Decree holder sought arrest and detention of a former managing partner in execution of a decree for overdrawn partnership sums under s. 51(c) CPC. The Supreme Court held that absent special circumstances a partner is not a trustee for co-partners; no fraud was alleged or proved, so detention was impermissible.
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PREM BALLABH KHULBE
r.
MATHURA DATT BHATT
December 16. 1966.
(K. N. WANCHOO, R. S. BAC'HAWAT AND .J.M. SHELAT JJ.)
Code of Ci1·i/ Procedure (Act 5 of 1908). cl. (c) of the pro'l'L<o to_ **_s._ 5** **_l-Partners-lf in fiduciary r1..>lationship.**
The partnership business carried on by the appellant, respon"ent and t>.ll others \:as dissolved. The appellant obtained a final decree for .. 1.'.'Ilain sums against the rcspc._1dcnt, who was the ntanaging partner of thi: 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 Hi,gh Court set aside this order. On appeal, this ('ourt.
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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 lo them in a fiduciary capacity, [300 DJ
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 o·r proved. The fac!s did not disclose that the-. decree was for a sun1 for which the r~spondent v.·as bound to account in a fiduciary capacity. (300 El
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Piddock,• v.Burt, Cliittv, [ 1894] I Ch. 343, Rodriquez v. Speyer IJrotha.<, [1919) A.C. 59, Bli11hm1 Moha11 Rana v. Sure11da Moha11 .D<u. l.L.R. [1952] :'.Cal. 123 and Vdji Ra11/1a1·j/ Paid v. Stak of Maharashtra [ 1965] 2 S.C.R. 429, approved, '
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 615 of 1964.
Appeal from the judgment and decree dated March 3, 1960 of the Allahabad High Courl in Execution First Appeal No. 332 of 1956.
C. B. Agarwala and A'. P. Gupta for the appellant.
S. G. Palll'ardhan. Yashpal Singh and M. S. G11pfa for the respondent.
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The Judgment of the Court was delivered by
Bacbawa:, 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
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PREM BALLABH '. MATHURA DATT (Bachawat, J.)
299'
·
On behalf of the appellant our attention w~s drawn to
D 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 tbe 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.
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On the question whether a fiduciary relation exists between the partners, the law is stated thus in Halsbury's Laws of England Jrd Edition, Vol. 38, art. 1363, p. 820 :
"Partnership itself does Mt create a fiduciary rel<ttion between the partners or make one of therr. a truste(. 1 1 ' 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.
G In Piddo<"ke v. Burt. (1 ) Chitty, J. held that a partner failing to pay moneys in his hands anr\ 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 H a partner receiving money on account of the partnership-·that is, on behalf of himself and his co-partners-
( I) I th941 I Ch. 343.
(1967] 2 S.C.R.
SUPREME CO!RT REPORTS
:100
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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 lo whom it is due, and I am unable to recognise any s~ch 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 partna over-drawing the partnership account; because if this uistinction were true, it would apply to every case where one partner wrongly over draws the partnership account."
This decesion was approved of by Lord Atkinson in Rodrigue: v. Speyer Brothers,(') and by Harries, C. J. in Bl111ban Mohan Rana v. Surmder Mohan Das.(2 ) The last case received the approval of this Court in VeljiRaghaiji Patelv. Stateo.fMalwrashtra.('! A nartner must observe the utmost good faith in his dealing~ with the othe~ partners. He is bound to render accounts of the partnership assets in his hands. But in the absence of special circumstances he cannot he regarded as a kind of trustee for the other partners or liable to render accounts to them in a fiduciary cap:1city.
In the present case the respondent as t~e 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.
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c
D
f,
The appe;tl is dismissed. There will be no order as to costs.
Y.P.
Appecl dismissed.
1 issue framed by the court
Whether a managing partner is bound in a fiduciary capacity to account so as to permit execution of a money decree by detention under cl. (c) of the proviso to s. 51 CPC.
Colour shows how this judgement treated each authority
Piddocke v. BurtReferred
[1894] I Ch. 343
Rodriguez v. Speyer BrothersReferred
[1919] A.C. 59
Bhuban Mohan Rana v. Surinder Mohan DasReferred
I.L.R. 1952 (2) Cal. 123 · Who else cites this
Velji Raghavji Patel v. State of MaharashtraRelied on
[1965] 2 S.C.R. 429 · Who else cites this
3 provisions across 3 enactments
Prem Ballabh Khulbe
Mathura Datt Bhatt
K. N. Wanchoo
R. S. Bachawat
J. M. Shelat
As recorded by the court registry
Judgements on the same questions, provisions and authorities, from every court
