ANANDA PRASAD Vs. BHAGWANT PRASAD

JUDGEMENT

(1.) This appeal has arisen out of a suit brought by the plaintiff-appellant for a declaration that the parties to the suit are the four partners in a firm styled, Luxmi Flour Mill, each having an equal share in the assets thereof, and that the defendant 1 is not entitled to have the Mill attached and sold in execution of a decree obtained by him against defendant 3.

(2.) The plaintiff's case as set out in the plaint is as follows: The plaintiff, Ananda Prasad, the defendant 1 Babu Bhagwant Prasad, an Advocate practising at Ghazpur, defendant 2 Tirjugi Narain, who is a cousin of the first defendant and Haranandan Singh, defendant 3, a brother-in-law (sister's husband) of the plaintiff, entered into an agreement of partnership for the purpose of setting up a flour mill at Ballia with a capital of nearly Rs. 4,000. Each partner agreed to contribute Rs. 1,000. The plaintiff advanced Rs. 2,000 for himself and his brother- in-law, Harnandan Singh. The defendant 1 advanced the remaining Rs. 2,000 as his share and that of his cousin, the second defendant. The third defendant had some experience of similar concerns and was, therefore, chosen to be the managing partner having extensive powers of management including the power to contract debts. The machinery was purchased with the funds supplied by the partners. Some more money was needed and it was raised by loan from one or the other of the partners, who as creditors were entitled to receive interest. Sometime after the mill was put in working order under the supervision of the third defendant, it was discovered that the concern was a losing one. The defendant 1 persuaded the third defendant to execute a deed of hypothecation in respect of the sum of Rs. 2,000 minus Rs. 400 which he had since taken out of the partnership funds. The deed recited that the concern belonged exclusively to the third defendant, and that he was indebted to the first defendant to the extent of Rs. 1,600 the amount left unpaid out of the initial advance of Rs. 2,000. According to the recitals of the deed the sum of Rs. 2,000 which the first defendant had advanced was a loan to the third defendant. The deed purported to hypothecate a half share of the mill for repayment to defendant 1 of what was due to him, namely, Rs. 1,600 by a number of instalments detailed in the deed. Subsequently the first defendant instituted a suit for recovery of what was due to him under the hypothecation bond above referred to and obtained a decree for Rupees 1,990 principal and interest. It should be noted that the decree was a simple money decree and not in enforcement of the hypothecation bond to which reference has already been made. The machinery was attached by the first defendant in execution of his decree against the third defendant. The plaintiff instituted the suit which has given rise to this appeal for the relief already mentioned.

(3.) The defence of the first defendant was that Luxmi Flour Mill belonged exclusively to the third defendant who had raised the necessary funds by borrowing Rs. 2,000 from the first defendant and another Rs. 2,000 from the plaintiff. He denied that the sum of Rs. 2,000 advanced by him had any reference to any partnership agreement to which he and the second defendant were parties. According to his defence even the second defendant was not a partner. In fact the whole tenor of his written statement shows that defendant 3 was the sole proprietor of the mill and that any other person who advanced any money to him did so only as a creditor. The second defendant Tirjugi Narain substantially supported the first defendant. The third defendant did not enter appearance. The partnership alleged by the plaintiff is not evidenced by any formal instrument. A draft was originally made by defendant 1 and shows that at first only defendants 2 and 3 were to be the partners but subsequently the plaintiff's name was added. This is characterised by defendant 1 as an interpolation. The question has no material importance and we ignore the draft.