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V.E.N.K.R.M.A. Venkatachallam Chetty and anr. Vs. V.E.N.K.R.M.A. Ramanathan Chetty and ors. - Court Judgment

LegalCrystal Citation
SubjectCivil
CourtChennai
Decided On
Reported in(1920)39MLJ269
AppellantV.E.N.K.R.M.A. Venkatachallam Chetty and anr.
RespondentV.E.N.K.R.M.A. Ramanathan Chetty and ors.
Cases ReferredRai Dwarka Nath Sarkar Bahadur v. Haji Mohammad Akbar
Excerpt:
.....has the authority to settle accounts relating to partnership and to give release with respect to partnership debts he can also be sued alone on a contract entered into by him, and his other partner would be bound by the decree so obtained. that being so, it is not easy to understand why in a case where a partner is sued alone he should not be at liberty to agree to a submission and why the award on such a submission should not as between him and his co-partner be good and conclusive evidence of the liability of the firm. in fact it was as much the interest of the plaintiffs as would have been that of the defendant, if he was a party to the suit to resist an unjust claim and if the plaintiffs thought that the submission was the best way of settling the disputes, there is no good reason..........the basis that a sum of rs. 662-9-0 was due by the partnership to the plaintiffs, while under the award in the suit which was filed afterwards the appellants were made liable as already stated for a sum of rs. 2,400 less the three items mentioned above. the amount claimed in the suit was however more than es. 5,000. the learned judge held that the award was not binding on the present defendants as they were not parties to the suit and the reference to the arbitration. he relied on lindley on partnership, 8th edition, page 164. there can be no doubt as laid down there and in the rulings referred to therein, e. g., stead v. salt (1826) 8 bing 101 that where a partner has submitted to arbitration, the award passed on such submission will not bind the other partner at the instance of the.....
Judgment:

1. The plaintiffs and defendants are Nattu-kottai Chetties carrying on business in Akyab. They had a separate money lending business of their own. It appears that they entered into a partnership with respect to a business in paddy as Commission agents. They used to buy paddy for customers on commission and send it to 'their customers in India. The business however, was conducted by the plaintiffs and defendants separately with their own customers and independently of each other. It was carried on in the separate names of the plaintiffs and the defendants and so far as we can gather they were to conduct the business entirely in their own way; but whatever was the profit or loss in the business as conducted by either party, that was to be shared by the other party equally. There was at first a suit for dissolution of this partnership but it was dismissed on the ground of limitation. The present suit is instituted by the plaintiffs for contribution with respect to certain sums paid by them in connection with joint business in paddy and in the appeal the learned Pleader for the appellants, plaintiffs, has contested the finding of the subordinate Judge with respect to three items.

2. The first refers to the amount recovered in O.S. No. 80 of 1910 by the plaintiff in that suit against the present plaintiffs 1 and 2. In that suit the present defendants (Respondents in the appeal) were not made parties and the present appellants who were the only defendants agreed to the submission of the suit to arbitration. The arbitrators passed an award finding that a sum of Rs. 2,400 was due to the plaintiffs in that suit. Some small items concerned in that suit admittedly did not relate to the partnership in question. Those are a sum of Rs. 66-9-3, a sum of Rs. 38-8-9 and a sum of Rs. 31-6-0 mentioned in the plaint Exhibit A. The appellants' contention is that the rest of the items to which the award related formed part of the partnership transaction. The practice adopted apparently was for the plaintiffs and the defendants to adjust the rights and liabilities with respect to each transaction soon after it closed. In accordance with that practice they adjusted their accounts with respect to the dealings with the plaintiffs in O.S. No. 80 of 1910 on the basis that a sum of Rs. 662-9-0 was due by the partnership to the plaintiffs, while under the award in the suit which was filed afterwards the appellants were made liable as already stated for a sum of Rs. 2,400 less the three items mentioned above. The amount claimed in the suit was however more than Es. 5,000. The learned Judge held that the award was not binding on the present defendants as they were not parties to the suit and the reference to the arbitration. He relied on Lindley on Partnership, 8th Edition, page 164. There can be no doubt as laid down there and in the rulings referred to therein, e. g., Stead v. Salt (1826) 8 Bing 101 that where a partner has submitted to arbitration, the award passed on such submission will not bind the other partner at the instance of the third party. The ground on which this ruling is founded is obvious that submission to arbitration ordinarily does not come within the scope of a partner's authority so as to bind the other partners. This ruling has been followed in Ramabose v. Kallumal I.L.R. (1899) All. 185 and Datoo Bhoy v. Vallu (1899) 1 Bom. L.R 828 and we may take it that the rule is well established and cannot be questioned. But the question here is not between a partner and a stranger, but between the partners interse. The point for determination is whether when a partner has in good faith submitted the claim of a third party against a firm to arbitration and that partner had to make payments in accordance with the award passed on the submission, he would not be entitled to claim contribution from his partner on the basis of that award. There is no express authority on this point. One which has been brought to our notice as being nearest to the present case is the ruling of the Privy Council in Rai Dwarka Nath Sarkar Bahadur v. Haji Mohammad Akbar (1914) 27 M.L.J. 192. There the question was sought to be raised for the first time in the Appellate Court and their Lordships of the Privy Council held that it should not have been allowed to be so raised. The question whether a legal representative of the deceased partner should be bound by the reference made by a survivng partner in relation to a partnership contract was not a pure question of law to be decided without reference to the facts of the case ; and it was held that the High Court was in error in permitting the question to be raised for the first time in Appeal. That passage at least suggests that there may be circumstances in a particular case which would justify the Court in holding that the legal representative of the deceased partner was bound by a reference by the surviving partner relating to a partnership contract.

3. Mr. Krishnaswamy Aiyer the learned Vakil for the respondents however urges that the surviving partner's powers are wider than those of an ordinary partner after dissolution. That may be so generally speaking. But it is a well established rule relating to partnership that if one partner has the authority to settle accounts relating to partnership and to give release with respect to partnership debts he can also be sued alone on a contract entered into by him, and his other partner would be bound by the decree so obtained. That being so, it is not easy to understand why in a case where a partner is sued alone he should not be at liberty to agree to a submission and why the award on such a submission should not as between him and his co-partner be good and conclusive evidence of the liability of the firm. It is not contended in this case that the submission was not bona fide. In fact it was as much the interest of the plaintiffs as would have been that of the defendant, if he was a party to the suit to resist an unjust claim and if the plaintiffs thought that the submission was the best way of settling the disputes, there is no good reason for holding that this partner should not contribute to the amount decreed by the award. As the submission was bona fide and as it has not been shown that the award was vitiated by any illegality we must hold that the defendants are liable on the basis of the award. On that basis the plaintiffs would be entitled to get from the defendants the sum of Rs. 800 with interest from the date of the award.

4. The next point taken in appeal refers to the expenses of certain litigation in O.S. No. 80 of 1910 already referred to and of O.S. No. 118 of 1910. The Lower Court disallowed the claim on the ground that the entries in the accounts stand in the name of one Palaniappa Chetty who was the agent of the Plaintiffs. But if the money was spent through that agent, there seems to be no reason why on that account the amount so spent should be disallowed simply because the amounts are entered in the name of the person who actually disbursed them. Mr. Krishnaswamy Aiyar however argued that there is really no evidence that the sum claimed under this head was actually spent on account of the suits relating to the partnership transactions. We have the accounts Exhibits S and T series and the evidence of one of the plaintiffs that the entire expenses relating to the litigation amounted to the sum entered in the schedule D of the plaint that is Rs. 865-13-0. There was no serious attempt made to show that this is incorrect. We therefore hold that half of this amount should have been decreed to the plaintiffs.

5. As regards the third point it relates to the rate of interest. The Subordinate Judge has allowed interest at 6 per cent but the defendant's own evidence is that the usual rate, that is the Madras rate of interest prevailing among the Chetties is 81/2 per cent. That we think is the rate which should be awarded. The decree will therefore be modified in accordance with the above findings. The appellants will have their costs from the respondents.


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