KARUMUTHU THIAGARAJAN CHETTIAR AND MOTHER Vs. E M MUTHAPPA CHETTIAR

JUDGEMENT

(1.) THIS is an appeal on a certificate granted by the Madras High Court. The brief facts necessary for present purposes are these : The present suit was brought by Multhappa Chettiar (hereinafter referred to as the respondent) against K. Thaiagarajan Chettiar (hereinafter called the appellant) and the Saroj Mills Ltd. In 1939 these two persons thought of doing business jointly by securing managing agencies of some mills. In that connection they carried on negotiations with two mills, namely, Rajendra Mills Limited, Salem and the Saroja Mills Limited, Coimbatore (hereinafter called the Mills). The managing agency of the Mills was with the Cotton Corporation Limited. On 4/10/1939, the said Corporation transferred and assigned its rights to the appellant and the respondent under the name of Muthappa and Co. On 15/11/1939, the Mills at an extraordinary general meeting of the shareholders accepted Muthappa and Co. as the managing agents and made the necessary changes in the Articles of Association. Later the appellant and the respondent obtained the managing agency of the Rajendra Mills Ltd., Salem. The managing agents of this mill were Salem Balasubramanian and Co. Ltd. Muthappa and Co. purchased all the shares of the Salem Balasubramaniam and Co. and thereafter carried on the business of the managing agency of this mill in the name of Salem Balasubramaniam and Co. Ltd. In November 1940 the appellant and the respondent entered into a written partnership agreement with respect to the managing agency business of the two mills. We shall consider the terms of this agreement later and all that we need say at this stage is that turns were fixed for the appellant and the respondent to look after the actual management of the two mills and the appellant's turn was the first and he therefore came into actual control of the two mills. Soon after however disputes arose between the appellant and the respondent with respect to the managing agency of the Rajendra Mills Ltd. , which resulted in various suits being filed between the partners, to which we shall refer later. Eventually on 4/03/1943, the appellant gave notice to the respondent terminating the partnership, considering it as a partnership at will. THIS was followed by the directors of the Mills terminating the managing agency of Muthappa and Co. on the ground that that company had ceased to exist and also on the ground that quarrels between the partners of the firm were not conducive to good management of the mills. THIS was notified to the respondent on 22/03/1943. THIS action of the directors was approved in a meeting of the shareholders of the Mills on 29/09/1943, and necessary modifications were again made in the Articles of Association. In between on 17/04/1943, the respondent had filed a suit for a declaration that Muthappa and Co. continued to be the managing agents of the Mills and for obtaining possession of the office of managing agents for himself or along with the appellants and also for a permanent injunction restraining the Mills from appointing any other managing agents. THIS suit was dismissed by the trial court on the ground that it was not maintainable under S. 69 of the Indian Partnership Act. No. 9 of 1932 (hereinafter called the Act), though the trial court gave findings on other issues also. The respondent went up in appeal to the Madras High Court against the decree in that suit. THIS appeal was dismissed on 8/07/1948, as the High Court held that the finding of the subordinate judge that the suit was not maintainable under S. 69 of the Act was correctness or otherwise of the other findings recorded by the subordinate judge.

(2.) WHILE this appeal was pending the respondent brought the present suit on 28/02/1946. In this suit he prayed for dissolving the firm Muthappa and Co., for accounts and for damages against the appellant and the Mills. The main contention of the respondent in the suit was that the alleged dissolution of partnership by the appellant and the removal of Muthappa and Co., from the managing agency of the Mills were part of a scheme of fraud conceived by the appellant which was actively connived at by the Mills in order to defeat and defraud the respondent of his legitimate dues and his right to continue and act as the managing agent of the Mills. The damages claimed were estimated at the figure of five lacs of rupees to be recovered from both the appellant and the Mills or from either of them. In the alternative the respondent claimed that even if Muthappa and Co. had been removed validly from the managing agency on 29/09/1943, he was entitled to an account from the appellant from 15/11/1939, to 29/09/1943. The suit was resisted by both the appellant and the Mills and their case was that the partnership was one at will and therefore was validly terminated by the appellant by notice. It was further contended that in any case the Mills were within their rights in terminating the managing agency of Muthappa and Co., as that firm had ceased to exist and there were interminable disputes between the partners. Fraud and collusion were denied and it was alleged that it was the respondent's conduct which compelled the appellant to give notice of termination of partnership and the Mills to terminate the managing agency. The Mills took a further plea, namely, that so far as they were concerned, the suit was barred under S. 69 of the Act.

(3.) THE first question therefore that arises for our determination is whether the partnership in this case is a partnership at will and it is necessary to refer to the terms of the partnership agreement to determine this question. After reciting that the management of the Mills was being carried on in the name and style of Muthappa and Company and of the Rajendra Mills Limited in the name and style of Salem Balasubramaniam and Co. Ltd., the partnership agreement goes on to say that the partners shall get in equal shares, the salary, commission, profit, etc., that may be realised from the aforesaid managing agencies. It provides for carrying on the management in rotation once in four years, the appellant to manage for the first four years and thereafter the respondent to manage for the next four years and in the same way thereafter. It further provides that the partners and their heirs and those getting their rights shall carry on the management in rotation. THE accounts were to be made once in every year after the closing of the yearly accounts of the two mills. THEre were then provisions as to borrowing with which we are not concerned. THE agreement further provides that in case either partner thinks of relinquishing his right of management under the agreement it shall be surrendered to the other partner only but shall not be transferred or sold to any other person whatever. Finally it is provided that the two partners shall carry on the affairs of the firm by rotation once in four years and the income realised thereby shall be divided year after years and the partners and their heirs shall get the same in equal shares and thus carry on the partnership management.