Sd. Gurmukh Singh Anand Huf And ... vs Sd. Suchacha Singh Anand And ...
1995 Latest Caselaw 840 Del

JUDGMENT

S.D. Pandit, J.

1. Suit No. 2619 of 1992 is filed by Gurmukh Singh Anand against his brother, Surja Singh Anand, and his sons for the dissolution of the partnership between the plaintiff and the defendants and to take accounts of the said partnership business.

2. It is the case of the plaintiff that the late Sardar Pachu Singh, father of Gurmukh Singh and the defendant, Surja Singh, has started the business of distribution of petroleum products, like petrol and lubricants in the name and style of Gurmukh Singh at 2775, Lodium road, Kashmiri Gate, Delhi. The said Sardar Pachu Singh expired in the year 1954 and his sons, the plaintiff, Gurmukh Singh, and the defendant, Surja Singh, inherited the said business and then they entered into a partnership and carried on the said business and then they entered into a partnership and carried on the said business partnership from 1954 to 1992. But the plaintiff, Gurmukh Singh, had gone to the United States of America in 1972, and he was there for about 10 years. When he came back he found that the defendants had opened a separate bank account and instead of crediting the sales proceeds in the partnership account in the Canara Bank, they were depositing the amounts in the account opened in their name. They were not also allowing him to participate in the management of the business. They were also not giving him any share in the profits of the said business and prevented him from entering into the partnership business premises and, therefore, he has come to the court with this suit.

3. The claim of the plaintiff is resisted by the defendants and it is the contention of the defendants that after the plaintiff had gone to the USA in 1972, the plaintiff had obtained American citizenship and from June, 1977, plaintiff, Gurmukh Singh, had ceased to be an Indian citizen and he had obtained citizenship of the USA. The plaintiff, Gurmukh Singh, was prevented by the provision of law from carrying on any business in India in view of the provisions of the Foreign Exchange Regulation Act, 1973, the plaintiff could not legally carry on any business in India, and consequently, the partnership between the plaintiff and the defendant stands dissolved on the date when he ceased to be an Indian citizen and became an American citizen. Therefore, in the circumstances, the suit for dissolution of partnership filed in the year 1992 is not at all tenable in law and, therefore, the same is liable to be dismissed.

4. The defendants had not disputed the relationship between the plaintiff and the defendants. They had not also disputed in the written statement that the partners, Gurmukh Singh and Surja Singh, had entered into a partnership for carrying on the business in question after the death of their father in the year 1954 and that they were carrying on the business of partnership in the year 1972, when the plaintiff, Gurmukh Singh, left Indian for America.

5. After the defendants filed their written statement, the plaintiff has filed this Interim Application No. 3670 of 1995, under Order XII, rule 6 read with section 151 of the Code of Civil Procedure to pass a preliminary decree for dissolution of the partnership firm. It is contended in this interim application by the plaintiff that the defendants have clearly admitted the existence of the partnership firm, Surja Singh Gurmukh Singh. They also accepted that in the said partnership firm the plaintiff had a 50 per cent. share and the defendants have 50 per cent. share. When the existence of the partnership is accepted and when the shares are also accepted and when the partnership is at their will the court should be pleased to pass a decree under Order XII, rule 6 read with Order XX, rule 15 in view of the admission given by the defendants in their written statement.

6. The claim of the plaintiff is resisted by the defendants by filing the reply. It is their contention that in view of the provisions of the Foreign Exchange Regulation Act, 1973, the plaintiff has ceased to be a partner of the said partnership when he ceased to be an Indian citizen and when he became an American citizen. Admittedly, that event has taken place in the year 1977. Therefore, the plaintiff has ceased to be a partner in the said partnership firm under the provisions of law and the partnership firm stands dissolved. When the partnership is already dissolved long before the date of the suit, the plaintiff is not entitled to get the preliminary decree as on the said date of the suit, the partnership was not in existence. Thus, it is contended on behalf of the defendants that the suit in question is not tenable and, consequently, there is no question of passing any preliminary decree in the suit.

7. Therefore, in view of the contentions raised by the plaintiff and the defendants the issues which arise for my consideration and my findings thereon for the reasons thereon are as under :

                        Issue                            Finding
1. Whether the partnership between the
plaintiff and the defendants stand dissolved in view
of the provisions of the Foreign Exchange Regulation
Act, 1973 ?                                                No.
2. Whether a preliminary decree for dissolution of the
partnership is to be passed in the suit ?                  Yes.
3.  What order and decree as per the order.               As  per
                                                          final
                                                          order.  
 

8. It must be stated at the outset that inadvertently, I.A. No. 3670 of 1995 is wrongly typed as an application under Order 20, rule 6. It seems that there is a mistake in quoting Order 20 instead of Order 12 of the Code of Civil Procedure. It is settled law that the court has to consider the application by reading the contents of the application as a whole and not to be misled by the mere title of the application, I, therefore, treat this application as an application under Order 12, rule 6, of the Code of Civil Procedure.

9. It is an admitted fact that the plaintiff, Sardar Gurmukh Singh, had left India some time in the year 1970-71 and had gone to the United States of America. It is also not in dispute that Sardar Gurmukh Singh has obtained American citizenship in the year 1977. In view of these admitted facts a contention is raised on behalf of the defendants that in view of the provisions of the Foreign Exchange Regulation Act, 1973, the plaintiff, Gurmukh Singh, could not continue the partnership between him and his brother, Sardar Sucha Singh, and the moment he obtained the American citizenship, he ceased to be the partner of the partnership between the two brothers. This contention raised on behalf of the defendants is resisted by the plaintiff on two counts. It is contended that the Hindu undivided family of Sardar Gurmukh Singh and the Hindu undivided family of Sardar Sucha Singh are the partners of the partnership firm. Therefore, though Sardar Gurmukh Singh had obtained American citizenship, his son was the member of the Hindu undivided family of Sardar Gurmukh Singh and he must be presumed to have continued the same partnership and the partnership would not come to an end on Gurmukh Singh ceasing to be an Indian citizen and becoming an American citizen. Secondly, it is contended that even if Gurmukh Singh had obtained an American citizenship, his partnership with his brother in India would not become illegal and unvalid.

10. The first contention raised on behalf of the plaintiff is that the Hindu undivided family of Gurmukh Singh and the Hindu undivided family of Sucha Singh are the partners and, consequently, the partnership would not come to an end. But the said contention is not a proper and legal contention. It must be remembered that a Hindu undivided family is a legal entity and it is not a juristic person for all purposes. A Hindu undivided family may be included as a person as defined in the Income-tax Act as well as the Excess Profit Tax Act but it is not a juristic person for all purposes. Consequently, there could not be a partnership of two Hindu undivided families as claimed by the plaintiff. Similarly, a Hindu undivided family could not be a partner though the karta of the Hindu undivided family could become a partner and the loss and profits of which are incurred by the karta could be of the Hindu undivided family of which he is the karta but that does not mean that Hindu undivided family is a partner in the partnership. The question of considering as to whether a Hindu undivided family could be a partner or not is considered by the Supreme Court in the case of Kshetra Mohan-Sannyasi Charan Sadhukhan v. CEPT [1953] 24 ITR 488 and the following principles are laid down (headnote) :

"A Hindu undivided family is included in the expression 'person' as defined in the Income-tax Act as well as the Excess Profit Tax Act but it is not a juristic person for all purposes. When two kartas of two Hindu undivided families enter into a partnership agreement, the partnership is properly described as one between the two Hindu undivided families. But in the eyes of the law, it is a partnership between two kartas and all the members of the families do not ipso facto become partners. There is, however, nothing to prevent the members of one Hindu undivided family from entering into a partnership with individual members of another Hindu undivided family and in such a case. It is a partnership between individual members and it is wholly inappropriate to describe such a partnership as one between the two Hindu undivided families."

11. A similar view is again expressed by the Supreme Court in the case of Ram Laxman Sugar Mills v. CIT [1967] 66 ITR 613 where the following principles are laid down :

"A Hindu undivided family is undoubtedly a 'person' within the meaning of the Indian Income-tax Act. It is, however, not a juristic person for all purposes and cannot enter into an agreement of partnership with either another undivided family or individual."

12. From the very nature of its fluctuating composition consisting of members some of whom may not have attained the age of majority and some may at a given time be unborn, the joint Hindu family is incapable of entering into a partnership agreement contemplating the creation of rights of agency amongst its members. Therefore, the contention raised on behalf of the plaintiff that the partnership is of two Hindu undivided families is not tenable in law. The plaintiff, Gurmukh Singh, and the defendant, Sucha Singh, are two individual partners, and they are the sole partners of the partnership firm in question and the members of their Hindu undivided family could not be treated and the members of their Hindu undivided family could not be treated and considered as the partners of the partnership in question. Therefore, in the circumstances, the contention raised on behalf of the plaintiff that even after the plaintiff obtained American citizenship the members of his Hindu undivided family are the partners of the partnership in question is not tenable.

13. At the cost of repetition it must be said that it is an admitted fact that the plaintiff, Gurmukh Singh, has left India and settled in America some time in 1971. It is also an admitted fact that he was residing in America till 1992 and in the year 1977, he had obtained American citizenship. Admittedly, the partnership between the plaintiff and the defendant started on April 1, 1963, and the said partnership was not dissolved till the plaintiff, Gurmukh Singh, had left India in 1970-71. It must be also mentioned here that it is not a claim of the defendant that the partnership in question has been dissolved by agreement between the parties or by a decree of the court at any time before the date of the present suit. The contention raised on behalf of the defendants is that in view of the provisions of the Foreign Exchange Regulation Act, 1973, the partnership in question, stands dissolved. Therefore, in order to consider that contention of theirs we have to go to the provisions of the Foreign Exchange Regulation Act, 1973. But before referring to the said provisions of the Foreign Exchange Regulation Act, 1973, in this necessary to mention here that the partnership between the plaintiff and the defendant had already come into existence and that the said partnership was carrying on the business of running a petrol pump and selling and disbursing petroleum products since the year 1963. It is also an admitted fact that the said business is continued at the same terms, viz. till this date. The provisions of the Foreign Exchange Regulation Act, 1973, have come into force on January 1, 1974. Thus, the said Act has come into existence when the partnership of the plaintiff and defendant No. 1 was already in force and the said partnership was carrying on the business and when the plaintiff, Gurmukh Singh, had not obtained American citizenship and had not ceased to be an Indian citizen. At the cost of repetition, it must be mentioned that in the year 1977, the plaintiff, Gurmukh Singh, had obtained American citizenship. Thus, he had obtained American citizenship after the Foreign Exchange Regulation Act, 1973.

14. In the light of the above admitted facts, the relevant provisions of the Foreign Exchange Regulation Act, 1973, will have to be considered. The learned advocate for the defendants is relying on the provisions of sections 29 and 47 of the Foreign Exchange Regulation Act, 1973. Sub-section (1) of section 47 reads as under :

"No person shall enter into any contract or agreement which would directly or indirectly evade or avoid in any way the operation of any provision of this Act or of any rule, direction or order made thereunder".

15. If the facts of the present case are considered then it would be quite clear that provision of sub-section (1) of section 47 is not covering the partnership in question because admittedly, the partnership in question has taken place prior to the provisions of the said Act coming into force. Section 29 of the said Act of 1973 is providing restrictions on establishment of business in India. The case before me as per the contention of the learned advocate for the defendant is governed by sub-section (2) of section 29 of the said Act of 1973. In view of the said contention, it is necessary to see the provisions of sub-section (2) of section 29 which run as under :

"29(2)(a). Where any person or company (including its branch) referred to in sub-section (1) carries on any activity referred to in clause (a) of that sub-section at the commencement of this Act or has established a branch, office or other place of business for the carrying on of such activity at such commencement, then, such person or company (including its branch) may make an application to the Reserve Bank within a period of six months from such commencement or such further period as the Reserve Bank may allow in this behalf for permission to continue to carry on such activity or to continue the establishment of the branch, office or other place of business for the carrying on of such activity, as the case may be.

(b) Every application made under clause (a) shall be in such form and contain such particulars as may be specified by the Reserve Bank.

(c) Where any application has been made under clause (a) the Reserve Bank may, after making such inquiry as it may deem fit, either allow the application subject to such conditions, if any, as the Reserve Bank may think fit to impose or reject the application :

Provided that no application shall be rejected under this clause unless the parties who may be affected by such rejection have been given a reasonable opportunity for making a representation in the matter.

(d) Where an application is rejected by the Reserve Bank under clause (c), the person or company (including its branch) concerned shall discontinue such activity or close down the branch, office or other place of business established for the carrying on of such activity, as the case may be, on the expiry of a period of ninety days or such other later date as may be specified by the Reserve Bank from the date of receipt by such person or company (including its branch) of the communication conveying such rejection.

(e) Where no application has been made under clause (a) by any person or company (including its branch), the Reserve Bank may, by order, direct such person, or company (including its branch) to discontinue such activity or to close down the branch, office or other place of business established for the carrying on of such activity, as the case may be, on the expiry of such period as may be specified in the direction :

Provided that no direction shall be made under this clause unless the parties who may be affected by such direction have been given a reasonable opportunity for making a representation in the matter."

16. As per the above provisions, it would be quite clear that any person carrying on commerce and trade activities at the commencement of the said Act was permitted to make an application to the Reserve Bank of India for granting permission to continue to carry on the said commerce and trade. Admittedly, no such application is made in this case. But merely, because no such application in this case was made it could not be said that the continuance of the business is an illegal act. The above-quoted sub-section (2)(e) clearly lays down that when no application is made under clause (a), the Reserve Bank may order or direct such person to discontinue such activities or business within a specified period. It is an admitted fact that no action is also taken as contemplated by sub-section (e) of section 29(2) of the Foreign Regulation Act, 1973. Sub-section (3) of section 29 gives powers to the Reserve Bank of India to grant exemption. Therefore, if the provisions of sub-sections (2) and (3) of section 29 are read together then it would be quite clear that a non-resident Indian who was a citizen when he has started a partnership firm in India and the said partnership firm had continued till the said Act of 1973 came into force and if the Reserve Bank of India does not issue any order or direct him to close the business or to discontinue the business activity then the continuation of the said business could not be said to be an illegal act.

17. As stated earlier, it is an admitted fact that the agency of sale and distribution of petroleum products was initially taken by the father of the plaintiff and the defendant and the said business was inherited by the plaintiff and the defendant and the said business was converted into a partnership business in 1963. The said business was going on for more than three decades prior to the date on which this Act came into force. The business, in question, has not also been on large scale. If the provisions of sub-section (1) of section 29 are carefully read then it would be quite clear that the prohibition contemplated is for starting a commerce or trade by a non-resident Indian or a foreigner and it does not intend to create a bar for all types of business activity. Therefore, in the circumstances, it seems that the Reserve Bank of India thought it proper not to take any action under sub-section (3) of section 29 of the Foreign Exchange Regulation Act, 1973. If no action was taken by the Reserve Bank of India under sub-section (3) of section 29 and if it has not issued either an order or direction to the plaintiff to close down the said partnership business then the continuation of the said business would not become illegal under the provisions of section 29. It must be mentioned here that the business in partnership by a non-resident Indian was started before he became a non-resident Indian and continued before the said Act came into force. Therefore, the said business cannot become an illegal business if no permission is obtained from the Reserve Bank of India. The learned advocate for the defendants has cited before me the case of Mohrilal v. Ballabh, . In that case, a partnership firm carrying on business of tobacco was not holding any license but only one partner of the said partnership was holding a license and, therefore, the partnership business in tobacco was held to be an illegal business and, consequently, the suit for its dissolution or rendition of accounts was held to be not tenable in law. Thus, the facts of the said case are not applicable to the facts of the case before me. The learned advocate for the defendants had also cited before me the case of Hudgeliyates v. Watson [1978] 2 All ER 363. In that case, a partnership firm of solicitors was created but one of the partners had let his practicing license lapse and, consequently, he was not entitled to act as a solicitor. Consequently, the partnership had come to an end on the day one of the partners had ceased to have a practicing certificate. That case has also no application to the facts of the case before me.

18. Therefore, in view of the above discussion, I hold that the partnership in question had not come to an end and was not dissolved on account of the plaintiff, Gurmukh Singh, becoming a citizen of America. Consequently, the plaintiff's present suit is tenable in law. Admittedly, there is no dispute about the shares of the plaintiff and the defendants. The plaintiff does not want to continue with the partnership and hence, a preliminary decree for dissolution of partnership will have to be passed in this case. I, therefore, pass the following order :

"1. The partnership between the plaintiff, Sd. Gurmukh Singh Anand, and defendant No. 2, Sd. Sucha Singh Anand, entered into on April, 1963, stands dissolved from today.

2. Shri Muni Lal Jain, retired District Judge, and practicing advocate of this court is appointed as Commissioner. The said court Commissioner should sell the partnership business and he should take accounts of the said partnership business from April 1, 1971, till this day and find out to what amount the plaintiff is entitled towards his 50 per cent. share in the said partnership business.

3. The Commissioner's free is initially fixed at Rs. 10,000.

4. A preliminary decree be drawn up accordingly."

19. I.A. No. 9440 of 1995 in S. No. 2619 of 1992 :

20. Heard both the sides. The plaintiff in this case has gone abroad as per the earlier order passed by this court. When an amount is to be withdrawn from the bank, the cheque is to be jointly signed by the plaintiff and defendant No. 2. As the plaintiff has gone abroad, he has authorised the Local Commissioner appointed by this court in this suit to sign the cheque on his behalf Along with defendant No. 2 while withdrawing amount from the bank, but the bank has not accepted the said authorisation given by the plaintiff and, therefore, defendant No. 2 has moved this application and he is seeking permission of this court to allow him alone to sign the cheque to withdraw the amount, but in view of the disputes between the plaintiff and the defendants and in view of the preliminary decree passed by me today, it would not be proper and just to allow defendant No. 2 alone to sign the cheque and withdraw the amounts from the bank. I would, therefore, hold that in view of the consent and authorisation given by the plaintiff, the cheque for withdrawal of the amount should be jointly signed by the Local Commissioner, Shri B. B. Gupta, advocate, appointed in this suit and defendant No. 2, Shri Suchcha Singh Anand. I, therefore, pass the following order :

"The withdrawal cheques are to be signed hereinafter for withdrawing the amount from the bank account, jointly by defendant No. 2, Shri Suchcha Singh Anand and Local Commissioner, Shri B. B. Gupta, advocate, and the Kashmiri Gate branch of Canara Bank should honour the said cheque. The copy of this order be also sent to the said bank."

21. I.A. disposed of.