Prem Ballabh Khulbe Vs. Mathura Datt
Bhatt  INSC 271 (16 December 1966)
16/12/1966 BACHAWAT, R.S.
CITATION: 1967 AIR 1342 1967 SCR (2) 298
Code of Civil Procedure (Act 5 of 1908), cl.
(c) of the proviso to s. 51--Partners--If in fiduciary relationship.
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
[300 E] Piddocke v. Burt, Chitty,  1
Ch. 343, Rodriquez v. Speyer Brothers,  A.C. 59, Bhuban Mohan Rana v. Surender
Mohan Das, I.L.R.  2 Cal. 123 and Velji Raghavji Patel v. State of
Maharashtra  2 S.C.R. 429, approved.
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
C. B. Agarwala and K. P. Gupta for the
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)  1 ch. 343 300 received it
in a fiduciary capacity towards 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)  A.C. 9,59 89.
(2) I.L.R. 1952 (2) Cal. 23.
(3)  2 S.C.R. 429.