Res judicata and partnership compensation: jointly contributed funds must be shared in proportion to each partner's interest.

Res judicata did not bar the compensation claim because the earlier suit concerned the existence and dissolution of the partnership and accounts, while the later suit concerned entitlement to compensation after takeover of the undertaking. The compensation could not be claimed exclusively by one respondent where the undertaking had been acquired with funds contributed by partners in agreed proportions and the arrangement was acted on through registered deeds and balance-sheets. Applying restitution principles, the Court held that the contributors or their legal representatives and assignees were entitled to share the compensation in proportion to their respective interests after liabilities.

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Issues: (i) Whether the appeals were barred by res judicata in view of the dismissal of the connected appeals arising from the other suit. (ii) Whether the first respondent alone was entitled to the entire compensation money, or whether the amounts contributed by the partners had to be shared according to their respective interests.

Issue (i): Whether the appeals were barred by res judicata in view of the dismissal of the connected appeals arising from the other suit.

Analysis: The two suits were held to involve different subject-matters. The earlier suit concerned the existence and dissolution of the partnership and rendition of accounts, whereas the present suit concerned entitlement to the compensation payable after the undertaking had been taken over. The issue whether the first respondent alone was entitled to the compensation was not directly and substantially in issue in the earlier suit. Since the relevant controversy in the present suit was distinct, the bar of res judicata did not apply.

Conclusion: The plea of res judicata was rejected.

Issue (ii): Whether the first respondent alone was entitled to the entire compensation money, or whether the amounts contributed by the partners had to be shared according to their respective interests.

Analysis: The evidence showed that the undertaking had been purchased pursuant to a partnership arrangement, that the capital was contributed by the partners in agreed proportions, and that the partnership was openly acted upon through registered deeds and balance-sheets. Even if the arrangement was void or became void, the money contributed by the partners and invested in the undertaking could not be retained by one person alone. On the principles of restitution and the treatment of advantages received under void agreements, the contributors were entitled to recover and share the compensation in proportion to their shares after meeting outstanding liabilities.

Conclusion: The first respondent was not entitled to the whole compensation money, and the compensation was held distributable among the persons named in the partnership deed or their legal representatives or assignees in proportion to their respective shares.

Final Conclusion: The appeals succeeded, the High Court's decree was set aside, and the suit claiming exclusive entitlement to the compensation was dismissed, with the compensation directed to be distributed among the entitled contributors according to their shares.

Ratio Decidendi: A claim to compensation arising from property acquired with jointly contributed funds cannot be confined to one partner merely because the arrangement may be void; where the subject-matter in an earlier suit is different, res judicata does not bar adjudication of entitlement to the compensation in the later suit.

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