Dear LCI members,
Greetings!
Need you advice on partnership dispute which one of my practicing friends's client came across . Below are the facts :
1. ABC are friends (B&C are real brothers). A & B agreed to from partnership. Mr. B brought his elder brother Mr. C as well, though Mr. A wasn’t happy but he agreed. All of them A, B and C entered into partnership on 01 July 2012 at PSR of 35:30:35 respectively and got it registered. Mr. A was appointed as managing partner as other partners B&C said they are busy in their other business. B&C said they are not in a position to contribute their share (though they have good amount of property and also have other real estate business) and gave Post Dated Cheques for Nov- Dec ’12 and asked partner A to contribute whatever is required till B&C pay their share, which they haven’t paid till date. Both the PDCs got bounced on presentation to the bank. In the month of Jan'13 Mr. C told Mr. A that he is not interested in the business. At the time of entering in to p/ship Mr A clearly told that he alone can not run business so he needs support from B&C to which they had agreed.
2. A&B had property which they offered to be used for firm’s business, which they said they would provide till firm start making profit. rent shall ve paid once firm start earning profit. (not in writing).
3. After bouncing of cheque, Mr. A expressed in Jan’13 that he cannot pay his contribution and withdraw and stopped attending meetings etc. it is noteable that P/s deed is not revised and not submitted with registrar to this effect till date. however he proposed Mr. D to be admited in his place. Mr. D is common freind of AB&C.
4. Now in Aug’13 proposed partner Mr.D ready to enter. Mr. C says since he no more a partner from Jan’13 as he expressed in ability to pay he is not interested in meeting and Mr. C started demanding rent for his property which he offered free of cost till firm earns profit at the time forming p/ship.
5. His brother Mr. B suggested to calculate capital invested in the business (more than 90% of which is invested by Mr. A). let say capital invested is 10 lacs less items which new partner not ready to admit is Rs. 2 lacs and net valuation for new partner is 8 lacs. In the new partnership all the partners ready to bring in 1/3 of 8 lacs. The loss of 2 lacs (due to old assets which new partner not ready to accept) shall be shared between B &C into 50:50. [although Mr. C joined in pursuance of his brother Mr. B yet the his loss is borne in equal ratio] Mr. A suggested that Mr B should bear share of loss of Mr. C to which Mr. B is not ready.
Today the scene is Mr. A feeling cheated since he invested almost entire amount out of his retirement benefits which he received, he put in all effort 9at the age of 60) to run business in good faith (hoping other two partners would pay in future) without charging even single penny and without demanding interest on capital which is provided in the deed. Mr. A established entire business he was administrating, planning, managing operations. Business promotions, supply chain etc. Mr. A as managing partner used to conduct meetings with B&C at least once in quarter in addition to personal informal meetings where he used to disclose day to day experience to keep B&C brothers informed he used to share each details and business performance keeping in mind B&C are partners and they will contribute in future. Mr. B&C didn’t contribute their share as both the cheques got bounced. Now Mr. C is asking Rent for the property from July’13. Firm is in Loss of almost 4.5 lacs. Which was obvious and known to B&C although the rate of return is almost 40% and good prospects but due to lack of funds and frustration Mr. A intends to shut the business. Mr. B&C as far as knowledge is concerned are dumb though they are educated (engineer and graduate)
The logic B&C brothers giving to Mr. C is very funny. B&C said that He (Mr. C) invested entire amount, he took all the decisions it becomes kind of proprietorship so whatever he earned he should keep it with him (all the partners always had access to the books of accounts and email id and password of the firm also) they know there is a loss of Rs. 4.5 Lacs) and Mr. A is frustrated as he is no able to manage end to end business at this age and also running out of money. Mr.C contention is that he had already informed that he is not interested in the business so he treats himself as an outsider and demanding rent of his property else asking Mr. A to vacate his place. Looking to this kind of dispute the new partner is also afraid (who is friend of AB&C).
Mr. A offered B&C to buy the firm in which they are pretending as if they are not interested actually they are . It seems their intension is to buy the business at nominal amount telling Mr. A that though both the brothers not interested yet they are buying. Also, Mr. C is offering Mr. B or new partner to run business but Mr. B &C say they need rent then only they will allow to run business.
LCI members are requested to suggest best possible action which Mr. A can take against B &C .
Thanks, Vikash
