M.C. Shanmukhan Vs. Vachali Jayalakshmi and anr. - Court Judgment

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- - he is not on good terms with his brother. a preliminary decree was passed holding that the plaintiff and defendants are each entitled to l/3rd share in the capital as well as in the profits of the business. 6. before us the appellant's counsel took strong exception to the advertence made by the subordinate judge to the particulars contained in the sales tax files. 5,000 each, the court below held that each one of them is entitled to 1/3 share in the capital as well as in the profits of the business. 10. in the result, we hold that the court below was justified in finding that the plaintiff and defendants 1 and 2 are partners of the firm 'plasto' and that they are entitled to 1/3 share in the capital as well as in the profits of the business.k.s. paripoornan, j.1. the first defendant in o. s. no. 9 of 1977, sub court, tellicherry, is the appellant in this appeal. the plaintiff and the second defendant in the suit are the respondents herein. the suit was filed for dissolution of partnership and settlement of accounts of the firm 'plasto'. the plaintiff averred that the shop building is in her actual possession on the strength of a possessory mortgage, dated 24th november, 1970, and that she has contributed the entire capital of the firm. there is an understanding that 15 per cent of the profits will be given to the first defendant and 10 per cent to the second defendant. the defendants have not made any investment. there is no deed evidencing the partnership. the first defendant was managing the business. he has not rendered accounts. he is making preparations to make the business his own. hence the suit was filed for dissolution of partnership and for settlement of accounts.2. the first defendant was the main contesting defendant. he denied the existence of a partnership. he averred that the plaintiff and the second defendant gave a loan of rs. 5,000 each. the business belongs to him exclusively. he was an employee in the shop of the plaintiff's husband (p. w. 1), that the amounts payable to him accumulated and were utilised for this business. p. w. 1, the husband of the plaintiff, is his elder brother. when he knew about the sale of the shop, he approached his elder brother and the purchase was made through him. an amount of rs. 10,000 was paid to the landlord. the first defendant requested his brother to pay the amount to the landlord. the possessory mortgage was executed, in such circumstances, in the name of the plaintiff. he is not on good terms with his brother. the suit was filed in the above circumstances. the second defendant filed a separate written statement stating that she had advanced a loan of rs. 5,000 to the first defendant and the said amount was returned in 1973. she has no knowledge about the partnership arrangement.3. the learned subordinate judge by his judgment, dated 31st march, 1980 held that the business by name 'plasto' was started as a partnership concern and that the plaintiff and defendants are partners of that business. he also held that the relevant evidence established the contribution of share capital by the three partners at the rate of rs. 5,000 each and therefore the profits are to be shared equally. a preliminary decree was passed holding that the plaintiff and defendants are each entitled to l/3rd share in the capital as well as in the profits of the business. the first defendant has come up in appeal.4. on 1st october, 1986, this appeal was heard in part. on hearing counsel on both sides, we felt that the relevant files of the firm 'plasto' in the sales tax office, tellicherry, should be summoned. we passed an order to that effect and directed the sales tax officer, tellicherry to be present in court along with the relevant files of the firm 'plasto' on 9th october, 1986. on 9th october, 1986, the sales tax officer was present in court with all the records. we perused through the relevant records adverted to in para 6 of the judgment of the court below. appellant's counsel, mr. p. g. rajagopal, then submitted that he is not in a position to say whether the records aforesaid, i.e., the application for registration under section 13 of the kerala general sales tax act filed in the sales tax department and other papers, were really signed by his party (appellant). he wanted to contact his party. accordingly, the case was adjourned to 17th october, 1986. when the case was taken up for hearing on 17th october, 1986, the appellant himself was present in court. the records were made available to the appellant's counsel for perusal of the appellant. the appellant was represented by counsel, m/s. t. p. kelu nambiar and p. g. rajagopal. counsel submitted on instructions that the application for registration under the kerala general sales tax act was signed by the appellant and the appellant does not dispute the contents or the signature contained in the aforesaid papers filed before the sales tax department. accordingly, we ordered that photostat copies of the application filed under section 13 of the kerala general sales tax act by the appellant, dated 7th march, 1971 as also the enquiry report thereon by the assistant sales tax officer dated 9th june, 1971 may be taken from the originals produced in court by mr. b. v. raghavan, sales tax officer, ii circle, tellicherry and they may be marked as exhibits c-1 and c-2. the said documents were marked as exhibits c-1 and c-2.5. the short question that arises for consideration in this appeal is whether the business run in the name of 'plasto' in tellicherry town belongs to a partnership consisting of the plaintiff and defendants or the first defendant exclusively the learned subordinate judge referred to the documents obtained from the sales tax department, namely, the application for registration of the firm, the recommendation made for the issue of the registration certificate and other connected matters. he held that the said documents are privileged ones but the court is entitled to look into the same. reference was also made to exhibits b-8, b-9, b-21 and b-22, exhibits a-5, a-6, a-10, a-11, a-14 to a-17 and the evidence of p. ws. 1 and 3, to hold that the business by name 'plasto' was started as a partnership concern with the plaintiff and defendants are partners of that business. the learned subordinate judge referred to exhibits b-1 to b-7, relied on by the first defendant and held that those receipts will not show that the business belongs to the first defendant exclusively.6. before us the appellant's counsel took strong exception to the advertence made by the subordinate judge to the particulars contained in the sales tax files. counsel submitted that under section 54 of the kerala general sales tax act, there is a prohibition of the disclosure of particulars contained in the files of the sales tax authorities. the court below erred in perusing through the same as detailed in para 6 of the judgment. at any rate, counsel contended that without giving an opportunity to the appellant/lst defendant to admit or to contradict the documents, the court below should not have relied on the said documents. we should state that records in the appeal did not show what are the contents of the relevant records perused through by the learned subordinate judge and adverted to in para 6 of the judgment. accordingly, by order dated 1st october, 1986, we directed the sales tax officer, tellicherry to produce the relevant files in court relating to the firm 'plasto'. the sales tax officer himself was present in court and produced the relevant records on 9th october, 1986. again they were produced on 17th october, 1986. we perused through the relevant records. they were handed over to the appellant's counsel. the appellant himself was present in court, who had occasion to peruse through the said records. counsel submitted that the appellant admits the signature and contents of the records shown to him. we have marked them as exhibits c-1 and c-2. objection is taken that in view of section 54 of the kerala general sales tax act, the said documents should be treated as confidential and the contents should not be disclosed, except in cases covered by section 64(2) of the act. admittedly, section 54(2) of the act will not be attracted in this case. so, the question is whether on the facts of this case, section 64(1) of the kerala general sales tax act will bar the court from perusing or relying on the application for registration filed under section 13 of the act, the enquiry relating thereto and the order passed thereon (exhibits c-1 and c-2). section 54(1) of the kerala general sales tax act is as follows :54. prohibition of disclosure of particulars produced before sales tax authorities.-(1) all particulars contained in any statement made, return furnished or accounts, registers or documents produced under the provisions of this act or in the evidence given or affidavit or deposition made in the course of any proceeding under this act or in any record of any proceeding relating to the recovery of a demand, prepared for the purposes of this act, shall be treated as confidential and shall not be disclosed.counsel placed reliance on the decisions reported in state of punjab v. sodhi sukhdev singh : [1961]2scr371 , charu chandra kundu v. gurupada ghosh : [1961]43itr83(sc) , sankaranarayana bhatta v. ganapathi bhatta 1977 klt 583 and ibrahim v. agricultural income-tax officer 1984 klt 725. in the above cases, similar provisions of the income-tax act and agricultural income-tax act were construed. a reference to the said decisions will show that the prohibition is only against the disclosure to a stranger to the proceedings. we do not understand the said decisions to lay down that if the parties to the sales tax proceedings themselves apply for or desire or make request for the supply of information or documents, it can be contended that the disclosure is either prohibited or that the particulars in the relevant documents should be treated as confidential and shall not be disclosed. section 54 of the sales tax act is only intended for the benefit of the assessee. the general concept of the firm is that it is not an entity or person in law. it is only an association of individuals, and a firm name is only a collective name of those individuals who constitute the firm. the firm is a unit of assessment in view of the special provisions contained in the act. as held by the supreme court in commissioner of income-tax v. r. m. chidambaram pillai : [1977]10itr292(sc) 'that although for the purposes of the act a firm has certain attributes simulative of personality, we have to take it that a partnership is not a person but a plurality of persons'. under the kerala general sales tax act, since a firm is a person and so a unit of assessment as provided in section 2(xvi-a)(iv) of the act, the assessee-firm takes within its fold every partner of the firm. the documents produced before the officer on behalf of the firm must be considered to be on behalf of the partners. so, every partner has a right to inspect and obtain certified copies of the documents and produce them before courts. the production of the documents of a firm at the instance of one of the partners in a litigation between the partners or suo motu ordered by the court to be produced in a litigation between the partners of a firm, will not be covered by section 64 of the act. the contents of these documents are known to the parties. they cannot be said to be confidential. so, they cannot be covered by the privilege in respect of its production at the request of that person in a proceeding to which no outsider is a party. we are fortified in this view by the decisions reported in ram chandra v. laxman das and sohan lal v. nasib chand .7. in this view of the matter, we are of the view that there was no error in the court below in summoning the production of the sales tax files and in adverting to the same. all the same, the court below should have made them available for perusal of the appellant/lst defendant, so that he will be given an opportunity either to admit or to deny the same. the appellant was given that opportunity by us. he has admitted the same. we perused through the documents and have also made photostat copies of the relevant documents (exhibits c-1 and c-2), we hold that the said documents are not confidential and reliance thereon is not prohibited. section 54 of the kerala general sales tax act has no application in this case. the argument to the contrary by the appellant's counsel is repelled.8. it is common ground that the plaintiff was not examined in this case. her husband was examined as p. w. 1. the appellant's counsel contended that the finding of the court below that there is a firm wherein the plaintiff and defendants are partners and the capital might have been obtained by p. w. 1 and the plaintiff, is against the plea set up in the plaint. we are unable to agree. the substantial plea set up in the plaint was that the plaintiff and the defendants are partners in the firm. it was also stated that the first defendant should get 15 per cent of the profits and the second defendant should get 10 per cent. since there was no evidence to prove that the plaintiff invested the entire rs. 15,000, but on the other hand, the sales tax files disclosed that the contribution of the capital by all the three partners was at rs. 5,000 each, the court below held that each one of them is entitled to 1/3 share in the capital as well as in the profits of the business. we are unable to accept the argument of the appellant's counsel that the plea found is totally inconsistent. the appellant's counsel also contended that there is no clinching evidence to show that there was a partnership, consisting of plaintiff and defendants 1 and 2, on the basis of the documents and the evidence adverted to by the court below in paras 7 to 14 of the judgment. in advancing this argument, counsel eschewed from consideration the documents contained in the sales tax files. this argument is without force. exhibits a-l, a-2 and a-5 will show that the shop-room belongs to the plaintiff on the strength of a possessory mortgage. exhibit b-8 ledger and exhibit b-9 day book of the firm for the year 1971-72, maintained by the first defendant, will show that an amount of rs. 5,000 has been invested as the capital by the plaintiff and defendants 1 and 2. the entries for the year 1972-73 (exhibit b-21) are in continuation of the previous entries in exhibit b-8. so also, the ledger entry in exhibit b-22 carried over the amounts and details of the previous years. in exhibit a-5, there is an entry that the articles in the shop belonging to the previous tenant were purchased or surrendered to the plaintiff. exhibits a-6, a-10, a-11 and a-14 to a-17 will show that p. w. 1, the husband of the plaintiff, was considered by others or professing to be as the owner of the firm. the plaintiff's husband (p. w. 1) was assisting or was actually associated with the firm's business. the above documents, along with the evidence of p. w. 1, were relied on by the court below to find that the plaintiff and the defendants are partners of the business. we are of the view that the above documents and the evidence of p. w. 1 by themselves probabilise the plea of the plaintiff that the plaintiff and defendants are partners of the firm. the finding of the court below in that regard is amply supported by relevant evidence. now, apart from the above evidence, exhibits c-1 and c-2 marked in this court and admitted by the appellant, will go to show that the business of the firm 'plasto' is carried on by the plaintiff and defedants 1 and 2 as partners, that they had contributed rs. 5,000 each as capital, that the first defendant is managing the affairs of the firm, that the assistant sales tax officer made enquiries and inspected the shop, and verified the signature of the managing partner and found that the application is genuine and in order and in accord therewith the registration was granted to the firm. exhibits c-1 and c-2 taken along with exhibits b-8, b-9, b-21 and b-22, a-l, a-2, a-5, a-6, a-10, a-11 and a-14 to a-17 and the evidence of p. w. 1 unmistakably lead to the conclusion that the plaintiff and defendants are partners of the firm 'plasto'. we have absolutely no hesitation to affirm the finding of the court below in that regard. we do so.9. appellant's counsel laid considerable stress on an entry in the ledger of 1972 to show that the plaintiff and the second defendant were paid rs. 6,000 each. there is no receipt therefor from the plaintiff or the second defendant. the court below has adverted to this aspect in para 7 of the judgment and has held that it has been so made, so as to make it appear that the amounts originally shown in the accounts are in the nature of borrowals. it will also militate against the statement contained in exhibits c-1 and c-2. stress was also laid on exhibits b-1 to b-7 receipts. they are rent receipts alleged to have been issued by the plaintiff to the first defendant in 1973. the genuineness of these receipts is seriously challenged by the plaintiff. the court below held that these receipts themselves will not show that the business belongs to the first defendant exclusively. we are of the view that neither the later entry in the accounts for the year 1973-74 regarding payment of rs. 6,000 each to the partners nor exhibits b-1 to b-7 rent receipts, can in any way militate against the unambiguous statements in the application filed by the first defendant himself before the statutory authorities and the enquiry and finding by such authorities thereon. they are exhibits c-1 and c-2. in the light of exhibits c-1 and c-2, the payment of rs. 6,000 each to the plaintiff and to the second defendant (exhibits b-1 to b-7) are insignificant.10. in the result, we hold that the court below was justified in finding that the plaintiff and defendants 1 and 2 are partners of the firm 'plasto' and that they are entitled to 1/3 share in the capital as well as in the profits of the business. the judgment and decree of the court below are confirmed. no interference is called for.11. this appeal is without force. it is dismissed. there shall, however, be no order as to costs in this appeal.12. we direct the court below to expedite the final decree proceedings and pass the final decree within six weeks from the date of receipt of the records.