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Shankar Bandu Vs. Shankar Babaji and ors. - Court Judgment

LegalCrystal Citation
SubjectCivil
CourtMumbai High Court
Decided On
Case NumberA.F.O. No. 24 of 1954
Judge
Reported inAIR1956Bom165
ActsEvidence Act, 1872 - Sections 91 and 92; Code of Civil Procedure (CPC), 1908 - Order 6, Rule 4; Partnership Act, 1932 - Sections 4; Indian Contract Act, 1872 - Sections 10
AppellantShankar Bandu
RespondentShankar Babaji and ors.
Appellant AdvocateR.A. Jahagirdar, ;G.R. Samant and ;V.V. Divekar, Advs.
Respondent AdvocateR.B. Kotwal, Adv.
Excerpt:
.....1 and 2 were grossly negligent in their conduct and were liable to make good an amount alleged to have been lost by them and account of the partnership should be made on that footing. where a contract is entered into between parties, the contract deals with the subject matter as well as the persons between whom it is entered into, and the names of the parties in so far as they relate to tennis which create obligations cannot be regarded as so divorced from the terms of the contracts, that evidence may be led to show that some other persons who intended to incur obligations under the contract instead of the parties designated therein. if one person has entered into a contract with others, evidence may be led for the purpose of showing that he acted not only for himself, but for others as..........signed the partnership agreement merely because the 1st defendant could not remain present. the learned judge accordingly directed that the name of the 2nd defendant be struck off as he was improperly joined as a party to the suit.the learned judge accordingly amended the plaint by deleting the name of the 2nd defendant and proceeded to pass a preliminary decree for an account on the footing that the plaintiff, defendant 1 and the other defendants, but not defendant 2, were partners. against that decree, an appeal was preferred by the plaintiff to the district court.the contention substantially was that it was the 2nd defendant who was a partner. the learned district judge held that the 2nd defendant was a partner of the firm and that the order passed by the trial court striking off.....
Judgment:

1. This appeal is filed against the order passed by the Assistant Judge Dhulia, allowing the appeal filed by the plaintiff & setting aside the decree passed by the trial Court striking off the name of the 2nd defendant and holding the 2nd defendant not to be a partner.

The plaintiff filed suit No. 338 of 1949 in the Court of the Civil Judge, Senior Division, at Dhulia against 14 defendants for a declaration that the partnership between himself and the defendants had been dissolved in or about March 1948 and for an account of the partnership. Alternatively, the plaintiff claimed a decree for dissolution of partnership and for accounts.

2. It was the plaintiffs case that the plaintiff and the defendants had entered into a partnership to carry on business in cloth in the name and style of 'The Cloth Merchants' Association', and that certain terms were agreed upon and th3 same were recorded in an agreement.

The plaintiff claimed in the suit that defendants 1 and 2 were grossly negligent in their conduct and were liable to make good an amount alleged to have been lost by them and account of the partnership should be made on that footing.

3. Defendant 1 by his written statement inter alia contended that he was the partner land that the 2nd defendant was not a partner of the firm. He also contended that the suit was not maintainable on the footing that there had been a dissolution of the firm. The 2nd defendant by his written statement contended inter alia that he was not a partner and that the 1st defendant was a partner.

He also contended that an amount of Rs. 15,000/- was lost on account of the unexpected accident of robbery and that he was not liable for the amount. At the trial evidence was sought to be led on behalf of defendants 1 and 2 that defendant 2 signed the partnership agreement, because defendant 1 was not present at the time when the agreement was executed and presented for registration. It was also urged that the 2nd defendant was merely a benamidaf for the 1st deft, and was not liable on the partnership agreement.

4. The learned trial Judge held that it was the 1st defendant who had entered into the partnership agreement, and that the 2nd defendant had signed the partnership agreement merely because the 1st defendant could not remain present. The learned Judge accordingly directed that the name of the 2nd defendant be struck off as he was improperly joined as a party to the suit.

The learned Judge accordingly amended the plaint by deleting the name of the 2nd defendant and proceeded to pass a preliminary decree for an account on the footing that the plaintiff, defendant 1 and the other defendants, but not defendant 2, were partners. Against that decree, an appeal was preferred by the plaintiff to the District Court.

The contention substantially was that it was the 2nd defendant who was a partner. The learned District Judge held that the 2nd defendant was a partner of the firm and that the order passed by the trial Court striking off the name of, the 2nd defendant was erroneous.

The learned Judge accordingly rectified the decree passed by the trial Court and restored the name of the 2nd defendant on the record and directed that the case be sent back to the trial Court for deciding other questions on the footing that the 2nd defendant was a partner. Against that decree the 2nd defendant has come to this Court in appeal.

5. Now, the learned appellate Judge observed that the partnership deed Ex. 58, in the operative part thereof was 'transparently clear' and it showed that the 2nd defendant, who was described as the owner and manager of the shop Trimbak Bandu Shet, was a partner of the suit firm. He further observed that even though the preamble of the deed referred to cloth licence holders it did not prohibit a non-licence holder from becoming a partner.

In the view of the learned appellate Judge the trial Court had discarded the operative part and had given undue importance to the recital contained in the preamble and he had thereby subordinated the operative part to the recital contained in the preamble. On a construction of the deed of partnership, the learned Judge held that the 2nd defendant had agreed to become a partner of the firm and that he was liable to be so treated. The learned Judge then observed, that the partnership agreement was entered into for and on behalf of the joint family of defendants 1 and 2 and because the 2nd defendant had subscribed his signature to the document Ex. 58, he must be regarded as a partner of the firm. The learned Judge accordingly modified the decree passed by the trial Court and declared that the 2nd defendant was also a partner of the firm and on that footing, he remanded the suit for decision of the remaining issues on the footing that the 2nd defendant was not a partner of the firm.

6. In this appeal from order Mr. Jahagirdar has contended that the learned Appellate Judge was in error in holding that oral evidence was inadmissible in evidence to prove that the 2nd defendant who had subscribed his signature to Ex. 58, was not a partner.

Mr. Jahagirdar contended that the question whether the 2nd defendant is or is not a partner of the firm is not a term of the contract of partnership and therefore evidence is admissible notwithstanding the provisions of Sections 91 and 92, Evidence Act, to show that it was the 1st defendant who intended to join the firm as partner and not the 2nd defendant.

Further, Mr. Jahagirdar contended that according to the agreement Ex. 58 the 2nd defendant could not have become a partner, because he was not a holder of a licence for dealing in cloth and the partnership was brought into existence for doing business in cloth.

Mr. Jahagirdar relied upon the second proviso to Section 92 and contended that there was want of capacity in the 2nd defendant to be a partner and, therefore, oral evidence is admissible to show that he could not have become a partner of the firm. Lastly, Mr. Jahagirdar urged that facts may, notwithstanding that a contract by law is required to be in writing or the terms thereof have to be reduced to writing, be proved to show in what manner the language of the document is related to existing facts.

According to Mr. Jahagirdar, the facts show that the first defendant became a partner and not the second defendant. Now, it has to be noted that the 1st defendant in his written statement pleaded that he was a partner and that the 2nd defendant was not a partner. Similarly, the 2nd defendant pleaded that he never became a partner, but he was only a secretary of the partnership.

In the written statements of the 1st defendant and the 2nd defendant their case as to the circumstances in which the 2nd defendant came to be shown as a partner and came to sign, the deed of partnership as a partner were, it is admitted, not set out. If evidence is proposed to be led to vary or modify the terms of a document or a writing, there must be a proper pleat raised which brings the case within any of the provisos to Section 92, Evidence Act.

But no such plea was raised either by the 1st defendant or the 2nd defendant. It is true that at the trial it was suggested that the 2nd defendant was merely a benamidar for the 1st defendant, but it was never suggested that all the parties agreed that the 2nd defendant was not to be liable and the 1st defendant was, alone to be liable under the partnership agreement which was signed by the 2nd defendant.

A plea of benami may be raised by the 1st defendant if he desires to enforce any rights against the partnership. But by raising the plea of benami the 2nd defendant cannot escape his liability under the deed of partnership unless the other parties to the agreement have agreed not to hold him liable.

Explanation 3 to Section 91, on which reliance was sought to be placed by Mr. Jahagirdar, provides that the statement, made in any document whatever, of fact other than the facts referred to in Section 91, shall not preclude the admission of oral evidence as to the same facts.

Now, the operative part of Section 91 requires that the terms of a contract, or of a grant, or of any other disposition of property, which have been reduced to the form of a document, shall be proved by production of the document itself, or by secondary evidence of its contents in cases where secondary evidence is admissible.

But in the 3rd Explanation it is provided that the mere statement made in any document of a fact which is not a term of a contract, does not preclude the admission of oral evidence as to that fact. The 3rd Explanation does not deal with evidence which may be used for contradicting, varying or altering the terms of a contract, grant, or disposition of property contained in a document, but enables evidence to be given relating to facts which do not constitute terms of a contract, even though the original document has been produced.

Mr. Jahagirdar contended that a recital as to the names of contracting parties cannot be regarded as a term of the contract. I am unable to accept that argument without qualifications. Where a contract is entered into between parties, the contract deals with the subject matter as well as the persons between whom it is entered into, and the names of the parties in so far as they relate to tennis which create obligations cannot be regarded as so divorced from the terms of the contracts, that evidence may be led to show that some other persons who intended to incur obligations under the contract instead of the parties designated therein.

Reliance was sought to be placed in support of his contention by Mr. Jahagirdar upon a judgment of the Madras High Court reported in --'Venkatasubbiah Chetty v. Govindrajulu Naidu' 31 Mad 45 (A). The headnote of that case is as follows:

'Under English Law in an action on a written contract, oral evidence is admissible to show that the party liable on the contract contracted for himself and as the agent of his partners. Such partners are liable to be sued on the contract, though no allusion is made to them in it.

This is also the law in India as there is nothing in Section 91, Evidence Act to show that the Legislature intended to depart from this settled rule of English Law.'

It is difficult to see how this case assists the contention which is sought to be raised by Mr. Jahagirdar. As I will presently point out, instead of supporting the contention raised by Mr. Jahagirdar, it destroys the argument which is sought to be raised by him. If one person has entered into a contract with others, evidence may be led for the purpose of showing that he acted not only for himself, but for others as well. But that is far from saying that the names of the parties to the contract are not at all to be regarded as terms of the contract.

In the judgment in 'Venkatasubbiah's case (A)', at page 46, there is a quotation from Roscoe's Nisi Prius Evidence which is to the following effect:

'In an action on a written contract between, plaintiff and B, oral evidence is admissible, on behalf of the plaintiff, to show that the contract was in fact though not in form, made by B, as agent of the defendant; for the evidence tends not to discharge B, but to charge the dormant principal; -- 'Wilson v. Hart' (1817) 7 Taunt 295 (B).'

The statement contained in the second part of the sentence that 'the evidence does not tend to discharge B but to charge the dormant principal', would clearly show that evidence cannot be led for the purpose of discharging the 2nd defendant from liability which he has undertaken under the agreement Ex. 58.

7. Section 92, Proviso (1), can also have no application to the facts of the present case. The licence which was obtained for carrying on business in cotton cloth was admittedly obtained by the 1st defendant in his own name. But the licence does not appear to have been produced in this case, and there is nothing to show that the terms of the licence prohibited the holder from entering into a partnership for carrying on business in cloth with any person who was not the holder of a licence.

As the learned appellate Judge has pointed out, the licence was obtained for the business of the shop carried on by defendants 1 and 2 and that defendant 2 was managing the business of that shop. Even though the shop was started in the name of the 1st defendant and he had a licence, the 2nd defendant was managing the shop and the shop was the family shop of defendants 1 and 2.

It is true that under the Cloth Control Order, for carrying on business in cloth, a licence was required. But unless there was a provision in the Cloth Control Order or in the terms of the licence which prohibited the holder of a licence from entering into a partnership with another person who is not holding a licence, it cannot be said that the partnership agreement entered into between the 2nd defendant and the plaintiff and the other defendants was unenforceable.

In -- 'Bhagwant Genuji v. Gangabisan Ramgopal' : AIR1940Bom369 (C), this Court after an exhaustive consideration of the case law on the subject held that an agreement to sub-let entered into by the holder of a licence from the Collector for collection of 'tolls' on a public road was not invalid, unless the sub-letting was absolutely prohibited or shown to be opposed to any provisions of the law.

In that case, in the licence there was a clause against sub-letting or assignment except in the particular manner stated therein. The Court held that the clause did not render the sub-letting void. The mere fact that the 2nd defendant had no licence in his own name for dealing in cloth did not render the partnership agreement void or unlawful and did not incapacitate him from entering into an agreement of partnership with others who did hold a licence for carrying on business in cloth in their own names.

8. Proviso (6) to Section 92 also has, in my judgment, no application to the present case. There is no ambiguity in the language which is required to be explained. Proviso (6) will not apply to those cases where the language is clear. It may apply where the language used in a document applies to one of two or more sets of facts and evidence is intended to be given to show in what manner the language used was related to those facts.

In the present case, the 2nd defendant himself having signed the deed of partnership, he alone was liable as a partner, and there was no question of leading evidence to explain the statement that the 2nd defendant became a partner by reference to existing facts.

In my view the partnership deed is not susceptible of the interpretation that both defendants 1 and 2 became partners of the partnership. It is the 2nd defendant who alone became a partner under the deed. The view taken by the learned appellate Judge that the 1st defendant also must be regarded as a partner cannot be sustained. It must therefore be held that the 1st defendant is not a partner and that the 2nd defendant is a partner.

9. Subject to that modification and the consequential modification which may be required to be made in the decree, this appeal is dismissed with costs.

10. Appeal dismissed.


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