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Smart Summary

Structured Summary of the Provided Legal Opinion

Factual and Procedural Background

The parties (or their ancestors) carried on a joint karbar (partnership) for many years until its termination in the year 1280. On 15 September 1876, within three months after the dissolution of the business, the plaintiffs instituted a suit in the Court of the Subordinate Judge of Dacca claiming that, on an adjustment of accounts between the parties, they would be entitled to a considerable sum. The defendants, by their written statement, contended that on an adjustment of accounts they would be entitled to a larger balance. The Subordinate Judge framed seven issues and tried the case.

The Subordinate Judge treated the matter as if it could be finally disposed of at the first hearing, raised issues (including third and fourth issues) at that stage, and concluded—on the evidence available to him—that the defendants were not solely the managers of the business and that the plaintiffs were not the sole advance-makers. The Subordinate Judge consequently held that the plaintiffs were not entitled to call upon the defendants to submit a nikas in respect of the business and dismissed the suit.

On appeal (or review), the higher court examined whether the Subordinate Judge had jurisdiction and whether the proper procedure for partnership suits (particularly as to taking accounts and making a final decree) had been followed. The court directed that further trial and inquiry should be conducted by the District Judge with specific directions as to the accounts to be taken and the procedure to be followed.

Legal Issues Presented

  1. Whether the Subordinate Judge had jurisdiction to try a partnership suit for winding up the business and adjusting accounts, or whether such a suit must be brought in the Court of the District Judge (reference to Section 265 of the Contract Act and precedent discussed).
  2. What is the proper procedure in a partnership suit for determining whether a partnership existed, its conditions, its dissolution, the parties interested and their shares, and the manner in which accounts must be taken (reference to Forms No. 132 and No. 133 of Schedule IV of the Code of Civil Procedure and the plaint form No. 113 of Schedule IV).
  3. Whether the Subordinate Judge was bound to direct that accounts be taken (in the manner required by the procedural forms) despite arriving at preliminary factual conclusions at the first hearing.
  4. How the costs of the proceedings up to the present hearing should be dealt with in a partnership suit where there are allegations of obstruction by one party.

Arguments of the Parties

Plaintiffs' Position

  • The plaintiffs alleged that the defendants were in fact the managing partners in the relevant business and that the plaintiffs were concerned only in making advances as required for the business.
  • They asserted that the defendants were in a poorer condition of life and never made advances (or were unable to make advances) for the purposes of the joint business.
  • The plaintiffs sought a judicial adjustment of accounts after dissolution, claiming they would be entitled to a considerable sum.

Defendants' Position

  • By written statement, the defendants contended that on an adjustment of accounts they would be entitled to a more considerable balance than the plaintiffs claimed.
  • The Subordinate Judge's view of the evidence (as recorded) was that the defendants continuously occupied the principal guddi where the partnership business was carried on, that they joined in the management, and also carried on separate business there.
  • The defendants objected in the lower court to the plaintiffs' cross-examination question regarding which talooks were purchased with joint funds; that question was disallowed by the Subordinate Judge.

Table of Precedents Cited

Precedent Rule or Principle Cited For Application by the Court
Syud Shah Alaiahmad v. M. S. Bibee Nusibun (24 W. R., 70) Observations by Phear, J., on the procedure for taking accounts and the usefulness of audit in suits for account (in that case addressed to an account against one accounting party). The court cited Phear, J.'s observations to support the importance of following appropriate accounting procedure in suits for account and administration, while noting that a partnership involves multiple accounting parties and thus requires broader application of those principles.
Prosad Doss Mullick v. Russich Lull Mullick Authority for the proposition that a suit to wind up the business of a partnership firm and provide for payment of debts and distribution of surplus must be brought in the Court of the District Judge (as interpreted under Section 265 of the Contract Act). The court relied on this decision (noting it was decided by McDonell and Field, JJ.) to cast doubt on the Subordinate Judge's jurisdiction and to justify remitting the case to the District Judge for further trial and accounts.

Court's Reasoning and Analysis

The court's analysis proceeded in several connected steps:

  1. Procedure: The court identified the correct procedural route for partnership suits under the Code of Civil Procedure. It stated that at the first hearing the court must determine (a) whether a partnership existed and its terms, (b) whether it was dissolved or ought to be dissolved, and (c) who were the parties interested and in what shares. Upon such determinations the court should direct that accounts be taken in the first instance as set out in Form No. 132 of Schedule IV, with any necessary adjustments for the specifics of the case, and only after the accounts and report are obtained should a final decree be drawn in accordance with Form No. 133.
  2. Error below: The Subordinate Judge erred by treating the case as capable of final determination at the first hearing and by raising and deciding issues (third and fourth issues, inter alia) that were more properly addressed after accounts had been taken. Even if the Subordinate Judge's factual view of the evidence was correct, he was nevertheless bound to proceed with the accounts under the prescribed forms.
  3. Evidence and practical difficulties: A substantial part of the evidence focused on who occupied the principal guddi and where business was carried on. The court observed that the joint partnership account books were either not forthcoming or in such a condition as to be difficult or impossible to use. The court held that even if books cannot be obtained or utilized, the court must take an account of the partnership and its property to the best of its ability—by requiring statements of facts from each party supported by evidence and by shaping the decree on the basis of such statements and evidence.
  4. Precedent and statutory support: The court referred to Phear, J.'s observations in Syud Shah Alaiahmad (to stress proper auditing/accounting procedure) and invoked Section 265 of the Contract Act (and the decision in Prosad Doss Mullick) to question whether the Subordinate Judge had jurisdiction to entertain a suit of this nature and to support remittance to the District Judge.
  5. Directions given: Given these considerations, the court directed that the District Judge conduct further trial and inquiry into the partnership's conditions and the parties' shares. The court specified the order in which accounts should be taken: first, an account of credits, property and effects belonging to the partnership; second, an account of debts and liabilities; and third, an account of all dealings and transactions between the parties relating to the partnership. The court required that parties show advances and withdrawals from time to time and prove any interest claimed on advances; the plaint should be framed on the lines of Form No. 113 of Schedule IV and the final decree in accordance with Form No. 133 after evidence is taken.
  6. Evidence reuse and fresh evidence: The court allowed the parties to use any part of the evidence adduced before the Subordinate Judge and to lead additional evidence before the District Judge. It expressly stated that neither party would be bound by the Subordinate Judge's conclusions; the whole case would be open for decision by the District Judge.
  7. Costs: The court considered how costs should be handled. While noting that one partner who denies partnership or obstructs accounting is often made to pay costs up to the hearing, and that defendants appeared to have thrown obstacles in the way of taking accounts, the court ultimately decided to leave costs to be dealt with by the District Judge in the ordinary manner for partnership suits.

Holding and Implications

Holding: The court remitted the matter for further trial and directed that the District Judge proceed with a full inquiry and taking of accounts as follows:

  • The District Judge is to inquire into the conditions on which the parties carried on the partnership and the shares in which they were respectively interested.
  • An account is to be taken, in this order: (a) credits, property and effects belonging to the partnership; (b) debts and liabilities of the partnership; and (c) all dealings and transactions between the plaintiffs and defendants with respect to the partnership, including advances, withdrawals and any interest claimed on advances.
  • The plaint should be framed on the lines of Form No. 113 of Schedule IV of the Code of Civil Procedure; accounts should be taken as per Form No. 132; and the final decree should be made in accordance with Form No. 133 of Schedule IV after evidence and accounting are complete.
  • Parties may rely on evidence already adduced before the Subordinate Judge and may produce further evidence; neither party is bound by the Subordinate Judge's conclusions.
  • Costs up to the present hearing are to be dealt with by the District Judge in the ordinary way for partnership suits.

Implications: The direct effect is that the case is sent to the District Judge for proper accounting and final decree in accordance with the procedural forms cited. The opinion emphasizes adherence to prescribed procedure for partnership accounts and queries the jurisdictional competence of the Subordinate Judge in light of Section 265 of the Contract Act and prior authority. The opinion does not purport to set a novel legal precedent beyond applying the cited authorities and procedural requirements; it gives specific remedial directions as enumerated above.

Show full summary ...

    Ram Chunder Shaha And Ors. v. Manick Chunder Banikya And Anr.

    1. In this case the parties, or their respective ancestors, (sic) together in carrying on a joint karbar, or partnership, which continued for many years down to the year 1280. The plaintiffs, on the 15th September 1876, within three months after the termination of the business, instituted a suit in the Court of the Subordinate Judge of Dacca, whereby they claimed that, on an adjustment of accounts between the parties, they would be entitled to a very considerable sum. The defendants, by their written statement, insisted, on the other hand, that, on an adjustment of accounts, they would be entitled to a still more considerable balance. The parties being thus at issue, the Subordinate Judge, who tried the case, framed seven issues, to be found in his judgment. Now, assuming for a moment that the Subordinate Judge had jurisdiction to try the case, the course which he ought to have pursued is clearly pointed out in Forms Nos. 132 and 133 of schedule iv of the Code of Civil Procedure. At the first hearing of the suit, really what the Court had to determine was, whether there had been a partnership, and what were its conditions; was it dissolved, or ought it to be dissolved; and who were the parties interested in the partnership, and in what shares; and upon determining these questions, it ought, in the first instance, to have directed that accounts should be taken as set forth in form No. 132, subject, of course, to any such alterations as the nature of the case might require. It is only after taking these accounts and obtaining the report of the officer of the Court, or, if there is no such officer, when the Judge himself has arrived at a decision on the accounts, that a final decree should be made according to Form No. 133 of the 4th schedule of the Code. Instead of following this procedure, the Subordinate Judge has dealt with the case as if the whole matter was to be completed at the first hearing; and has, as I have said, raised, at the first hearing, issues which ought more properly to have been raised after the first hearing. He has dealt with the third and fourth issues raised by him. The plaintiffs, who also carried on a separate business, in their plaint tried to make (sic) that the defendants were in fact the managing partners in this business, to which the suit relates; and that the plaintiffs were only concerned in making advances, for the purposes of the business, whenever they were required. Their case also was that the defendants were as compared to them in a much poorer condition of life and that they never made advances, or were able to make advances, for the purposes of this business. The Subordinate Judge, therefore, raised the issues for the purpose of ascertaining by whom the business was in fact carried on, and by whom the advances were made; and he seems to have determined, upon the result of his view of the evidence, that the defendants were not alone the managers of the business, and that the plaintiffs were not the persons who alone made the advances. Having arrived at the conclusion, he held that the plaintiffs were not entitled to call upon the defendants to submit a nikas in respect of the business, and dismissed their suit. Now, whether the plaintiffs were right or not in the allegations made in the plaint, and if it were proved that they were joint managers, or even the sole managers, of the business, they were, nevertheless, entitled, after the dissolution of the partnership, to have the accounts taken; and even if upon those accounts it should appear that the plaintiffs were, contrary to these allegations, under liability to the defendants, yet they would entitled to have a decree of Court determining the amount of their liability and (sic) get the indemnity of the Court from further litigation, or future demands by defendants in respect of the accounts. We think, therefore, that even if (sic) view of the evidence taken by the Subordinate Judge was a correct view, to which we express no opinion, he was, notwithstanding, bound to proceed with the accounts in the manner shown in Form No. 132 of the 4th schedule, and to have the twitter settled. Now, a considerable part of the evidence that was taken before the Subordinate Judge was addressed to the question who occupied the principal guddi, where the business of this partnership was carried on; and the Subordinate Judge seems to have come to the conclusion, that it was the defendants who continuously occupied that guddi, and that they not only joined in the management with the plaintiffs in the partnership business there, but also did their own separate business in that guddi. It also appears that the account books of the joint partnership are no longer forthcoming, or if forthcoming, are in such a condition that it would be difficult or impossible for the Court to utilize them for the purpose of settling an account between the parties. Now, if it were the fact that the defendants were the principal occupants of the guddi, it might be inferred that they would be at least as equally responsible for the hooks as the plaintiffs. But assuming that the books cannot be obtained or utilized, still an account must be taken of the partnership and of the property if any, still belonging to the partnership, in the best manner the Court can arrive at it. For example, if no books are forthcoming, the Court must call upon each party to furnish a statement of facts in respect of the business and its transactions, and to support such statement by evidence; and upon these statements of facts, as supported or contradicted by the evidence bearing thereupon, the Court must come to a conclusion and shape its decree accordingly. It is of great importance that, in suits for account and administration, the proper procedure should be followed, audit may be useful to refer to the observations of Phear, J., in Syud Shah Alaiahmad v. M. S. Bibee Nusibun (24 W. R., 70), though in that case his observations were addressed to an account to be taken against one accounting party only, whereas in a partnership, all the partners are, of course, accounting parties. The plaint in a partnership suit ought to be framed on the lines of Form 113, schedule iv of the Procedure Code, and the accounts should be taken as prayed in that form. Now, we have considerable doubt whether this partnership suit should have been instituted in the Court of the Subordinate Judge. Under Section 265 of the Contract Act, it is enacted that where parties wish to apply to the Court to wind up the business of a partnership firm, to provide for the payment of its debts, and to distribute the surplus according to the shares of the partners respectively, the Com to which they must apply, is the Court of the District Judge. That appears in the explanation to the Section, and there has been a case in this Court, decided MoDonell and Field, JJ., Prosad Doss Mullick v. Russich Lull Mullick (A (sic) p. 157), in which they held that such a suit could only be brought in the Court the District Judge. Under the circumstances in which this case comes before we think the proper course will be to direct that the District Judge proceed the further trial of the case, and we shall now order that an enquiry be ma to the conditions on which the parties carried on the partnership, and as t shares in which they were respectively interested. That an account be first of the credits, property, and effects now belonging to the partnership secondly, an account of the debts and liabilities of the partnership; and (sic) account of all dealings and transactions between the plaintiffs and the (sic)dants with respect to the partnership. In taking these accounts, the will have to show what advances have beer made by either of them fro to time, and also what monies have been dr(sic)out by either of them (sic) to time; and they will have to prove whether (sic) and what interest is (sic) upon the advances made by them, and the Court will make o(sic) accordance with the form of the prayer, to form No. 113 of schedule. (sic) Procedure Code. Upon the evidence taken the Court will frame its accordance with Form No. 133 of the 4th schedule in favour of the plaintiffs or defendants according as it decides on which side the balance is due.

    2. We had some little doubt at first as to how we should deal with the costs of the suit up to this hearing. It is true that the plaint is not very artistically framed, but it is also clear that the defendants, by their written statement, asked that an account should be taken, and claimed that, upon the taking of such account, they should be entitled to a balance; but so far as we can see, it appears to us that the defendants have really thrown every obstacle they could in the way of the plaintiff's having this account taken. In the examination of the principal defendant himself, a question in cross-examination was put by the plaintiffs--a very pertinent question as it seems to us--with respect to property alleged to be now belonging to this partnership, viz., "which of the talooks was purchased with joint funds ?" That question was objected to by the defendants, and was disallowed. Under ordinary circumstances, the costs of a partnership suit should be paid out of the assets of the partnership, or in default of assets, by the partners in proportion to their respective shares in the partnership business. But when one of the partners either denies the fact of a partnership, or opposes obstacles to the taking of the accounts, and so renders a suit necessary, it is usual to make such partner pay the costs up to the hearing. However, under the circumstances of this case, we think that the costs of the proceedings up to this time must be dealt with as costs are ordinarily dealt with in a partnership suit: accordingly we leave them to be dealt with by the District Judge, and we make no other order concerning costs. In taking the accounts before the District Judge, the parties will be at liberty to use any part of the evidence adduced by them before the Subordinate Judge, and also to adduce further evidence. This course is consented to by the parties before us. Neither party will be bound by the conclusions arrived at by the Subordinate Judge, but the whole case will be open for decision by the District Judge.

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    Ram Chunder Shaha And Ors. v. Manick Chunder Banikya And Anr.
    (May 30, 1881)