JUDGMENT
Srinivasan, J.
1. This second appeal arises out of a suit for dissolution of partnership filed by the first respondent herein. The plaintiff and defendants 2 and 3 were partners in the first defendant firm. The plaintiff and the second defendant are brothers while the third defendant is a junior paternal uncle. The partnership commenced under a document dated 15.4.1964 marked as Ex. B-19. The share contributed by each of the partners was Rs. 1,500 and under the partnership deed they agreed to share the profits equally. The suit for dissolution was filed on 7.9.1972. While the third defendant supported the case of the plaintiff, the second defendant alone contested the same claiming that the partnership was dissolved on 31.3.1970 and the accounts were settled. There was another business by name Narayanan & Company run by the same partners and they had a jewellery shop in Ceylon. According to the second defendant, Narayanan & Company was allotted to the third defendant and the first defendant firm was being carried on by the second defendant himself as he was the person to whom it was allotted. 2. Both the courts below have held against the contentions raised by the second defendant and granted a decree as prayed for by the plaintiff. In this second appeal, it is contended by the second defendant that the Courts below were not justified in holding that there was no dissolution as on 31.3.1970 in view of Exs. B-5 to B-9 which proved beyond doubt that there was a dissolution on that date. It is also argued that the courts below were wrong in granting a decree for accounting as against the second defendant alone.
3. Two questions which are raised for consideration in this second appeal, one relating to the factum of dissolution on 31.3.1970 as pleaded by the second defendant and the other relating to the liability to account by the second defendant alone, have been answered against the second defendant by both the courts below.
4. I am of the view that the finding of the courts below are supported by sufficient evidence on record. The reasons given by the courts below are:
1. There is no deed of dissolution;
2. There is no intimation to the Registrar of Firms about the alleged dissolution;
3. The second defendant was admittedly in Ceylon on 31.3.1970. He claims in the written statement that the discussion took place even in 1969 and the parties had come to an understanding at that time. But, no particulars whatever have been given by the second defendant as to when exactly the discussion took place and what exactly were the terms arrived at. Hence, the accounts could not have been settled in March, 1970.
4. The plaintiff is said to have written a letter to Ceylon addressed to the second defendant, but that letter has not been produced;
5. None of the persons connected with the Auditors viz. Ayyar & Co., has been examined by the second defendant to prove the statements relied on by him:
6. No vouchers or receipts have been produced by the second defendant to prove the factum of dissolution.
5. Learned Counsel for the appellant/second defendant places reliance on some documents and portions of the deposition of D.W. 1 in support of his contention that the firm was dissolved on 31.3.1970. Learned Counsel submits that the courts below have not approached the evidence from a proper perspective and have appreciated the evidence from a wrong angle based on a misconception of the position in law. According to learned Counsel the courts have proceeded on the footing that unless there is notice of dissolution, a partnership firm cannot be dissolved. He invites my attention to the observations of the trial Court in paragraph 7 of its judgment to the following effect:
…The arguments of the learned Counsel appearing for the 2nd defendant that there is no necessity for issuing any notice before dissolving the firm since it is not the only mode of dissolution of partnership under Section 40 of the Act and the firm may be dissolved with the consent of all the partners cannot hold water in view of the specific clause, namely, Clause 15 of Ex. B-19 which contemplates a notice in writing even for a retirement of a partner.
A similar observation has been made by the Appellate Judge to which also my attention is drawn:
Section 40 of the Indian Partnership Act says that a firm may be dissolved with the consent of all the partners or in accordance with the contract between the partners…The rule laid down in Section 40 of the Indian Partnership Act is an application of the General Rule relating to discharge of a contract by mutual agreement. The evidence on record does not make out any such mutual contract for dissolution of the suit partnership. Section 43 of the said Act provides for the dissolution of a partnership at will by notice. As per this section, where the partnership is at will, the firm may be dissolved by any partner giving notice in writing to all the other partners of his intention to dissolve the firm. Therefore, under law, a partnership at will can be dissolved by one of the partners giving notice. In this case, there was no such notice by the respondents 1 and 2….
6. Learned Counsel contends that the above passage shows that both the Courts below discussed the evidence only on the footing that in law a notice in writing was required for dissolving the firm. Therefore, the entire judgments of both the Courts below were on a wrong approach made by them. Learned Counsel has submitted authorities in support of the proposition that a dissolution of a firm can be inferred from various circumstances and that there is no necessity for a notice in writing to bring about a dissolution. In Pollock & Mulla’s “The Indian Partnership Act.” Fifth Edition page 112, the following passage is found:
An intention to dissolve a firm may be inferred from circumstances showing that a partner has in fact abandoned his interest in the business. No positive rule can be formulated to define what evidence will be sufficient. It is a matter of inference from the facts in each case whether a partner’s interest has or has not been abandoned either by overt acts or passively.
At page 130, the following passage is found:
However, circumstances may also indicate existence of such agreement and consequential dissolution. It has now been affirmatively decided that the doctrine of repudiation has the same applicability to partnerships as in the case of other contracts. The repudiation of the partnership by one or more of the partners which is accepted by the others would indicate an implied agreement to dissolve. Dissolution may also be inferred from the service by a partner or his partners of an invalid notice to determine the partnership is accepted by the co-partners as a valid notice or where the conduct of the partners is incdnsistent with the continuance of partnership.
7. In Sudarsanam Maistri v. Narasimhulu Maistri I.L.R. 25 Mad. 149, Justice Bhashyam Ayyangar, one of the members of a Division Bench which decided that case after quoting from Lord Lindley in his Treatise on ‘Partnership’, 4th Edition, page 966, observed as follows:
The same learned author, on the authority of Pearce v. Lindsay 3 De.G.J., & Sm., page 139, says that a dissolution of a partnership at will may be inferred from circumstances, e.g., a quarrel, although no notice to dissolve may have been given. Lindley on ‘Partnership’, 5th Edition, page 572.
8. In Commissioner of Income-tax West Bengal-III v. Pigot Champan & Co. , the Supreme Court held that the question whether there has been a dissolution of the firm and upon such dissolution a new firm has succeeded to the business of the old firm is a question which depends upon the intention of the parties to be gathered from the document or documents, if any, executed by and between the partners and other facts and surrounding circumstances of the case.
9. The principles set out in the above passages can never be disputed. In has to be seen in this case whether on an application of the above principles, the factum of dissolution as pleaded by the appellant has been established.
10. I do not, however, agree with learned Counsel for the appellant that the appreciation of the evidence by the courts below is vitiated by the view taken by them on the question of law or that the view taken by them that in law a notice in writing is necessary for the purpose of dissolution. In fact, the expression of their opinion on law is given only after the entire evidence is discussed and a clear finding is given on the facts of the case. The trial court has discussed the entire evidence and given a finding of fact that the evidence on record does not establish that the firm has been dissolved on 31.3.1970. Similarly, the appellate Court has stated that there is no evidence to show that there was any consensus among all the partners of the partnership for dissolving the firm. Hence, it cannot be held that the judgments of the courts below are vitiated by a wrong approach.
11. Learned Counsel for the appellant places reliance on the following documents: Ex. B-11 is an annexure to Ex. B-10, which is a return of income for the year 1969-70 submitted by the plaintiff to Income-tax Department. Ex. B-10 is signed by the plaintiff. Ex. B-11 is signed by the auditors. It is a statement prepared by the auditors. It relates to the year ending with 31.3.1969. Neither Ex. B-10 nor Ex. B-11 refers to any dissolution of the firm. But the two documents are relied on for the purpose of showing that the documents have clearly established that the firm had incurred loss in the year ending 31.3.1969, which, according to learned Counsel, would probabilise the dissolution of the firm as pleaded by him on 31.3.1970. From the mere fact that in the year ending 31.3.1969 admittedly there was a loss in the partnership business, no inference could be drawn that the firm was dissolved on 31.3.1970. It should be seen whether the cumulative effect of all the documents referred to by learned Counsel would lead to an inference of dissolution of partnership. That I will consider after referring to all the documents.
12. The next document on which reliance is placed is Ex. B-9. It is a Form of Declaration signed by all the three partners on 30.9.1970, under Section 184(7) of the Income-Tax Act, for the purpose of continuation of registration. Paragraph (ii) there of reads as follows:
There has been no change in the constitution of the firm or the shares of the partners since the last day of the previous year relevant to the assessment year 1966-67 upto the last date of the previous year relevant to the assessment year 1970-71 (or to the date 31.3.70 of dissolution of the firm).
Ex. B-8 is an enclosure to Ex. B-7, which is a return of income for the year 1970-71, submitted by the plaintiff and the third defendant. The return was signed by the second defendant alone on 4.11.1970, while Ex. B-8 was signed by the auditors. In Ex. B-7 there is no reference whatever to the dissolution of the firm on 31.3.1970, though the return was signed on 4.11.1970. However, in Ex. B-8, a statement is found as follows:
The partnership appears to have been dissolved on 31.3.1970bytheretirementoftwo of the three partners. The retired partners are:
N. Subrarnanian and P.M. Pillathian Asari.
N. Subramanian and P.M. Pillathian Asari therein are the plaintiff and the third defendant respectively. The statement is signed by the auditor on 28.10.1970, There is no explanation for the dubious language found in the statement. If the partnership had been dissolved on 31.3.1970, the Auditor, who is said to have taken part in the discussion between the parties, would certainly have been aware of the dissolution of the partnership on 31.3.1970 and hence would have certainly stated, that th0 partnership was dissolved On 31.3.1970. But, he uses the language “appears to have been dissolved.” In the absence of any explanation therefor, it is a circumstance which would stand against the second defendant.
13. Ex. B-4 is a statement signed by the auditors on 31.12.1970. That is annexed to Ex. B-3, a return filed by the plaintiff for the year ending 31.3.1970. The return is signed by the plaintiff. The signature is made on 31.12.1970. The return does not contain any reference to the dissolution. But, Ex. B-4 contains1 a statement that the assessee retired from the partnership on 31.3.1970.
14. Ex. B-28 is again a statement signed by the auditors on 19.12.1970. It is annexed to a return of the same date, which is also part of Ex. B-28. In the return, there is no reference to the dissolution, but it is only in the statement of the auditor, it is stated that the assessee retired from the partnership on 31.3.1970. That return and statement related to the third defendant.
15. With regard to these documents, the case of the plaintiff and the third defendant is that the auditor used to take their signatures in blank forms and fill up the same later. That is probabalised by Ex. A-5, letter dated 15.2.1965 sent by the Auditors to the firm. Ex. A-5 is addressed to the plaintiff. It is seen from the said letter that the auditors had asked for wealth-tax forms, and they would send the same to the assessee as soon as they were received. The auditors had requested the assessee to sign the form and send it to the auditors so that they could fill up the same and send to the concerned wealth-tax office thereafter. This clearly shows that the parties were accustomed to sign blank forms as directed by the auditors. The courts below have accepted this version. I do not find any infirmity in the acceptance of the said evidence by the Courts below. It cannot be said that it is wholly improbable that the partners would have signed blank forms.
16. In the light of Ex. A-5, the courts below have come to the conclusion that the statements referred to above bund in Exs. B-4, B-8, B-9 and B-28 cannot be taken to be conclusive pro of the fact that there was dissolution of the firm. The courts below have accepted the explanation for such statements as given by the plaintiff and the third defendant and I do not find any justification for interfering with the conclusion of the Courts below. As the statements found in the above documents are explained properly and such explanation has been accepted by the courts below, this Court cannot in second appeal interfere with the same.
17. Learned Counsel for the appellant contends that till this date neither the plaintiff nor the third defendants has issued any notice to the auditors questioning their filing the statements as referred to above. According to learned Counsel, the action of the auditors has not been challenged by either the plaintiff or the third defendant. From that circumstances, one cannot infer that the plaintiff and the third defendant voluntarily signed the statements after knowing the contents thereof. There may be several reasons for the parties for not taking any action against their auditors. When the plaintiff and the third defendant were in the witness box, no question was put to them on this aspect of the matter. Hence, no inference can be drawn by this Court from the circumstances that no action was taken against the auditors, even if it is so.
18. Learned Counsel for the appellant points out the evidence given by the second defendant as D.W. 1 that the rental agreement which was in the joint names of P.W. 1 and himself were changed into the exclusive name of the second defendant from and after 1.4.1970. He also refers to the deposition relating to the entries in Ex. B-13, which show return of shares to the partners for the purpose of their retirement. Yet another circumstance which is relied on by learned Counsel for the appellant is that the plaintiff has not produced his individual returns filed by him after 1970 in spite of notice having been given to him. But, the above circumstances will not clearly indicate that there was a dissolution of the firm as alleged by defendant No. 2. In his own deposition, he has stated in the cross-examination that he was not aware of the exact situation prevailing in the suit firm at the time when he agreed to take the firm for his share. He also admits that even after 1.4.1970 up to July-August, 1970, the plaintiff was looking after the medical shop run by this partnership firm. In fact, he adds that the entire responsibility of the shop was that of the plaintiff. This is clearly an admission on the part of the second defendant that the plaintiff was in charge of the shop even after 1.4.1970, which would go contrary to the case that there was a dissolution on 31.3.1970, as well as his earlier statement in his cross-examination that from 1.4.1970 he was in charge of the shop and looking after the same as his own. Thus, there is a clear prevarication in the evidence of the second defendant.
19. There is yet another clinching circumstances which goes against the second defendant. He admits in his evidence that the drug licence for the shop stood in the name of the first defendant and he could not have carried on any business without a licence for the same. When he was asked specifically as to whether the licence which was in the name of the 1st defendant continued after 1.4.1970, he answered it by saying that he was not aware of the same. As regards the rental receipts, he pleaded ignorance and stated that he did not know in whose names the receipts stood prior to 9.5.1970. He admits in the cross-examination that the rent deed for the shop was in his name even from 1969. Ex. A-1 is the relevant document. That disproves his version In the chief-examination that the rental agreement stood jointly in the name of himself and P.W. 1 till 31.3.1970. Ex. B-24 is a bunch of receipts for the period 9.5.1970 to 10.5.1972. Those receipts are issued in his name. He has not produced any receipt prior to 9.5.1970 When he was asked about the same, he has deposed that he did not know whether receipts prior to that date were also in his name.
20. In is seen from a reading of the entire evidence that the case of the second defendant is not true and the Courts below have rightly upheld the contention of the plaintiff and the third defendant. The cumulative effect of all the documents placed before the Court and the Oral evidence adduced by the parties will only lead to the conclusion that there was no dissolution of the firm as pleaded by the second defendant. Consequently, the concurrent finding of the courts below has to be upheld.
21. The second substantial question of law framed by the Court at the time of admission is whether the direction regarding rendering of accounts by the appellant as if he was the only party to account was proper and legal. Learned Counsel for the appellant points out to the direction in paragraph 11 of the Judgment of the trial court to the effect that a decree for general accounting will be passed as per Form No. 21 of Appendix ‘D’ of the Code of Civil Procedure. But, the decree that is drafted by the trial Court directs the second defendant to render a general account in regard to the entire transaction of the partnership firm. That part of the decree is really based upon paragraph 8 of the Judgment of the trial court, wherein it has found that the second defendant has to render a general account in regard to the entire transaction of the partnership firm from its inception till the closing of the business viz., 11.9.1972. The finding is clearly unsustainable in law. If a partnership is dissolved, the only direction will be to take a general account as provided in Form No. 21 in Appendix ‘D’ of the Code of Civil Procedure. The relevant portion of the form is as follows:
And it is ordered that the following accounts be taken:
(1) An account of the credits, property and effects now belonging to the said partnership;
(2) An account of the debts and liabilities of the partnership;
(3) An account of all dealings and transactions between the plaintiff and defendant, from the fact of the settled account exhibited in this suit and marked (A), and not disturbing any subsequent settled accounts.
In fact, learned Counsel for the plaintiff/first respondent had conceded the position in law and the decree as drafted by the trial court is not sustainable. Hence, the second appeal is dismissed partly and allowed partly to the following extent of modifying the decree of the trial Court as confirmed by the appellate Court:
The second clause of the decree shall be substituted by the following:
And it is ordered that the following accounts be taken:
1. An account of the credits, property and effects now belonging to the said partnership;
2. An account of the debts and liabilities of the partnership;
3. An account of all dealings and transactions between the plaintiff and defendants, from the fact of the settled account and not disturbing any subsequent settled accounts.
In other respects, the decrees of the Courts below a re affirmed. The parties will bear their respective costs here in this second appeal.