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Markandrai Kalyanrai Mehta Vs. Virendrarai Chandraprasad Desai and anr. - Court Judgment

LegalCrystal Citation
SubjectContract
CourtMumbai
Decided On
Case NumberO.C.J. Suit No. 134 of 1916
Judge
Reported inAIR1917Bom262; (1917)19BOMLR837; 42Ind.Cas.815
AppellantMarkandrai Kalyanrai Mehta
RespondentVirendrarai Chandraprasad Desai and anr.
DispositionSuit dismissed
Excerpt:
indian contract act (ix of 1872) sections 43 and 62-novatio-promissory note passed by a firm-promissory note renewed after the death of a partner by the surnviny partners-suit on the promissory note compromised by the surviving partners-suit against the estate of the deceased partner not maintainable.;on 15th february j909, the plaintiff advanced for a period of three years rs. 50,000 to y. h. desai & co. a firm consisting of three partners who were brothers, who passed in favour of the plaintiff a deposit receipt for the amount. y. h. desai & co., being unable to repay the loan at the end of three years, passed, on 15th february 1912, a fresh deposit receipt to the plaintiff for the said amount repayable after a year. before the loan was repaid one of the partners died leaving..........partners, laxmiprasad and yeshwantprasad but as well as against the assets of the deceased partner chandraprasad and any decree passed in the suit can be executed against all the assets of the firm including those of chandraprasad and therefore the plaintiff cannot now go against the representatives of the deceased partner chandraprasad because it extinguished his cause of action. on the other hand it is argued for the plaintiff that the only persons who were parties to suit no. 1502 of 1914 were yeshwantprasad and laxmiprasad because the suit was founded on a promissory note passed on 27th april 1914, that is at a time when they were the only partners and that they would have had no authority to pass a promissory note so as to bind the estate of a deceased partner. it is not.....
Judgment:

Kajiji, J.

1. The plaintiff, Markandrai Kalyanrai Mehta claims from the defendants Rs. 48,000. It appears that on 15th February 1909 the plaintiff advanced Rs. 50,000 at interest at the rate of 6 per cent, per annum for a period of three years to' the firm of Y. H. Desai & Co. who passed in favour of the plaintiff a deposit receipt for this amount. The firm of Y. H. Desai & Co. at that time consisted of three brothers, Laxmiprasad, Yeshwantprasad and Chandraprasad the father of the defendants in this suit. The amount due under the receipt became due and payable on 15th February 1912 but the firm of Y. H. Desai and Co. being unable to pay the loan passed a fresh deposit receipt to the plaintiff for Rs. 50,000 repayable after one year with interest at the same rate. The deposit receipt of 15th February 1909 was returned by the plaintiff to the firm of Y. H. Desai & Co. Before the loan of Rs. 50,000 was repaid Chandraprasad Hariprasad Desai died on 28th February 1913 leaving two sons, the pre-sent defendants.

2. On 7th April 1913, Laxmiprasad and Yeshwantprasad, the surviving partners of the firm of Y. H. Desai & Co., passed in the name of the firm a demand promissory note to the plaintiff for Rs. 50,000 with interest at 6 per cent, per annum the deposit receipt of 15th February 1912 being returned to the firm of Y.H. Desai & Co. Subsequently the firm of Y.H. Desai & Co. paid Rs. 2000 on account to the plaintiff' and on 27th April 1914 the surviving partners of the firm of Y. H. Desai and Co. passed a fresh demand promissory note for Rs. 48,000, the balance of the original loan of Rs. 50,000. On 21st December 1914 the plaintiff filed a suit being Suit No. 1502 of 1914 against the firm of Y, H. Desai & Co. to recover the amount of the promissory note of the 27th April 1914. The Suit No. 1502 of 1914 was on 9th March 1915 referred to the arbitration of Mr. Chimanlal H. Setalvad. On 21st August 1915 an agreement was arrived at between the plaintiff and Laxmiprasad and Yeshwantprasad in respect of the subject matter of the reference and a bond was prepared providing for payment of Rs. 48,000 by instalments and the bond was afterwards settled by the arbitrator and engrossment thereof signed before the arbitrator on the 26th January 1916 by Yeshwantprasad and Dinkarrai Laxmiprasad as manager of the family of Laxmiprasad who died on 1st October 1915. The plaintiff accepted the bond without prejudice to his rights, if any, against the estate of Chandraprasad. The arbitrator made his award on 31st January 1916. The plaintiff now seeks to recover from the estate of Chandraprasad in respect of the deposit receipt dated 15th February 1912 and the debt in respect of which the receipt was passed. There are two main defences to this suit. The defendants contend that the plaintiff is not entitled to maintain this suit by reason of the proceedings taken in Suit No. 1502 of 1914 and acts had and done thereunder and further that the right of the plaintiff in respect of the alleged debt is extinguished or released by reason of the promissory notes, dated 7th April 1913 and 27th April 1914 and by the return of earlier notes and by reason of the plaintiff's acceptance of the bond dated 26th January 1916. Hence the present suit. The first question that I have to consider is whether this suit is barred by reason of what has taken place in Suit No. 1502 of 1914. Therefore it is necessary to consider against whom that suit was filed, that is to say, who were the defendants in that suit. It must be remembered that suit No. 1502 of 1914 was filed by the present plaintiff against the firm of Y. H. Desai & Co. in the firm's name. It was open to the plaintiff to have made Laxmiprasad and Yeshwantprasad and the defendants in the present suit, as heirs and legal representatives of the deceased Chandraprasad, defendants individually, but the plaintiff preferred to file that suit in the name of the firm. It appears that parties to that suit referred the matters in dispute in that suit and something more with which we are not concerned, to the arbitration of Mr. Setalvad. On 21st August 1915, parties came to some agreement; attention of the arbitrator is called to this agreement and the decision of the arbitrator is invited as to the terms on which the parties were ultimately to settle the claim. The arbitrator gave his decision and his decision is acted upon by the bond being executed in his presence. The arbitrator made his award and the award directed the defendants to execute a bond in favour of the plaintiff providing payment of Rs. 48000 by instalments. Eventually, on 13th April 1916, decree in terms of this award was taken. It is contended that the bond of 26th January is not part of the award but in my opinion such contention is absolutely untenable. The bond must be considered as part of the award. On this a most careful, elaborate and interesting argument was addressed to the Court both by Mr. Mulla and Mr. Desai for their respective clients. To put it briefly it is contended for the defendants that the plaintiff had one single and entire cause of action against the three brothers constituting the firm of Y. H. Dasai & Co. and that Suit No. 1502 of 1914 was a suit not only against the surviving partners, Laxmiprasad and Yeshwantprasad but as well as against the assets of the deceased partner Chandraprasad and any decree passed in the suit can be executed against all the assets of the firm including those of Chandraprasad and therefore the plaintiff cannot now go against the representatives of the deceased partner Chandraprasad because it extinguished his cause of action. On the other hand it is argued for the plaintiff that the only persons who were parties to Suit No. 1502 of 1914 were Yeshwantprasad and Laxmiprasad because the suit was founded on a promissory note passed on 27th April 1914, that is at a time when they were the only partners and that they would have had no authority to pass a promissory note so as to bind the estate of a deceased partner. It is not necessary to consider and discuss in great detail this part of the case having regard to the decision I have come to on the question whether there was novatio or not for it is conceded by Mr. Mulla for the plaintiff that in the event of the Court holding that there was novatio there is an end of his case.

3. It is true that the plaintiff in Suit No. 1502 of 1914 sought unsuccessfully to bring the representatives of Chandraprasad on the record and he accepted the bond without prejudice to his rights if any against the representatives of Chandraprasad but it seems to me that the plaint in this suit and the affidavits filed on the Chamber Summons dated Gth February 1915 for bringing the representatives of Chandraprasad on the record make it abundantly clear that there was only one cause of action and that the Suit No. 1502 of 1914 being against the firm in the firm's name it must be taken to be against the three.

4. Further it seems to me that the contention of the plaintiff that the surviving partners of Y. H. Desai & Co. had no authority to bind the estate of the deceased partner by giving a fresh note is untenable having regard to the provisions of Section 263 read with Section 251 of the Indian Contract Act and that on dissolution and there was in law dissolution on the death of Chandraprasad, the surviving partners had power for the purpose of winding up the estate of a deceased partner and that as agents of the partners they have power to bind his co-partner for the purposes of winding up, therefore any act done by the surviving partners provided it is done in due course of winding up would bind the estate of a deceased partner. If promissory note was given then it cannot be argued that the estate of Chandraprasad was not bound. It is bound by the ultimate result of the suit. The suit was against the firm and it resulted in a compromise and the right as against the estate not being expressly reserved I hold no right now subsists to the plaintiff to bring the present suit against the representatives of Chandraprasad.

5. Further even assuming for the sake of argument that the suit was against the surviving partners of Y. H. Desai & Co. as contended for by the plaintiff, still I think that having regard to the provisions of Section 43 of the Indian Contract Act and the recent decision of Macleod J. in Shivlal Motilal v. Birdichand Jivraj (1917) 19 Bom L.R. 370 the present suit against the representatives of the deceased Chandraprasad would not be maintainable. It is plaintiff's case that he accepted the promissory note dated 27th April 1914 from the surviving partners of the firm of Y. H. Desai & Co. in lieu of the earlier note of 15th February 1912. Therefore it seems to me that the plaintiff having surrendered the earlier notes for cancellation and accepted in lieu thereof a receipt or note by two surviving partners the claim or right against the estate of the deceased partner Chandraprasad is extinguished or released and it constitutes what is known as novatio. Section 62 of the Indian Contract Act deals with this question. It is settled law that when a creditor of a firm contracts or agrees with a new firm to take their security in discharge of that of the, old the retiring partner is discharged from any liability to pay the debt but whether such a contract or agreement has or has not taken place is a question of fact. Novatio, according to Lord Selbourne in Scarf v. Jardine (1882) 7 App. Cas. 345, means this, 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. Novatio is another word for accord and satisfaction by giving in substitution the liability of another person upon another contract in lieu of the contract for which the former partners were liable.

6. It is true that in In re Head [1893] 3 Ch. 426 it was held that acceptance by a. customer, from the surviving partners of a fresh deposit note for the balance of a debt due from a firm one of whose partners is dead is not sufficient evidence of novatio to discharge the estate of the deceased partner. From this it follows that mere acceptance of a note from surviving partner in itself is not enough. From Harris v. Farwell (1851) 15 Beav. 31, it appears that a contract to discharge a retiring partner from a debt due from the firm may be proved either by an express agreement or by facts and conduct from which it may fairly be inferred. I have therefore to consider in this case whether the facts amount to such a discharge. In this case it is not pretended that there was any express agreement; therefore the question is whether it can be fairly inferred from the subsequent dealing between the parties. Is there sufficient evidence of the intention which would be necessary on the part of the plaintiff to relinquish the original debtor, i.e., the estate of Chandraprasad It is contended by the plaintiff's counsel that the promissory note which was put in suit No. 1502 of 1914 was a fresh cause of action; then it is a substituted liability inasmuch as it is given in lieu of the liability under the promissory note of 25th February 1912. Then this is a clear case of novatio. In the present case plaintiff agreed to accept in satisfaction of the liability of three, the liability of two and further liability of two, with added security, viz., second mortgage of Barsi Mills. It is not necessary to consider whether taking of the note by two was more beneficial or not: see Thompson v. Percival (1834) 5 B & A 925. Further there has been a change in the course of dealing between the parties, for the promissory note dated 15th February 1912 was not for cash at all but for return of various securities like Government Paper, Port Trust Bonds, Municipal Bonds, Improvement Trust Bonds and cash amounting in all to Rs. 50,000 and interest was payable every six months and from the endorsement on the note it appeals that in lieu of this a new demand promissory note was given on 7th April 1913 for Rs. 50,000 in cash and interest payable at 6 per cent, per annum and not as in former case with six monthly rests. When there is such a change in the course of dealing, it is a clear case of novatio: see In re Head [1894] 2 Ch. 23fi, where a customer of Banking partnership after the death of one of the partners removed money from the current account to a deposit account bearing interest at the same bank and received a deposit note from the surviving partner without the money being actually received and deposited except by fiction it was held that there was sufficient evidence of novatio to discharge the estate of the deceased partner from liability for. the amount placed on deposit. So in the present case bearing in mind that the first deposit receipt of 25th February 1912 was for return of various securities and cash and interest payable every six months and this was cancelled and in lieu thereof a demand promissory note for Rs. 50,000 interest payable at six per cent, per annum is taken, I hold that there is enough evidence of intention on the part of the plaintiff to discharge or relinquish the estate of Chandraprasad by accepting the new note from the surviving partners. So the present suit cannot be maintained. The result is suit must be dismissed with costs.


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