P L D 1956 Sind 84 (PLP)

MUHAMMAD BACHAL, C. J.‑In response to the notices issued by this Court to show cause why Contempt of Court proceedings may not be taken against the 19 opponents who happen to be the practising advocates of Sukkur District, they have appeared before us and filed affidavits showing that they had not committed any contempt of Court as they had no knowledge about the pending contempt proceedings in this Court initiated on 12th July 1955, three days before they passed the resolution at Sukkur. We have heard the learned Advocate‑General and the opponents' advocate Mr. Tufail Ali. At the very outset we may state that the learned Advocate‑General has not been able to point out any authority to support the contention that the mere pendency of proceedings in Court about which some comment may have been made would amount to contempt of the Court, though the opponents have no knowledge about the pendency of the proceedings. On the other hand, Mr. Tufail Ali for the opponents has relied on the case of Emperor v. Mahashe Khushal Chand and another (A I R (1945) Lah. 206) in support of his contention that in the absence of knowledge about the pendency of proceedings about which some comment may have been made, the opponents cannot be held to be guilty of contempt of the Court. In the present case we are satisfied after perusing the affidavits filed by the opponents‑advocates that they had no knowledge about the contempt of Court proceedings initiated on 12th July 1955. We accept this plea in view of the fact that being advocates they would not have committed contempt of Court by passing a .resolution about a matter pending in this Court. We are satisfied that in the circumstances of the present case the opponents have not committed any contempt of Court. The rule is therefore discharged. A. H. Rule discharged. P L D 1956 Sind 85 (Original Civil Jurisdiction) Before Inamullah, J OMAR‑Plaintiff Versus Haji RAZZAK and another‑Defendants Suit No. 144 of 1953, application for appointment of receiver decided on 28th January 1955. (a) Partnership Act (IX of 1932)

S. 4‑Partnership comes into existence as soon as something is done which may be taken as commencement of business‑Deed of partnership not necessary. The object of a business is not to be confused with its commencement. The business of manufacturing hosiery, for instance, commences when the partners raise money to place order for machinery, acquire a plot of land and construct a building to instal the machinery. The actual production of hosiery and subsequent sale in the market is only the final step in carrying on the business. The various things necessary to achieve the object of the business are includ ed in the words " a business carried on" occurring in section 4 of the Partnership Act. Moreover, what is necessary is, the carrying on of the business, and not the execution of a deed of partnership. Lakshmishankar Devshankar v. Motiram Vishuram etc. 6 Bom. L R 1106 and R. R. Sarna v. Reuben, A I R 1946 Oudh 68 ref. (b) Civil Procedure Code (V of 1908)

O. XL, r. 1

Partnership property‑Court will appoint a receiver if defend ant unsuccessfully denies that plaintiff is a partner‑Defend ant partner may be appointed a receiver. Where the defendant unsuccessfully denies the plaintiff to be a partner, the Court will appoint a receiver, although such unsuccessful denial does not amount to misconduct which may be said to jeo-pardise the interests of the firm. Lindlay on Partnership, 11th Edition, p.

650. The defendant partner can be appointed a receiver if it is for the benefit of the firm provided the defendant is such misconduct as would jeopardise the concern. Kerr on Receivers, 12th Ed. p.

119. A. Aziz for Plaintiff. Waheed‑ud‑Din for Defendants. ORDER INAMULLAH, J.‑This is an application for the appoint ment of a Receiver of a partnership concern. Muhammad Bakhsh J. passed the following order on 12th February 1953 " Nazir appointed Interim Receiver to get the machinery cleared and to take possession thereof, and to take posses sion of the plot in question with notice ". Thereafter, on the application moved by defendant 1, the following order was passed by Bachal J., on February 24, 1953 " Mr. Waheed‑ud‑Din and Mr. Usman undertake to furnish security for Rs. 65,000 and also to clear the machinery within month and instal it on the land given on lease to defendant (1). If security is furnished for Rs. 65,000, further proceedings to stay. Nazir is informed personally who would hand over land to defend ants after they furnish security. Notice to other side". The defendant 1 has furnished the security as ordered and it appears that he has installed the machinery in question. The application arises under the following circumstances :‑ An agreement to carry on the business under the name and style of " Pyramid Industries " was entered into between the plaintiff and the defendants. It is contended by the plaintiff that, by virtue of this agreement, the plaintiff took possession of the plot of land from defendant 1 on behalf of Pyramid Industries and paid certain amount of money to defendant

1. It is also contended by the plaintiff that he started negotiation with a firm in Japan to purchase the machinery in question. He did so far and on behalf of Pyramid Industries. The reason to have defendant 1 as a partner of the firm was that it was the defendant 1 who had taken permission of the Ministry of Industries for setting up a hosiery factory at Karachi. As a result of the correspondence between the plaintiff and a firm in Japan, the hosiery machinery arrived November, 1952. On the request of the defendants, the plaintiff advanced a sum of Rs. 50 thousand towards the partnership fund for retiring documents of the said machinery. The documents could be retired by the defendant 1 alone as, the same were in his name. The defendant 1, as already mentioned, alone had the permission from the Government to establish a hosiery factory. The plaintiff contended that he had in all invested Rs. 65 thousand towards the partnership concern. It is alleged by the plaintiff that the defendants did not want to abide by the terms of the agreement and refused to deliver the documents and failed to contribute any money towards the partnership fund. As a result of these differences, the plaintiff was obliged to serve a notice to dissolve the partnership on February 10, 1953. On the facts disclosed above, the plaintiff has asked for a declaration that the partnership stands dissolved with effect from February 10, 1953 and that a preliminary decree be passed for accounts of the partnership. Mr. Waheed‑ud‑Din, the learned advocate for the defendants, has raised 5‑fold contentions before me :‑ (1) The document relied upon is not the partnership deed but only an agreement to enter into partnership ; (2) That the agreement was only executory and not final ; (3) Even if partnership existed, no business was carried on by the firm (4) The property viz.,, the plot of land and the machinery purchased by the defendants did not belong to the concern and therefore, no Receiver could be appointed of the same ; and lastly (5) The suit for dissolution of partnership was not maintainable. The plaintiff should have filed a suit for specific performance and damage. It would appear from the above contentions raised by the learned advocate for the defendants that they are inter related and depend upon the existence or non‑existence of certain common facts and circumstances. I would therefore dispose of all these points together. They are inter‑linked in the sense that if my finding is that prima facie partner ship has been proved, the question regarding contention No. 2 is disposed of against the defendant and it would follow that the agreement was not only executory but was final. The point No. 3 would also be disposed of as with out the commencement of any business, no partnership could exist. If once it is held that partnership exists, points No. 4 and No. 5 are also disposed of in so far that the machinery would be the property of the firm and the question of suing for specific performance and damages would also not arise. I would now consider the points raised by the learned advocate for the defendants. The deed, dated July 16,1952 is no doubt an agreement to enter into partnership. It is not a partnership deed. The main question for determi nation would be : whether this agreement to partnership was given effect to or not ? It was held in the case of Lakshmishankar Devshankar v. Motiram Vishuram etc., (6 Bom, L R 1106) relied upon by Mr. Aziz, the learned advocate for the plain tiff, that ; " In order to give rise to the relationship of partner ship what is necessary is the carrying on the business and not the execution of the deed of partnership. The delay in executing a formal deed of partnership is immaterial ". In the present case therefore, what has to be seen is whether a partnership within the meaning of Partnership Act had come into being or not. The real question would be: whether the business was carried on by all the partners or any one of them acting for all. The main contention of Mr. Waheed‑ud‑Din was that no business having commenced, the partnership did not come into being within the meaning of the Partnership Act. Mr. Waheed‑ud‑Din relied on the case of R. R. Sarna v. Reuben (A I R 1946 Oudh 68). It was held in that case that " What is essential to constitute partnership within the meaning of section 4, is the actual existence of a busi ness carried on by the partners with an agreement to share the profits of such business. Thus the agreement must be to carry on business by way of a present partner ship. An agreement to carry on business from a future date will not result in partnership until that date arrives, unless the parties choose to commence business before that date. It may not always be easy to determine at what stage a business comes into existence, but that is a question of fact to be determined by the circumstances of each case. But so long as the business does not come into existence or something is not done which may be taken as the commencement of, the business, there can be no partnership". I respectfully agree with these observations. The question is, as held above whether anything was done which may be taken to be commenced of the business. In this connec tion, section 4 of the Partnership Act requires considera tion which runs as under: " Partnership is the relation between persons who have agreed to share the profits of a business carried on by all or any of them acting for all ". The main words that require consideration in section 4 of the. Partnership Act are " A business carried on by all or any of them acting for all ". These words, in my opinion, must be given liberal interpretation so as to give effect to what actually takes place when a firm is established. In order that the partners of the firm may be able to share the profits of a business they have to do a number of things. All these various things would be included in the word " carrying on " of the business. I would illustrate my point by taking an example of a firm which has to commence the business of manufacturing cloth. The partners of the firm must, in the first place, raise money to place order for machinery. They must also obtain some plot for building the factory. After the machinery has been re ceived, that has to be fixed and a building for the same to be constructed. The factory has to be run before it starts manufacturing cloth. Lastly, the manufactured cloth will be put in the market for sale. In my opinion, all these various things done by the partners in order to put the cloth in the market to earn some profit, would be included in the words " a business carried on " or at any rate, the com mencement of the business. The object of them no doubt is to sell Cloth or as in the present case, to sell hosiery; but the object should not be confused with the com mencement of the business. Business in the limited sense may mean only the sale of the Cloth or hosiery but it cannot be carried on unless certain other things had also been done in order to bring about the sale. The words " a business carried on " in section 4 of the Partnership Act must be given an interpretation which is in favour of establishing the intention of the parties who have formed n a partnership to commence a business, by giving to their acts a meaning which is in favour of establishing partner ship so as to give rise to mutual rights and obligations. To give a limited meaning to " a business carried on " to mean only the sale of Cloth or hosiery in the market, would be doing violence to the conception of partnership. It is impossible to hold that pooling of money by different partners to purchase machinery, to buy a plot of land, to build a building, to install the machinery are not the acts of partnership towards the commencement of business. The question before me therefore is : whether anything was done by all the partners or any of them towards the commence ment of the business in the sense I have explained above. In the present case it was contended by Mr. Aziz, the learned advocate for the plaintiff, that the business of the concern had commenced. The plaintiff had paid Rs. 50 thousand towards the partnership assets for retiring the documents of the machinery to be installed for producing hosiery. It was also contended by the plaintiff that he had carried on the correspondence on behalf of the firm with the exporters in Japan. It was only as a result of this negotiation by the plaintiff that the order was placed for importing the machinery in question from Japan. It was also contended by the learned advocate for the plaintiffs, that a joint account had been opened in the firm's name " Pyramid Industries ". So far as the question of payment of Rs. 50 thousand by the plaintiff towards the assets of the firm is concerned, Mr. Waheed‑ud‑Din, the learned advocate for the defendants, had pointed out certain dis crepancies from which he wanted me to conclude that the plaintiff has not paid any amount towards the partnership assets. The discrepancies were based on the contents of the plaint filed by the plaintiff and the affidavit filed by him. It was, for instance, contended by Mr. Waheed‑ud‑Din that in para. 5 of the plaint, the plaintiff has stated that the defendants had no money and therefore he paid Rs. 50 thousand for retiring the documents for the machinery; but it would appear that a cheque for Rs. 32 000 was in fact given by defendant

2. It was contended by Mr. Waheed‑ud‑Din that it was the defendant 2 who had given a bearer cheque to the defendant

1. On the other hand, it is denied by the plaintiff that this amount was paid by defendant 2 to defendant

1. It is contended by him that the defendant 2 had given this cheque for Rs. 32,000 towards a debt due to the plaintiff. The discrepancies pointed out by Mr. Waheed‑ud‑Din towards the payment of Rs. 50 thousand by the plaintiff have some force; but at this stage, I am not deciding the suit. All that I have to see is, whether on the affidavits filed by the parties and the documents before me a prima facie case for payment of Rs. 50 thousand is made out or not. In this connection I am much impressed by a receipt filed by the plaintiff purported to have been given by defendant 1 and which bears his signature. This receipt runs as under: "Received from Mr. Umar Haji Ayyub a sum of Rs. 50,000 ( Rupees fifty, thousand) only to meet and to pay off the approved amount of hosiery machinery arrived per S. S. Nankai Maru as per the invoice No. 2059, dated 5th October 1952 amounting to 4,

966. The bank memo and the documents will be handed over to you on receipt from the bank‑The above amount has been received by me in the following manner Rs. 32,000 a cheque drawn on the N. T. S. Bank Karachi. Rs. 18,000 in cash.

Rs. 50,000 Total. Dated this 11th day of December 1952. H. A. Razzak. The above receipt is on the form of the defendant

1. This is a very important document and if it is accepted to be genuine, the discrepancies pointed out by Mr. Waheed- ud‑Din will lose their significance. Though the signature on this document is denied at this stage, I am inclined to accept this document to be a genuine document. The defendant 1 no doubt has denied his signature on this docu ment but mere denial would not reduce this document to be a forged one. It was very easy for the defendant 1 to have sent the document to handwriting expert. The defend ant 1 had sufficient time to do so. I have compared the signature on this piece of document with the other signature of the defendant

1. I could not, on mere comparison of both the signatures, come to the conclusion that the signature on this receipt is a forgery. It was however open to the defendant 1 to have got this signature sent to a handwriting expert if he really wanted this Court to believe that the signature on the receipt is forgery. At present I am therefore, not inclined to discard the receipt which bears the signature of defendant

1. I hold that the plaintiff has prima facie been able to establish that he has advanced a sum of Rs. 50 thousand towards the assets of the firm. From the various documents filed by the plaintiff it is fully established that it was he who carried on the corres pondence with the Japan firm to supply the machinery 'in question. In fact the bill of lading filed by the defendant 1 would show that it bears the initial " P. I. " which‑ stands for Pyramid Industries" the name pf the firm. This fact goes to establish that the plaintiffs contention is correct that the business of the firm had commenced by negotiating for the purchase of the machinery and placing the order for the same which was also received arid that the bill of lading actually bears the mark " P. I. " which stands for the firm's name "Pyramid Industries ". Section 6 of the Partnership Act lays down the mode of determining the existence of Partnership. It runs as under: " In determining whether a group of persons is or is not a firm or 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". Keeping the above proposition of law in view, I have no doubt from what I have discussed above that the plaintiff has contributed 50 thousand rupees towards the capital of the firm and having negotiated and placed order for the purchase of the machinery as a partner in the firm of Pyramid Industries which had commenced its business though had not started the sale of hosiery. So far as the machinery is concerned, I have no doubt that in view of the finding that I have given above that the plaintiff has contributed the money for its purchase, the machinery will belong to the firm. Under section 14 of the Partnership Act, 1932: "Property and rights and interests in property acquired with money belonging to the firm are deemed to have been acquired for the firm". The question before me now is, whether the case for the appointment of a receiver on the facts disclosed above has been made out or not? In this connection the follow ing paragraphs from the commentary of " Lindlay on Partnership " 11th Edition at page 650 would be helpful: "Moreover, even though there be no misconduct jeopardizing the partnership assets, the Court will appoint a Receiver if the defendant wrongfully excludes his co partner from the management of the partnership affairs. This doctrine is acted on where the defendant unsuc cessfully contends that the plaintiff is not a partner or that he has no interest in the partnership assets ". Two things are clear from the above : (1) The denial by the defendant that the plaintiff is not a partner, is not tantamount to misconduct jeopardising the partnership assets ; and (2) where the defendant unsuccessfully denies the plain tiff to be a partner, the Court will appoint a Receiver. In the present case, I have already found that the plaintiff is prima facie a partner 'in the concern. The plaintiff no doubt has not contended before me any misconduct on the part of the defendants which may be said to jeopardise the partnership assets, e.g., the defendants were to collude with the debtors of the firm so as to allow them to delay paying their debts ; or carries on trade on his own account with the partnership property. From what I have discussed above an view of the rule of practice enunciated above, I am satisfied that a case for the appointment of a Receiver has been made out. The next question is, who should be appointed Receiver ? I have given my careful consideration to this question and I have come to the conclusion in the interest of the part nership concern that the defendant 1 should be appointed the Receiver of the concern. In this connection the following passage at page 119 from " Kerr on Receivers " 12th Edition is noteworthy. It runs as under : " The appointment of a party as Receiver without the consent of the other parties is most frequently made in partnership cases, because in such cases it is likely to be for the benefit of the estate: if 'the partner actually carrying on the business has not been guilty of such misconduct as‑ to have rendered it unsafe to trust him, the Court sometimes appoints him Receiver and Manager with or without salary according to circumstances. It is usual, however, to require him to give security duly to manage the partnership affairs and to account for moneys received by him ". It would appear from the above that the defendant can be appointed a Receiver and Manager if it is for the benefit of the firm provided the defendant is not guilty of such mis conduct as would jeopardise the concern. I am satisfied that it would be for the benefit of the concern if defend ant 1 is appointed as Receiver and Manager. It is admitted by the plaintiff that the defendant 1 has been granted licence by the Government to manufacture hosiery. It is the defen dant 1 who would also be able to get the benefit of the licence and also other facilities from the Government. No other party will get the same facilities by way of importing raw material and other things for the running of the factory as the defendant

1. So far as the question of misconduct is concerned, there is nothing on the record to show that the defendant 1 has committed any act of misconduct so as to jeopardise the interest of the concern It would appear from the quotation from Lindlay which I have already reproduced above, that mere unsuccessful denial of partnership of the plaintiff would not tantamount to mis conduct which can be said to jeopardise the interest of the concern. I would, for the reasons set forth above, appoint the defendant 1 as Receiver and Manager of the concern. He has already furnished a security for the amount that was alleged to have been paid by the plaintiff towards the assets of the concern. It is not necessary to call for any further security from the defendant

1. The plaintiff, by the appoint ment of defendant 1 as Receiver and Manager cannot in any way suffer as his interests are amply safe‑guarded by asking him to furnish the security. A. H. Receiver appointed.