1. This is a second appeal by the second defendant to a suit for the recovery of its. 3959 alleged to be due from him along with the other defendants to the suit, on account of the price of certain ghee sold to them. The plaintiff's case is briefly as follows : The shop of Damodardas Narayandas of Khamgaon was a joint Hindu family firm owned by its members, defendants Nos. 2 to 5. The defendant No. 5 purchased 50 tins of ghee from the plaintiff on 9-2-1949 at the rate of Rs. 4/9/0 per seer. The net weight of the ghee was 706 seers and it was worth Rs. 4134/3/0. In addition to this sum, other charges amounting to Rs. 84/12/0 were also payable by the defendants to him. The total amount which was due from the defendants to the plaintiff was, according to the plaintiff, Rs. 4218-15-0. Out of this amount, Rs. 218-15-0 were said to have been paid in cash by Narayandas on the date of purchase and a hundi for Rs. 500 was also given by him on that date. This hundi is said to have been dishonoured within a week. The defendant No. 5 is said to have repaid Rs. 125 in cash within a few days and returned 6 tins of ghee of the value of Rs. 500. The total amount credited by the plaintiff to the defendants comes to Rs. 1343-15-0. Deducting this from the amount of Rs. 4218-15-0, the plaintiff claims that he is entitled to Rs. 2875. In addition to this he claims Rs. 1075 by way of interest at 1 per cent per month as per agreement, or in the alternative, by way of damages. In this way, he laid a claim for Rs. 3959 in the trial Court.
2. The defendant No. 5 admitted the transaction in question, but contended that the shop of Damodardas Narayandas was only a partnership firm owned by himself and his brother defendant No. 2 and not a joint family firm. He further contended that the purchase by him on 9-2-1949 was on his own account and not on behalf of the partnership. He admitted that Rs. 2875 were due from him and denied the claim for interest as also for damages. The defendants Nos. 3 and 4 denied all connection either with the shop or with the transaction. The defendant No. 2 who is the appellant before me also contended that the shop of Damodardas Narayandas was a partnership firm and added that this firm had stopped its business by the Diwali of 1949 and that the transaction in question was not in any case a partnership transaction but was a personal transaction of Narayandas. He thus denied his liability or the liability of the firm of Damodardas Narayandas. The defendant No. 1 to the suit was the firm of Damodardas Narayandas. A summons was issued to the firm but it does not appear that the summons was served on the firm at any time. This would appear from the order-sheet dated 23-7-1952 which says, 'Defendant No. 1 is absent. It is a firm whose partners are served'. On 26-9-1952 the Court directed the plaintiff to state clearly as to who represented the shop and to amend the plaint accordingly. The plaintiff thereupon made an application on 27-12-1952 in which he sought to add the following after paragraph 2 of the plaint:
'The defendants 2 to 5 are real brothers. They do business under the name and style of Damodardas Narayan. They are members of joint family and in any case they are partners and they are being sued individually and also owners of the shop of Damodardas Narayan'.
This application was allowed and the plaint was amended accordingly. However, no summons was either directed or taken out against the defendant No. 1 afresh thereafter, and indeed, this was not accessary in view of the stand taken by the plaintiff. I have given these details because a certain argument about the tenability of the appeal is advanced before me.
3. The trial Court decreed the suit against the defendant No. 5 alone and absolved the other defendants from liability. The plaintiff thereupon preferred an appeal before the District Judge, Akola. The District Judge, by his order dated 3-2-1955 allowed the appeal, set aside the decree of the trial Court and remitted the suit to the trial Court for a fresh decision on merits in the light of certain observations made by him. The matter then went back before the trial Court where certain applications for amendment of the pleadings were made by the parties which were partially allowed and the case was set down for evidence. In the meanwhile, a revision application preferred by the present appellant to the High Court at Nagpur challenging the order of remand was allowed and the order of the District Judge, remitting the case to the trial Court, was set aside. The High Court directed the District Judge to readmit the appeal and decide it himself on merits. It may be mentioned that the ground on which the District Judge had set aside the decree of the trial Court was that it did not admit on record a certain document which the plaintiff sought to file at a late stage. When the plaintiff preferred an appeal before the District Judge, he had made an application under Order 41, Rule 27 of the Code of Civil Procedure for the admission of his document. The High Court, by its order dated 11-11-1955, directed the District Judge to decide that application himself. After the High Court set aside the order of the District Judge, the matter went back to him and he transferred the appeal to the Extra Additional District Judge, Akola. The latter rejected the application of the plaintiff under Order 41, Rule 27, but allowed the appeal partially by holding that tho present appellant as well as the firm of Damodar-das Narayandas were liable for the plaintiff's claim.
4. It is contended by Shri Chandurkar on behalf of the plaintiff that this appeal is untenable because the firm of Damodardas Narayandas has not been joined as a party to the appeal, though there is now a decree against that firm also. Mr. Chandurkar points out that even if the appeal of the defendant No. 2 were to be allowed, he would still, in his capacity as a partner of the firm Damodardas Narayandas, remain liable under the decree of the lower appellate Court and that since the firm of Damodardas Narayandas is not before the Court, it will be impossible for this Court to grant completely the relief which the defendant No. 2 seeks.
5. The liability of a firm is, however, not quite the same as the liability of the persons who are partners of the firm. Order 21, Rule 50 of the Code of Civil Procedure lays down that where a decree has been passed against a firm, execution may be granted-
(a) against any property of the partnership;
(b) against any person who has appeared in his own name under Rule 6 or Rule 7 of Order 30 or who has admitted on the pleadings that he is, or who has been adjudged to he, a partner; and
(c) against any person who has been individually served as a partner with a summons and has failed to appear.
Therefore, even if the decree which has been passed against the partnership has become final as not having been challenged in appeal by the firm, it can be executed only against the property of the partnership, unless, of course, any of the partners has appeared in his own name as a partner or has admitted in his pleadings that he is a partner or has been so adjudged as a partner, or has been served as a partner. In the instant case, the second defendant has not entered appearance either under Rule 6 or Rule 7 of Order 30, nor has he admitted in the pleadings that he is a partner. Furthermore, he has not been individually served as a partner but has been served only as an individual. No doubt, the lower appellate Court has adjudged him to be a partner but this is a decision which he is entitled to challenge in appeal. If he is successful in his challenge he would not be liable to satisfy the decree from his personal property. Therefore, in any event, even in the absence of an appeal from the firm, the second defendant is entitled to challenge that decree and it is not incumbent upon him to join the firm as a parly thereto. However, Mr. Kalele who appears for the second defendant, has made an application on his behalf for the joinder not only of the firm of Dainodardas Narayandas but also of the other persons who were alleged by the plaintiff to be partners of that firm on the basis that the firm was a joint Hindu family firm. I do not think it necessary for the purpose of completely adjudicating upon the rights of the parties to order the joinder of the defendants Nos. 3 to 5 as the suit has been dismissed against them and the plaintiff has not challenged the decision in this regard. In order, however, to obviate any possible inconsistency or any difficulty that may arise later I allow the amendment in so far as the joinder of the defendant No, 1 is concerned. This application was opposed by Mr. Chandurkar and I have allowed it despite his opposition. I do not think it necessary to adjourn the case for enabling the defendant No. 2 to take out a summons against the firm because the lower appellate Court at least has placed it ex parte.
6. Now, as regards merits. The lower appellate Court has observed in paragraph 4 of its judgment that the defendants Nos. 2 and 5 have admitted in their pleadings that the partnership was dissolved at the Diwali of 1949 and the transaction in question having taken place before the Diwali of 1949, the transaction must be deemed to be that of the partnership in the absence of any evidence to indicate that the defendant No. 5 had at any time any business of his own. In paragraph 6 of the judgment, the learned Judge has observed that in the chit (Ex. P-l) executed by the defendant No. 5 Narayandas he has given his address as care of 'Damodardas Narayandas Rathi, Khamgaon', and that there was no propriety in giving this address unless the transaction was intended to have been entered into on behalf of the firm. In the same paragraph, the learned Judge has stated that the hundi for Rs. 500 was drawn by Narayandas on the partnership firm arid that this fact 'puts the doubt at rest and clearly shows that the transaction was not the personal affair of the defendant No. 5 but was entered into on behalf of the firm'. In paragraph 7, he has stated that the defendant No. '2 has admitted in his evidence that the goods in question were brought by the plaintiff to the partnership shop & that that shop accepted those goods. He has then gone on to observe. '......if the transaction had been the-, personal affair of the defendant No. 5, there was no reason for the defendant shop to accept the goods' and concluded therefrom that the acceptance of the goods by the defendant shop, was a conclusive piece of evidence to show that Narayandas had entered into the transaction on behalf of the shop and not on his own account.
7. It may be mentioned that the defendant No. 2 had made an application to the trial Court after the suit had been remanded to it by the District Judge for an amendment of the written statement by saying that the partnership was dissolved not in the Diwali of 1949 but in the Diwali of 1948. This application was rejected by the Court. It does not appear that the application was renewed before the lower appellate Court after the order of remand passed by the District Judge was set aside by the High Court. Though a ground has been taken in this Court to the effect that the amendment application should have been allowed, I am afraid it is not possible for this Court to take into consideration an application made in a proceeding the very basis of which was quashed by the order of the High Court at Nagpur in revision. I therefore proceed to deal with this appeal on the footing that the Partnership had not been dissolved in the Diwali of 1948 but was dissolved in the Diwali of 1949.
8. It may be mentioned that both the Courts below have concurred and in holding that the firm of Damodardas Narayandas was not a joint Hindu family firm but was a partnership firm. This position is also not disputed by Mr. Chandurkar in this appeal.
9. Now, the question is whether the grounds-upon which the finding of the lower appellate Court that the transaction in question was a partnership, transaction is based, are legally sufficient to warrant that finding, it seems to me that it was not necessary for the defendant No. 2 to show that the defendant No. 5 who, though his partner, had an independent business of his own. Indeed, even if the defendant No. 5 had no independent business of his own, there was nothing to prevent him from entering into just a single transaction like the one in suit. A good deal of argument was addressed to me by Mr. Chandurkar on the basis that where a partner enters into a transaction of the same type of which the firm used to enter into, the transaction' must necessarily be regarded as that of the firm. I shall deal with this aspect of the argument presently; but before doing that I would like to dispose of the other grounds given by the learned Judge of the-lower appellate Court.
10. Now, as regards the chit, Ex. P-1. No doubt, in that chit Narayandas had stated just below his signature
^^ fB- nkeksnjnkl ukjk;.knkl jkBh] [kkexkao- **
Merely because Narayandas had given his address as care of the firm of Damodardas Narayandas, it is difficult to understand how the transaction could be regarded as that of the partnership. Indeed, if it was a transaction intended to be that of the firm, there was nothing to prevent Narayandas from describing himself as a partner of the firm Damodardas Narayandas. A bare look at the chit (Ex. P-l) would show that it does not purport to have been executed by Narayandas for and on behalf of the partnership firm. It may be noted that when Narayandas was examined as a witness in the case, he stated;
'Thikana (place) is written on the receipt Ex.. P-l dated 9-2-1949 so that the address may be traced. The deal was effected by me'.
Not a single question was put to him on this point in cross-examination by the plaintiff, and therefore it would not be legitimate to discard the explanation given by Narayandas and draw an inference of the kind which the learned Judge had drawn.
11. Now, as regards the Hundi. It would seem to me that drawing a hundi on the partnership firm would be a circumstance militating against the inference that the transaction was a partnership business, for, ordinarily a person does not draw a hundi on himself but on another person. Now, the partnership being still in existence, Narayandas, by drawing the hundi on the firm, would, in effect, be drawing a hundi on himself which, to say the least, would be extremely unusual. Moreover, there seems to be also a legal difficulty in his doing so. Now, when a person draws a hundi on a partnership firm in his capacity as a partner and the hundi is dishonoured after its acceptance could it be said that any enforce-able legal liability would arise between the partnership firm on the one hand and the partner on the other, as representing the partnerships' In other words can a claim arise in favour of the person against himself? plainly, such a claim cannot arise. There is, therefore, no scope for the conclusion that a hundi drawn by a person who happens to be a partner of a firm against that firm must have been drawn by him in his capacity as a partner of that firm. I may add that not a single question was put to Narayandas in his cross-examination as to whether the hundi in question was drawn by him on 'the partnership because the transaction was of the partnership firm.
12. Then, as regards the alleged admission of the defendant No. 2 Damodardas. In paragraph 2 of his cross-examination, the defendant No. 2 stated, 'We took the goods which were brought by the plaintiff to the shop'. There is no specific reference to the goods in question. This is a vague statement and it was necessary for the plaintiff to put a further question to the defendant No. 2 on the point and ascertain from him as to what goods he was referring to. Indeed, it is not the plaintiff's case that the goods were delivered by him to the defendants at Khamgaon. In his examination-in chief, he has stated, on the other hand, that on 9-2-1949 Narayandas and Arjun purchased and took away 50 tins of ghee from him. From this it would be clear that the delivery of the goods was taken at Akola itself. Therefore, there is no scope for the inference that the goods which the defendant No. 2 speaks in his evidence were those purchased on' 9-2-1949. It is the plaintiff's case that there were previous transactions between the parties and it is possible that what the defendant No. 2 was saying had reference to some such transaction.
13. Apart from the fact that these circumstances do not warrant the inference which the learned Judge of the lower appellate Court has drawn, there are certain other circumstances which are relevant and which have not been noticed by the learned Judge of the lower appellate Court. In the first place, I would refer to the admission of the plaintiff in his cross-examination to the effect that the transaction in suit was between him and Narayandas. His actual words are:
^^ fpB~Bh >kyh o O;ogkj >kykrks ukjk;.knkl'kh Bjyk **
which have been translated as 'chit written and the deal effected was one which was effected with Narayandas'. In my opinion, the proper translation would be 'The transaction was entered into with Narayandas and the chit was written by him'. If this is the correct way of interpreting the evidence of this witness, it would show that the plaintiff was dealing with Narayandas alone and not with the partnership firm. Indeed, if he were dealing with the firm of Damodardas Narayandas, he would have known, or he would have at least tried to ascertain, who the partners of that firm were. But this is what he has stated in his evidence in para. 4:
'I did not make any enquiry as to who were the partners of the firm Damodardas Narayandas'.
Again, in paragraph 10 he has repeated this and added that he saw all the four brothers working in the shop. Now, this later statement is apparently a prevarication. In his cross-examination by the defendants Nos. 3 and 4, the plaintiff has stated:
''Narayandas did not say as to on whose behalf he was taking part, The deal was on behalf of Damodardas Narayandas'.
Later he asserted that this transaction was on behalf of the 'shop', but he has given no reasons to explain why he thought that the transaction was on behalf of the 'shop'. It would thus appear that the plaintiff was merely dealing with Narayandas and did not bother to enquire as to whether the transaction was in his capacity as a partner or on his own account and that that is why he did not even require Narayandas to show in Ex. P-l that he was purchasing the goods on behalf of the partnership.
14. Now, I will come to the point which I left over for consideration and that is whether the transaction must necessarily be deemed to be that of the partnership because it was of a kind which the partnership used to enter into. In support of this contention, Shri Chandurkar relies upon a decision of a Division Bench of the Calcutta High Court in Lal Chand v. Gopi Chand 54 Cal WN 167 . The facts of that case are as follows: One Ridkaran Surana was a partner of a trading firm which carried on business under the name of ''Lal Chand Dugar'. Ridkaran had also his own business which he carried on in the name of 'Begraj Dugar'. He wanted to raise a loan of Bs. 5000 for his own business of 'Begraj Dugar'. He eventually obtained it from the plaintiff who drew a cheque in favour of 'Mr. Lal Chand Dugar'. There was, however, no individual of the name of Lal Chand Dugar. The plaintiff did not purport to lend the money to the firm of 'Lal Chand Dugar' of whose existence he was unaware, but he lent the money to the individual who went to him and apparently drew the cheque in the name of 'Mr. Lal Chand Dugar' in the belief that his name was La! Chand Dugar. The money obtained by encashment of the cheque was utilised by Bidkaran for the purpose of his own business. As the money was not repaid the plaintiff filed the suit against 'Lal Chand Dugar carrying on business at No. 5/1, Lucas Lane, Calcutta', but subsequently amended the cause title by. adding the words 'a firm' after the name 'Lal Chand Dugar'. The firm contested its liability for the loan, but the High Court held that it was liable. Banerjee J. who delivered the judgment of the Court has observed at page 172;
'The principle is that if an agent professes to contract for his principal and has authority so to contract, the state of his mind cannot be inquired into, in order to show that he was not really exercising his authority, and did not so contract. This principle also applies to the ease of a partner for he is the agent of the firm for the purposes of its business.
'It seems, therefore, that the state of mind of the lender as to whom he was lending the money is an irrelevant consideration for the decision of this case. The pertinent question is whether the partner borrowing the money had the authority and acted within the scope of his authority. If he has done so, the firm is liable'.
No exception can be taken to this statement of the Jaw provided the lender knew that he was dealing with an agent. But then the learned Judge has gone on to hold that where a partner of a firm borrows money purporting to act on behalf of the firm, though, in fact, he requires the money for his own business for which purposes he utilizes it, the firm is liable to the lender even though the lender does not know that he was lending the money to the firm and thought that he was lending it to an individual.
15. In support of this decision, the learned Judges have relied upon two English decisions : Watteau v. Fenwick (1893) 1 Q. B. 346 and Hambro v. Burnand (1904) 2 K. B. 10. The facts of the first case are that the defendants, a firm of brewers, who were the owners of the business of a beerhouse, appointed one Humble as the manager of the business. The licence was always taken out in the name of Humble whose name also appeared over the door. By the agreement between the defendants and their manager, the latter was forbidden to purchase any articles for the purpose of the business on credit. But Humble, in contravention of his instructions, ordered such articles from the plaintiff for use in the business. The plaintiff supplied them and gave credit for them to Humble only. Subsequently, upon discovering that the defendants were the real owners of the business, the plaintiff sued them for the value of the goods. It was held that the plaintiff was entitled to maintain the action for the defendants, as the real principals, were liable for all acts of their agent which were within the authority usually conferred upon an agent of this particular character, although he had never been held out by the defendants as their agent, and although the authority actually given to him by them had been exceeded. This decision has been criticized by Pollock and proceeds upon a principle which is opposed to that stated by Lord Lindley in Farquharson Brothers and Co., v. King and Co. 1902 A. C. 325 where he has observed :
'It was pointed out by Parke, J., afterwards Lord Wensleydale, in Dickinson v. Valpy (1829) 34 R. R. 348, that 'holding out to the world' is a loose expression; the 'holding out' must be to the particular individual who says he relied on it, or, under such circumstances of publicity as to justify the inference that he knew of It and acted upon it. The same principle must be borne in mind in dealing with cases like the present.' I do not myself see upon what ground a person can be precluded from denying as against another an authority which has never been given in fact, and which the other has never supposed to exist.''
Again, it is stated in Lindley on Partnership at p. 184 (11th edition) that a firm will not be bound by an unauthorised act of a partner done for carrying on the partnership business when the person dealing with him did not know or believe him to be a partner. This decision has also been attacked by other writers on partnership (See Underbill, 'Law of Partnership' 6th edition, pp. 59-60; and Halsbury's Laws of England, 2nd edition, volume XXIV, p. 422). That apart, it may be possible to support the decision in Fenwick's case (B) as it was found there as a fact that Humble was only an agent of the defendants, was acting as such, that the real principals were the defendants, and that the goods supplied by the plaintiff had been actually received by the defendants. It could therefore be regarded as a case of ratification by the principal of an unauthorised act of an agent by consent. Such is not the case in the appeal before me. As I have already pointed out, Narayandas was not acting as an agent of the firm. Again, there is no specific averment in the plaint that the tins of ghce purchased by Narayandas were in fact either required or were received by the partnership or that the partnership obtained any benefit therefrom and could therefore be regarded as the principals. In the Calcutta case also, the person Ridkaran, who borrowed money, was not in fact acting as an agent and quite plainly entered into the transaction on his own account. There was no question of there being a principal at all in that case and therefore the concept or ratification upon which the decision in Fenwick's case (B) ran be supported is not at all attracted.
16. In the case of Hambro v. Burnand (C), it was held that where an agent, in contracting on behalf of his principal, had acted within the terms of a written authority given to him by the principal, but the existence of which was not known to the other party to the contract, the principal cannot, if the other party has acted bona fide, repudiate liability on the contract on the ground that the agent, in making it, acted in his own interest, and not in the interests of his principals. In this particular case, it may be pointed out that the agent had set out the names of the principals on whose behalf he was acting. In such circumstance, the principals would be bound by the act of the agent which was within the scope of his authority and that would be so even though the exact terms of the authority were not known by the other party. If the several cases bearing on this point cited at p. 214 of Lindley on Partnership were examined, it would be found that in each of them the person dealing with another knew that that Other was only an agent and not the principal. Indeed, as has been poised out by Scrutton L. J., at p. 792 in A. L. Underwood, Ld., v. Bank of Liverpool (1924) 1 K. B. 775 , if the third party is unaware of a principal of the party with whom he is dealing, then there cannot be any appearance of authority at all and therefore there is no room for a representation to be made to a third party by a principal of whose existence he is unaware.
17. With great respect to the learned Judges who decided the Calcutta case, I fail to see how the above decisions, even considered conjointly, can justify the conclusion arrived at by them. It is one thing to say that an unauthorised act of an agent binds the principal because the principal, though undisclosed, has ratified it by conduct or because the third party knows that the person acting is in fact an agent, when, in either circumstance, the act is such as falls within the usual or apparent authority of the agent. But it is quite another tiling to say that a person is bound by the act of another with whom a third party deals as principal, though that act is in fact unauthorised and is not ratified by that person, merely on the ground that the act falls within the scope of the usual or apparent authority of that other. In such a case, there is no meeting of two minds, that of the principal through an agent and that of the third party, which is of the essence in every consensual contract, nor is there a subsequent adoption of the contract by the principal.
18. I quite understand that the state of the mind of the supplier of goods would be irrelevant for consideration where the goods supplied by him are actually received and utilised by the principal, but where, as here, the goods are taken by a person for himself and the supplier knows that he was selling the goods only to the person who is actually before him and none else, on what principle can another be held liable for the price of the goods which he has never received just because the person contracting was for certain purposes an agent of that other person and could, in his capacity as an agent, have entered into the contract of this kind on his behalf?
19. In the Calcutta case, the learned Judges have held that Ridkaran professed to act on behalf of the firm because there was no evidence before the Court that he purported to act on behalf of the individual to whom the lender thought he was lending the money. Now, bearing in mind that the plaintiff was consciously dealing with an individual and not with the firm and Ridkaran was borrowing the money for his own business and not that of the firm and had apparently so stated in the case, it is difficult to understand what further evidence was required to have been led in the case to show that ho purported to act on his own behalf or on behalf of the individual bearing the name set out in the cheque. It seems to me that the inference drawn that Ridkaran must, in the absence of evidence of the kind referred to by the learned Judge, be said to have professed to act on behalf of the firm is not justifiable. Whatever that may be, in the present case, the defendant No. 3 had not professed to act for the firm since he had entered into the transaction in his own name and, therefore, the Calcutta decision is at least distinguishable. In these circumstances, I cannot accept the contention raised on behalf of the appellant.
20. Accordingly, I allow the appeal and set aside the decree of the lower appellate Court as against the defendant No. 2. Upon the view I have taken, it would be appropriate for me to use my powers under Order 41, Rule 43 and also to set aside the decree against the firm. I accordingly do so. The appeal is allowed with, costs. Leave to appeal under the Letters Patent granted.
21. Appeal allowed.