John Wallis, C.J.
1. I agree with the order proposed by my learned brother whose judgment I have had the advantage of reading. I agree with him that there is no res judicata in this case on any view, and it is therefore unnecessary for me to consider whether the doctrine of res judicata has any application to the case, seeing that the former suit was dismissed as against the sub-partners on the ground that assuming them to be such they were not proper parties to that suit. As regards the question whether the settlement Ex. 3 made between the plaintiff and his partner C.V.C.T. after the dissolution of the partnership is binding on the present defendants as his sub-partners, assuming them to be such, I am of opinion that it is not. Section 263 of the Contract Act the language of which clearly resembles that of Section 38 of the Partnership Act, 1890, no doubt provides that the rights and obligations of the partner continue in all things necessary for the winding up of the partnership. That Section deals in my opinion with the continuing authority of the former partners to bind one another after dissolution and has no application to a settlement between the partners after dissolution which is binding on them by virtue of their agreement and not by virtue of this section and whether or not it is binding on the sub-partner of one of them, The question whether such a settlement is binding on the Sub-partner against the principal partner gives rise to different considerations. The Indian Contract Act, 1872, does not deal specifically with the case of sub-partners except in so far as by Section 263 it prohibits the introduction of a new partner into a firm without the consent of all the partners ; but it is dealt with by Section 31 of the English Partnership Act, 1890. I can see no reason why the rule laid down by the legislature in that Act, which was drafted with great care and with the assistance of eminent lawyers, should not be applied in this country, where our Contract Act is silent, especially when they appear to merely give effect to the earlier decisions. I can find nothing in the Contract Act to warrant us in adopting a different rule. Under Section 31 an assignee from a partner, which term includes a sub-partner cannot interfere in any way in the management of the business and must accept the account of profits agreed to by the partners. Otherwise a new partner would in effect be introduced in the business by one partner, without the consent of the other partners and the continuance of the partnership would be endangered. If any one chooses to take an assignment of a share in a partnership he must accept it, subject to the restrictions which are necessary for the carrying on of the partnership business one of which is that he must accept the accounts of profits agreed upon between the partners. The same considerations, do not apply after the dissolution of the partnership and there are not the same difficulties in the way of allowing the sub-partner to enforce his full rights against the assigning partner and accordingly Section 31 entitles him for the purpose of ascertaining his share to an account as from the date of dissolution. As held by Vaughan Williams, L.J., in Watts v. Driscell (1901) 1 Ch. 294 an assignee would be entitled to such an account independently of Section 31 which only affirms his right to it. As pointed out by Rigby, L.J., in the same case there would be no equity in enforcing on the assignee of one partner a bargain entered into between the partners after dissolution which might involve gross injustice to the assignee and might have been entered into for that very purpose. My experience of partnership suits leads me to the opinion that the rule is at least as necessary in this country as in England and that the opposite rule would operate as a strong inducement to commit fraud, and would frequently result, in very questionable settlements such as that in the present case being entered into between the partners to the prejudice of the sub-partner. I am therefore of opinion that the sub-partner is entitled to an account under (he rule embodied in Section 31 as interpreted in Whetham v. Davey (1885) 30 Ch. D. 574 Watts v. Driscell (1901) 1 Ch. 294 and Bonnin v. Neame (1910) 1 Ch. 732. What I mean is that in the absence of any settlement between the partners before dissolution which, of course, would be binding on the sub-partner, the sub-partner after the dissolution is entitled to have an account taken to ascertain the share of the partners under whom he claims as in Whetham v. Davey (1885) 30 Ch. D. 574 as without such an account it would be impossible to say what he was entitled to.
Sadasiva Aiyar, J.
2. The defendants 2 to 5 are the appellants. The 4th defendant is the son and the 5th defendant is the grandson of the 1st defendant who died after suit. Of the 5 plaintiffs, the plaintiffs 2 to 5 are the undivided sons of the 1st plaintiff. I shall speak shortly first as the plaintiff hereinafter.
3. The suit was brought for recovery of contribution from the defendants in the following circumstances:
(1) The plaintiff and. one C.V.C.T. Chidambaram Chetty (hereinafter called C.V.C.T.) carried on money lending business as partners, the business being conducted at Paungde in Lower Burma, the plaintiff's share being 10/16 and C.V.C.T.'s share being 6/16.
(2) Out of the plaintiff's 10 shares he assigned three shares, one to each of the defendants 1, 2 and 3 as his sub' partners for consideration.) The defendants 1 and 2 denied that they were sub-partners but the 3rd defendant admitted that he purchased one share from 1st defendant.)
(3) The business in Lower Burma ended in a loss and the plaintiff instituted O.S. No. 293 of 1912 against C.V.C. T. (and his six sons) and also against the present defendants 1 to 3 (defendants 8 to 10 in that suit) for dissolving the firm and for obtaining the usual appurtenant reliefs. The Ramnad Sub-Court passed a preliminary decree dissolving the form from 20-2-1914 (the date of that decree) and directing the taking of accounts, after it gave the finding that the present defendants 1 to 3 were the plaintiff's sub-partners each for one share as alleged by the plaintiff.
(4) On 14-7-1914 the plaintiff and C.V.C.T. agreed upon a statement of accounts filed in the Ramnad Sub-Court according to which statement nearly Rs. 2,54,000 was agreed to be the total loss incurred by the firm. That Court in its final decree passed on 15-7-1914, held each of the present defendants 1, 2 and 3 liable to pay Rs. 15,872-8-0 to the plaintiff (their principal partner) for their respective one-sixteenth shares. The total sum payable by all three was thus 47 thousand and odd rupees.
(5) Meanwhile the present defendants 1 to 3 (then defendants 8 to 10) had filed A.S.No. 197 of 1914 against the preliminary decrees of the Sub-Court of Ramnad and they afterwards filed three separate appeals against the final decree. The principal grounds in these appeals were (a) There is no evidence that the 8th and 9th defendants (the present 1st and 2nd defendants) are sub-partners. (6) The lower court ought to have dismissed the suit against defendants 8, 9 and 10 if they were only sub-parlners, and as soon as it was found that the plaintiffs' case that they were principal partners was not made out. (These two grounds are the principal grounds of attack against the preliminary decree), (c) The statement of accounts Ex. III filed by the plaintiff and C.V.C.T. is no evidence against the defendants 8 to 10. The plaintiff and C.V. C.T. acted collusively and fraudulently in accepting each other's statements on 15-7-1914 and the defendants 8 to 10 had no knowledge or opportunity to object to Ex. III. (This was the principal ground of attack against the final decree).
(6) The High Court allowed the appeals of the present defendant 1 to 3 by the Judgment Ex. A-4 dated 14-4-1916. (Oldfield and Srinivasa Aiyangar, JJ.) I shall extract the material passages in the Judgment pronounced by Oldfield, J. and concurred in by the other learned Judge. ' The preliminary decree passed decided that they (the defendants 8 to 10) were sub-partners and so far no objection has been taken to it. The argument for the 8th to 10th defendants is shortly that having no rights or liabilities in connection with the firm or any of its members, except the first plaintiff, they have no concern with the taking of the accounts between its members and cannot be bound by it ; and they should therefore have been dismissed from the suit as soon as the decision against their position as partners was reached. It is urged (contra) that the 8th to 10th defendants were either necessary or proper parties, because multiplication of proceedings would be avoided if the 1st plaintiff's rights or liabilities in the partnership were determined once for all in a manner, which would be binding on the 8th to 10th defendants, as well as C.V.C.T. since, whether or no the 8th to 10th defendants were directly liable for any proportion of the partnership liabilities, such determinations would be necessary in the adjustment between them and the 1st plaintiff. This is not in my opinion sustainable. There is nothing regarding the relations between the sub-partners and partners in the Indian Contract Act. Section 31, however, of the English Partnership Act provides that the assignee of a share in a partnership is entitled ' only to receive the share of the profits to which the assigning partner would otherwise be entitled and the assignee must accept the account of profits agreed to by the partners.' The assignee is ' in case of a dissolution of the partnership entitled to receive the share of the partnership assets, to which the assigning partner is entitled as between himself and the other partners and for the purpose of ascertaining that share to an account as from the date of the dissolution,' And this may be taken as the law in India since it is well supported by authority. The result is that sub-partners, must ordinarily accept the account taken between the partners, but have not the right and are not subject to any duty to take part in the proceedings in which it is taken. For these reasons the learned Judge decided that the defendants 8 to 10 were neither necessary nor proper parties to O.S. No. 293 of 1912, allowed the appeals and dismissed the plaintiff's suit, so far as the defendants 8 to 10 were concerned. The result was that the direction in the final decree that each of these three defendants should pay Rs. 15,800 and odd to the plaintiff was also set aside. The judgment was, as I said before, pronounced on 14--4--1916. The present suit was brought on 21--7--1916 for recovery of the total of the three items of Rs. 15,800 and odd or Rs. 47,617-6-9 with compound interest with six months' rests from 20--2--1914, jointly and severally from the defendants.
4. The principal issues framed in this suit are the issues 1, 2, 4, 5, 7 and 8 which are as follows:
(1) 'whether the defendants 1 and 2 were sub-partners of 1st plaintiff in the V.R.K.R. firm mentioned in the plaint
(2) 'whether the defendants 1 and 2 are precluded from raising the plea that they are sub-partners by reason of the decision in O.S. No. 293 of 1912 on the file of the Ramnad Sub-Court and A.S. No. 197 of 1914 on the file of the High Court of Madras ?
(4) ' whether the statement of account showing the losses is fraudulent and collusive ?
(5) ' what are the accounts to be taken and from what date are they to be taken ?
(7) ' whether plaintiffs are entitled to a joint decree against all the defendants ?
(8) ' whether the plaintiffs are entitled to any and if so what interest ?
5. The compound interest claimed with six months' rests was disallowed by the Lower Court on the 8th issue and simple interest at 6% was allowed, from the date of the preliminary decree i. e., 20-2-1914 in the former suit of 1912. On the first and 2nd issues the Lower Court held that the question, whether the defendants 1 and 2 were sub-partners of the plaintiff was res judicata against their contention that they were not such sub-partners by the decision in the former suit, though that suit was dismissed by the High Court as against them. The 3rd defendant had admitted even in the former suit that he was a sub-partner for 1/16th share. On the 3rd, 4th and 5th issues the Lower Court held that the common statement Ex. III filed in the former suit by the plaintiff and C.V.C. T. was not shown to be fraudulent or collusive, that that statement was binding upon the defendants 1 to 3 and that the defendants are therefore liable to contribute towards the losses of the firm, as found in the final decree in that suit and also to contribute towards the subsequent payments found to have been made by the plaintiff to the partnership creditors. On the 7th issue the Subordinate Judge held that the plaintiff was entitled only to a separate decree against each of the defendants 1 to 3 for Rs. 15,000 and odd and interest and not a joint decree for Rs. 47,000 and interest as claimed in the plaint.
6. The questions we have to consider in this appeal are (1) whether the defendants 1 and 2 were sub-partners of the plaintiff and whether the Lower Court was right in holding that the question was res judicata by the decision in the previous suit of 1912 ; and (2) whether the defendants are bound by the statement of accounts, Ex. III, agreed upon between the principal partners, the plaintiff and C. V. C. T, and filed by them on the 14th July, 1914 or are they entitled to have the accounts of the partnership re-taken as regards the assets and liabilities, as they stood on the date of dissolution, namely 20-2-1914.
7. As regards the first point, it seems to me difficult to hold that the judgment (Ex. A-4) of this Court in the appeal in the former suit intended to decide finally that the defendants 1 and 2 were sub-partners of plaintiff. It only recited that no objection was taken before the learned Judges to the decision of the lower Court that they were sub-partners and then it proceeded to decide the appeal on the footing that they were sub-partners, and then held finally that they were neither necessary nor proper parties on that footing. I am myself inclined to take a very liberal view, so as to extend the bar of res judicata as far as possible. See Ramakrishna Naidu v. Krishnaswami Naidu (1919) 86 M.L.J. 641. But I do not think thatthe intention of the parties or of this Court to obtain or give a final decision on that question, when it was before the High Court on appeal in the former suit, is so clearly made out as to enable me to hold that notwithstanding that it was unnecessary to decide that question for the disposal of the appeal, this Court did so decide it in a final manner and that decision is therefore res judicata. The case has therefore to go back for a fresh decision on the merits (after taking evidence) on this question.
8. The remaining point for decision is whether the statement Ex. III filed by the plaintiff and C.V.C.T. in the former suit is binding on the defendants. On this question there were learned arguments citing English decisions (many of them based on it (2) of Section 31 of the English Partnership Act as I think that the law governing Partnership transactions is laid down with sufficient clearness in the Indian Contract Act itself. The assignee of a share (whether completed or only by way of mortgage) from one of two partners not having any primity of contract with the other partner, can of course not claim to interfere with the business so long as it is a going concern. The assignor stands in the position of a trustee or agent for the assignee and any settlement of accounts made by him prior to dissolution and up to the date of dissolution is binding in the same manner on the assignee as on the assignor. But just as and to the extent that the assignor can surcharge and falsify on the ground of mistake or fraud in the settlement, the assignee may also do so. After dissolution according to Section 263 of the Contract Act, the rights and obligations of the partners continue in all things necessary for the winding up of the business of the partnership. If for the purpose of such winding up, the assignor settles accounts with his partner in a proper manner it seems to me on principle that such settlement should be binding on the assignee, just as and to the extent that it is binding on the assignor, subject of course to the right to surcharge and falsify for proper causes shown. Any fraudulent or collusive settlement of accounts made by the assignor is of course not binding on the assignee. If there are English decisions which imply that a settlement made by the assignor after dissolution of partnership for the purpose of winding it up is in no way binding on the assignee I do not feel myself bound by those decisions and I respectively differ from them. The observation in the case in Willams v. Poe21 W.R. 252 rather seems to show that even in England, the English Court has the power to bind the assignee by such a settlement of account made by the assignor in certain circumstances. I do not think that there is anything even in Section 31 of the English Partnership Act, which gives the assignee the unconditional right to have the accounts completely retaken in those circumstances ; and the observations tending to an opposite conclusion (if they really tend to such a conclusion, a matter about which I feel some doubt) are based in my opinion on a rather narrow view of the meaning of the 2nd clause of Section 31 of the Partnership Act and seem to have ignored the provisions of Section 38 of the English Partnership Act corresponding to Section 263 of the Indian Contract Act. However I express my opinion on the English Act with very great diffidence as my knowledge of the history of Partnership Legislation in England is almost negligible. If as I hold the assignor is a trustee or agent of the assignee, I do not see why the assignor's partner should not settle accounts bona fide with the assignor and why his right to so settle should be restricted by an assignment made without his consent.
9. The question therefore is whether the joint statement of account Ex. III filed on 14-7-1914 by the plaintiff and C.V.C.T. is a bona fide settlement, or whether it is fraudulent and collusive.
10. On this question I feel constrained to differ from the finding of the Lower Court. The accounts of the partnership were kept by the salaried agent, Olagappa Chetty at Paungde in Lower Burma and were in his possession till 23rd March, 1909. On that date Olagappa Chetty and plaintiff went before mediators at that place and signed the agreement Ex. IV in their presence. That document provides that the plaintiff should make himself liable to pay Rs. 8,000 due to certain persons (from whom Olagappa had borrowed money on his own personal credit on hand loans) within 12th April, 1909, that Olagappa should in his turn write up the accounts properly and prepare the ayinthokai account, before the same date (12th April, 1909) and that if the plaintiff pays up Rs. 8,000 to the creditors before 12th April the promissory notes, documents, jewels, decrees and documents should be put into plaintiff's possession by Olagappa. It is the case of the plaintiff that he did pay the sum of Rs. 8,000 according to the said agreement (see also plaintiff's statement of account Ex. II). It is difficult to believe that he so gave Rs. 8,000 out of his own pocket without getting back the account books and ayinthokai statement from Olagappa. Olagappa died in 1911, that is 2 years after the date of Ex. IV. The plaintiff never made any demand on Olagappa for delivery of the ayinthokai accounts before Olagappa's death. The plaintiff's story that he did not get back the accounts is therefore not believed by me. In a document Ex. V, dated 13th April, 1909, signed by the plaintiff he says, 'As I have received from you all the accounts and on demand deeds of the firm at Paungde in which you had been conducting agency business on our behalf under the vilasam of V.K.' (which is the plaintiff's own vilasam) ' no connection exists between us and yourself in respect of the said firm. Should the other partners make any demand on you, I shall not only be answerable for the same but also pay any costs which you may incur thereby. As I have received from you free of all encumbrances all the accounts and on demand deeds by returning to you the salary chit which you had given, there shall be no connection between you and ourselves in future.' The plaintiff's case is that he signed this document Ex. V without receiving the accounts. None of the arbitrators who settled the accounts between the plaintiff and Olagappa Chetty have been called on the plaintiff's side to prove that notwithstanding the acknowledgment made by him in Ex. V, he did not receive the accounts from Olagappa. Reliance is placed on the plaintiff's side on a telegram Ex. K sent to the plaintiff by C.V.C.T. (the other partner) on the 23rd August 1909. It is an obscure telegram which is as follows: 'Is Olagappa brings account books with him or has not by post reply without delay immediately.' As far as I could see the meaning seems to be 'Is Olagappa bringing account books or is he not?' It is argued for the plaintiff that if the plaintiff had received the account books from Olagappa in April, 1909, according to Exs. IV and V at Paungde, C.V.C.T. would not have sent this telegram from Karaikudi, Madura, to the plaintiff (who was then in a place in Burma) about the accouuts as if Olagappa had the books with him ; on the other hand, it seems to be that this telegram shows that C.V.C.T. knew that the plaintiff had control over the account books. It is probable that C.V.C.T. had asked the plaintiff by a letter to send the account books through Olagappa who was then expected to be going over to British India shortly and that there/ore C.V.C.T. sent the telegrams addressed to the plaintiff to send the accounts through Olagappa. The plaintiff has very cleverly suppressed the letters which passed between him and C.V.C.T. or between him and Olagappa in connection with all these matters and contends that the accounts must be either with C.V.C.T. or must have been with the deceased Olagappa and if they have remained with the latter till his death, it is not known what Olagappa had done with them or where the accounts now are. In the suit 293 of 1912, C.V.C.T. and the plaintiff accused each other of suppressing the accounts, the plaintiff stating that Olagappa Chetti had fraudulently delivered the accounts to C.V.C.T. while C.V.C.T. stated that the plaintiff had received all the accounts from Olagappa, the plaintiff having gone over to Paungde specially in order to remove Olagappa from his position as agent and to conduct the business himself.
11. Though the plaintiff and C.V.C.T. accused each other of suppressing the accounts neither of them produced the accounts before the Court and quietly behind the back of the present defendants (alleged sub-partners') and while the defendants were absent in Madras for filing their appeal against the preliminary decree, made up their differences and filed their common statement Ex. III on the 14th July, 1914. The plaintiff and C.V.C.T. in March 1914 (see Exs. II and II a) had filed their respective separate statements but as the plaintiff was charging C.V.C.T. with having received Rs. 40,000 worth of cash, jewels and documents from Olagappa and C.V.C.T. was denying it and as C. V, C. T. was on his side charging the plaintiff with suppression of accounts and with making unfounded claims the matter had been adjourned by the court to the 15th July, 1914, for further hearing in order to appoint a commissioner to go through the accounts and to prepare the necessary statements in view to a final decree. The enquiry before a commissioner was however burked by C.V.C.T. and the plaintiff and they admitted the correctness of the figures in their respective accounts statements Ex. II and II a except in the matter of rate of interest claimed and the plaintiff gave up his contention that C.V.C.T. had obtained from Olagappa, cash, jewels and documents (including of course the account books) worth Rs. 40,000. It is clear to me that the account books must have been either with C.V.C.T. or with the plaintiff on the 14th July, 1914, and that they must have, when they settled the matter on 14th July, 1914, been in common control and possession of those accounts and having regard to the plaintiffs admission in Ex. V, I have very little doubt that the accounts have been with the plaintiff from April 1909. It is said that Ex. V was prepared in March on the date of Ex. IV itself but was post-dated as 13th April. Reliance is placed on the recital in Ex. IV that the salary chit of Olagappa should be returned to Olagappa on his giving up the accounts whereas the salary chit Ex. S. was not so given. I am not prepared to believe the plaintiff's statement about the antedating of Ex. V or that the agreement written on a five-rupee stamp paper mentioned in Ex. IV is the ten rupees stamped agreement Ex. V. The salary chit Ex. S. may have been obtained from Olagappa before his death, or from Olagappa's heirs afterwards and not necessarily from the arbitrators, none of whom has been examined.
12. The plaintiff as I said before stood in the position of a trustee and agent to the defendants 1, 2 and 3 (assuming of course for argument's sake that the defendants 1 and 2 also were like the 3rd defendant his sub-partners and not mere strangers.) The duty of showing, especially after quarrels had arisen between him and the defendants 1 to 3 at the very commencement of the suit of 1912, that a settlement made by him on their behalf also in July, 1914, was a proper and bona fide settlement lies in my opinion heavily on him. He is bound as between himself and defendants 1 to 3 to keep and submit ' clear and accurate accounts ' and to furnish them with full and accurate information. Not only has he not proved that it was such a bona fide settlement but his suppression of the partnership accounts, which are in his possession and the suspicious haste with which he and C.V. C.T. agreed with each other to admit each others statements (fhe plaintiff even withdrawing his appeal 199 of 1912 which he had himself filed against C.V.C.T. and his sons, impugning C.V.C.T.'s claims (see Ex. IX-a) clearly indicate in my opinion that C.V.C.T. and the plaintiff colluded against the present defendants (then defendants 8 to 10) and that Ex. III does not represent a bona fide settlement of accounts between the principal partners.
13. It is argued for the plaintiff that as Ex. III made the plaintiff and the defendants liable to pay Rs. 29,890-10-10 to C.V.C.T. the statement of account was prima facie bona fide as the plaintiff had no motive to put himself under liability to C.V.C.T. to pay him Rs. 29,890-10-10 besides Rs. 7,308-5-8 mentioned in Ex. III as due to other creditors, total nearly Rs. 37,200-0-0. But Ex. III shows that if that account be accepted as correct, the plaintiff could recover Rs. 47,600 and odd from the defendants thus making a profit of Rs. 11,400. The plaintiff and C.V.C.T. had only to collusively agree to admit each others claims against the partnership provided those claims are both in excess of the amounts really due to them in proportion to their respective shares 6 and 10 and the sum due to C.V.C.T. will still be Rs. 29,890-10-10 assuming that this sum was really due to C.V.C.T. from the partnership and was really paid by the plaintiff to him. To illustrate this, I shall put the following case. Instead of the amount due to the plaintiff being Rs. 1,21,525 as stated in Ex. B if the amount due to the plaintiff had been Rs. 50,000 only and the amount due to C.V.C.T. had been Rs. 82,225 it will be found that even then the same sum of Rs. 29,820 will be due to C. V. C. T.
14. Thus the plaintiff had only to admit Rs. 42,900 more as due to C.V.C.T. than was really claimable by the latter and C.V.C.T. had to admit Rs. 71,525 more than was really claimable by the plaintiff as due to the plaintiff and C.V.C.T. would still get his Es. 29,000 (which I shall assume to be due to him) while the present defendants could be made liable for Rs. 47,000 and odd though there actual liability will be far less if the true amounts due to the plaintiff and C.V.C.T. were only Rs. 82,225 and' Rule 50,000 respectively.
15. In the result the Lower Court's decision based upon the preliminary findings as to res judicata and as to the bona fide character of the settlement under Ex. III will be set aside and the case will be remanded to the Subordinate Judge for fresh decision on the merits after directing the plaintiffs to produce the accounts in their possession. Costs hitherto incurred will abide the result. The Court fees on the appeal memo, will be refunded to the appellants.