P L D 1988 Karachi 560 (PLP)

AJMAL MIAN, J.‑‑ This appeal is directed against an order dated 15‑1‑1987 passed by a learned single Judge of this Court in Suit No.815 of 1977 allowing respondents Nos.l and 2's application under Order XXIII, rule 1, C.P.C. (CMA No.6079/1986) and declining the present appellant's two applications, namely, an application under Order 1, rule 10, C.P.C. (CMA No.4802/1986) and another application under Order VIII, rule 10 read with Order XII, rule 6 and section 151 C.P.C. (CMA No.5041/1986). The appellant being aggrieved by the above order has filed the present appeal.

2. The brief facts leading to the filing of the shove appeal are that there was a partnership dated 20th September, 1948 for a fixed period of thirty years under the name and style of Messrs Erose Theatre (hereinafter referred to as the firm). The subsequent development relating to the above partnership including assignment of ten annas share by some of the partners in favour of late Malik Muhammad Ishaque and his wife Mst. Parveen Begun has been dealt with in detail by the Hon'ble Supreme Court of Pakistan in the case of Malik Muhammad Ishaque (represented by his legal heirs) v. ;Aessrs Erose Theatre and others (P L D 1977 S C 109). The effect of the above Supreme Court judgment is that it was held that MaliK Muhammad Ishaque and his aforesaid wife were entitled to the assets of the firm on its dissolution to the extent of ten annas share but they were not entitled to manage or run the business of the firm. The aforesaid appeal arose, inter alia, out of Suit No.159 of 1964 which was filed by some of the partners of the firm against late Malik Muhammad Ishaque and his wife Mst. Parveen Begum, inter alia, for possession of the assets of the firm and for account. In the above suit a preliminary decree was passed on 20‑3‑1971 for account. It further seems that the present suit was filed by two partners on 7‑12‑1977 for dissolution, winding up and accounts against the partners and their assignee. In the above suit the legal heirs of late Malik Muhammad Ishaque and Mst. Parveen Begum were impleaded as defendants Nos. 24 to

34. In the above suit an application under Order XL, rule 1 C.P.C. (CMA No.42/1978) was filed alongwith the suit, which was taken up, inter alia, on 7‑4‑1979 when the Official Assignee was appointed as the Receiver with the direction that he should take all necessary steps to dispose of the assets of the firm in order to wind up the firm as early as possible. It may be advantageous to reproduce hereinbelow para. 2 of the above order, which reads as follows: "In view of the fact that the joint receivers have developed differences and the fact that the period of partnership has already expired on 19‑9‑1978 in my view, the plaintiffs are entitled to approach this Court for the fresh order for the appointment of a receiver. The defendants 1 to 23 cannot insist upon that the business be run by the aforesaid four joint receivers against the will of the persons who have more than 10 annas share in a rupee in the assets of the firm to be dissolved. I, accordingly, appoint the Official Assignee, as the receiver with the power contained in Order XL, rule 1 C.P.C. with the direction that lie should take all necessary steps to dispose of the assets of the firm in order to wind up the firm as early as possible. The aforesaid consent order dated 9‑3‑1977 passed in the aforesaid Suit No.159/64 for appointing joint receiver stands superceded. The receiver shall continue to pay monthly allowances to the parties as per order passed in Suit No.159/64 till further order. The receiver shall make a reference as per order of even date passed on CMA No.3898/78 in the aforesaid Suit No.159/64. Mr. Dastagir and Khursheed Ahmed submit that in suit No.159/64 Mr. Rehanul Hassan Naqvi has been 'appointed as the Commissioner for taking accounts. It will suffice to observe that the Official Assignee will render all assistance to Mr. j. f6 Naqvi for the purpose of finalising the accounts. CMA No.912/78 also stands disposed off."

3. The above order was modified by order dated 15th December, 1979 by consent of all the parties, whereby the Official Assignee was discharged from the Receivership and plaintiff No.l (respondent No.1) was appointed as the Receiver to carry out the above object.

4. It appears that inter alia, on 2‑9‑1984 respondent No.l was directed to submit his report about the disposal of the Cinema. The above matter was taken up again on 17‑3‑1985 when the Advocate for respondent No.l was directed to seek instructions from respondent No.l on the above earlier direction as to the disposal of the Cinema. It further seems that when the aforesaid suit had come up for final disposal on 27‑10‑1986 respondent No.l instead of submitting report as to the reason for non‑disposal, filed aforesaid application under Order XXIII, rule 1 C .P. C. , which reads as follows: "It is submitted on behalf of the plaintiffs that the partners of the firm Messrs Erose Theatre amicably settled their differences and have entered into a fresh partnership to continue the partnership business and as such the above suit has now become infructuous. It is, therefore, prayed that this Hon'ble Court may be pleased to dispose of the above suit as withdrawn with no order as to costs and the order dated 15‑12‑1979 appointing plaintiff No. l as the Receiver may be recalled hereafter the possession of Erose Theatre shall continue to remain within joint possession of all the partners under plaintiff No.l, who is the Managing Partner in the fresh partnership." To the above application the appellant who was defendant No.24 filed objections. He also filed the aforesaid two applications namely, one under Order 1, rule 10 read with section 151 C.P.C. (CMA No.4802/86) for getting himself and defendants Nos. 25 to 34 transposed as plaintiffs and the other under Order VIII, rule 10 read with Order XII, rule 6 and section 151 C.P.C. (CMA No.5041/1986) for pronouncing the judgment.on the basis of admission made in the pleadings. The above three applications were disposed of by the order under appeal in the above terms. The appellant being aggrieved by the above order has filed the present appeal.

5. In support of the above appeal Mr. Arif Hussain, learned counsel for the appellant has urged as follows: (i) That the firm stood dissolved on 19‑9‑1978 on the expiry of the period of thirty years, the defendants Nos.24 to 34 in the suit as the assignees were entitled to the assets of the firm to the extent of ten annas and also accounts from, the date of the dissolution of the firm, the learned single Judge was not justified in allowing the withdrawal of the suit and declining the appellant's above application for transposition of the above defendants as plaintiffs. (ii) That the object of she withdrawal was Mala fide to deprive the above defendants No.24 to 34 their share from the assets and to frustrate the order of the learned single Judge dated 7‑4‑1977 for disposing of the assets of the firm. On the other hand 11r. Shafaat Hussain, learned counsel for respondents Nos.l and 1, who were the plaintiffs in the suit, as observed hereinabove,, has submitted as under: (i) That the appellant /defendant No.24 and defendants Nvs.25 to, 34 were not partners of the firm and, therefore, they had no right to oppose the above application for withdrawal of the suit., (ii) That since in spite of best efforts, the assets of the firm could not have been disposed of, the remaining partners entered into fresh arrangement with the object to dispose of the assets. on the :maximum price. ' (iii) That the remedy of the appellant, if any, was to file a fresh suit and not to get himself and defendants Nos.25 to 34 transposed as the plaintiffs in the above suit.

6. Before dilating upon the above submissions of the learned counsel for the parties, it may be pertinent to reproduce section 29 of the Partnership Act, 1932 (hereinafter referred as to the Act), which reads as follows: "

29. Rights of transferee of a partner's interest.‑‑(1) A transfer by a partner of his interest in the firm, either absolute or by mortgage, or by the creation by him of a charge on such interest, does not entitle the transferee, during the continuance of the firm, to interfere, in the conduct of the business, or to require accounts, or to inspect the books of the firm, but entitles the transferee only to receive the share of profits of the transferring partner, and the transferee shall accept the account of profits agreed to by the partners. (2) If the firm is dissolved or if the transferring partner ceases to be a partner, the transferee is entitled as against the remaining partners, to receive the share of the assets of the firth to which the transferring partner is entitled, and, for the purpose of ascertaining that share, to an account as from the date of the dissolution.,' 7 . A perusal of the above‑quoted section indicates that if a partner transfers his interest in the firm, it does not entitle the transferee during the continuance of the firm, to interfere in the conduct of the business or to require accounts, or to inspect the books of the firm, but entitles him only to receive share of the profits of the transferring partner. He is also bound to accept the accounts of profits agreed to by the partners. It may further be noticed that upon dissolution of the firm a transferee is entitled as against the remaining partners, to receive the share of the assets of the firm, to which the transferring partner is entitled and for the purpose of l ascertaining that share to an account as from the date of the dissolution .

8. It may be pertinent to point out here that in the above‑reported judgment of the Supreme Court the above position in respect of late Malik Muhammad Ishaque and his wife Mst. Parveen Begum was confirmed, the relevant portion of the judgment reads as follows: "It follows, therefore, that the legal position of the assignees has been correctly described by the High Court, namely, that the matter is governed entirely by section 29 of the Partnership Act, with the result that the assignees were not entitled to interfere in the conduct of the business or to require or to inspect the books of the firm, but only entitled to receive the shares of the profits of the transferring partner or partners, and to accept the account of profits agreed to by the partners, their right and interest in the event of the dissolution of the, firm or their transferors ceasing to be partners in the firm, shall be governed by subsection (2) of section 29 of the Act. This incidentally also disposes of Mr Sharifuddin Pirzada's contention regarding the consequence Of the death of Biavi in 1963 after he had parted with his six Annas share in the firm. The matter would be governed by Subsection ( 2) of section 29 read with section 37 of the Partnership Act, and it is not necessary for us to say anything More in this behalf, except to add that There is nip question; of 'Mst.Perveen Begum s becoming an heir or legal representative of Rizvi. She remains as assignee and nothing more.,,

9. It may be observed that it seems to be an admitted position that on 19‑9‑1978 the partnership stood dissolved in terms of clause (a) of section 42 of the Act as 30 years period of partnership had expired and, therefore, the appellant ‑‑d other legal heirs of late Malik Muhammad Ishaque and his wife Mst Parveen Begum had become entitled to receive the shares from the assets of the firm to the extent of about 10 annas and also to ask for accounts. It may again be pointed out that the Above order dated 7‑4‑1979 was passed in the suit by a learned single Judge on the assumption that the partnership stood dissolved which position was not controverted by any of the parties. Mr. Arif Hussain in support of the above submission has referred to the following cases: Edulji Muncherji Wachs v. Vullebhoy Khanbhoy and others (7 Bombay 167) in which a learned single Judge of the Bombay In Court in a suit of dissolution of partnership declined an application filed by the plaintiff for the withdrawal of the suit supported by two out of 21 defendants but opposed by two defendants and allowed the aforesaid two opposing defendants, application for transposition as plaintiffs. (t may be advantageous to reproduce the relevant observations from the above judgment; .. But a partnership suit is a suit of a peculiar character, and the parties to such a suit do not stand to each other precisely in the same relation as parties to suits generally. Each‑of the parties to a partnership suit, however he may be formally ranked, is really in turn plaintiff and defendant, anti in both capacities comes before the Court for the adjudication of his rights relatively to the other partners, which the Court endeavours to determine by its decree" If the partnership account prayed for in the suit is to be complete, all the parties to the partnership have a right, and are under an obligation to appear ............................. All the proceedings already taken might prove futile, and it might be necessary to begin the whole case over again." (ii) Debi Chand v. Parbhu Lal and others A I R 1926 Allahabad

582. In the above case in a suit for partnership accounts, a preliminary decree was passed, and that the plaintiff prayed for the withdrawal of the suit, a Division Bench of the Allahabad High Court confirmed the orders of the Courts below in declining the application for the withdrawal of the suit and transposing the defendant as plaintiff in the suit. (iii) Devsey Khetsey v. Hirji Khairaj A I R 1942 Bombay 35, in which a learned single Judge of the Bombay High Court reiterated the earlier view of the Bombay High Court taken in the above‑cited Bombay case and held that a partnership suit is a suit of peculiar character and the parties to such a suit do not stand to each other precisely in the same relation as parties to suits generally. It was further held that in a suit for dissolution of partnership and for partnership accounts under Order 1, rule 10, the Court has the jurisdiction in proper cases to transpose the defendants as plaintiffs where it would work great hardship if the death of the original plaintiff, who filed a .suit for partnership accounts, should put an end to the suit. (iv) Kedar Nath and others v. Chandra Kiran and others (A I R 1982 All. 283). In the above case a learned single Judge in a Second Appeal declined an application for withdrawal of the suit under Order XXIII, rule 1 C.P.C. and held that the above provision does not give an absolute right to the plaintiff to withdraw the suit, at any rate at the stage of Second Appeal. On the other hand Hr. Shafaat Hussain has referred to the following cases: (i) Malik Mumtaz Ali v. Pakistan through Secretary, Refugees and Works. Government of Pakistan, Rawalpindi and 3 others (P L D 1971 Lah. 395), in which Anwarul Haq, C.J. (as he then was) held that the power of Court to strike out or add necessary parties under Order 1, rule 10, C.P.C. are not to be exercised in a manner so as to change the character of the suit; and that under Order XXIII, rule 1, C.P.C. a plaintiff who is not seeking the permission of the Court for instituting a fresh suit in respect of the same subject‑matter on the same cause of action is at liberty to withdraw the suit at any time; and that the Court does not appear, in such circumstances to have any power to compel the plaintiff to continue the suit. In the above case in a Constitutional Petition, the Aunicipal Committee of Lyallpur sought permission to get itself transposed as co‑petitioner, whereas the petitioner sought the withdrawal of the petition under Order XXIII, rule 1, C.P.C. (ii) Group Capt. A.M. Murad and another v. Mushtaq Ahmed and 9 others (P L D 1975 Kar. 32?). In the above case, a learned Single Judge allowed the withdrawal of a suit under Order XXIII, rules 1 and 2, C.P.C. by holding that the same was in the interest of the company in respect of which litigation was going on. It may be advantageous to reproduce para. T of the judgment, which reads as follows: "

7. As Mr. Fazeel conceded that the plaintiffs were entitled to drop the other relief sought in the application I would treat it as an application only under rule 1 Order XXIII for the unconditional withdrawal of the suit. Learned counsel however, submitted, very half‑heartedly, that even this unconditional withdrawal by the Director was in breach of his undertaking to Mr. Desa. But as the suit filed by Mr. Hoon is pending, if the 9th defendant is entitled in law in any relief in the present suit, he would be entitled to seek 'it in his own suit, and this was admitted by Mr. Fazeel. Accordingly, it cannot be said that the mere withdrawal of the suit would prejudice Mr. Hoon. Additionally, a Director stands in a fiudiciary capacity to the company of which he is a director, and if it is in the interest of a company to withdraw a suit filed by it, it is the duty of its Directors to do so'. In the instant case, I am satisfied that it is in the interest of the Company to withhdraw this suit, and if the Director does not, he will be in breach of his own obligations to the Company. Now, although I do not think the withdrawal of the suit would be a breach of the Director's undertaking even if I am wrong, at the highest, there is an ambiguity in the undertaking, which should therefore, be construed in a manner consistent with the substantive law applicable namely, the Company Law. Accordingly, on this ground also, I would agree with Mr. Muhammad All Saeed that the Director has not committed any breach of his undertaking by filing this application for the withdrawal of the Company's suit. And I may further observe in passing that the application is supported by the majority of the Company's shareholders. The result is that, as I pointed out earlier, the real question in the suit is whether the withdrawal application is by the Company." (iii) Amjad Rashid Khan Malik v. Mrs. Zubeda Rashid Khan and another (1984 C L C 2851), in which a learned single Judge while dealing 'with the question of the right of a plaintiff to withdraw the suit observed as follows: "The learned counsel for the plaintiff and the defendants jointly contended that the effect of a preliminary decree passed in the suit is confined to the parties to the suit and a third party or a intervenor cannot resist withdrawal of the suit by the plaintiff if the defendants have no objection to it. The contention of the learned counsel has not impressed me. If a defendant in a suit can resist withdrawal of suit of plaintiff on the ground that a preliminary decree has been passed in the case which has the effect of determining rights of parties and fixing future course of conduct of the proceedings, 1 see no reason why a third party in whose. favour aright is. created under the preliminary decree cannot resist withdrawal of suit by the plaintiff, if such an action would result in destroying the rights lawfully acquired by him. In the case before me' it is an admitted position that the property in dispute was ordered to be sold through the Administrator appointed in the suit under the preliminary decree and the sale in favour of late Mst. Atia Begum was confirmed by the Court as late as 28th October, 1974. An earlier attempt by the plaintiff and the defendants in the suit to get the order of confirmation of sale set aside by means of an application under Order XXIII, rule 2, C.P.C. filed before the Court failed and the order passed by a learned single Judge of this Court in this regard was upheld by the Supreme Court. In these circumstances, I am of the view that the plaintiff and defendants cannot nullify the rights acquired by late Mst. Atia Begum by confirmation of the sale of property in her favour under preliminary decree passed in the suit by withdrawing the suit now. I, therefore, find no hesitation in rejecting the application under Order XXIII, rule 1 C.P.C. filed by the plaintiff."

11. From, the above‑cited cases, it seems that the suits for dissolution of partnership and for rendition of accounts interest between the partners stand on different footings from other suits like that of declaration and permanent injunction inasmuch as in the former cast each of the parties is a plaintiff and defendant, whereas in the latter case it is not so. In the instant case, though the appellant/ defendant No.24 and defendants Nos.25 to 34 were not the partners in the firm and were the assignees of tent annas share in the firm. but their position had become akin to that of a partner upon the dissolution of the partnership on 19‑9‑1978 or. the expiry of thirty years period as they had become entitled to ten annas share in the assets of the firm and for that purpose to ask for accounts from the date of dissolution. We are inclined to hold that the principle of law enunciated in the above‑cited Bombay cases is applicable to the present case. The cases cited by hr. Shafaat Hussain are distinguishable inasmuch as in the aforesaid Lahore case, it was pointed out by Anwarul Haq, C.J., that the Lyallpur Municipal Committee was in fact attempting to change the nature of the Constitutional Petition by bringing in a matter foreign to the controversy in the petition, whereas in the above Karachi case, Dorab Patel, J. (as he then was) was of the view that the withdrawal of the suit was in the interest of the Company in respect of which the suit was filed and the question, whether the withdrawal of the suit would prejudice any party, was not involved. In the above Karachi case of Amjad Rashid Khan Malik, Saeeduzzaman Siddiqui, J., in fact declined the application under Order XXIII, rule 1, C.P.C. as he was of the view that it would nullify a preliminary decree already passed under which a third party had acquired some right.

12. In our view, the application which was filed by respondents Nos.l and 2 for the withdrawal of the suit was not bona fide as it intended to deprive the appellant and defendants Nos.25 to 34 their ten annas share in the assets of the firm by allegedly entering into new partnership inter se between tile persons holding only six annas interest out of a rupee. The above suit remained pending for about I a decade and the respondent No.l, who was appointed as the Receiver about a decade back with the object to wind up the firm and to dispose of the assets thereof and to distribute the sale proceeds thereof, among the persons entitled to the same, instead of complying with the above Court order dated 1?‑4‑1979, attempted to retain the assets by the mechanism of filing of the aforesaid application under Order XXIII, rule 1, C.P.C. We are inclined to hold that though under Order Xxltt, rule 1, C.P.C. a plaintiff has the right to withdraw the soft, if he is not seeking the permission to file A fresh suit on the same cause of action but the Court can decline such an application in a suit, where all the parties are treated as plaintiffs and defendants for the purpose of grant of relief or in a case where the grant of the same, would perpetuate injustice or fraud. 13, For the aforesaid reasons, we allow the above appeal and set aside the above order and dismiss respondents Nos.l and Z's above application (C.:N.A.No.6079 of 1986) and allow appellant's above application (C.M.A.No.4802 of 1986) to the extent of transposing the appellant as plaintiff and respondents Nos.l and 2 as defendants. The appeal stands disposed of in the above terms with so order as to costs. M. B.A./R-55/K Appeal allowed.