A GOPALA REDDI Vs. E JAYARAMI REDDI

JUDGEMENT

(1.) JUDGMENT :The first defendant in O.S. No. 188 of 1980 on the file of the Court of the Additional Subordinate Judge, Tirupati, is the appellant. The co-defendants in the said suit are shown as respondents 8 and 9 in this appeal. The suit was initially filed by one E.Jayarami Reddi. During the pendency of the suit, he died and respondents 2 to 7 herein were added as his legal representatives by order dated 17-1-1986 in I.A.No.1577 of 1985. The suit was filed for dissolution of firm and rendition of accounts of M/s.Karuna Oil Mills, Mallamgunta. The learned trial Judge, by judgment and decree dated 21-4-1987 decreed the suit with costs and passed a preliminary decree dissolving the firm with effect from 1-1-1981 and further directed the first defendant/appellant to render accounts to other partners for the period from 19-4-1979 to 1-1-1981.

(2.) The plaintiff, E.Jayarami Reddi filed the suit alleging that so as to construct the factory of M/s.Karuna Oil Mills, Mallamgunta, to carry on the business of groundnut oil cake, he commenced construction with the loan sanctioned by the A.P. State Financial Corporation and borrowing money from N.Chenga Reddi, E.Ratnamma and E.Sudhakara Reddi with whom he entered into a partnership deed dated 15-1-1975. Three partners subsequently retired duly receiving their capital investment. At that stage, the plaintiff was in great financial troubles and could not complete the project. The defendants who are related to each other (defendants No.1 and 3 are sons of defendant No.2) came forward to invest the working capital and it was agreed to share the profits and losses in the ratio of 50:22:14:14. The unit was handed over to the first defendant on 19-4-1979 and a deed of partnership was drawn on 26-4-1979 which was registered in accordance with the Indian Partnership Act, 1932 ('the Act' for brevity). The following acts of commission and omission and acts of mistrust were done by the first defendant who was at the helm of affairs in the partnership. The first defendant tried to knock away the enterprise with all its assets; he did not agree for mutual examination of accounts up to 18-4-1979, but served a concocted and false balance sheet and profit and loss account based on fraudulent accounts; the defendants freely indulged in fabrication of accounts systematically reducing the liability for capital to the plaintiff and bloating up the liability for himself and his benamidars; he undervalued the fixed assets by showing abnormal expenses with a view to knock away the property under Clause 18 of the partnership deed; he sold away 1 H.P. motor belonging to the factory without the knowledge of the plaintiff and also indulged in activities of selling the groundnut oil cake and it was not shown in the accounts submitted by him; the conduct of the defendants whether acts of commission and omission and their dishonest intention are likely to prejudice the plaintiff and, therefore, the plaintiff had lost confidence in the defendants. He, therefore, prayed for dissolution of the partnersnip.

(3.) The first defendant/appellant filed a written statement which was adopted by defendants 2 and 3. All the plaint allegations were denied. It was further stated that the defendants were always willing to show the accounts, that when the plaintiff was in a state of desperation for want of funds to carry on the business further, the defendants came to the rescue of the plaintiff and helped him. They also stated that due to various technical problems like inadequate supply of power and non-availability of groundnut seed due to drought conditions, the factory could not be run to its full capacity. All the transactions were reflected as true accounts and they were entered in the account books and correctly reported to the Sales Tax authorities. They also opposed the suit on the ground that as per Clause 19 of the partnership deed, all the disputes have to be referred to arbitration and, therefore, the jurisdiction of the Civil Court is barred. An additional written statement and a rejoinder were also filed and it is not necessary to refer to them.