Ketan A.Shah v. Yashwant Hiralal Veecumsee & Ors.

IN THE HIGH COURT OF JUDICATURE AT MADRAS DATE : 24.01.2008CORAMTHE HONOURABLE MR. JUSTICE S.J.MUKHOPADHAYAANDTHE HONOURABLE MR. JUSTICE M.VENUGOPALO.S.A. NOS. 99 & 348 OF 2000O.S.A. No.99 of 2000Ketan A.Shah.. Appellant/Applicant - Vs -1.Yashwant Hiralal Veecumsee (deceased)2. Devendrakumar Hiralal Veecumesee3. Mahendrakumar Hiralal Veecumesee4. Deepak Biharilal Adalja5. Keshavlal M.Jogani6. Bhuralal M.Jogani7. Udayan R.Shah8. Mrs. Vijayalakshmi Shantilal Mehta9. Mrs. Sandhya Harshadrai Shah10. Mr. Sarala C.Shah11. Mrs. Prabhavathi K.Shah12. Mrs. Nirmala Kumari Bethala13. Aswinkumar H.Shah14. Mrs. Susila chemanlal Shah15. Mrs. Chandan Lavchand Shah16. Mrs. Nirmala Dinesh Chandra Shah17. Mrs. Vasanthi Devendra Shah18. Mrs. Ushakumari Bethala19. Mrs. Hansa Yeshwant Veecumsee20. Mrs. Mitesh Yeshwant Veecumsee21. Vikesh Yeshwant Veecumsee22. Mrs. Rupal Mayur Chelani.. RespondentsO.S.A. No. 348 of 20001. Deepak Biharilal Adalja2. Bhuralal M.Jogani3. Udayan R.Shah4. Mrs. Sandhya Harshadrai Shah5. Aswinkumar H.Shah6. Mrs. Ushakumari Bethala.. Appellants- Vs - https://hcservices.ecourts.gov.in/hcservices/

1. Devendrakumar Hiralal Veecumesee2. Mahendrakumar Hiralal Veecumesee3. Keshavlal M.Jogani4. Mrs. Vijayalakshmi Shantilal Mehta5. Mr. Sarala C.Shah6. Mrs. Prabhavathi K.Shah7 . Mrs. Nirmala Kumari Bethala8. Mrs. Susila Chemanlal Shah9. Mrs. Chandan Lavchand Shah10. Mrs. Nirmala Dinesh Chandra Shah11. Mrs. Vasanthi Devendra Shah12. Mrs. Hansa Yeshwant Veecumsee13. Mrs. Mitesh Yeshwant Veecumsee14. Vikesh Yeshwant Veecumsee15. Mrs. Rupal Mayur Chelani16. Ketan A.Shah.. RespondentsAppeals filed against the order dated 22nd Feb., 2000, passed bylearned single Judge in Application No.6917/93 in C.S. No.577/82 asstated therein.For Appellants: Mr. L.Joseph for M/s.Surana & Surana in OSA 99/00 Mr. Tohera Murfaya for Mr.C.Gopalakrishnan in OSA 348/00For Respondents: Mr. K.Ramu for R-1 in OSA 99/00 Mr. P.Rajamanickam for R-2 in OSA 99/00 Mr. T.R.Rajagopalan, SC, for M/s.K.Banumathy for RR-18 to 21 in OSA 99/00 Mr.Tohera Murfaya for Mr.C.Gopalakrishnan for RR-3, 5, 6, 8, 12 & 17 in OSA 99/00 Mr. K.Mani for R-7 in OSA 348/00 Mr. P.Rajamanickam for R-2 in OSA 348/00 Mr. T.R.Rajagopalan, SC, for M/s.K.Banumathy for RR-12 to 15 in OSA 348/00 Mr. L.Joseph for M/s.Surana & Surana for R-16 in OSA 348/00COMMON JUDGMENTS.J.MUKHOPADHAYA, J.Both the appeals have been preferred by appellants against orderdated 22nd Feb., 2000, passed by learned Judge in ApplicationNo.6917/93 in C.S. No.577/82. They were heard together and disposedof by this common judgment. https://hcservices.ecourts.gov.in/hcservices/

2. The plaintiff, Ketan A.Shah, appellant in O.S.A. No.99/00preferred the suit for declaration that the partnership firm'Sapphire' of which he is partner shall be deemed to have beendissolved with effect from 27th Feb., 1982 and also for rendition ofaccounts of the firm upto dissolution and also for consequentialrelief of allotment of plaintiff's share and profit. In the saidsuit, a preliminary decree was passed on 3rd July, 1989, whereinafterapplication No.6917/93 was filed by plaintiff to pass a final decreein pursuance of the preliminary decree.3. The plaintiff, who was the applicant was in fact appointed asReceiver by order made by Bench on 23rd Aug., 1989 and he took chargeof the properties of the firm. Receiver filed application Nos.6915and 6916/93 seeking for a direction to the defendants to co-operatewith the auditors and to furnish accounts and also for permitting theapplicant to sell the property of the firm. By an order dated 11thApril, 1994, the Court allowed those applications giving direction tothe partner to co-operate with the auditors in preparation of finalaudited report and also permitted the Receiver to sell the property ofthe partnership firm, namely, the building situated in Anna Salai,Madras.It is pursuant to a direction of Division Bench in O.S.A. Nos.168to 170/94, the offers made by intending purchasers were placed beforethe Bench, which accepted the highest offer made by the JointSecretary of a political party and the Receiver was directed to sellthe property to the said party for a sale consideration ofRs.6,12,00,000/=. Time was granted till 16th Sept., 1994 for thepurchaser to deposit the amount and to get the sale deed executed bythe Receiver. The highest bidder deposited the amount with theReceiver and sale deed in respect of building bearing Door No.614,Anna Salai, Madras, was executed by the Receiver in favour of theJoint Secretary of the political party, which was the highest bidder.The auditors, in the meantime, filed their report and the 3rd defendantfiled objection to the final report of the auditor.The objections filed by some of the defendants were dealt with bythe Court and they were allowed to peruse the record and otherdocuments available with the Receiver and auditor and to submit theirobjections. Sale proceeds of the partnership firm, 'Sapphire' withall its goodwill was deposited with the Court and other amounts wereaccounted for by the Receiver enabling the Court to come to the stageof passing the final decree by allotment of shares and profit due tothe partners in accordance with shares held by them. The Courtnoticed the share of the partners as given in the annexure in thepreliminary decree and the report submitted by the auditor.4. While submitting the report, the auditors had charged interestat 18% p.a., for certain amount overdrawn by defendants 2 to 4 andtheir father, who were in management of the theatres run by thepartnership firm. The auditor had stated, which was also not https://hcservices.ecourts.gov.in/hcservices/ disputed, that the total amount withdrawn by defendants 2 to 4 andtheir father is Rs.9,97,855/= belonging to the partnership firm. Theauditor calculated the interest at the abovesaid rate and charged onthose defendants, which comes to total Rs.14,79,596.09.The auditor having taken into consideration of the relevant factsand services rendered by the Receiver, provided a sum ofRs.24,48,000/= for payment of fee towards the services rendered by theReceiver. The amount was worked out by charging a fee of 4% on thesale price of Rs.6,12,00,000/=. The auditor also provided a sum ofRs.24 lakhs for meeting out the contingent liabilities, which was saidto have been set apart in the hands of the Receiver to meet anyliability that may arise in future. The report of the auditor alsorevealed that a sum of Rs.3 lakhs had been paid to the advocate,M/s.Surana & Surana by the Receiver towards its fee on 10th Dec., 1994.The auditor, therefore, provided a further sum of Rs.4,75,000/= forfurther payment to the advocate for the Receiver. The accountsubmitted by the auditor further shows that a sum of Rs.2,40,000/= hadalready been paid to the advocate of the Receiver between 28th March,1990 to 16th March, 1994. So the auditors report has provided a totalsum of Rs.10,15,000/= for payment towards fee for advocate for theReceiver. The amount that has been realised from Receiver fromrunning the theatre, which was running till August, 1994, was statedto be Rs.2,05,48,050/=. The amount derived by selling the building ofthe partnership firm was Rs.6,12,00,000/=.5. The applicant and defendants made their submissions withregard to the division of the assets of the partnership firm anddistribution of shares and assets to the partners at the time ofpassing of final decree.6. On behalf of the Receiver prayer was made to accept theauditors report for payment in his favour. It was also contended onbehalf of the Receiver that overdrawal of the amount done bydefendants 2 to 4 and their father to the tune of Rs.9,97,855/=, whichcomes to Rs.14,79,596.09 alongwith interest at the rate of 18% p.a.,as calculated by the auditor must be charged as per recommendation ofthe auditor and the said amount must be realised from those defendantsto be made available among the partners for disbursement.The proposal for levying interest, that too at the rate of 18%suggested by the auditor was opposed by defendants 2 to 4. Accordingto them, they are the promoters of the partnership firm along withtheir father and they had contributed initially some amount, which wasmade available for the partnership firm for running the business andwhile the partnership firm has been benefited by such generosity onthe part of defendants 2 to 4 and their father, it was not proper tocharge interest for overdrawing done by them.The Receiver, i.e., the plaintiff (appellant herein), vehementlycontended before the trial court that the amount having overdrawn by https://hcservices.ecourts.gov.in/hcservices/ defendants 2 to 4 and their father, belong to the partnership firm andwas so overdrawn without the knowledge of other partners. Therefore,they must pay interest for the overdrawn amount. Parties relied onone or other decision in support of their claim.7. By impugned order dated 22nd Feb., 2000, learned Judge havingnoticed different decisions rendered by courts and in absence of anyprovision for charging interest for any amount overdrawn by thepartner, accepted the submission made on behalf of defendants 2 to 4that no interest is allowable for overdrawal of funds made bydefendants 2 to 4 and their father, while the partnership firm was agoing concern. Therefore, the auditor's report charging interest at18% for the amount overdrawn by them was not accepted and such part ofthe auditor's report was rejected.So far as the question of payment of remuneration of the Receiverfor the services rendered by him is concerned, defendants 2 to 4objected the claim. Learned Judge noticed that for service renderedby the Receiver for conducting the sale and realising the sale amount,the auditor has provided remuneration @ 4% of the sale price, whichcomes to Rs.24,48,000/=, but in view of the objection made by thedefendants and other grounds as shown in the order, remuneration ofthe Receiver was fixed to the extent of Rs.1,25,000/= and further sumof Rs.75,000/= was fixed as remuneration for running the theatre forthe period of five years. So far as the advocate's fee is concerned,similar objection was made on behalf of defendants 2 to 4 that theauditor's recommendation should not be accepted, but in the case ofadvocate's fee, learned Judge allowed a sum of Rs.6,12,000/= in favourof the advocate.8. The grievance of the appellant/plaintiff Receiver is two fold– (i) with regard to interest at the rate of 18% not charged ondefendants 2 to 4 and their father as per report of the Receiver; and(ii) with regard to remuneration of Receiver. Apart from thesubmission as was made before trial court, it was contended that theCourt, almost in all cases allow 4% of the sale proceeds as Receiver'sfee.Learned counsel for the appellant further submitted that theReceiver having performed all the duties which he was supposed toperform and in absence of any failure, there was no occasion for thelearned Judge to curtail any amount from the fee as was recommended bythe auditor.Counsel appearing on behalf of the 1st respondent/2nd defendant,made similar argument as was advanced before the trial court, suchargument was adopted by learned counsel appearing on behalf of the 2ndrespondent/4th defendant and 7th respondent/9th defendant.9. We have heard the parties, noticed the rival contentions andthe judgments referred to by one or other party. https://hcservices.ecourts.gov.in/hcservices/

10. Payment of interest on the money drawn by a partner from a partnership fund :Similar matter fell for consideration before a Bench of thisCourt in Uma Maheswara Mudaly & Ors. - Vs – Muniswami Mudali & Ors.reported in AIR 1926 Madras 642, wherein the Court held that it is notthe practice to allow interest on money drawn by a partner from apartnership firm, be it capital or interest, unless it is so providedin the deed.In Suleman & Anr. - Vs – Abdul Latif & Ors. reported in AIR 1930PC 185, Privy Council noticed that it was a matter in which an actionwas taken to dissolve and to wind up the affairs of a partnershipfirm. Until the accounts have been taken it was impossible to saywhether if anything is due from any partner to his co-partners. TheCourt held that interest should be allowed only from the date of finaldecree by which the amount, if any, is found due from the defendant tothe plaintiff.Similar was the view of this Court in the case of PallaVeeraswami & Anr. - Vs – Bandaru Chitti Naidu & Ors. reported in AIR1948 Madras 231.. In the said case, this Court held that "usuallycourts allow interest only in exceptional circumstances where there isan express or implied agreement to that effect or that a partnerwrongfully withholds money or a partnership business and makes secretprofit in breach of his duty to other partners or where some partnershave overdrawn money from partnership fund and have established otherbusiness with that money and have made large profits. In such cases,they are not only bound to account for the profits made in the otherbusiness, but are chargeable with interest on the money so overdrawn".In another case of Vincent Antony Jabamalai Fernando & Ors. - Vs– S.A.Thomas Fernando & Ors. reported in ARI 1978 Madras 90, the Courtheld that in a suit for settlement of account of a dissolved firm,interest could be allowed from the date of plaint.11. In the present case, it has not been brought on record thatthere is a partnership deed for charging interest for any amountoverdrawn by a partner. The plaintiff failed to bring on record anyevidence to suggest that any practice was in vogue that in case apartner overdrawn some amount from the partnership firm, he is liableto pay interest. In view of the aforesaid fact and the decisionsrendered by this Court, if learned single Judge rejected the auditor'srecommendation in regard to payment of 18% interest on the amountoverdrawn by defendants 2 to 4, no interference is called for againstsuch part of the order.11. Remuneration to Receiver :Learned Judge disallowed the report of auditor so far as https://hcservices.ecourts.gov.in/hcservices/ remuneration of Receiver is concerned, which was calculated @t 4% ofthe sale proceeds for the ground mentioned in paragraph 29, and quotedhereunder :-"29. In the report submitted by the Auditor, theremuneration of the Receiver has been calculated at 4%out of the sale proceeds of the theatre building. Thesale has been actually conducted by the court throughthe Receiver and the Receiver has only causedadvertisement in newspapers calling for tenders andall the sealed tenders from the prospective purchaserswere placed by the Receiver before the Court and itwas the Court which finally decided that theproperties shall be sold to the General Secretary ofAIADMK who has offered the highest price ofRs.6,12,00,000/=. In this respect, the learnedcounsel appearing for the Receiver would draw myattention to the Original Side Rules of the HighCourt, Madras, according to which the Court may grantupto 7% of the realised amount to the Receiver. But,the remuneration has to be only paid in accordancewith the efforts made by the Receiver, the servicesrendered by him and the labour which has beenextracted from the Receiver. So far as the sale ofthe building is concerned, the Receiver has notconducted the negotiations, he has not met the partiesconcerned and it was not with the efforts of theReceiver the property was sold. The mode of sale ofproperty was by calling for public tenders and theReceiver has not contributed his labour or serviceand, therefore, if we were to pay the Receiver at therate of 4% which may be permissible to a commissionagent or broker, this alone will come to more thanRs.24 lakhs which is totally not warranted. TheReceiver is only an instrument in the hands of thecourt and the court has decided the mode of conductingsale, calling of tenders and accepting the highest bidand only by the direction issued by the court no doubtthe sale deed was executed by the Receiver.Therefore, towards the sale of the property for theservices rendered by the Receiver, he shall beentitled to a sum of Rs.1,25,000/= as remuneration.So, towards the services rendered, the Receiver isentitled to Rs.1,25,000/= and Rs.75,000/= which is tobe paid to him as remuneration for running the theatrefor five years. The Receiver is entitled to only thisremuneration and he cannot be paid in excess. So,towards remuneration, the Receiver is entitled only tothis amount."The other ground taken by learned Judge to allow only a sum of https://hcservices.ecourts.gov.in/hcservices/ Rs.1,25,000/= as remuneration is that it is the discretion of theCourt, which has to determine and fix the amount of remuneration to bepaid for the service rendered by the Receiver.12. Order XL deals with 'Payment to Receiver'. Order XL Rule 2relates to remuneration, whereas Rule 3 and 4 relates to duties andenforcement of Receiver's duties, where Receiver fails to perform anyone or other duty as shown therein.In the present case, there is nothing on the record to suggestthat the Receiver failed to perform any duty. Learned Judge has takenplea that the sale has actually been conducted by the Court throughthe Receiver, but we are of the view that such observation ismisconceived because the Receiver appointed by court cannot sell anyproperty of his own without the order of the Court concerned. Otherground taken is that the property was sold to the party, who gave thehighest offer, which is also misconceived as the sale is always to bemade in favour of highest bidder, which has nothing to do with theremuneration of the Receiver.It is not in dispute that under the Original Side Rules of theHigh Court, Madras, the Court may grant remuneration to the Receiverupto 7% of the amount realised by the Receiver. We have noticed thatnormally 4% of the amount realised is allowed by the court as feepayable to the Receiver in normal course in majority of the cases.However, in some of the cases, lesser amount is allowed, but for thereasons as shown in such case. This is not a case of such nature todisallow 4% of amount realised as recommended by the auditor. Therespondents also fail to show as to why any amount lesser than theamount recommended by auditor be allowed in favour of the Receiver.13. It is true that the Receiver's commission is the price of thework done by them. It must have some relationship with the labourinvolved and time taken for such purpose. (See decision of this Courtin P.V.S.Kabalamurthi Pillai – Vs – P.V.Subramania Pillai & Ors. -1991 MLJ 332).We are not disputing that Order XL Rule 2 leaves a discretion forthe Court to pay the Receiver a percentage of the collection so fixedas remuneration for his services, but that does not mean that theCourt will exercise such discretion without any basis in an arbitrarymanner. If the Original Side Rules of the Madras High Courtprescribes fee upto 7% of the sale proceeds, the Receiver cannot beprovided any amount excess to such prescription, nor the court canallow a meagre amount on the ground of discretion of the court. Itmust be in consonance with the nature and volume of work entrusted onthe Receiver and the time required for performing the duties. In thisregard one may refer to the Division Bench decision of this Court inB.Soundarapandian & Anr. - Vs – Industrial Finance Corporation ofIndia & Ors. reported in AIR 1982 Madras 206. https://hcservices.ecourts.gov.in/hcservices/ Admittedly, the Receiver has performed work for more than fiveyears. He has performed all the job, which was entrusted to him andthere was no failure shown on his part. Sale was conducted in themanner the court ordered. Though the order was passed by court andauction had taken place in the court, but all such proceeding weredone through the Receiver. It is not the case of the respondent thatthe Court accepted money directly, and no work was taken from theReceiver.14. It is also not in dispute that an advocate was appointed toassist the court and the Receiver. The trial court has allowed a sumof Rs.6,12,000/= in favour of the said advocate. If such amount isallowed in favour of the person, who assisted the Receiver, it is notclear as to why a lesser and petty amount of Rs.1,25,000/= has beenallowed in favour of the Receiver,while the auditor recommended toallow 4% of the sale proceeds, which comes to Rs.24,48,000/=.15. Taking into consideration the nature of work done by theReceiver, the period of service rendered by him (five years),including running of a cinema hall for a period of five years, we areof the view that atleast 2% of the sale proceeds should be allowed infavour of the Receiver, which will come to Rs.12,24,000/=approximately, which will include the remuneration for running thecinema hall for five years.16. In the result, the judgment and decree dated 22nd Feb., 2000,passed by learned Judge in C.S. No.577/82 is modified to the extentabove. Both the appeals stand disposed of. But there shall be noorder as to costs.Sd/Asst.Registrar/true copy/Sub Asst.Registrar GLNTo1. THE SUB- ASSISTANT REGISTRAR,ORIGINAL SIDE, HIGH COURT, MADRAS. https://hcservices.ecourts.gov.in/hcservices/

2. KETAN A.SHAH (RECEIVER)S/O.AMRIT LAL SHAH, GANESH CHAMBERS NO.143,ELDAMS ROAD,CHENNAI 600 018.+1cc to Mr.K.Mani, Advocate Sr 2843+1cc to Ms.K.Bhanumathi, Advocate Sr 2746+1cc to Mr.P.Rajamanickam, Advocate Sr 2937+1cc to Mr.A.Dhiraniyanathan, Advocate Sr 2933NG (CO)km/12.2. O.S.A. NOS. 99 & 348 OF 2000