which was initially purcnased in the company - 200
in the name of Dattatraya and 125 in the name of Bhagwant - plus
the 83 further shares - 79 in the name of Bhagwant and 4 in the
~
name of Gopal - were paid for by the joint family out of the
joint family funds. Therefore, the entire amount of remuneration
which was received by Dati:atraya and Bhagwant not only on account
of their shares of coumission under the managing agency agreement
on the basis of the partnership deed but also on account of the
Director's fees paid to them and also on account of the salary
paid to Dattatraya who acted as the managing agent of the company
D till 1935, was treated as joint family property. Even after
Bhagwant took over as the managing agent in 1935, the position
continued to be the same and the remuneration received by him
formed part of the joint family income till the dispute raised by
him by his letter dated 15th July, 1941. All monies received by
Bhagwant and Dattatraya from the company were not only treated as
E
joint family property, but also were so entered in the books of
account of joint family and were so shown in the income tax
returns.
However by his letter dated 15th July, 1941 Bhagwant
informed Dattatraya that the remuneration received by him as the
F
managing agent of the company on the basis of the managing agency
agreement, fees received by him as the director of the company
and his income from his profession as a lawyer were his personal
income and should be treated as such. He made it clear that he
will not in future put any of these incomes into the botch pot of
the joint family. By another letter dated 8.12.1941 Bhagwant
G
intimated his intention to cause severance of the joint family
status. Since Dattatraya did not accept the claim of Bhagwant for
treating the said amount as the personal property. Bhagwant filed
a suit No. 166/43 in the original side of the Bombay High Court
laying claim to the said amounts. In the meantime
Gopal and
Dattatraya filed two suits in the Civil Court against the Company
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and Bhagwant for the payment of the sum of money credited to the
BHAGWANT P.SULAKHE V• DIGAMBAR GOPAL SULAKHE
171
joint family in the books of the parties and as a result thereof
A
ioost of the joint family properties came to be divided S100ngst
the parties in accordance with their respective shares, except
the dispute raised in the suit in the original side of the High
Court.
During the pendency of the said suit the managing agency
F
agreement had come to an end by virtue of the provisions
contained in section 87 (A) (2) of the Companies Act, in as DDJCh
as though the Board of Directors of the company had "passed a
resolution on 28. 6. 56 for the renewal of the managing agency
agreement, no action was taken by Sulakhe & Co. to· get the
Managing Agency Agreement for a further term after 1957 extended.
C
On
the other hand,
the
company
amended its articles of
asso.ciation and proceeded to appoint Bhagwant as its managing
Director and neither his appointment nor the validity of the
amendment of articles of association was objected to by either
Sulakhe & Co. or any of the co-sharers forming part of the
partnership firm· The trial Judge accepted the claims of Bhagwant
D
and decreed the suit in his favour and made Gopal and Dattatraya
accountable in respect of the joint family business. The High
Court in appeal held that the income received by Bhagwant as
lll&llaging agent and managing Director of the company could not be
considered to be the personal property of Bhagwant and reversed
the decision of the trial Judge in this respect and also on
E
various other claims
to cash etc•
Hence
the appeals
by
certificate under Article 133 (1) (a) as it stood before the
Constit~tion (Thirtieth) Amendment Act, 1972.
Allowing the appeals in part and passing a final decree in
terma clarified, the Court.
HELD : 1.1
The character of any joint family property
does not change with the severance of the status of the joint
family and a joint family property continues to retain its joint
family · character so long as the joint family. property is in
existence and is not partitioned amongst the co-sharers. By an
F
unilateral act it is not open to any member of the joint family
G
to convert any joint family property into his personal property.
[194 B-<:]
1. 2
The agreement of partnership clearly indicates that
Bhagwant and Dattatraya became members of the firm M/s. Sulakhe &
Co. which W"lS appointed as the managing agent of the company, on
the basis of the managing agency agreement, representing the
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joint family and for the benefit of the joint family. Their
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SUPREME COURT REPORTS
[1985] SUPP.3 s.c.R.
interest in the partnership firm and managing agency was a part
of joint family assets and whatever income was earned by them on
the basis of the managing agency agreement belongs to the joint
family and formed part of the joint family property. The same
position must necessarily continue in the eye of law so long as
the partnership agreement and the managing agency agreement
continued. [192 G-ti; 193 A-DJ
1.3 By seeking to bring about a severance in the status of
the joint'family, one of the co-sharers cannot deprive the joint
family of this property and the income derived on the basis of
the managing agency agreement continues to remain the property of
the joint family so long as the joint family asset is not
partitioned and otherwise continues to remain in existence. In
the facts and circumstances of the case, the entire income
arising out of the managing agency agreement and accruing to the
two members of the family, namely, Bhagwant and Dattatraya who
might have rendered the services had been earned for and on
behalf of the family and as representatives of the joint family.
llattatraya had continued as the managing agent for a number. of
years and there had been no question of apportionment of any
income derived by him as hie remunerations for the services
rendered by him as managing agent. Therefore, Bhagwant cannot lay
any claim for retaining any part of the remuneration received by
him from the company for the services rendered by him· [193 D-E;
194 A]
2.1 In llaj Kumr Singb Buba lhmdj1.'s case, [1971) l
s.c.R. 748, the Supreme Court held that "the broader principle
that emerges is whether the remuneration received by the
coparcener in substance though not in form was but one of the
modes of return made to the family because of the investment of
the family funds in the business or whether it was a compensation
made for the servi.oes rendered by the individual coparcener • If
it is the former, it is an income of the Hindu undivided family
but if it is the latter then it is the income of the individual
coparcener. If the income was essentially earned as a result of
the funds invested the fact that a coparcener has rendered some
service would not change the character of the receipt• But, if on
the other hand, it is essentially a remuneration for the services
rendered by a coparcener, the circumstance that his services were
availed of because of the reason that he was a member of the
family which had invested funds in that business or that he had
obtained the qualification shares from out of the family funda
would not make the receipt, the income of the Hindu undivided
family.• The legal principle enunciated therein for determining
BllAGWANT P. SULAKHE v. DIGAMBAR (',OPAL SULAKHE
173
the true nature and character of the remuneration received by any
A
member of the joint family equally applies in deciding the nature
and character of the remuneration received by the Managing
Director in the instant case. [195 C-D; 196 C-E; 197 A-B]
2.2 The position of the Managing Director is entirely
different from the position of the managing agent on the basis of
B
the inanaging agency agreement between the partnership firm of
Sulakhe & Co. and the position of the Managing Director stands
entirely on a different footing. At the time when Bhagwant was
appointed the Managing Director of the company on 19.10.1957,
with effect from 16,1.1957, there was complete disruption of the
joint family and there was no joint family in existence. Further
c
inspite of the Board of Director's resolution dated 28.6.1956 for
the renewal of the inanaging agency agreement
as
required by
section 87A (2) of the Companies Act, no action was taken by the
firm of Sulakhe & Co. or any partner thereof for obtaining
renewal of the inanaging agency agreement for a further term after
1957. On the other hand when the company had amended its articles
D
of 1<Ssociation and had p::oceeded to appoint Bhagwant as the
Managing Director, there was no challenge to them either by any
partner of the firm of Sulakhe & Co. which had been appointed as
the inanaging agent of the company or by any member of the joint
family. As the inanaging agency agreement had ceased to exist at
the time Bhagwant was appointed the Managing Director of the
E
company and as at that time there was no joint family of Bhagwant
·anc1 the other co-sharera in existence, Bhagwant cannot be said to
r.ave been appointed as the Managing Director of the company
either because of the managing agency agreement or because of his
being a member of the joint family. The facts and circumstances
make it clear that the partnership agreement or the managing
agency agreement had no relevance to the appointment of Bhagwant
F
as the ilanaging Director of the Company, ln the said circ1DDstances, (i) the rl!llllDeration received by Bhagwant as Managing
Director of the company from the company is his personal property
and cannot be considered to be the .l.Dcome of the joint family;
(ii) the appointment of Bhagwant as Managing Director, at a time
when there was complete disruption of the joint family and the
G
members of the family were fighting in Court cannot be considered
to be by way of any return on the inves::ment made bY the joint
family; and (iii) Bhagwant was appointed as the Managing Director
by the company for services to be rendered by him, as the company
might have been impressed by his performance as the managing
agent for a number of years. Though undoubtedly Bhagwant acted as
the managing agent for and on behalf of the joint family. and for
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SUPREME COlJRT REPORTS
(198)] SUPP.3 s.c.R.
benefit of the joint family, yet what must have weighed with the
company is the kind of services rendered by him to the company.
The company was concerned with his services snd not with the
question whether he was rendering the services for and on behalf
of the family. The remuneration which the company agreed to pay
to Bhagwant for acting as the Managing Director was for the
services to be rendered by him. [194 D-i!; 195 A-ll; 196 G]
Kaj Kumar Siogb l9llaa <2umilji V• C<-riBSiooer of locaE
Tax, Madhya Pradesh (1971] 1 s.c.R. 748 applied.
2.3 From the materials on record, it is clear that there
can also be no question of Bhagwant being a trustee or acting as
the trustee for the benefit of the joint family in relation to
his appointment as the Managing Director of the company. The
managing agency of the company was that of the partnership firm
in which the four outside members with a majority of shares in
the partnership were interested and the managing agency firm
cannot therefore, be considered to be an asset of the joint
family. It was the interest of Dattatraya and Bhagwant in the
managing agency firm on the basis of their shares in the partnership which belonged to the joint family and the managing agency
was an agreement between the company and the partnership firm.
The effect of not renewing the agreement was that the interest of
the partnership firm of Sulakhe & eo. in the COlllpallY as the
managing agent thereof with all the rights and privileges on the
basis of the said agreement came to an end. With the termination
of the managing agency agreement the interest of the joint family
in the managing agency on the footing that two of the members of
the joint family,
namely, Dattatraya and Bhagwant were as
partners of the firm associated with the managing agency and were
acting as the managing agent on the basis of the partnership
agreement and the managing agency agreement also ceased. [197
C-G; 198 G-H]
CIVIL
APPELIATE
JURISDICTION
& 2622A of 1969·
Civil Appeal
Noa. 2622
From the Judgment and Decree dated 18/19/20/25/29.9.1967
and 9.10.1967 of the Bombay High Court in First Appeal Nos. 278
and 279 of 1960.
V.M. Tarkunde, Dr. Y.S. Chitale, Mukul Mudgal, Mrs. M.
Karanjawala and D.N. Mishra for the Appellant.
M.C. l!handare, D.R. Dhanuka, Mrs. Rani Chhabra K.H. Kapadia
and G.B. Sathe for the Respondents.
BHAGWAIIT P.SULAKHE v. DIGAMllAR GOPAL SULAKHE [A.N. SEN, J.j 175
The Judgment of the Court was delivered by
A.N. SEN, J. This is an unfortunate litigation between near
relations and this litigation between the parties is now going on
for over four decades.
These two appeals have been filed with the certificate
granted by the High Court against the judgment of the High Court
by the plaintiff in the suit instituted by him for partition of
joint family properties, for accounts and other reliefs mentioned
in the plaint.
By a common judgment delivered by the High Court in two
separate appeals filed by the defendants in the suit against the
judgment of the Trial Court., the High Court has substantially
reversed the judgment of Trial Court.
The facts of the case have been fully set out in the
judgment of the Trial Court and also in the judgment of the High
Court.
We shall briefly indicate the facts material for the
purpose of disposal of these two appeals. As the High Court
disposed of both the appeals by one common judgment and the two
appeals which have been preferred against the same judgment have
been heard together, this judgment will dispose of both the
appeals.
One Pandarinath Martand Sulakhe
died leaving behind him
his sons Viswanath, Gopal, Govind and Bhagwant and considerable
properties. The properties left by him included agricultural
lands, a number of houses in Barshi and three shops. Of the three
shops one was a Sharafi shop at Barshi, another cloth shop at
Barshi and the other a commission Agency and Sarafi shop at
Bombay. Business in all these three shops was carried on in the
name of P.N. Sulakhe. Of the four sons Vishwanath died in 1910
leaving behind him his son Dattatraya who happens to be the
second defendant in the suit. Govind, one .of
the brothers who
constituted a joint family after the death of their father
Pandarinath Sulakhe separated from the joint family in 1914
taking his share of the family properties. Though Govind separated in 1914, the other brothers and the son of Vishwanath
continued to remain joint and lived as members of the joint
family. Bhagwant who filed a suit for partition as the plaintiff
was the youngest of the four brothers. He graduated in law in the
year 1914 and commenced practice as a lawyer at about that time.
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SUPREME COURT REPORTS
[1985] SUPP.3 s.c.R.
In 1922, a public limited company named Lokmanya Mills Ltd.
(hereinafter referred to as the Company) was intended to be
floated and with that end in view, the defendant No. 2 Dattatraya
and the plaintiff Bhagwant entered into a p~rtnership under the
name and_ style of M/s. Sulakhe & Co. with four
outsiders. A
Managing agency agreement between the company and the partnership
firm of Sulakhe & Company was executed. The mill actually went
into production in 1938. On the basis of the managing agency
agreement between the company and the firm of Sulakhe & Co. the
defendant No. 2 Dattatraya acted as the managing agent upto 1935
and thereafter the plaintiff Bhagwant became the managing agent.
Sometime after the plaintiff Bhagwant had been appointed the
managing agent, the defendant No. 2 Dattatraya was appointed as
the Director of the Company. It appears that in the year 1935, a
new Adat shop had been started at Barshi. All the shops were run
in the name of P.N. Sulakhe. It is not in dispute that all the
shops were joiut family businesses. It is also not in dispute
that the remuneration paid to the defendant No. 2 and also the
plaintiff Bhagwant as managing agent and alao the amount of
commission falling into the shares of defendant No. 2 Dattatraya
and the plaintiff Bhagwant out of the comnission earned by the
managing agency firm were treated as joint family properties and
were shown in the joint family books so long as disputes between
the parties had not arisen. During the period when there were no
disputes between the parties, the Director's fees paid to
defendant
No. 2 Dattatraya and the plaintiff Bhagwant were
treated as income of the joint family and even the professional
income of the plaintiff Bhagwant earned by him as a lawyer was
also thrown into the joint family hotch-pot and
w~s treated as
joint family income. In the income-tax returns filed on behalf of
the joint family, all these amounts were shown as income of the
joint family. It appears that everything did not go well with the
members of the joint family and disputes arose between the
parties soon after the commencement of the second world war. The
plaintiff Bhagwant by his letter dated 15th July, 1941 addressed
to the defendant No.
2 Dattatraya informed him that the
remuneration received by him as the managing agent of the company
on the basis of the managing agency agreement, fees received by
him as the director of the company and his income from his
profession as lawyer were his persons t income and should be
treated as such. By this letter, he made it clear that he was not
prepared to throw any of these incomes into the joint family
hotch-pot and he asked the defendant No. 2 Dattetraya that all
these amounts should be shown as his separate income for the
purposes of income tax and should be credited to his personal
I
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'• '
BHAGJANT P.SIJLAKHE v. DIGAMBAR GOPAL SULAKHE [A.N. SEN, J. J 177
Khata in Sarafi shop account. Disputes and differences between
the parties became more acute and the plaintiff on 8.12.1941
intimated to the. defendant No.
2 Dattatraya his intention to
cause severance of the joint family status. Th_ereafter attempts
were made to divide the properties amicably between the parties
without
success,
The
plaintiff
Bhagwant
claimed
that
the
remunerations paid to him by the company as managing agent, the
fees paid to him as director of the company and hi~ incom~ from
his profession as a lawyer were his personal income and as such
his personal property. The defendants did not accept the claim of
the plaintiff Bhagwant that the remuneration paid to him as
managing agent by the company and the fees paid to hiffi as the
director of the company, could be his personal income and the
defendants claimed that all such amounts received by him belonged
to the joint family and formed
part of the joint family
properties. Ultimately Bhagwant filed a suit being suit No.
166/43 in the original side of the High Court in Bombay. In this
suit Gopal was the first defendant and Dattatraya was the second
defendant .and the suit was filed in the original side of the
Bombay High Court on the basia that the Adat Shop and Sarafi Shop
were situated within the original jurisdiction of the Bombay l;ligh
Court. In this suit, Bhagwant the plaintiff did not made any
reference to the managing agency of the company in the plaint and
he claimed partition of the joint family shares and moveable and
immovable properties mentioned in the plaint as belonging to the
joint family, seeking to reserve his right under o. 2, rule 2 of
the Code of Civil Procedure to file a suit for p~rtition of the
joint family
properties situated at llarshi.
The
plaintiff
Bhagwant in this suit claimed various other reliefs. He prayed
for a direction that the immoveable properties and the business
at Bombay
should
be ordered td be partitioned under the
directions of the Court, that the joint family firms should be
wound up, that the sum of Rs. 6843-36 claimed by him as his
personal income as a lawyer from his profession from 1940 should
be awarded to him with interest at 12% interest on the same and.
he also claimed as consequential relief that the defendants
should be ordered to account for the profits earned by them from
the joint family business from the date of severance and also of
the income derived by them fr011 immovable properties belonging to
the joint family. In the sui-t Govind as defendant No. 1 and
Dattatraya as defendant No. 2 were impleaded and no other members
of their branches were made parties to the suit. On the death of
defendant No. 1 Gopal during the pendency of the suit his five
Sons were brought on record a:s his heirs and legal representatives. The defendants resisted the suit of the plaintiff on
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SUPREME COURT REPORTS
[1985] SUPP.3 S.C.R.
various grounds, mainly however on the ground that the plaintiff
had asked for partition only of some of the joint family
properties without including in the suit various other joint
family properties, particularly the shares and interest of the
joint family in the company. The defend2nts contended that the
plaintiff was bound to include in the.suit all the joint family
properties which also comprised all the interests of the joint
family in the company and various other it1100vable properties in
the possession of the plaintiff. It may be noted that defendant
No. l Gopal and the defendant No. 2 Dattatraya filed t1'() suits in
the Court of Civil Judge against the company and the plaintiff
for payment of the swn of money credited to the joint family in
the books of the company in accordance with the respective shares
of the parties. In the suits various proceedings were taken and
various orders including the appointment of the Court receiver
for all the properties of the joint family were passed from time
to time. It does not become necessary for us to refer to these
proceedings at any length as in -the present appeals these
questions are no longer germane. It appears that as a result of
the various proceedings in the suit most of the joint family
properties came to be divided amongst the parties in accordance
with their respective shares and the disputes between the parties
now centre on the following questions :-
1. Whether the shares in the company standing in the
names of the various members of the family are joint
family properties?
2. Whether the commission received by the two members
of the family namely, defendant No. 2 Dattatraya and
plaintiff r>hagwant from the managing agency firm in
respect of their shares in the firm out of the total
conmission paid by the company to the managing agency
firm belongs to the joint family?
3. Whether the re1!1lneration received by the plaintiff
Bhagwant from the company as managing agent on the
basis of the managing agency agreement with the
company is the personal property of the plaintiff or
whether the same belongs to the joint family?
4. Whether the re1!1lnerations paid to the plaintiff as
the managing director of the company is his personal
income or is the property of the joint family?
B!IAGWANT p;sULAKHE v. DIGAMBAR GOPAL SUJ..AKHE [A.N. SEN, J.]
179
5. Whether there was any amount in cash in Mahalaxmi
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room belonging to the family and if so, how llllch?
6. Whether there were any ornaments
and
jewellary
belonging to the joint family? If so, in whose possession and custody are such ornaments lying and what is
the value of such ornaments?
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It is to be noted that during the pendency of the proceedings in
the Court relating to partition of the joint family properties
the managing agency agreement had come to an end and it has also
become inoperative by virtue of the provisions of law. The
plaintiff Bhagwant was the managing agent on the basis of the
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managing agency agreement and thereafter he had been appointed as
the managing director of the company. The learned trial judge .on
the question of the remuneration paid to the plaintiff as
managing agent on the basis of the managing agency agreement and
the fees paid to him as the director of the company has held in
favour of the plaintiff that these are the personal incomes of
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the plaintiff and do not belong to the joint family. The learned
trial Judge also held in favour of the plaintiff on the question
of cash money belonging to the joint family found in the
Mahalaxmi room and also on the question of accountability of the
defendants in respect of the joint family business. The High
Court in appeal has held that the income receiveo by the
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plaintiff as managing agent and as Managing director of the
company could not be considered to be the personal property of
the plaintiff and they belonged to the joint family and the High
Court has reversed the decision of the trial Judge on this
question. On various other questions also, the High Court has
held in favour of the defendants reversing' the decision of the
Trial Court. The correctness of the High Court judgment is
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questioned by the plaintiff in the appeals.
The principal controversy between the parties relates to
the question whether the rellllneration paid to the plaintiff
Bhagwant by the company as the Managing Agent and also as the
Managing Director is his personal property or whether the same
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forms as part of the joint family property. The contention of the
plaintiff-appellant Bhagwant is that the rellllneration received by
him for acting as Managing Agent and also as Managing Director of
the company is his persoanal income and cannot be considered to
belong to the joint family, whereas it is the case of the
defendant No. 2 Dattatraya and the heirs of the Defendant No. 1
Gopal and that all such remuneration received by the plaintiff
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[1985] SUPP.3 S.C.R.
!lllSt belong to the joint family and must be held to constitute
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part of the joint family
propertie•· They further contend that
the shares in the company subsl!quantly purcha&ed by the members
of the plaintiff's family mu•t alao be held to belong to the
joint family. As this happens to be the most important question
which has been urged at length before llB, we propose to deal with
this question in the first place. In our view it will be approB
priate to consider this question under two separate heads,
namely, (1) the remuneration received by the plaintiff Bhagwant
as managing agent and (2) rem.merations received by him as
managing director. We firot propose to take up the question
whether the remuneration received by the plaintiff from the
company as managing agent, is his personal income or the same
constitutes a part of the joint family.property.
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For a proper appreciation of this que•tion it is necessary
to consider some broad facts which are not in serious dispute.
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A partnership agreement wa• entered into on the 3rd of
January,
1923 between defendant No.
2 Dattatraya, plaintiff
Bhagwant, one Ramchandra Moreshwar Sane, one Moolchand Jotirzm
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Baldote, one Nemchand Shivram Baldote and one Ganoba Andoba
Gavane to start a mill by the name 'The lokmanya Mills Bars<>
Limited' as promoters and agents of the said mills on terms and
conditions set out in the deed of partnerhsip dated 3rd January,
1923. This deed of partnership which is not in dispute and which
has been exhibited in the suit provides :-
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"An agreement dated 3rd of the month of January, 1923.
We,
Dattatraya Vishwanath
Sulakhe, Caste Brahnin,
aged 37, profession trader, resident of Barsi and
llhagwant Pandharinath Sulakhe, caste Brahmin, age 33,
profession pleader, resident of Barsi, and Ramchandra
Moreshwar
Sane,
caste Brahmin,
age 64 profession
pleader, resident of llarsi and Moolchand Jotiram
Baldote, caste Marwari,
resident of Barsi age 48,
profession trade, and Nemc.hand Shivaram Baldote, caste
Marwari, age 39, profession trade, resident of Barsi,
and Ganoba Andoba Gavane,
caste Maratha,
age
58
profession agriculturist resident of Pangaon, Taluka
Barsi, Distt~ Sholaput, all of us make an ~greement as
follows :-
We all of us have agreed and decided between us on
29th November,
1922 to start a mill by name
'The
BHAGIANT P.S\JLAKHE v. DIGAMBAR GOPAL S\JLAKHE [A.N. SEN, J.]
181
Lokamanya Mills Barsi Limited'. The following are the
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terms of agteeme!).t·, ~hat we have agreed to, between us
all as the promoters.agents of the Mills.
l. The agency firm should be named as 'Sulakhe & Co. 1
and the agreement of this firm are t:o be in force and
existence for the period of 35 years from the date of
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registration of the said company.
2.
Messers.
Dattatraya,
Vishwanath
Sulakhe
and
Bhagwant Pandharinath Sulakhe should joini:ly contribute towards the purchase of shares of tht! value of
Rs.40,625 (forty thousand six hundred and
twenty
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five). Mr. Moolchand Jotiram should purchase in his
name shares of a value of Rs. 25, 000 (twenty five
thousand) , Namchand Shi vram should purchase in his
name shares of the value of Rs.9375 (nine thousand
three hundred seventy five) and Ganoba Andoba Gavane
should purchase in his name shares of the '?alue of
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Rs.25,000
(twenty
five
thousand)
and
Ramchandra
Moreshwar Sane should purchase in his name share of
the value of Rs.3000 (Rupees three thousand). The
above named persons, or in case of their death, or if
they become incapable on account of some illness or if
they have been unable to purchase the said shares or
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have been unable to pay further instalments after
purchase of. the said shares on account of some
dificulty, their heirs should as stated above purchase
the sharea or pay the amount of further in2talm.ents.
3.
After .the shares are purchased as stated in the
foregoing clause, the agents are to get 10% conmission
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on the net profit earned by the Lokamanya Mills Barsi
Limited. Out of this 10% cmmission l/l/2% amount is
to be paid t~ a cOlllldttee appointed in that behalf for
the purpose of spending that amount
over public
charitable
purposes
and
the
remaining
8/1/2%
commission is agreed to be distributed as follows:-
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1. Messrs D.V. Sulakhe & B.P. Sulakhe to get 3/1/4%
2. Moolchand Jotiram
- 2%
3. Ganoba Andoba Gavane
-
2%
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[1985] SUPP.3 s.c.R.
4. Nemchand Shivaram
- 3/4%
5. Ramc~.andra Moreshwar Sane
- 1/27.
The total amount of 8/1/2% is to be thus distributed.
4.
The amount of profits is to be distributed as
stated in the foregoing clause, after it has been
received by the Managing Agents from the company. If
any partner or his heirs had not purchased the shares
originally or not paid amount of further instalments
after allotment on account of some inability stated in
the last foregoing clause 2, he will lose his share in
the agency firm and his share is to be distributed
among the remaining partners in proportion to the
capital contributed by each of them. The partners IlllSt
keep in tact their shares for the period of five years
from the date of allotment. The partners have no right
tJ dispose of or mortgage their share within that
period of five years. If any of the partners fails to
do
so,
he
stands
to lose his interest in
t~e
partnership.
5.
The agents firm
is entitled to receive 2-1/2%
commission on the amounts of expenditure which the
company may
incur towards
the
construction
of
buildings,
purchase
of
machinery
and
other
necessaries, purchase of lands and other materials.
Out of the amounts so received, an amount of 1-1/2% is
to be paid towards public charitable purposes and the
remaining amount is to be distributed among the
partners in proportion to their shares described
above• This amount is to be recei·1ed in the first
instance by the managing agents, and after setting a
part the amount of charity, he has to distribute the
balance amongst the partners in proportion of their
respective shares.
6.
All the responsibility 0£ all work of whatever
kind to be performed by the managing agents firm such
as, raising of capital of the said mill running of the
mill, keeping of accounts, purchase of land, purchase
of machinery, appointing and remov.:l.ng of servants,
solicitors, auditors, banker,
agents, brokers,
and
underwriters to keep accounts and prepare the reports
BHAGWANT P.SULAKHE v. DIGAMBAR GOPAL· SULAKllE [A.N. SEN, J.] 183
of the company and do all such other as the managing
agents are required to do shall be on the managing
agent Mr. n.v. Sulakhe or his family. His family means
.the joint family of three persons viz: D.V. Sulakhe,
B.P •. Sulakhe and Gopal Pandharinath Sulakhe. The other
partners have nothing to do with the above work and
they have no right ot interfere with the power of the
managing agents.
The company will hold only the
managing agent responsible for his faults and the
other partners are not to be responsible to the
company.
7.
The preliminary expenses of the mill will be about
Rs.8000 (eight thousand). This &m)unt is to be paid to
the managing agent Mr. n.v. Sulakhe, by all the
partners except Mr. Sane, in proportion to their
respective shares. The managing agent is to return
this maount of expenditure to the partners form the
proceeds of the shares of the company that may be
collected after its registration.
8.
Some one person from among the family of Sulakhe
described
above
shall
always
be
an, Ex-offici1>
Director. Some other person from amongst the agency
firm, or some other person , from 'outside elected by
majority, and who is not in the agency firm shall be a
special director, but he shall not be in office
permanently. The term of his office will be as of the
other
directors
and
he
shall
be
eligible for
re-election. Some persotr from the finn or some one
from outside according to the opinion ot the firm
shall always be &m)ng the directors ••
9.
No partner of the agent's firm, shall except wi.th
the leave of the directors, enter in any other agency
firm of a mill of the like tenure and situate within
the limits of Barsi Taluka. If any one of them does so
enter he will stand to lose his share in this
partnership firm of this mill.
10. A partner of the agent's firm shall be entitled as
any other outsider to do business with the company and
enter into private transactions on reasonable terms
and to take commissioo from the company.
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SUPREME COURT REPORTS
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11.
From
the date
the share,
of the value of
Rs.7,00,000 (seven lacs) are sold the managing agent
Mr. Sulakhe shall get a
re!Lilneration (salary) of
Rs.600 per month. The other partners or the charity
fund shall have no interest whatsoever therein. From
the
time
when . products
shall
be
begun
to
be
manufactured in the mill, the managing agents are to
receive a
remuneration of Rs.1000 (salary) every
month. Out of that amount Rs.600 are to be taken by
the managing agent every 100nth and the remaini.ng
amount of Rs.400 (Four hundred) is to be divided among
all the partners of the agency firm including Sulakhe,
in proportion to their respective shares (till the
profits oI the company come to 10% by the way of
divident) so that the partners may get an interest
over their amounts at the rate of 5% per annum, but
from and after the date when the dividend of the
company shall be distributed at the rate of 10% on the
amount of shares 1 the other partners shall have no
right over the said sum of Rs.400 (Four hundred) to be
received every month, and this amount is to be taken
by the managing agent Mr. Sulakhe as the increase in
his remuneration (salary). After that period other
partners will have no claim whatever against the said
amount of Rs.400.
12. The rights of the partners in the ageucy firm are
to pass to their respective lineal descendants or to
their respective assignees after the expiration of the
period of 5 years allotment. The right of a p;;rtner
shall go to other persons by partition among his
family or by heirship and if such persons to whom the
rights of a partner in the agency firm are to pass,
are more than one, they shall unanimously elect some
one from among themselves for the
purpose. If there
is disagreement between them the board
o~ directors
shall choose some such person from among them and the
person so chosen shall take interest in the agency
firm. The company or the managing agents shall not
take cog~izance of the other sub--~artners ..
The terms vf agreement between us all are as above,
and for that this agreement (in wr1ting) 1 is prepared
and is signed by us all and a copy of this agreement
i.e. a counter part of it l.s delivered to each of us
BHAGWANT P.SlJLAKllE v. DIGAMBAR GOPAL SULAKHE [A.N. SEN, J. J 185
all. This agreement made and signed on the 3rd of the
A
month of January in the year of 1923, and it is iu the
handwriting of Sarbootam Annaji l'.adhekar, a resident
of Barshi.
Sd/- Datartraya Vishwanath Sulakhe
Sd/- Bhagwant Pandharinath Sulakhe
Sd/- Ramchar.dra Moreshwar Sane
Sd/- Moolchand Jotiram Marwadi
Nemchand Shivaram Marwadi
Ganoba Andoba Gavane.
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•
Tne said partnership firm of M/s. Sulakhe & ,Co.
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consisting of the aforesaid six partners entered into
a managing agency agreement on 5. 2.1923 with the
company. Relevant provisions of the managing agency
agreement dated 5.2.1923 may be set out:-
1.