K.T. Abdul Badsha Saheb And Anr.

vs Century Wood Industries on 14

November, 1952
Equivalent citations: AIR 1954 Kant 33, AIR 1954 Mys 33, ILR 1953 KAR
427
Bench: Mallappa

JUDGMENT

1. The plaintiffs styling themselves as K.T.A. Rasheed & Coy.' by partners K.T. Abdul
Badsha Saheb and K.T. Abdul Rasheed filed a suit against the defendant-respondent
for recovery of some money due in connection with their having supplied some
poles. Among other grounds the defendant intended that the firm of the plaintiffs
was not registered in the books of the Registrar of Firms as required under
the Partnership Act and that the suit is, therefore, not maintainable under Section
69(2), Partnership Act. The plaintiffs on the other hand contend that they are the
sole-proprietors of the business which is not a firm in the strictest sense of the word
and that though their company is not registered the suit filed by them is tenable.
Both the Courts below have dismissed the suit on the ground that the plaintiffs'
company is a firm and that it ought to have been got registered and as the same is
not registered the suit is not maintainable.

2. The main point for consideration is whether the concern run by K.T. Abdul
Badsha Saheb and his brother K.T. Abdul Rasheed under the name and style K.T.A.
Rasheed & Coy., is a firm of partners or not. According to the evidence of K.T.A.
Rasheed, the two brothers are living together and have not divided the properties
which jointly belong to them. The two brothers sold a garden of theirs for Rs.
5,000/- and invested this sum in business. He states that there is no partnership
agreement between them, but he admits that it he and his brother have to divide the
profits, each of them will get half the profits. They have been acquiring properties
jointly for the benefit of both of them. In cross-examination it has been elicited that
either one or the other brother might take a loan and that payment may be made by
either of them.

3. What has to be considered in this case is whether under the circumstances

referred to above, it could be said that the concern run by K.T. Abdul Badsha Saheb
and K.T. Abdul Rasheed is a partnership concern. According to Section
4, Partnership Act, " 'Partnership' is the relation between persons who have agreed
to share the profits of a business carried on by all or any of them act ing for all."

The first point to be noticed in this definition is that before we think of partnership
there should be a relationship between two or more persons. The second point that
will be noticed is that these persons must run a business. Thirdly, the business must
be run by them with the intention of realising profits. Fourthly, it is not sufficient if
the profits are intended to be taken exclusively by one of the partners. The
agreement must be that every one of the partners should share the profits. The last
but not the least of the points that have to be borne in mind is whether there was an
agreement between the parties that the business should be run by all or any one of
them acting for all.

In this case it will be noticed that the concern is run by more than one person.
Admittedly the plaintiff-company is running a business. It is not disputed that their
intention is to realise profits. What is contended is that they have at no time divided
the profits and that it is possible they may never divide in their lifetime. But it is
admitted that in case they divide, each will get half a share in the profits. As regards
the last point, the evidence referred to above shows that one of the two is acting for
both either in borrowing money for the concern or in discharging the loan. In fact it
will be noticed that the suit transaction was entered into by one of the partners and
the other brother K.T. Abdulla examined as third witness for the plaintiffs clearly
admits that he does not know anything about the suit transaction.

It is thus clear that all the conditions referred to above are fulfilled and if at all the
only point in respect of which there is some difference of opinion between the parties
is that there was at no time division of profits, it may happen that they never divide
profits; but it has to be remembered that what the section requires is not actual
division of profits; but parties agreeing to share the profits. It is not contended that
the profits of the business hava to be taken exclusively by one of the brothers; and it
is clear that the profits have to be shared by both and that at such a time as the
parties might think of dividing, however remote that time might be, the two brothers
are entitled to divide the profits.

4. Sri Viswanatha lyer, the learned counsel for the appellant could only say that the
relationship between the two brothers is that of joint proprietors and it does not
amount to one of partners. The distinction between co-owners and partners is that in
the case of co-ownership the co-owners do not intend to carry on a business, still less
do they intend to share the profits realised. On the other hand, in case of partnership
concern they intend to carry on business with money or property which belongs to
both of them. They intend to realise profits and share the same. If two or more
persons buy a land on joint account with the intention of having an interest
according to the amounts invested by them they arc merely co-owners. They do not
become partners merely because they are entitled to share the income they get
according to their shares.

On the other hand if two or more persons put together certain amounts of money in
certain shares for the purpose of purchasing properties and selling them for profits
for common benefit, it has to he said that such a business amounts to a partnership
concern. That is if two or more parsons expressly acquire property for the purpose of
joint business they bring the property into partnership stock and they become
partners. If, however, by the agreement the parties merely intend to acquire the
properties in shares leaving each of them to do whatever he liked with his share, that
will not amount to partnership. In this connection it is Useful to notice the following
observations made in the decision reported in -- 'London Financial Association v.
Kelk', (1883) 26 Ch. D. 107 at p. 143 (A):

"One of the charges pressed by the plaintiffs was that the directors by entering into
the agreement of August 1865 had committed the Association to a partnership with
Mr. R, and Messrs. Kelk & Lucas, and that they had, in this respect violated and
exceeded the terms of the memorandum, and had exposed the assets of the
Association to the risks attendant upon a partnership. It does not appear to me that
either in law or in fact any kind of partnership was created. Each of the three parties
was entitled under the contract to an undivided share in the subject. Each paid for
that share with individual separate money. The three had, no doubt, in a sense, a
common interest in the subject, but no one of the essential elements of a partnership
was found to exist in the case, for no one of them could interfere with either of the
others in whatever disposition the other might make of their separate shares, nor
could the death or bankruptcy or transfer or devolution of the shares of any one of
the parties affect the rights of the others; neither of them could object to the
introduction of any other person, or be liable in respect of any debt or engagement of
the others.

Nor can it be truly said that any analogy exists between this case and the well-known
cases in bankruptcy where, one partner, a trustee, having employed trust moneys
with the knowledge and consent of his co-partners in the partnership business, joint
debt is contracted by all the partners. Here the only money furnished by the
directors was for the purchase of the separate share acquired by them, while each of
the parties dealt only with their own moneys and each of them acquired rights and
interests wholly distinct from those of the others."

In this case a property which belonged to the two brothers was sold for Rs. 5.000/-.
This sum was invested for running a business with the idea of realising profits to be
shared by both. They were co-owners of the property sold and in the amount
realised, but when the amount which belonged to both of them was invested in a
business with the intention of realising and sharing the profits and when they agreed
that both of them should carry on the business and that each of them should carry it
on behalf of the other, as is clear by the evidence of the two brothers, their
association or concern is one of partnership.

5. A contention was raised that the brothers are carrying on business as in the case of
a joint Hindu family and that it is not unusual in these parts that Muslim brothers
behave like Hindu brothers. But there is no evidence to show that by custom, Hindu
Law is applicable to the plaintiffs. As observed in -- 'Mahomed Abdul Rahim v.
Mahomed Abdul Hakim', AIR 1931 Mad 553 (B), relied on in the course of
arguments:
"It is not an uncommon thing in the Madras Presidency where members of a
Mohamedan community live surrounded by Hindus that they absorb and adopt
Hindu social ideas and tend to look on their own social customs from a Hindu point
of view. It is very common in the Madras Presidency for descendants of
Mahomedans to live and trade together and the property of the ancestor is then held
by the several members of the family in the shares to which they are entitled under
the Mahomedan law.....

Where the descendants of a deceased Mahomedan live and trade together and the
property is held by the several members according to their shares under
Mahomedan law, the Court in a suit for profits by the other members of the family
will not obviously apply Hindu Law, but that is not the proper way to decide cases of
such kind though it may be the way of least resistance. Such cases are not problems
of law nor does their decision depend upon the ideas of law which the parties have
put in their pleadings but are concerned with questions of fact and have to be
decided on the facts."

In this case no question of any family property arises and no question of the property
of minors or persons who have not actually come to an agreement to run the
business for purposes of trade is involved. This is a case of two brothers agreeing to
use their joint funds for purposes of running a business for profit for the benefit of
both. It may or may not be true that there was no express agreement between the
brothers but there is hardly any doubt that there was implied agreement between
them to run a business for profit to be shared by both, each acting lor the other in
running the business. As observed in -- Haji Isa Haji Noor Firm v. Sam Bai', AIR
1938 Nag 324 (C) by Vivian Boss J. which was a case in which two members of a
Mohamedan family were found to be running a business as in this case;

"An agreement of partnership need not be express. It can arise out of a mutual
understanding evidenced by a consistent course of conduct, and indeed, by the
express admission of the parties concerned."

It is also observed in that case as follows:

"When more than one businessman associate together for the purpose of carrying on
a business, it is legitimate to infer that they are not doing it for philanthropic
purposes but intend to make a profit out of it; also that they all intend to share in the
benefit of the proceeds. The person who actually conducts the business acts on
behalf of all his associates, that is to say, on behalf of all who are joint proprietors
with him. He does not act for his own separate and exclusive benefit. His intention is
obviously to further the business as a whole for the benefit of all who own the
concern."

These observations are clearly applicable to the facts of the present case and it is
clear that the concern of the plaintiffs is one of partnership. The lower Courts were
therefore light in dismissing the suit on the ground that the suit is not maintainable
as the plaintiffs' firm was not registered in the books of the Registrar of Firms, as
required under the Partnership Act.

6. During the course of the suit the plaintiffs who filed the suit as partners pplied for
amendment and this was allowed and with the amendment the name of the
plaintiffs' concern was changed as K.T.A. Rasheed & Coy., by its proprietors K.T.
Abdul Badsha Saheb and KT. Abdul Rasheed. It is clear even here that the suit
continued to be by K.T.A. Rasheed & Coy., by its proprietors. It need hardly be said
that partners of a firm are also its proprietors. However when this appeal had to be
filed it was realised that the suit should have been filed in the name of the two
brothers, if necessary, by describing them as proprietors of the company, and in fact
the appeal was filed by "K.T.A. Abdul Badsha Saheb and K.T. Abdul Rasheed,
proprietors of K.A. Rasheed & Coy.".

If it was intended that the suit should be filed by the two brothers & not by the
company, this is no doubt the correct form in which they should have described
themselves in the plaint. It is rather strange that an amendment was not sought for
in the form in which the appeal is now filed. However, though the suit has been filed
in the name of the firm the appeal has been filed by the two brothers in their
individual capacity and a question was raised that the appeal is not maintainable as
it was not filed by the company who was the party to the suit and the regular appeal
filed in the first appellate Court.

To rectify this defect an application has been filed to restore the name of the
company by its proprietors as the plaintiff-appellant. The proper thing for the
appellants to do was to file the appeal in the name of the company as it stood alter
amendment in the trial Court and then to seek for the amendment to substitute the
names of the brothers as plaintiffs. No purpose is gained by allowing the amendment
now sought for and alter all irrespective of the amendment the main question is
whether the two brothers are partners of a firm and it has been held that they are.
Therefore no useful purpose is served by any amendment as even if the amendment
is allowed it would be of no help to the plaintiffs.

7. In the circumstances, the appeal stands dismissed with costs. The application for
amendment is also dismissed.

8. Appeal and application dismissed.