MURLI PRASAD Vs. PARASNATH PRASAD

JUDGEMENT

(1.) These two appeals and a third appeal, viz . First Appeal 164 of 1959 were preferred against the judgment of an Additional Subordinate Judge of Chapra. governing three suits, which were tried and heard together, relating to an undertaking for the generation and supply of electric energy to consumers in the town of Chapra Originally, the late Shri Mahendra Prasad obtained a license under the Indian Electricity Act of 1910 and started an undertaking, known as "Chapra Electric Supply Works", in 1932. After his death, his son Shri Janardan Prasad Varma became the licensee in 1935 Subsequently, the undertaking was transferred to a limited company, known as ''Chapra Electric Supply Works Limited", which was incorporated under the Indian Companies Act, 1913. The aforesaid license and the undertaking were transferred to this company by Shri Janardan Prasad Varma with the consent of the State Government, accorded under Sub-section (2) of Section 9 of the Act. by a notification dated the 10th December. 1937. This company went into voluntary liquidation in 1944. and Shri Chandradeo Narain, an Advocate of Chapra, was appointed liquidator The liquidator put the undertaking to public auction on the 15th September, 1944. and the highest bid of Murli Prasad at Rs 4.10.000 was accepted. By a letter dated the 20th April, 1945 (Ext C-1), the State Government gave its consent to this sale to Murli Prasad and also to the assignment of the license to him A statutory notification under Section 9 (2) of the Act to the same effect was made on the 30th April, 1945. But really Murli Prasad had bid at the auction sale on behalf of a partnership created orally sometime before the 15th September, 1944. This partnership was constituted by Murli Prasad--4 annas share, Ayodhya Prasad Gupta--8 annas share, Parasnath Prasad --2 annas share, Gharbharan Sah--1 anna share, and Nandkishore Prasad--1 anna share. The sale price was paid to the liquidator in three instalments, viz., Rs. 1,00,000 on 28-11 1944, Rs. 60,000 on 3-2-1945 and Rs. 2,50,000 on 13-7-1945. A deed of partnership was executed by the aforesaid five partners on the 10th July, 1945, and it was registered on the 11th July, 1945. By that date only Rs. 1,60,000 was paid, the amounts paid by the different partners being Murli Prasad--Rs. 59,000, Ayodhya Prasad Gupta--Rs. 1000, Parasnath Prasad--Rs. 50,000, Gharbharan Sah--Rs. 25,000 and Nandkishore Prasad--Rs. 25,000. Out of the remaining amount of Rs. 2,50,000 Rs. 43,500 was to be paid by Murli Prasad, Rs. 2,04,000 by Ajodhya Prasad Gupta, Rs. 1250 by Parasnath Prasad, Rs. 625 by Gharbharan Sah and Rs. 625 by Nandkishore Prasad. The different co-partners paid their quotas to the account of Murli Prasad in the Central Bank at Chapra, and on the 13th July, 1945, the liquidator received a cheque for Rs. 2,50,000 from Murli Prasad and delivered possession of the undertaking to him on the same date vide Ext. C (5)-1. Nandkishore Prasad transferred his one anna share to Gharbharan Sah and withdraw from the Partnership since 31-3-1947, This transfer was accepted by all the partners at a meeting held on 28-8-1950. On that very day Parasnath proposed to dispose of his one anna out of two annas share, and Murli Prasad also proposed to dispose of one anna out of his four annas share. Ayodhya Prasad Gupta agreed to purchase the same, and thus his share was enhanced to ten annas, and the same was distributed amongst the members of his family like this. Ayodhya Prasad Gupta--3 annas 9 pies. Ram Saran Sah Gupta--3 annas 9 pies. Brahmadeo Prasad Gupta--1 anna 3 pies. and Ramagya Prasad Gupta--1 anna 3 pies. The remaining three annas share of Murli Pra-sad was also divided amongst the members of his family like this: Murli Prasad--1 anna. Dharnidhar Prasad--1 anna. Chandreshwar Prasad Gupta--6 pies. Kamleshwar Prasad Gupta--6 pies. This meeting had been held particularly to arrange for a sum of Rs. 1,50,000 in order to take delivery of a new plant lying at the railway station, and these eight persons as also Parasnath and Gharbharan agreed to contribute amounts proportionate to their shares On account of this change in the partners and their shares, the said ten persons executed another deed of partnership on the 31st August, 1950, which was registered the same day. By this document, Ramyagya Prasad Gupta was appointed as the managing partner to manage the partnership business, subject to certain restrictions. A copy of this document was forwarded by this managing partner to the Electrical Inspector, Government of Bihar, with a letter dated the 12/13th December, 1950. On the 15th November, 1952, an application was made by all the ten partners to the Registrar of Firms for the registration of this partnership firm; and a certificate of registration was granted by the Registrar on the 13th June, 1953, and it was registered as firm No. 88 of 1953. After sometime there was some difference between the parties; and on the 4th September, 1953, Shri J. D. Sahai, the same Electrical Inspector of the Govcrnment of Bihar, intimated through a letter to Murli Prasad that the State Government did not recognise any partnership for running the Chapra electrical undertaking and that the action of the licensee having taken partners was illegal and void under Section 9 of the Indian Electricity Act. In the same letter, he also called for an explanation from Murli Prasad in respect of the unsatisfactory working of the company, particularly, on account of the lack of financial and administrative control. On the 11th March, 1954, Parasnath served a notice of dissolution of the partnership. There was no dispute about all these facts in this Court.

(2.) On the 22nd May, 1954, Parasnath Prasad instituted Title Suit 68 of 1954, impleading the aforesaid partners as defendants. Some of these partners died during the pendency of the suit, and their heirs were impleaded. In this suit Parasnath sought for a declaration that the partnership was dissolved by notice of dissolution served by him on the first nine defendants on the llth March, 1954, and for rendition, of accounts from the 3Ist August, 1950, up to the date of institution of the suit or in the alternative, for dissolution of the partnership by an order of the Court and for rendition of accounts. Thereafter, he made an application for the appointment of a receiver. Defendant Ramagya Prasad contested this application and prayed that he should be allowed to continue as a managing partner, inasmuch as the partnership could not be said to have been dissolved by a mere notice. The State Government also intervened at this stage and stated that, inasmuch as many of the duties under the Electricity Act had to be performed with its approval, the receiver should be its nominee. The learned Subordinate Judge thought it to be a fit case for the appointment of a receiver and directed the management of the undertaking to be made over to the State Government, which would nominate its own men for running the undertaking. Against this order, Ramagya came to this Court; and by its order dated 19-3-1955 this Court directed the Subordinate Judge to appoint one or more persons of his own choice or even a nominee of the Government as receiver. In pursuance of this order, the Subordinate Judge appointed Mr. S.N. Sinha, the then Additional District Magistrate of Saran, as the receiver. On 19-5-1955 the Government, however, revoked the license and decided to purchase the undertaking; on 20-10-1955 the Government took possession of the undertaking under Section 7-A of the Act and deposited a sum of three lacs of rupees, being a part of the purchase money.

(3.) Most of the defendants filed written statements in the suit in 1957-58. The minor defendant filed a formal written statement through a pleader guardian ad litem; Ramagya Gupta and two heirs of Ayodhya Prasad Gupta deceased resisted the reliefs sought by the plaintiffs. But Gharbharan, Brahmadeo, Nandkishore and Thakur Prasad merely claimed their respective shares in the assets of the partnership business, Nandkishore claiming one anna out of two annas share claimed by Gharbharan. Murli (defendant 8) claimed the entire property as the sole licensee and purchaser. The suit was decreed.