CH JOGINDER NATH Vs. CH SURINDER NATH

JUDGEMENT

(1.) This judgment will dispose of two suits- C.O. 2-D and C.O. 3-D of 1965. The suits were originally instituted in the Court of Subordinate Judges, Delhi, but were transferred to the Punjab High Court, and on the establishment of High Court of Delhi, were transferred to this Court. C.O. 2-D of 1965 was filed by Surinder Nath son of Ch. Bhagat Ram, against his four real brothers-Joginder Nath, Rajinder Nath, Narinder Nath and Washeshar Nath (hereinafter referred to as "the brothers") for a declaration, cancellation of a document by way of consequential relief and for an injunction. The allegations in the plaint are: Surinder Nath and the brothers were carrying on separate businesses on their individual accounts in Rawalpindi (now in Pakistan). On the partition of the country on the 15th August 1947, Surinder Nath had migrated to Delhi and had set up an independent business of his own of Stock and Share Brokers under the name and style of Ch. Bhagat Ram and Sons. This business was the sole proprietary business of Surinder Nath and the brothers had no interest in it. The brothers had not made any contribution or investment in the capital nor any of them had taken part in the business. Being the eldest brother, Surinder Nath, keeping in view the financial distress of the brothers, resulting from their compulsory migration from Pakistan, consented to give them grants equivalent to one-fifth portion of the net income of the business-Ch. Bhagat Ram and Sons, though the-brothers had absolutely no interest in the business. In order that there may not be excessive taxation, a document dated the 27th August 1951 (the date 25th August given in the plaint is wrong) was executed between Surinder Nath and the brothers, wherein the parties were discribed as partners in the business having equal shares in the profits and losses. The document was a sham affair and was never intended to govern the relations between Surinder Nath and the brothers. Surinder Nath continued to carry on the business as the sole proprietor. The brothers did not contribute any capita] nor took part in the business even after the execution of the document. The brothers had accepted cheques issued by Surinder Nath as the sole proprietor of Ch. Bhagat Ram and Sons. They have started contending that they are partners in the business-Ch. Bhagat Ram and Sons and that the document dated the 27th August 1951 was, in fact, intended to be a partnership deed. The brothers have also started claiming interest in the assets of the business. The claim of the brothers is baseless and they have no interest in the business. The brothers are carrying on their independent vocation without giving the slightest attention to the business of Ch. Bhagat Ram and Sons. The document, dated the 27th August 1951, did not create a partnership within the meaning of section 4 of the Indian Partnership Act. The brothers had served notice dated the 15th November 1962, alleging that the business Ch. Bhagat Ram and Sons is a partnership business and claiming shares in the business and its assets. The conduct of the brothers has done injury to the rights of Surinder Nath. The document, dated the 27th August, 1951, if allowed to stand, is likely to cause irreparable injury to Surinder Nath and his business. Surinder Nath seeks the following reliefs in his suit :-

(2.) The brothers filed a joint written statement. They denied that the business-Ch. Bhagat Ram and Sons-is the sole proprietary business of Surinder Nath or that the document dated, the 27th August 1951. was a sham affair, not intended to be acted upon. The plea of the brothers is that the business, Ch. Bhagat Ram and Sons, was a joint Hindu family business and was being carried on by the brothers and Surinder Nath at Rawalpindi and that it continued to be a joint Hindu Family business even after the partition of the country, but that with effect from the 1st November 1947. the business was converted into a contractual partnership of which Surinder Nath and the brothers were the partners. Surinder Nath, being the eldest member of the family, was given authority to open bank accounts in the name of the partnership and operate them. The firm-Ch. Bhagat Ram and Sons. is a registered firm. duly registered with the Registrar of Firms and is being assessed to income-tax as a contractual partnership. The partnership has been acted upon for a period of about fifteen years and all the partners have been acting in terms of the partnership deed. Surinder Nath has been instituting suits in the name of Ch. Bhagat Ram and Sons as its partner and not as its proprietor. Surinder Nath has all along been accepting the position that the business-Ch. Bhagat Ram and Sons-is a partnership business. So far as the allegation of Surinder Nath that no capital was contributed by the brothers is concerned, the brothers pleaded that no capital was needed for the business of Stock and Share Brokers as the firm Ch. Bhagat Ram and Sons had established, at Rawalpindi' a reputation of first class house of Stock and Share Brokers and dealers and the contractual business was started with the help of trade name and old established reputation and clientele. Whenever funds were needed, the parties approached their mother Smt. Bhagwanti and the needed financial help was always forthcoming. The brothers had been regularly carrying on their part and the shares of the brothers were credited to their individual accounts and the advances taken by 'them from time to time were adjusted against their shares. The brothers, further, pleaded that Surinder Nath had abused the trust reposed in him as the eldest member of the family by opening the bank accounts of Ch. Bhagat Ram and Sons and by acquiring property with the funds of the firm in his own name and the names of his relatives. Surinder Nath had made entries in the account books to the injury of the brothers and had committed acts of embezzlement. As a result of these acts of Surinder Nath, disputes between the parties had arisen. Surinder Nath had suggested that the disputes be referred to arbitration. An arbitration deed was drawn up and was signed by Surinder Nath, Joginder Nath, Rajinder Nath and Washeshar Nath. It was admitted, in that arbitration deed, that Surinder Nath and the brothers were partners in the firm, Ch. Bhagat Ram and Sons. "The arbitration deed could not be completed as Narinder Nath, one of the partners, was not willing to refer the matter to arbitration. The brothers asserted that Surinder Nath was not entitled to any of the reliefs claimed by him and his suit was liable to be dismissed.

(3.) In his replication, Surinder Nath reasserted the allegations made in the plaint. He denied the allegation of the brothers that he had not invested any capital in the business-Ch. Bhagat Ram and Sons. He pleaded that the whole of the capital was invested by him. He, however, admitted that Smt. Bhagwanti, mother of the parties, had given him some financial assistance as he had given to the brothers. Surinder Nath pleaded that he had not only been operating bank accounts but had also executed promissory notes in his capacity as the sole proprietor of firm- Ch. Bhagat Ram and Sons. Surinder Nath admitted that he had filed suits on behalf of Ch. Bhagat Ram and Sons as a partner. He explained that as the firm Ch. Bhagat Ram and Sons was a registered firm, he had to show himself as a partner, though in fact, he was the sole proprietor of the firm. Surinder Nath admitted that an arbitration deed, as alleged by the brothers, was drawn up. His explanation was that he always had a soft corner for his brothers and with a view to settle the disputes he had proposed, without prejudice, that the matter may be referred to arbitration. It was, further, explained that the document was executed during negotiations for a compromise and not as an admission of any liability and was inadmissible in evidence.