Khanna, J. - (1.) This appeal by special leave is directed against the judgment of a Division Bench of the Bombay High Court affirming on appeal the decision of the learned single Judge whereby a suit for dissolution of partnership and rendition of accounts filed by the two plaintiff-appellants, Saligram Ruplal Khanna and Pessumal Atalrai Shahani, against Kanwar Rajnath defendant-respondent was dismissed. The partnership which was sought to be dissolved carried on business under the name and style of "Shri Ambernath Mills Corporation" (hereinafter referred to as SAMCO). The property which according to the appellants belonged to the partnership consisted of three mills at Ambernath. One of them was a woolen mill, the other was a silk mill and the third was an oil and leather cloth factory with land, bungalows and chawls attached thereto. In addition to that, there was a bobbin factory at Taradeo with offices at Bombay, Ahmedabad and other places. For the sake of convenience the above property may be described, as it was done in the High Court, as "Ambernath Mills". Although the case involves a tangled skein of facts, the points which survive for determination in appeal are rather simple.
(2.) The Ambernath Mills originally belonged to a company called Ahmed Abdul Karim Bros. Private Ltd. The mills were declared to be evacuee property in September 1951 and the Custodian took over the management of the mills in pursuance of the provisions of the Administration of Evacuee Property Act, 1950. It was then decided that the mills should be managed by displaced persons who had been industrialists in Pakistan. A private limited company was formed of 31 persons for taking over the management of the mills. Rs. 25,000/- were contributed by each one of those persons in that connection. The appellants and the respondent too were members of the company. Appellant No. 1 and the respondent had migrated at the time of partition from Gujarat in West Punjab. The respondent was a big industrialist and left behind extensive properties in Pakistan. He held verified claim of rupees 23 lakhs in lieu of property left by him in West Pakistan. The first appellant had a verified claim of Rupees 22,000/- in respect of residential property left in Pakistan. In addition to that, he had a disputed claim in respect of industrial properties. The second appellant had a verified claim of about Rs. 30,000/-. The two appellants and the respondent were associated by the Custodian with the management of the Ambernath Mills. By August 1952 all the members of the private limited company dropped out. It was accordingly decided by the Custodian to grant a lease of the Ambernath Mills to the respondent and the two appellants. On August 30, 1952 two documents were executed. One of the documents was an agreement of partnership between the two appellants and the respondent for carrying on the business of Ambernath Mills under the lease in the name and style of Shri Ambernath Mills Corporation. The other document was the agreement of lease executed by the Custodian of Evacuee Property as lessor and the appellants and the respondent carrying on business in partnership under the name and style of SAMCO as lessees. The subject-matter of the lease was Ambernath Mills. It was stated in the lease that the lessees had appointed the respondent as their chief representative with full powers of control, management and administration of the entire demised premises. The lease was to be for a period of five years to be computed from the date on which the possession of the demised premises was handed over to the lessees, subject to sooner determination thereof on any of the contingencies provided in clause 21 or on the breach of any condition on the part of the lessees or in the event of any dispute among the lessees resulting in the closure of the mills. It was also provided that the lessees would purchase and the lessor would sell to the lessees at an agreed price the stocks of raw materials, unsold finished goods, consumer's stores, spare parts, cars and trucks and other moveables which had already been vested in the lessor; as well as three diesel generating sets purchased by the lessor. In the event of any difference on the question of the price, the same was to be fixed through one or more experts. The sale was to be completed within a period of three months from the date of the agreement. The lessees were authorised to take as partner one or more displaced persons who had filed claims under the Displaced Persons Claims Act, 1950 subject to the prior approval of the Government. The agreement also contained a provision for reference of any dispute arising out of the agreement of lease to arbitrators chosen by the parties by mutual consent. The annual rent payable by the lessees was fixed at Rs. 6,00,000/- payable in four quarterly installments of Rs. 1,50,000/- each on or before 30th day of each quarter. The lessees also undertook to deposit or furnish bank guarantee in the sum of Rs. 7,00,000/- as security for the payment of the value of raw material, unsold finished goods, stores, spare parts and other articles. Clauses 17 to 21 of the agreement of lease read as under: "17. It is agreed between the lessor and the lessees that when the entire claims of the lessees filed by them under the Displaced Persons Claims Act, 1950, for all their properties are determined and the compensation payable to them by the Government of India is ascertained, the market value of the entire demised premises shall be determined by an expert appointed in that behalf by the Government of India, Ministry of Rehabilitation, and such value as is determined shall be taken as price for acquisition by the lessees of the full proprietary interest in the demised premises in the manner shown in the next succeeding paragraph. 18. The lessees, being all displaced persons from Pakistan and having left large properties in Pakistan, have all of them put in claims in respect of their properties and other assets left by them in Pakistan under the Displaced Persons Claims Act, 1950. When the claims under the said Act of the lessees are verified and determined and compensation payable in respect thereof has been ascertained the compensation payable to the lessees shall be taken into consideration, and it has been agreed as a term of this Agreement between the parties hereto with the concurrence of Government of India, Ministry of Rehabilitation, that on such total compensation being arrived at the lessees shall be allotted proprietary rights in the demised premises, in the manner shown viz., in case the value of the aggregate compensation payable to the lessees is equivalent to the value of the demised premises as assessed, the Lessor shall convey the demised premises absolutely to them as full proprietors thereof, their interest in the demised premises being in proportion to the compensation payable to each of the lessees and the respective shares in the proprietary interest shall be adjusted according to the amount of compensation payable to each as finally determined. 19. In case the aggregate amount of compensation payable by the Government of India to the lessees exceeds the value of the demised premises as determined, the demised premises will be conveyed to the lessees, their share inter se being in the proportion of the amount of compensation payable to each. 20. It is further agreed that in case the aggregate amount of compensation payable to the Lessees falls short of the value fixed for the demised premises, the Lessor shall be entitled to associate with the Lessees in the ownership of the proprietary interest to be allotted as aforesaid other displaced persons who have left industrial concerns in Pakistan, so that the total compensation payable to the lessees and the others thus associated is equivalent to the total value of the demised premises and the said demised premises shall then become the absolute property of the lessees and others thus associated in proportion to the total compensation payable to each as finally determined. 21. The lease to be granted pursuance hereto shall be liable to determination earlier on the settlement of the claims of the lessees and the allotment and transfer of the full proprietary interest in the demised premises as provided in clauses 17 to 20 hereof; provided that if the value of the full proprietary interest in the demised premises exceeds the amount of compensation payable to the lessees and part of such proprietary interest is allotted to other persons as provided in clause 20 hereof, the lessees shall be at liberty to continue the lease for the unexpired residue of the term on the terms and conditions and yearly rent prescribed hereunder, the yearly rent being adjusted proportionately to the extent of the proprietary interest allotted and transferred to the lessees." According to the partnership agreement executed by the two appellants and the respondent on August 30, 1952, each partner had agreed to contribute a capital of Rs. 1,00,000/-. The amount of Rs. 25,000/- already paid by each partner to the Custodian was regarded as part payment of the capital of rupees one lakh. Each partner had one-third share in the partnership, but it was provided that the shares would be adjusted by the respondent if fresh partners were taken in the partnership. The respondent was to be the managing partner and was entitled to assign work in the partnership to the two appellants. It was agreed that the appellants were not to interfere directly or indirectly in any manner with the management and control of the business by the respondent. The respondent was also authorised to form a limited liability company for running the business of the partnership with the consent of the Custodian and the appellants agreed to join the company as shareholders on such terms and conditions as might be agreed when such company was formed. The period of the partnership was five years "being the period of said lease".
(3.) The partnership took possession of Ambernath Mills on August 31, 1952. The respondent directed the first appellant to be in charge of the administration of the mills at Ambernath, while the second appellant, being an engineer, was placed in charge of the properties, machinery and stores of the mills. The respondent was in overall charge of the concern.;