1. ' SYED HAIDER ALI PIRZADA, J.---This High Court Appeal is directed against the judgment and decree dated 7-3-1986 passed by a learned Single Judge of this Court whereby dismissing the suit filed by the appellant.
2. ' The facts leading to the filing of the above appeal are that the appellant and the respondents are real brothers. The appellant had purchased plot of land bearing No,11/A/7/16, Nazimabad, Karachi, in the name of his wife and had raised construction thereon for being used as a hospital. It is the case of the appellant that he through remittances made from abroad imported machinery and equipment worth several million of rupees and got the same installed at the above building. It is his further case that he had sponsored the respondents for studies abroad and had financed their education, in order to rehabilitate them in Pakistan entered into partnership with them for running a hospital at the above address under the name and style of Ara Medical Centre. Under the terms of partnership, dated December, 1978, the appellant who had contributed the entire investment, was to get 75% of the profits from business. The partnership was at will and it was agreed that on dissolution of partnership, the properties, both movable and immovable, would revert to the appellant. It is the further case of the appellant that on account of severe differences between the respondents inter se who were the working partners and were looking after the business in Pakistan on 16-1-1980 it was proposed that the management and control of the hospital be bifurcated in two units under the name and style of Ara Medical Centre and Ara Diagnostic Centre. It was further proposed that two limited companies be set up for looking after the working of two units. However, nothing was provided in the bifurcation proposals in respect of the rights, interest and liabilities of the parties in the business. The bifurcation proposals did not make any reference to the partnership business which had been commenced under the partnership deed of December 1978 nor was any working arrangement or assets and capital of the proposed companies shown in the bifurcation proposals. The respondents still could not carry on the business and the bifurcation proposals too did not materialize.
3. ' It is the further case of the appellant that the partnership business on account of the facilities available at the hospital had initially attracted quite a good deal of clientage. It was then noticed that on account of the irresponsible conduct of respondent No,1, the partnership business interests were being overlooked and ignored; the appellant was not given any accounts and the respondent No,1 made the working of partnership impossible except at a loss.
4. ' On 4-1-1981 the appellant was eventually constrained to give notice of dissolution of partnership under clause 6 of the partnership deed. The respondent No,2 while expressed his willingness to cooperate, the respondent No,1 failed to respond and refused to give accounts. In the circumstances, the appellant filed a suit on the original side of this Court being Suit No,2 of 1981 praying the following reliefs:- "(1) Dissolution of the partnership business run in the name and style of 'ARA MEDICAL CENTRE' or in other or changed name but belonging to the partnership Business pertaining to the partnership agreement, dated December 1978 effective from 1-1-1979.
(2) That the business of the partnership stands dissolved on 4-1-1981.
(3) Permanent injunction restraining defendant No,1 to carry on business or interfere with the partnership business run under the name and style of 'ARA MEDICAL CENTRE' or in other or changed name but belonging to the partnership business and from restraining the defendant No,1 from realising any amount payable to the said partnership business or from withdrawing any sum from the bank or banks of the partnership business.
(4) That the plaintiff or his nominee be appointed RECEIVER to run the partnership business and for accounts of M/s. Ara Medical Centre.
(5) Costs of the suit be awarded.
(6) Interest on the decretal amount at 13% per annum from the date of the suit to that of realisation of the decretal amount against defendant No,1 and defendant No,2.
(7) Any other/further or better relief and/or reliefs as this Hon'ble Court' may deem fit and proper."
5. ' The respondent No,1 resisted the suit and in his written statement took the pica that the partnership deed of December 1978 had been got signed from him by fraud and the partnership had never been acted upon. It was further averred in the written statement that the entire property and hospital belonged to their father who had established the same for the benefit of his all four sons including the parties to the proceedings. The respondent No,2 in his written statement supported the case of the appellant. The following issues were settled upon the pleadings of the parties:- "(1) Whether the partnership deed as mentioned in paragraph 3 of the plaint is a genuine and bona fide document or the same was procured by the plaintiff by misrepresentation and fraud?
(2) Whether the above partnership was ever acted upon by the parties?
(3) To whom the movable properties belong?
(4) Whether the Ara Medical Centre was established by defendant No,1 and he procured all business for the Centre and its effect?
(5) To what relief, if any, the plaintiff is entitled to?"
6. ' The parties led evidence in support of their respective pleas. After hearing the learned counsel for the parties at length, issue No,2 was re-framed which reads as under:- "Whether the partnership between the parties was ever acted upon? If not, was there any other arrangement between them in this regard?"
7. ' The learned Single Judge, on appreciation of the evidence, has held that the partnership'deed of December 1978 was voluntarily executed by all the parties and was a genuine document. It was further held that the partnership business which had commenced under the terms of deed executed in December 1978 did work for some time but was superseded by the bifurcation proposals which had the effect of extinguishing the original partnership It was further held that for all practical purposes, a new arrangement had been arrived at between the partiesswhich was,wholly inconsistent with the terms of original partnership deed. The learned Judge consequently came to the conclusion that on the date of the institution of suit, there was no partnership firm in existence of which, dissolution could be sought by ,the appellant.
8. ' The Nazir of this Court who had been appointed Receiver of the property, was consequently discharged and was directed to hand over the possession of the property to the party from whom possession was taken over. Hence this appeal.
9. ' Mr. Khalid M. Ishaquc on behalf of the appellant/plaintiff advanced his three-fold arguments in support of his contention that the suit as instituted ought to have been decreed in favour of the plaintiff. His contention is that interim arrangement contained in the document (Exh.7/3) neither in fact nor in law constitutes a new arrangement. The next argument is that even if this was a new arrangement, the relief could be granted to the plaintiff and it was incumbent on the Court to grant the relief which the circumstances of the case demand and the law permits.
10. ' The third argument is that there was no justification for modifying issue No,2 during correction of the judgment which was dictated and announced in Court such a course had deprived the parties of proper presentation of case and has rendered the judgment unlawful.
11. ' On the other hand Mr. Choudhri Abdul Rauf appearing on behalf of the respondents submitted that mere writing of partnership deed does not constitute partnership. Exhibit 7/3 is bifurcation agreement is a novation of partnership. His contention is that partnership was never acted upon.
12. ' Admittedly these are the only main controversial points involved in this appeal. The first point therefore for our consideration is, whether exhibit 7/1 constitutes a partnership ? If so, whether it was acted upon or not?
13. ' The appellant/plaintiff averred in para 3 of the plaint that , in December 1978 the plaintiff and the defendants entered into partnership of running a hospital and medical centre at 11/A/7/161, Nazimabad, Karachi in the name and under the style of Ara Medical Centre. The terns of partnership are reproduced in para. 4 of the plaint. The plaintiff averred in para 6 of the plaint that since the very inception of the partnership, the plaintiff had to go abroad on his professional callings, the entire management and control having been entitled to the joint care and control and management of the defendants. It is averred in para 7 of the plaint that since the very inception of the partnership business cracks were visible in the relationship between the defendants who quarrelled between themselves over management, control, distribution of the money's received, the defendants made complaints and counter-complaints to the plaintiff against one another's conduct of business so much so that some time they indulged in exchange of fists, creating ugly situation calling for intervention of the plaintiff. The plaintiff had to come to Pakistan to settle the differences between the defendants and at their request the partnership business, management and control was bifurcated without prejudice to the terms and conditions of the partnership business. On 16-1-1980 the bifurcation proposals were made, as a result of which management and control of the Ara Medical Centre was entrusted to defendant No,1 and management and control of 'ARA DIAGONISTIC CENTRE' was entrusted to the defendant No,2 but it could not work and was never given effect to so much so that defendant No,1 refused to allow this bifurcation arrangement and tried to boss over and dominate the entire working of the partnership business to the great prejudice of the plaintiff and defendant No,2 as also to the partnership business.
14. ' It is an admitted position that the partnership deed (Exh.7/1) executed between the parties was to come into effect from January 1979 as mentioned in the deed. The plaintiff/appellant has stated in his examination-in-chief that the partnership went on for about two years and thereafter differences arose between the respondent No,1 and defendant No,2/respondent No,1, and, in order to resolve the differences he had to visit Pakistan on several occasions. He has further stated that he finally came to the conclusion that the differences between the respondents were of serious nature which could not be resolved. He produced in his evidence, a note written by respondent No,1 to respondent No,2, as Exh. 7/2, in which respondent No,1 expressed his decision to disassociate himself from the hospital. He has further stated that as a result of the above situation, he brought about another interim arrangement between the parties, contained in the document (Exh.7/3). In his cross-examination, he stated that after signing of the partnership deed he left for Tanzania but he could not precisely say after how many days. He also stated that he cannot say as to exact date and time when the differences arose between the respondents after signing of the partnership deed but he stated that this was within the first two years of the execution of the partnership deed; and it was on more than one occasion. He admitted that out of disgust with the working condition the respondent No,2 left Karachi, and he further stated that it may be in July 1979. He also admitted that the business started in early 1979 and it was round about July 1979 Dr. Hamid Kamal left the country out of disgust. He denied the suggestion in cross-examination that after returning from abroad after July 1979, Dr. Hamid Kamal set up his independent clinic.
15. ' Defendant No,1 respondent No,1 has stated in his examination-inchief that he signed Exh. 7/1 without understanding its implications. He has stated that Dr. Hamid Kamal is Radiologist. He has further stated that his work as a surgeon and that of respondent No,2 as Radiologist in the hospital were independant of each other. He has further stated that Dr. Hamid Kamal was very uncooperative during all that period ,he, was working in hospital. According to him, the agreement Exh. 7/3 was entered into for the reason that respondent No,2 was working as Radiologist and for that purpose he needed separate department. He admitted in his cross-examination that he never submitted any income-tax return in respect of partnership business. He admitted that income-tax return was filed as an association of persons and in that return their father's name was also entered.
16. ' It is quite clear from the evidence adduced by the parties that soon after execution of the partnership deed, the parties were at loggerheads, and it did not carry through. The appellant has categorically stated that it was impossible to give effect to the arrangement of partnership reflected in the deed (Exh. 7/1). The appellant produced a note written (Exh. 7/2) by respondent No,1 to respondent No,2, showing his intention to disassociate himself from the partnership. It was in these circumstances bifurcation document (Exh.7/3) was executed between the parties on 16-1- 1980. The 'Ara Medical Centre' was bifurcated into two separate centres with the name and style given hereunder:-
1. Ara Medical Centre.
17. Ara Diagnostics Centre.
18. The Ara Medical Centre would pertain the followings:-{{TABLE}} I. Dr. Khalid Kamal Khan Chairman Dr. Arshad Kamal Khan Managing Director Mrs. Yousuf Ara Begun Director Mr. M.M.R. Khalid Secretary.
19. The Ara Diagnostic Centre would pertain the following:- Dr. Khalid Kamal Khan Chairman Dr. Hamid Kamal Khan Managing Director Mrs. Saeeda Khalid Kamal Khan. Director Mr. M.M.R. Khalid Secretary.
20. ' The organisations referred to above would run independently with independent administrative and financial status together with paid-up and authorised capital.
21. ' A perusal of the document (Ext. 7/3) would show that as a result of this new arrangement, the original partnership was bifurcated into two different organisations. According to document (Exh.
22. 7/3) Ara Medical Centre was headed by the appellant with respondent No,1 as its Managing Director, one Mrs. Yousuf Ara Begum as the Director and M.R. Khalid as the Secretary. The second organisation Ara Diagnostice Centre was headed by the appellant as the Chairman, respondent No,2 as the Managing Director Mrs. Khalid Kamal as Director and Mr. M.R. Khalid as the Secretary.
23. The document contemplated incorporation of the abovementioned two organizations as limited companies under the provisions of Companies Act and it is further provided that in order to start the functioning of Ara Diagnostic Centre, the Ara Medical Centre would pay a sum of Rs,55,000 as loan to the Ara Diagnostic Centre, which will be refunded within ten years. The entire finding in which the partnership firm under the name of Ara Medical Centre was situated, was also bifurcated into two portions, one of which wont to Ara Medical Centre, and the other was to be utilized by Ara Diagnostic Centre. The two organizations were functioning in the premises where the original partnership started at the time of filing of suit, as would appear from the documents Exhs. 11/3 to 11/83 produced by the Nazir of this Court (Exh.11)
24. ' It is clear from the documentary as well as oral evidence adduced by the parties that partnership deed was not only executed voluntarily by the parties but it was truly constituted.
25. ' Mr. Khalid M. Ishaq advanced his three-fold arguments in support of his contention that in para 7 of the plaint, the plaintiff/appellant has alleged that the two organizations were to work within the framework of the original partnership (Exh. 7/1), the alternative argument is that mere setting up of these two organizations did not bring to an end the circumstance of the original partnership created under Exh. 7/1. The third argument is that the subsequent arrangement shown in Exh. 7/3 was never acted upon by the parties. In support of this argument that the arrangement reflected in Exh. 7/3 was not acted upon between the parties, reliance. Was placed on the Income-tax Returns in the name of Ara Medical Centre to the Income Tax Authorities concerned. Reliance was also placed on the evidence of the Receiver (Exh. 11) in the case that the entire property was recovered at the time of appointment of Receiver in the case from the possession of respondent No,1.
26. ' A perusal of evidence would show that the appellant not only produced Exh. 7/3 in his evidence, but relied on it and it was nowwhere. Contended in his examination-in-chief or in cross-exam. 1%c arrangement )wit in Exh.7/3 was not acted upon '"it is pertinent to note that even it was not suggested in the cross-examination of the respondent No,1 that the arrangement reflected in Exh.
27. 7/3 was not acted upon by the parties. There is absolutely no evidence on record to show that the arrangement (Exh.7/3) arrived at by the parties was either not acted upon or had failed after it came into effect. A bare reading of the arrangement (Exh.7/3) will clearly show that it was for all practical purposes a new arrangement between the parties, which was wholly inconsistent with the original partnership (Exh.7/1). By this document, the firm "Ara Medical Centre was not only bifurcated with two different organizations, which were proposed to be incorporated as separate limited companies. In each one of the two new bifurcated organizations, there were two strangers introduced as Directors, who were not partners in the partnership Exh. 7/1.
28. ' Mr. Abdul Rauf submitted that the original partnership as reflected in Ext. 7/1 was substituted on the principle of novation of contract, contained in section 62 of the Contract Act, 1872, the original partnership ceased to be operative and/or never acted upon. Section 62 of the Contract Act provides:- "62. Effect of novation, rescission and alteration of contract.---If the parties to a contract agree to substitute a new contract for it, or to rescind or alter it, the original contract need not be performed."
29. ' The term "novation" is explained by the House of Lords in Benjamin v. Alfred George Jardine ((1882)
30. 7 A.C. 345) that there being a contract in existence, some new contract is substituted for it either between the same parties or between different parties, the consideration mutually being the discharge of the old contract.
31. ' It was laid down in Gilbert v. Hall ((1831) 1 L.J.Ch. 15) that a new and independent/agreement concerning the same matter as the previous agreement may be construed to discharge the former, only if the terms of the latter are so inconsistent with those of the former that they can stand together.
32. A novation is a substitution of the contract and not a mere variation of its terms. Before novation can occur it must be shown as a fact that the intention of the parties was to substitute a new contract for the original contract. The intention has been proved to exist in the instant case. The appellant averred in para 7 of the plaint that a bifurcation agreement (Exh. 7/3) was entered into between the parties, in these circumstances, it can be held that the parties agreed ,to substitute a new contract for the original one.
33. We are satisfied that the findings of the learned Single Judge on the I issues raised in the suit are absolutely correct and fully supported by the evidence on the record.
34. The new arrangement arrived at between the parties under Exh. 7/3 cannot be treated as a partnership between the parties. Apart from it, the arrangement arrived at between the parties vide Exh. 7/3, included two more persons who are not parties to the present suit. A new arrangement arrived at between the parties, the basis of the claim for dissolution and accounts, as laid in the plaint, does not exist.
35. ' The last argument of the learned counsel is that the learned Single Judge has modified issue No,2 at the time of writing of judgment. This is apparent from observations appearing at page 2 of the judgment where the learned Single Judge says that "after hearing the learned counsel for the parties at length, and examining the evidence on record, I am of the view that issue No,2 framed in the suit, needs modification" the modified issue to new: "Whether the partnership between the parties was ever acted upon? If not, was there any other arrangement between them in this regard?"
36. We find chat the modified issue is in accordance with the plaint and the evidence on record. Mr. Khalid Ishaq was not able to show us as to how the modified issue had prejudiced the plaintiff. On the contrary, it appears to us that the modified issue served to clarify the real contest between the parties. The undertaking given by Mr. Lari on behalf of Saeeda Kamal Khan is hereby allowed to be withdrawn.
37. After careful consideration of the evidence on the record and the arguments advanced before us, we are satisfied that the learned Single Judge's decision in the suit is fully justified and needs no interference. No other point was urged before us. As a result the appeal is dismissed. In the circumstances of the case, the parties are directed to bear their own costs.