1. This is a defendant's appeal and arises out of a suit for recovery of Rs. 1800 on a promissory note of 19th November 1934. This promissory note was executed by two men Keshav Dutt and Gopal Dutt for Rs. 1358. Keshav Dutt and Lalmani are the sons of a man named Moti Ram. Lalmani is the appellant before us. This promissory note was in lieu of two earlier promissory notes, one of 18th November 1931 for Rs. 400 and the other' of 30th November 1931 by Keshav Dutt alone. The first two promissory notes were executed in favour of Lachhi Ram, the uncle of the plaintiffs, whereas the one in suit was executed in favour of his nephews who are the plaintiffs in this action.
2. The suit was instituted against Keshav Dutt, Lalmani and Gopal Dutt. The defence of Gopal Dutt was that he was merely a surety. But this will not affect the fate of the case, inasmuch as even if he is not the executant but a surety, the liability of the two is under the law, co-extensive. The defence of Lalmani with which we are concerned in this second appeal was that he was not liable for the debt, inasmuch as he had separated from his brother, Keshav Dutt. The learned Munsif decreed the suit as against Keshav Dutt and Gopal Dutt, but exempted Lalmani. On appeal by the plaintiffs, the learned District Judge of Kumaun has passed a decree also against Lalmani. He has, therefore, come in appeal before us. In support of his case that he was separate from his brother Keshav Dutt, Lalmani produced a partition deed dated 17th December 1928. It was an unregistered document and both the Courts below refused to admit it in evidence. In the view which we have taken of this case it is not necessary to decide if the Courts below were right in discarding the partition deed for want of registration. On the question whether the family was joint or separate and also whether Keshav Dutt executed the promissory note for himself or both for himself and for his brother Lalmani, the learned Judge has made certain observations which might be quoted.
It has been proved by Jai Datt and his evidence has not been rebutted, that Lalmani was prosecuted by the Forest Department and convicted with the result that the timber contracts from 1928 until 1934 stood in the name of Keshav Dutt alone.... Their evidence shows that during the period when the promissory notes were executed both brothers were engaged in the timber trade though the contract from 1928 stood in the name of Keshav Dutt only. The reason why the contract was in Keshav Dutt's name was probably because the Forest Department was not willing to give a contract to Lalmani whose conduct had been unsatisfactory. There is overwhelming evidence, indeed, to prove that both brothers were joint in this timber business.
3. The learned Judge has found that both the brothers were members of a joint Hindu family, but even if we refuse to accept his finding on the status of the brothers as members of a joint Hindu family by reason of the exclusion from evidence of the deed of 17th December 1928, the above lines clearly establish a joint partnership between them. A joint family and a joint partnership are two distinct things and the deed, while it might have been disruptive of the joint status of the family, cannot disprove the joint partnership. Once it is established that there was a joint partnership between the two brothers, the first question which falls for our consideration is in what capacity did Keshav Dutt execute the promissory note? The observations quoted from the judgment of the learned Judge establish, in point of fact and beyond doubt, that although the promissory note was ostensibly executed by Keshav Dutt yet he executed it not for himself but also for his brother Lalmani. In this connexion certain provisions of the Partnership Act which have replaced some of the provisions of the Contract Act, may be considered. Section 11, Partnership Act, says that,
Subject to the provisions of this Act, the mutual rights and duties of the partners of a firm may be determined by contract between the partners, and such contract may be express or may be implied by a course of dealing.
4. Section 22 is in these terms:
In order to bind a firm, an act or instrument done or executed by a partner or other person on behalf of the firm shall be done or executed in the firm name, or in any other manner expressing or implying an intention to bind the firm.
5. This makes it clear that an intention to bind a firm may be express or implied. The act of a partner of the firm shall not ipso facto bind it unless it is done in the name of the firm. The real question, therefore, is whether when he executed the promissory note, Keshav Dutt really wanted to bind the partnership, that is also his brother Lalmani. On the finding of the learned Judge that both the brothers were carrying on the business jointly and Lalmani kept himself in the back ground, because he had put himself in the wrong with the Forest Department, it is clear that the promissory note must, in point of fact, be deemed to have been executed both by Keshav Dutt and Lalmani. But Mr. Shambhu Nath Seth, the learned Counsel for the appellant, contends that the considerations which generally prevail under the Partnership Act do not exist in the case of a negotiable instrument. Before dealing with the authorities cited by him it will be of advantage to notice the relevant section of that Act. Section 26 deals with the capacity to make promissory notes and is a general section.
6. Section 27 says:
Every person capable of binding himself or of being bound, as mentioned in Section 26, may so bind himself or be bound by a duly authorized agent acting in his name.
A general authority to transact business and to receive and discharge debts does not confer upon an agent the power of accepting or indorsing bills of exchange so as to bind his principal.
An authority to draw bills of exchange does not of itself import an authority to indorse.
7. Section 28 is in these terms:
An agent who signs his name to a promissory note, bill of exchange or cheque without indicating thereon that he signs as agent, or that he does not intend thereby to incur personal responsibility, is liable personally on the instrument, except to those who induced him to sign upon the belief that the principal only would be held liable.
8. The first case on which he has taken his stand is Sadasuk Janki Das v. Kishan Pershad ('18) 5 A.I.R. 1918 P.C. 146. Their Lordships at p. 408 have made the following observations:
It is of the utmost importance that the name of a person or firm to be charged upon a negotiable document be clearly stated on the face or on the back of the document, so that the responsibility is made plain and can be instantly recognised as the document passes from hand to hand.
In order to appreciate the above, the facts of the case might be briefly set forth. One Mohan Lal, a servant of His Excellency Maharaja Sir Kishan Pershad Bahadur, Prime Minister of His Exalted Highness the Nizam, drew in favour of Sadasuk Janki Das a series of hundis; each of these began with the heading: 'By order of Sirkar may his happiness increase.' to 'Mohan Lal, son of Hira Lal.' The hundis were dishonoured and Sadasuk Janki Das instituted a suit both against Mohan Lal and his master. Their Lordships laid down the law quoted above and dismissed the suit as against Maharaja Sir Kishan Pershad Bahadur.
9. This case does not go the whole length with the appellant's contention. The present is not a case of an agent executing a document and the master being sought to be bound by it. Here one partner is sought to be bound by the conduct of the other partner. But there can be no doubt that there are certain dicta in the judgment which do lend some countenance to his contention. The learned Counsel has further relied upon Sitaram Krishna v. Chimandas Fateh Chand ('28) 15 A.I.R. 1928 Bom. 516 and Punjab United Bank Ltd. v. Muhammad Husain ('34) 21 A.I.R. 1934 Lah. 358. All these merely follow the Privy Council case. The learned, counsel for the respondents has cited cases in Karmali Abdulla v. Karimji Jiwanji ('14) 1 A.I.R. 1914 P.C. 132 and Shanmuganatha Chettiar v. K. Srinivasa Ayyar ('17) 4 A.I.R. 1917 Mad. 108. The facts of Karmali Abdulla v. Karimji Jiwanji ('14) 1 A.I.R. 1914 P.C. 132 are complicated and require some detailed consideration. Briefly they are these. Karimji and Rashid were two merchants carrying on business in Mauritus. Rashid had, all along, a Bombay house and Karim was in the act of setting up one. Karmali was a merchant carrying on business in Bombay and in Hongkong. Karim and Rashid resolved to have a joint speculative business in brown sugar to be shipped from Mauritus to Hongkong. The terms of the arrangement were that purchases were to be made jointly at Mauritus by both the firms after consultation with each other and after taking advice from the Bombay houses. When sufficient sugar to load a ship had been purchased a ship with the consultation of each other was despatched to Hongkong.
10. Invoices in sugar were to be made out separately as half and half and to be sent respectively to each of the Bombay firms. Rashid was to draw bills to the value of the sugar on his Bombay house and Karim on his Bombay house. Notwithstanding the above which indicated separate liability, there was an agreement the preamble of which ran thus 'for the purpose of doing any partnership in brown sugar from Mauritus to Hongkong agreed to act as follows.' Sugar was sent to Hongkong, but the venture failed. Rashid had been declared an insolvent. Karmali brought a suit in respect of the liability of both and impleaded Karim and Rashid. Rashid was represented by the Official Assignee, but neither he nor the assignee opposed judgment. Karim, however, opposed the judgment on the ground that he had paid all sums due on bills signed by himself and that he was not liable in respect of the money raised on bills to which he was no party. It was contended on the basis of Section 251, Contract Act, which corresponds with Section 22, Partnership Act, that the claim as against Karim, to the extent of the liability of Rashid, ought to fail. But their Lordships held him liable for the debt due from Rashid. At p. 274 say their Lordships:
Their Lordships think that the law on these matters is accurately stated in the well-known judgment of Lord Ellenborough in Gouthwaite v. Duckworth (1810) 12 East. 421.
In saying 'the law,' it would perhaps be more accurate to say, a statement of the criterion which is to be applied to the particular facts of each case in order to see whether the transaction is or is not a partnership transaction. In that case it was sought to make Duckworth liable for goods purchased by Brown and Powel, and Lord Ellenborough says this:There seems also to have been some contrivance in this case to keep out of general view the interest which Duckworth had in the goods; the other two defendants were sent into the market to purchase the goods in which he was to have a moiety; and though they were not authorised, he says, to purchase on the joint account of the three; yet if all agree to share in goods to be purchased, and in consequence of that agreement one of them go into the market and make the purchase, it is the same for this purpose as if all the names had been announced to the seller, and therefore all are liable for the value of them.
11. On the principle enunciated above, it is clear that when Keshav Dutt executed the promissory note, the obligee thought, and had good reason to think that, although the note was by Keshav only, the true executants were both he and his brother. The Madras case, Gouthwaite v. Duckworth (1810) 12 East. 421 has considered the above and has definitely held that if
a promissory note was executed by two out of three partners of a firm for money then advanced to the executants for purposes of the firm, but the note did not contain any indication that it was executed on behalf of the firm, then even the third partner who did not execute the note was liable.
The learned Judge has distinctly held that
he had no doubt whatever that the whole of the money was intended to finance the business.
12. He has held that the business was a joint family business and even if we rule out of consideration the joint family character of the business, it is still and does not cease to be at least a joint business. On the principle laid down in Karmali Abdulla v. Karimji Jiwanji ('14) 1 A.I.R. 1914 P.C. 132 and also in Shanmuganatha Chettiar v. K. Srinivasa Ayyar ('17) 4 A.I.R. 1917 Mad. 108, Lalmani is also liable. We may, however, also rest our decision on another, quite possibly, surer ground. Even if the promissory note is, so far as Lalmani is concerned, ruled out of consideration, there is no doubt, on the finding, that he has benefited by the consideration. It was held in Venkatachalapati v. Ramakrishnayya : AIR1930Mad168 :
Where there is a contract with the partnership and a promissory note signed by a partner in his own name and not in the name of the partnership as evidence of such contract, all the partners will be liable.
13. In that case their Lordships reviewed most of the case-law on this question, including the case in Sadasuk Janki Das v. Kishan Pershad ('18) 5 A.I.R. 1918 P.C. 146, and wound up their judgment by permitting the plaintiff to amend his plaint in order to make the consideration as the basis of the claim in respect of the promissory note. This step was necessary as the plaint in that case did not indicate that consideration was the basis of the suit. This view was followed in Sharanbasappa Tippanna v. Rachappa Basappa ('33) 20 A.I.R. 1933 Bom. 101. The plaint in the present case, however, suffers from no such defect and an amendment is not necessary. Paragraphs 2 and 3 set forth the purpose for which the money was taken and the earlier promissory notes of 18th and 30th November 1931 were executed. The case may be approached from yet another point of view. On the findings it must be held that although Keshav Dutt alone executed the promissory note, he did it at the suggestion of Lalmani and the obligee must have been sure that though executed by one, it would bind both. It might be contended that when the terms of a contract had been reduced to writing, oral evidence is shut out by Sections 91 and 92, Evidence Act. But, in a recent case, their Lordships have made it plain that where all the terms have not been reduced to writing, oral evidence is not excluded : vide Mohammad Akbar Khan v. Attar Singh ('36) 23 A.I.R. 1936 P.C. 171.To quote their Lordships:
Before evidence is excluded under Sections 91 and 92, Evidence Act, it must be proved that the document in question records or purports to record all the terms of the contract between the parties.
The point has been made clear in Sheonath Prasad v. Sarju Nonia ('43) 30 A.I.R. 1943 AIL 220. On the strength of these authorities, it is open to the respondents to contend that Lalmani must on the findings of the learned Judge be deemed to have given an assurance to Lachhi Ram originally and the plaintiffs at the time of the execution of the promissory note in suit that the money was being taken for the business in which both were jointly interested, and both would be liable for it. We have, therefore, come to the conclusion that the learned Judge is right in the view he has taken. We accordingly dismiss this appeal, but in the circumstances of the case, we direct that parties should bear their own costs throughout.