GUR DAYAL PRASAD Vs. L RAGHUNATH PRASAD

JUDGEMENT

(1.) THE present appeals are directed against the judgment and decree dated 30th October, 1958, passed by the 1st Additional Civil Judge, Agra in a suit for dissolution of partnership, rendition of accounts and for recovery of damages.

(2.) THERE was a spinning mill at Hathras in the district of Aligarh, known as Ram Chand Hardeo Dass. This mill was, later on, purchased by Shroti Lal Bankey Lal and others in execution of a decree No. 217 of 1916 for a sum of Rupees 24,00,000. According to the plaintiffs, the purchasers were short of funds. They, therefore, approached Makhan Lal, grandfather of plaintiff No. 1 and father of Ram Swarup plaintiff No. 2 and persuaded him to become a partner in the said mill on the assurance of prospective profits. Makhan Lal agreed to become a partner and invested a sum of Rs. 2,25,000 out of Rs. 24,00,000, the total sale consideration of the mill. The terms of the partnership were agreed upon in or about November, 1920, and later on, a partnership deed dated 4th April, 1923, incorporating the terms of the partnership was written out at Agra and registered at Hathras. Under the terms of the partnership, Bankey Lal, father of defendants Nos. 3 and 4 and husband of defendant No. 5, and Ganpat Lal, defendant No. 2 were appointed Manager and Assistant Manager respectively of the mill, which was styled as Lalla Mal Hardeon Dass Cotton and Spinning Mill, Hathras and to which a ginning factory and other immovable properties were attached. These two managers were responsible to keep and render correct accounts. Bankey Lal died in January, 1942, and, after his death, Gur Dayal Prasad, defendant No. 1, was appointed as Manager and Ganpat Lal continued to be the Assistant Manager and they were liable for rendering accounts of the partnership for the period during which they acted as Managers. The management of the mill was very unsatisfactory. The Managers did not hold regular meetings, as required by the deed of partnership. The accounts were not subjected for examination and audit nor true balance sheets were prepared nor the stocks of raw and finished materials were included therein. The yarn was sold at a favourable rate fictitiously to their own creatures and resold after making secret profits. The partners personally utilised the mill property without the price being debited in their accounts in utter disregard of Clause 11 of the partnership deed. The Managers were not purchasing cotton for the mill at Agra nor selling the yarn of the mill through the plaintiffs firm and the plaintiffs have thereby been put to heavy loss on account of the wrongful acts for which defendants Nos. 1 to 5 were liable. The Managers and other persons secured the majority of partners to their side by showing them illegal favour. They were not carrying on their duties imposed by law and under the terms of the partnership deed and were acting dishonestly with the sole object of misappropriating to themselves the profits of the mill and making illegal gains. The plaintiffs, fed up with the state of affairs of the mill, had no other alternative but to sever their connection with the mill and a notice dated 14th March, 1944, was served, under Clause 18 of the Partnership Deed, offering to sell their own share to the firm. No resolution was, however, passed on the notice despite its being included in the agenda of the meetings of 31st March, 1944, 16th April, 1944 and 28th May, 1944. On the other hand, to create complications, a supplementary aganda at the instance of certain members was issued on 7th April, 1944, that the mill be sold by public auction. This resolution was passed in the meeting of 28th May, 1944, with a view to causing loss and prejudice to the plaintiffs. The defendants were bound to inform the plaintiffs of their decision as to whether the firm was prepared to purchase the plaintiffs share or not within thirty days but the plaintiffs got no response. The result was that the price of the share of the mill fell down and the strangers were not prepared to purchase the shares even at the price fixed by the mill under clause 28 of the partnership deed, viz. at Rupees 416/10/8 per share of Rs. 500 the actual price being much more. As the defendants failed to purchase the share of the plaintiffs, they were entitled to have the partnership dissolved by Court as per clause 17 of the partnership deed. The defendants were anxious to sell the mill privately with the object of whitewashing their misdeeds of management and to avoid their liability to render true and correct accounts. The defendants Nos. 1 to 5 and other defendants were forming a clique and were acting negligently and carelessly and had committed acts and omissions, viz they did not get the partnership registered with the income-tax authorities in time causing loss to the partnership, that in spite of the resolution to get the burnt portion of the mill and the machinery restored so as to make the mill to yield as much profit as possible, it was not done. The raw cotton for the mill was not purchased through the plaintiffs nor the finished yarn was sold through them at Agra. The defendants were thus liable to compensate the plaintiffs for the loss caused on account of the breach of duties of the defendants and for their acts and omissions. Makhan Lal having died, Raghunath Prasad plaintiff No. 1 is entered as partner in the firm as per Clause 23 of the partnership deed and Ram Swarup, plaintiff No. 2, was a sub-partner. The plaintiffs, therefore, filed the suit for recovery of a sum of Rs. 50,000 for the loss suffered by them on account of the acts and omissions of the defendants in not considering the notice of the plaintiff dated 14th March, 1944, and passing of the resolution dated 28th May, 1944, for the sale of the mill thereby reducing the value of the share pro rata and for a sum of Rs. 25,000 as damages for the acts and omissions, as mentioned in paragraph 32 of the plaint. They also laimed a relief for dissolution of the partnership and for rendition of accounts

(3.) GANPAT Lal, defendant No. 2, filed a separate written statement and denied the plaint allegations that Seroti Lal and others persuaded Makhan Lal and made certain exaggerations and misrepresentation. The true facts were that Makhan Lal became a partner of his own free will, that the terms of the partnership, the writing of the partnexwhip deed, its execution and attestation all took place at Hathras and no part of the cause of action arose within the jurisdiction of the trial court, that the profit and loss accounts, balance sheets etc. used to be considered in the meetings of the partners and dividends distributed, that the defendant being the Assistant Manager had no share in the management and was not liable to render accounts, that Suit No. 96 of 1943 was instituted by defendant No. 3 for a declaration that the proceedings of the meeting of 17th February, 1943, were ineffective and ultra vires, that the said suit was dismissed on 27th February, 1944, that during the pendency of the said suit and after its decision, the business of the partnership was managed by Gur Dayal Prasad, defendant No. 1 and the defendant had no hand in the management, that the purchase of cotton and sale of yarn at Agra had to be discontinued as the plaintiff firm did not do the business honestly. He further denied that the defendants intentionally did not hold the meetings with the intention that the plaintiffs' notice remained undisposed of and that the resolution of 28th May, 1944, for the sale of the mill was passed in the interest of all the partners.