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Bhaishankar Motiram Vs. Lakshmi Dyeing Works - Court Judgment

LegalCrystal Citation
SubjectContract
CourtMumbai
Decided On
Case Number Civil Revision Application No. 74 of 1928
Judge
Reported inAIR1930Bom449; (1930)32BOMLR1031; 129Ind.Cas.588
AppellantBhaishankar Motiram
RespondentLakshmi Dyeing Works
DispositionApplication dismissed
Excerpt:
.....partner-lietire-mail of dormant partner before a party entered into a transaction with the firm-notice of dissolution published after the. transaction-party dealing with the firm having no knowledge of the existence of the dormant partner-liability of the dormant partner.;on november 12, 1926, the plaintiff entered into a transaction with a firm which consisted of two partners but one of whom had retired on august 20, 1926 , notice of dissolution of the partnership was published on january 2, 1927, but the plaintiff was not aware at the time he entered into the transaction with the firm that the retiring partner was a member of it. in a suit by the plaintiff against the partners to recover the amount due in respect of the transaction :-;(1) that section 261 of the indian contract..........that section 264 of the indian contract act does not apply to new customers, that section runs : 'persons dealing with a firm will not be affected by a dissolution of which no public notice has been given, unless they themselves had notice of such dissolution'. the question then is whether the words persons dealing with a firm' are confined to persons dealing with a firm before dissolution, or whether it also includes persons dealing with a firm after the dissolution. in other words, does it include new customers as well as old ones in jwaladutt pillani v. banailal motilal : air1927bom560 this point was discussed in this court, and there it was conceded in argument that section 264 applied to new customers as well as old ones. there a recent decision in jagat chandra bhattacharjee v......
Judgment:

Amberson Marten, Kt., C.J.

1. The question here is whether defendant No. 2 is liable for a debt contracted by the Lakshmi Dyeing Works, of which firm defendants Nos. 1 and 2 had both been partners, but of which at the date of the transactions in question defendant No. 1 was the sole partner or proprietor, and defendant No. 2 had retired. The learned Judge held that it was doubtful whether Section 264 of the Indian Contract Act applied, as defendant No. 1 dealt with the plaintiff for the first time after a change in constitution, and that accordingly defendant No. 2 was not liable. The exact dates are as follows. The dissolution was on August 20,1926; the goods in question were supplied by the plaintiffs on November 12, 1926 ; and notice of dissolution was given on January 2, 1927.

2. As regards the ground taken by the learned Judge, viz., that Section 264 of the Indian Contract Act does not apply to new customers, that section runs : 'Persons dealing with a firm will not be affected by a dissolution of which no public notice has been given, unless they themselves had notice of such dissolution'. The question then is whether the words persons dealing with a firm' are confined to persons dealing with a firm before dissolution, or whether it also includes persons dealing with a firm after the dissolution. In other words, does it include new customers as well as old ones In Jwaladutt Pillani v. Banailal Motilal : AIR1927Bom560 this point was discussed in this Court, and there it was conceded in argument that Section 264 applied to new customers as well as old ones. There a recent decision in Jagat Chandra Bhattacharjee v. Gunny Hajee Ahmed ILR (1925) Cal. 214 was referred to, in which Sir Lancelot Sanderson stated (p. 227):-

In the first place the section says 'persons dealing with a firm,' It does not say ' persons dealing with a firm before its dissolution', and, I see no reason why the words 'before its dissolution' should be interpolated in the section.

In my judgment it is clear that the above-mentioned case is an authority for the proposition that the section applies not only to persons who dealt with the firm before the dissolution, but also to persons dealing with the firm after the dissolution or Change of partners.

This, as already stated, is the natural construction of the section giving the ordinary meaning to the words used in the section.

3. This Court accepted that view of the law in Jwaladutt Pillani's case. Therefore, we think that in the present case the learned trial Judge's decision on that point cannot be upheld.

4. Then comes a point which has not been dealt with in the Court below. That is, whether the plaintiff at the time he entered into the suit transaction knew that defendant No. 2 was a partner in the firm. That raises the question of dormant partners, which is discussed in the same case of Jwaladutt Pillani v. Bamilal Motilal (at p. 1251). The conclusion eventually arrived at there was that ' a 264 must in any event be construed in such a way that it is not to apply to cases of dormant partners nor to cases of death.'

5. What then is a dormant partner Is he a partner not known to be such to a person dealing with a firm, or not known to the world at large It is clear that in English law the sole question is whether he is known to the person dealing with the firm. Thus Section 36 of the English Partnership Act 1890 (53 & 54 Via c. 39) provides that-.The estate of a partner who...not having been known to the person dealing with the firm to be a partner, retires from the firm, is not liable for partnership debts contracted after the date of the death, bankruptcy, or retirement respectively.

6. Then in Lindley on Partnership, 6th Edn., p. 71, it is stated:-

If the firm name does not disclose the fact that the retiring partner is a member of the firm the continued use of that name after his retirement will not, as a matter of fact, represent him as being a member of the firm except to persons who know of his connections with it, and as to such persons due notice of his retirement will terminate his liability for the future.

7. And at p. 221 it is pointed out that- if a known partner retires, and no notice is given, he will be liable to be sued in respect of a promissory note made since his retirement by his late partner, even though the plaintiff had no dealings with the firm before the making of the note.'

8. Then lower down it is stated :

if a dormant partner is known to certain individuals to have been a partner, ho is as to them no longer in the situation of a dormant partner, and must therefore give them notice of his retirement if he would free himself from liability in respect of the future transactions between them and his late partners.

9. Similar passages appear in the 9th edition (p. 80).

10. That being so, the crux of this case is: Did the plaintiff know that defendant No. 2 was a partner in the firm in question That question, therefore, we think, must be answered before we can finally determine the point of law. Therefore, we direct an issue to the lower Court to determine this question, with liberty to either side to adduce further evidence. The answer should be returned to us within four months. Costs of this application will be reserved.

11. I should have stated that the decision of this Court in Jwaladutt Pillani v. Banailal has been confirmed by the Privy Council on February 28, 1929a), and that consequently it has now been finally decided that for old customers it is necessary to give actual notice of dissolution, and that a mere public notice is insufficient. But the judgment before us does not expressly decide the question of dormant partners, which we have to deal with in the present case. In Jwaladutt Pillani's case the parties in question were old customers.

12. The lower Court answered the issue sent down in the negative.

W. B. Pradhan (Ramnath Shivlal appeared), for the applicant.

V. K. Chhatrapati, for opponent No. 2.

13. Marten C. J. For the reasons given in our judgment of April 4, 1929, we remanded this case to determine whether the plaintiff knew that defendant No. 2 was a partner in the firm in question. That question has been answered in the negative by the learned Judge. And after hearing what Mr. Ramnath Shivlal for the petitioner has to urge against that finding, we have arrived at the conclusion that it ought to be confirmed.

14. It is next urged by counsel that defendant No. 2 was known to the public as a partner, and that therefore the rules as to a dormant partner quoted from the English Partnership Act arid from Lindley on Partnership in our previous judgment do not apply. But, as pointed out there, the real question is whether the partner in question who retires is known to the person dealing with the firm to be a partner.

15. It has now been held by their Lordships of the Privy Council in Jwaladutt Pillani v. Bansilal Motilal : (1929)31BOMLR687 , confirming the decision of this Court in Jwaladutt Pillani v. Bansilal Motilal : AIR1927Bom560 , that the provisions of the Indian Contract Act, 1872, are not exhaustive of all questions which can be raised in connection with partnership, and that despite Section 264 it is necessary to give old customers actual notice of dissolution, and not only public notice. In that case it was held by this Court that Section 264 did not apply to the case of dormant partners unknown to the contracting party. This had already been decided by Mr. Justice Tyabji in Greawa v. Purahotam (1903) 5 Bom. L.R. 366. And in argument before this Court in Jwaladutt Pillani's case it was conceded by counsel that Section 264 would not apply to such a dormant partner. Further, having regard to the arguments as reported in 81 Bom. L. R. 687, it would appear that the same admission was made by counsel before the Privy Council, although the point was not mentioned in the judgment.

16. Under the circumstances of the present case we think that Section 264 does not apply. We are thus thrown back on the agency clauses of the Indian Contract Act, or else on English law as showing that in such a case as the present, no liability attaches to the dormant partner who has retired before the suit transaction and is unknown to the party contracting with the firm.

17. We hold, therefore, that the petitioner's claim against defendant No. 2 fails, and that this revisional application must be dismissed with costs as against him.


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