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Suit No711 of 1976, decided on 6th November, 1986

‑‑‑S. 2(2) & O. XXXVII, R. 2‑‑Preliminary decree‑‑Suit for recovery‑ Preliminary decree‑‑When preliminary decree is passed, suit remains pending till such time a proper final decree is passed and right of parties determined.

‑‑‑0. XXXVII, R. 2‑‑Suit for recovery‑‑Amount claimed on basis of agreement which was devised to defeat provision of law and was against public policy and void‑‑Suit dismissed even when preliminary decree for accounts was passed and rights of parties were yet to be determined.

S. Ishtiaq Ali for Plaintiff.

Ismail Merchant for Defendant.

Date of hearing: 6th October, 1986.

The plaintiff has filed the suit for dissolution of partnership and accounts. The plaintiff was running hotel‑cum‑bar under the name and style of Sartaj Hotel and in respect of which licence was granted by the Provincial Government. The plaintiff's son Syed Abdul Khaliq joined him who handed over his business to him. Later in March, 1975. the plaintiff agreed to sell the business, hotel, bar, licence and good‑will to his son. The plaintiff developed some differences with him and their relationship got strained. The defendant and his brother got friendly with the plaintiff and taking advantage of the situation in which the plaintiff was under great mental agony and torture, the defendant obtained his signature on a document called a partnership and manoeuvred to take possession of the business. The defendant and one Dr Bashir Malik opened an account with Habib Bank, Tariq Road Branch, as Proprietor of Sartaj Hotel. The plaintiff had filed Suit No 495 of 1976 against his son and the defendant was voluntarily giving assistance to the plaintiff. However, as the suit between the plaintiff and his son was compromised by consent a receiver was appointed in those proceedings. The defendant in collusion with Dr. Bashir Malik committed serious breach of agreement from the start and committed acts prejudicial to the business of the partnership. He not only opened an account with the Habib Bank, Tariq Road Branch, as proprietor of Sartaj Hotel, but got the appointment letters issued to the staff by Dr Malik Bashir and started the business to the exclusion of the plaintiff without a bar licence. He restrained the plaintiff and his son from carrving on the business. The plaintiff, therefore, prayed for dissolution of the firm and accounts.

The defendant filed his written statement in which it was pleaded that the plaintiff was the sole proprietor of the business. He was not aware of strained relation between the plaintiff and his son. It is averred that the plaintiff approached the defendant to sell his running business viz. Sartaj Bar and Hotel with good‑will, tenancy rights and Bar licence for Rs.3,50,000. The defendant agreed but as bar licence and tenancy agreement could not be transferred, the defendant was first to be made a partner and take over the entire business on payment of Rs.1,00,000. The defendant was to pay Rs.50,000 on inclusion of his name in the Excise Licence issued to the plaintiff and two lacs were to be paid to the plaintiff on his retirement from the business and on transfer of bar licence and tenancy rights. Till such time transfer was completed the defendant was to pay to the plaintiff Rs.1,000 p.m. The plaintiff accordingly paid Rs.1,00,000 to the defendant on 25‑8‑1976 and executed agreement on .25‑8‑1976. Rs.30,000 was also paid to the defendant upto 12‑10‑1976. All other allegations made against the defendant were denied. It was also pleaded that the suit is not maintainable and the plaintiff is not entitled to any relief.

The following consent issues were framed:‑

(1) Is the suit maintainable

(2) Did the defendant join the plaintiff in the partnership business of Sartaj Hotel and Bar in terms of the agreement, dated 3‑9‑1976 or stated in para. 5 of the written statement

(3) What were the terms and conditions of partnership

(4) Did the partnership stand dissolved If so on what date

(5) Who was in possession of the business and from what date to what date

(6) Is the defendant liable to render accounts of dissolved partnership

(7; To what relief is the plaintiff entitled to

On 17‑1‑1979 a consent statement was filed by the parties and a preliminary decree was passed by which a Commissioner was appointed to go into the accounts for the period from 25‑8‑1976 to 12‑10‑1976 and to ascertain the following:‑

"(a). What assets and liabilities were taken over by defendant on 25‑8‑1976 and what assets and liabilities were left by the defendant on 12‑10‑1976.

(b) What amount were paid by the defendant to the plaintiff."

After a preliminary decree was passed the Commissioner after taking accounts submitted his report holding as follows:‑‑

(i) "On 25‑8‑1976 the defendant has taken over the stock of the liquors and furniture etc. of Sartaj Hotel from the plaintiff and the defendant carried on the business of partnership from 25‑8‑1976 to 12‑10‑1976 with the stock delivered by the plaintiff. Defendant did not invest any money in the said business.

On 12‑10‑1976 the defendant delivered stock of liquors etc. of partnership to a receiver appointed by this Court in Suit No. 495 of 1976 and the receiver prepared an inventor Exh. D‑8. This liquors etc. of D‑8 was of the value of Rs.85,416.96 as deposed by Dr. Bashir Malik. The defendant paid Rs.646 for ice as shown in D‑11 from partnership account.

The defendant has withdrawn Rs.82,826.96 from Habib Bank, the money of Sartaj Hotel after 12‑10‑1976. The plaintiff has paid the Excise assessment of Rs.13,964.36 of September which should have been paid by the partnership.

(ii) The defendant paid only one lac of rupees to the plaintiff."

This report was considered and accepted by the Court.

In this suit a preliminary decree was passed on the basis of a consent statement which related to rendition of accounts without any reference to the dissolution of partnership and determination of liabilities of the parties. A preliminary decree was also passed for taking accounts although aforestated consent issues had been framed.

After the consent statement was filed and preliminary decree was passed, the Commissioner was appointed before whom evidence was produced. He has submitted his report as the questions referred to him. These questions merely relate to the determination of assets and liabilities taken over by the defendant on 25‑8‑1976 and left by him on 12‑10‑1976 and what amounts were paid by the defendant to the plaintiff. The Commissioner was required to investigate into the assets and liabilities taken over and left by the defendant and the amount paid by him. In this state of affairs the preliminary decree was restricted to such investigation by the Commissioner and it did not determine the right of any party to recover any amount or disputes relating to maintainability of the suit, the dissolution of firm and consequences flowing from it. Therefore, at this stage it is open to the Court to determine such right, disputes, and issues which have remained untouched by the preliminary decree and without whose determination no final decree can be passed.

The parties to the suit seem to be under the impression that after a preliminary decree is passed the final decree should be passed as a matter of course. In this suit such is not the case. Even if the report of the Commissioner is accepted further determination of rights of parties is required. When a preliminary decree is passed the suit remains pending till such time a proper final decree is not passed. Therefore, the rights of parties have to be determined.

None of the parties have led any evidence with regard to other issues and have argued on the basis of the evidence produced before the Commissioner. Mr. Ishtiaq has argued that in terms of the Commissioner's report the plaintiff will be liable to pay Rs.3,210 to the defendant. However, Mr. Merchant has contended that the defendant is entitled to recover Rs.1,00,000 from the plaintiff. These rival claims have to be considered in terms of agreement, dated 3‑‑9‑1976. From perusal of the agreement and admitted facts it is clear that it was devised to defeat the provision of law which prohibits sale or transfer of business of sale of wine run under a licence issued by the Excise Department. In Suit No. 122 of 1977 filed by the defendant against the plaintiff and his son for recovery of Rs.2,25,000 on the basis of agreement, dated 3‑9‑1976, I have held that the agreement is against public policy and void. The parties in this suit are seeking relief on the basis of the same agreement which has been held to be void. Although preliminary decree for accounts only has been passed the rights of the parties are yet to be determined. Where the parties claim rights and benefits under an agreement which is void, no Court will lend its assistance to give effect to it. The suit is, therefore, dismissed with no order as to costs.

M. Y. H. /5142/K Suit dismissed

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