# MOHATIA BROTHERS v. BHARAT SURYODAYA MILLS CO. LTD., AHMEDABAD

- **Citation:** [1976] 3 S.C.R. 1022
- **Court:** Supreme Court of India
- **Decided:** 1976-04-05
- **Case number:** Civil Appeals Nos. 2075 & 2076 of 1968
- **Bench:** H. R. Khanna, P. K. Goswami
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/mohatia-brothers-v-bharat-suryodaya-mills-co-ltd-ahmedabad-6722
- **Pages:** 10

## Headnote

Indian Partnership Act (9 of 1932), s. 69-Scope
of-Partnership deed
sho~ing partners-Later deed showing change in partners-Proof, that it was
1101 acted upon.
'The appellant, a registered partnership-firm, was the managing agent of
the respondent.
After submitting its resignation to the board of directors of
the respondent-company, the appellant filed a suit claiming a sum of money
in accordance with an agreed scheme. The appellant-firm consisted of 5 partners
with effect from April 1, 1949, and in addition, a minor was entitled to a
4-anna share in the profits of the partnership but was not liable for the losses.
The minor was represented by his mother as guardian.
On October 24, 1949,
another partnership deed was executed wherein the mother was shown as a
partner of the appellant-firm with a 4-anna share and the minor's name was \
omitted. The respondent contended that the suit was not maintainable, because, ·
the constitution of the old firm had been changed on October 24, 1949, and
that the newly constituted firm consisting of 6 partners had not been registered.
The trial court held that the new partnPrshio deed was not acted upon and
decreed the suit for a part of the amount claimed. There were appeals by both
sides.
The High Court disagreed with the finding of the trial court that the
later partnership deed had not been acted upon and held that the mandatory
condition of s. 69(2), Indian Partnership Act, was not fulfilled as the name of
the mother. who was a partner in the reconstituted firm and in whose favour
a cause of action had accrued, was not shown in the register of firms, and
that this defect was fatal to the suit.
A1lowing the appellant's appeal to this Court and remanding the appeal
to the High Court for disposal on merits,
HELD : The trial court took the correct view of the matter in so far as it
held that the later partnership deed was not acted upon and that the mother
did not become a partner of the appellant-firm. [1028B]
(1) The question as to when it was decided not to act upon the later deed
is not material.
The evidence of one of the partners of the appellant-firm
that it was not acted upon and that the mother was not a partner is admissible
:ind is fully corroborated by the documentary evidence. It is a statement inade
by him against his own pecuniary interest. because, if the mother was a partner,
the loss of the other partners would extend only to 12-anna share in the rnpee;
whereas. if she was not a partner then they would have to bear losses to the
full extent of 16 annas in the rupee.
[1029G-H; 1030H-1031D]
(2) In the register relating to the registration of firms kept under the Indian
Partnership Act, an entry relating to the registration of the appeIIant-firm dated
May 5. 1952. reveals that even in the year 1952, the stand of the partners of
the· appellant-firm was that the mother was not a partner and that it wa-; only
her minor son who was entitled to a share in the profits of the partnership.
[1028G-1029Al
(3) In the staiement of accouilts of the appellant-firm it is only the minor
that is sho\vn to have a 4-anna share and not his mother. [1030B-C]
( 4) Applications in connection with the registration of that firm were prerented to the Income Tax Authorities under s. 26A, Indian Income Tax Act,
1922.
AU these applications were signed by the mother and they show that tho
mother never claimed to be a partner of the appellant-firm and that, on the
contrary, she acknowledged that it was her minor son who was entitled to the
4-anna share in the profits. [1029E-GJ
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MOHATTA BROS. v. BHARAT SURYODAYA MILLS (Khanna, J.)
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(5) The directors of the respondent-company ,bad passed a resolution in 1950
referring to the two partnership deeds.
But the entry which was made in the
register of the respondent-company regarding the partners of its managing
agents as required by s. 87, Indian Companies Act, 1913, shows that after April
1, 1949, there were only 5 partners, besides the mino

## Text

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1022
MOHATIA BROTHERS
v.
BHARAT SURYODAYA MILLS CO. LTD., AHMEDABAD
April 5, 1976
[H. R. KHANNA AND P. K. GOSWAMI, JJ.]
Indian Partnership Act (9 of 1932), s. 69-Scope
of-Partnership deed
sho~ing partners-Later deed showing change in partners-Proof, that it was
1101 acted upon.
'The appellant, a registered partnership-firm, was the managing agent of
the respondent.
After submitting its resignation to the board of directors of
the respondent-company, the appellant filed a suit claiming a sum of money
in accordance with an agreed scheme. The appellant-firm consisted of 5 partners
with effect from April 1, 1949, and in addition, a minor was entitled to a
4-anna share in the profits of the partnership but was not liable for the losses.
The minor was represented by his mother as guardian.
On October 24, 1949,
another partnership deed was executed wherein the mother was shown as a
partner of the appellant-firm with a 4-anna share and the minor's name was \
omitted. The respondent contended that the suit was not maintainable, because, ·
the constitution of the old firm had been changed on October 24, 1949, and
that the newly constituted firm consisting of 6 partners had not been registered.
The trial court held that the new partnPrshio deed was not acted upon and
decreed the suit for a part of the amount claimed. There were appeals by both
sides.
The High Court disagreed with the finding of the trial court that the
later partnership deed had not been acted upon and held that the mandatory
condition of s. 69(2), Indian Partnership Act, was not fulfilled as the name of
the mother. who was a partner in the reconstituted firm and in whose favour
a cause of action had accrued, was not shown in the register of firms, and
that this defect was fatal to the suit.
A1lowing the appellant's appeal to this Court and remanding the appeal
to the High Court for disposal on merits,
HELD : The trial court took the correct view of the matter in so far as it
held that the later partnership deed was not acted upon and that the mother
did not become a partner of the appellant-firm. [1028B]
(1) The question as to when it was decided not to act upon the later deed
is not material.
The evidence of one of the partners of the appellant-firm
that it was not acted upon and that the mother was not a partner is admissible
:ind is fully corroborated by the documentary evidence. It is a statement inade
by him against his own pecuniary interest. because, if the mother was a partner,
the loss of the other partners would extend only to 12-anna share in the rnpee;
whereas. if she was not a partner then they would have to bear losses to the
full extent of 16 annas in the rupee.
[1029G-H; 1030H-1031D]
(2) In the register relating to the registration of firms kept under the Indian
Partnership Act, an entry relating to the registration of the appeIIant-firm dated
May 5. 1952. reveals that even in the year 1952, the stand of the partners of
the· appellant-firm was that the mother was not a partner and that it wa-; only
her minor son who was entitled to a share in the profits of the partnership.
[1028G-1029Al
(3) In the staiement of accouilts of the appellant-firm it is only the minor
that is sho\vn to have a 4-anna share and not his mother. [1030B-C]
( 4) Applications in connection with the registration of that firm were prerented to the Income Tax Authorities under s. 26A, Indian Income Tax Act,
1922.
AU these applications were signed by the mother and they show that tho
mother never claimed to be a partner of the appellant-firm and that, on the
contrary, she acknowledged that it was her minor son who was entitled to the
4-anna share in the profits. [1029E-GJ
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MOHATTA BROS. v. BHARAT SURYODAYA MILLS (Khanna, J.)
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(5) The directors of the respondent-company ,bad passed a resolution in 1950
referring to the two partnership deeds.
But the entry which was made in the
register of the respondent-company regarding the partners of its managing
agents as required by s. 87, Indian Companies Act, 1913, shows that after April
1, 1949, there were only 5 partners, besides the minor under the guardianship
-Of his mother of the appellant-firm. If the mother had become a partner since
October 24, 1949, it is unlikely that an entry to that effect would not have been
made in the reJdster of the defendant-company, because, under s. 87, a return
has to be sent to the Registrar of Firms regarding any change in the particulars
required to be contained in the register and non-compliance with the requirement
would entail imposition of fine.
[1029A-E]
(6) The letter of resignation sent by the appellant-firm was signed by the
mother also, but there was no indication whether she signed in her capacity
as partner or as the_ guardian of her minor son.
[1028F-G]
(7) Soon after the presentation of the suit, on an application under Order
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XXX, r.2, C.P .C., filed by the respondents, the appellant-firm declared the names
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of its partners and the declaration did not show the mother as one of the
partners. The question as to who should share the profits of the appellant-firm
and should be other,wise entitled to its assets is essentially a matter for the
partners of that firm.
Unlike the case of a defendant-firm from which money
j is claimed ~here each partner may be personally liable, in the case of the plaintiff (appellant) firm claiming money, it would be a wholly untenable plea for the
defendants, from whom money is claimed, to urge that even though the 1nother
as well as other partners claimed that it was not she but her minor son that was
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entitled to the 4-anna share in the partnership, the Court should hold that it
was the mother who was entitled to that share.
[1030C-G]
CIVIL APPELLATE JURISDICTION : Civil Appeals Nos.
2075
&
2076 of 1968.
From the judgment and decree dated the 29th March & 1st April
1968 of the Gujarat High Court in First Apeals Nos. 769 and 1029 of
19W.
E
A. K. Sen, L. M. Singhvi, S. K. Bagga and Mrs. Bagga, for the
~ appellant.
R. P. Bhatt, B. S. Trivedi H. S. Parihar and I. N. Shroff, fer the
respondent.
The Judgment of the Court was delivered by
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KHANNA, J.
These two appeals on certificate by Mohatta Brothers
plaintiff-firm are directed against the judgment of Gujarat High Court
whereby that court reversed on appeal the judgment of the trial court
awarding a decree for recovery of Rs. 77,286/0 Anna/2 Pies
in
favour of the plaintiff-appellant against the respondent-company and
dismissed the suit.
The plaintiff is a partnership firm doing business under the name
and style of Mohatta Brothers.
The plaintiff-firm carried on the business of managing agency of the defendant company up to September
4, 1950. Sometime before that date, it appears
the
plaintiff-firm
expre5'ed an intention of giving up the post of managing agents.
On
July 31, 1950 Chaturbhujdas on behalf of
M/s.
Chaturbhujdas,
Kharawala M0hatta & Co. submitted scheme Ex. 168 in consultation
with the plaintiff.
Paras 5, 6 and 7 of the scheme were as under :
" ( 5) Before our this Scheme is approved by the Company the present Directors shall submit before the Company
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SUPREME COURT REPORTS
[1976] 3 s.c.1'..
the Balance Sheets and the Profit and Loss Account upto
the end of the year 1949 and get the same passed, and they
shall get the Proforma Balance Sheet up to the date 31-7-5 0
prepared by the Auditors of the Company and shall hand
over the same to us, and this Scheme has been given while
understanding that at present everything is according to the
list of machinery given to us by the present Agents.
And
no one has any kind of charge or debt claimable from the
Company till this day excep'.ing the approximate amount of
Rs. 4,77,850/- due to the Agents and their kith and kin till
this day and the list of which is given to us.
We give this
Scheme believing the said fact true.
(6) The amounts of the Agents of the Company and
their kith and kin which may have been deposited in the
Company on the day the date 31-7-50 and which come to
a)lout Rs. 4,77,850/- as told by the present Agents are to
be kept credited in their accounts and interest thereon is ·
not to be given from the date 1-8-50. And when our Scheme
is approved they have not to take any interest on the said
amounts from the Company for five years from the date we
start the work of the Mills and they have not to withdraw
the said amounts for a' period of ten years therealiter but the
same are to be kept credited in the Company with interest
at six per cent.
But the Company shall return the amounts
earlier if it so desires.
(7) At present the amount of Rs. 3,46,466-11-8 is due
to the Punjab National Bank Ltd. by the Company and the
demand of giving bonus to the workers for the year 1949 is
outstanding from the Company.
The present Agent states
that in both of the said matters payments can be made from
the amounts obtained by selling the goods of stores, etc.
which is lying with the Company at present, the list of which
is given to us by the present Agents, and from the amounts
of E.P.T. deposit and advance payments of the income tax.
On making arrangement accordingly if the debt of the Bank
is not fully paid or the liability of bonus is not fully fulfiIIed
and if the Company is found responsible in any way, then the
same is to be fuifilled by the present Agent.
But after fuifilling all liabilities accordingly if any amount
remains in balance the same shall be treated as assets of the
Company and half of the said amount shall be returned towards the above mentioned amount deposited in the Company and which belongs to the present Agent and their kith
and kin.
But on fulfilling completely the liability of the
Bank from the sale of goods of the Stores, etc. if there does
not remain sufficient surplus or before getting the amount of
E.P .T. deposit and income tax advance
payment if the
amount of bonus is required to be paid then the present
Managing Agents has to give that amount first."
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MOHATTA BROS. V. BHARAT SURYODAYA MILLS (Khanna, J.)
1025
On the following day, i.e. August 1, 1950, the following Jetter was
addressed by the plaintiff-firm to the Board of Directors of the defen-
~ ""· dant-company :
"We Messrs Mohatta Brothers, the Secretaries, Treasurers & Agents of the company hereby beg to tender our
resignation as Secretaries, Treasurers and Agents of the Company on condition of the scheme of Sheth Chaturbhujdas
Chirnanlal dated 31-7-50 duly approved by the Board of
Directors, being passed by the share-holders of the company
in the Extraordinary General Meeting of the company to be
held on 4th September, 1950.
FOR MOHATTA BROTHERS
Ahmedabad
Shivaratan G. Mohatta
Chandratan G. Moondhra
D. R. Moondhra
Brijratan S. Mohatta
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S. R. Mohatta
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Satyavati Mohatta"
A notice was then issued for convening a general meeting of the
defendant-company on September 4, 1950 for sanctioning the said
scheme.
The said scheme was approved by the shareholders on
September 4, 1950. Accordingly, as from that date Messrs Chaturbhujdas Kharawala Mohatta & Co. took over as the new managing
~ agents of the defendant-company instead of the plaintiff-firm.
The plaintiff's case was that the liability of the Punjab National
Bank was fully discharged by sale of the stores.
No bonus was held
to be payable by the Industrial Court to the employees of the company
for the year 1949. It was stated that there was surplus left after discharging the liability of the Punjab National Bank from earmarked
assets consisting of excess profit tax deposits, income tax advance
amount and the amounts realised from the sale of the stores. The
plaintiff-firm claimed half the surplus in terms of clause (7) of the
scheme towards the deposit amounts of the plaintiff.
Prayer was
made for accounts of the. surplus and decree for the amount due as per
terms of the scheme with 9 per cent interest.
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It may be stated that the plaintiff-firm with effect from April 1,
". 1949 .consisted of five partne~. In addition to those five partners,
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Shash1 Kumar, who was a mmor and whose mother Satyavati was his
guardian, was entitled to four Anna share in a rupee in the profits of 1
the partnership but was not liable for its losses.
Partnership deed
~x. 115 was executed for this purpose on May 19, 1949 and was
signed by the five partners and Satyavati.
On October 24
1949
another partnership deed Ex. 116 was executed wherein s'atyavati
was shown as a partner of the plaintiff-firm instead of her minor son
Shashi Kumar.
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The suit was resisted by the defendant-company. Besides taking
other pleas with which we are not conc~rned, the defendant contended
that the plainllff firm could not maintam the suit as the constitution of
the old firm which acted as managing agents of the defendant-company
had been changed on October 24, 1949. From that date, it was
stated, the plaintiff-firm consisted of six partners, including Satyavati.
The newly constituted firm, according to the defendant-company, had
not been registered and as such the suit was not maintainable.
The trial court held that the new partnership deed Ex. 116 by which
Satyavati became a partner was not acted upon. As the original partnership mentioned in the partnership deed dated May 19, 1949 had
been registered, the plaintiffs suit was held to be not barred by section
. 69 of the Indian Partnership Act. It is not necessary to refer to the
other issues and the findings of the trial court on those issues. Suffice
it to say that the defendant was held entitled to deduct certain amounts
from the amount claimed by the plaintiff. The trial court accordingly
passed the following order_ :
"The plaintiff has filed this suit for account as the
account was to be• taken of the realisation and expenses of
the stores. But by pursis Exhibit 424
t_he
parties have
agreed about the net realisation of the stores and have
therefore urged that no Co=issioner be appointed and · a
final decree be passed. The real account was to be taken
of the actual receipts and expenses of the sale of stores. But
now nothing is required to be done and hence there is no
necessity of passing any preliminary decree.
The plaintiffs
as shown above are entitled to receive Rs. 77,286-0-2, from
defendant towards their deposit amount being the net surplus
which they are entitled. Hence defendants are liable to pay
the said amount to plaintiff. The plaintiff should pay the
remaining Court-fee stamp within a month.
I, therefore,
pass the following order.
ORDER-··
Defendants do pay Rs. 77,286-0-2 and the cost of the
snit to plaintiff with futnre interest at 6 per cent from 1st
January. 1956. The plaintiff should
pay the remaining
Court fees within a month. Defendants to bear their own
cost."
Two cross-appeals were filed against the judgment and decree of
the trial Court. One appeal was by the defendant-company praying
for the dismissal of the plaintiff's suit. ·The other appeal was by the
plaintiff-firm claiming for enhancement of the amount decreed by the
trial court.
One of the contentions advanced
by the defendantcompany was as under :
"The plaintiff-firm was not entitled to file a suit as the
plaintiff-firm was differently constituted from· the firm
of
Mohatta Brothers as on 31st July 1950, and, in any event, as
the minor Shashikumar had become major in 1953 and had
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MOHATTA BROS. v. BHARAT SURYODAYA MILLS (Khanna, J.) 102 7
become a partner of the plaintiff-firm Mohatta Brothers,
Ahmedabad, and as even the name of Satya vati Devi who
was the partner suing did not apepar in the entry in the register of firms the present snit was barred under section 69(2) of
the Act." ·
Dealing with the above contention, the High Court disagreed with the
finding of the trial court that partnership deed Ex. 116 dated October
24, 1949 had not been acted upon.
The learned Judges of the High
Conrt held so far as the first part of the above contention is concerned
that when a firm is reconstituted by introduction of a new partner, it
would remain the sgme registered firm, and there would be no necesA
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sity of fresh registration if the continuing firm was registered with the
Registrar of the Firms under section 59 of the Indian Partnership Act.
Dealing with the contention that Shashi Kumar had become
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the High Court found that there was no evidence to show the age of
Shashi Kumar and the whole argument in this respect was based on
niere conjecture. On the latter part of the submission, the High Court
held that the mandatory condition under section 69(2) of the Indian
Partnership Act was not fulfilled in the present case as the name of
Satyavati who was a partner of the reconstituted firm and in
whose
favour a cause of action had accrued was not shown in the register of
the firms.
This defect was held to be fatal. The High Court in this
context observed :
"In view of this legal position which we have discussed
the second mandatory condition under section 69 (2) is not
fulfilled in the present case as the name of Satyavati who
was partner of the reconstituted firm and in whose favour
the cause of action had accrued is not shown in the register
of firms.
This defect would be fatal as the first defect of
want of registration of the firm itself and in both the cases
we would have no option but to dismiss the suit.
In that
view of the matter it would be wholly unnecessary to go into
any of the other contentions which have been raised in these
two appeals and to record any· finding on the issues relating
to the merits of the case or as regards the other appeal of the
plaintiff as well.
Howsoever much we may regret to dismiss
the plaintiff's suit which apparently is well founded by upholding this technical objection of the defendant company.
we are bound to dismiss this suit as in law a non-compliance
of this second mandatory condition is also equally fatal as
the non-compliance of first condition.
At the same
time,
however, in the circumstances of the cases while dismissing
the plaintiff's suit we would order both the parties shall bear
their own costs all throughout."
In appeal before us Mr. Sen on behalf of the appellants has assailed the judgment of the High Court in so far as it has disagreed with
the finding of the trial court that Satyavati was not a partner of the
plaintiff-firm and the deed of partnership dated October 24, 1949 had
not been acted upon.
Mr.· Sen has also questioned the correctness oE
the view taken by the High Court regarding the construction of section
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69 (2) of the Indian Partnership Act.
As against that, Mr. Bhatt on
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behalf of the respondents has canvassed for the correctness of the view
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taken by the High Court, both on the question of fact as well as on the
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question of law.
After hearing the iearned counsel for the parties and after having
been taken through the relevant material on the record, we are of the
opmivn that the trial court took a correct view of the matter in so far
as it has held that Satyavati did not become a partner of the plaintififirm and that the deed of partnership dated October 24, 1949 was not
acted upon.
The main consideration which prevailed with the High Court in
holding that Satyavati became a partner of the plaintiff-firm was the
execution of deed of partnership dated October 24, 1949. According
to this deed, Satyavati became a partner to the extent of 4 Annas share
out of 16 Annas, which had been previously held by her minor son "
Shashi Kumar. Shashi Kumar under the deed of partnership of May
19, 1949 was entitled to the share of profits to the extent of four
Annas in a rupee and was not liable for the losses which were to be
borne by the other five partners. Satyavati became entitled undec the
deed of October 24, 1949 not only to the share of profit to the extent
of 4 Annas in a rupee but also became liable to share losses to that
extent.
The other circumstance relied upon by the High Court was
resolution dated January 21, 1950 passed by the Board of Directon
of the defendant-company.
That meeting was presided over by
Shivratan G. Mohatta, partner of the plaintiff-firm.
In that resolution
there was reference to partnership deeds dated May 19,
1949 and
October 24, 1949 which had been received along with letter dated
"
December 1, 1949 from Mohatta Brothers. The Board of Directors
took note of the changes mentioned in the above two partnership deeds
and agreed to accept the partners therein mentioned.
The third circnmstance relied npon by the High Court is letter dated Augnst 1,
1950 Ex. 118 which was sent on behalf of the plaintiff-firm, Mohatta
Brothers, for the purpose of tendering resignation as Secretaries,
Treasnrers and Agents of the defendant-company. This letter was
,signed, besides the other partners, by Satyavati.
There was, however,
no indication in the letter as to whether Satyavati signed it in her capacity as a partner or as the gnardian of her minor son Shashi Kumar.
As against the circumstances relied upon by the High Court, we
find that in the register relating to the registration of firms kept under
the Indian Partnership Act, an entry was made on May 5, 1952 relating to the registration of the plaintiff-firm.
The above entry was
plainly in pursuance of application filed on behalf of the plaintiff-firm
shortly before the making of that entry.
The above entry shows that
the position taken up on behalf of the plaintiff-firm even in the year
1952 was that there were only five partners of the plaintiff-firm and
that in addition to that, Shashi Kumar minor was admitted to the
benefit of partnership. The entrv thus reveals that even in the. year
1952 the stand of the partners of the plantiff-firm was that Satyavati
was not a partner r>f the olaintiff-firm and that it was her minor son
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I 02 9
Shashi Kumar who was entitled to share in the profits of the partnership.
This entry would be mexplicable if Satyavati had become a
partner of the plaintiff firm with effect from October 24, 1949.
Another circumstance which goes to show that Satyavati did not
become a partner of the plamtiff-firm is the entry in the registers of the
defendent-company. According to section 87 of the Indian Companies Act 1913, which was the Act in fqrce at the relevant time, every
company shall keep inter alia at its registered office a register of
managmg agents containing with respect to each of them the following
particulars, that is to say, in the case of a firm, the full name, address
and nationality of each partner, and the date on which each became a
partner.
The entry which was made in the register of the defendantcompany regarding the partners of its managing agents showed that
after April 1, 1949 there were five partners besides Shashi Kumar
minor under the guardianship of his mother Satyavati, of the firm of
the managing agents Mohatta Brothers.
Although the above entry
was made on October 6, 1949, no subsequent entry was made thereafter showing Satyavati as partner of the firm of Mohatta Brothers.
Had Satyavati in fact become a partner since October 24, 1949 of
Mohatta Brothers, it seems unlikely that an entry to that effect would
not be made in the register of the defendant-company. It may aloo
be mentioned in the above context that return has to be sent to the
Regis'.rar of Firms under section 87 regarding any change in the particulars required to be contained in the register.
Failure to comply with
the above directions entailed imposition of fine.
The third significant circumstance which tends to show that Satyavati despite the execution of the deed of partnership dated October 24,
1949 did not become a partner of the plaintiff-firm is evidenced by
applications in connection with the registration of that firm which were
presented to the income-tax authorities under section 26A of
the Indian Income-tax Act, 1922. Ex. 280 to 286 are the applications which were filed on behalf of the plaintiff-firm for the years
1949-50 to 1956-57. In all these applications, Shashi Kumar minor
under the guardianship of Satyavati was shown entitled to 4 Anni!!
share in a rupee in the plaintiff-firm.
Satyavati was not shown in any
of these applications as partner of the plaintiff-firm. All. these applications which were signed by Satyavati clearly go to show that during
these years she did not claim herself to be partner of the plaintiff firm.
On the contrary, she acknowledged that it was her minor son Shashi
Kumar who was entitled to 4 Annas share in the profits of the partnership.
Documentary evidence which has been brought on the record
in
our opinion, clearly lends support to the statement of Shivratan (PW 1)
that partnership deed dated October 24, 1949 was not acted upon
and that Satyavati did not become a partner of the plaintiff-firm.
~ivan. Das PW, who was an employee of the defendant-company, ha~
likewise deposed that Satyavati was never a partner of Mohatta
Brothers.
During the hearing of the appeal, affidavit of Satyavati has been
filed stating that she was never a partner of Mohatta Brothers and it
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SUPREME COURT REPORTS
[1976] 3 s.c.R.
was her son Shashi Kumar who was at all material times admitted to·
the benefit of the partnership. Mr. Bhatt has objected to this Court
taking notice of the contents of the affidavit of Satyavati including her
disclanner of any interesnn the plaintiff-firm.
In this respect we arc
of the view tha: even without the above affidavit, the material on
the record clearly goes to show that Satyavati was not a partner of the
plaintiff-firm.
In addition to what has been pointed out, we find that in the statement of accounts of the plaintiff-firm it is Shashi Kumar and not
Satyavati who is shown to have 4 Annas share in the plaintiff-firm.
Entries show that Shashi Kumar shared the profits as well as the losses
in that proportion.
The significant thing which emerges from
the
account books is that Satyavati was not shown as the person entitled
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to 4 Annas share in the partnership firm.
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Soon after the present suit had been filed, on application filed on
behalf of the defendants under Order XXX, Rule 2 of the Code of
Civil Procedure, names of the partners of the plaintiff-firm were
declared on behalf of the plaintiff-firm.
In the declaration the name
of Satyavati was not mentioned as one of the partners of the plaintiff·
firm.
The question as to who should share the profits of the plaintifffirm and should be otherwise entitled to its assets is essentially a matter
for the partners of the plaintiff-firm.
The facts of the case disclose
that the partners of the plaintiff-firm have agreed between themselves
that so far as the 4 Annas share in the profits and assets of the plaintiff-firm are concerned, it would be Shashi Kumar who would be
entitled to the same.
That position is also accepted by Satyavati in
the applications in connection with the registration of the firm to the
income-tax authorities. It would, in our opinion, be a wholly untenable plea for the defendant from whom money is claimed, to urge that
even though Satyavati as well as the other partners claim that it is not
she but her son Shashi Kumar who is entitled to 4 Annas share in the
partnership, the court should hold that it is Satyavati who is entitled
to that share.
The distinction between a plaintiff-firm and a defendant-firm in the above context should not be lost sight of.
So far as a
defendant-firm against whom a suit for recovery of money has been
filed is concerned, it would be open to the plaintiff to prove that a person is a partner of the defendant firm despite the denial of that fact by
that person as well as the other partners of the defendant-firm.
The
reason for that is that a creditor of a defendant-firm can, except in
some cases to which it is not necessary to refer, also proceed against
the personal assets of each and every partner. Such a consideration
does not hold good when the dispute relates to the question as to who
are the partners of the plaintiff-firm.
It has been mentioned above that Shivratan stated in the course of
his deposition that partnership deed dated October 24, 1949 had not
been acted upon.
This statement is against the pecuniary interest of
Shivratan. It is plain that if Satyavati were a partner of the plaintifffirm, Shivratan and other partners would have to bear looses to the
extent of 12 Annas in a rupee.
As against that, if Shashi Kumar be
entitled to share profits to the extent of 4 Annas in a rupee and be not
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MOHATTA BROS. v. BHARAT SURYODAYA MILLS (Khanna, J.)
1031liable for the losses, in such an eveut Shivratan and other partners
would have to bear the losses to the full extent of 16 Annas in a rupee.
If despite that fact, Sh1vratan has deposed that SatayvatJ did not become a partner of the plaintiff-firm and the deed of partnership dated
October 24, 1949 was not acted upon, his statement in this
respect
should not, in our view, be rejected, especially when there is overwhelming documentary evidence which lends support to the
above
statement.
The entire course of dealings shows that despite the execution of
the deed of partnership dated October 24, 1949, the said partnership
deed was not acted upon and the relations between the partners of the
plaintiff-firm continued to be governed by the deed
of partnership
dated May 19, 1949 according to which it was not Satyavati but her
son Shashi Kumar who was entitled to four Annas share in the partnership. The question, to which a reference has been made in the
course of arguments, as to when it was decided not to act upon t!tc
deed of partnership dated October 24, 1949 is hardly of much importance, the material thing is that the said deed was not given effect to
or acted upon by the parties concerned. The firm which came into
existence as per deed of partnership dated May 19, 1949 was admittedly registered under the Indian Partnership Act and its partners were
shown in the Register of Firms.
Looking to all the facts we are of the opinion that the trial court
took a correct view of the matter in so far as it held that Satyavati had
not become a partner of the plaintiff-firm and that the deed of partnerA
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ship dated October 24, 1949 had not been acted upon.
The High
Court, in our opinion, was in error in reversing that finding of the trial
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court.
In view of this conclusion of ours, it is not necessary to go
into the legal qu,estion as to what should be the proper construction of
section 69(2) of the Indian Partnership Act.
Learned counsel for the
parties are agreed that such question would arise only in case we had
affirmed the finding of the High Court that Satyavati had become a
prtner of the plaintiff-firm and that the deed of partnership dated
October 24, 1949 had been acted upon.
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The High Court did not deal with the merits of the cross-appeals
filed by the parties in view of its finding on the point as to whether
Satyavati had become partner of the plaintiff-firm and the construction
it placed upon section 69(2) of the Indian Partnership Act.
In the
light of the conclusion we have arrived at, it becomes essential to
remand the matter to the High Court so that the cross-appeals filed
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by the parties may be disposed of on merits.
We accordingly accept
the appeals, set aside the judgment of the High Court and remand the
case to it for disposal of the appeals filed by the parties on merits
Looking to all the circumstances, we leave the parties to bear their own
costs of these appeals.
As the matter has been pending for a long time, the High Court
may dispose of the appeals at an early date.
V.P.S.
Appeals allowed.
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