- (1.) Brig. F. J. Dillon and Major S. S. Khanna hereinafter called 'Dillon and Khanna' respectively carried on business in partnership as Construction Engineers. They agreed to dissolve the partnership with effect from February 15, 1956. By the deed of dissolution it was agreed that Dillon was to make over all the assets and properties of the partnership as absolute owner and to pay all the debts and to discharge all the liabilities of the partnership and to keep Khanna indemnified against all demands and claims in relation to the partnership business.
(2.) But the deed did not terminate the disputes between the partners, and Khanna commenced an action against Dillon in the Court of the Subordinate Judge, 1st Class, Delhi "for dissolution of the partnership and rendition of accounts". On January 12, 1957, the parties arrived at a compromise (which was incorporated into a decree of the Court) confirming the earlier dissolution of the partnership, subject to a scheme of winding up, under which all out-standings realised from the debtors of the firm and the sale proceeds of certain assets were to go into a banking account to be opened in the joint names of Dillon and Khanna and were to be applied in the first instance to meet the liabilities of the dissolved firm, and the balance in that joint account was to belong to Dillon. Some outstandings of the dissolved partnership were collected by Dillon and were deposited in the joint account of Dillon and Khanna.
(3.) Dillon filed a suit in the Court of the Subordinate Judge at Delhi for a decree for Rs. 54,250/- with future interest alleging that between the months of May 1957 and November 1957 he had, at the request of Khanna, advanced in three sums an aggregate amount of Rs. 46,000/- as short-term loans which Khanna had promised to but had failed to repay. Khanna pleaded that he did not borrow any loans from Dillon, and that the amounts claimed in the action being advanced, even on the plea of Dillon, out of joint fund belonging to the two partners, action for recovery of those amounts was in law not maintainable.;