Supreme Court of India
BHAGWANT P. SULAKHEversusDIGAMBAR GOPAL SULAKHE AND ORS.
- Citation
- 1985 INSC 214
- Decided
- 30 September 1985
- Disposal
- Appeal(s) allowed
Holding
Remuneration earned under the managing‑agency agreement is joint‑family property, whereas remuneration earned as managing director after the agreement’s termination is personal income; shares bought with joint‑family funds are joint‑family property, and cash in the Mahalaxmi room belongs to the joint family, while no claim is established over ornaments or jewellery.
Summary
The Supreme Court examined a long‑standing dispute among members of the Sulakhe joint family concerning whether various incomes and assets derived from a partnership firm (Sulakhe & Co.) and a public limited company (Lokmanya Mills Ltd.) belonged to the joint family or to individual members. The Court held that remuneration received by Bhagwant Sulakhe as managing agent under the managing‑agency agreement was joint‑family property, while remuneration earned after his appointment as managing director—after the managing‑agency agreement had terminated and the joint family was severed—was his personal income. Shares purchased with joint‑family funds (200, 125, 79 and 4 shares) were declared joint‑family property to be divided equally among the three branches. Cash found in the Mahalaxmi room was deemed joint‑family property, with a reasonable amount to be fixed, and no claim was established over ornaments, jewellery or utensils. The appeals were partly allowed and a final decree was issued accordingly.
Issues considered
- Whether remuneration received by a co‑coparcener as managing agent under a managing‑agency agreement is joint‑family property or personal income.
- Whether remuneration received by the same person as managing director after the termination of the managing‑agency agreement and severance of the joint family is personal income.
- Whether a unilateral act can convert joint‑family property into personal property.
- Whether shares purchased with joint‑family funds belong to the joint family.
- Whether cash found in the Mahalaxmi room belongs to the joint family and how its amount should be determined.
- Whether ornaments, jewellery and utensils are joint‑family property.
Legislation cited
- Companies Act, 1956s. 87A(2)
Subjects
joint family propertymanaging agency agreementpartnershipseverance of joint familyremunerationsharesCompanies Actpartitionmanaging directorincome tax
Judgment
169
llllAQIANT P, SULAKllE A
V•
DlGAllllAR GOPAL SULAKllE AND ORS.
SEPTEMBER 30, 1985
[P.N. BHAGIATl, c.J., .AMARENDRA NATH SEN AND o.P. MADON, JJ.] B
Joint family property, character of - When it changes -
Whether by an unilateral act it is open to any member of the
joint family to convert any joint family property into his
personal property - Partnership firm formed out of joint family
funds and managing agency agreement entered into by such a c
partnership firm with another company - Commission received by
the co-sharers of the joint family in terms of the managing
agency agreement and the remuneration received by them as the
managing director treated as the joint family property for all
purposes - Whether one of the co-sharers by a simple letter claim
the commission remuneration received by . him as his personal o
property · till the joint family is disrupted - Position of
managing director and the managing agent, explained.
One Pandarinath Martand Sulakhe died leaving behind him
his sons Vishwanath, Gopal, Govind and Bhagwant and conaiderable
properties. Vishwanath died in 1910 leaving behind his so11 E
llattatraya, Govind, one of the brothers who constituted a joint
family after the death of their father Pandarinath Sulakhe,
separated from the joint family in 1914 taking his share of the
family properties. However, the other two brothers along with the
son of Vishwanath continued to remain joint and lived as members
of the joint family till 8.12.1941 on which date Bhsgwsnt
intimated llattatraya son of Vishwanath his intention to cause F
severance of the joint family status.
Prior to it, in the year 1922, a Public Limited Comapny
named Lokmanya Mills Ltd. was intended to be floated and with
that in view Dattatraya and Bhsgwant entered into a partnership
under the name and style of M/s. Sulakhe and Co. with four G
outsiders, as per the Partnership Agreement dated 3rd January,
1923. The said Partnership Firm Sulakhe and Co. entered into a
Managing Agency agreement on 5.2.1923 with the said Lokmanya
Mills Company Ltd. The said agreement was to expire after 35
years. The mill actually went into production in the year 1938.
On the basis of the managing agency agreement between the company
H
170 SUPREME COURT REPORTS [1985] 5UPP.3 s.c.R.
A and the firm Sulakhe & Co,, Dattatraya acted as the managing
agent upto 1935 and thereafter Bhagwant became the managing
agent. After Bhagwant's appointment as managing agent, Dattatraya
was appointed as the Director of the company.
At the time when the company was incorporated and its
B articles were adopted and also at the time when the comapny
entered into tha managing agency agreement with Sulakhe and Co.
and when the deed of partnership of the firm was executed
Bhagwant and Dattatraya teing members of the joint family, all
the 325 shares which was initially purcnased in the company - 200
in the name of Dattatraya and 125 in the name of Bhagwant - plus
the 83 further shares - 79 in the name of Bhagwant and 4 in the
~ name of Gopal - were paid for by the joint family out of the
joint family funds. Therefore, the entire amount of remuneration
which was received by Dati:atraya and Bhagwant not only on account
of their shares of coumission under the managing agency agreement
on the basis of the partnership deed but also on account of the
Director's fees paid to them and also on account of the salary
paid to Dattatraya who acted as the managing agent of the company
D till 1935, was treated as joint family property. Even after
Bhagwant took over as the managing agent in 1935, the position
continued to be the same and the remuneration received by him
formed part of the joint family income till the dispute raised by
him by his letter dated 15th July, 1941. All monies received by
Bhagwant and Dattatraya from the company were not only treated as
E joint family property, but also were so entered in the books of
account of joint family and were so shown in the income tax
returns.
However by his letter dated 15th July, 1941 Bhagwant
informed Dattatraya that the remuneration received by him as the
F managing agent of the company on the basis of the managing agency
agreement, fees received by him as the director of the company
and his income from his profession as a lawyer were his personal
income and should be treated as such. He made it clear that he
will not in future put any of these incomes into the botch pot of
the joint family. By another letter dated 8.12.1941 Bhagwant
G intimated his intention to cause severance of the joint family
status. Since Dattatraya did not accept the claim of Bhagwant for
treating the said amount as the personal property. Bhagwant filed
a suit No. 166/43 in the original side of the Bombay High Court
laying claim to the said amounts. In the meantime Gopal and
Dattatraya filed two suits in the Civil Court against the Company
H and Bhagwant for the payment of the sum of money credited to the
BHAGWANT P.SULAKHE V• DIGAMBAR GOPAL SULAKHE 171
joint family in the books of the parties and as a result thereof A
ioost of the joint family properties came to be divided S100ngst
the parties in accordance with their respective shares, except
the dispute raised in the suit in the original side of the High
Court.
During the pendency of the said suit the managing agency F
agreement had come to an end by virtue of the provisions
contained in section 87 (A) (2) of the Companies Act, in as DDJCh
as though the Board of Directors of the company had "passed a
resolution on 28. 6. 56 for the renewal of the managing agency
agreement, no action was taken by Sulakhe & Co. to· get the
Managing Agency Agreement for a further term after 1957 extended. C
On the other hand, the company amended its articles of
asso.ciation and proceeded to appoint Bhagwant as its managing
Director and neither his appointment nor the validity of the
amendment of articles of association was objected to by either
Sulakhe & Co. or any of the co-sharers forming part of the
partnership firm· The trial Judge accepted the claims of Bhagwant D
and decreed the suit in his favour and made Gopal and Dattatraya
accountable in respect of the joint family business. The High
Court in appeal held that the income received by Bhagwant as
lll&llaging agent and managing Director of the company could not be
considered to be the personal property of Bhagwant and reversed
the decision of the trial Judge in this respect and also on E
various other claims to cash etc• Hence the appeals by
certificate under Article 133 (1) (a) as it stood before the
Constit~tion (Thirtieth) Amendment Act, 1972.
Allowing the appeals in part and passing a final decree in
terma clarified, the Court.
F
HELD : 1.1 The character of any joint family property
does not change with the severance of the status of the joint
family and a joint family property continues to retain its joint
family · character so long as the joint family. property is in
existence and is not partitioned amongst the co-sharers. By an
unilateral act it is not open to any member of the joint family G
to convert any joint family property into his personal property.
[194 B-<:]
1. 2 The agreement of partnership clearly indicates that
Bhagwant and Dattatraya became members of the firm M/s. Sulakhe &
Co. which W"lS appointed as the managing agent of the company, on
the basis of the managing agency agreement, representing the H
joint family and for the benefit of the joint family. Their
17£ SUPREME COURT REPORTS [1985] SUPP.3 s.c.R.
A
interest in the partnership firm and managing agency was a part
of joint family assets and whatever income was earned by them on
the basis of the managing agency agreement belongs to the joint
family and formed part of the joint family property. The same
position must necessarily continue in the eye of law so long as
the partnership agreement and the managing agency agreement
continued. [192 G-ti; 193 A-DJ
1.3 By seeking to bring about a severance in the status of
the joint'family, one of the co-sharers cannot deprive the joint
family of this property and the income derived on the basis of
the managing agency agreement continues to remain the property of
the joint family so long as the joint family asset is not
c partitioned and otherwise continues to remain in existence. In
the facts and circumstances of the case, the entire income
arising out of the managing agency agreement and accruing to the
two members of the family, namely, Bhagwant and Dattatraya who
might have rendered the services had been earned for and on
behalf of the family and as representatives of the joint family.
D
llattatraya had continued as the managing agent for a number. of
years and there had been no question of apportionment of any
income derived by him as hie remunerations for the services
rendered by him as managing agent. Therefore, Bhagwant cannot lay
any claim for retaining any part of the remuneration received by
him from the company for the services rendered by him· [193 D-E;
E
194 A]
2.1 In llaj Kumr Singb Buba lhmdj1.'s case, [1971) l
s.c.R. 748, the Supreme Court held that "the broader principle
that emerges is whether the remuneration received by the
coparcener in substance though not in form was but one of the
modes of return made to the family because of the investment of
F
the family funds in the business or whether it was a compensation
made for the servi.oes rendered by the individual coparcener • If
it is the former, it is an income of the Hindu undivided family
but if it is the latter then it is the income of the individual
coparcener. If the income was essentially earned as a result of
the funds invested the fact that a coparcener has rendered some
G
service would not change the character of the receipt• But, if on
the other hand, it is essentially a remuneration for the services
rendered by a coparcener, the circumstance that his services were
availed of because of the reason that he was a member of the
family which had invested funds in that business or that he had
obtained the qualification shares from out of the family funda
H
would not make the receipt, the income of the Hindu undivided
family.• The legal principle enunciated therein for determining
BllAGWANT P. SULAKHE v. DIGAMBAR (',OPAL SULAKHE 173
the true nature and character of the remuneration received by any A
member of the joint family equally applies in deciding the nature
and character of the remuneration received by the Managing
Director in the instant case. [195 C-D; 196 C-E; 197 A-B]
2.2 The position of the Managing Director is entirely
different from the position of the managing agent on the basis of B
the inanaging agency agreement between the partnership firm of
Sulakhe & Co. and the position of the Managing Director stands
entirely on a different footing. At the time when Bhagwant was
appointed the Managing Director of the company on 19.10.1957,
with effect from 16,1.1957, there was complete disruption of the
joint family and there was no joint family in existence. Further c
inspite of the Board of Director's resolution dated 28.6.1956 for
the renewal of the inanaging agency agreement as required by
section 87A (2) of the Companies Act, no action was taken by the
firm of Sulakhe & Co. or any partner thereof for obtaining
renewal of the inanaging agency agreement for a further term after
1957. On the other hand when the company had amended its articles D
of 1<Ssociation and had p::oceeded to appoint Bhagwant as the
Managing Director, there was no challenge to them either by any
partner of the firm of Sulakhe & Co. which had been appointed as
the inanaging agent of the company or by any member of the joint
family. As the inanaging agency agreement had ceased to exist at
the time Bhagwant was appointed the Managing Director of the E
company and as at that time there was no joint family of Bhagwant
·anc1 the other co-sharera in existence, Bhagwant cannot be said to
r.ave been appointed as the Managing Director of the company
either because of the managing agency agreement or because of his
being a member of the joint family. The facts and circumstances
make it clear that the partnership agreement or the managing
agency agreement had no relevance to the appointment of Bhagwant F
as the ilanaging Director of the Company, ln the said circ1DD-
stances, (i) the rl!llllDeration received by Bhagwant as Managing
Director of the company from the company is his personal property
and cannot be considered to be the .l.Dcome of the joint family;
(ii) the appointment of Bhagwant as Managing Director, at a time
when there was complete disruption of the joint family and the G
members of the family were fighting in Court cannot be considered
to be by way of any return on the inves::ment made bY the joint
family; and (iii) Bhagwant was appointed as the Managing Director
by the company for services to be rendered by him, as the company
might have been impressed by his performance as the managing
agent for a number of years. Though undoubtedly Bhagwant acted as
the managing agent for and on behalf of the joint family. and for H
174 SUPREME COlJRT REPORTS (198)] SUPP.3 s.c.R.
benefit of the joint family, yet what must have weighed with the
A
company is the kind of services rendered by him to the company.
The company was concerned with his services snd not with the
question whether he was rendering the services for and on behalf
of the family. The remuneration which the company agreed to pay
to Bhagwant for acting as the Managing Director was for the
services to be rendered by him. [194 D-i!; 195 A-ll; 196 G]
l!
Kaj Kumar Siogb l9llaa <2umilji V• C<-riBSiooer of locaE
Tax, Madhya Pradesh (1971] 1 s.c.R. 748 applied.
2.3 From the materials on record, it is clear that there
can also be no question of Bhagwant being a trustee or acting as
the trustee for the benefit of the joint family in relation to
c his appointment as the Managing Director of the company. The
managing agency of the company was that of the partnership firm
in which the four outside members with a majority of shares in
the partnership were interested and the managing agency firm
cannot therefore, be considered to be an asset of the joint
family. It was the interest of Dattatraya and Bhagwant in the
managing agency firm on the basis of their shares in the partner-
D ship which belonged to the joint family and the managing agency
was an agreement between the company and the partnership firm.
The effect of not renewing the agreement was that the interest of
the partnership firm of Sulakhe & eo. in the COlllpallY as the
managing agent thereof with all the rights and privileges on the
basis of the said agreement came to an end. With the termination
E
of the managing agency agreement the interest of the joint family
in the managing agency on the footing that two of the members of
the joint family, namely, Dattatraya and Bhagwant were as
partners of the firm associated with the managing agency and were
acting as the managing agent on the basis of the partnership
agreement and the managing agency agreement also ceased. [197
F
C-G; 198 G-H]
CIVIL APPELIATE JURISDICTION Civil Appeal Noa. 2622
& 2622A of 1969·
From the Judgment and Decree dated 18/19/20/25/29.9.1967
G and 9.10.1967 of the Bombay High Court in First Appeal Nos. 278
and 279 of 1960.
V.M. Tarkunde, Dr. Y.S. Chitale, Mukul Mudgal, Mrs. M.
Karanjawala and D.N. Mishra for the Appellant.
H M.C. l!handare, D.R. Dhanuka, Mrs. Rani Chhabra K.H. Kapadia
and G.B. Sathe for the Respondents.
BHAGWAIIT P.SULAKHE v. DIGAMllAR GOPAL SULAKHE [A.N. SEN, J.j 175
The Judgment of the Court was delivered by
A
A.N. SEN, J. This is an unfortunate litigation between near
relations and this litigation between the parties is now going on
for over four decades.
These two appeals have been filed with the certificate
B
granted by the High Court against the judgment of the High Court
by the plaintiff in the suit instituted by him for partition of
joint family properties, for accounts and other reliefs mentioned
in the plaint.
By a common judgment delivered by the High Court in two
separate appeals filed by the defendants in the suit against the c
judgment of the Trial Court., the High Court has substantially
reversed the judgment of Trial Court.
The facts of the case have been fully set out in the
judgment of the Trial Court and also in the judgment of the High
D
Court. We shall briefly indicate the facts material for the
purpose of disposal of these two appeals. As the High Court
disposed of both the appeals by one common judgment and the two
appeals which have been preferred against the same judgment have
been heard together, this judgment will dispose of both the
appeals.
E
One Pandarinath Martand Sulakhe died leaving behind him
his sons Viswanath, Gopal, Govind and Bhagwant and considerable
properties. The properties left by him included agricultural
lands, a number of houses in Barshi and three shops. Of the three
shops one was a Sharafi shop at Barshi, another cloth shop at
Barshi and the other a commission Agency and Sarafi shop at
F
Bombay. Business in all these three shops was carried on in the
name of P.N. Sulakhe. Of the four sons Vishwanath died in 1910
leaving behind him his son Dattatraya who happens to be the
second defendant in the suit. Govind, one .of the brothers who
constituted a joint family after the death of their father
Pandarinath Sulakhe separated from the joint family in 1914
G
taking his share of the family properties. Though Govind separat-
ed in 1914, the other brothers and the son of Vishwanath
continued to remain joint and lived as members of the joint
family. Bhagwant who filed a suit for partition as the plaintiff
was the youngest of the four brothers. He graduated in law in the
year 1914 and commenced practice as a lawyer at about that time.
H
176 SUPREME COURT REPORTS [1985] SUPP.3 s.c.R.
I-
In 1922, a public limited company named Lokmanya Mills Ltd. ~-·
A (hereinafter referred to as the Company) was intended to be
floated and with that end in view, the defendant No. 2 Dattatraya
and the plaintiff Bhagwant entered into a p~rtnership under the
name and_ style of M/s. Sulakhe & Co. with four outsiders. A
Managing agency agreement between the company and the partnership
firm of Sulakhe & Company was executed. The mill actually went
B into production in 1938. On the basis of the managing agency
agreement between the company and the firm of Sulakhe & Co. the
defendant No. 2 Dattatraya acted as the managing agent upto 1935
and thereafter the plaintiff Bhagwant became the managing agent.
Sometime after the plaintiff Bhagwant had been appointed the
managing agent, the defendant No. 2 Dattatraya was appointed as
the Director of the Company. It appears that in the year 1935, a
c new Adat shop had been started at Barshi. All the shops were run
in the name of P.N. Sulakhe. It is not in dispute that all the
shops were joiut family businesses. It is also not in dispute
that the remuneration paid to the defendant No. 2 and also the
plaintiff Bhagwant as managing agent and alao the amount of
commission falling into the shares of defendant No. 2 Dattatraya
and the plaintiff Bhagwant out of the comnission earned by the
D managing agency firm were treated as joint family properties and
were shown in the joint family books so long as disputes between
the parties had not arisen. During the period when there were no
disputes between the parties, the Director's fees paid to
defendant No. 2 Dattatraya and the plaintiff Bhagwant were
treated as income of the joint family and even the professional
E income of the plaintiff Bhagwant earned by him as a lawyer was
also thrown into the joint family hotch-pot and w~s treated as
joint family income. In the income-tax returns filed on behalf of
the joint family, all these amounts were shown as income of the
joint family. It appears that everything did not go well with the
members of the joint family and disputes arose between the
F parties soon after the commencement of the second world war. The
plaintiff Bhagwant by his letter dated 15th July, 1941 addressed
to the defendant No. 2 Dattatraya informed him that the
remuneration received by him as the managing agent of the company
on the basis of the managing agency agreement, fees received by
him as the director of the company and his income from his
G profession as lawyer were his persons t income and should be
treated as such. By this letter, he made it clear that he was not
prepared to throw any of these incomes into the joint family
hotch-pot and he asked the defendant No. 2 Dattetraya that all
these amounts should be shown as his separate income for the
purposes of income tax and should be credited to his personal
H
BHAGJANT P.SIJLAKHE v. DIGAMBAR GOPAL SULAKHE [A.N. SEN, J. J 177
Khata in Sarafi shop account. Disputes and differences between A
the parties became more acute and the plaintiff on 8.12.1941
intimated to the. defendant No. 2 Dattatraya his intention to
cause severance of the joint family status. Th_ereafter attempts
were made to divide the properties amicably between the parties
without success, The plaintiff Bhagwant claimed that the
remunerations paid to him by the company as managing agent, the B
fees paid to him as director of the company and hi~ incom~ from
his profession as a lawyer were his personal income and as such
his personal property. The defendants did not accept the claim of
the plaintiff Bhagwant that the remuneration paid to him as
managing agent by the company and the fees paid to hiffi as the
director of the company, could be his personal income and the c
defendants claimed that all such amounts received by him belonged
to the joint family and formed part of the joint family
properties. Ultimately Bhagwant filed a suit being suit No.
166/43 in the original side of the High Court in Bombay. In this
suit Gopal was the first defendant and Dattatraya was the second
defendant .and the suit was filed in the original side of the D
Bombay High Court on the basia that the Adat Shop and Sarafi Shop
were situated within the original jurisdiction of the Bombay l;ligh
Court. In this suit, Bhagwant the plaintiff did not made any
'•
' reference to the managing agency of the company in the plaint and
he claimed partition of the joint family shares and moveable and
immovable properties mentioned in the plaint as belonging to the E
joint family, seeking to reserve his right under o. 2, rule 2 of
the Code of Civil Procedure to file a suit for p~rtition of the
joint family properties situated at llarshi. The plaintiff
Bhagwant in this suit claimed various other reliefs. He prayed
for a direction that the immoveable properties and the business
at Bombay should be ordered td be partitioned under the
directions of the Court, that the joint family firms should be F
wound up, that the sum of Rs. 6843-36 claimed by him as his
personal income as a lawyer from his profession from 1940 should
be awarded to him with interest at 12% interest on the same and.
he also claimed as consequential relief that the defendants
should be ordered to account for the profits earned by them from
the joint family business from the date of severance and also of G
the income derived by them fr011 immovable properties belonging to
the joint family. In the sui-t Govind as defendant No. 1 and
Dattatraya as defendant No. 2 were impleaded and no other members
of their branches were made parties to the suit. On the death of
defendant No. 1 Gopal during the pendency of the suit his five
Sons were brought on record a:s his heirs and legal representa-
tives. The defendants resisted the suit of the plaintiff on H
178 SUPREME COURT REPORTS [1985] SUPP.3 S.C.R.
A
various grounds, mainly however on the ground that the plaintiff
had asked for partition only of some of the joint family
properties without including in the suit various other joint
family properties, particularly the shares and interest of the
joint family in the company. The defend2nts contended that the
plaintiff was bound to include in the.suit all the joint family
properties which also comprised all the interests of the joint
family in the company and various other it1100vable properties in
the possession of the plaintiff. It may be noted that defendant
No. l Gopal and the defendant No. 2 Dattatraya filed t1'() suits in
the Court of Civil Judge against the company and the plaintiff
for payment of the swn of money credited to the joint family in
c the books of the company in accordance with the respective shares
of the parties. In the suits various proceedings were taken and
various orders including the appointment of the Court receiver
for all the properties of the joint family were passed from time
to time. It does not become necessary for us to refer to these
proceedings at any length as in -the present appeals these
questions are no longer germane. It appears that as a result of
D the various proceedings in the suit most of the joint family
properties came to be divided amongst the parties in accordance
with their respective shares and the disputes between the parties
now centre on the following questions :-
1. Whether the shares in the company standing in the
names of the various members of the family are joint
family properties?
2. Whether the commission received by the two members
of the family namely, defendant No. 2 Dattatraya and
plaintiff r>hagwant from the managing agency firm in
F respect of their shares in the firm out of the total
conmission paid by the company to the managing agency
firm belongs to the joint family?
3. Whether the re1!1lneration received by the plaintiff
Bhagwant from the company as managing agent on the
G basis of the managing agency agreement with the
company is the personal property of the plaintiff or
whether the same belongs to the joint family?
4. Whether the re1!1lnerations paid to the plaintiff as
the managing director of the company is his personal
H income or is the property of the joint family?
B!IAGWANT p;sULAKHE v. DIGAMBAR GOPAL SUJ..AKHE [A.N. SEN, J.] 179
5. Whether there was any amount in cash in Mahalaxmi A
room belonging to the family and if so, how llllch?
6. Whether there were any ornaments and jewellary
belonging to the joint family? If so, in whose posses-
sion and custody are such ornaments lying and what is
the value of such ornaments? B
It is to be noted that during the pendency of the proceedings in
the Court relating to partition of the joint family properties
the managing agency agreement had come to an end and it has also
become inoperative by virtue of the provisions of law. The
plaintiff Bhagwant was the managing agent on the basis of the C
managing agency agreement and thereafter he had been appointed as
the managing director of the company. The learned trial judge .on
the question of the remuneration paid to the plaintiff as
managing agent on the basis of the managing agency agreement and
the fees paid to him as the director of the company has held in
favour of the plaintiff that these are the personal incomes of D
the plaintiff and do not belong to the joint family. The learned
trial Judge also held in favour of the plaintiff on the question
of cash money belonging to the joint family found in the
Mahalaxmi room and also on the question of accountability of the
defendants in respect of the joint family business. The High
Court in appeal has held that the income receiveo by the E
plaintiff as managing agent and as Managing director of the
company could not be considered to be the personal property of
the plaintiff and they belonged to the joint family and the High
Court has reversed the decision of the trial Judge on this
question. On various other questions also, the High Court has
held in favour of the defendants reversing' the decision of the
Trial Court. The correctness of the High Court judgment is F
questioned by the plaintiff in the appeals.
The principal controversy between the parties relates to
the question whether the rellllneration paid to the plaintiff
Bhagwant by the company as the Managing Agent and also as the
Managing Director is his personal property or whether the same G
forms as part of the joint family property. The contention of the
plaintiff-appellant Bhagwant is that the rellllneration received by
him for acting as Managing Agent and also as Managing Director of
the company is his persoanal income and cannot be considered to
belong to the joint family, whereas it is the case of the
defendant No. 2 Dattatraya and the heirs of the Defendant No. 1
Gopal and that all such remuneration received by the plaintiff H
180 SUPREME COURT REPORTS [1985] SUPP.3 S.C.R.
!lllSt belong to the joint family and must be held to constitute
A part of the joint family propertie•· They further contend that
the shares in the company subsl!quantly purcha&ed by the members
of the plaintiff's family mu•t alao be held to belong to the
joint family. As this happens to be the most important question
which has been urged at length before llB, we propose to deal with
this question in the first place. In our view it will be appro-
B priate to consider this question under two separate heads,
namely, (1) the remuneration received by the plaintiff Bhagwant
as managing agent and (2) rem.merations received by him as
managing director. We firot propose to take up the question
whether the remuneration received by the plaintiff from the
company as managing agent, is his personal income or the same
constitutes a part of the joint family.property.
c
For a proper appreciation of this que•tion it is necessary
to consider some broad facts which are not in serious dispute. •
A partnership agreement wa• entered into on the 3rd of
January, 1923 between defendant No. 2 Dattatraya, plaintiff
Bhagwant, one Ramchandra Moreshwar Sane, one Moolchand Jotirzm
D Baldote, one Nemchand Shivram Baldote and one Ganoba Andoba
Gavane to start a mill by the name 'The lokmanya Mills Bars<>
Limited' as promoters and agents of the said mills on terms and
conditions set out in the deed of partnerhsip dated 3rd January,
1923. This deed of partnership which is not in dispute and which
has been exhibited in the suit provides :-
E
"An agreement dated 3rd of the month of January, 1923.
We, Dattatraya Vishwanath Sulakhe, Caste Brahnin,
aged 37, profession trader, resident of Barsi and
llhagwant Pandharinath Sulakhe, caste Brahmin, age 33,
profession pleader, resident of Barsi, and Ramchandra
F Moreshwar Sane, caste Brahmin, age 64 profession
pleader, resident of llarsi and Moolchand Jotiram
Baldote, caste Marwari, resident of Barsi age 48,
profession trade, and Nemc.hand Shivaram Baldote, caste
Marwari, age 39, profession trade, resident of Barsi,
and Ganoba Andoba Gavane, caste Maratha, age 58
G profession agriculturist resident of Pangaon, Taluka
Barsi, Distt~ Sholaput, all of us make an ~greement as
follows :-
We all of us have agreed and decided between us on
29th November, 1922 to start a mill by name 'The
H
BHAGIANT P.S\JLAKHE v. DIGAMBAR GOPAL S\JLAKHE [A.N. SEN, J.] 181
Lokamanya Mills Barsi Limited'. The following are the A
terms of agteeme!).t·, ~hat we have agreed to, between us
all as the promoters.agents of the Mills.
l. The agency firm should be named as 'Sulakhe & Co. 1
and the agreement of this firm are t:o be in force and
existence for the period of 35 years from the date of B
registration of the said company.
2. Messers. Dattatraya, Vishwanath Sulakhe and
Bhagwant Pandharinath Sulakhe should joini:ly contri-
bute towards the purchase of shares of tht! value of
Rs.40,625 (forty thousand six hundred and twenty C
five). Mr. Moolchand Jotiram should purchase in his
name shares of a value of Rs. 25, 000 (twenty five
thousand) , Namchand Shivram should purchase in his
name shares of the value of Rs.9375 (nine thousand
three hundred seventy five) and Ganoba Andoba Gavane
should purchase in his name shares of the '?alue of D
Rs.25,000 (twenty five thousand) and Ramchandra
Moreshwar Sane should purchase in his name share of
the value of Rs.3000 (Rupees three thousand). The
above named persons, or in case of their death, or if
they become incapable on account of some illness or if
they have been unable to purchase the said shares or E
have been unable to pay further instalments after
purchase of. the said shares on account of some
dificulty, their heirs should as stated above purchase
the sharea or pay the amount of further in2talm.ents.
3. After .the shares are purchased as stated in the
foregoing clause, the agents are to get 10% conmission F
on the net profit earned by the Lokamanya Mills Barsi
Limited. Out of this 10% cmmission l/l/2% amount is
to be paid t~ a cOlllldttee appointed in that behalf for
the purpose of spending that amount over public
charitable purposes and the remaining 8/1/2%
commission is agreed to be distributed as follows:- G
1. Messrs D.V. Sulakhe & B.P. Sulakhe to get 3/1/4%
2. Moolchand Jotiram - 2%
3. Ganoba Andoba Gavane - 2%
H
182 .SUPREME COURT REPORTS [1985] SUPP.3 s.c.R.
A 4. Nemchand Shivaram - 3/4%
5. Ramc~.andra Moreshwar Sane - 1/27.
The total amount of 8/1/2% is to be thus distributed.
Jl 4. The amount of profits is to be distributed as
stated in the foregoing clause, after it has been
received by the Managing Agents from the company. If
any partner or his heirs had not purchased the shares
originally or not paid amount of further instalments
after allotment on account of some inability stated in
the last foregoing clause 2, he will lose his share in
c the agency firm and his share is to be distributed
among the remaining partners in proportion to the
capital contributed by each of them. The partners IlllSt
keep in tact their shares for the period of five years
from the date of allotment. The partners have no right
tJ dispose of or mortgage their share within that
period of five years. If any of the partners fails to
D do so, he stands to lose his interest in t~e
partnership.
5. The agents firm is entitled to receive 2-1/2%
commission on the amounts of expenditure which the
company may incur towards the construction of
E buildings, purchase of machinery and other
necessaries, purchase of lands and other materials.
Out of the amounts so received, an amount of 1-1/2% is
to be paid towards public charitable purposes and the
remaining amount is to be distributed among the
partners in proportion to their shares described
F above• This amount is to be recei·1ed in the first
instance by the managing agents, and after setting a
part the amount of charity, he has to distribute the
balance amongst the partners in proportion of their
respective shares.
G 6. All the responsibility 0£ all work of whatever
kind to be performed by the managing agents firm such
as, raising of capital of the said mill running of the
mill, keeping of accounts, purchase of land, purchase
of machinery, appointing and remov.:l.ng of servants,
solicitors, auditors, banker, agents, brokers, and
H underwriters to keep accounts and prepare the reports
BHAGWANT P.SULAKHE v. DIGAMBAR GOPAL· SULAKllE [A.N. SEN, J.] 183
of the company and do all such other as the managing A
agents are required to do shall be on the managing
agent Mr. n.v. Sulakhe or his family. His family means
.the joint family of three persons viz: D.V. Sulakhe,
B.P •. Sulakhe and Gopal Pandharinath Sulakhe. The other
partners have nothing to do with the above work and
they have no right ot interfere with the power of the B
managing agents. The company will hold only the
managing agent responsible for his faults and the
other partners are not to be responsible to the
company.
7. The preliminary expenses of the mill will be about c
Rs.8000 (eight thousand). This &m)unt is to be paid to
the managing agent Mr. n.v. Sulakhe, by all the
partners except Mr. Sane, in proportion to their
respective shares. The managing agent is to return
this maount of expenditure to the partners form the
proceeds of the shares of the company that may be D
collected after its registration.
8. Some one person from among the family of Sulakhe
described above shall always be an, Ex-offici1>
Director. Some other person from amongst the agency
firm, or some other person , from 'outside elected by E
majority, and who is not in the agency firm shall be a
special director, but he shall not be in office
permanently. The term of his office will be as of the
other directors and he shall be eligible for
re-election. Some persotr from the finn or some one
from outside according to the opinion ot the firm
shall always be &m)ng the directors ••
F
9. No partner of the agent's firm, shall except wi.th
the leave of the directors, enter in any other agency
firm of a mill of the like tenure and situate within
the limits of Barsi Taluka. If any one of them does so
enter he will stand to lose his share in this G
partnership firm of this mill.
10. A partner of the agent's firm shall be entitled as
any other outsider to do business with the company and
enter into private transactions on reasonable terms
and to take commissioo from the company.
H
184 SUPREME COURT REPORTS [1985] SUPP.3 s.c.R.
A 11. From the date the share, of the value of
Rs.7,00,000 (seven lacs) are sold the managing agent
Mr. Sulakhe shall get a re!Lilneration (salary) of
Rs.600 per month. The other partners or the charity
fund shall have no interest whatsoever therein. From
the time when . products shall be begun to be
B manufactured in the mill, the managing agents are to
receive a remuneration of Rs.1000 (salary) every
month. Out of that amount Rs.600 are to be taken by
the managing agent every 100nth and the remaini.ng
amount of Rs.400 (Four hundred) is to be divided among
all the partners of the agency firm including Sulakhe,
in proportion to their respective shares (till the
c profits oI the company come to 10% by the way of
divident) so that the partners may get an interest
over their amounts at the rate of 5% per annum, but
from and after the date when the dividend of the
company shall be distributed at the rate of 10% on the
amount of shares 1 the other partners shall have no
right over the said sum of Rs.400 (Four hundred) to be
D received every month, and this amount is to be taken
by the managing agent Mr. Sulakhe as the increase in
his remuneration (salary). After that period other
partners will have no claim whatever against the said
amount of Rs.400.
E 12. The rights of the partners in the ageucy firm are
to pass to their respective lineal descendants or to
their respective assignees after the expiration of the
period of 5 years allotment. The right of a p;;rtner
shall go to other persons by partition among his
family or by heirship and if such persons to whom the
F rights of a partner in the agency firm are to pass,
are more than one, they shall unanimously elect some
one from among themselves for the purpose. If there
is disagreement between them the board o~ directors
shall choose some such person from among them and the
person so chosen shall take interest in the agency
G firm. The company or the managing agents shall not
take cog~izance of the other sub--~artners ..
The terms vf agreement between us all are as above,
and for that this agreement (in wr1ting) 1 is prepared
and is signed by us all and a copy of this agreement
i.e. a counter part of it l.s delivered to each of us
BHAGWANT P.SlJLAKllE v. DIGAMBAR GOPAL SULAKHE [A.N. SEN, J. J 185
all. This agreement made and signed on the 3rd of the A
month of January in the year of 1923, and it is iu the
handwriting of Sarbootam Annaji l'.adhekar, a resident
of Barshi.
Sd/- Datartraya Vishwanath Sulakhe
Sd/- Bhagwant Pandharinath Sulakhe B
Sd/- Ramchar.dra Moreshwar Sane •
Sd/- Moolchand Jotiram Marwadi
Nemchand Shivaram Marwadi
Ganoba Andoba Gavane.
Tne said partnership firm of M/s. Sulakhe & ,Co. c
consisting of the aforesaid six partners entered into
a managing agency agreement on 5. 2.1923 with the
company. Relevant provisions of the managing agency
agreement dated 5.2.1923 may be set out:-
1. Tne Agents will faithfully and with best of their D
ability perform the offices of the Secretaries,
Treasurers and Agents of the Company for purposes of
carrying on the best advantage the business of the
company so long as the company and the agents shall
continue to carry on their respective business (unless
prevented from so doing in man11er hereinafter E
mentioned) at the remuneration upon the terms and
subject to the conditions hereinafter particularly
mentioned and described.
•
2.. lnconsideration of the agreement hereinafter
contained on the part of the Agents and in further
consideration of the Agents having advanced the F
company - the Company hereby promise and agree with
the Agents that the agent shall be the Secretaries,
Treasurers and Agents of the Company for the period of
35 years from the date of these presents unless
prevented from so doing in manner hereinafter mention-
ed PROVIDED Al.WAY$ A_>;D IT IS HEREBY AGREED AND G
DECLARED that after the lapse of the said period of 35
years the Agents shall not be removed from the office
as the Secretaries, Treasurers and Agents but shall
carry on their respective business unless found guilty
cf fraud in the management of the.tr duties as
Secretaries, Treasurers and Agents of t~e Company.
H
186 SUPREME COURT REPORTS [1985] SUPP.3 s.c.R.
Clause 2A. "The Managing Agents shall not transfer or
A
assign or cause to be transferred or assign the
present Managing Agency Agreement of the Company their
right, title and interest therein to any person or
persons firm or Company during the continuation of the
security created by the Indenture of Mortgage dated
B
the 29th day of December 1950 without first obtaining
the approval in writing of the corporation to any such
transfer or assignment and the Company shall not cause
or permit or suffer to be transferred or assigned the
present Managing Agency Agreement of the Company or
the right, title and interest of the Managing Agents
therein to any other person or persons or firm or
Company during the continuance of the said security
c without first obtaining the approval in writing of the
Corporation to such transfer or assignment nor shall
the Company appoint any other person or persons or
firm or Company to be the Managing Agents of the
company during the continuance of th said security
without first obtaining the approval in writin of the
Corporation to such appointment."
D
(Amended as per Special resolution No. 2 in Extra-
ordinary general meeting held on 18.3.1951)
2. A Commission at the rate of 10% per anmun on the
annual net profits of the said company atter making
E
all allowance and deductions from revenue for interest
on loans and deposits and working expenses chargeable
against profits without making any deductions for or
in respect of interest on debentures Income Tax, Super
Tax or any other tax based on prof its or of any 811Xlunt
carried to insurance, reserve, depreciation or sinking
F fund or to any other special fund or in respect of any
expenditure on capital amount or on the wages or
remuneration which shall be payable to Bankers
Auditor, Solicitors, Mukadams, Clerks, Brokers, Under-
writers or any other officers or employees who may be
employed by the said firm for or on behalf of the
G Company or for carrying on and conducting the business
of the Company and for any rent, cost of postage,
telegram printing stationery or other expenses or
travelling expenses incurred and to be paid by the
said Company.
H
BHAGW:ANT P.SULAKHE v. DIGAMBAR GOPAL SULAKHE [A.N. SEN, J.] 187
A
"The Company shall not pay and the Managing Agents
shall not receive any commission during the pendency
of the loan from Indust.rial Finance Corporation of
India as provided above in Clause 3 without previous
consent in writing of the Corporation· unles• the
interest and instalment of principal sum due ia any B
year as provided by the Indenture of mortgase dated
the 29th December 1950 have been duly paid by the
Company to the Corporation."
(Amended as per Special Resolution No. 2 in Extra-
ordinary general meeting held on 18.3.1951.) C
Clause 4. The Agents are entitled to two and half
percent conmission on all sum or sums expended towards
the purchase of the land, construction of the mill
premises, including outhouses etc.~ the cost price of
Machinery, appliances and initial stock in trade D
necessary in establishing and starting the mill.
"But .during the pendency at the said loan, provisions
contained in clause 4 above relat.ing to payment of
commission to the Managing Agents on the Capital
Expenditure shall remain suspended." E
(Amended as per special Resolution No. 2, in extra-
ordinary general meeting held on 18.3.1951.)
5. Out of the Commission of 10 per cent and out of the
amount of 2-1/2 per cent commission as stated above
Agents .will have to set apart for public charitable F
purposes 1-1/2 per cent of their gains. The purpose
shall be uplift of the masses in the Bombsy Presi-
dency, without any distinction of caste, creed or
religion in matters social, educational, economic er
national as the conmittee of three persons, two of
whom shall be unconnected with the firm of the Agency G
and one from the Agency firm. The first such members
shall be N.C. Kelkar Esqr. B.A. LL.B. Editor of Kesari
Poona. M.R. Jayalkar Esqr. Bar-at-law, Bombsy and R.M.
Sane Esqr. pleader Barsi.
6. On the death or retirement of any of the said
members their place or places shall be filled in by H
the remaining members of the Committee, or if he or
188 SUPREME COURT REPORTS [1985) SUPP;3 s.c.R.
they fail or neglect to make the appointment as afore-
said within a reasonable time, such appointment is to
be made by the Board of Directors strictly conforming
to the condition stated above that the majority of the
colIIll1ittee should \le independent and unconnected with
B
the firm of the Agency.
7 • The comnission due to the Agency shall be payable
yearly iU111ediately when the accounts are made up.
8. After deducting the amount from the comnission for
public purposes as stated above 'the remaining amount
c will be received by Mr. D.V. Sulakhe and his succes-
sors and divided among the members of the firm as
agreed upon between them.
9. The Directors are authorised to increase the am:>unt
of reftl.!neration or the percentage of connn.ission on
profits or to allow any bonus if· they thl.nk that the
profits of the concern are encouraging enough to
D
grant an increase.
Clause 9. "The said clause shall remain modified to
the extent that "so long as any moneys due to the
Corporation under the Indenture of Mortgage dated 29th
E
day of December 1950 remain unpaid, no payments what-
soever under this clause shall be made to the Managing
Agent without first obtaining the approval in writing
of the Corporation to such payment."
(Amended as per Special Resolution No. 2 in Extra-
F
ordinary general meeting held on 18.3.1951)
10. The reooneration of the Agents' firm shall be
Rs. 600 per month from the date of allotment and
Rs .1000 per month from the date when products are
begun to be manufactured and the said re1D1neration is
G
always to .be received from the Company by Mr. D.V.
Sulakhe or his successors.
11. If the said firm or any member of the firm shall
at any time hereinafter act as Mucadams or brokers of
the Company or as selling agents of the Company's yarn
H or cloth or for purchase of other articles such as
coal, wool machinery oil-seeds or other products or
BHAGWANT P.SULAKHE v •. DIGAMBAR GOPAL SULAKHE [A.N. SEN, J.] 189
A
other things required for the business of the Company
they shall be paid such commission or additional
rem.meration as shall be agreed to between them and
the directors.
The said cl""'""shall remain rodified to the extent B
that "so long a• any roneys due to the Corporation
under the Indenture of Mortgage dated 29th day of
December 1950 remain unpaid, no payments whatsoever
under the clause shall be made to the Managing Agent
without first obtaining the appr9val in writing of the
Corporation to such payment." c
(Amended as per special Resolution No. 2 in Extra-
ordinary general meeting held on 18.3.1951)
12. Until the Company is registered all expenses of
whatever nature of and incidental to the prorotion D
thereof shall be defrayed in the first instance by the
fil'11l of Agency as agreed between them. The sum or sums
os expended will be duly refunded to the afore.aid
firm when the first call in respect of the oubacribed
shares of the Company is paid in and realized.
E
· 13. All work of whatsoever kind which is usually
attended to or done by the managing agents in connec-
tion with the business of the Company by virtue of the
Articles of Association of the Company such as raising
the necessary capital, ereotion of the mill premises
employment of staff, establishment of Ageocieo, buying
. of raw materials, dilposiq; of the fipished preducts F
of the Mill, keeping regul.ar accounts preparing the
statutory reports &c. &c. will be attended to and all
powers of the managing Agents shall be vasted in and
exercised by Mr. D.V. Sulakhe alone or in case of bis
retirement or death by Mr. B.P; Sulakbe if he survives
him, or by a person of the Sulakhe family nominated G
unanirously by all the surviving major male members of
the family of Messrs. o.v. Sulakhe, B.P; Sulakhe and
Gopal P; Sulakhe and in case of disagreement between
these members in nominating a member from the Sulakhe
family, the board of directors will choose some one
from the said Sulakhe family for acting as a Managing
Agent on behalf of the firm. There will be no inter- H
190 SUPREME COURT REPORTS [1985] SUPP.3 s.c.R.
A ference or obstruction from any other member of the
Agency Firm who will have neither any voice nor
control of any kind over the matters of management of
the business of the company such as those enumerated
above. All the responsibility with regard to such 'work
lies solely and entirely on the said D. V. Sulakhe and
B his successor or successors as aforesaid.
14. The other partners of the Agency firm who have no
right to take any part in the management of the Agency
business or, no right to interfere with such management
will not be liable in any way whatsoever to the
Company for any acts of commission or omission,
c misfeasance, malfeasance fraud, misappropriation or
any other act or acts of the said D.V. Sulakhe and his
successors. The company will look to and hold
responsible the said D· V. Sulakhe and his successors +
aforesaid in respect of the management of the Agency
business in all branches and in all its aspects.
D 15. Either D.V. Sulakhe or B.P. Sulakhe may act as
Ex-officio Director and after them some person from
the Sulakhe family shall be entitled to act as Ex--
officio Director and he will not be liable to retire-
ment or he will not be removed from such office.
E !SA. The firm of Agency has always a right of appoint-
ing any one of them or outsider as a special Director
and he will be liable to retire as other Directors,
but he is eligible for re-election by the firm of
Agency.
F
20. The shares of the profits of the Agency business
to which each partner is entitled according to their
mutual agreement will pass to their direct lineal
G descendants by way of an ancestral and hereditary
right unless alienated or disposed of by such partner
during his life time. If the said share devolves on
more than one of such lineal descendants by way of
inheritance or otherwise they (they said descendants)
should elect one of them to be the member of the firm
H on their behalf. If they cannot agree among themselves
for the purpose of such election the Board of
BHAGWANT P:SUJ..AKHE v. DIGAMBAR GOPAL SUJ..AKHE [A.N. SEN, J.] 191
Directors has the right to elect one of them to be A
their representative in the Agency Firm for receiving
commission; neither ·the Board of Directors nor t~e
Agents are bound to recognise the rights of the other
heirs and legal representatives as aforesaid.
Two of the relevant Articles namely, Art. 113A and B
Art. 146 of the Articles of Association may be noted. Art.113A
reads:-
"M/s. D.v. or B.P; or Gopal p; Sulakhe or any other
menibers of the Sulakhe family whc may be chosen for
that purpose in terms of the agency agreement shall be C
an ex-officio director of the company. Agents firm.
have, however, subject to the terms of the agency
agreement to appoint any other person whether a member
of the· firm or not, as a special director. The person
appointed as special director as aforesaid shall after
the lapse of one year, retire but be eligible for D
re-election."
Art. 146 of the Articles of Association provides as follows:-
"The firm of M/s. Sulakhe & Co. and the partners or
members for the time being constituting the said firm E
and their successors ln business notwithstanding any
change in the constitution or in the name or style of
the said firm by the death, retirement or insolvancy
of any member of the said firm shall be and they are
hereby appointed the managing agency of the company
for the period and upon the terms, provisions and
conditions set out in the agreement referred to in F
article hereof. Such agreement may be modified in such
manner as may be mutually agreed between the firm and
the directors and the Board is hereby authorised to
execute the said agreement on behalf of the company."
It has to be borne in mind that at the time when the company G
was incorporated and its articles were adopted and also at the
time when the company entered into the managing agency agreement
with Sulakhe & Co. and when the deed of partnership of the firm
of Sulakhe & Co. was executed, the plaintiff Bhagwant and the
defendant No. 2 Dattatraya were admittedly the members of the
joint family and no disputed of any kind had arisen 1l!IKlngst the
members of the joint family. It is not in dispute that 325 shares H
A
192 SUPREME COURT REPORTS [1985] SUPP.3 s.c.R.
which were initially purchased in the company - 200 in the name
•
of th1.~ de..tendant No. 2 Dattatraya and 125 in the name of the
plaint.Lff l:Shagwant - were paid for by the joint family out of the ' lil
joint fomi ly funds. It is also an admitted position that the
entire a~ount of remuneration which was received by the defendant
No. 2 Dattatraya and plaintiff Bhagwant not only on account of
B their shares of commission under the manag.ing agency agreement on
the basis of the partnership deed but also on account of the
Directors' fees paid to them and also on account of the salary
paid to defendant No.2 Dattatraya who acted as the managing agent
on behalf of the firm was treated as joint family property.
Defendant No. 2 Dattatraya had continued to be the managing agent
of the co~pany till 1935. It is also not in dispute that when the
c plaintiff Bhagwant took over as the managing agent from defendant
No. 2 Dattatraya in 1935, the position continued to be the same
and the remuneration received by him formed part of the joint
family income tHl the dispute ra::.sed by palintiff Bhagwant by
his letter dated 15th July, 1941 to the defendant No. 2
Dattatraya. The agreement of partnership clearly indicates that
the plaintiff Hhagwant and the defendant No. 2 Dattatraya beca.~e
D members of the firm M/ s. Sulakhe & Co. which was appointed the
managing agent of the company on the basis of the managing agency
agreement, representing the joint family and for the benefit of
the joint family. Since the establishment of the partnership firm
of Sulakhe & Co. on the 3rd day of January, 1923 and since this
finn's appointment as the managing agent of the company under the
E managing agency agreement dated 5-2-1923 t.ill the di.spute was
raised by the plaintiff in July, 1941 this position appears to be
accepted by all without any kind of reservation. All monies
received by the plaintiff Bhagwant and defendant No. 2 Dattatraya
from the company, we.re treated as joint fo.mily income , were
ente.red i.n the books of account of joint faini ly an<l were shown in
F income tax returns to be the income of the joint family.
'The facts and circUmstances of this ~a8~ clearly indicate
that in the partnership agreement and the managing agency
agreem~nt in whtch the plaintiff Bhagwant iin<l defendant No. 2
Dattatraya were parties, they had become parties on behalf of the
G joint family representing the joi11t family and the entire
remuneration received by them, whether by way of commission or
the directors' fees or by way of salary for having acted as the
managing agent, was joint family income. On the materials on
record we have no hesitation in coming to the conclusion that
the plaiRtiff lihagwant and the defendant No. 2 Dattatraya became
H the partners of Sulakhe & Co. which was appointed as the managing
BHAGWANT P;SULAKHE v. DIGAMBAR GOPAL SULAKHE [A.N. SEN, J.] 193
agent of the company on the basis of the Managing Agency A
Agreement for the benefit of the joint family and their interest
in the partnership firm and Managing Agency was a part of joint
family assets and whatever income was earned either by the
plaintiff Bhagwant or by the defendant No. 2 Dattatraya on the
basis of the managing agency agreement belongs to the joint
family and formed part of the joint family property. As the B
entire income coming in the hands of the plaintiff Bhagwant or
defendant No. 2 Dattatraya on the basis of the partnership
agreement and the managing agency agreement, whether on account
of commsission or by way of directors' fees or renuneration for
acting as the managing agent, belonged to the joint family and
formed part of the joint family property, the same position llllSt c
necessarily continue in the eye oi;.law so long as the partnership
agreement and the managing agency agreement continued. The
plaintiff by seeking to bring about a severance in the status of
the joint family, cannot deprive the joint family of this
property and the income derived on the basis of the managing
agency agreement continues to remain the property of the joint D
family, so long as this joint family asset is not partitioned and
otherwise continues to remain in existence. We have, therefore,
no hesitation in holding that the reauneration received by the
plaintiff Bhagwant from the company for acting as the managing
agent on the basis of the managing agency agreement llllst
necessarily be held to be the joint family property - and the E
plaintiff Bhagwant cannot claim the same to be his personal
property.
Mr. Tarkunde had addressed a novel and interesting argument
that even if the- income detived by the plaintiff Bhagwant from
the company by way of renuneration for acting as the managing
agent can be considered to be the income of the joint family, F
there should be an apportionment of this income between the
plaintiff and the joint family, as the plaintiff alone had
rendered all services . on behalf of the family and he should,
therefore, be held entitled to retain a part thereof for himself
for the services rendered by him. This argument of Mr· Tarkunde
sounds attract!ve and my raise an interesting question in an G
appropriate case. But in the facts and circumstances of this case
and taking into consideration the true nature of the partnership
and the Managing Agency Agreement.and the conduct of the parties,
we are of the opinion that there is no 'merit in the plaintiff's
claim for retaining any part of the rellllneration received .by him
from the company for the services rendered ·by him. The entire
H
income arising out of the managing agency agreement and accruing
194 SUPREME COURT REPORTS [1985] SUPP.3 s.c,R.
A to the two members of the family, namely, the plaintiff Bhagwant
and the defendant No. 2 Dattatraya who might have rendered the
services, had been earned for and on behalf of the family and as
representatives of the joint family. The defendant No. 2
Dattatraya had continued as the managing agent for a nwnber of
years and there has been no question of apportionment of any
B income derived by him as his remunerations for the services
rendered by him as managing agent. The character of any joint
family property does not change with the severance of the status
of the joint family and a joint family property continues to
retain its joint family character so long as the joint family
property is in existance and is not partitioned amongst the co-
sharers. By an unilateral act it is not open to any iocmber of the
C Joint Family to convert any• joint family property into his
personal property.
We now proceed to consider whether the remunerations receiv-
ed by the plaintiff Bhagwant from the company as the Managing
Director of the Company belonged to the joint family or not. The
position of the Managing Director is entirely different from the
D position of the Managing Agent on the basis of the Managing
Agency Agreement between the firm of Sulakhe & Co. and the
company and the position of the Managing Director stands entirely
on a different footing. At the time the plaintiff was appointed
the Managing Director of the company on 19.10.1957 with effect
from 16th January, 1957, there was complete disruption of the
E joint family and there was no joint family in existence. In fact
at that point of time litigation between the parties was going
on. By virtue of the incorporation of S. 87A in the Indian
Companies Act by amendment in 1937 the duration of any Managing
Agency Agreement was limited to a period of 20 years only at a
time though on the expiry of the period of 20 years the Managing
F Agency Agreement could be renewed by virtue of the provisions
contained in Sub-Sec. (2) of s. 87A of the Act. In view of the
change brought about with regard to the duration of the Managing
Agency Agreement at a time the Managing agency Agreement
automati2l.lly came to an end on the expiry of the period of 20
years and though there was the provision with regard to the
G renewal of the Managing Agency Agreement it appears that the
Managing Agency Agreement was not renewed. It appears that the
lloard of Directors of the Company had passed a resolution on
28. 6. 56 for the renewal of the Managing Agency Agreement. The
Managing Agency Agreement was not ultimately renewed and it does
not appear that any action was taken by the firm of Sulakhe & Co.
tt or any partner thereof for obtaining renewal of the Managing
BHAGWANT P.SULAKHE v. DIGAMBAR GOPAL SULAK!ill ffi.·"'· SEN, J.] 195
Agency ,>.greement for a further term after 1957. On the other hand A
it appears that the company had amended its articles of associa-
tion and had proceeded to appoint the plaintiff Bhagwant as the
Managing Director. It is significant to note that no partner of
the firm of Sulakhe & Co. which had been appointed as the
Managing Agent of the Co11ljlany or no member of the joint family
took any steps for challenging the validity of ,the amendment of B
the articles of association or the validity of the appointment of
the plaintiff as the Managing Director of the Comapny.
Before we proceed to decide whether the remuneration
received by the plaintiff as the Managing Director of the Company
can be considered to be part. of the joint family property, it c
will be appropriate to refer to a decision of this Court for
proper appreciation of the legal position. Though a number of
decisions had been cited from the Bar, we do not consider it
necessary to refer to all the decisions, as in our view the legal
position has been very lucidly and clearly discussed in the case
of Baj Kumar Singh Hokum <hmdji v. Comnissioner of Income-Tax D
Madhya l'radesp, [1971] 1 S.C.R. 748 by this Court after reviewing
the earlier decisions on this quest~on. After considering various
earlier decisions, this Court at page 758-759 observed:-
"At first sight there appears to be conflict between
the two lines of decisions namely Kalu Babu •a· case, E
Mathura Praaad's case; two Illanwatey's cases and
Krishna Iyer's case on one side Palaniappa Chettiar's
case, Dakappa 's case and n.c. Shah's case on the
other. The line that demarcates these two lines of
decisions is not very distinct but on a closer exami-
nRtion that line cane be located. In order to find out
whether a given income is that of the· person to whom F
it was purported to have been given or that of his
family, several tests have been enumerated in the
aforementioned decisions but none of them excepting
Kalu Ba.bu's case makes reference to the observations
of Lord Summer in Gokal Chmd's case that 'in
considering whether gains are partible, there is no G
valid distinction between the direct use of the joint
family funds and a sue which q•ialifies the member to
make the gains by his own efforts.' We think that that
principle is no more valid. The other tests enumerated
are;-
(1) Whether the income received by a co-parcener of a H
Hindu undivided famlly as remuneration had any real
' a-
196 SUPl(EME COURT RlhPORTS [1985] SUPP.3 s.c.R.
A connection with the investment of the joint family
funds;
(2) Whether the income received was directly related
to any utilization of family assets;
B
(3) Whether the family had suffered any detriment in
the process of realization of the income; and
)
(4) Whether the income was received with the aid and
assistance of the family fu!)ds;
In our opinion form these subsidiary principles, the
c broader principle that emerges is whether the remu-
neration received by the coparcener in substance
though not in form was but one of the modes of return
made to the family because of the investment of the
family funds in the business or whether i t was a
compensation made for the services rendered by the
individual coparcener. If it is the former, it is an
D income of the Hindu undivided family but if it is that
latter then it is the income of the individual
coparcener. If the income was essentially earned as a
result of the funds invested the fact that a
coparcener has rendered some service would not change
the character of the receipt. But if on the other hand
E it is essentially a remuneration for the services
rendered by a coparcener, the circumstance that his
services were availed of because of the reason that he
was a member of the family which had invested funds in
that business or that he had obtained the qualifi -
cation shares from out of the family funds would not
F make the receipt, the income of the Hindu undivided
famly."
This decision was no doubt given in a case arising out of an
Income-Tax matter. The various cases which have been referred in
the judgment also arise out of Income-tax matters and they miinly
G deal with the question of determination of the nature and
character of remuneration received by a member of the family, -
whether the remuneration so received is income of the joint
family property or is the personal income of the individual,-for
the prupose of assessment of income-tax on such income. It is no
doubt true that the observations which we have earlier quoted
H have been made on the nature and character of the income received
by way of remuneration by a member of the joint family while
BHl1.GWANT p;sUl.AKHE v. DIGAMBAR GOPAL.SULAKllE [A.N. SEN, J.] 197
considering the question of assessment of lnco~-tax on such A
income; but, in our opinion, the legal principles enunciated in
this decision for determining the true nature and character of
the rellUneration received by any member of the joint family apply
equally in deciding the nature and character of the rellllneration
received by the Managing Director in the instant case. This
decision, to our mind, correctly lays down the tests which have B
to be considered for deciding the question whether the income
derived by any member of the joint family by way of re1I11neration
as managing Director is his personal income or is the income of
the joint family.
In the facts and circumstances of this case_, we have no c
hesitation in coming to the conclusion that the rerruneretion
received by the plaintiff Bhag'<fant as Managing Director of the
company from the company is his personal income and cannot be
considered to be the income of the joint family. At the time the
plaintiff Bhagwant became the Managing Director of the Company,
the joint family had completely disrupted and it cannot be said D
that the plaintiff was the member of any joint family of which
the defendants were also members. In fact, litigation between the
parties was going on. Though the defendant No. 2 Dattatraya was
also a member of the managing agency firm Sulakhe and Co., it
does not appear that he took any steps for reappointment of the
said firm as the managing agent. There were four outside partners E
interested in the Managing Agency Agreement and it does not
appear that the defendant Dattatraya or the other outside
partners of the managing agency firm Sulakhe & Co. had taken any
steps against the company for not renewing the managing agency
agreement. It is to be borne in mind that it was for the company
to renew the managing agency agreement. For the purpose of
appointing the plaintiff as the managing director, the articles F
of association of the company had to be amended and Art. 146A had
been incorporated in the Articles of Association by amendment. It
does not appear that defendant No. 2 Dattatraya or the other
outside partners of the managing agency firm Sulakhe & Co. or any
other shareholder of the company sought to prevent the company
from amending the articles of association or challenged the G
validity of the amendment of the articles. ·The appointment of
plaintiff Bhagwant as managing director after the amendment of
the Articles also does not appear to have been challenged by the
defendant No •. 2 Dattatraya or any of the other partners of the
managing agency firm. The termination of the managing agency
agreement with the partnership firm Sulakhe & Co. appears to have
been accepted by the members of the said firm including the H
198 SUPREME COURT REPORTS [1985] SUPP.3 s.c.R.
A -defendant No. 2 Dattatraya who alongwith the plaintiff Bhagwant
were partners of the firm representing the joint family. It is
also to be noted that in the partnership firm of Sulakhe & Co.
which was appointed the managing agent of the company on the
basis of the managing agency agreement, the iouc partners who did
not belong to the family held majority shares in the partnership
B althuugh by virtue of the agreement between the parties they had
agreed that either the plaintiff Bhagwant or defendant No. 2
Dattatraya would ac< as the managing agent of the company on
behalf of the managing agency firm and should receive the remu-
neration which would be paid to the managing agent acting as such
on behalf of the firm. These outside partners who held the major-
ity shares in the partnership firm of Sulakhe & Co· which nad
c been appointed and had been acting as the managing agent of the
company on the basis of the managing agency agreement, raised no
protests for not renewing managing agency for a further term,
though under Sub-section (2) of s. 87A of the amended provision,
the managing agency agreement which stood terminated in 1957,
could have been extended. It appears, therefore, that the major-
ity of the partners had lost interest in the renewal of the
D managing agency agreement. In any event, the undisputed facts
remain that the managing agency agreement was not renewed after
1957 and no action was taken against the company or anybody else
by the firm of Sulakhe & Co. which had been acting as the manag-
ing agent or by any partner thereof either for renewal of the
managing agency agreement or for not renewing the managing agency
E agreement. It also does not appear that the firm Sulakhe & Co· or
any of its partners took any action to prevent the company from
amending its articles and for appointing Bhagwant as the Managing
Director of the company. The facts and circumstances of the case
go to indicate that the partners•of the firm Sulakhe & Co. which
had been acting as the Managing Agent on the basis of the manag-
F ing agency agreement with the company accepted the termination of
the managing agency on the expiry of the term prescribed under
the amended law without any protest and did not seek to enforce
the right or renewal of the managing agency agreement or of any
other provision of the agreement. As the managing agency agree-
ment had ceased to exist at the time the plaintiff Bhagwant was
G appointed the Managing Director of the company and as at that
time there was no joint family of the plaintiff Bhagwant and the
defendants in existences, the plaintiff Bhagwant caooot be said
to have been appointed as the Managing Director of the company
either because of the Managing agency agre.ement or because of his
being a member of the joint family. The facts and circumstances
H make it clear that the partnership agreement or the managing
BHA~ANT P.SUl..AKllE v. DIGAMBAR GOPAL SUl..AKllE [A.N. SEN, J.] 199
agency agreement had no relevance to the appointment of the
plaintiff Bhagwant as the Managing .Director of the Company. As we A
have earlier indicated the company had initially contemplated to
renew the managing agency on the expiry of the term prescribed by
law and the Board of Directors had passed a resolution according-
ly. Subsequently, for reasons known to the company, the company
decided not to continue the managing agency agreement and decided
to appoint plaintiff llhagwant as the Managing Director of the B
company. For the purpose of appointing the plaintiff Bhagwant as
the Managing Director, :he company had to amend its Articles of
Asso~iation and the company, in fact, duly altered the Articles
of Association of the company. Neither the partnership firm of
Sulakhe & Co. which had been appointed as the Managing Agent of
the company and had been acting as such till the expiry of the c
term nor any partner thereof had taken any effective step for
renewal of the managing agency agreement or had made any effect-
ive protest for not reappointing the firm Sulakhe & Co. as the
managing agents of the firm and for appointing the plaintiff as
managing director of the ·company after having amended the
articles of association of the company. The facts and circumstan- D
ces of the case also do not go· to indicate that the appointment
of the plaintiff as mauaging director of the company was by way
of any return to the family because of the investments of the
family funds in the business of company. As earlier noticed the
joint family had purchased only 325 shares at the time of the
. managing agency agreement with the company and, in fact, other E
parties have invested a much larger amount in the parChase of
.shares. Taking into coD.sideration the total investment made in
I. the company by various 'parties it appears that the contribution
.of the joint family appears to be insignificant. It cannot,
therefore, be said that the appointment of the plaintiff as
'
Managing Director, at a time when there was complete disruption
of the joint family and the members of the family were fighting F
in Court, was by way of any return on the investment made by the
Joint family. It is.quite clear that. the plaintiff Bhagwant was
appointed as the Managing Director by the company for services to
be rendered by him, as the company might have been impressed by
his performance as the managing agent for a number of years.
Though undoubtedly the plaintiff llhagwant acted as the managing G
agent for and on behalf of the joirtt family and for benefit of
the joint family, yet what must have weighed with the company is
the kind of services rendered by him Lo the company. The company
was concerned with his services and not with the question whether
he was rendering the services for and on behalf of the family.
The plaintiff Bhagwant, was therefore appointed as the managing
H
200 SUPREME COURT REPORTS [1985] SUPP.3 s.c.R.
A director for the services rendered by him and for services to be
rendered by him. The remuneration which the company agreed to pay
to the plaintiff Bhagwant for acting as the managing director was
for the services to be rendered by him. This remuneration rust,
therefore, be the personal income of Bhagwant and does not belong
~o the joint family. The decisions of this Court and the
B principles enunciated by this Court which we have earlier noted
clearly support the view we have taken.
In facts and circumstances of this case there cart be no
question of the plaintiff Bhagwant being a trustee or acting as
the trustee for the benefit of the joint family in relation to
his appointment as the managing director of the company.
c
It has to be borne in mind that it was the partnership firm
of Sulakhe & Co. which was appointed as the managing agent of the
company and on the basis of the partnership agreement and the
managing agency agreement, the defendant No. 2 Dattatraya and
thereafter the plaintiff Bhagwant acted as the managing agent of
the company and was entitled to receive the remuneration from the
D company for acting as such managing agent. As we have already
noticed the partnership firm consisted of si::it members, four of
whom were outsiders and did not belong to the family. These four
outside members of the partnership firm had, in fact, held the
majority shares in the partnership. The defendant No. 2
Dattatraya and the plaintiff Bhagwant had become members of the
E partnership firm for and on behalf of the joint family and
representing the joint family interest. The firm had entered into
the Managing Agency agreement with the company. The managing f
agency of the company was that of the partnership firm in which
the four outside members with a majority of shares in the
partnership were interested and the managing agency firm cannot,
F therefore, be considered to be an asset of the joint family. It
was ·the interest of the defendant No. 2 and the plaintiff
Bhagwant in the managing agency firm on the basis of their shares
in the partnership which belonged to the joint family. Further-
more, the managing agency was an agreement between the company
and the partnership firm. It would no doubt be open to the
G partnership firm to ask for renewal of the managing agency agree-
ment and it would be equally open to the company to decide what
the company should do. We have earlier observed that on the
expiry of the term of the managing agency by virtu« of the
changes introduced in the Companies Act no effective steps appear
to have been taken by the firm Sulakhe & Co. which acted as the
H managing agent or any partner thereof for renewal of the managing
BHACMANT P.SULAKHE v. DIGAMBAR GOPAL SULAKHE [A.N. SEN, J.] 201
agency agreement.. The alterations of the articles of association A
of the company and the appointment of the plaintiff as managing
director after the amendment of the articles also went without
any effective challenge by the firm of Sulakhe & Co. or any
partner thereof or by any share holder of the company. The effect
of not renewing the agreement was that the interest of the
partnership firm of Sulakhe & Co. in the company as the managing B
agent thereof with all the rights and privileges on the basis of
the said agreement came to an end. With the termination of the
managing agency agreement the interest of the joint family in the
managing agency on the footing that two of the members of the
joint family, namely, defendant No. 2 Dattatraya and plaintiff
Bhagwant were as partners of the firm associated with the C
managing agency and were acting as the managing agent on the
basis of the partnership agreement and the managing agency agree-
ment also ceased. As we have earlier observed, the appointment of
the plaintiff Bhagwant as managing director was not because of
any special investment by the joint family in the company and the
remuneration which was agreed to be paid by the company to the D
plaintiff Bhagwant for acting as the managing Director of the
company was not by way of any retuJn on the investment of the
joint family in the company and the plaintiff Bhagwant became
entitled in his individual capacity as the managing director of
the company to the remuneration offered to him for the services
to be rendered by him as such Managing Director. The plaintiff E
Bhagwant earned the relll'ineration in his personal capacity for
services rendered by him. The argument advanced on behalf of the
defendants that plaintiff Bhagwant was in the position of a
trustee with regard to the remuneration received by· him for
acting as managing director of the company and is accountable to
the joint family for all such remunerations received by him is,
therefore, in the facts and circumstanc£.s of this case without F
any merit.
At the time when the company was incorporated and admittedly
when the family was joint, 325 shares in the company were
purchased, - 200 in the name of the defendant No. 2 Dattatraya
and 125 in the name of the plaintiff Bhagwant. Admittedly the G
price for these shares was paid out of the joint family funds.
There can, therefore, be no dispute that these shares belong to
the joint family in which each branch of the joint family has an
equal share. In fact, it is so conceded before us by the parties
concerned. It appears that 79 further shares in the company in
the name of the plaintiff Bhagwant and four further shares in the
name of defendant No. 1 Gopal were purchased. It further appears H
202 SUPREME COURT REPORTS [1985] SUPP.3 s.c.R.
A that the purchase price of these 83 shares were also paid out of
the joint family funds. So far as the four shares purchased in
the names of defendant No. l it is not disputed that the said
four shares belong to Lhe joint family. Though the plaintiff
claims that the 79 shares belong to him and not to the joint
family on the plea that the price paid by the joint family for
B the purchase of the said shares was paid to the plaintiff
Bhagwant by way of loan to him, we must hold taking into
consideration the facts and circumstances of this case and in
particular the fact that the story of the loan by the joint
familj, has not been accepted, that these 79 shares also belong
to the joint family. Shares which were subsequently purchased by
the parties were purchased when the status of the joint family
C has been completely disrupted and there is no evidence to
indicate that the joint family had paid for the shares
subsequently purchased by the parties. Shares had been purchased
by the plaintiff, his sons and other members of the family.
Plaintiff's son is a Doctor and has his own income. It is not
established that the plaintiff purchased shares out of the
remunerations earned by him as the Ma111aging Agent or the managing
D director of the company. Even. if we assume that the plaintiff has
paid for these shares out of the remunerations paid to him by the
company for acting as the Managing Agent or the managing
director, the joint lamily can have no claim with regard to any
such share. The plaintiff Bhagwant may in the facts and
circumstances of this case be accountable to the joint family for
E the rE!llllneration earned by him as Managing Agent, but he is not a
trustee and the shares purchased by him will not belong to the
joint family. We have already held that the plaintiff was not in
the position of a trustee for the benefit of the joint family in
his capacity as the managing direr.tor of the company and -the
remuneration which the plaintiff earned belonged to him and was
F his personal income. We, therefore, hold that 200 shares standing
in the name of defendant No. 2, 125 shares standing in the name
of the plaintiff Bhagwant, four shares standing in the name of
defendant No. l and the 79 shares standing in the name of the
plaintiff or his sons which were purchased out of the joint
family funds belong to the joint family and each branch has equal
G 1/3 shares in these shares.
We now proceed to consider the question of cash money which
was found in the Mahalaxmi room. The plaintiff calims that in the
Mahalaxmi room there was about a Lac of Rupees belonging to the
joint family which had been secreted by the defendants. When the
H receiver counted the money, it was found that there was cash
BHAGWANT P.SULAKHE v. DIGAMBAR GOPAL SULAKllE [A.N. SEN, J.J 203
A
money in Mahalaxmi room over twenty-<>ne-thousand rupees. 'Lhere is
no evidence on record which wo•1ld justify the claim of the
plaintiff that there was a Lac of Rupees in the Mahalaxmi room•
Materials on record show that there was some cash money belonging
to the joint family in the Mahalaxmi room. To ascertain exactly
how much cash money was there in ttie Mahala.'Wli room, it becomes
B
necessary to direct that a proper account should be taken. Tt-.e
litigation between the parties is going on for decades, and any
reference directing accounts to be taken on this question would
necessarily mean that the litigation would be prolonged further.
Taking an overall view of the matter we have decided that in the
interest of justice and in the interest of the parties it will be
appropriate in <he facts and circumstances of this case that this
c
Court should determine and reasonable amount on the basis of the
materials which are there on the record and on the basis of the
submission made by the counsel and the counsel for the parties
also suggested that iP the interest of the parties concerned it
would be desirable that this Coart should fix an amount which the D
Court will consider reasonable. We propose to take this aspect
into consideration while passing the decree in these appeals.
The last question which falls for determination is on the
question of ornaments, jewellery and utensils. There is no proper
evidence on record which will justifiable lead to the conclusion
E
that any ornarrients, jewellery or utensils belonging to the joint
family are in the possession of any particular party. Materials
on record, on the .other hand, suggest that these movables luJ.ve
already been partitioned. We are, therefore, inclined to take the
view that whatever ornaments, jewellery and utensils are in the
possession of any of the parties now belong to them and there is
no question of any party being in possession of any joint family
F
ornaments, and utensils.
In the result we hold ·-
1. That all remunerations received by the plaintiff
Hhagwant from the company by way of commission
G
director's fees and remunerations as the managing
agent of the company so long as the managing agency
agreement continued its existence till 1957, belong to
the joint family and the plaintiff is bound to render
true and faithful accounts of all such amounts
received by him and to pay to the other two branches
their share, nemely, l/3rd to each of the other
H
branches who happen to be. the defendants in the suit.
204 SUPREME COURT REPORTS [1985] SUPP.3 s.c.R.
A 2. The position of the defendant No. 2 Dattatraya who
was the other person in the firm of Sulakhe & Co.
re.presenting the joint family and who also acted as a
managing agent is also the same. There is no question,
however, of the defendant No. 2 Dattatraya rendering
any account in respect of such sums received by him as
B all such sums received by him had been treated without
any k.J.nd of dispute as joint family income and had
been entered in the books of the joint family. The
question of rendition of any account by the defendant
No. 2 Dattatraya therefore, doeg not arise.
3. The remuneration received by the plaintiff as
c managing director of the company on his appointment as
managing director of the company in 1957, belongs to
the plaintiff personally and does not belong to the
joint family. The entire renruneration received by the
plaintiff after the termination of the managing agency
agreement and after his appointment as managing
director of the company is the personal income of the
D plaintiff and the joint family or any member thereof
has no interest or claim in the amounts so received by
th~ plaintiff.
4. 200 shares of the company in the name of the
defendant No. 2, 125 shares in the company in the name
E of the plaintiff which were initially acquired by the
j01nt family and the subsequent acquisition of 79
shares by the plaintiff in his name or in the name of
his sons and the acqu.isition of four shares in the
name of defendant No. 1 belongs to the joint family
and each branch of the joint family has an equal
F interest in the shares. In other words, these 408
shares belong to the joint family and being 408 shares
have to be divided equally amongst the three branches
of the family. All other shares in the company stand-
ing in the nanies of the parties or their children do
not belong to the joint family and form no part of the
G joint family property.
5. So for as the cash money in the Mahalaxmi room is
concerned there was undoubtedly some cash money lying
in that room belonging to the joint family. The exact
amount of cash money lying in the Mahalaxmi room is
H difficult, if not impossible, to ascertain on the
~HAGWANT P.SULAKllE v. DIGAMBAR GOPAL SULAKllE [A.N. SEN, J. J 205
basis of the materials on record. It will be equally A
difficult . to ascertain the exact amount even if a
reference is directed as on the materials on record
and after hearing the submissions of the counsel for
the parties, we find that there is no dependable
material to come to any definite conclusion. The
plaintiff claims that there was approximately a Lakh B
of Rupees whereas the receiver found only an amount of
ov~r Rs.21,000. The plaintiff Bhagwant is no doubt
entitled to a reasonable amount in respect of money
lying in Mahalaxmi room and we shall tak~ this aoount
into account while passing the final decree herein.
c
6. So far as the ornaments, jewellery and utensils are
concerned, we hold that there is no material on record
to establish that any party in possession of any
ornaments, jewellery and utensils belong to the joint
family. The ornaments, jewellery and utensils in the
possession of the respective parties wfll be treated D
as their own properties. There is nothing further to
enquire into or decide on these questions.
On the basis of the aforesaid findings we now proceed to
consider the nature of the relief that should be granted and the
kind of decree that we should pass in these appeals. We are of E
the opinion that taking into consideration that the litigation
between the parties has been going on for over four decades, it
will be in the interest of justice and in the interest of parties
that any kind of decree would not be passed which may have the
effect of prolonging the litigation. In that view of the matter
we are of the opinion that we should not pass any decree for
accounts, as any reference for taking accounts will result F
in prolongation of litigation to the detriment of the interest of
the parties. The learned counsel appearing on behalf of the
parties also submitted before us that we should pass a final
decree to put an end to the litigation. To enable us to pass a
final decree without any directions for taking of accounts
between te parties we directed all the parties to place before us G
the relevant facts and the necessary figures in re.spect of their
claims on each head. On the basis of the directions given by us,
the parties have furnished the Court with relevant facts and
... figures relating to their claims in respect of every item of
claim and have also made their submissions before us on the basis
thereof• We have carefully considered all the materials which
h.3.ve been placed before us by the parties and also the H
206 SUPREME COURT REPORTS [1985] supp,3 s.c.R.
A
suhmissions made in suppnrt thereof by the parties. On a careful
consideration of all the materials placed before us and also the
submiesl.ons made on behalf of the parties, we now proceed to pass
the final decree in these app..al.s in the following terms :-
(1) The plaintiff Bhagwant who happens to be the
B appellant before us will pay a sum of Rupee two Lacs
to the defendants to be divided equally between. the
two respective branches of the defendants. In other
words, the plaintiff Bhagwant wl.ll pay a sum of Rupees
one lac to the heirs of defendant No. 1 Gopal and a
sum of Rupees one lac to the defendant No. 2
Datt11traya.
c
( 2) The said sum of Rupees two lacs will be paid to
the defendants in the manner aforesaid, nemely, one
lac to the heris of defendant No. 1 Gopal and Rupees
one lac to the defendant No. 2 Dattatraya within a
period of two months from date.
D (3) In default of payment of the said sum within the
aforesaid period, the decretal amount of Rupees 1 lac
in favour of e.ach branch of the defendants will carry
interest ~ 9% per annwn from the date of default till
recovery of the said amount by the defendants. In
other words, the interest on the said sum of Rupees
E one lac each for defendant No. 2 and the heirs of
defendant No. 1 Gopal will run from 1st Decem!ier,
1985, if the said amount is not paid by the end of
November 1985.
(4) If the amount of Rupees one Lac or any part there-
F
of remains unpaid by the end of November, 1985 to the
heirs of defendants No. 1 Gopal or to the defendant
No. 2 Dattatraya, the said defendants or either of
them who would not be paid the entire sum of Rupees
one Lac by the end of November, 1985 will be entitled
to execute the decree for the said amount of Rupees
G one Lac or any part thereof which will remain unpaid
with interest on the said amount, on the basis of the
decree passed herein.
(5) It is declared that 408 shares which we have held
to be the property of the JOint family as recorded in
h
our finding No. 2 belong to the joint family and the
BHAGWANT P.SULAKHE v. DIGAMBAR GOPAL SULAKHE [A.N. SEN, J.] 207
plaintiff Bhagwant, the defendant No. 2 Dattatraya and A
heirs of defendant No. 1 Gopal shall ha% each 1/3
share in the said 408 shares in the co,...any. The sa~d
408 shares shall be divided equally amongst the three
branches and the plaintiff will get 136 •hares,
defendant No. 2 Dattatraya 136 shares awl the heirs of
Defendant No. 1 Gopal will get· 136 shares. B
(6) Mr. S.B. Sulakhe son of the plaintiff Bhagwant who
happens to be the present managing director of the
company is hereby appointed Commissioner without any
remuneration to divide the shares equally in the
aforesaid three lots and to, have the same transferred C
and registered in the names of the parties on the
basis of the civision of the said shares to be effect-
ed in terms of the decree. The plaintiff will proceed
to divide the said shares in the manner directed above
within two months from date. All the parties will give
necessary co-operation to the plaintiff in the matter D
of effecting division of the said 408 shares in the
manner aforesaid.
( 7) If for any reason, the plaintiff in not abl; to
divide the said shares within a period of twc months
from date of the decree any of the i>arties will have E
the liberty to apply before the Trial Judge for the
appointment of a Commis•ioner of partition to divide
the said 408 shares in three equal lots of 136 shares
each in the manner directed by this decree.
(8) It is declared that the amount which would have
been payable to the plaintiff as his share out of cash F
money lying in the Mahalaxmi room, ·has been taken into
consideration while passing the decree for Rupees two
lacs against the plaintiff and the plaintiff wili have
no further claim against the defendants on this
account.
G
(9) It is declared that no party has any claim against
the other on account of any joint family ornaments,
jewellery and utensils. It is further declared that
whatever ornaments jewellery and utensils are in the
possession of any of the parties are their own proper-
ties and no other party bas any claim in respect
thereof. H
208 SUPREME COURT REPORTS [1985] SUPP.3 s.c.R.
A
(10) It is declared that there are no other joint
family properties in respect of which any of the
p•rties can make any claim and it is f\lrther declared
that apart from what is provided in this decree, no
party has or will have any claim against any other
party on the basis of any property being a part of the
B
joint family property.
(11) Save arui except the costs already paid by the
plaintiff to the defendants, the parties will pay and
bear their own costs. It is made clear that the plain-
tiff will not be entitled to recover whatever costs he
might have paid to the defendants and the defendants
c will be entitled to retain all sums received on
account of costs and will not be called upon to refund
any part of the amounts received by them by way of
costs from the plaintiff,
(12) Any direction or finding of the High Court
D
contrary to what we have held must necessarily stand
set aside and appeals to that extent stand allowed.
S.R. Appeals partly allowed.
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