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Mirza Mal Bhagwan Das Vs. Rameshar and ors. - Court Judgment

LegalCrystal Citation
SubjectCivil
CourtAllahabad
Decided On
Reported inAIR1929All536; 118Ind.Cas.145
AppellantMirza Mal Bhagwan Das
RespondentRameshar and ors.
Cases ReferredBaldeo Das v. Manek Chand
Excerpt:
.....and it would be most dangerous to extend the rule to the case like the present. no doubt it is well settled that where a property stands in the name of a junior member of a joint hindu family the presumption where the nucleus is proved, is that it was acquired out of the joint family funds and belongs to the joint family, but that presumption cannot be extended to cases of partnership. 157, where it was clearly laid down that there was no presumption that a business carried on by a coparcener is a family business......other two were sued as sureties.2. the plaintiffs alleged that defendants 1 to 4 were members of a joint family and were originally residents of salimabad in the kishangarh state in the district of ajmer, that defendants 1 to 4 were related to the other defendants, that defendants 1 to 4 in partnership with defendants 5, 6 and 7 started a firm known as kishori lal bhagwati prasad at kishengarh for carrying on trade, that defendant 1 roormal was the managing member of the said partnership concern, that on the recommendation of defendants 8 and 9, who carried on business in nasirabad cantonment, under the name of bhaniram chhote lal and under a letter dated asarh badi 9 sambat 1978, corresponding to 29th june 1921, and on their standing sureties thereunder, the plaintiffs supplied various.....
Judgment:

Sen, J.

1. This is a plaintiffs' appeal in a suit for recovery of Rs. 8,078-13-6 for the price of various articles, such as molasses, sugar, raw sugar, sesamum seed, grain, etc., supplied to the defendants together with commission and interest. The plaintiffs carry on the business of commission agency at Shahganj in the district of Jaunpur under the style of Mirza Mal Bhagwan Das. The suit was directed against nine defendants, seven of whom were sued as principals and the other two were sued as sureties.

2. The plaintiffs alleged that defendants 1 to 4 were members of a joint family and were originally residents of Salimabad in the Kishangarh State in the district of Ajmer, that defendants 1 to 4 were related to the other defendants, that defendants 1 to 4 in partnership with defendants 5, 6 and 7 started a firm known as Kishori Lal Bhagwati Prasad at Kishengarh for carrying on trade, that defendant 1 Roormal was the managing member of the said partnership concern, that on the recommendation of defendants 8 and 9, who carried on business in Nasirabad Cantonment, under the name of Bhaniram Chhote Lal and under a letter dated Asarh Badi 9 Sambat 1978, corresponding to 29th June 1921, and on their standing sureties thereunder, the plaintiffs supplied various articles to defendants 1 to 7, that retrogressive interest at 12 annas per cent. and commission at 8 annas per cent. were settled between the parties and that upon an account Rs. 6,586-4-3 principal and Rupees 1452-9-3 as interest were due to the plaintiffs from the defendants.

3. Roormal and Ram Kishen who were defendants 1 and 2 admitted the plaintiffs' claim but contended that they had purchased various goods from the plaintiffs on their own responsibility. They denied that defendants 3, 5, 6 and 7 were partners in the firm styled Kishori Lal Bhagwati Prasad. They also denied that defendants 8 and 9 ever stood sureties for them or the other defendants and they finally pleaded that Rameshar, defendant 3, who was the own brother of Roormal defendant 1 and son of Balkishen, defendant 2, had been taken in adoption by one Ladu Ram and had nothing to do with the joint family of defendants 1, 2 and 4. Defendants 5, 6 and 7 contended that they never carried on any business in partnership with defendants 1 to 4 nor were they partners in the firm styled Kishori Lal Bhagwati Prasad. They carried on business at Beawar in iron and not in sugar, grain etc.

4. Defendants 8 and 9 pleaded that they did not stand sureties for the other defendants in respect of any amount due to the plaintiffs nor did the plaintiffs give any goods on credit to the defendants on the recommendation of these defendants. The Court below held that the firm styled Kishori Lal Bhagwati Prasad consisted of only four partners, namely, Roormal, defendant 1, Ram Kishen, defendant 2, Bhagwati Prasad, son of Roormal, defendant 4, and Kishori Lal, defendant 6, who was outside the family of Ram Kishan, that Rameshar defendant 3 had been adopted by Ladu Ram and did not belong to the family of Ram Kishan and was not concerned with the partnership firm, that Moti Lal, defendant 5, and Bhagwati Prasad defendant 7 were not the members of that firm and that defendants 8 and 9 had not stood sureties for the other defendants. Upon these findings, the Court below passed a decree against defendants 1, 2, 4 and 6. These defendants have submitted to the decree and have preferred no appeal.

5. The plaintiffs in their appeal to this Court claim a decree against Rameshar, defendant 3, Moti Lal, defendant 5 and Bhagwat Prasad defendant 7, on the allegation that they are also members of the partnership firm styled Kishori Lal Bhagwati Prasad. They challenge the finding of the lower Court that Ramesherhad been adopted by Ladu Ram and that defendants 8 and were not the sureties for the other defendants. (Here the judgment discusses evidence and finding (1) family that Rameshar was adopted in another was not justified by evidence (2); that it was not proved that defendants 5 to 7 were members of the partnership firm, it proceeds). It is contended by the plaintiffs-appellants that Rameshar being a member of the joint family with Ram Kishan, Roormal and Bhagwati Prasad and Moti Lal and Bhagwat Prasad being members of another joint family with Kishori Lal, it must be presumed that Rameshar, Moti Lal and Bhagwat Prasad were also the members of the partnership firm, known by the name of Kishori Lal Bhagwati Prasad. A large number of authorities have been cited in support of this proposition. In Parbati Dasi v. Baikuntha Nath De [1914] 12 A.L.J. 79, the question now raised was not the question in issue. All that was decided in this case was that where property was purchased in the name of a junior member of a joint Hindu family, the criterion was to consider the source from which the purchase money was paid and in the absence of evidence to prove that the junior member had any separate funds, the presumption was clear and decisive that the property was acquired by the joint family and was not the self-acquisition of the junior member. In Bandhu Ram v. Chintaman Singh A.I.R. 1922 P.C. 215, the same rule of law was reiterated in different words and a bond held in the name of the managing member of a joint Mitakshara Hindu family was presumed to be the joint property of the family in the absence of evidence to the contrary. Their Lordships observed in this case that where the evidence on both sides was somewhat meagre, the presumption in favour of joint ownership was not displaced. Jagan Lal v. Mathura Prasad [1917] 39 I.C. 498 is a decision of the late Court of Judicial Commissioners of Oudh and rests upon the same rule. The ordinary presumption of the Hindu law is that property acquired, whether in the name of one member of the family or another, while the family is joint will be deemed to have been acquired from the joint funds, where a joint nucleus was shown to exist, unless it was shown to have been acquired by any member from separate earnings of his own. In Punnu v. Mt. Kousa [1918] 40 I.C. 463 a Bench of this Court enunciated the rule in this form:

We think that if the family was found to be joint and it was proved that there was joint family property belonging to the family, then the onus of showing that the money advanced on these mortgages was a self-acquired property of Govind would lie upon the defendant his daughter.

6. This view has not been departed from in Annamalai Chetty v. Subramanian Chetty A.I.R. 1929 P.C. 1.

7. The contracting capacity of the joint family as a whole or of an individual member of the joint family for himself is not disputed. The joint family as a jural unit may enter into an agreement of partnership with a person or persons outside the family either through its managing member or by the consensus of the members constituting the joint family. Likewise a member of the joint family may enter into such a contract in his individual capacity. The nature and incidents of the partnership in each of these cases have to be determined by a consideration of the evidence produced in each case. In Moti Ram v. Mohammad Abdul Jalil A.I.R. 1924 All. 414, it was held that where a partnership consisted of numerous individuals, some of whom were entered in the partnership deed as holding certain shares on their own behalf and in trust for certain minor members of their family, the partnership would be accountable to such individuals alone and the minor members should not for the purposes of Section 4, Companies Act, be regarded as separate partners. In Mewa Ram v, Ram Gopal : AIR1926All337 it was decided that where a person representing a joint Hindu family or a firm lends his name to a partnership contract, ho must be deemed to be one person within Section 4, Act 7 of 1913. Sulaiman J, observed:

If each of the executants entered into his partnership in his own individual capacity, he admittedly counts as one. On the other hand, if he entered into partnership in his representative capacity on behalf of his family, then his joint family must be considered to be a unit and must be deemed to be one person within Section 4. Companies Act.

8. It follows from this that the matter has got to be determined in each case with reference to the evidence produced therein and that no presumption necessarily arises either as a matter of law or of logic that the other members of the family should be deemed to be partners in the firm by reason of an individual member of the family entering into a contract of partnership with strangers. The same view is endorsed by Mukerji, J, but in different words

Where a person lends his name to a partnership contract, he is a 'person' constituting the total number of partners. Behind his back there may be a joint Hindu family or he may be representing a firm consisting of himself and several other members. In either case, so far as the other partners are affected, the party joining in the contract is the only person with whom they are concerned. The share owned by the individual member may have to be, in the case of a partition in the family or dissolution of partnership, divided among certain parties. But that fact cannot affect the other members in the partnership in question. In this view the party joining constitutes only one person and not more than one person.

9. This observation leaves count of the fact that it may be permissible for an individual member of a joint family to enter into a partnership with persons who are strangers to the family on his own personal account and not as a member of the family at all. The matter was considered by this Court in a very recent case in Gauri Shankar v. Keshab Deo : AIR1929All148 , and it was held that a joint family can enter into a partnership and that where a joint family carries on a trading concern there is no dissolution of partnership amongst the various members of the concern by reason of the death of its managing member.

10. In the case of a joint family-ancestral-trade the various members are not only coparceners but also copartners of the trading firm. A member of the family becomes a copartner by operation of law and the partnership can suffer no dissolution from the death of an individual member. The law on the subject has been thus stated by Mayne (Hindu Law and Usage, 9th edition, 398):

Where a managing member of a joint Hindu family enters into a partnership with a stranger, the other members of the family do not ipso facto become partners in the business so as to clothe them with all the rights and obligations of a partner as defined by the Indian Contract Act. In such a case, the family as a unit does not become a partner but only such of its members as in fact, enter into a contractual relation with the stranger: the partnership will be governed by the Act.

11. The distinction between an ancestral Hindu family firm and a partnership between certain members of a joint family and strangers to that family, has been recognized and acted upon in a number of cases. In Anant Ram v. Channu Lal [1903] 25 All. 378, this distinction was emphasized upon in the following terms:

Now in dealing with this contention it is most essential to bear in mind that the firm Channu Lal, Lal Man was not an ancestral Hindu firm belonging to the members of a joint Hindu family and, as such, subject to the peculiar rules by which such a firm is governed. The relationships between the persons who established this firm was not that created by the personal law and arising out of the status of the members of a Hindu joint family but that it takes its rise from a contract between partners as defined in Section 239, Contract Act. The firm was an ordinary commercial trading firm, consisting of several persons who had agreed to combine their property and skill in the business of purchasing and selling cloth at a profit, dividing the profits among themselves in certain proportions. Whatever may be the rules which govern an encestral joint Hindu family partnership they cannot, in our opinion, affect a firm such as that which we have before us in this case.

12. In Kharidar Kapra Co. Ltd. v. Daya Kishan A.I.R. 1921 All. 306, a Bench of this Court endorses the view laid down by the Madras High Court in the Full Bench case of Gangaya v. Venkataramiah [1917] 41 Mad. 454. In the latter case the following rule has been enunciated:

It is wall settled that a contract of partnership between a member of joint family and a stranger does not make every member of the joint family which the managing member represents a partner so as to clothe him with all the rights and obligations of a partner as defined in Section 239, Contract Act.

13. In Vadi Lal Lallubhai v. Shah Kushal [1903] 27 Bom. 157, it was held that:

Although a person carrying on business is a coparcener in a joint family, it does not necessarily follow that all his coparceners are his partners in that business, entitled with him to its rights and responsible with him for his liabilities. The fact of partnership must be proved by evidence showing that the persons alleged to be partners have agreed to combine their property, labour or skill in the business and to share the profits and losses thereof.

14. The following passage from the judgment may be usefully-reproduced:

In our opinion, it is too broad a proposition of law to lay down that because a person carrying on business is a coparcener in a joint family, therefore all his coparceners are his partners in that business entitled with him to its rights and responsible with him for its liabilities:

We are left to presume therefrom the mere fact that the plaintiff is joint with his father and his brother, but just as there is no presumption that a loan contracted by a manager of a Hindu family is for a family purpose... so there can be no presumption that business carried on by a co-sharer is a family business.

15. The same rule was enunciated in an earlier case by Sir Lawrence Jenkins, C.J., Baldeo Das v. Manekchand [1901] a Bom. L.R. 144. The point argued in this case was that the members of a joint family whose assets comprised a business are ipso facto liable for debts that may be incurred by any member of the family in any business carried on by him. His Lordship observed that this would be a most dangerous doctrine to accept:

Possibly under the rule of Hindu law, which regulates the relations between the members of a joint family, the rest of the members may under certain circumstances claim the benefits arising from a business carried on by one of their numbers but until the business is in some way adopted as an asset of the joint family, it would be contrary to principle to fasten on the other members any liability for the debts of that business. Therefore, it must, in my opinion, be shown by the creditor who advances such a claim that the business carried on by an individual member has, by some such method as I have indicated, become the business of the family or is carried on for its benefit.

16. It is respectfully submitted that the above contains the true statement of the law and ought to be adopted. In V.P.L.R.M. Palaniappa Chetty v. Official Assignee of Madras [1917] 20 M.L.T. 565, Abdul Rahim Officiating, C.J., is reported to have made the following observations:

It is said that 'there is a general presumption of Hindu law that a business carried on by the head of a Hindu family although started by himself for the first time, is, without anything more being shown, the joint business of the family.' I do not think that there is any such absolute presumption. In order that a presumption may arise it must be shown that the other members participating in the conduct of the business or its profits or by a long course of acquiescence treated it as a business in which all the coparceners were interested.

17. Phillips, J., did not share his views. He says:

No doubt the provisions of the Indian Contract Act must be read together with the provisions of the Hindu law, for the coparcenary of a joint Hindu family is of such a nature that it must modify to a certain extent some of the provisions of the Indian Contract Act in regard to partnership but this is no ground for contending that such provisions are not to be applied, as far as are consistent with Hindu law to the partnership constituted by a joint family business.

18. He was of opinion that given a joint family with the nucleus of ancestral property the presumption of Hindu law was that the property acquired by the manager of the family was joint family property. This proposition cannot be controverted. But it is respectfully submitted that the proposition in question cannot be extended to partnerships between a member of the joint family and a stranger. Nor can a presumption be invoked in favour of the creation of such a partnership apart from the provisions of Section 239, Contract Act. The ruling enunciated in Malaiperumal Chetti v. Arunachalla Chettiar [1917] 6 M.L.W. 417, was with reference to the presumption which should ordinarily be raised in the case of a trading caste or family and it would be most dangerous to extend the rule to the case like the present. An individual member embarking in a business on his own personal account cannot be permitted to involve the entire family credit and all the joint family properties to the prejudice of the family as a whole including the minor members. The rule of evidence laid down in Grey v. Walker Coward & Co. [1913] 40 Cal. 523, does not militate against the view that the character and constitution of the partnership in dispute have to be proved in each case upon a consideration of such evidence as may be forthcoming and cannot be decided merely upon a presumption of law one way or the other. There can be no doubt that in the case of trading families there is a presumption of jointness not only of their property but even as regards the business which they carry on.

19. It was observed by Lord Lindley (The Law of Partnership, 9th edition 25) that where the legislature has provided a statutory definition of partnership, that definition, taken in connexion with other sections, must be the ultimate test applicable to the determination of the question whether in the particular case a partnership does or does not exist. Regard has to be paid in particular to the contract and intention of the parties as appearing from the whole facts of the case: Cox v. Hickman [1860] 8 H.L.C. 268.

20. Section 239, Contract Act, defines partnership as the relation which subsists between persons who have agreed to combine their property, labour and skill in some business and to share the profits thereof between them. Partnership therefore is a relation resulting from the contract and that an agreement, express or implied, is the source of the said relation. The definition in the Indian Contract Act may be compared with the definition given by Watson. According to him it is a voluntary contract between two or more persons for joining together their money, goods, labour and skill or either of them or all of them upon an agreement that the gain or loss shall be divided proportionately between them and having for its object the advancement and protection of a fair and open trade. An agreement to share the loss is not a necessary ingredient of partnership under the Indian Contract Act. An agreement is essential for the creation of partnership under the Indian Contract Act.

21. No evidence is forthcoming in this case that defendants 3, 5 and 7 entered into such an agreement with the other persona against whom the decree has been passed by the Court below. The agreement to constitute a partnership may be express or may be implied. A presumption in favour of such an agreement may be raised from the conduct of the parties, from their mutual dealings and from the surrounding circumstances but there is no presumption in law that a member of a family entering into a partnership with certain persons who are strangers to the family is doing so in a representative or vicarious capacity. If a liability is sought to be fastened upon the other members of the family it can be done either by evidence of consensus or by evidence to prove an agency through which the contract of partnership was brought into existence. These have not bean proved in this case. The finding of the Court below that defendants 3, 5 and 7 are not the partners in the firm of Kishori Lal Bhagwati Prasad is correct and ought not to be displaced.

22. It is next contended that defendants 8 and 9 are the sureties of the remaining and are liable for the plaintiff's claim. The plaintiffs in para. 5 of the plaint relied upon a letter dated Asarh Badi 9 Sambat 1978 corresponding to 29th June 1921. In the course of the argument the learned Counsel for the appellant who has dealt with this case very skilfully and in all its aspects-brought to our notice another document which has been marked as Ex. 3. A contract of guarantee has been defined in the Indian Contract Act as a contract to perform the promise or to discharge the liability of a third parson in case of a default. We have been taken through these two documents in extenso and we do not find anything there to indicate that defendants 8 and 9 gave an undertaking to the plaintiffs either to perform the promise or to discharge the liability of the remaining defendants. I therefore repel this contention. In view of the above findings I would, therefore, dismiss this appeal.

Sulaiman, J.

23. I entirely concur in the conclusions of my learned brother including the view that there is no presumption in this case that the other members of the family of Kishori Lal are partners in the firm. No doubt it is well settled that where a property stands in the name of a junior member of a joint Hindu family the presumption where the nucleus is proved, is that it was acquired out of the joint family funds and belongs to the joint family, but that presumption cannot be extended to cases of partnership. The acquisition of property stands on quite a different footing from the membership of a partnership, which involves not only an acquisition of an interest is a partnership concern but an assumption of liability also. My learned brother has referred to the case of Vadi Lal Lallubhai v. Shah Kushal [1903] 27 Bom. 157, where it was clearly laid down that there was no presumption that a business carried on by a coparcener is a family business. In Gangayya v. Venkata Ramiah [1917] 41 Mad. 454 it was conceded that as between the members of an undivided family and the co-parcener who enters into a contract of partnership for the benefit of the family they will be entitled to call upon him to account for the profits earned by him from the partnership and to share in such profits, but this will not place them in any position of direct contractual relationship with the other partners of the firm, even though the entire assets at the joint family might be available to the creditors of the family in certain circumstances.

24. Similarly in the case of Baldeo Das v. Manek Chand [1901] a Bom. L.R. 144 (at 145), Jenkins, C.J., remarked that under certain circumstances the rest of the members of the family may claim the benefit arising from the business carried on by one of their number, but until this is done, or until the business is in some way adopted as an asset of the joint family, it would be contrary to principle to fasten on the other members any liability for the debts of that business, and therefore, the creditor who advances such a claim must show that the business carried on by an individual member has by some such method become the business of the family or is carried on for its benefit. It follows therefore that the question is one of fact and not of presumption, and there is no initial presumption in favour of the defendants that the entire family of Kishori Lal was a partner of this firm merely because Kishori Lal is now found to have been a partner, particularly when Kishori Lal was a junior member and not the karta or the head of the family.


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