PETITIONER:
PREM BALLABH KHULBE
Vs.
RESPONDENT:
MATHURA DATT BHATT
DATE OF JUDGMENT:
16/12/1966
BENCH:
BACHAWAT, R.S.
BENCH:
BACHAWAT, R.S.
WANCHOO, K.N.
SHELAT, J.M.
CITATION:
1967 AIR 1342 1967 SCR (2) 298
ACT:
Code of Civil Procedure (Act 5 of 1908), cl. (c) of the
proviso to s. 51–Partners–If in fiduciary relationship.
HEADNOTE:
The partnership business carried on by the appellant,
respondent and two others was dissolved. The appellant
obtained a final decree for certain sums against the
respondent, who was the managing partner of the partnership
assets. The appellant applied for the execution of the
decree by arrest and detention of the respondent in prison.
The executing court held that the provisions of cl. (c) of
the proviso to s. 51 of the Code of Civil Procedure were
satisfied and issued a warrant for the arrest of the
‘respondent. The High Court set aside this order. On
appeal, this Court.
HELD:The appeal must be dismissed.
In the absence of special circumstances a partner cannot. be
regarded as a kind of trustee for the other partners or
liable to render accounts to them in a fiduciary capacity.
[300 D]
In the present case, the conditions of cl. (c.) of the
proviso to s. 51 were not satisfied. No fraud or
clandestine dealing was alleged or proved. The facts did
not disclose that the decree was for a sum for which the
respondent was bound to account in a fiduciary capacity.
[300 E]
Piddocke v. Burt, Chitty, [1894] 1 Ch. 343, Rodriquez v.
Speyer Brothers, [1919] A.C. 59, Bhuban Mohan Rana v.
Surender Mohan Das, I.L.R. [1952] 2 Cal. 123 and Velji
Raghavji Patel v. State of Maharashtra [1965] 2 S.C.R. 429,
approved.
JUDGMENT:
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 615 of
1964.
Appeal from the judgment and decree dated March 3, 1960 of
the Allahabad High Court in Execution First Appeal No. 332
of 1956.
C. B. Agarwala and K. P. Gupta for the appellant.
S. G. Patwardhan, Yashpal Singh and M. S. Gupta for the
respondent.
The Judgment of the Court was delivered by
Bachawat, J. The appellant, the respondent and two other
persons carried on business in partnership under the name
and style of Nayagaon Farm. The respondent was the managing
partner and was incharge of the partnership assets. The
firm was dissolved and a suit was instituted by the
appellant for the taking of the accounts of the dissolved
firm. Eventually a final decree
299
was passed in the suit in favour of the appellant against
the respondent for Rs. 1 7,143 /1 I /0 and Rs. 3,171 /6 as
on account of costs The appellant applied for execution of
the decree by arrest and detention of the respondent in
prison. In this affidavit in support of the application,
the appellant relied upon the grounds mentioned in clauses
(a) and (b) of the proviso to s. 51 of the Code of Civil
Procedure 1908. At the hearing of the application those
grounds were not pressed but his counsel relied upon the
ground mentioned in cl. (c) of the proviso. By cl. (c) of
the proviso to s. 51, the court is empowered to order
execution of a money decree by detention of the judgment
debtor in prison if it is satisfied “that the decree is for
a sum for which the judgment debtor was bound in a,
fiduciary capacity to account”. The executing court held
that the provisions of cl. (c) were satisfied and issued a
warrant for the arrest of the respondent. On appeal, the
High Court of Allahabad, set aside this order. The decree
holder now appeals to this court under a certificate granted
by the High Court.
On behalf of the appellant our attention was drawn to ss. 9,
15, 18, 46 and 48 of the Indian Partnership Act 1932 and ss.
88, 94 and 95 of the Indian Trusts Act 1882, and it was
urged that the respondent as the managing partner of the
firm was bound in a fiduciary capacity to account for the
assets of the partnership in his hands and the decree
against him must be regarded as a decree for a sum for which
he was bound in a fiduciary capacity to account.
On the question whether a fiduciary relation exists between,
the partners, the law is stated thus in Halsbury’s Laws of
England 3rd Edition, Vol. 38, art. 1363, p. 820 :
“Partnership itself does not create a
fiduciary relation between the partners or
make one of them a trustee for the other or
for his representatives. The relation may,
however, arise on the death of one of them or
be created by other special circumstances.”
This statement of law is consistent with the provisions of
the Indian Partnership Act 1932 and the Indian Trusts Act
1882.
In Piddocke v. Burt. (1) Chitty, J. held that a partner
failing to pay moneys in his hands and received by him on
account of the partnership was not liable to be imprisoned
under s. 4(3) of the Debtors Act 1869 as a person “acting in
a fiduciary capacity” within the meaning of that statute.
He said :
“I should be straining the law if I were to
hold that a partner receiving money on account
of the partnership-that is, on behalf of
himself and his co-partners-
(1) [1894] 1 ch. 343
300
received it in a fiduciary capacity towards
the other partners. The law allows one
partner-one of several joint creditors-to
receive the whole debt on account of the firm
to whom it is due, and I am unable to
recognise any such distinction, as was
endeavoured to be made by Mr. Church, between
the case of a partner receiving money of the
firm and not accounting for it, and that of a
partner over-drawing the partnership account;
because if this distinction were true, it
would apply to every case where one partner
wrongly over draws the partnership account.”
This decision was approved of by Lord Atkinson in Rodriguez
v. Speyer Brothers,(1) and by Harries, C. J. in Bhuban
Mohan Rana v. Surender Mohan Das.(2) The last case received
the approval observe the utmost good faith in his dealings
with the other partners. He is bound to render accounts of
the partnership assets in his hands. But in the absence of
special circumstances he cannot be regarded as a kind of
trustee for the other partners or liable to render accounts
to them in a fiduciary capacity.
In the present case, the respondent as the managing partner
was liable to render accounts of the partnership assets in
his hands. .,On the taking of the accounts it was found that
he overdrew the partnership account and a decree for the sum
due was passed against him. No fraud or clandestine dealing
is alleged or proved. On these facts it is not possible to
say that the decree was for a sum for which he was bound to
account in a fiduciary capacity. The High Court rightly
held that the conditions of cl. (c) of the _proviso to s. 51
of the Code of Civil Procedure were not satisfied.
The appeal is dismissed. There will be no order as to
costs.
Y.P. Appeal dismissed.
(1) [1919] A.C. 9,59 89.
(2) I.L.R. 1952 (2) Cal. 23.
(3) [1965] 2 S.C.R. 429.
301