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PETITIONER: PREM BALLABH KHULBE

       Vs.

RESPONDENT: MATHURA DATT BHATT

DATE OF JUDGMENT: 16/12/1966

BENCH: BACHAWAT, R.S. BENCH: BACHAWAT, R.S. WANCHOO, K.N. SHELAT, J.M.

CITATION:  1967 AIR 1342            1967 SCR  (2) 298

ACT:     Code of  Civil Procedure (Act 5 of 1908), cl. (c) of the proviso to s. 51--Partners--If in fiduciary relationship.

HEADNOTE:     The  partnership business carried on by  the  appellant, respondent  and  two others was  dissolved.   The  appellant obtained  a  final  decree  for  certain  sums  against  the respondent, who was the managing partner of the  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  High  Court set aside  this  order.   On appeal, this Court. 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 to them in a fiduciary  capacity. [300 D] 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 or proved.  The  facts  did not  disclose  that the decree was for a sum for  which  the respondent  was  bound to account in a  fiduciary  capacity. [300 E] Piddocke  v.  Burt, Chitty, [1894] 1 Ch. 343,  Rodriquez  v. Speyer  Brothers,  [1919]  A.C. 59,  Bhuban  Mohan  Rana  v. Surender  Mohan  Das,  I.L.R. [1952] 2 Cal.  123  and  Velji Raghavji Patel v. State of Maharashtra [1965] 2 S.C.R.  429, approved.

JUDGMENT: CIVIL APPELLATE JURISDICTION : Civil Appeal No. 615 of 1964. Appeal  from the judgment and decree dated March 3, 1960  of the  Allahabad High Court in Execution First Appeal No.  332 of 1956.

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C.   B. Agarwala and K. P. Gupta for the appellant. S.   G. Patwardhan, Yashpal Singh and M. S. Gupta for the respondent. The Judgment of the Court was delivered by Bachawat,  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                             299 was  passed in the suit in favour of the  appellant  against the  respondent for Rs. 1 7,143 /1 I /0 and Rs. 3,171 /6  as on  account of costs The appellant applied for execution  of the  decree  by arrest and detention of  the  respondent  in prison.   In this affidavit in support of  the  application, the  appellant relied upon the grounds mentioned in  clauses (a)  and  (b) of the proviso to s. 51 of the Code  of  Civil Procedure  1908.   At the hearing of the  application  those grounds  were  not pressed but his counsel relied  upon  the ground  mentioned in cl. (c) of the proviso.  By cl. (c)  of the  proviso  to  s. 51, the court  is  empowered  to  order execution  of  a money decree by detention of  the  judgment debtor in prison if it is satisfied "that the decree is  for a  sum  for  which  the judgment  debtor  was  bound  in  a, fiduciary  capacity to account".  The executing  court  held that  the provisions of cl. (c) were satisfied and issued  a warrant  for the arrest of the respondent.  On  appeal,  the High  Court of Allahabad, set aside this order.  The  decree holder now appeals to this court under a certificate granted by the High Court. On behalf of the appellant our attention was drawn to 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  the 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. On the question whether a fiduciary relation exists between, the  partners, the law is stated thus in Halsbury’s Laws  of England 3rd Edition, Vol. 38, art. 1363, p. 820 :                "Partnership   itself  does  not   create   a               fiduciary  relation  between the  partners  or               make  one of them a trustee 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. In  Piddocke  v. Burt. (1) Chitty, J. held  that  a  partner failing  to pay moneys in his hands and 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 a partner receiving money on account               of  the  partnership-that  is,  on  behalf  of               himself and his co-partners-               (1) [1894] 1 ch. 343 300                received  it in a fiduciary capacity  towards

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             the  other  partners.   The  law  allows   one               partner-one  of  several  joint   creditors-to               receive the whole debt on account of the  firm               to  whom  it  is  due,  and  I  am  unable  to               recognise   any  such  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               partner over-drawing the partnership  account;               because  if  this distinction  were  true,  it               would  apply to every case where  one  partner               wrongly over draws the partnership account." This decision was approved of by Lord Atkinson in  Rodriguez v.   Speyer  Brothers,(1)  and by Harries, C. J.  in  Bhuban Mohan Rana v.  Surender Mohan Das.(2) The last case received the  approval observe the utmost good faith in his  dealings with the other partners.  He is bound to render accounts  of the partnership assets in his hands.  But in the absence  of special  circumstances  he cannot be regarded as a  kind  of trustee for the other partners or liable to render  accounts to them in a fiduciary capacity. In the present case, the respondent as the 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. The appeal is dismissed.  There will be no order as to costs. Y.P.                             Appeal dismissed. (1) [1919] A.C. 9,59 89. (2)  I.L.R. 1952 (2) Cal. 23. (3)  [1965] 2 S.C.R. 429. 301