N SATYANARAYANA Vs. M VENKATA BALA

JUDGEMENT

(1.) The appeal of seven defendants against a preliminary decree of dissolution of Minerva Talkies, Vizianagaram, a partnership firm (for short "the firm") of which they and the respondent-plaintiff are partners, rendition of accounts and payment of his 1/5 th share granted by trial court raises a question whether it is "just and equitable" to dissolve the firm.

(2.) The admitted facts are that on Feb. 1, 1947, a vacant site and a dilapidated building were purchased and a cinema theatre was constructed thereon and from June 2, 1949, the firm started exhibiting cinematography. Initially the respondent had 1/6th share, but on his purchasing the share of another partner he augmented to 1/5th share thereof and invested Rs. 35,000/-. The appellants together have 4/5th share (the details of their respective shares are not necessary). The partnership deed was executed on Jan. 20, 1970, but due to change of partners another unregistered partnership deed Ex. B1 dated November 9, 1975 was executed. From its inception the 1st appellant was the managing partner, the rest including the respondent are the "sleeping partners". The 1st appellant is a qualified Sound and Radio Engineer having had wide experience in management of cinema business. He appointed initially one Bramhajirao and on his demise his son Ramakrishnarao as the Manager and he was getting the theatre managed. The firm is an on-going business earning good profits. For long over 27 years none of the partners including the respondent had any mistrust in the 1st appellant or grievance in his management. The 1st appellant has been paying at the rate of Rs. 500/- to each partner including himself. He opened an account in the firm's name in a bank and he has been crediting the residue amount to the "reserve fund". He also constructed shops from it and leased them out to the tenants, rents collected are also being credited to the account. The partnership deed Ex. B1 provides thus : Cl. (i) relates to appointment of the 1st appellant as the managing partner to run the theatre on fixed remuneration; Cl. (ii) relates to the respective shares; Cl. (iii) enjoins to settle the accounts every year by March 31; Cl. (iv) empowers to admit new partners with the consent of all; Cl. (v) which is material for the purpose of this case reads thus :

(3.) It would appear that the respondent was in financial stringency and to tide over the same he offered to sell his share in the firm valuing at Rs. 1,80,000/- and the first appellant agreed to purchase but when it was not agreed to by others, he negotiated for sale of the firm itself as reflected in his letter Ex. B2 dated Dec. 5, 1973. It is now an admitted fact that he offered to sell his share at Rs. 1,20,000/- to third parties. But when it was turned down it has ignited the respondent to cause the notice Ex. A5 dated March 1, 1976 issued imputing erosion of his confidence reposed in the 1st appellant; accounts were not being settled; the 1st appellant in collusion with the manager Bramhajirao, manipulated the accounts; misused the reserve fund by diverting to his cinema production business at Madras; by lending on interest to third parties and without being credited to the account of the firm or to the knowledge of the partners, the 1st appellant, thereby is "culpable for misappropriation and falsification of accounts". He is "guilty of fraud and misappropriation" by "acts of commission and breach of confidence reposed." It was denied by the first appellant in reply Ex.A6 dated March 13, 1976 with a positive statement that accounts were settled in terms of Cl. (v) of Ex.B1 and the respondent was relieved as partner from Feb. 29, 1976. He was called upon to produce income-tax clearance certificate so as to enable them to pay his share of the amount. Thus the suit came to be filed. The respondent reiterated all the averments in the plaint, with an additional averment that he was unilaterally and deliberately excluded from the firm in collusion with other partners and thereby he was dismissed from the firm, thereby confidence he reposed in the first appellant "was rudely shaken". These allegations were again refuted in the common written statement of all the appellants contending that the firm is not liable to dissolution, Cl. (v) of the partnership deed Ex.B1 provides a right to a partner who is dissatisfied with the management to retire, by issue of one, month notice to the managing partner so as to enable the Managing Partner to close the account up to that date and to ascertain his share inclusive of the profits. Therefore action was taken in terms thereof and it is neither an expulsion nor dismissal, but an action to retire the respondent in terms of the contract and intimation given under Ex.A6.