P L D 1962 (W (PLP)

ABDUL RAHIM KHARAL, J.‑This is an appeal against the judgment and decree dated 30‑9‑1958 by the District Judge (Mr. Feroz Nana Ghulamali) Karachi passing a decree in the sum of Rs. 16,010 in favour of the plaintiff‑respondent. The suit was for dissolution of partnership entered into between the parties under deed Exh. 6 and for the asserted sum of Rs. 16,

010. The defence set rip by the appellants was that there was no partnership between the parties and that in fact Exh. 6 was a fake document, that in fact the defendant had taken a loan of Rs. 20,000 and that to hide the usurious nature of the rate of Interest 48%, a guaranteed profit of Rs. 800 per month was mentioned. The trial Court settled the following issues:‑ "(1) Whether the plaintiff and defendant entered into a partnership ? (2) Whether the document dated 21‑12‑51 purporting to be a deed of partnership was fake, fictitious and cannot be treated or acted upon as partnership ? (3) Whether the advance of Rs. 20,000 was made by way of loan ? (4) Whether the buses built on Chassis Nos. 189684 and 189685 vested in the alleged partnership or was run by or on behalf of the same ? (5) Whether the defendant is entitled to protection under the Usurious Loans Act ? (6) Whether the defendant paid Rs. 18,950 towards return of principal sum advanced by the plaintiff ? (7) What amount, if any, is due to the plaintiff ? (8) General." We have to consider in this appeal whether Exh. 6 is in fact a deed of partnership and whether the parties had become partners in the business of running the two buses under agreement Exh.

6. Partnership is defined in section 4 of the Partnership Act (1X of 1932) as under: "Partnership is the relation which subsists between persons who have agreed to combine their property, labour or skill in some business, and to share the profits thereof between them." Section 6 of the Partnership Act prescribes the mode of determin ing the existence of partnership and says that in determining whether a person is or is not a partner in a firm regard shall be had to the real relation between the parties as shown by all relevant facts taken together. Under Explanation (1) the sharing of profits or of gross returns arising from property by persons holding a joint or common Interest in that property does not of itself make such persons partners. Under Explanation (2) the receipt by a person of a share of the profits of a business, or of a payment contingent upon the earning of profits or varying with the profits earned by a business, does not of itself make him a partner with the persons carrying on the business ; and in particular, the receipt of such share or payment by a lender of money to persons engaged or about to engage in any business. It is open to the parties to share the profits in any way they like. They may agree that one partner may receive a fixed annual or monthly sum in lieu of a sum varying in accordance with the profits actually earned. It is not essential to constitute a partnership that the partners should agree to share the losses. Raghunandan Nanu Kothare v. Hormasji Bezonji Bamji (A I R 1927 Bom. 187). It has been held in Ambalal Sarabhai : In re (A I R 1924 Bom. 182), that "The fact that the control of the business is kept with one partner and that he has certain extra rights as a major partner does not in any sense negative the partnership according to law. It is open to the partners to allow the business of the partnership to be conducted by one of the partners." The question whether there is a relationship of partnership in any particular case will depend on the facts and circumstances brought out in each case or in the words of section 6 "regard shall be had to the real relation between the parties as shown by all relevant facts taken together." The agreement Exh. 6 between the parties does call itself "this deed of partnership" and the parties call themselves as "working partner" and "financing partner" and the two buses after com pletion are to run "on behalf of this firm". It has been held in Majooji Moosaj v. Tayebali and others (A I R 1933 Sind 210) that: "Even where the parties call themselves "Partners" in a writing embodying the agreement between them, this does not constitute a partnership within the meaning of section 239, if the true relationship be not that of partnership. On the other hand an agreement purporting to be something else, may be one of partnership; for the law regards the body and substance of the agreement and its real character." It has been held in Karnidan Sarda and another v. Sailaja Kanta Mltra and another (A I R 1940 Pat. 683) that: "It is not the description given by the parties to the deed that determines the character of the deed but the provisions contained therein, on a proper construction placed on them." It is therefore necessary to look into the tenure of the agreement and take together all relevant facts to determine the real character of the agreement Exh.

6. Clause 1 of the agreement provides that the "financial partner" shall pay Rs. 20,000 to the "working partner" to meet the bill of body building of the two buses. Clause 2 provides that the "working partner" shall repay the "financial partner" in 16 monthly instalments of Rs. 1,250 the amount invested by the "financing partner". Clause 3 provides that the "working partner" shall also in addition to the monthly instalment of Rs. 1,250 pay a sum of Rs. h00 per month as fixed guaranteed profit to the "financing partner" and that the "finan cing partner" shall not be liable for any loss that the "working partner" may suffer In this partnership business. Clause 4 pro vides that the "working partner" shall pay the above monthly instalments (its. 1,250 and Rs. 800) from the 10th of February 1952 whether the buses in question are complete or not. Clause 5 says that in case of breach of any of the terms or of default of any instalment the "working partner" shall pay to the "financing partner" the entire amount invested by the "financing partner" and the amount due as and by way of fixed guaranteed profit along with interest at 12% on the entire amount paid by the "financing partner" from the date of payment. The "financing partner" shall be entitled to take possession of the chassis or buses and could sell the same and appropriate the sale proceeds and if the sale proceeds are less than the amount due to the "financing partner", the balance shall be recovered from the "working partner" personally. Clause 6 provides that the working partner shall be at liberty to pay off the total amount due to the "financing partner" after the expiry of first 12 months and on such payment the "financing partner" shall, cease to be a partner and the "wording partner" shall become the sole proprietor of the business. Clause 7 provides that the "financing partner", as long as he is a partner in the business or till any amount due to the "financing partner" by the "working partner" remains unpaid, shall have a lien on the chassis of the buses. Lastly clause 8 provides that the "working partner" alone shall have the entire control of the running of the two buses and that the "financing partner" shall not interfere in their actual management or the use to which they are put, their income or proceeds or any further matter connected therewith. Reading the agreement as a whole it is apparent that a partner ship in the business was never intended. The real intention appears to be to advance a loan of Rs. 20,000 to the appellant defendant and secure its repayment at a very high rate (48% of Interest. This was to escape the mischief of Sind Money Lenders Act and Usurious Loans Act and for that purpose this agreement appears to have been drafted to give it a shape and form of partnership. Before proceeding further it is necessary to point out mis statement of facts which have crept into the judgment of the learned District Judge. At line 110 of the judgment it is stated :‑ "In the entire correspondence that has ensued between the parties which has been admitted by the consent of the parties as Exh. 8, at no time has the defendant ever alleged or set up the defence, as he now does, that the deed of partnership was a fake and that Rs. 20,000 in actuallity was a loan given to the defendant and that the tern with regard to the monthly payments towards the principal and the fixed guaranteed profits to be paid to the financing partner and the plaintiffs were merely set down to cover up what he further alleges was a usurious interest for the loan paid to him." These remarks are falsified by the letter dated 27th March 1953 at page 35 of the paper‑book addressed to the plaintiffs Advocate by the appellant where all these pleas are taken. The second mis‑statement is at line 165 where the learned District judge writes: ". . . . . amount of Rs. 20,000 was not advanced as a mere loan but as the financier's contribution towards the formation of a firm to share the profit and loss in respect of the two buses involved." There is nothing about sharing the loss anywhere In Exh.

6. On the contrary clause 3 of the agreement as already mentioned above stipulates that the respondents shall not be liable for any lobs. The working partner may suffer in the so‑called partnership business. The 3rd mis‑statement is at line 170 of the judgment where the learned District Judge writes: " It is admitted that the buses . . . . were vested in the partnership . . . ." There is no clause which vests the buses in the partnership. On the other hand clause 8 suggests that the buses were to vest in the appellant and respondent had a right of sale in case the amount was not paid. The last and the most serious mis‑statement in the judgment is at line 148 where it is stated :‑ "It is also clear from the terms of the deed of partnership that there was a regular partnership in respect of this parti cular transaction between the parties and that either party could act as an agent in respect of the property mentioned in this partnership." There is nothing in the agreement or anywhere else in the record to substantiate the finding that the respondent was an agent of the partnership. It was pointed out by Beaument C. J. in Chimanram Motilal crud another v. Jayantilal Chhaganlal and another (A I R 1939 Bom. 410). "There can be a partnership in a single transaction and sharing profits and contributing to losses are indications of a partnership, but by themselves they are not enough to constitute a partnership. One essential element of partnership is that there should be agency. One partner can always bind another partner in any matter which falls within the scope of the partnership business, subject to any limitation under section 20, and if the relationship constituted between parties in respect of a partnership matter does not expressly or by necessary implication involve the right of one party to pledge the other as an agent, then there is no partnership." The element of agency is entirely absent and has been kept deliberately absent in the agreement Exh.

6. Clause 8 of the agreement clearly negatives the agency or indication of it in the plaintiff‑respondents. The agreement gives the plaintiff‑respondents right to the guaranteed profits of Rs. 800 per month even if there was any loss, under clause

3. Under clause 4 the monthly instalments of the guaranteed profits are to be paid from 10th February 1952, "Whether the buses in question are complete or not." In other words even if the buses do not "run on behalf of the firm" the guaranteed profits are assured so far as the plaintiffs are concerned. As per the terms of the agreement Exh. 6 the plaintiff's have reserved no right whatsoever for themselves in the assets of the business. The partnership is also to dissolve after the "financing partner" has been paid off his dues. The learned counsel for the respondents laid stress on the circumstances that the appellant bad paid some of the amounts as stipulated in the agreement. This, however, proves nothing. The amounts paid in terms of the agreement shall be deemed to have been paid in its terms as a loan agreement on our finding. In view of the above facts and circumstances we find against the respondents on issues 1 to

4. We are of the clear view that the so‑called deed Exh. 6 creates no relationship of partnership between the parties and it cannot be treated or acted upon as such, and that the advance of Rs. 20,000 was made by the respondents by way of a loan to the appellant and that the buses were not run on behalf of the partnership. The judgment and the decree of the lower Court is set aside and the case is remanded back under section, 151, C. P. C., to the District Court Karachi for finding on the remaining issues 5 to 8 in the light of our above finding. The respondents will bear the costs of this appeal. K. B. A. Case remanded.