2021 (10) TMI 249 - SC - Indian Laws

Supreme Court Upholds Division Bench Decision on Partnership Dispute under Indian Law

RAJENDRA BAJORIA AND OTHERS Versus HEMANT KUMAR JALAN AND OTHERS

The Supreme Court dismissed the appeals, concurring with the Division Bench's ruling that the reliefs sought in the plaint were not maintainable under the ... Claim of share from the partnership firm - Right of legal heirs after the demise of three original partners - rejection of the plaint on the ground that the plaint does not disclose any cause of action - Order VII Rule 13 of the Civil Procedure Code - It is their case that the accounts of the partnership firm have not been finalized and that the share of the profits of the partnership firm has not been paid to them. It is also the case of the plaintiffs that the defendants are seeking to represent the partnership firm to the exclusion of the plaintiffs and that the defendants are siphoning off funds of the partnership firm. HELD THAT:- From the perusal of the plaint, it could be gathered that the case of the plaintiffs is that in spite of demise of the three original partners of the partnership firm, through whom the plaintiffs were claiming, the defendants have been carrying on the business of the partnership firm. It is their case that the accounts of the partnership firm have not been finalized and that the share of the profits of the partnership firm has not been paid to them - it is rightly contended on behalf of the plaintiffs that, only on the basis of the averments made in the plaint, it could be ascertained as to whether a cause of action is made out or not. It is equally true that for finding out the same, the entire pleadings in the plaint will have to be read and that too, at their face value. At this stage, the defence taken by the defendants cannot be looked into. This Court has held that reading of the averments made in the plaint should not only be formal but also meaningful. It has been held that if clever drafting has created the illusion of a cause of action, and a meaningful reading thereof would show that the pleadings are manifestly vexatious and meritless, in the sense of not disclosing a clear right to sue, then the court should exercise its power under Order VII Rule 11 of CPC. It has been held that such a suit has to be nipped in the bud at the first hearing itself. This Court has held that the power conferred on the court to terminate a civil action is a drastic one, and the conditions enumerated under Order VII Rule 11 of CPC are required to be strictly adhered to. However, under Order VII Rule 11 of CPC, the duty is cast upon the court to determine whether the plaint discloses a cause of action, by scrutinizing the averments in the plaint, read in conjunction with the documents relied upon, or whether the suit is barred by any law - This Court has held that the underlying object of Order VII Rule 11 of CPC is that when a plaint does not disclose a cause of action, the court would not permit the plaintiff to unnecessarily protract the proceedings. It has been held that in such a case, it will be necessary to put an end to the sham litigation so that further judicial time is not wasted. We are in agreement with the Division Bench of the Calcutta High Court which, upon an elaborate scrutiny of the averments made in the plaint, the reliefs claimed therein, the provisions of the said Act and the clauses of the Partnership Deed, came to the conclusion that the reliefs as sought in the plaint, cannot be granted. Appeal dismissed. Issues Involved:1. Whether the plaint disclosed a cause of action under Order VII Rule 11 of CPC.2. Whether the reliefs claimed in the plaint could be granted under the provisions of the Indian Partnership Act, 1932.3. Whether the suit was barred by limitation.4. Whether the plaintiffs, as legal heirs and not partners, could seek dissolution of the partnership firm and other related reliefs.Detailed Analysis:1. Whether the plaint disclosed a cause of action under Order VII Rule 11 of CPC:The appellants argued that the Single Judge rightly concluded that the plaint disclosed a cause of action, thus it could not be rejected under Order VII Rule 11 of CPC. They contended that the Division Bench erred in conducting a 'mini-trial' to determine if the reliefs could be granted, which is impermissible under Order VII Rule 11. The Supreme Court noted that for determining a cause of action, the entire plaint must be read in its entirety and not in piecemeal. The Court referred to precedents, emphasizing that if clever drafting creates an illusion of a cause of action, the court should nip it in the bud at the first hearing itself.2. Whether the reliefs claimed in the plaint could be granted under the provisions of the Indian Partnership Act, 1932:The respondents argued that the reliefs sought could not be granted under Sections 40, 42, 43, and 44 of the Indian Partnership Act, 1932, and the clauses of the Partnership Deed dated 6th December 1943. The Supreme Court examined these provisions and clauses, noting that the partnership deed specifically provided that the partnership would not be automatically dissolved upon the death of any partner. The Court agreed with the Division Bench's finding that the plaintiffs, as legal heirs and not partners, could not maintain any claim in respect of the assets and properties of the firm, nor could they seek dissolution of the firm.3. Whether the suit was barred by limitation:The Single Judge had found that the issue of limitation was a mixed question of fact and law and did not dismiss the suit on this ground. The Division Bench did not specifically address this issue but focused on whether the reliefs sought could be granted. The Supreme Court did not delve into this issue further, given its agreement with the Division Bench that the reliefs sought could not be granted under the law.4. Whether the plaintiffs, as legal heirs and not partners, could seek dissolution of the partnership firm and other related reliefs:The Supreme Court agreed with the Division Bench that only partners of a firm could seek its dissolution. The plaintiffs, being legal heirs and not partners, were not entitled to claim dissolution or related reliefs. The Court emphasized that allowing the suit to proceed to trial would be an exercise in futility, wasting time, money, and judicial resources. The Court upheld the Division Bench's decision to reject the plaint, as the reliefs claimed were not maintainable under the law.Conclusion:The Supreme Court dismissed the appeals, agreeing with the Division Bench's findings that the reliefs sought in the plaint could not be granted under the Indian Partnership Act, 1932, and the clauses of the Partnership Deed. The Court emphasized the importance of scrutinizing the averments in the plaint to determine if a cause of action exists and preventing sham litigation from protracting judicial proceedings.