1988 PLP 1180 (MLD)

The plaintiff has filed a suit for declaration that the retirement deed is void/voidable against the plaintiff and that the same is liable to be cancelled and in the alternative for recovery of Rs.1,96,70,033 against the defendants of which defendant No.1 is a partnership firm, whereas the defendants Nos.2 and 3 are the real brothers of the plaintiff and his ex‑partners in‑the firm, Kaiser Arts and Crafts, defendant No.1. The plaintiff's case is that he and defendants Nos.2 and 3 were carrying on business together as partners in the name of Kaiser Arts and Crafts. 'she firm came into existence in 1972 with the plaintiff and defendant No.2. and one Naveed Anwar as partners. Later on, changes took place amongst the partners and ultimately m 1984 die plaintiff and defendants Nos.2 and 3 became the only arm. The plaintiff and defendants Nos.2 and 3 are real brothers, inter se, and the plaintiff is the eldest brother. The father of the parties died in 1959 and the plaintiff who was about 17 years of are at that time and was student of Class IX, gave up his education and took upon himself the task of managing the family business and maintaining the family. Defendant Nos.2 and 3 were of 9 and years of age respectively. It was in the year 1971, when the defendant: No .2 completed his education and was taken in as a partner in the said firm in, 1972. In view of educational background of defendant No.2, the plaintiff voluntarily entrusted financial affairs of the business to him. Certain trivial frictions arose between the parties and hence through the intervention of family well‑wishers the plaintiff agreed to retire from the partnership business. A statement of the accounts of the firm's finances was prepared by the ‑defendants Nos. 2 and 3 jointly signed by the plaintiff and defendants Nos.2 and 3 although the plaintiff resisted against its incompleteness. A balance sheet elaborating upon the firm's financial position was prepared by the defendants alone later on and was signed by the defendant No.2 only and given to the plaintiff after his retirement. The defendants committed a fraud and misrepresentation with the plaintiff in preparation of the said accounts and hence the same are not binding upon the plaintiff. The mother of the parties who was the sole arbitrator as per partnership deed and so also the defendants Nos.2 and 3 threatened the plaintiff that the plaintiff's share would be completely wiped out in all the family business if the plaintiff will not accept the accounts and retire from the business. In view of the coercions and undue influence exerted over the plaintiff he executed the retirement deed dated 31‑5‑1984. The plaintiff's case is that accounts are fraudulent and not binding on him for various reasons given in the plaint and consequently he has been deprived of huge amounts which are payable to him. The retirement deed signed by him is also not binding upon him cueing void ab initio/voidable as it was based on having received full and proper share in the capital/profits/goodwill which was not the case. The plaintiff has, therefore prayed that the retirement deed is void/voidable against the plaintiff and it may be cancelled accordingly and as a consequence to the cancellation it may be declared that the plaintiff remains partner in the defendant No.1 firm; that the defendants 2 and 3 be ordered to render accounts of the defendant No.1 firm from the date of dissolution to the date of decree and to make payment to the plaintiff of the ;hares of the profit from such date and that the properties brought by the defendants Nos. 2 and 3 from the funds/profits of defendant No.1 be declared to be jointly owned by the defendants No.2 and 3 and the plaintiff, who has his proportionate share therein. In the alternative, the plaintiff has prayed for the recovery of amount mentioned in para. 1 above. Alongwith the plaint the plaintiff has filed an application under Order XXXIX, Rules 1 and 2, C.P.C. and Order XL, C.P.C. (C.M.A. No.298 of 1987) for grant of the following temporary reliefs:, (1) grant temporary injunction during the pendency of this suit, prohibiting the defendants, from transferring to, owned by and being the valuable right of the defendant No.1, to any other person/firm/company and directing the Pakistan Cotton Fashion Apparel Manufacturers and Exporters Association of 5, Amber Court, Shahed-e-Millat Road, Karachi and the Export Promotion Bureau, I.I.Chundrigar Road, Karachi, not to register/transfer any such quotas (2) grant temporary injunction/stay during the pendency of this suit restraining the defendants from selling, leasing transferring in any way or surrendering possession of properties listed in Para 15 (D) of the plaint (3) Appoint a receiver over the assets and property of the defendant No.1 firm and such receiver to over‑sea management of the firm in conjunction with the defendants and plaintiff." Later on, on 14‑4‑1987 the plaintiff filed two further applications one under Order I, Rule 10 and Order VI, Rule 17, C.P.C. (C.MA. No.2034 of 1987) and the other under Order XXXIX, Rule 7 read with Order XL, C.P.C. (C.MA. No.2035 of 1987). Through the first above application the plaint is sought a to be amended so as to add one more defendant, namely, "Kaiser Arts and Krafts (Private) Limited", and to ask for a further relief as under:‑ "Declare that the plaintiff has a proportionate share in the company, Kaiser Arts and Krafts (Private) Limited, and is deemed to be: share holder to that extent and direct defendants to issue shares to the plaintiff in such Company to such extent, as such Company is carrying on business previously carried on by the defendant No.1 utilising its goodwill etc. and has been setup from the funds/profits of the defendant No.1." Whereas the appointment of Receiver over the abovenamed Company for the purpose of inspecting, preserving and detaining its property etc. is prayed for in the second abovementioned application. The defendants also filed, firstly, on 25‑5‑1987 an application (C.M.A. 2888 of 1987) under section 34 of the Arbitration Act stating that in terms of clause 12 of Partnership Deed dated 2‑7‑1983, "all disputes relating to the partnership are to be referred to the Arbitration of Mst. Habeeb Begum, mother of the plaintiff and defendants 2 and 3" and hence the plaintiff had no right to file the suit. Besides, in previous suits pending in this Court between the parties bearing Nos.756 and 757 of 1984 by an agreement of the parties all the disputes between them have been referred to the sole arbitration of Mr. Kamal Azfar, Bar‑at‑Law, who is still seized of the matter and hence the present suit could not proceed and is liable to be stayed. Again on 30‑7‑1987, an application under section 34 of the Arbitration Act (C.M.A. 3366 of 1987) was filed by the defendants with the same averments as made in the former application (C.M.A. 2888/87) and with ire same prayer for stay of the suit proceedings. I have heard the learned counsel for the parties at length. For the sake of convenience, I propose to decide all the above applications by this single order as under:‑ 1.C.M.A.298 of 1987 (under OXXXIX, Rr. 1 and 2 and O.XLI, C.P.C.). The plaintiff's case is that the defendants No.2 and 3 committed a fraud and misrepresentation upon him in the preparation of the accounts of defendant No.1 and the same are not binding upon him. The execution of a Deed of Retirement dated 31-5-1958 is not biding upon him. The execution of Deed of received a full and proper share of the defendant No.1 capital, goodwill etc., which was not the case. The plaintiff has therefore, prayed for the cancellation of the retirement decd and, in the alternative, he has claimed a sum of Rs.1,96,70,033 being his share of the amount not received by him from the firm/defendants upon retirement. In clause 15(b) he has prayed fog‑ a declaration and order that upon cancellation of the retirement deed which is void/voidable he remains a partner to his full extent in the defendant No.1 firm and is entitled to participate fully in the working of the firm and has all rights/duties of a partner. There is enough reported law on the point that a deed of document executed as a result of fraud, misrepresentation, undue influence or coercion etc. is not void, but voidable only. It holds the field until it is adjudged voidable and cancelled by a Court of competent jurisdiction. If any authority is required to be cited then a reference may be made to the two decisions of the Supreme Court in P L D 1975 S C 624 and at page

62. In view of the matter there is no escape from the conclusion ex face that the deed of retirement in question shall govern the situation until it is declared as voidable. Moreover, pursuant to the died of retirement the continuing partners, namely, the defendants No.2 and 3 have;, to the exclusion of the plaintiff, taken over and are controlling the affairs of partnership. The change thus brought about in the constitution of the firm in effect resulted in the dissolution of the partnership firm as constituted under the deed dated 2‑7‑1983 executed between the plaintiff and the defendant. No .2 and

3. It has, for all practical and legal purposes, been so treated by the retiring as well as the continuing partners. And it is what the plaintiff has admitted ;very in the plaint as is evident from clause (c) of para 15 of the plaint wherein it is stated that "this Hon'ble Court may order rendition of accounts by the defendants of the defendant No.1 from the date of the Dissolution (it has been underlined by me for emphasis).to the date hereof and onwards, and order payment to the plaintiff of his share of the profits from such date." The contention of Mr. Nasim Farooqui learned counsel for the plaintiff, to the effect that partnership being at will stood dissolved with the filing of the suit and that the appointment of Receiver on dissolution of a firm is a, matter of course is wholly misconceived and unsustainable on the facts of the case as set up in the plaint. No doubt, had it been a case for dissolution of partnership and rendition of accounts, the appointment of Receiver would not have, in the absence of exceptional circumstances, presented any difficulty. But it is a case where the plaintiff seeks, firstly a declaration that the retirement deed dated 31‑5‑1984 is voidable against him and its cancellation and then a declaration that he (the plaintiff) remains a partner to his full extent in the defendant No.1 firm, and is entitled to participate fully in the working of the firm and has all rights duties of a partner. It is thus evidently clear and may be emphasised even at the cost of repetition that merely on the basis of the allegations of fraud, misrepresentation, coercion and undue influence as pleaded in the plaint which allegedly rendered the retirement deed voidable against the plaintiff, the plaintiff cannot legally or even reasonably be deemed to be a partner out of possession of the management and assets of the firm so as to entitle him to apply for and get the Receiver appointed in respect of the defendant No.1 firm. Having reached the conclusion that it is not a fit case for appointment of Receiver and consequently the request made in the application in this behalf is rejected. Now there remains to be considered whether the temporary injunction as prayed for should be granted. In view of the admitted fact that the defendants No.2 and 3 have enjoyed the rights and title in respect of the property of the defendant No.1 firm to the exclusion of the plaintiff ever since his retirement from the partnership in May, 1984, I do not find that the balance of convenienceSI11granting the injunction prayed for. The plaintiff has filed this suit on 21-1-1987 i.e. after a period of over 2 1/2 years of the execution of the Deed of Retirement sought to be declared fraudulently executed by the plaintiff, the plaintiff does not seem to have made out a strong prima facie case as well. Unless the said document is declared voidable as claimed in the plaint, it would not be safe to presume that it was not executed by the parties including the plaint];! in the normal course of events. Moreover, the plaintiff has himself, alternatively, prayed for a money decree in the sum of Rs.1,96,70,033 against the defendants, jointly and severally on account of his unaccounted for and unpaid share in the capital/profits/goodwill of the firm and hence no irreparable damage or injury is likely to be caused to the plaintiff if the injunction is not granted. The grant of injunction as prayed for would, in my opinion, be detrimental to the interest of the defendants. For this reason the prayer for grant of temporary injunction is also rejected. In the result C.M.A. 298 of 1987 stands dismissed. Before proceeding further I would like to add that the learned counsel for both the sides cited a number of authorities before me in support of their connections but the said authorities were not, in my opinion, relevant in the context of the facts of the case in hand and hence I have deliberately omitted to deal with them individually. However, I have tried to keep in view the basic principles enunciated therein with regard to the grant of temporary injunction/car appointment of receiver. 2‑C.M.A. 2034/87 (Application under Order 1, R.10, O.VI, R.17, C.P.C. The plaintiff, as already mentioned above, has filed this application for impleading another defendant, namely, Kaiser Arts & Krafts (Private) Limited, Karachi, and for a consequential amendment of the plaint by adding a fresh para after the existing para 15 D thereof. The plaintiff has in his affidavit filed in support of this application stated that the present defendants No.2 and 3 have with ulterior motives started to transfer the business of the defendant No.1 firm to a private limited company owned and incorporated only by them and that the proposed defendant has been incorporated with the assets of the family firm and carries on business transferred from such firm. The defendant in the counter-affidavit of Jehangir Anwar, defendant No.3 has denied the allegations regarding transfer of business of defendant No.1 firm to any private limited company as being absolutely false and baseless inasmuch as the defendants have not transferred any of their business to the private limited company. Having asserted that the business which was being carried on by the defendant No.1 continued to be carried on in its name, the deponent of the counter‑affidavit, has deposed that there is neither in law nor in fact any justification for impleading M/s. Arts & Drafts (Pvt.) Limited as a party to the suit. According to him, the aforesaid Company is neither a necessary nor a proper party and the application is thus wholly misconceived. The plaintiff in his affidavit‑in‑rejoinder has reiterated the contents of his earlier affidavit filed in support of the application. The plaintiff has not brought any material on record to show as to who are the Directors of the proposed Company and what are its aims and objects. The learned counsel for the parties addressed general arguments 'without making any specific reference to any document. I am, however, of the opinion that since the proposed defendant is a corporate body and hence a different entity, a notice of this application must go to it. The notice of this application has been ordered only to the present defendants vide order dated 18‑5‑1987. I would, therefore, direct that, a notice of this application should be issued to the proposed defendant and it should be fixed for hearing after due service of notice on the proposed defendant with intimation to the parties to the suit.

3. C.M.A No 2035 of 1987(Apn1: under O XXXIX Rule 7 r/w O XL C. P.C. By this application the plaintiff has prayed for appointment of a Receiver over the proposed defendant company, Kaiser Arts & Krafts (Pvt.) Limited for the purpose of inspecting, preserving and detaining its property, assets and business and for performance of certain other acts mentioned therein. Notice of this application, I find, has not been issued to the proposed defendant. The notice vide order sheet entry dated 18‑5‑1987 has been given only to the defendants. I would, therefore direct that a notice of this application should also be sent to the proposed defendant and it should be fixed for hearing after due service of the proposed defendant and under intimation to the parties to the suit.

4. C. M. A. 2888 of 1987 &. C.M.A. 3366 of 1987 (Applications under section 34 of the Arbitration Act. 1940. Both these applications are couched in similar terms and could not be explained at the bar as to what led the defendants to file these two separate applications, the first one on 25‑5‑1987 and the second one on 30th July, 1987. The defendants' case is that since the suit is based on the allegation that the plaintiff was a partner of defendant No.1 firm constituted vide partnership deed dated 2‑7‑1983 and continues to remain as such notwithstanding his retirement, and since clause 12 of the aforesaid partnership deed stipulates and provides that all disputes arising between the parties in respect of matters relating to partnership are to be referred to the arbitration of Mst. Habib Begum, mother of the plaintiff and the defendants Nos.2 and 3, the plaintiff has thus no right to file the suit which is wholly misconceived and cannot proceed under the law. The defendants, have, therefore, prayed that the proceedings in the above suit may be stayed under section 34 of the Arbitration Act. The plaintiff's case as disclosed in the counter‑affidavit is that the application is not maintainable for having been filed at a belated stage and after the defendants have already taken many steps in the proceedings. The disputes involved in this suit are not covered by the clause relied upon by the defendants and hence the applications were not maintainable for that reason as well. The plaintiff has further deposed that in view of the stand taken by the defendants before the Arbitrator appointed in previous suits pending between the parties in this Court bearing Suits Nos.75 and 76 both of 1984 to the effect that the claims raised by him being the same which are subject‑matter of this suit before the Arbitrator, were outside the purview of those proceedings and hence they are estopped from taking an opposite stand in this suit. Jehangir Anwar, defendant No.3, has filed his affidavit‑in‑rejoinder in connection with these applications wherein he has deposed that "the application filed by me is maintainable in law and the arbitration agreement between the parties fully covers the dispute raised in the present suit." He has further explained that the proceedings before the Arbitrator in the earlier suits were consequent to an agreement entered between the parties in Court and was not in pursuance to the arbitration agreement relied upon by the defendants in the present application." I have heard the learned counsel for the parties and I find that since the stand of the defendants as disclosed in the counter‑affidavit filed in connection with C.MA. 298 of 1987 under Order XXXIX, Rules 1 and 2 and Order XL, C.P.C. for injunction and appointment of Receiver; these applications are misconceived. Although I feel inclined to hold that by merely filing the counter affidavits in connection with the various applications made in this suit, as stated above, the defendants cans 3t be said to have taken any such steps which debar them from filing this application. I am, however, of the view that the stand taken by them in the said counter‑affidavits could not completely be ‑ignored while considering these applications. If their stand is that the Retirement Deed has been acted upon by their executants bona fide and as a result whereof the plaintiff stood retired from the defendant No.1 firm then the abovenoted partnership deed cannot be said to be applicable to the dispute in this suit which is confined to the declaration of the Retirement Deed as void/voidable against the plaintiff and of his continuing in the firm, defendant No.1. The Arbitration clause, therefore, embodied therein would not govern the situation prevalent in the instant suit notwithstanding the fact that the plaintiff has made a reference to it in the plaint. That partnership deed qua the plaintiff ceased to be operative consequent to the execution of the retirement deed. Unless the retirement deed is held to be voidable and cancelled as prayed for, it shall hold the field and all the consequential effects flowing therefrom shall also remain unaffected. Clause 12 of the partnership deed dated 2‑7‑1983 would not apply and govern the dispute involved in this suit. For the foregoing reasons I do not find any substance in these applications and dismiss them accordingly. In the result, the application C.MA. 298 of 1987 moved by the plaintiff and the C.M.A. 2888 of 1987 and C.M.A. 3366 of 1987 presented by the defendants stand dismissed. Consequently the Court's order dated 24‑1‑1987 with its implications stands vacated. The remaining two applications, C.M.A. 2034 of B 1987 and C.M.A. 2035 of 1987, shall be fixed for hearing as per directions given hereinabove in respect thereof. M.Y.H./K‑83/K Order accordingly.