1962 (12) TMI 71 - SC - Indian Laws

Supreme Court clarifies limitation period in partnership dissolution case, emphasizes pleading amendments

BANARSI DAS Versus. SETH KANSHI RAM & OTHERS (and Connected Appeals)

The Supreme Court confirmed the dissolution of the partnership of Shiv Prasad Banarsi Das Sugar Mills on May 13, 1944. It held that the limitation period ... - Issues Involved:1. Dissolution of partnership and winding up of business.2. Limitation period for filing a suit for accounts and share of profits.3. Fiduciary duty of the receiver to render accounts.4. Application of Order 41, Rule 33 of the Code of Civil Procedure.5. Commencement date for the limitation period.Issue-Wise Detailed Analysis:1. Dissolution of Partnership and Winding Up of Business:The plaintiff, Kundanlal, sought a declaration that the partnership of the Shiv Prasad Banarsi Das Sugar Mills was dissolved on May 13, 1944, and requested the court to dissolve it if it was still in existence. The trial court decreed that the partnership stood dissolved with effect from May 13, 1944, and appointed a commissioner to wind up the affairs of the mills. The High Court upheld the dissolution but dismissed the suit regarding other reliefs. The Supreme Court restored the trial court's decree, confirming the dissolution date as May 13, 1944.2. Limitation Period for Filing a Suit for Accounts and Share of Profits:The High Court held that the suit for accounts and share of profits was barred by Article 106 of the Limitation Act. It also held that the claim for the distribution of the dissolved firm's assets was time-barred. The Supreme Court disagreed, stating that the limitation period's commencement date was a mixed question of fact and law. The High Court erred by not allowing the parties to amend their pleadings and by not framing an issue on the limitation point.3. Fiduciary Duty of the Receiver to Render Accounts:Kanshi Ram, appointed as a receiver, was argued to have a fiduciary duty to render accounts to the other partners. The Supreme Court noted that the receiver held assets for the benefit of all partners and was bound to render accounts, independently of other considerations. The trial court's decree, which held Kanshi Ram liable to render accounts, was restored.4. Application of Order 41, Rule 33 of the Code of Civil Procedure:The High Court invoked Order 41, Rule 33, to disallow the plaintiff's claim decreed by the trial court. The Supreme Court found this inappropriate, as the High Court should have provided an opportunity for the parties to address the limitation issue. The High Court's decision to raise the limitation point for the first time in argument caused prejudice to some parties and was thus set aside.5. Commencement Date for the Limitation Period:The High Court held that the limitation period commenced on May 13, 1944, the date when Sheo Prasad filed the suit for dissolution. The Supreme Court clarified that the mere filing of a suit does not amount to a notice of dissolution. The partnership would be deemed dissolved from the date mentioned in the notice or the date of communication of the notice. The High Court lacked material to ascertain the correct date, leading to an erroneous decision on the limitation period.Conclusion:The Supreme Court allowed the appeals of Banarsidas and Kundanlal, restoring the trial court's decree, and dismissed the Civil Miscellaneous Petitions. The appeals were decided on merits, and no order as to costs was made.