NAGIN CHAND Vs. SHADI LAL

JUDGEMENT

(1.) THIS will dispose of two appeals Nos. 273 and 274 of 1964, under Clause 10 of the Letters Patent, the first by Nagin Chand and the second by Ramesh Chand to which the main opposite party is their third brother Shadi Lal respondent, from the judgment and decree, dated September 6, 1963, of a learned Single Judge accepting two appeals by the respondent from the appellate decrees of the first appellate Court, which had reversed the decree of the trial Court and decreed the two suits, one by each one of the two appellants, against the respondent. So the learned Single Judge dismissed the suits of the appellants.

(2.) THE two appellants and Shadi Lal respondent are three brothers. They were having a partnership hosiery business in Ludhiana, with the name and style of their partnership as Jain Bodh Hosiery. On March 31, 1959 the three brothers dissolved the partnership. The appellants went out of the partnership leaving the business of Jain Bodh Hosiery with Shadi Lal respondent. The dissolution deed is exhibit D. 1 of that date. Clauses 2 and 3 of the same read --"2. That entire business assets of the firm along with the goodwill and liabilities have been taken over by the parties of the First part and parties of the Second and Third parts shall have no concern absolutely with the affairs of 'messrs. Jain Bodh Hosiery' hereinafter. 3. Income-tax and Sales-tax and other taxes cases of the firm have not yet been settled and there might be some other liabilities unexpected at this time. If anv liability will arise all the partners (retiring as well as continuing) will pav according to the share. " The first party was Shadi Lal respondent, the remaining two parties to this document were the two appellants. It has been admitted at this stage in these appeals that after the dissolution of the partnership between the three brothers, the two appellants went into the very same business, but independently. So that on and from the date of dissolution of the partnership on March 31, 1959, the three brothers started hosiery business, but separately, shadi Lal respondent continuing it in the name of the original firm and each one of the two appellants taking a new name of his business. However, all the three continued in hosiery business. Sometime after the dissolution of the partnership between the three brothers, there came a control over the raw material that they were using in their hosisry business. The Central Government having made, under the provisions of the Essential Commodities Act, 1955 (Act 10 of 1955), the woollen Yarn (Production and Distribution) Control Order, 1960, the Textile commissioner framed a scheme for distribution of wool varn by fixing quotas, the basis for distribution with regard to the same having been adopted at the time with reference to the actual consumption of yarn by various manufacturers during the years 1956-57, 1957-58 and 1958-59. It will be seen that the basis for allotment of quota of yarn, a controlled commodity, by that time came to be the actual consumption of such wool yarn by the manufacturers during the three year? preceding the dissolul ion of the fi rm of three brothers. The Textile Commissioner, according to the scheme of distribution, having passed on the distribution of wool yarn to the Hosiery Industry Federation, each one of the two appellants instituted a separate suit against the Federation, Shadi Lal respondent and the other appellant, for permanent injunction restraining the Federation to allot and Shadi lal respondent to accept quota of wool varn beyond one-third share of this respondent, because, according to the two appellants, either has been entitled to half of the remaining two-third share of the wool yarn quota The two main matters for consideration before the learned trial Judge were whether either appellant was entitled to one-third share of the quota of wool yarn, and whether Civil Court had jurisdiction in the suits of the type, out of which these appeals have arisen. The learned Judge dismissed the claims of the appellants, but, on appeals by the appellants, the learned Judge in the first appellate Court reversed the decrees of the trial Court and granted a decree as claimed by each one of the appellants, finding the two main matters of controversy, as above, in favour of that particular appellant. It was Shadi Lal respondent who was in second appeal in this Court and a learned Single Judge by his judgment and decrees of September 6, 1963. reversed the decrees of the first appellate Court, restoring those of the trial Court, thus dismissing the suit of each one of the appellants. The learned Single Judge proceeded on the basis that "it is not possible To frame a comprehensive definition of 'goodwill' as its actual content would continue changing with the change in the business methods and activities, but one thing is not in my opinion in doubt and that is that the goodwill of a business house includes every advantage that accrues to the business house in the future on account of its business activity in the past. Such an advantage was deliberately agreed to be made over by the two plaintiffs-respondents to Shadi Lal appellant at the time of the dissolution. The allocation of yarn quota was certainly an advantage that accrued to the firm after the dissolution of the previous partnership and it accrued on account of the previous business activity of the firm. It is thus an advantage included in the goodwill of the firm of which Shadi Lal appellant was the owner after the 31st March 1959. " As stated, il is the appellant in each appeal who has come in appeal under clause 10 of the Letters Patent from the judgment and decree of the learned Single Judge dismissing his suit.

(3.) IT is clear from what has already been staled that the facts are not in dispute. The three brothers dissolved their hosiery business partnership on March 31, 1959. Each one of the three brothers then entered into the very same hosiery business, but independently. Shadi Lal respondent, under the terms of the dissolution deed, continued his business in the name of the old firm, Jain Bodh hosiery, and each one of the appellants took a new name to his hosiery business. After the dissolution of the partnership and sometime in 1960 on account of statutory control over distribution of wool yarn, according to the scheme of such distribution, allotment of quotas of yarn, raw material for hosiery business, was made on the basis of manufacturers' consumption in the three years preceding the year of the dissolution of the partnership of the three brothers. The quota of yarn having come to be controlled by the year 1960 according to law, raw material for hosiery business was obviously not available to businessmen of this type in the open market. They had. therefore, to obtain quota under the relevant scheme from the proper authority or the proper body, such as the Federation in this case, who had been given the facility of distributing such quota The basis for the allotment of quota, as stated, was the actual use of the raw material by the manufacturers in three years preceding the date of the dissolution of the three brothers' partnership. Each one of the three brothers could, on the basis of manufacture of hosiery goods during the three years preceding the year of dissolution of their partnership, lay claim to one-third of the quota that was his share of the business of the partnership, the dissolution of the partnership in this respect having no effect whatsoever. If this was not so, the dissolution in the wake of this new unexpected development about the control of wool yarn would have thrown two out of three former partners, the two appellants, out of business, a contingency never in the contemplation of the parties when they came to execute the dissolution deed. Exhibit D. 1, on March 31, 1959. Obviously, in the circumstances, the whole of the quota could not possibly have been claimed by shadi Lal respondent alone merely on the basis of having the right to use the name of the old firm for the purposes of his business. So naturally argument turned to the meaning and scope of the word 'goodwill' before the learned Single judge, and it is with reference to the same, as has already been shown, that the learned Judge has come to the conclusion that the quota that was available to firm jain Bodh Hosiery was available to it as a part of its goodwill, which having, under the dissolution deed, passed to Shadi Lal respondent alone, the appellants have no claim to any share in it.