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Suresh Kumar Sanghi v. Amit Kumar Sanghi & Sons
Factual and Procedural Background
The firm Sanghi Motors, consisting of seven partners, was engaged in automobile dealings and held a franchise/dealership from M/s Mahindra and Mahindra Ltd. for distribution and sale of jeeps and F.C trucks in Delhi, Chandigarh, Haryana, and Punjab. The plaintiff and defendants Nos. 5 and 6 formed one group, while defendants Nos. 1 to 4 formed another group within the partnership. The latter group allegedly attempted to undermine the partnership business by causing cancellation of the Mahindra and Mahindra dealership and obstructing the firm's bank operations. The plaintiff and defendants Nos. 5 and 6 later succeeded in restoring the dealership.
The plaintiff instituted the suit in August 1980 seeking an injunction restraining defendants Nos. 1 to 4 from interfering with the firm's bank operations and dealership. The plaintiff claimed to be the Managing Partner entitled to manage the firm's affairs. An interim injunction was granted by J.D Jain, J., on 16-1-1981, allowing the plaintiff to operate the overdraft facility and directing certain conditions including furnishing an indemnity bond and quarterly accounting statements.
During proceedings, statements were made on 10-9-1980 indicating that defendants Nos. 1 to 4 wished to dissolve the partnership, which was described as a partnership at will, and the notice of dissolution was waived. However, no suit for dissolution was filed by defendants Nos. 1 to 4 as indicated. Subsequently, defendants Nos. 1 to 4 claimed that a resolution was passed on 20-9-1980 removing the plaintiff as Managing Director, while the plaintiff contended that defendants Nos. 1 to 4 ceased to be partners from 10-9-1980.
The plaintiff sought to amend the plaint under Order 6 Rule 17 read with Section 151 CPC to include a declaration that defendants Nos. 1 to 4 ceased to be partners from 10-9-1980. The defendants opposed the amendment, arguing it introduced a new and conflicting case inconsistent with the original suit and was likely to prolong litigation.
Legal Issues Presented
- Whether the plaintiff could amend the plaint to declare that defendants Nos. 1 to 4 ceased to be partners from 10-9-1980 based on statements made in court and subsequent developments.
- Whether such an amendment would be permissible without causing prejudice or leading to multiplicity of proceedings.
- The legal effect of the statements made on 10-9-1980 concerning the dissolution or cessation of partnership.
Arguments of the Parties
Plaintiff's Arguments
- The plaintiff asserted he was the Managing Partner entitled to manage the firm’s affairs.
- The statements made on 10-9-1980 by defendants’ counsel indicated that defendants Nos. 1 to 4 had ceased to be partners, which should be incorporated as a vital subsequent development in the plaint.
- The amendment was necessary to avoid multiplicity of proceedings and to address alternative pleas within the same suit.
- Reliance was placed on various precedents supporting the taking note of subsequent events and allowance of alternative pleas.
Defendants Nos. 1 to 4 Arguments
- The defendants contended the plaintiff misinterpreted the statements made on 10-9-1980.
- The proposed amendment introduced a new and conflicting case inconsistent with the original suit, which maintained that defendants Nos. 1 to 4 were partners.
- The scope of the suit would change drastically, requiring adjudication on issues beyond the original pleadings, such as retirement, substitution of partners, and rights of legal heirs.
- The amendment was alleged to be mala fide, intended to prolong litigation and take unfair advantage of the interim injunction already granted.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Abbott v. Abbott, 1936 (3) All. E.R 823 | Allowing courts to take note of subsequent events and permitting alternative pleas in pleadings. | Relied upon to support the plaintiff’s contention that subsequent developments may be incorporated in pleadings. |
| Karumuthu Thiagerajan Chettiar and another v. E.M Muthappa Chatteri, AIR 1961 SC 1225 | Principle of allowing amendments to pleadings to reflect subsequent events. | Invoked in support of the plaintiff’s application for amendment. |
| Shikar Chand Jain v. Digamber Jain Praband Karini Sabha and others, AIR 1974 SC 1178 | Permitting alternative pleas and amendment of pleadings. | Used to argue for liberal exercise of amendment powers. |
| Rameshwar and others v. Jot Ram and others, AIR 1976 SG 49 | Principle of incorporating subsequent developments in pleadings. | Referenced to support plaintiff’s right to amend. |
| Pasupuleti Venkateswar lu v. Motor and General Traders, AIR 1975 SG 1409 | Allowing amendments to pleadings to reflect change of circumstances. | Relied upon to justify amendment application. |
| Velammel and others v. Chookish Gounder and others, AIR 1971 Madras 469 | Permitting amendments to avoid multiplicity of proceedings. | Invoked in support of avoiding multiple suits. |
| Firm Shrinivas Ram Kumar v. Mahabir Prasad and others, AIR (38) 1951 SC 177 | Power of courts to allow amendments in pleadings. | Used to establish the principle of liberal amendment. |
| Ganpat Singh v. Sher Bahadur Singh and others, AIR 1978 Allahabad 66 | Scope of amendment and its limits. | Referenced to highlight limits on amendments that alter the nature of the suit. |
Court's Reasoning and Analysis
The court noted that the suit was originally based on the premise that defendants Nos. 1 to 4 were partners who had breached their obligations, justifying injunctions against them as partners. The proposed amendment sought to negate this fundamental basis by declaring these defendants no longer partners, which was directly inconsistent with the original pleadings. The court acknowledged the general principle of liberally allowing amendments to reflect subsequent developments and avoid multiplicity of proceedings. However, it emphasized exceptions where amendments introduce a new and incompatible case or are mala fide.
The court found that the proposed amendment was both incompatible with the original case and likely to complicate and indefinitely prolong litigation rather than shorten it. The legal effect of the statements made on 10-9-1980 and related partnership questions were complex and not suitable for resolution within the limited scope of the present suit. The court observed that these larger disputes could be pursued in an independent suit and that defendants could raise pleas related to cessation of partnership in their written statement if they chose. The plaintiff would then have the opportunity to respond accordingly.
Accordingly, the court concluded that allowing the amendment would be inequitable and prejudicial, given the interim injunction already in place and the conflicting positions the plaintiff sought to maintain simultaneously.
Holding and Implications
The court dismissed the plaintiff’s application for amendment of the plaint.
The direct effect of this decision is that the plaintiff cannot amend the plaint to declare defendants Nos. 1 to 4 as having ceased to be partners within the present suit. The original case, premised on their status as partners, remains intact. The court indicated that disputes regarding the existence or cessation of partnership may be litigated separately in an independent suit. No new precedent was established beyond the application of established principles on amendments and pleadings in partnership disputes.
D.R Khanna, J.:— The firm Sanghi Motors is constituted of seven partners and the business of automobile dealings. It is also holding franchise/dealership of M/s Mahindra and Mahindra Ltd. for the distribution and sale of jeeps and F.C Trucks for the areas of Union Territory of Delhi Chandigarh, Haryana and Punjab. The plaintiff and defendant Nos. 5 and 6 are stated to form one group and the defendant Nos. 1 to 4 as the other group in this partnership. The latter, however, it is alleged attempted to undermine the partnership business and succeeded in obtaining cancellation of franchise/dealership of Mahindra and Mahindra Ltd. They also attempted to obstruct the operation of the bank accounts of the firm at different places: and refused to sign the requisite bank papers which had been renders red necessary because of rise in price of vehicles. It was latter that the plaintiff and defendant Nos. 5 and 6 succeeded in getting the said Franchise/dealership restored.
2. The present suit was, therefore, brought by the plaintiff in August, 1980, seeking following relief:—
“That a decree for injunction restraining the defendant Nos. 1 to 4 from writing any letter or sending any communication to bank of Rajasthan, Janpath, New Delhi, for getting bank operation of the partnership account with the said bank closed or suspended and also from writing any letter or sending any communication to Mahindra and Mahindra Ltd, Bombay for the purpose of getting dealership terminated and for getting the supplies of jeeps and F.C trucks closed, stopped or suspended to the partnership firm and/or from taking any steps, whatsoever, by which the bank operation of any of the bankers of the partnership firm closed or suspended or the dealership with the partnership firm from Mahindra and Mahindra Limited, in any manner, prejudicially or adversely affected, be passed in favour of the plaintiff and defendant Nos. 5 and 6 against the defendant Nos. 1 to 4. The cost of the suit be also awarded to the plaintiff. Any other relief which this Hon'ble Court deems just and fit in the circumstances of the case be also granted to the plaintiff and defendant Nos. 5 and 6.”
3. The plaintiff has been claiming that he is Managing Partner of the Firm, and, as such, he is entitled to manage its affairs.
4. Along with the suit a petition for interim injunction was moved (I.A 2592 of 1980), which ultimately came up for hearing before J.D Jain, J. His Lordships by a detailed order dated 16-1-1981, directed as under:—
“(1). The plaintiffs shall be entitled to operate the overdraft facility to the full limit of Rs. 18,000,00 (Rupees eighteen lacs only) in connection with the business of the partnership firm and the defendant was not in any manner interfere with or withdraw the personal guarantee furnished by them to their bankers so as to cause any hindrance or obstruction M/s. Mahindra and Mahindra Limited and other parties having business dealings with the firm, till the decision of the suit.
(2). The plaintiff shall, however, furnish an indemnity bond in the sum of Rs. 5,00,000/- (Rupees five lacs only) to this court undertaking to indemnify the defendants for any act of misfeasance or gross negligence on his part. The indemnity bond shall be furnished with one surety to the satisfaction of the Registrar within a month, failing which the ad interim injunction shall stand vacated.
3. The plaintiff shall further maintain true and faithful accounts of all the business and shall submit a true statement of partnership account to this court every quarterly; the first such statement of accounts for the period ending 31st December, 1980, to be furnished by 15th February, 1981 and the subsequent statements shall be furnished within a month succeeding the last date of each quarter, the first such quarter to be reckoned as ending on 31st March, 1981 and so on and so forth”.
During the course of this order, the learned Judge was of the prima facie view that the terms and conditions of the partnership and its nature did not show that it was a partnership at will. These observations, according to the plaintiff, happened to be made when the counsel for the parties had made the following statements in court on 10-9-1980:—
“Statement of Shri J.K Seth, counsel for the defendant Nos. 1 to 4.
On account of difference which have arisen between the parties, defendant Nos. 1 to 4 no longer wants to continue the firm M/s. Sanghi Motors and they are filing a suit for dissolution of the partnership firm. However notice of demolition of the firm is to be given as it happens to be a partnership at will. In case, counsel for the plaintiff and defendant Nos. 5 and 6 waive the notice, the suit will be filed immediately.
R.O & A.C
Statement of Shri P.K Aggarwal, counsel for the plaintiff and Shri Ajant Kumar, counsel for the defendant Nos. 5 and 6.
5. We have heard the statement of counsel for the defendant Nos. 1 to 4. We waive notice of dissolution of partnership at will as prayed by the counsel for the defendant Nos. 1 to 4.
R.O & A.C
10th September, 1980.”
6. No suit was, however, instituted by defendant Nos. 1 to 4 as mentioned by the counsel's statement.
7. The defendant Nos. 1 to 4 claim that a resolution was passed on 20-9-1980 by the partners of the firm under which the plaintiff ceased to be the Managing Director. The plaintiff instead now taken the stand that defendant No. 1 to 4 ceased to be partners in view of the statement as aforesaid, given on 10-5-1980.
8. Some of the clauses in the partnership deed have been as under:—
“13. In the event of death or retirement of a partner his nominee or legal heir shall be admitted as a partner with the same rights and benefits as the deceased or retired partners.
14. Death of retirement of partners shall not dissolve the partnership but shall be continued with respect to other partners and the nominees of legal heirs of the deceased of retiring partner.
15. Any partner desirous of retiring from the partnership shall give six calender months' notice of his intention to retire and on the expiry of the notice, he shall be deemed to have ceased to be a partner.
16. That on the death or retirement of a partner, he shall not be entitled to claim revoluation of the assets of the partnership but shall retire amount standing to his capital account credited at the foot of his account. On the date of his death or retirement being paid immediately or if the amount of his capital is not returned to him immediately, the same shall be repaid to him in such a manner and with such interest as may be mutually agreed upon”.
9. Now the plaintiff has moved an application under order 6 Rule 17, read with Section 151 C.P.C (I.A No. 4097), seeking amendment of the plaint. The following further prayer is sought to be incorporated:—
“that a decree of declaration be passed in favour of the plaintiff and against the defendant Nos. 1 to 4 declaring that the defendant Nos. 1 to 4 have ceased to be partners with effect from 10th September, 1980 and have no right or interest in the firm as partners:—
10. Various paragraphs, of the plaint are also sought to be amended in order to make mention of the statements recorded on 10-9-1980 and the effect thereof. It is pleaded that the defendant Nos. 1 to 4 should be treated to have retired from the partnership as a result of the said statements, should no longer be considered as partners. This subsequent development after the institution of the suit and having a vital bearing on the rights of the parties, it is pleaded, should be allowed to be incorporated in the plaint. This is, also, it is urged, necessary in order to avoid multiplicity of proceedings and shorten the disputes inter se them. The plaintiff, it is contended, is within his rights to take up alternative plea in the suit, and the significant development of the statement made by the counsel for the defendants 1 to 4 in court on 10-9-1980 and its effects should be taken note of and adjudicated. This application was moved on 19-11-1981.
11. In support reliance has been placed on a number of decisions to the effect that the court should take note of subsequent events and there is no prohibition against the taking of alternative pleas in the plaint. Those decisions are Abbott v. Abbott, 1936 (3), All. E.R 823 Karumuthu Thiagerajan Chettiar and another v. E.M Muthappa Chatteri, AIR 1961 SC 1225, Shikar Chand Jain v. Digamber Jain Praband Karini Sabha and others AIR 1974 SC 1178 Rameshwar and others v. Jot Ram and others, AIR 1976 SG 49 Pasupuleti Venkateswar lu v. Motor and General Traders AIR 1975 SG 1409 Velammel and others v. Chookish Gounder and others AIR 1971 Madras 469 Firm Shrinivas Ram Kumar v. Mahabir Prasad and others, AIR (38) 1951 SC 177 Ganpat Singh v. Sher Bahadur Singh and others, AIR 1978, Allahabad 66.
12. This application is vigorously opposed from the side of defendants 1 to 4 and it is pleaded that the plaintiff in altogether misinterpreting the statement given on 10-9-1980 and that the new case now sought to be incorporated in the plaint will be in conflict and totally inconsistent with the one already set. The scope and ambit of the suit, it is next pointed out, would entirely change and the court will be required to embark upon an altogether different controversy about the existence of the partnership, retirement of some of the partners, consequential rights available to them to seek accounts etc. and further the effect of the clause in the partnership deed about substitution in their place of their legal representatives. Such a vast controversy it is urged is beyond the scope of this limited suit in which the plaintiff is seeking to enforce certain rights qua the defendants 1 to 4 in their status as partners. The new plea raised would be in negation of the stand already taken and would tend to nullify the status of these defendants as partners. Now that the plaintiff has succeeded in obtaining interim injunction against defendants 1 to 4 in their capacity as partners, to allow him to shift his ground and start pleading that they are no longer partners while allowing the noose of the interim injunction to still remain around them, would be highly inequitable. The proposed amendment is pleaded to be malafide and meant to prolong the litigation indefinitely, and thus take advantage of the interim injunction already obtained.
13. I have given my due consideration to the entire circumstances and contentions raised. It is obvious from the narration of the facts above that so far the plaintiffs has been seeking to saddle the defendants with the liabilities which they are obliged to abide in their status as partners. They according to him had attempted to sabotage the partnership business in total defiance of their obligations as partners and therefore relief was sought requiring them to act in a manner as partners should. The suit has been primarily directed against them with regard to the operation of the bank accounts, substance by them of their personal guarantees with regard to the overdraft facilities allowed to the partnership and the dealership from M/s. Mohindra and Mohindra. The basis of the whole suit thus has been that the defendants are partners.
14. By the proposed amendment, the plaintifis seek altogether set up a new and totally new case that the defendants 1 to 4 are no longer partners and therefore they have no say in the affairs of the partnership. It is thus in the affairs of the partnership. It is thus in entire conflict with any negation of the case already set up in the plaint. No blow of hot and cold can at the same time be permissible and the plaintiff cannot on the one hand treat defendants as partners and require them to discharge their obligations as partners, and take benefit thereof and on the other hand, confront them that they are no longer partners. He cannot have advantage of both the words.
15. I am fully conscious that power of amendment of pleadings should be liberally exercised is so far as the same may be necessary for the purpose of determinating the real question and controversy between the parties. Subsequent developments should also be allowed to be taken note of and incorporated in the pleadings if they can be done without prejudice to the rights of the other party or creating unnecessary complications and rendering the suit altogether of a different nature. The parties should as Well not required to embark upon several litigations, and endeavour should be made to avoid multiplicity of proceedings and shorten the disputes inter se parties. However, there are exceptions to this general principles and one of them is where the proposed amendment is malafide. Another is where a totally incomplatible and a new case is sought to be set up. In my view, the proposed amendment in the present case suffers from both the infirmities. It is besides likely to complicate and indefinitely prolong the disposal of the suit instead of shortening the litigation between the parties.
16. What is the effect of the statements made by the parties on 10-10-1980 and what rights and obligations ensure thereunder and whether any legal heirs or nominees have to be introduced as partners are not matters free from difficulty and capable of determination in the limited scope of the present suit. The defendants 1 to 4 are contesting the implication sought to be deduced by the plaintiff that thereby they have resigned. According to them, it is only if the plaintiff and defendants 5 to 6 accept the partnership to be at will and agree to dissolve the firm that they may be inclined to consider the propriety of putting an end to the joint venture of partnership.
17. In my considered opinion, these larger disputes if the plaintiff so chooses can be made the subject matter of an independent suit. There need be no apprehension with the plaintiff that the defendants may not at the final stage of the present suit seek the dismissal of the suit on the ground that they have ceased to be partners. Such a plea on the part of defendants Nos. 1 to 4 cannot be entertained unless they get it incorporated in their written statement and no circumstances will be taken into consideration which travles beyond their pleadings. If and when the defendents 1 to 4 seek to amend the written statement and try to set up a case of ceasation of partnership or their status as partners, it will be open for the plaintiff to them seek to get the plea now sought to be raised and incorporated in his pleadings.
18. With these observations, I am constrained to dismiss the petition.
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