Cassation No. 933 of 2019 Commercial
Issued on 10/03/2020
Court Panel: Presided over by Mr. Judge Shihab Abdul Rahman Al-Hammadi, Chief Judge of the Circuit, with Messrs. Judges Abdullah Boubakar Al-Siri and Sabri Shams Al-Din Muhammad as counsellors.
1- The effect of a judgment removing a partner from the company.
2- The contested ruling is deemed deficient in reasoning, as it calculates the respondent's share based on the company's debts and goods inventory, relying on an expert report that fails to settle accounts between partners concerning profits, losses, and debts due to or owed by the company despite the appellants’ objection to it.
The law “its application”. Commercial companies. A partner “his dismissal" “his removal”. Contracts. “Limited Duration” company. Ruling “invalid causation.” Reversal “acceptable reasons.”
- In matters not covered by private law, public law principles should be consulted.
- The Commercial Companies Law No. 2 of 2015 is bereft of provisions governing the majority partners' right to seek judicial intervention for the dismissal of a partner. In light of this lacuna, recourse is to be made to the Civil Transactions Law No. 5 of 1985, specifically concerning contractual matters.
- The majority of partners, in consonance with Article 677 of Law No. 5 of 1985 promulgating the Civil Transactions Law, have the right to petition the judiciary for the dismissal of any partner, provided they present compelling reasons justifying such action.
- Based on the aforementioned article, any partner has the right to request judicial removal from the company, especially if the company operates on a limited-term basis, and such a request is based on reasonable grounds.
- With regard to the share of a dismissed or withdrawn partner, Article 675/2 of the aforementioned law governs such matters, and its application takes effect from the date of filing the lawsuit.
- An illustrative instance of a deficiency in reasoning is evident in the ruling directing the payment of a sum to the respondent based on the expert's report, which regrettably omitted the calculation of the company's losses and profits until the date of filing the lawsuit.
Whereas, pursuant to the ruling of this court, the public law shall govern matters not explicitly addressed by private laws, and upon careful examination of Law No. 2 of 2015 on Commercial Companies, it is evident that said law does not expressly confer upon the majority of partners the right to petition the judiciary for the dismissal of a fellow partner within the company. In contrast, Chapter Three of Title 2 of Law No. 5 of 1985, which promulgates the Civil Transactions Law and pertains to contracts, specifically addresses the company contract in Articles 654 to 709. Notably, Article 677 of said law stipulates as follows:
1- The majority of partners may seek judicial intervention to adjudicate on the dismissal of any partner, provided that such request is grounded in compelling reasons justifying dismissal.
2- It is also within the prerogative of any partner to petition the judiciary for his removal from the company in instances where the company operates for a limited term, and such petition is founded on reasonable grounds.
3- In both aforementioned scenarios, the provisions of Article 675, Paragraph (2) shall be applicable to the share of the dismissed or voluntarily withdrawn partner. The valuation of this share is to be determined based on its value as of the date of filing the lawsuit.
Consequently, a ruling for the removal of a partner from the company does not result in the dissolution of the company; instead, it persists with the remaining partners. Furthermore, the dismissed partner is entitled to receive his share in the company's funds, and the valuation of this share is contingent upon its value as of the date when the legal action was initiated.
In light of the aforementioned circumstances, it is noted that the contested judgment awarded the appellant an amount determined in accordance with the expert's report. However, it is crucial to underscore that the said report did not encompass an evaluation of the company's profits and losses up to the date of the lawsuit. Rather, it was confined to the calculation of the debts owed to the company by its customers and the valuation of the inventory of goods, without elucidating whether these debts have been collected or not.
Furthermore, the contested judgment determined the appellants' share based on the company's outstanding debts to external entities and the inventory of goods, overlooking the expert's failure to reconcile the financial transactions among the partners pertaining to profits, losses, and debts attributable to or owed by the company. Despite the appellants' explicit objections to the report, the ruling premised its decision on this report without due consideration of the objections raised, thereby rendering it deficient in reasoning and in breach of the right of defence, necessitating reversal.
The Court,
Whereas in the facts - as apparent pursuant to the perusal of the contested ruling and the remaining document - it is observed that the respondent initiated Suit No. 1319 of 2017 - Civil, Plenary - in Ajman against the appellants. The suit sought a judicial declaration to institute receivership proceedings on the company (Name) engaged in advertising media trading, along with the removal of the first appellant from said company. Additionally, the plaintiff urged the appointment of an accounting expert to conduct an inventory of the company's accounts and ascertain its profits.
The grounds for the plaintiff's claims were rooted in the establishment of the company on 6/5/2012, wherein he, along with the two appellants, founded the enterprise. The plaintiff asserted his ownership share in the company as 24%, attributing 25% to the first appellant and 51% to the second appellant. Subsequently, the plaintiff alleged that he was unjustly ousted from the company by the defendants, prompting the initiation of the lawsuit with the aforementioned requests.
Upon the court's assignment of an accounting expert who subsequently submitted a report, the plaintiff amended his original requests to include the removal of the first defendant (first appellant) and sought an order for the defendants to remit his entitled share of 1,923,125 dirhams. In response, the two defendants (appellants) filed a counterclaim, requesting the removal of the plaintiff from the company as a partner.
In a session convened on 30/06/2019, the court issued a ruling rejecting the original lawsuit and ordering the removal of the plaintiff, (respondent) from the company. Subsequently, the plaintiff in the original lawsuit lodged an appeal, identified as Appeal No. 573 of 2019, Ajman Commercial. In the session held on 28/10/2019, the Court of Appeal modified the contested ruling by directing the appellants to remit the amount of 991,568 dirhams to the respondent, representing the value of his share in the company. The Court of Appeal confirmed the appealed ruling in all other aspects. Dissatisfied with this judgment, the two appellants sought redress through the present cassation, and upon review by this court in a Council Chamber, it deemed the cassation worthy of consideration.
The two appellants raise various objections against the contested ruling, including alleged violations of the law, errors in its application, and deficiencies in reasoning. Notably, they contest the directive compelling them to pay the respondent's share of the company's outstanding debts to its clients. The appellants assert that these debts remain uncollected, with some being perishable and deemed irrecoverable. Additionally, they express dissatisfaction with the expert's report in the case, citing the failure to settle accounts between the partners and determine their respective shares after accounting for losses and profits. The appellants had requested the court to reassign the expert to address this matter, a request that went unanswered. This, in their view, renders the ruling defective and warrants its reversal.
Whereas this objection holds merits, since pursuant to the ruling of this court, the public law shall govern matters not explicitly addressed by private laws, and upon careful examination of Law No. 2 of 2015 on Commercial Companies, it is evident that said law does not expressly confer upon the majority of partners the right to petition the judiciary for the dismissal of a fellow partner within the company. In contrast, Chapter Three of Title 2 of Law No. 5 of 1985, which promulgates the Civil Transactions Law and pertains to contracts, specifically addresses the company contract in Articles 654 to 709. Notably, Article 677 of said law stipulates as follows:
1- The majority of partners may seek judicial intervention to adjudicate on the dismissal of any partner, provided that such request is grounded in compelling reasons justifying dismissal.
2- It is also within the prerogative of any partner to petition the judiciary for his removal from the company in instances where the company operates for a limited term, and such petition is founded on reasonable grounds.
3- In both aforementioned scenarios, the provisions of Article 675, Paragraph (2) shall be applicable to the share of the dismissed or voluntarily withdrawn partner. The valuation of this share is to be determined based on its value as of the date of filing the lawsuit.
Consequently, a ruling for the removal of a partner from the company does not result in the dissolution of the company; instead, it persists with the remaining partners. Furthermore, the dismissed partner is entitled to receive his share in the company's funds, and the valuation of this share is contingent upon its value as of the date when the legal action was initiated.
In light of the aforementioned circumstances, it is noted that the contested judgment awarded the appellant an amount determined in accordance with the expert's report. However, it is crucial to underscore that the said report did not encompass an evaluation of the company's profits and losses up to the date of the lawsuit. Rather, it was confined to the calculation of the debts owed to the company by its customers and the valuation of the inventory of goods, without elucidating whether these debts have been collected or not.
Furthermore, the contested judgment determined the appellants' share based on the company's outstanding debts to external entities and the inventory of goods, overlooking the expert's failure to reconcile the financial transactions among the partners pertaining to profits, losses, and debts attributable to or owed by the company. Despite the appellants' explicit objections to the report, the ruling premised its decision on this report without due consideration of the objections raised, thereby rendering it deficient in reasoning and in breach of the right of defence. The ruling is hereby reversed, and the case is remanded for further proceedings, with no need for examining the remaining grounds of cassation.

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