PANNALAL PAUL Vs. PADMABATI PAUL
LAWS(CAL)-1960-6-20
HIGH COURT OF CALCUTTA
Decided on June 15,1960

PANNALAL PAUL Appellant
VERSUS
PADMABATI PAUL Respondents

JUDGEMENT

Bachawat, J. - (1.) THIS is an appeal from an order refusing to set aside an award. The appellants and the respondents carried on business in co-partnership in Homoeopathic medicines under the name and style of Paul and Co., at No. 82, Clive Street, and another business in paper under the name and style of Hari Narayan Paul and Co., at No. 103. Old China Bazar street. The appellants Pannalal Paul, Chunilal Paul and Lakshman Chandra Paul are the sons of one Hari Narayan Paul, deceased, and each of them had one-fourth share in the profits and losses of the two partnership businesses. The respondent Padmabati is the widow and the respondents Satya Charan Paul and Amar Nath Paul are the minor sons of another son of Hari Narayan Paul and they jointly had one-fourth share in the profits and losses of the two businesses. The respondents instituted a suit in this Court for dissolution and accounts of the two partnerships and for the realisation and distribution of the partnership assets and properties. The respondents also applied for appointment of a receiver. By an order dated January 31, 1956 all disputes in respect of the two partnerships mentioned in the plaint and in the petition for appointment of receiver were referred to the sole arbitration of Mr. D. K. Ghose, Barrister-at-Law. The parties filed their respective statements before the arbitrator and adduced oral and documentary evidence. We are informed that the arbitrator held over one hundred sittings. Several issues were raised in the reference. Eventually, the arbitrator made his award on July 25, 1957. The appellants being dissatisfied with the award moved an application to set it aside. Mallick, J., held that the appellants had made out no ground for setting aside the award and dismissed the application. The appellants have preferred this appeal from that order.
(2.) TO appreciate the arguments addressed before us it is necessary to refer to relevant portions of the impugned award. Clauses 1, 2, 3 and 4 of the award are as follows : 1. "Pannalal Paul, Chunilal Paul and Lakshman Chandra Paul are from this day entitled to) the right, title and interest in the business of Harinarayan Paul and Co. and Paul and Co. They will have all the assets of the said 2 businesses including 'Good Will' and tenancy rights of the shop. They will be responsible for and bear all the debts and liabilities of the said businesses in respect of Income Tax, Sales Tax, chartered Bank of India Ltd., Titagar Paper Mills Ltd., Bhola Nath Paper House, arrears of rent and other small sundry debts"; 2. "S. Padmabati Paul, Satya Charan Paul and Amarnath Paul will from this day have no right title and interest in the said businesses nor will they have any liability or debt of the said 2 businesses." 3. "Pannalal Paul, Chunilal Paul and Lakshman Chandra Paul will indemnify and reimburse Sm. Padmabati Paul, Satya Charan Paul and Amar Nath Paul in case the 3 latter suffer any loss on account of the aforesaid liabilities or debts of the said 2 businesses." 4. "Pannalal Paul, Chunilal Paul and Lakshman Chandra Paul will forthwith pay Sm. Padmabati Paul, Satya Charan Paul and Amarnath Paul the sum of Rs. 1,2,255/- (Rupees Twelve thousand two hundred and fifty five) only." In support of this appeal Mr. Sen contends that the award is bad, inasmuch as it purports to create a new partnership between the three appellants, Pannalal, Chunilal and Lakshman. He contends that on a true construction of the award the arbitrator has not dissolved the partnership, that in substance he has compelled some of the partners to retire, and has awarded that the remaining partners are to carry on the two businesses in future in co-partnership. I am unable to accept this contention. The whole argument is based upon fact that award does not explicitly award that the two firms have been dissolved. But it is to be seen that by Clause 1 of the award the two businesses with all their assets and liabilities have been allotted to the appellants with effect from the date of the award and by Clause 2 it is provided that the respondents will have no right, title and interest in the two businesses as from the date of the award. On a fair construction of the award it must be held that the arbitrator awarded that the two partnerships would stand dissolved as from the date of the award. Clauses 1, 2, 3 and 4 of the award contain directions consequential on the dissolution of the two partnerships. The award allots the two businesses and all their assets to the appellants. By force of the award the appellants have become the co-owners of the two businesses and of all the business assets. But the award has not created a new partnership. It has not directed the appellants to carry on the two businesses in co-partnership. Partnership is a relation created by contract. The appellants may now agree to carry on the two businesses in copartnership and if they do so, a new partnership will be created, not by the award, but by the agreement. Mr. Sen relied upon the decision in Ram Protap Chamria v. Durga Prosad Chamria, 53 Ind App 1; (AIR 1925 PC 293). That decision is entirely distinguishable. In that case by the express terms of the award the arbitrator purported to create a new partnership. The arbitrator had no I authority to create the new partnership. In the instant case the arbitrator has not by his award created a new partnership. The first contention raised by Mr. Sen therefore fails.
(3.) MR. Sen next contends that the award is in contravention of Sections 46 and 48 of the Indian Partnership Act inasmuch as the entire assets of the dissolved firms have been allotted to the appellants without providing for payment of the liabilities of the dissolved firms out of the assets in the first instance and that consequently the award is in excess of the powers conferred on the arbitrators by the order of reference and is also erroneous in law on the face of it. By Section 46 of the Indian Partnership Act, on the dissolution of the firm, every partner is entitled, as against all the other partners, to have the property of the firm applied in payment of the debts and liabilities of the firm, and to have the surplus distributed among the partners according to their rights. Section 48 of the Indian Partnership Act provides for the mode of settlement of accounts between the partners and for the Order of the application of the assets of the firm on its dissolution. Sub-clause (b) of Section 48 provides that the assets of the dissolved firm shall be applied, in the first instance, in paying the debts of the firm to third parties. Every partner has the right as against the other partners to insist that the assets of the dissolved firm be applied in accordance with the provisions of Sections 46 and 48 of the Indian Partnership Act. Each partner has for that purpose a general lien over the assets of the dissolved firm. By the award in this case the appellants have been allotted all the assets and properties of the dissolved firms and have also been made responsible for all the liabilities thereof. It is expected that the appellants will apply all the assets allotted to them towards discharge of those liabilities. The rights conferred on the appellants by Sections 46 and 48 have in no way been infringed by the award. Far from suffering a prejudice they have obtained an advantage by It. Instead of their general lien over the properties of the dissolved firms they have now obtained the full ownership over those properties. The respondents also were entitled to insist that all the assets of the dissolved firms should be applied in the first instance towards the discharge of those liabilities; they could contend that the award was in contravention of their rights under Sections 46 and 48, inasmuch as it had allotted all those assets to the appellants without providing, in the first instance, for the payment of the liabilities. But the respondents have made no complaint on that account. The appellants are in no way prejudiced by the contravention of the respondents' rights under Sections 46 and 48 and they are not entitled to have the award set aside on that ground.;


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