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Kaicker Typewriter Exchange Vs. Ram NaraIn Mehra - Court Judgment

LegalCrystal Citation
SubjectCivil
CourtDelhi High Court
Decided On
Case NumberCivil Revision Appeal No. 297 of 1970
Judge
Reported inILR1970Delhi384
ActsCode of Civil Procedure (CPC), 1908 - Sections 115
AppellantKaicker Typewriter Exchange
RespondentRam NaraIn Mehra
Advocates: R.M. Lal and; J.L. Seth, Advs
Cases ReferredVeeria Perumal Pillai Padmanabha Pillai v. Ayukkaarummal Muhammad Pathummal and
Excerpt:
.....authority of a partner -- 'trading firm' -- what constitutes.; that where the firm is a trading firm, a partner has implied authority to borrow money and the firm would constitute a trading firm if its business consists in buying and selling. ; that where defendants (as in the instant case) constituted a partnership and one of the partners executed a promissory note for and on behalf of the firm, the court would be entitled to presume that such a partner had authority on behalf of the other partners to execute the promissory note. ;(ii) civil p.c. - section 115 - burden of proof of one of the issues on a party -- revision against.; that the placing of burden of proof of an issue is hardly a matter to be interferred with in revisional jurisdiction of the high court. - - avakkarummal..........name and account of the partnership.'(8) it, thereforee, follows that where the firm is a trading firm, a partner has implied authority to borrow money and the firm would constitute a trading firm if its business consists in buying and selling as was laid down in higgins v. braucheme (1914) 3 kin ben 1192. coming to indian decisions, in saremal punamchand v. punamchand and another air 1924 bom 260. justice mulla observed following okell v. eston (1874) 31 l t 330, that where the business of the partnership consisted in buying copper and brass utensils and selling them. it would constitute a trading firm and one partner would borrow money for the purpose of the business on the credit of the film and no duty was cast on the person advancing the money to make any further enquiries and the.....
Judgment:

B.C. Misra, J.

(1) This revision under section 115 of the Code of Civil Procedure is directed against the order of the trial Court dated 16th April, 1970 by which the learned Judge repelled the objection of the defendant to the burden of proof on issue No. 3 and held that the firm was dealing in the sale of typewriters and it was thus a trading firm and so all the partners had authority in law to raise loans and the petition was dismissed.

(2) The brief facts of the case are that the plaintiff-respondent instituted a suit against the partnership firm, defendant No. 1, and five other partners of the same firm for the recovery of Rs. 3,400.00 together with costs and future interest on the allegations that on or about 3rd January, 1963, defendant No. 2 acting for and on behalf of defendant No. 1, borrowed a sum of Rs. 5,000.00 from defendant No. 6 and executed a promissory note and receipt of the same and that later on defendants Nos. 1 to 5 paid certain amount on account of principal and interest due on the promisosry note, leaving a sum of Rs. 2,500.00 on account of principal and Rs. 900.00 on account of interest as due and payable by defendants Nos. 1 to 5. The promissory note was transferred by endorsement by defendant No. 6 in favor of the plaintiff, hence this suit. The suit was decreed ex parle on 26th September, 1968, but on a an application by the contesting defendants, the ex parte decree was set aside and defendants Nos. 1, 3, 4 and 5 filed a common written statement in which they denied their liability to pay the amount in dispute and asserted that the father of defendants Nos. 2, 3 and 4 and husband of defendant No. 5 with the sole proprietor of the trading concern defendant No. 1 and on his death, the business was inherited by the contesting defendants Nos. 2 to 5 and defendant No. 2 was allowed to manage and carry on the business and he was in sole charge of the same. They admitted that a partnership had been constituted amongst defendants Nos. 2, 3, 4 and 5 according to the records of the income-tax department and a partnership-deed was in fact executed amongst them in the year 1965, but the contesting defendants denied the authority of defendant No. 2 to incur any loan for and on behalf of the partnership firm or on behalf of other contesting defendants. They also denied that the premissory note had been executed by defendant No. 2 for and on behalf of defendant No. 1 or that they had received any valuable consideration for the same.

(3) On the pleadings of the parties, the following issues were framed on 19th February, 1970 : -

'1.Did defendants execute any pronote on behalf of Kaicker Typewriter, Exchange 2. On proof issue No. 1, is the pronote without consideration 3. Did defendant No. 2 have no authority to raise a loan on behalf of the firm 4. Were defendants Nos. 3 to 6 excluded from the business of defendant No. 17. If so, how and to what effect 5. What is the effect of formation of partnership in 1965 6. Did defendant No. 6 validly assigned the pronote in favor of the plaintiff 7. To what amount of principal and interest the plaintiff in entitled 8. Relief.'

(4) The learned counsel for the contesting defendants has not filed any revision against the framing of the issues by order dated 19th February, 1970, but he has challenged the order of the trial Court dated 16th April, 1970 by which the learned Judge declined to alter the burden of issue No. 3. Mr. Radhe Mohan Lal, learned counsel for the contesting defendants has urged before me two contentions, namely, that it. was for the plaintiff to have established positively that defendant No. 2 had authority to raise a loan on behalf of the firm and the contesting defendants could not be required to prove the negative by way to absence of authority. The second contention is that the learned lower Court has erred in presuming that the firm was a trading firm and all the partners had in law authority to raise loans. I have heard the learned counsel for the parties. The learned counsel for the petitioners has relied upon the provisions of sections 19 and 21 of the Partnership Act and has cited Firm Ghasi Ram Rampat v. Shimhu Dayal and others A.I.R. 1928 Lah 105 while the learned counsel for the respondent has relied upon Vecria Pernmal Pillai Pcidmnnabh pillai v. Avakkarummal Muhammad Pathummal and others : AIR1958Ker257 . In my opinion, the first contention of the learned counsel for the petitioners must fail. The learned trial Court has correctly framed the first issue and has placed its burden on the plaintiff and the plaintiff is required to prove that the defendants executed a promissory note in suit on behalf of the firm, defendant No. 1. The learned lower Court has also correctly framed issue No. 2 placing the burden of want of consideration on the defendants in case issue No. 1 has been proved and the framing of the said two issues has not been challenged before me. The attack of the learned counsel for the petitioners is directed against the burden placed on issue No. 3. Once it is either admitted or established that the defendants constitute a partnership and one of the partners executes a promissory note for and on behalf of the firm and in the name of the firm, the Court would be entitled to presume that such a partner had authority on behalf of the other partners to execute the promissory note. A few provisions of the Partnership Act of 1932 will clarify the position. Under section 18 of the Act, a partner is the agent of the firm for the purposes of its business and under section 19, an act of the partner done to carry on the business in the usual way binds the firm and as provided by sub-section (2) of section 19 as well as section 20, the authority of the partner to act may be extended or restricted. However, under section 21 of the Partnership Act, a partner has authority. in an emergency, to do all such acts for the purpose of protecting the firm as would be done by a person of ordinary prudence. Section 22 states that in order to bind a firm, act or instrument done or executed by a partner shall be done or executed in the name of the firm or in any other manner expressing or implying an intention to bind the firm, Section 25 lays down that every partner is liable, jointly with all the other partners and also severally, for all acts of the firm done while he is a partner. Again, section 27 provides that where a partner acting with his apparent authority receives money or property from a third party and misapplies it, the firm is liable to make good the loss.

(5) The partnership firm, defendant No. 1, was admittedly carrying on the business of repairing and selling typewriters and this would be a trading firm and as such it is reasonable to expect that a partner borrowing money for the purposes of the business of the firm would be acting within the scope of his apparent authority. The fact that there was no specified arrangement amongst the partners restricting the authority or otherwise prohibiting the partner from borrowing any money in the name of the firm is a fact which is within the special knowledge of the partners and as such it is the defendants-partners who have to prove and establish the same.

(6) Whether a partner has implied authority to borrow money or not, very much depends on the business of the firm and if it is a trading partnership, this power would be implied. Lindley on Partnership, Twelfth Edition at page 77, has observed as follows :-

'ONEof the most important of the implied powers of a partner is that of borrowing money on the credit of the firm. The sudden exigencies of commerce render it absolutely necessary that such power should exist in the members of a trading partnership, and accordingly is a comparatively early case this power was clearly recognised. It has been already seen that one partner can bind the firm by a bill or note, upon which money may be obtained, by the everyday process of discounting; and the power of one partner to pledge partner ship goods for advances is equally well established. At the same time, the implied power of borrowing money, like every other implied power of a partner, only exists where the business is of such a kind that it cannot be carried on in the usual way without such a power. If money is borrowed by one partner for the declared purpose of increasing the partnership capital, or of raising the whole or part of the capital agreed to be subscribed in order to start the firm, or if the business is such as is customarily carried on or ready-money principles, e.g., mining on the cost-book principle; or without borrowing, as in the case of solicitors, or cinematograph theatre proprietors, the firm will not bound unless some actual authority or ratification can be proved. Still less will the firm be bound unless some actual authority or ratification can be proved. Still less will the firm be bound where borrowing is prohibited and the person advancing the money is aware of the prohibition.'

(7) The Judicial Committee of the Privy Council in Bank of Australasia v, Brilliant. Where 6 Moo PC 152 observed as follows :-

'EVERYpartner is, in contemplation of law, the general and accredited agent of the partnership, or, as it is sometimes expressed, each partner is proppesitus negativs, and may. consequently, bind all the other partners by his acts, in all matters which are within the scope and objects of the partnership. Hence, if the partnership be of a general commercial nature, he may pledge or sell the partnership property; he may borrow money, contract debts, and pay debts on account of the partnership, he may draw, make, sign, endorse, accept. transfer, negotiate, and procure to be discounted, promissory notes, bills of exchange, cheques, and other negotiable paper in the name and account of the partnership.'

(8) It, thereforee, follows that where the firm is a trading firm, a partner has implied authority to borrow money and the firm would constitute a trading firm if its business consists in buying and selling as was laid down in Higgins v. Braucheme (1914) 3 Kin BEN 1192. Coming to Indian decisions, in Saremal Punamchand v. Punamchand and another Air 1924 Bom 260. Justice Mulla observed following Okell v. Eston (1874) 31 L T 330, that where the business of the partnership consisted in buying copper and brass utensils and selling them. it would constitute a trading firm and one partner would borrow money for the purpose of the business on the credit of the film and no duty was cast on the person advancing the money to make any further enquiries and the other partners were liable, although the borrowing partner had misappropriated the money. Similarly in Waung Pa Thayag v. Touggaa Timber Company I.L.R. 10 Ran 204, where a partnership business consisted of buying and selling timber, it was held that the same constituted a trading partnership as its activities were of the nature of buying and selling and as a partner of such firm had ostensible authority to borrow money on behalf of the firm. In Kaka Ram Sohan Lal and others v. Firm Thakar Das Mathra Das and another , a Division Bench of the High Court held that it was beyond dispute that a managing partner of a firm could borrow money for the purpose of the business of the firm and other partners were bound by his acts and were responsible for the debts contracted by him.

(9) Consequently, it follows that in a trading firm, where buying and selling is the nature of the business of the partnership, the managing partner is empowered to borrow money and the Court would be justified in drawing a presumption in favor of implied authority of the other partners for taking the loan. However, I am not called upon to decide this question as it 'would be determined on the evidence on record by the trial Court and my observations should not be taken to be expression of opinion on the merits of the case, but I have made the observations for the purpose that the order of the trial Court, where it placed the burden of issue No. 3 upon the defendants was correct. In Firm Ghasi Ram Rampal v. Shimbu Dayal and others A.T.R. 1928 Lah (105) , the facts of the case were that the plaintiff-firm instituted a suit for recovery of certain amount on foot of certain contracts alleged to have been made with the defendant-firm through one Shimbu Dayal who alleged to have employed the plaintiff-firm as commission agent. The defendants asserted that the suit was purely fictitious and they had never any transactions of any kind with the plaintiff, but their younger brother Shimbu Dayal entered into certain transactions and they denied that Shimbu Dayal was a partner of the firm or that he had any authority to act on behalf of the defendant-firm. On facts, the Court came to the conclusion that there was no evidence to establish that the defendant- firm was a money lending concern or a trading concern dealing in grain. Tn this context, the Court held that in the absence of the evidence, it was not possible to refuse the relief to the plaintiff and it observed that it was for the plaintiff to show that either by the course of dealings between him and the defendants or by some overt acts of the defendant-firm Shimbu Dayal was acting as their authorised agent in the said transactions so as to bind the firm. In my opinion, the said case is no authority for the proposition contended for by the learned counsel for the defendant. There was no finding in that case that Shimbu Dayal was a partner of the firm and as such the question of implied authority to bind the firm did not arise for consideration. This authority, thereforee, does not render' any assistance to the resolving of the dispute raised before me.

(10) On the other hand, the authority cited by the plaintiff-respondent reported as Veeria Perumal Pillai Padmanabha Pillai v. Ayukkaarummal Muhammad Pathummal and others : AIR1958Ker257 , supports the view I am taking in the case and I follow the same with respect. Even otherwise, the placing of burden of an issue is hardly a matter to be interferred with in revisional jurisdiction of this Court.

(11) With regard to the second contention of the learned counsel for the defendant-petitioner, I hold that the observations of the trial court will not amount to expression of opinion on the merits of the case and the question of the existence or lack of authority of the partner to raise the loan, whether implied or express, is a matter which will be decided at the trial of the suit.

(12) As a result, I hold that the burden of issue No. 3 has been correctly placed and the revision is dismissed with costs.


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