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Godavari Pravara Canal Co-operative Purchase and Sale Union Ltd. Vs. Krishnarao and anr. - Court Judgment

LegalCrystal Citation
SubjectCommercial
CourtMumbai High Court
Decided On
Case NumberA.F.O. No. 20 of 1970
Judge
Reported inAIR1974Bom52; 1974MhLJ75
ActsCode of Civil Procedure (CPC), 1908 - Order 30, Rule 4; Indian Contract Act, 1872 - Sections 45
AppellantGodavari Pravara Canal Co-operative Purchase and Sale Union Ltd.
RespondentKrishnarao and anr.
Appellant AdvocateG.G. Mdak, Adv.
Respondent AdvocateG.A. Paunikar, Adv.
Excerpt:
.....or more persons jointly is clearly a matter of debate. these elements clearly show that qua the firm, the partners are not merely co-constituents, but are agents as well as principals. the provision of section 45 of the indian contract act clearly indicates that the promise as such must be to two or more persons jointly, every promise being an independent agreement. this can well be a matter differently providing and indicating a contrary intention. 13. this review clearly shows that partnership is a legal relationship recognized and is mainly based on the doctrine of agency. law governing its life clearly is an evidence to treat it as a unit or a recognized group. it is, however ,clear that where a business like money-lending has to be carried on in the interests of the family as a..........section concerns itself when a promise is made to two or more persons jointly and not surely to a firm partnership though that is a name for all those who carry on business together. whether a promise to a partnership or a two or more persons jointly is clearly a matter of debate. distinction however fine does exist and must be given effect to.11. the nature of partnership is referable to the provisions of section 4 of the indian partnership act, 1932, which states that 'partnership' is the relation between persons who have agreed to share the profits of a business carried on by all or any or them acting for all. individually they are called partners and collectively a firm. the source, no doubt, is the agreement between the persons for sharing the profits of the business and that.....
Judgment:

1. The original defendant Godavari Pravara Canal purchase and Sale Union, a Co-operative Society has filed this appeal against the order of remand made by the Assistant Judge Nagpur in Civil Appeal No. 241 of 1968.

2. Few facts may be noticed to understand the submissions made at the Barin this appeal. Respondent Krishanrao filed a suit which is record page 27 styling it as a suit on account-books for the recovery of price of goods supplied to defendant No. 1-appellant. He instituted it on March 30, 1965. To that suit he joined one Haribhau since deceased as defendant No. 2. It is no more disputed that later on Haribhau was joined as co-plaintiff. The trial Court dismissed the suit mainly on two grounds reflected in issues 5 and 6. Though the learned Judge recorded answers against all other issues, he did not discuss any evidence nor disclosed any reasons on the basis of the evidence to reach to those conclusions. In that, it is surprising to note that the learned Judge says as to issues on merits while recording positive findings that in view of the foregoing findings on issues Nos. 5 and 6, it is not necessary to discuss the other issues on merits. This is hardly a proper method to write a judgment. In substance, the trial Judge really record his judgment on two maintainable in view of Section 164 of the Maharashtra in view of Section 164 of the Maharashtra Co-operative Societies Act and whether the Court had jurisdiction to try the suit. The aggrieved plaintiffs took up the appeal. During the pendency of the appeal, the co-plaintiff died on November 5, 1968. His name was struck out under an application filed on August 1, 1969. It appears before the learned appellate Court, a submission was made that the appeal has become incompetent as legal representatives of Haribhau have not been brought on record. The learned appellate Judge rightly remanded the matter after negativing the said contention.

3. In this Court the same said point is urged by the learned counsel appearing for the appellant. His submits that no proper construction of the pleadings in suit filed by Krishnarao this was a suit in individual capacity to recover a debt from defendant No. 1. This was not a suit, according to him, in the name of the firm, nor was it a suit representing he firm. He further submits that in view of the provisions of Section 45 of the Indian Contract Act, it must be held that legal representatives of the deceased partner had subsisting interest and unless they were joined, the appeal must abate. This is more so, according to the counsel, for Haribhau was permitted to join in his individual capacity as co-plaintiff. The learned counsel mainly and heavily relied upon the judgment reported in Shrikrishna v. Deokinandan : AIR1961MP314 .

4. To understand the contention of the learned counsel the first thing that has to be done is to see the frame of the suit and to find out in what capacity the claim was laid. Plaintiff has described himself as one of the partners of the dissolved firm 'Haribhau Sant & Co.' In the very first paragraph the plaint alleges that there is a firm by name Haribhau Sant & Company registered under the Indian Partnership Act, 1932 and also discloses the registration number. Further it gives the details of the partners, one being plaintiff himself and other being deceased Haribhau. It alleges that the firm is dissolved and plaintiff alone is the owner and he is so suing. In para. 2 the plant states that under the deed of partnership the plaintiff was authorized to sue in the name, for and on behalf of the firm. Defendant No. 2 was joined merely to avoid any technical defects in the plaint and he has his share in the suit-claim being a partner. It the defendant No.2 wasn't to joint in the suit, the plaintiff has no objection. Plaint narrates how the supply of goods was made to defendant No. 1 and what is due and outstanding at the foot of the account of the firm. Cause of action is pleaded to have arisen at Nagpur when the goods were supplied, obviously, by a firm within the jurisdiction of the Court, Ultimately, it is prayed that a decree be passed against the defendant No.1 with full costs of the suits. The deed of partnership provides that the said plaintiff Krishnarao will have full authority to bring as well as defend all actions at law. Similarly, it recites that even after the closure of the partnership, the recoveries from the customers of the firm shall be made by Krishnarao, i.e. the plaintiff. It does appear that this firm between Krishnarao and Haribhau stood dissolved under an order made by the Court produced at Exh. 36 as from the 9th of February, 1966.

5. These events clearly indicate that the debt for which the suit was filed was for the period when the partnership was very much in existence and continuing in business. That is the cause of action pleaded in the suit and is referable to the accounts of the firm for the years 1962-63. The nature of the suit is, therefore, plain that a partner of a registered firm who is authorized by the tremens of the agreement has brought the suit for the recovery of the partnership debt. He has also disclosed who is the other partner and has stated that the latter has a share in suit claim. It is thus plain that the suit is based for a cause furnished by the partnership business. It is not an individual who seeks the remedy but as and for the firm, though styled as dissolved, the decree is sought.

6. Now the law on this point is well settled as far as this Court is concerned. In Devshi Harpal v. Bhikamchand (AIR 1927 Bom 125), a Division Bench of this Court has considered the matter at some length and it has been laid down that notwithstanding the provisions of Section 45 of the Contract Act, it is not imperative to add the legal representatives of a deceased co-partner to an action for recovery of a debt by the surviving partners. For coming to the conclusion of that law this Court has referred to its earlier decision reported in Motilal Bechardas v. Ghellabhai Hariram ((1893) ILR 17 Bom 6). There is yet another decision of a Division Bench of this Court reported in Mathuradas Ganji v. Ibrahim Fazalbhoy, (AIR 1927 Bom 581), where it was pointed out that Order 30, Ruke 4, C.P.C., was in fact enacted to set at rest the doubt that existed in connection with Section 45 of the Contract Act, in regard to suits by and against firms. There the suit was brought against a partnership firm. In Savalaram v. Himatlal (AIR 1944 Born 350), Macklin J, was considering Order 30, Rule 4, and has observed that in view of that provision, it was unnecessary to bring the legal representatives of the deceased partner on record of the suit, the suit being a suit against a firm.

7. This is enough to indicate the view of law consistently taken by this Court that notwithstanding the provisions of Section 45 of the Contract Act, if a suit is one for or on behalf of a firm brought by a person claiming to be the partner for an item of loan due for or by the firm, the provisions of Order 30, Rule 4, make it unnecessary to join the legal representatives of the deceased partner. The view taken in : AIR1961MP314 cited supra, on which the learned counsel heavily relies, is quite contrary and states that the representatives of a deceased partner are necessary parties to a suit brought by a partner for the recovery of a debt which accrues due to the partnership in the lifetime of the decreased partner. Wit respect, I am unable to follow the same said exposition to law by the learned Single Judge and wish to add that there are no good reasons to take any different view of the matter, as far as this Court is concerned.

8. The Madhya Pradesh High Court while deciding the true meaning of Order 30, Ruke 4, appears to have drawn upon the English law of devolution of rights in the case of joint promises, except to the extent indicated by Order 30, of the Code of Civil Procedure. It is further observed that the matter was governed clearly by Section 45 of the Indian Contract Act. The learned Judge has distinguished the exposition of law of this Court in Devshi Harpal's case AIR 1927 Born 125 and in Mathuradas Ganji's case AIR 1927 Born 581 (above cited) mainly because it drew assistance from the earlier judgment in (1893) ILR 17 Born 6). The Court appears to prefer the view expressed by the earlier Nagpur decisions and hence ruled that the matter in spite of Order 30, Ruke 4, must still be governed by Section 45 of the Indian Contract Act.

9. The provision of Section 45 of the Indian Contract Act is a part of the topic as to by whom contracts must be performed. Its object is also to specify the devolution in case of joint rights. This is explained by the illustration appended to the section. First part of the section enjoins all joints promises to join in an action for the recovery of the entire debt. This is subject to the contrary intention appearing in the contract itself. The words 'unless a contrary intention appears from the contract', are very much part of the first limb of the provision and can take in variety of cases.

10. The latter part of the section indicates how the right would pass or devolve upon the death of one of the join promises. It is really a rule indicating the devolution of the rights. it is plain, therefore, that the section concerns itself when a promise is made to two or more persons jointly and not surely to a firm partnership though that is a name for all those who carry on business together. Whether a promise to a partnership or a two or more persons jointly is clearly a matter of debate. Distinction however fine does exist and must be given effect to.

11. The nature of partnership is referable to the provisions of Section 4 of the Indian Partnership Act, 1932, which states that 'partnership' is the relation between persons who have agreed to share the profits of a business carried on by all or any or them acting for all. Individually they are called partners and collectively a firm. The source, no doubt, is the agreement between the persons for sharing the profits of the business and that business has to be carried on by all or any of the persons concerned acting for all. These elements clearly show that qua the firm, the partners are not merely co-constituents, but are agents as well as principals. By the very nature of relationship, implied agency is contemplated and every one who does the business of the firm acts for all the partners. This element of mutual agency is a principle that makes the relationship of the partners distinctive which may not be present in the case of joint promises. The provision of Section 45 of the Indian Contract Act clearly indicates that the promise as such must be to two or more persons jointly, every promise being an independent agreement. The position of the partnership firm is not, in law, of two or more persons jointly taking the promise but any one for others accepting the promise for the firm. This can well be a matter differently providing and indicating a contrary intention. Though on the surface, this looks anomalous, the difference is of substance.

12. Though partnership is not a juridical person, the relationship between the partners and the name under which they carry on the business is an entity specifically recognized and treated as such by the provisions of the Indian Partnership Act, giving rise to certain rights and obligations between the parties and also those who deal with such firms. The provision of that Act provide ample machinery to indicate how the firm is constituted and how it works and how it can be put an end to. Even it refers to the property that it possesses. Section 14 of the Partnership Act states that the property of the firm includes all property and rights and interest in property originally brought into the stock of the firm or acquired, b purchase or otherwise, by or for the firm, or for the purposes and in the course of the business of the firm, and includes also the goodwill of the property has to be held and used by the partners, exclusively for the purpose of the business. Section 18 of the Partnership Act states that subject to the provisions of the Act, a partner is the agent of the firm for the purposes of the business of the firm. Then follow the provisions how the partner can act. his admissions and representations concerning the affairs of the firm are evidence against the firm and give rise to several obligations. Provisions of Chapter V deal with incoming and outgoing partners and Chapter VI deals with dissolution of a firm. Section 42 speaks that subject to contract between the partners a firm is dissolved because of the happening of the several events and one of them is by the death of a partner.

13. This review clearly shows that partnership is a legal relationship recognized and is mainly based on the doctrine of agency. it is capable of being dissolved either by agreement or under the exigencies spoken of by Section 42, one of them being death. It holds property and its agents can bind others. Strictly therefore though not incorporated, it has all the trappings of an entity. Law governing its life clearly is an evidence to treat it as a unit or a recognized group. Though not a person it surely possesses character of quasi person. if with such a relationship available at law, can it at all be called a case of mere joint promises as contemplated by Section 45 of the Indian Contract Act I doubt very much.

14. If this relationship is to be read in Section 45 of the Indian Contract Act, it will be clear that the provisions cannot properly operate. By the very nature of the section it is restricted to the promises made by two or more persons jointly and further even after the demise of one, the enforcement rights rest with the representatives of such deceased person jointly with the surviving person. This will not be possible in case of the firm which would stand dissolved upon the death of a partner in a given case. Every partner of the firm is capable of representing the entire collocation called the firm. He has a right subject in the business of the firm but to enforce the promises for and on behalf of the firm. That is on the footing that he acts for all and is an agent as such. Therefore, a surviving partner need not for the enforcement of the rights arising out of the firm-business seek the aid of the representatives of the deceased partner for he represents the business of the firm as such.

15. This leads me to conclude that with respect to the relationship between the partners, it is not merely a case of joint promises or joint primroses; it is a case something different and something more than that and that is not the part of the provisions of Section 45 of the Contract Act.

16. In Krishanparshad v. Harnarain Singh (1911) ILR 33 All 272, Privy Council was considering the case of a joint family business where the suit was brought by the managing members and the objection was that all the members of the joint family ought to have been made parties, which found favour with the High Court at Allahadab. This view was not approved by the Privy Council and considering the various Indian decisions, the Privy Council observed:

'............... It is, however , clear that where a business like money-lending has to be carried on in the interests of the family as a whole, the managing members may properly be entrusted with the power of making contracts, giving receipts and compromising or discharging claims ordinarily incidental to the business. Without a general power of that sort, it would be impossible of the business to be carried on at all, and there is no reason to doubt the correctness of the finding of the learned Subordinate Judge that the first three plaintiffs here were in fact entrusted with, and regularly exercised, such a power in regard to this money lending business. he finds in broad terms that all the business relating to the shop had been carried on in the names of the first three plaintiffs only, and that all law suits relating to the shop, or the family had also been instituted in their names alone.'

While considering the other decisions and particularly the decision reported in (1895) ILR 18 Mad 33, Alagappa Chetti v. Vellian Chetti the Privy Council observed:

'The decision in (1895) ILR 18 Mad 33, cited by the respondents, may be supported on the ground that the single plaintiff in that case was not shown to be the managing member of the family or to be the only partner of the business with which the litigation was concerned.

Their Lordships think however, that the proposition there laid down to the proposition there laid down to the effect that the manager cannot sue without joining all those interested with him, if literally construed, goes too far.'

The ratio of this authority clearly enables the manager of the business to institute suits if it can be shown that the business was carried on as such. The relationship of a partner with the business is well-known, and it is different and distinct from being merely a co-owner or a person having joint interest. He (manager) is further enabled by the terms of the agreement as well as by the agent for all the body of law to be the agent for all the body known as 'firm'. The agreement of partnership itself therefore, may properly confer the powers of the management of the business on any single partner and further may authorize such a partner to sue or to defend the legal actions in law Courts. Once it is shown that the plaintiff was such a partner of a registered firm, it is plain that there is no principle which can defeat the action properly brought by such a single plaintiff for the firm.

17. With this I may examine the relevant provisions of the Code.

18. Order 30 of the Code of Civil Procedure is by itself a special procedural enactment. It deals with suits by or against firms and persons carrying on business in names other than their own. This itself shows that a special provision is being made how such suits are to be instituted or defended. The rules and sub-rules under Order 30 are indicative that it is a complete code within itself and does not leave matters to any other law. It is well-known that the provisions of this Order were introduced to acid the consequences and conflicts raised at the behest of Section 45 of the Contract Act. Though a firm is not a juridical person like a body corporate, it is enabled by virtue of this Order to sue and defend suits in the manner provided. Once it is shown that the suit is brought by the firm, it follows that it is brought in the name of all the partners constituting the firm.

19. The provisions of this Order have been considered by the Supreme Court in Purushottam & Co. v. Manilal and Sons, : [1961]1SCR982 . It has been found that the introduction of Order 30 in the Code was an enabling one which permitted partners constituting a firm to sue or be sued in the name of the firm. This enabling provision accorded no such facility or privilege to partners constituting a firm doing business outside India. The Court noticed the history of O. 30 of the Code of Civil Procedure and observed that there was a practice prior to that to institute suits in the name of the firm which was based on the assumption that the suit concerned was either by all the partners of the firm or against all the partners of the firm. If, however, objections were taken that such a suit in the name of a firm was not maintainable because it had no legal entity, the Courts were to decide whether the suit had been instituted by non-existent persons and if so, whether it was void. The introduction of Order 30 into the Code prevents such objection being taken because it permits two or more person carrying on business of the firm but the firm must be carrying on business in India. As to the nature of the firm but the firm must be carrying on business in India. As to the nature of the firm under Section 4 of the Indian Partnership Act, 1932, the Court observed that the word 'firm' or the 'firm name' was merely a compendious description of all the partners collectively. It followed, therefore that where a suit is filed in the name of a firm it is still a suit by all the partners of the firm unless it is proved that all the partners had not authorized the same. A firm may not be a legal entity in the sense of a corporation or a company incorporated under the Indian Companies Act, but it is still an existing concern where business is done by a number of persons in partnership. When a suit is filed in the name of a firm it is in reality a suit by all the partners of such firm. After referring to Rule 1 of Order 30, the Court observed that the rule enabled any party to a suit filed in the name of a firm doing business in India to apply to the Court for a statement of the names and addresses of persons who were at the time of the accruing of the cause of action partners in the firm to be furnished and verified in such manner as the Court may direct. R. 2 of O. 30 makes it obligatory to declare in writing the names and places or residence of all the persons constituting the firm on whose behalf the suit is instituted. Certain consequences have been indicated. The provision of Rule 2 indicates that although the suit is filed in the name of a firm, it is nonetheless a suit by all the partners of the firm and all these provisions are enabling to permit several persons who are doing business as partners to sue or be sued in the name of the firm. That does not, however, prevent the partners of a firm from suing or being sued in their individual names. There is no prohibition as such in terms imposed by Order 30 of the Code. Upon this view, the Court ruled that such a suit filed in a Court in India was not a nullity, though the firm was carrying on business outside India.

20. This authoritative exposition of law clearly shows that in matters of suits on behalf of firm, the provisions of Order 30 are ample and conclusive, Rule 4 of Order 30 specifically deals with right of suit on death of a partner and opens by a non obstinate clause expressly excepting Section 45 of the Contract Act. It is further enabling in nature and clearly shows that where two or more persons are enabled to sue or can be sued in the name of a firm under the provisions of Order 30 and any one of them dies whether before institution or during the pendency to join the legal representatives of the deceased as a party to the suit. Sub-rule (2) does not however affect or limit the right of the legal representatives of the deceased to apply to be made a party to a suit for enforcing their claim against the survivor or survivors. Once it is shown that a suit is on behalf of a firm, it is equally a suit under Order 30 itself and it is plain that the terms 'suits' will also include the term 'appeal', the same being continuation of the suit. The procedural laws are to be liberally construed laws are to be liberally construed and this is more so when it is an enabling provision. It appears from the very scheme of Order 30, and particularly of ule 4, that it did away with the necessity of impleading the legal representatives of the deceased partner in express terms, and avoiding abatements of the partnership causes in Court. It is perfectly possible to see the object underlying the provision and that is to enable the enforcement of the firm-obligation without least complications. Otherwise the partners who have brought the suit properly would be visited with penalty of facing an abatement of the action only for legal representatives are not brought on record. It is conceivable that such a partner may not be knowing at all, all the legal representatives or there may be various difficulties in bringing all of them on record and in law can be treated as best representing interest of the deceased partner. To attract Ruke 4 the action needs be in the name of the persons collectively, called 'firm'. The words 'where two or more persons may sue or be sued in the name of a firm', under the foregoing provisions, indicate that the suit may be by a person or partner on behalf of the firm for enforcing the firm-obligations. it would bristle with technicality to say that the suit must be in the name of a firm. Even a suit properly laid for the firm by the authorized partner is well within the terms of Rule 4. The terms of this rule being permissive in nature I am not inclined to impose or imply any technicality in its construction.

21. In Dharamdas Gokaldas v. Krishan Chand. (FB) the Full Bench of the Punjab High Court considered the terms of this rule along with Order 22, Rules 4 and 11. It was a suit by the firm through its partner and during the course of the appeal a partner died. The Court held that appeal did not abate though legal representatives of the deceased partner were not brought on record. In Mohamed Valli Patel v. Western Indian Oil Distributing Co. Ltd., (1970) 74 Cal WN 1026 it was pointed out by the Calcutta High Court that a suit filed in the name of a firm is a suit by all the partners and Rule 4 (1) of Order 30, was a special provisions contained in Orders 1 and 22 so far as they related to addition and substitution to parties in case of death of partners. It was further observed that under Rule 4 (1) of Order 30, the surviving partner is enabled to file a suit in the name of the firm without impleading the legal representatives of the deceased partners. it terms, that rule conferred a right on the sole surviving partner to prosecute the suit without joining the deceased partners legal representatives.

22. I am in respectful agreement in what is stated in these two decisions. Once Order 30, Rule 4, is to be given effect to, it is clear that the suit can be continued without the legal representatives of the deceased partner. The provision, therefore, clearly carves out an exception to the general rule contained in Section 45 of the Indian Contact Act and though no legal representatives are brought on record, the action itself neither abates nor is affected.

23. That being the position, the contention raised on behalf of the appellant has no merit. the appeal, therefore, would has no merit. The appeal, therefore, would stand dismissed. However, under the circumstances, there will be no order as to costs.

24. Appeal dismissed.


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