The legal matter pertains to a conflict among partners of M/s Selwel Combines, established in 1986 and reconstituted in 1992, 1995, and 1996, which impacted their profit-sharing arrangements; specifically, Plaintiff ...
No Acts & Articles mentioned in this case
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REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 6469 OF 2021
[Arising out of Special Leave Petition (Civil) No.14165 of
2015]
V. ANANTHA RAJU & ANR. ...APPELLANT(S)
VERSUS
T.M. NARASIMHAN & ORS. .... RESPONDENT(S)
J U D G M E N T
B.R. GAVAI, J.
1. Leave granted.
2. The present appeal challenges the judgment and
order passed by the Division Bench of the High Court of
Karnataka at Bengaluru dated 27.2.2015, thereby,
dismissing the first appeal being R.F.A. No.1111 of 2008,
filed by the appellants and confirming the judgment and
decree passed by the XXXIII Additional City Civil & Sessions
Judge, Bangalore city dated 18.8.2008, vide which the suit
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being O.S. No.5622 of 2004 (hereinafter referred to as “the
said suit”) filed by the appellants/plaintiffs came to be
partly decreed.
3. The facts, in brief, giving rise to the present
appeal are as under.
The parties hereinafter will be referred to as per
their status in the said suit.
A partnership firm, namely, M/s Selwel Combines
(hereinafter referred to as “the partnership firm”) came to be
constituted in the year 1986. Vide Partnership Deed dated
30.10.1992 (hereinafter referred to as “the 1992 Deed”), the
partnership firm was reconstituted and the plaintiff No.1
(Appellant No.1 herein) was inducted as a partner along
with original partners, i.e., defendant Nos. 1 to 5. As per
the 1992 Deed, the plaintiff No.1 was to have 50% share in
the profits and losses of the partnership firm. It was
however provided in the 1992 Deed, that if the plaintiff No.1
fails to bring in an amount of Rs.50,00,000/ (Rupees Fifty
lakh) as his capital contribution to the partnership firm on
or before 31.3.1993, his share in the profits and losses of
the partnership firm would be only to the extent of 10%.
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On 2.11.1992, the partnership firm obtained a
property on lease for 99 years and constructed a
commercial building thereon. The building was leased out,
which fetched a monthly rent of Rs.22,05,532/
approximately.
Vide the Deed of Amendment of Partnership
dated 18.8.1995 (hereinafter referred to as “the 1995
Deed”), the partnership firm was again reconstituted,
whereby the plaintiff No.2, son of the plaintiff No.1, and
defendant Nos. 6 to 11 were inducted as partners and
defendant Nos. 12 to 16 were admitted to the benefit of the
partnership firm. As per the 1995 Deed, the share of the
plaintiff Nos. 1 and 2 in the profits and losses of the
partnership firm was to be 25% each.
It is the contention of the plaintiffs that vide
another Deed of Amendment of Partnership dated
22.05.1996, the partnership firm was reconstituted,
whereby the defendant No.12 was inducted as a partner and
the defendant Nos. 13 to 16 were continued to be entitled
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for the benefits of the partnership firm. However, this fact
is disputed by the contesting respondents.
It appears that in the year 2004, differences arose
between the plaintiffs and the defendants with regard to the
affairs of the partnership firm. On 8.5.2004, the plaintiffs
issued a legal notice to the defendants/partners, demanding
accounts right from the inception of the partnership firm
and their share of profits.
Defendant No.1 replied to the plaintiffs’ notice
dated 8.5.2004 by communication dated 12.5.2004. It was
stated in the said reply that the plaintiffs together were
entitled only to 10% share in the profits and losses of the
partnership firm and that mentioning of 25% share each in
the 1995 Deed was only a mistake of record.
In turn, a show cause notice was issued by the
defendants/partners to the plaintiffs on 8.6.2004 with
regard to the acts and omissions on the part of the plaintiffs
being contrary to the interests of the partnership firm and
other partners.
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Thereafter, again, there was exchange of
communication between the plaintiffs and the defendants.
According to the plaintiffs, in the meeting of the partners,
held on 18.6.2004, it was resolved to expel the defendant
No.1 from the partnership firm. However, as per the
defendants, a resolution was passed on the same day, i.e.,
18.6.2004, resolving expulsion of the plaintiffs from the
partnership firm.
In this background, the said suit came to be filed
by the plaintiffs for rendition of accounts with effect from
30.10.1992 and for releasing a sum of Rs.5,48,06,729/
being their 50% share in the profits of the partnership firm.
The claim of the plaintiffs was resisted by the defendant
No.1 by filing a written statement dated 9.9.2005; defendant
Nos. 2, 3, 7 to 12 by filing their joint written statement
dated 21.10.2005; and defendant No. 5 by filing written
statement dated 29.10.2007.
The XXXIII Additional City Civil & Sessions
Judge, Bangalore, framed the following issues and answered
them as such.
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“17.On the above pleadings of the parties,
the following issues have been framed for
consideration:
1.Whether the suit of plaintiffs is bad for
nonjoinder of necessary party that is
M/s Selwel Combines?
2.Whether the suit of plaintiffs is bad for
misjoinder namely defendant No. 17 to
19?
3.Whether the suit of plaintiffs is barred
by limitation?
4.Whether the plaintiffs prove that they
have got 25% share each in the M/s
Selwel Combines?
5.Whether the plaintiffs are entitled to the
relief of Rs.5,48,06,729/?
6.Whether the defendant No. 1, 2 and 5
proves that the expelled plaintiffs have
no locusstandi to seek accounts of the
said firm?
7.What order or decree?
19.My findings on the above issues are
as under:
Issue No.1: In the negative.
Issue No.2: In the negative,
Issue No.3: In the negative
Issue No.4: In the negative, the
plaintiffs have got 10%
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share together in M/s
Selwel Combines.
Issue No.5: See order below
Issue No.6: Plaintiff No. 1 and 2 were
expelled from the date
18/6/2004 and can seek
for accounts.
Issue No.7 As per final order.”
While partly decreeing the suit, holding that the
plaintiffs together are entitled to 10% share in the profits
and losses of the partnership firm till 18.6.2004, and that
from 18.6.2004, they were expelled partners of the
partnership firm, the trial court vide the judgment and
order dated 18.8.2008 directed that the partnership firm
had to be made as party in the final decree proceedings.
The other defendantspartners were also granted liberty to
apply to the Court during final decree proceedings for their
declaration of profit and loss share by paying necessary
court fee. The trial court further directed the partnership
firm and the defendant No.1 to produce all the accounts,
balance sheets, returns filed before Income Tax authorities
and the bank documents and such other documents for the
period from 30.10.1992 till 18.6.2004, before an
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independent and impartial auditor for drawing the final
decree.
Being aggrieved thereby, the plaintiffs preferred
an appeal being R.F.A. No.1111 of 2008 before the High
Court of Karnataka at Bengaluru. The Division Bench of
the Karnataka High Court, by the impugned judgment and
order dated 27.2.2015, dismissed the said appeal. Being
aggrieved thereby, the plaintiffs have approached this Court
by way of present appeal by special leave.
4. We have heard Shri R. Basant, learned Senior
Counsel appearing on behalf of the plaintiffs/appellants and
Shri Balaji Srinivasan, learned counsel appearing on behalf
of the defendants/respondent Nos. 1 and 2. Though service
of notice is complete on the other respondents, no one has
entered appearance on their behalf.
5. Shri R. Basant, learned Senior Counsel,
appearing on behalf of the appellants, submitted that both
the trial court and the High Court have grossly erred in
holding that the plaintiffs will have only 10% share in the
profits and losses of the partnership firm. He submitted
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that the finding, that since the plaintiffs failed to prove that
they have invested an amount of Rs.50,00,000/ (Rupees
Fifty lakh) and as such, they are not entitled to 50% share
but only 10% share in the profits and losses of the
partnership firm, is totally erroneous. Learned Senior
Counsel submits that the 1992 Deed was drastically
amended vide the 1995 Deed. He submits that, though the
1992 Deed had provided that the share of the plaintiff No.1
in the profits and losses of the partnership firm was 50%
and it will be reduced to 10% in the event the plaintiff No.1
does not contribute an amount of Rs.50,00,000/ (Rupees
Fifty lakh) towards capital of the partnership firm, there was
no such stipulation in the 1995 Deed. The learned Senior
Counsel submits that, as a matter of fact, the plaintiffs had
invested the said amount of Rs.50,00,000/ (Rupees Fifty
lakh). He submits that, in any case, the 1995 Deed clearly
provides that the plaintiff No.1 and the plaintiff No.2, who
was inducted into the partnership firm by the 1995 Deed,
would be entitled to 25% share each in the profits and
losses of the partnership firm. He submits that the same
cannot be a mistake or error. He submits that if the share
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of all the partners as specified in the 1995 Deed is
calculated, it would clearly reveal that it provided for 25%
share for each of the plaintiffs. The learned Senior Counsel,
therefore, submits that both the trial court and the High
Court have grossly erred in totally ignoring the specific
provision contained in the 1995 Deed.
6. Shri Balaji Srinivasan, learned counsel,
appearing on behalf of the respondent Nos. 1 and 2,
submitted that the finding of fact, on the basis of the
appreciation of evidence, by the trial court as well as the
High Court warrants no interference. He submits that the
perusal of the 1992 Deed as well as the 1995 Deed would
clearly show that the plaintiff No.1 could not have 50%
share in the profits and losses of the partnership firm
unless he invested an amount of Rs.50,00,000/ (Rupees
Fifty lakh). He submits that the evidence of plaintiff No.2 as
PW1 would itself show that he has admitted that he had no
material to establish that an amount of Rs.50,00,000/
(Rupees Fifty lakh) was invested by the plaintiff No.1 in the
partnership firm. Learned counsel further submits that the
plaintiff No.1 has failed to step into the witness box and as
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such, an adverse inference has to be drawn against him.
Learned counsel further submits that as per the 1992 Deed,
the plaintiff No.1 was entitled only to 10% share in the
profits and losses of the partnership firm since he failed to
invest an amount of Rs.50,00,000/ (Rupees Fifty lakh). By
the 1995 Deed, the plaintiff No.2, who is son of the plaintiff
No.1, came to be inducted and the 10% share of the plaintiff
No.1 was to be divided amongst them. However,
inadvertently, it came to be mentioned in the 1995 Deed
that the plaintiffs will have 25% share each. Learned
counsel, therefore, submits that no interference is
warranted and the appeal deserves to be dismissed.
7. In the present case, most of the facts are
undisputed. It is not in dispute that vide the 1992 Deed
(Exhibit D3), the partnership firm was reconstituted and
the plaintiff No.1 was inducted as a partner along with the
original partners, i.e., the defendant Nos. 1 to 5. As per
clause 4 of the 1992 Deed, the plaintiff No.1, i.e., the
incoming partner, was to contribute an amount of
Rs.50,00,000/ (Rupees Fifty lakh) towards capital, on or
before 31.3.1993. As per clause 22 of the 1992 Deed, the
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share of the plaintiff No.1 in the profits and losses of the
partnership firm was to be 50% if he contributed an amount
of Rs.50,00,000/ (Rupees Fifty lakh) on or before
31.3.1993. Failing which, the same was to be only 10%.
8. It is also not in dispute that on 2.11.1992, the
partnership firm obtained a property on lease for a period of
99 years and constructed a commercial building, which was
leased out, and the monthly rent of which was
Rs.22,05,532/ approximately.
9. It will be relevant to refer to paragraphs 2 and 4
of the plaint in the said suit, filed by the plaintiffs, in the
City Civil Court at Bangalore:
“2. A firm by name M/s Selwel Combines
was constituted in the year 1986 and the
same was registered in 1990. By means of
Reconstitution/Partnership Amendment
Deed dated 30th of October 1992, the
partnership firm was reconstituted
consisting of the first plaintiff and
defendant 1 to 5 as the partners of the
firm. The capital as invested under the
partnership Deed was to an extent of Rs.
25,000/ each by each one of the
defendants 1 to 5 and a sum of Rs.
50,00,000/ (Rupees Fifty Lakh only) was
invested by the first plaintiff alone. For the
purposes of operation of the Bank
Accounts, the first defendant was
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constituted as the Managing Partner who
was entrusted with the duty to operate the
bank Accounts. The first plaintiff was
entitled to a profit share of 50% and each
one defendants 1 to 5 were entitled to 10%
each. A copy of the Partnership Deed dated
30.10.1992 is produced herewith and
marked as DOCUMENT NO. 1.
4. The Partnership was again reconstituted
by the Partnership Amendment Deed dated
18.8.1995 by virtue of which the second
plaintiff and defendants 6 to 11 were to 16
who were them minors were also admitted
to the benefit of the partnership firm. The
firm was constituted to carry out the
activities of building and development. As
per the Reconstitution Deed, the capital of
the firm was the contribution which were
already made by the existing partners and
each one of the incoming partners had to
contribute a sum of Rs. 10,000/. To
reconstitute it further it is provided that
the first plaintiff was entitled to 25% of the
profit share and the second plaintiff who is
none other than the some of the first
plaintiff was also entitled to 25% of the
profit share. The other partners were
entitled to various extent of shares as
contained in the Reconstitution Deed
dated 18.08.1995. For the purposes of
operation of the Bank Accounts, the first
defendant was constituted as a Managing
Partner who was entrusted with the duties
of operation of the Bank Accounts. The
construction activities had to be looked
after by the first plaintiff. The Partnership
Deed further provided that the partners
could withdraw the amounts only if agreed
mutually between the partners from time
to time. Clause 10 of the agreement
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provided that any of the partner as per the
Reconstitution Deed were entitled to
appear in person or could authorize any
person to appear on behalf of the firm
before any judicial or quasijudicial
authority. Therefore as per the terms of the
Reconstitution Deed, the plaintiffs together
are entitled to a profit share up to 50%.
Copy of the Reconstitution Deed dated
18.08.1995 is produced and marked as
DOCUMENT NO. 2.”
10. Perusal of the aforesaid paragraphs would reveal
that the plaintiffs have specifically stated that, in pursuance
of the 1992 Deed, a sum of Rs.50,00,000/ (Rupees Fifty
lakh) was invested by the plaintiff No.1 alone. It has been
further averred that the plaintiff No.1 was entitled to a share
of 50% and each one of the defendant Nos. 1 to 5 were
entitled to share of 10% each in the profits and losses of the
partnership firm. The plaintiffs have further averred that
the partnership firm was again reconstituted on 18.8.1995
by the 1995 Deed, by virtue of which, the plaintiff No.2 as
well as defendant Nos. 6 to 11 were inducted as partners in
the partnership firm. Vide the 1995 Deed, the defendant
Nos. 12 to 16, who were then minors, were also admitted to
the benefit of the partnership firm. It has been averred that
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after the reconstitution of the partnership firm as per the
1995 Deed, it was provided that the plaintiff No.1 was
entitled to 25% share in the profits and losses of the
partnership firm, so also, the plaintiff No.2, who is the son
of the plaintiff No.1, was entitled to 25% share in the profits
and losses of the partnership firm. It has further been
averred that the share of the rest of the partners, i.e., the
defendant Nos. 1 to 11, in the profits and losses of the
partnership firm is as mentioned in clause 13 of the 1995
Deed, whereas the defendant Nos. 12 to 16 were entitled to
2% share in the profits of the partnership firm.
11. It is the specific case of the plaintiffs in the plaint
that the partnership firm on 2.11.1992 had obtained a
property bearing No.30, situated at Cunningham Road,
Bangalore560 052, admeasuring an extent of about 2972
sq. mtrs. on lease, for a period of 99 years. It is further
averred in the plaint that subsequent to the acquisition of
the leasehold rights, the partnership firm undertook the
construction activities with the investments, which were
made according to the terms of the partnership deed. It is
the case of the plaintiffs that after the construction of the
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building was complete, the entire building was leased out in
favour of the defendant No.17. It is averred that the
defendant Nos. 18 and 19 were made parties to the said suit
since the current account of the partnership firm was with
the respondent No.18 Bank, of which, the respondent
No.19 was the Manager. It is further averred by the
plaintiffs in the plaint that in the returns filed before the
Income Tax Authorities, the share of the plaintiffs in the
profits and losses of the partnership firm was shown as 25%
each.
12. It will further be relevant to reproduce paragraph
9 of the written statement, filed on behalf of the defendant
No.1, in the said suit:
“9. It is true that the firm was
reconstituted in the year 1995 and the
Defendants No. 6 to 11 are admitted as
partners and further Defendants No. 12 to
16 are admitted for the benefit of the firm.
They number of partners of the firm,
nature of activities of the firm and other
details pertaining to the partnership deed
is duly recorded in the partnership deed
and subsequent reconstitution deeds. In
the light of the facts stated supra, the 1
st
plaintiff was not entitled to 25% share in
the profits. Accordingly, at the time of
induction of 2
nd
plaintiff as a partner to the
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firm, it was agreed between the partners
that the 1
st
plaintiff would be entitled to
pass on 50% of his right to the 2
nd
plaintiff.
Accordingly, the plaintiffs No.1 and 2 are
only entitled to 10% share. The condition
incorporated in the partnership deed dated
30101992 had not been rectified or
varied in any manner. The reference to the
share of the party has come into
documentation of the subsequent deeds
based on the preceding document, but
without specific noting of the
noncompliance of the condition precedent
to be performed by the 1st plaintiff.
However, due to proximate relationship
between the partners, the same was
agreed to be understood between the
parties as per the original terms.”
13. It will also be relevant to refer to paragraph 4 of
the written statement, filed on behalf of the defendant No.2,
in the said suit:
“4. The facts regarding the constitution
and reconstitution of the firm M/s. Selwel
Combines is a matter of record similarly,
the accounts of the firm is also a matter of
record. In this context, it is relevant to
mention that the Plaintiff No.1 was
inducted into the firm as a partner and he
had assured to invest Rs. 50,00,000/ on
or before 31.03.1993. Under that
circumstance, he was entitled to 50% of
the share in firm. If he failed to comply
with the same, he is only entitled to 10%
share. Subsequently his; half share has
been transferred to the Plaintiff No.2. By
inadvertence by share ratio of the Plaintiffs
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has been reflected as 50% in some
documents and the same is subject to
rectification. The same was not
immediately rectified or altered due to the
cordial relationship between the parties
and since there was no actual distribution
of funds in that ratio. Any statement made
contrary to the same is hereby denied. In
fact, the Plaintiffs in the presence of the
other partners have accepted and admitted
this fact. They are estopped from pleading
anything to the contrary.”
14. The stand taken by the rest of the defendants in
their written statements is on the same lines as taken by
the defendant Nos. 1 and 2.
15. It could thus be seen that the defendants have
not disputed the fact with regard to the reconstitution of the
partnership firm in the year 1995 vide the 1995 Deed. They
have also not disputed the fact that the defendant Nos. 6 to
11 were inducted as partners in the partnership firm and
that the defendant Nos. 12 to 16 were admitted to the share
in the profits of the partnership firm vide the 1995 Deed. It
is however, their case that the plaintiff No.1 was entitled to
50% share in the profits and losses of the partnership firm,
only if he invested an amount of Rs.50,00,000/ (Rupees
Fifty lakh) on or before 31.3.1993. It is their case that, if
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the same was not complied with, he was entitled to only
10% share in the profits and losses of the partnership firm.
It is their stand that, by inadvertence, the profit and loss
share ratio of the plaintiffs had been reflected as 50% in
some documents and the same was subject to rectification.
It is their further case that the same was not immediately
rectified or altered due to the cordial relationship between
the parties.
16. It could thus be seen that the defendants have
not disputed about the reconstitution of the partnership
firm by the 1995 Deed. They have also not disputed that in
the 1995 Deed, the share of plaintiff Nos. 1 and 2 in the
profits and losses of the partnership firm is mentioned as
25% each. However, it is their case that, since in
pursuance of the 1992 Deed, the plaintiff No.1 had not
invested an amount of Rs.50,00,000/ (Rupees Fifty lakh),
his share remained to be only 10%, half of which was given
to his son, i.e., the plaintiff No.2, vide the 1995 Deed. It is
their case that the plaintiffs’ share of 25% each, as
mentioned in the 1995 Deed, is by inadvertence or a
mistake in fact, and the same was subject to rectification.
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17. It will be apposite to refer to relevant part of the
affidavit, filed by the defendant No.1 under Order XVIII Rule
4 of the Code of Civil Procedure, 1908, in the court of the
City Civil Judge at Bangalore, in the said suit:
“5.…In this context, it is pertinent to
mention that on 18.8.1995, a deed for
reconstitution of partnership was
entered into thereby admitting the
plaintiff No.2 as an additional partner.
At the time of induction of plaintiff No.2,
the plaintiff No.1 had proposed
admission of plaintiff No.2 with an
intention to bifurcate his share in the
firm by transferring half of his share to
his son who is plaintiff No.2. The
plaintiff No.1 in terms of the agreement
failed to pay towards capital of the firm
the sum of Rs.50 lakhs within 31.3.1993
and also until this day. Under such
circumstances, in reality, the plaintiff
No.1 was holding only 10% share in the
firm and consequently by virtue of
transfer of his half share the 5% was
transferred in favour of plaintiff No.2.
6. I state that on account of failure of
plaintiff No.1 to contribute Rs.50 lakhs
before 31.3.1993 having not been noted,
an error had crept in the account of the
firm initially reflecting the share of
plaintiff No. 1 as 50% and thereafter
reflecting the share of plaintiffs @ 25%
each subsequent to induction of plaintiff
No.2.”
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18. It could thus be seen that even in his affidavit in
lieu of examinationinchief, the defendant No.1 admits
about the execution of the 1995 Deed.
19. At this stage, it will be relevant to refer to
Sections 17, 91 and 92 of the Indian Evidence Act, 1872
(hereinafter referred to as ‘the Evidence Act’):
“17. Admission defined.—An admission is
a statement, oral or documentary or
contained in electronic form, which suggests
any inference as to any fact in issue or
relevant fact, and which is made by any of
the persons, and under the circumstances,
hereinafter mentioned.
91. Evidence of terms of contracts,
grants and other dispositions of property
reduced to form of document .—When the
terms of a contract, or of a grant, or of any
other disposition of property, have been
reduced to the form of a document, and in
all cases in which any matter is required by
law to be reduced to the form of a
document, no evidence shall be given in
proof of the terms of such contract, grant or
other disposition of property, or of such
matter, except the document itself, or
secondary evidence of its contents in cases
in which secondary evidence is admissible
under the provisions hereinbefore
contained.
Exception 1.—When a public officer is
required by law to be appointed in writing,
and when it is shown that any particular
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person has acted as such officer, the writing
by which he is appointed need not be
proved.
Exception 2.—Wills admitted to probate
in India may be proved by the probate.
Explanation 1.—This section applies
equally to cases in which the contracts,
grants or dispositions of property referred to
are contained in one document, and to
cases in which they are contained in more
documents than one.
Explanation 2.—Where there are more
originals than one, one original only need be
proved.
Explanation 3.—The statement, in any
document whatever, of a fact other than the
facts referred to in this section, shall not
preclude the admission of oral evidence as
to the same fact.
Illustrations
(a) If a contract be contained in several
letters, all the letters in which it is con
tained must be proved.
(b) If a contract is contained in a bill of
exchange, the bill of exchange must be
proved.
(c) If a bill of exchange is drawn in a set of
three, one only need be proved.
(d) A contracts, in writing, with B, for the
delivery of indigo upon certain terms. The
contract mentions the fact that B had
paid A the price of other indigo contracted
for verbally on another occasion.
Oral evidence is offered that no payment
was made for the other indigo. The evidence
is admissible.
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(e) A gives B a receipt for money paid
by B.
Oral evidence is offered of the payment.
The evidence is admissible.
92. Exclusion of evidence of oral
agreement.—When the terms of any such
contract, grant or other disposition of
property, or any matter required by law to
be reduced to the form of a document, have
been proved according to the last section,
no evidence of any oral agreement or
statement shall be admitted, as between the
parties to any such instrument or their
representatives in interest, for the purpose
of contradicting, varying, adding to, or
subtracting from, its terms:
Proviso (1).—Any fact may be proved
which would invalidate any document, or
which would entitle any person to any
decree or order relating thereto; such as
fraud, intimidation, illegality, want of due
execution, want of capacity in any
contracting party, want or failure of
consideration, or mistake in fact or law.
Proviso (2).—The existence of any
separate oral agreement as to any matter on
which a document is silent, and which is
not inconsistent with its terms, may be
proved. In considering whether or not this
proviso applies, the Court shall have regard
to the degree of formality of the document.
Proviso (3).—The existence of any
separate oral agreement, constituting a
condition precedent to the attaching of any
obligation under any such contract, grant or
disposition of property, may be proved.
Proviso (4).—The existence of any distinct
subsequent oral agreement to rescind or
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modify any such contract, grant or
disposition of property, may be proved,
except in cases in which such contract,
grant or disposition of property is by law
required to be in writing, or has been
registered according to the law in force for
the time being as to the registration of
documents.
Proviso (5).—Any usage or custom by
which incidents not expressly mentioned in
any contract are usually annexed to
contracts of that description, may be
proved:
Provided that the annexing of such
incident would not be repugnant to, or
inconsistent with, the express terms of the
contract.
Proviso (6).—Any fact may be proved
which shows in what manner the language
of a document is related to existing facts.
Illustrations
(a) A policy of insurance is effected on
goods “in ships from Calcutta to London”.
The goods are shipped in a particular ship
which is lost. The fact that that particular
ship was orally excepted from the policy,
cannot be proved.
(b) A agrees absolutely in writing to
pay B Rs 1000 on the 1st March, 1873. The
fact that, at the same time, an oral agree
ment was made that the money should not
be paid till the thirtyfirst March, cannot be
proved.
(c) An estate called “the Rampur tea es
tate” is sold by a deed which contains a map
of the property sold. The fact that land not
included in the map had always been re
25
garded as part of the estate and was meant
to pass by the deed, cannot be proved.
(d) A enters into a written contract
with B to work certain mines, the property
of B, upon certain terms. A was induced to
do so by a misrepresentation of B's as to
their value. This fact may be proved.
(e) A institutes a suit against B for the
specific performance of a contract, and also
prays that the contract may be reformed as
to one of its provisions, as that provision
was inserted in it by mistake. A may prove
that such a mistake was made as would by
law entitle him to have the contract re
formed.
(f) A orders goods of B by a letter in which
nothing is said as to the time of payment,
and accepts the goods on deliv
ery. B sues A for the price. A may show that
the goods were supplied on credit for a term
still unexpired.
(g) A sells B a horse and verbally war
rants him sound. A gives B a paper in these
words “Bought of A a horse for Rs
500”. B may prove the verbal warranty.
(h) A hires lodgings of B, and gives B a
card on which is written—“Rooms, Rs 200 a
month”. A may prove a verbal agreement
that these terms were to include partial
board.
A hires lodgings of B for a year, and a
regularly stamped agreement, drawn up by
an attorney, is made between them. It is
silent on the subject of board. A may not
prove that board was included in the terms
verbally.
26
(i) A applies to B for a debt due to A by
sending a receipt for the money. B keeps the
receipt and does not send the money. In a
suit for the amount, A may prove this.
(j) A and B make a contract in writing to
take effect upon the happening of a certain
contingency. The writing is left with B, who
sues A upon it. A may show the circum
stances under which it was delivered.”
20. It could thus be seen that the admission given by
the defendant No.1 in his written statement as well as in his
affidavit in lieu of examinationinchief, that the partners
have executed the 1995 Deed, is unambiguous and clear. In
the light of this admission by the defendant Nos. 1, 5, and
2, 3, 7 to 12, it will be relevant to consider the effect of
Sections 91 and 92 of the Evidence Act in the present case.
21. This Court in the case of Roop Kumar v. Mohan
Thedani
1
has elaborately considered the earlier judgments
of this Court on the issue in hand and has held as under:
“12. Before we deal with the factual aspects,
it would be proper to deal with the plea re
lating to scope and ambit of Sections 91 and
92 of the Evidence Act.
13. Section 91 relates to evidence of terms
of contract, grants and other disposition of
1 (2003) 6 SCC 595
27
properties reduced to form of document.
This section merely forbids proving the con
tents of a writing otherwise than by writing
itself; it is covered by the ordinary rule of
law of evidence, applicable not merely to
solemn writings of the sort named but to
others known sometimes as the “bestevi
dence rule”. It is in reality declaring a doc
trine of the substantive law, namely, in the
case of a written contract, that all proceed
ings and contemporaneous oral expressions
of the thing are merged in the writing or dis
placed by it. (See Thayer's Preliminary Law
on Evidence, p. 397 and p. 398; Phipson's
Evidence, 7th Edn., p. 546; Wigmore's Evi
dence, p. 2406.) It has been best described
by Wigmore stating that the rule is in no
sense a rule of evidence but a rule of sub
stantive law. It does not exclude certain
data because they are for one or another
reason untrustworthy or undesirable means
of evidencing some fact to be proved. It does
not concern a probative mental process —
the process of believing one fact on the faith
of another. What the rule does is to declare
that certain kinds of facts are legally ineffec
tive in the substantive law; and this of
course (like any other ruling of substantive
law) results in forbidding the fact to be
proved at all. But this prohibition of proving
it is merely that dramatic aspect of the
process of applying the rule of substantive
law. When a thing is not to be proved at all
the rule of prohibition does not become a
rule of evidence merely because it comes
into play when the counsel offers to “prove”
it or “give evidence” of it; otherwise, any rule
of law whatever might be reduced to a rule
28
of evidence. It would become the legitimate
progeny of the law of evidence. For the pur
pose of specific varieties of jural effects —
sale, contract etc. there are specific require
ments varying according to the subject. On
the contrary there are also certain funda
mental elements common to all and capable
of being generalised. Every jural act may
have the following four elements:
(a) the enaction or creation of the act;
(b) its integration or embodiment in a
single memorial when desired;
(c) its solemnization or fulfilment of the
prescribed forms, if any; and
(d) the interpretation or application of
the act to the external objects affected by
it.
14. The first and fourth are necessarily in
volved in every jural act, and second and
third may or may not become practically im
portant, but are always possible elements.
15. The enaction or creation of an act is
concerned with the question whether any
jural act of the alleged tenor has been con
summated; or, if consummated, whether the
circumstances attending its creation autho
rise its avoidance or annulment. The inte
gration of the act consists in embodying it in
a single utterance or memorial — com
monly, of course, a written one. This
process of integration may be required by
law, or it may be adopted voluntarily by the
actor or actors and in the latter case, either
wholly or partially. Thus, the question in its
usual form is whether the particular docu
29
ment was intended by the parties to cover
certain subjects of transaction between
them and, therefore, to deprive of legal effect
all other utterances.
16. The practical consequence of integration
is that its scattered parts, in their former
and inchoate shape, have no longer any ju
ral effect; they are replaced by a single em
bodiment of the act. In other words, when a
jural act is embodied in a single memorial
all other utterances of the parties on the
topic are legally immaterial for the purpose
of determining what are the terms of their
act. This rule is based upon an assumed in
tention on the part of the contracting par
ties, evidenced by the existence of the writ
ten contract, to place themselves above the
uncertainties of oral evidence and on a dis
inclination of the courts to defeat this ob
ject. When persons express their agree
ments in writing, it is for the express pur
pose of getting rid of any indefiniteness and
to put their ideas in such shape that there
can be no misunderstanding, which so often
occurs when reliance is placed upon oral
statements. Written contracts presume de
liberation on the part of the contracting par
ties and it is natural they should be treated
with careful consideration by the courts and
with a disinclination to disturb the condi
tions of matters as embodied in them by the
act of the parties. (See McKelvey's Evidence,
p. 294.) As observed in Greenlear's Evi
dence, p. 563, one of the most common and
important of the concrete rules presumed
under the general notion that the best evi
dence must be produced and that one with
30
which the phrase “best evidence” is now ex
clusively associated is the rule that when
the contents of a writing are to be proved,
the writing itself must be produced before
the court or its absence accounted for be
fore testimony to its contents is admitted.
17. It is likewise a general and most inflexi
ble rule that wherever written instruments
are appointed, either by the requirement of
law, or by the contract of the parties, to be
the repositories and memorials of truth, any
other evidence is excluded from being used
either as a substitute for such instruments,
or to contradict or alter them. This is a mat
ter both of principle and policy. It is of prin
ciple because such instruments are in their
own nature and origin, entitled to a much
higher degree of credit than parol evidence.
It is of policy because it would be attended
with great mischief if those instruments,
upon which men's rights depended, were li
able to be impeached by loose collateral evi
dence. (See Starkie on Evidence, p. 648.)
18. In Section 92 the legislature has pre
vented oral evidence being adduced for the
purpose of varying the contract as between
the parties to the contract; but, no such
limitations are imposed under Section 91.
Having regard to the jural position of Sec
tions 91 and 92 and the deliberate omission
from Section 91 of such words of limitation,
it must be taken note of that even a third
party if he wants to establish a particular
contract between certain others, either
when such contract has been reduced to in
a document or where under the law such
31
contract has to be in writing, can only prove
such contract by the production of such
writing.
19. Sections 91 and 92 apply only when the
document on the face of it contains or ap
pears to contain all the terms of the con
tract. Section 91 is concerned solely with
the mode of proof of a document with limita
tion imposed by Section 92 relates only to
the parties to the document. If after the doc
ument has been produced to prove its terms
under Section 91, provisions of Section 92
come into operation for the purpose of ex
cluding evidence of any oral agreement or
statement for the purpose of contradicting,
varying, adding or subtracting from its
terms. Sections 91 and 92 in effect supple
ment each other. Section 91 would be inop
erative without the aid of Section 92, and
similarly Section 92 would be inoperative
without the aid of Section 91.
20. The two sections, however, differ in
some material particulars. Section 91 ap
plies to all documents, whether they purport
to dispose of rights or not, whereas Section
92 applies to documents which can be de
scribed as dispositive. Section 91 applies to
documents which are both bilateral and
unilateral, unlike Section 92 the application
of which is confined to only bilateral docu
ments. (See: Bai Hira Devi v. Official As
signee of Bombay [AIR 1958 SC 448] .) Both
these provisions are based on “bestevidence
rule”. In Bacon's Maxim Regulation 23, Lord
Bacon said “The law will not couple and
mingle matters of specialty, which is of the
32
higher account, with matter of averment
which is of inferior account in law.” It would
be inconvenient that matters in writing
made by advice and on consideration, and
which finally import the certain truth of the
agreement of parties should be controlled by
averment of the parties to be proved by the
uncertain testimony of slippery memory.
21. The grounds of exclusion of extrinsic ev
idence are: (i) to admit inferior evidence
when law requires superior would amount
to nullifying the law, and (ii) when parties
have deliberately put their agreement into
writing, it is conclusively presumed, be
tween themselves and their privies, that
they intended the writing to form a full and
final statement of their intentions, and one
which should be placed beyond the reach of
future controversy, bad faith and treacher
ous memory.
22. This Court in Gangabai v. Chhabubai
[(1982) 1 SCC 4: AIR 1982 SC 20] and Ish
war Dass Jain v. Sohan Lal [(2000) 1 SCC
434: AIR 2000 SC 426] with reference to
Section 92(1) held that it is permissible to a
party to a deed to contend that the deed was
not intended to be acted upon, but was only
a sham document. The bar arises only when
the document is relied upon and its terms
are sought to be varied and contradicted.
Oral evidence is admissible to show that
document executed was never intended to
operate as an agreement but that some
other agreement altogether, not recorded in
the document, was entered into between the
parties.”
33
22. It could thus be seen that this Court has held
that the integration of the act consists in embodying it in a
single utterance or memorial — commonly, a written one.
This process of integration may be required by law, or it
may be adopted voluntarily by the actor or actors and in the
latter case, either wholly or partially. It has been held that
the question that is required to be considered is whether the
particular document was intended by the parties to cover
certain subjects of transaction between them to deprive of
legal effect of all other utterances. It has been further held
that the practical consequence of integration is that its scat
tered parts, in their former and inchoate shape, have no
longer any jural effect and they are replaced by a single em
bodiment of the act. It has been held that when a jural act
is embodied in a single memorial, all other utterances of the
parties on the topic are legally immaterial for the purpose of
determining what are the terms of their act. It has been
held that when persons express their agreements in writing,
it is for the express purpose of getting rid of any indefinite
ness and to put their ideas in such shape that there can be
34
no misunderstanding, which so often occurs when reliance
is placed upon oral statements. It has been observed that
the written contracts presume deliberation on the part of
the contracting parties and it is natural that they should be
treated with careful consideration by the courts and with a
disinclination to disturb the conditions of matters as em
bodied in them by the act of the parties. It has been held
that the written instruments are entitled to a much higher
degree of credit than parol evidence.
23. This Court has further held that Sections 91 and
92 of the Evidence Act would apply only when the document
on the face of it contains or appears to contain all the terms
of the contract. It has been held that after the document
has been produced to prove its terms under Section 91, the
provisions of Section 92 come into operation for the purpose
of excluding evidence of any oral agreement or statement for
the purpose of contradicting, varying, adding or subtracting
from its terms. It has been held that it would be inconve
nient that matters in writing made by advice and on consid
eration, and which finally import the certain truth of the
agreement of parties should be controlled by averment of
35
the parties to be proved by the uncertain testimony of slip
pery memory. It has been held that when parties deliber
ately put their agreement into writing, it is conclusively pre
sumed, between themselves and their privies, that they in
tended the writing to form a full and final statement of their
intentions, and one which should be placed beyond the
reach of future controversy, bad faith and treacherous
memory.
24. Though referring to Gangabai w/o Rambilas
Gilda (Smt.) v. Chhabubai w/o Pukharajji Gandhi
(Smt.)
2
and Ishwar Dass Jain (Dead) Through Lrs.
v. Sohan Lal (Dead) by Lrs.
3
, it has been held that it is
permissible for a party to a deed to contend that the deed
was not intended to be acted upon, but was only a sham
document, it would be necessary to lead oral evidence to
show that the document executed was never intended to op
erate as an agreement but that some other agreement alto
gether, not recorded in the document, was entered into be
tween the parties.
2 (1982) 1 SCC 4
3 (2000) 1 SCC 434
36
25. It could thus be seen that once the plaintiffs had
specifically contended that the terms of the 1992 Deed were
amended/modified by the 1995 Deed, and the defendants
admitted about the execution of the said document, i.e., the
1995 Deed, if it was the case of the defendants that the
terms mentioned in the 1995 Deed were inadvertent or a
mistake in fact, then the burden to prove the same shifted
upon the defendants. In view of Section 92 of the Evidence
Act, any evidence with regard to oral agreement for the
purpose of contradicting, varying, adding to, or subtracting
from the terms of the written contract, would be excluded
unless the case falls within any of the provisos provided in
Section 92. The defendants have attempted to bring their
case within the first proviso to Section 92 of the Evidence
Act, by contending that mentioning of 25% share to each of
the plaintiffs in the profits and losses of the partnership
firm was a mistake in fact.
26. It will also be relevant to examine the contention
of the defendants, as to whether the share of the plaintiffs
in the profits and losses of the partnership firm, mentioned
37
in the 1995 Deed, was due to inadvertence or was a mistake
in fact.
27. It will be relevant to refer to the preamble of the
1995 Deed:
“Whereas the Parties 1 to 6, hereto
in pursuance of Deed of Partnership
among themselves dated 30
th
October,
1992, have been carrying on business at
31/1.1 Cunningham Road Bangalore
360052 as Builders and Developers
under the name and style of "SELWEL
COMBINES".
AND the Parties of Seventh, Eight,
Ninth, Tenth, Eleventh, Twelfth,
Thirteenth parties have after negotiation
agreed to join the partnership firm M/s
Selwel Combines as Partners with effect
from 18
th
August, 1995 and are referred
tb as the Incoming Partners.
And the Parties hereto have decided
to admitted V. Vijaylakshmi Kumari R.
Poornima, Master R. Manjunath Master
S. Ragavendra, Master S. Badrinath to
the benefit of this partnership
AND whereas the parties of the
First, Second, Third, Fourth, Fifth and
Sixth parts have decided to continue∙ the
business of the Firm "SELWEL
COMBINES" after admitting parts of the
Seventh, Eight, Ninth, Tenth, Eleventh,
Twelth, Thirteenth parts as Partners and
are referred to as continuing partners.
38
And whereas the Parties hereto
after negotiations amount themselves
have decided to amend the terms of
partnership of the Firm M/s "SELWEL
COMBINES" with effect from
18.08.1995.
And whereas the parties hereto
have decided to admit the following
minors to the benefit of Partnership as:
1Kum. v.
Vijayalakshmi
Daughter of Sri
R Venkateshan
22.05.78
2Kum. R.
Poornima
Daughter of Sri.
Rajanna
07.10.87
3Master R.
Manjunath
Son of Sri.
Rajanna
07.10.86
4Master R.
Raghavendra
Son of Sri.
Somashekar
20.05.86
5Master S.
Lokanath
Son of Sri.
Somashelar
13.08.90
And whereas parties hereto are
desirous of reducing the terms and
conditions of the Agreement of
Amendment of Partnership into writing.”
28. It could thus clearly be seen that the 1995 Deed
specifically refers to the 1992 Deed between the party Nos. 1
to 6, i.e., plaintiff No.1 and the defendant Nos. 1 to 5. It
further states that the party Nos. 7 to 13, i.e., the defendant
39
Nos. 6 to 11 and the plaintiff No.2, have, after negotiation,
agreed to join the partnership firm with effect from
18.8.1995. It further states that it has been agreed between
the parties that the defendant Nos. 12 to 16 have been
admitted to the benefit of the partnership firm. The
preamble specifically states that after negotiation amongst
themselves, the parties have decided to amend the terms of
the partnership firm with effect from 18.8.1995 and
thereafter have reduced the terms and conditions of the
agreement of amendment of partnership into writing.
29. It will be apposite to refer to clause 4 of the 1995
Deed, which reads thus:
“4. Capital of the Firm
The capital of the firm shall consist
of Capital already contributed by parties
of First, Second, Third, Fourth, Fifth and
Sixth parts and capital contributed by
incoming partners of Rs. 10,000/ each.”
30. It could thus clearly be seen that clause 4 of the
1995 Deed specifically provides that the capital of the
partnership firm shall be the capital already contributed by
parties of First, Second, Third, Fourth, Fifth and Sixth
40
parts, and the capital contributed by the incoming partners
of Rs.10,000/ each.
31. In contrast, it will be relevant to refer to clause 4
of the 1992 Deed, which reads thus:
“4. Capital of the firm: Capital of the
firm shall consist of capitals already
contributed by partners of First, Second,
Third, Fourth & Fifth as below:
First Partner 25,000
Second Partner 25,000
Third Partner 25,000
Fourth Partner 25,000
Fifth Partner 25,000
Sixth Partner is all of that
contribute Rs. 50,00,000 (Fifty Lakhs) as
his contribution the capital of the firm
and he shall contribute his capital of Rs.
50,00,000 on or before 31
st
December
1993.”
32. It could thus be seen that clause 4 of the 1992
Deed, provides that though the capital of the partnership
firm was capital already contributed by the defendants Nos.
1 to 5, i.e., Rs.25,000/ each, the plaintiff No.1 was to
contribute an amount of Rs.50,00,000/ (Rupees Fifty lakh)
to the capital of the firm.
41
33. It will also be relevant to refer to clause 13 of the
1995 Deed, which deals with ‘sharing of profits or losses’ of
the partnership firm:
“13. Sharing of Profits or Losses:
The book profits or losses shall be
arrived at after providing for interest
paid or payable of this firm to any of the
partners; out of the balance, salary
payable to any of them shall be
allocated. After this, balance of Profits or
Losses shall be shared as below:
ProfitLoss
1T.M. Narasimhan 18% 28%
2V. Srinivas 2% 2%
3V. Umashankar 2% 2%
4E. Ravi Kumar 2% 2%
5H. Shamanna 4% 4%
6Anantha Raju 25% 25%
7V. Bahgyalakshmi 2% 2%
8V. Shakuntaia 2% 2%
9Padma 2% 2%
10Varalakshmi 2% 2%
11V. Badari 2% 2%
12Lakshmi 2% 2%
13S.A.L. Vinay 25% 25%
The following persons are admitted
to the benefits of Partnership only:
% of
share
in the
firm
profits
1 Kum. V.
Vijayalakshmi
2%
D/o Sri. R.
Venkatesan
22.05.782%
42
2 Kum. R.
Poornima
2%
D/o Sri
Rajanna
07.10.872%
3 Master R.
manjunath
2%
S/o Sri
Rajanna
07.10.882%
4 Master S.
Raghavendra
2%
S/o Sri.
Somasekar
20.05.862%
5 Master S.
Lokanath
2%
S/o Sri.
Somasekar
13.08.902%”
34. In contrast, it will be relevant to refer to clause 22
of the 1992 Deed, which reads thus:
“22. Sharing of Profit & Losses: Book
profits of the firm shall be arrived at
after providing for interest paid/payable
to partner on their capital account
balances as in para 22. Out of book
profits first salary allowable to any of the
partners will be allocated. Balance
profits or losses shall be shared as
below:
Sri T. M. Narashimhan 10%
Sri. V. Srinivas 10%
Sri. V. Uma Shankar 10%
Sri. E. Ravi Kumar 10%
Sri. H. Shamanna 10%
Sri. V. Anantha Raju 50%
If Sri V. Anantha Raju fails to bring
in Rs. 50,00,000 as his capital
contribution to the firm on or before 31
st
March 1993 he shall be entitled to only
10% of the profits of the firm and liable
to share losses also at 10% of total
losses. On that event, profits and losses
43
shall be shared or borne an the case
may be as follows:
Sri T. M. Narashimhan 20%
Sri. V. Srinivas 20%
Sri. V. Uma Shankar 20%
Sri. E. Ravi Kumar 20%
Sri. H. Shamanna 10%
Sri. V. Anantha Raju 10%”
35. Comparison of these two clauses would reveal
that in the 1992 Deed, though the share of the defendant
Nos. 1 to 5 in the profits and losses of the partnership firm
was specified as 10%, the share of plaintiff No.1 was
specified as 50%. However, it is specifically mentioned in
the 1992 Deed, that in the event, the plaintiff No.1 fails to
bring in an amount of Rs.50,00,000/ (Rupees Fifty lakh) as
his capital contribution to the partnership firm on or before
31.3.1993, the share in the profits and losses of the
partnership firm of defendant Nos. 1 to 4 would be 20%
each and that of the plaintiff No.1 and the defendant No.5
would be 10% each.
36. In the amended deed, i.e., the 1995 Deed, there is
no mention regarding such contingency upon the plaintiff
No.1 depositing or not depositing an amount of
Rs.50,00,000/ (Rupees Fifty lakh).
44
37. What has happened between 1992 and 1995 is
exclusively within the knowledge of the parties. Though the
plaintiffs have averred that an amount of Rs.50,00,000/
(Rupees Fifty lakh) was invested by the plaintiff No.1 in the
intervening period, the same is denied by the defendants.
However, in view of Section 91 of the Evidence Act, the
evidentiary value of the 1995 Deed would stand on a much
higher pedestal, as against the oral testimony of the parties.
The 1995 Deed clearly shows that it is executed after due
deliberations, negotiations and mutual consensus on the
terms and conditions to be incorporated therein. By the
1995 Deed, 6 new partners have been admitted to the
partnership firm, whereas 5 minors have been admitted to
the benefit of the partnership firm. The contention of the
defendants, that the share of the plaintiff Nos. 1 and 2 in
the profits and losses of the partnership firm, mentioned as
25% each, is by mistake and, in fact, is only 5% each, does
not sound logical and reasoned. If it was by mistake or
inadvertence, nothing precluded the defendants from
rectifying the same between 1995 and 2004. The
45
arithmetical calculations would also show that the share in
the profits and losses of the partnership firm has been
mentioned in the 1995 Deed after due deliberations and
negotiations. It could be seen that, though the share of the
defendant No.1, as per the agreement, i.e., the 1995 Deed,
in the losses of the partnership firm is 28%, his share in the
profits is only 18%. The 10% difference of share in the
profits and losses of the defendant No.1 has been adjusted
towards the 2% share in the profits given to the defendant
Nos. 12 to 16 each. As such, we are unable to accept the
contention of the defendants that the share in the profits
and losses of the partnership firm as mentioned in the 1995
Deed is inadvertent or a mistake in fact. In any case, if that
was so, the burden was on the defendants to establish that
the 1995 Deed did not reflect the mutual intention of the
parties and the terms and conditions agreed between the
parties were different than those reduced in writing by the
1995 Deed.
38. We find that the following observations by the
trial court in its judgment and order dated 18.8.2008 are
46
not sustainable in law, in the light of the provisions as
contained in Section 91 of the Evidence Act.
“…Therefore if we read the plaint and
evidence of plaintiff No.2, the plaintiffs
have not produced any scrap of paper
that plaintiff No.1 had given or deposited
Rs.50,00,000/ towards his share to
claim 50% of profit share. It is only mere
assertions the plaintiffs are asking
before the court that "we are entitled for
50% share" they are not saying before
the court why and for what reasons that
they are entitled to 50% share and
other partners are entitled to a lesser
share. Merely because share of the
plaintiffs have been shown as 25% each
either in the partnership deed dated
18/8/1995 or subsequent returns filed
before the income tax authorities is of no
avail because those documents have not
been acted upon to distribute the profits
between the partners to show that
plaintiff Nos. I and 2 were given profit
share at any time.”
39. In this factual background, we are of the
considered view that the trial court as well as the High
Court have erred in holding that the plaintiffs together were
entitled to only 10% share in the profits and losses of the
partnership firm till 18.6.2004.
40. Insofar as the challenge of the appellants to their
expulsion from the partnership firm is concerned, we do not
47
find any merit in the contention of the appellants. It will be
relevant to refer to clause 17 of the 1992 Deed:
“17. The Partners have right to expel an
erring partner/partners or a partner who
prevents the other partner from carrying
on business effectively and profitable or
the partner/partners who causes
damage to the interest of the firm of
his/their acts, after him/them
reasonable opportunity of being hard.”
41. Perusal of clause 17 of the 1992 deed would
reveal that the partners have right to expel an erring
partner/partners on the grounds specified therein. The
1995 Deed does not have any conflicting provision. The
clauses in the 1992 Deed, which are not superseded by the
1995 Deed, would still continue to operate. The trial court
has given sound reasons, while upholding the expulsion of
the plaintiffs. We see no reason to interfere with the same.
42. In the result, the appeal is partly allowed.
43. The judgment and decree passed by the trial
court, as affirmed by the High Court, holding that the
plaintiffs together have 10% share in the profits and losses
of the partnership firm is modified. It is declared and
decreed that the plaintiffs together are entitled to 50% share
48
in the profits and losses of the partnership firm till
18.6.2004.
44. The judgment and decree passed by the trial
court, as affirmed by the High Court, to the effect that the
plaintiffs are expelled from the partnership firm with effect
from 18.6.2004 is maintained. Rest of the directions of the
trial court in paragraphs 2 to 6 of the operative part in its
judgment are also maintained.
45. The appeal is disposed of in the above terms.
There shall be no order as to costs. Pending applications, if
any, shall stand disposed of.
…….…....................., J.
[L. NAGESWARA RAO]
…….…....................., J.
[SANJIV KHANNA]
…….…....................., J.
[B.R. GAVAI]
NEW DELHI;
OCTOBER 26, 2021
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