1. This is a suit by a firm against another firm claiming a money decree. One Khimji Motiohai was at all material times a partner of both the plaintiffs and the defendants. This fact is admitted, and the two issues that have been raised and which I have decided to try as preliminary issues are:
'1. Whether there, are common partners in theplaintiffs and defendants firms?
2. If so, whether the suit is maintainable?'
2. The first issue by an agreement of parties will be answered in the affirmative as Khimji Motibhai was admittedly a partner or both the firms at the relevant time.
3. The question, therefore, for me to determine is whether there can be a suit by one firm against another when there is a common partner. On behalf of the plaintiffs reliance is placed on Order 30, Rule 9, Civil P. C., which is in these terms:
'This Order shall apply to suits between a firm and one or more of the partners therein and to suits between firms having one or more partners in common; but no execution shall be issued in such suits except by leave of the Court, and, on an application for leave to issue such execution, all such accounts and inquiries may be directed to be taken and made and directions given as may be just.'
Now, it is quite obvious that this rule contemplates the possibility of a suit between firms having one or more partners in common, and it proceeds to state what procedure shall apply to such suits as well as what would be done in the case of execution of a decree in any such suit. The question is whether by virtue of this provision it can be said that the law that there could not be a suit between a firm End one or more of its partners and between two firms which have one or more common partners was altered. To that question, in my opinion, there can be only one answer. This rule in the Civil Procedure Code corresponds to Order 48 (A), Rule 10 of the Rules of the supreme Court in England; and both in England and in India it has been held that this rule does not alter the law as to the circumstances in which a suit lies either between a firm and one or more of its partners or between two firms haying a common partner or partners. The authority for this proposition is to be found in England in -- 'Meyer & Co. v. Faber (No. 2)', (1923) 2 Ch 421 (A), where Lord sterndale M.R. in his judgment observes after citing Order 48 (A), Rule 10 at p. 435:
'....... .That does not seem to me to alter the position as I have stated it that exists between partners in a firm. It applies the previous rules to actions between a firm and its members.'
Then his Lordship deals with the previous rules and further observes (p. 435):
'.......The rules do not in any way, as it seems to me, alter the substantive law as it existed before, or alter the rights which in law and in equity partners have one against the other; all they do is to provide that the procedure which is laid down in the order shall apply to actions between partners and that the firm name may be used for those actions, and other procedure may go on in those actions just as it may in other actions.'
4. Turning to the Indian authorities, in --'Lakshmanan v. Nagappa', AIR 1918 Mad 167 (B), a Division Bench consisting of Abdur Rahim and Oldfield JJ. took the same view. In their judgment their Lordships observe at p. 168 (right hand column):
'........Now all that can be said is that this rule contemplates the possibility of suits between a firm and one or more of the partners therein and suits between firms having one or more partners in common. But it does not profess to lay down when, and under what circumstances, such suits would be entertained and it would not ordinarily be within the scope of the Civil Procedure Code to lay down any such proposition. The rule in question only lays down that if such suits are entertained, the procedure to be followed is that set out in the order.'
The same view was taken by Macklin J. in --'Chandulal v. Keshavlal', AIR1938 Bom 246 (C), and by Chatterji J. in --'Rameswarlal Bagla v. Bezonji Barjorji', : AIR1950Cal236 .
5. My attention has been drawn to a passage in Lindley on Partnership, 11th edition, at p. 348, which is to the following effect :
'...... ..Again, there appears to be no reason why an action should not now be maintained for the recovery of a debt due from one partner to the firm; nor why, if two firms have a common partner, an action should not be maintained by one firm against the other.' A similar observation is to be found in the Annual Practice, 1943, Vol. I, p. 902: 'Actions between Partners. -- Prior to Rule 10 it was not quite clear that actions between a firm and one of its members, or between two firms with a common member, were maintainable in the firm's name......; but this doubt is now removed by Rule 10, which applies the rules of this order to such actions..........'
These statements of the law appear to me to be couched in language which is too general in its terms and they appear 'prima facie' to be contrary to the authorities which I have already referred to, but the statement in Lindley on Partnership is accompanied by a foot-note which says (p. 349):
'Before the Judicature Acts such actions could not be maintained. But suits in equity could.' Obviously all that the author of that famous treatise wanted to lay down was that such suits as could be entertained in equity before the Judicature Act can now be entertained and no more, and that appears to me to be the correct position on a proper interpretation of Order 30, Rule 9, Civil P. C.
6. The question then is under what circumstances did a suit lie before Order 30, Rule 9, was enacted between two firms in which there were one or more partners in common. That question came up for consideration before a Division Bench of this Court in -- 'Rustomji v. Purshotamdas', 25 Bom 603 (E), where their Lordships laid down that no action can be brought by one firm against another in which there is a common partner while such individual remains a common partner. However, their Lordships held that as all the parties interested were before the Court, either as plaintiffs or defendants, and the Court was in a position to adjust and determine their rights in accordance with justice, equity and good conscience, they would proceed to make an appropriate order in the suit. The principle of the derision is that a suit would lie in any case in which equity can be done as between the parties. This decision was followed by Macklin J. in -- 'AIR 1936 Bom 246 (C)', to which I have already referred. Therefore, if it is possible for me to come to the conclusion that in the present case equity can be done as between the parties, the suit would lie. Otherwise the suit is not competent.
7. Turning once again to the decision in --'Rustomji v. Purshotamdas', (E) that was a suit for monies lent to a firm. Purshotamdas and his son Nagindas were equally interested in the firm of Gordhandas Bhagwandas. Nagindas was also a partner in a firm which carried on business in the name of Pathak Shangavi & Co. Purshotamdas brought the suit against the latter firm in the names of its four partners to recover the sum that was due. The lower Court passed a decree for the amount claimed. Pending the appeal the plaintiff died and his son Nagindas who was the second defendant became the sole owner of the family firm and was substituted for his father on the record. He thus became both plaintiff and defendant in the suit. Their Lordships on appeal held that Purshotamdas and Nagindas being equally interested in the plaintiff's firm, the lower Court should have made a declaration that they were entitled to the amount advanced in equal shares and have passed a decree that one moiety thereof should be paid to Purshotamdas and the other moiety treated as an item to the credit of Nagindas in the partnership accounts of the defendant's firm.
The Court on appeal, however, did not proceed to pass a decree in favour of Nagindas after the death of Purshotamdas but only declared that Nagindas was entitled to a credit in the partnership accounts. Now, of course, the finding of their Lordships that the lower Court should have passed a decree for one moiety in favour of Purshotamdas, in my opinion, must of necessity proceed on the footing that as between Purshotamdas and Nagindas as partners of the plaintiffs' firm all other outstanding accounts had been made and also on the footing that as between Nagindas and the partners of the defendants' firm similar accounts had been made and the only transaction outstanding was the transaction of the loan, for if on the state of accounts between Purshotamdas and Nagindas as partners of the plaintiffs, Nagindas was indebted to Purshotamdas or 'vice versa', it would be impossible to say that both of them were entitled to the advance in equal shares. That would be a partnership asset which would be taken into account when partnership accounts were made and the actual share of any partner in such assets could not be ascertained until accounts were made up.
But it seems to me that if this assumption were not made, it is difficult to see how equity could be done by providing that half the amount should have been paid to Purshotamdas, because it may well be that Nagindas was a debtor to the defendant firm for the entire amount due to the plaintiffs and it cannot be that the defendants would still have to pay half that amount to Purshotamdas. The only equity would be that Nagindas in his accounts with the defendants' firm would be entitled to a credit for the entire amount due to the plaintiffs & in his accounts with the plaintiffs' firm he would be liable to a debit for a similar amount.
8. The Madras High Court in a decision reported in -- 'Vellayappa v. Krishna', AIR 1918 Mad 253 (P), took the view that a proper prayer in a suit by one firm against another in which there is a common partner ought to be the taking of the accounts of both the partnerships if necessary for adjusting the rights of the partners and for the grant of just and equitable reliefs which arise on the facts. With respect, their Lordships appear to have overlooked the fact that either or both of these firms may be for a fixed period and may not be liable to be dissolved and the accounts of a partnership cannot be taken until the partnership is dissolved. No action lies for such accounts until then. Of course if both the partnerships were dissolved, or were liable to be dissolved, it may well be that the Court would adjust the rights of the partners 'inter se' by taking accounts of both the partnerships.
But in a case in which such a course is not possible, there must be some other method of doing equity between the parties. That equity to my mind can be done without causing any injustice to either party by a declaration that the common partner is in his accounts with his partners in the defendants' firm entitled to a credit for the amount that is due by the defendants' firm to the plaintiffs' firm and is liable to a debit for a similar amount in his accounts with his other partners in the plaintiffs' firm. That is an equitable relief which it is competent for a Court to grant in a suit by a firm against another firm, and, in my opinion, therefore, a suit would lie limited to such a relief.
9. As the granting of the actual relief to which the plaintiffs may be entitled is not a matter that affects the maintainability of the suit but is a matter to be considered when the merits are determined, I hold that the suit is maintainable and answer issue 2 in the affirmative.
10. Answer accordingly.