Shri Narendra Kumar Jain vs Shri Karam Vir Singh Jain (Since ...
2011 Latest Caselaw 5125 Del

*             IN THE HIGH COURT OF DELHI AT NEW DELHI

+                         RFA No.187/1998

%                                                 18th October, 2011

SHRI NARENDRA KUMAR JAIN                                ...... Appellant
                   Through:           Mr. R.S. Kela, Adv.


                          VERSUS

SHRI KARAM VIR SINGH JAIN (SINCE DECEASED)
REPRESETNED BY LRS ETC.                                  ...... Respondents

Through:

CORAM:

HON'BLE MR. JUSTICE VALMIKI J.MEHTA

1. Whether the Reporters of local papers may be allowed to see the judgment?

2. To be referred to the Reporter or not?

3. Whether the judgment should be reported in the Digest?

VALMIKI J. MEHTA, J (ORAL)

1. The challenge by means of this Regular First Appeal under

Section 96 of the Code of Civil Procedure, 1908 (CPC) is to the impugned

judgment of the Trial Court dated 31.1.1998 whereby the objections of the

appellant herein, and who was the plaintiff in the Trial Court, to the report

of the Local Commissioner were dismissed and a final decree was

consequently passed by the impugned judgment in the suit for dissolution

of partnership and rendition of accounts.

2. The facts of the case are that a partnership was entered into

between the appellant herein and late Sh. Karam Vir Singh Jain, defendant

no.1. The last deed of partnership between the appellant/plaintiff and the

defendant no.1, Sh. Karam Vir Singh Jain was the partnership deed dated

2.4.1973, Ex.PW3/D1. There was a third partner, Sh. Anil Kumar Jain as

per the partnership deed, though there were no disputes with this third

partner of other two partners and who is thus not a party to these

proceedings. The defendant no. 1 was sued as respondent no.1 in this

appeal and who expired during the pendency of the appeal. His legal

heirs were brought on record vide order dated 17.1.2006. The partnership

business was to carry on the business under the name of M/s. ETA Radio

Industries. The business was basically of sale of amplifiers, radios and

accessories. Disputes and differences arose between the partners which

led to the filing of the subject suit for dissolution of partnership and

rendition of accounts.

3. A preliminary decree was passed by the Trial Court on

05.3.1982. As per the preliminary decree, the firm was dissolved and a

local commissioner was appointed to take accounts of the partnership

firm. The local commissioner after hearing both the parties and allowing

them to file their evidence, filed his final report on 14.12.1983. The main

dispute is with regard to whether the property no. W-32, Okhla Industrial

Area, Phase II, New Delhi admeasuring 391 square yards was or was not

the property of the partnership firm. The contention of the appellant was

that this property was a property of the partnership firm and thus the

appellant was entitled to a share in the same. It was argued that the

property was purchased with the funds of partnership firm and was duly

shown as a property of the firm in the various balance sheets of the firm

including for the accounting year 1978-1979. It is argued that once the

property in question was a property of the partnership firm, then, by

virtue of Sections 14 and 48 of the Indian Partnership Act, 1932 the

appellant was entitled to the share in the same.

4. The entire argument on behalf of the respondent was that

though the property is a property of the partnership firm, however when

the partnership was entered into vide partnership deed dated 2.4.1973,

Ex.PW3/D1, it was agreed that the appellant will only have a right to the

yearly profits and losses, and would not have any share in the properties

of the firm. It was argued that the appellant/plaintiff was only a qualified

engineer experienced in the trade and he was inducted in the partnership

firm for his qualification only and without his contributing any capital, and

therefore, the appellant had agreed not to claim rights to any of the

properties of the firm, except taking a share in the yearly profits and

losses. Reliance is placed by the legal heirs of the defendant

no.1/respondents no.1(a) to 1(g) upon para 8 of the partnership deed

which reads as under:-

"8. That on dissolution of the partnership the entire goodwill rights, its trade name, quota rights, tenancy rights and all such at present or procured during the partnership, will be the property of the first party, who will be its sole owner."

5. The only issue therefore which requires determination in this

appeal is as to whether the appellant has or does not have a right in the

property bearing no. W-32, Okhla Industrial Area, Phase II, New Delhi.

Putting it differently is the appellant debarred from claiming any rights in

the properties of the firm by virtue of para 8 of the partnership deed.

Counsel for the appellant has sought to argue that the language of para 8

of the partnership deed cannot be said to confer exclusive rights on late

defendant no.1 to all the assets of the partnership firm.

6. In order to deal with this only issue which is required to be

decided one has to look at the terms of the partnership deed dated

2.4.1973, Ex.PW3/D1, and I would therefore seek to reproduce the entire

deed, and which reads as under:-

" PARTNERSHIP DEED

This deed of Partnership made on 2nd April 1973, between

1) Shri Karam Vir Singh S/o Lala Balmukand Jain resident of 1204, Abdul Rehman Road, Karol Bagh, New Delhi- 5 of the first part

2) Shri Narendra Kumar Jain s/o Shri Ranbir Singh Jain resident of 4491, Patnamal Street, Pahari Dhiraj, Delhi-6 of the second part

3) Shri Anil Kumar Jain s/o Shri K.V. Jain, resident of 1204, Naiwala No.5, Karol Bagh, New Delhi-5 of the third part,

Witnesseth:-

WHEREAS the First Party is a qualified engineer and experienced in Trade, had been carrying on his business of the manufacture and sale of amplifiers, Radios, Accessories etc., under the brand name of „Ajanta‟, „New Voice‟, „Roxy‟, under the name and style of ETA RADIO INDUSTRIES, at 4491 Patnamal Street, Pahari Dhiraj Delhi-6 since 1956, That the firm was duly registered as a Small Scale Industry.

WHEREAS in order to expand the business, the First Party had taken the Second Party as partner in the said running business w.e.f. 1/4/1963.

WHEREAS the First and Second parties have been carrying on business under the regular Deed of Partnership dated 14th April 1963.

WHEREAS in order to further expand the business and its scope the First and Second parties wish to take Shri Anil Jain, the Third party of the Third part as a working partner w.e.f. 2/4/1973 in the said running business with all the Assets & Liabilities as on 31-3-73.

Now, therefore, the parties had decided to execute this fresh Deed of Partnership in writing.

WHEREAS the property of business running under the name and style of M/S. ETA RADIO INUSTRIES, stock, in trade, furniture, machinery, tools fittings and other assets and liabilities, have been taken over by the newly constituted partnership firm as its property, at par.

It is, therefore, mutually agreed that the said partners shall become partners on the following terms.

NOW this Deed Witnesseth as under:-

1. That the business of the firm ETA RADIO INDUSTRIES will continue to be carried on as before and now under this fresh partnership, with expression or changes as mutually decided by the partners from time to time.

2. That this partnership shall be deemed to have commenced w.e.f., 2.4.1973 and shall continue as Will.

3. That the profits and losses of the partnership shall be divided between the partners in the following proportions- First Party - Karam Vir Singh 40 paise in the rupee Second Party - Narendra Kumar Jain 35 paise in the rupee Third Party - Anil Kumar Jain 25 paisa in the rupee

4. The partners of the firm in anticipation of profits shall be at liberty to draw out of the profits a sum or sums as required for their personal expenses and the same shall be debited to their respective personal account.

5. That the accounting period of the firm shall be financial year and shall be closed on 31st March every year, when profits and loss account will be prepared and posted to the accounts of each partner.

6. The credit balance in the name of the parties No.1 & 2 shall be the capital of partnership firm. The new party may also provide capital to the firm form time to time. The

parties shall be entitled to an interest at the rate of 12% p.a. for the balance standing in their names on the close of the year.

7. That party No. 1 will be free to run or have interests in any other business, trade or industry, even competitive with the business of partnership.

8. That on dissolution of the partnership the entire goodwill rights, its trade name, quota rights, tenancy rights and all such at present or procured during the partnership, will be the property of the first party, who will be its sole owner.

9. That in case of disputes, no partner or his nominee shall interfere or stop the normal function of the partnership firm.

In witness, whereof, the parties, referred above placed their signature, to this Deed on the 2nd April, 1973 at Delhi.

         Witness: 1. Rambir Singh Jain      Sd/-
                                            KARAM VIR SINGH
                                            Party No.1

         Witness: 2. Jainti Pd Jain         Sd/-
                                            NARENDRA KUMAR JAIN
                                            Party No.2

                                            Sd/-
                                            ANIL KUMA JAIN
                                            Party No.3"

7. A reference to the partnership deed does show that the

appellant/plaintiff was shown as a partner who was taken in because of

his knowledge and experience of the trade. The first para of the

partnership deed specifically records this that the appellant is a qualified

engineer who is experienced in the trade. The partnership deed also does

not record any contribution towards capital on assets by the appellant

when the partnership deed was entered into, though subsequently the

balance sheet shows credit balance in the capital account of the appellant

which amount is the unwithdrawn profit share of the appellant credited to

his capital account every year after year, i.e. the capital account obviously

is the sum total of the credits from the profit and loss, year to year, of the

partnership firm, and this capital account shows the entitlement to the

capital which is not withdrawn by the appellant. This credit balance in

the capital account is payable to a partner on dissolution as per Section

48(b)(iii) of the Indian Partnership Act, 1932. As per numerical Para 3 of

the partnership deed, the right of the appellant/plaintiff was 40 paisa in

the rupee, i.e. 40% in the profit and loss of the partnership firm.

Para 8 is indeed crucial and this para of the partnership deed

clearly records in so many words that the entire goodwill, rights, its trade

name, quota rights, tenancy rights and all such at present or procured

during the partnership will only be the property of the late defendant no.1

who was to be its sole owner. In this para 8, it is quite obvious that by a

typographical error, the expression "rights" are missing after the words

"all such", however, a reading of para 8 makes it more clear that

reference is made to all the rights of the partnership firm of every type

including the rights to trade name, quota rights, tenancy rights and other

rights which would be of the partnership firm in its properties whether

existing when the partnership deed is entered into or which is

subsequently acquired. The appellant cannot make any capital, out of the

fact that the word "rights" are missing after the words "all such" in para 8

of the partnership deed. The contention of the learned counsel for the

appellant that reference to other rights would only be to rights as to

tenancy rights is an interpretation which I refuse to accept inasmuch as if

certain rights were to be excluded, then after the wide language of para 8,

there would have been an explanation or a clarificatory line as to which

rights of properties of the partnership firm would belong not to the late

defendant no.1 but to the partnership as a whole and which explanation

/clarification does not exist. I therefore hold that a reading of the para 8

of the partnership deed shows that the parties with open eyes agreed that

the appellant will have no rights whatsoever in any of the properties of the

partnership, and which was with the reason because the appellant was

taken as a partnership firm not because he had contributed any capital or

immovable property or any other property to the firm, but he was taken

as a partner because of his personal contribution which was to be made to

partnership on account of his being a qualified engineer experienced in

the trade.

8. No other issue was urged or argued before me.

9. In view of the above, appeal being without any merit is

accordingly dismissed, leaving the parties to bear their own costs. The

impugned judgment of the Trial Court dated 31.1.1998 is sustained.

Appeal is disposed of accordingly. Trial Court record be sent back.

OCTOBER 18, 2011                                  VALMIKI J. MEHTA, J.
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