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B.S. Mahadeva Aiyar and ors. Vs. Ramakrishna Reddiar and ors. - Court Judgment

LegalCrystal Citation
SubjectCommercial
CourtChennai
Decided On
Reported in(1926)50MLJ67
AppellantB.S. Mahadeva Aiyar and ors.
RespondentRamakrishna Reddiar and ors.
Cases ReferredChundee Churn Dull v. Eduljee Cowasjee Bijnee I.L.R.
Excerpt:
- - a). defendant 1 is also alleged to have made and endorsed a payment of rs. in the case of old customers, like the plaintiffs in this case, express notice is necessary vide chundee churn dull v......was directly raised in the lower court. p.w. 3, who was a clerk of the firm, says that the firm's business was closed on 14th thai, rakshasa, corresponding to 27th january, 1916, but 7th defendant who, as authorised agent of his father, 5th defendant, brought o.s. no. 7 of 1918 on the file of the sub-court of ramnad against 1st defendant to obtain a declaration that the partnership terminated on nth march, 1915, did not present the plaint in that suit to the court before 1st february, 1918 (see ex. h). in paragraph 11 of the plaint the 5th defendant states that he was dependent on the 1st defendant for all matters connected with the business of the firm, such as the collection of outstandings even after 10th march, 1915, pending the settlement of the accounts.5. fifth defendant.....
Judgment:

Odgers, J.

1. In this case the plaintiffs are the sons of one Section V. Manavala Reddiar who died about 1915 and they sue the defendants who are, as to defendants 2 to 4, the undivided sons of defendant 1 and as to defendants 6 and 7, the undivided sons of defendant 5. Defendant 1 and defendant 5 carried on business in partnership in cotton and money-lending under the style of 'P.K.N.'Firm. Defendant 1 borrowed from Manavala Reddy Rs. 16,000 from his family funds, in his (defendant I's) capacity as managing partner, on 26th August, 1914. The suit is brought on the promissory note executed thereupon (Ex. A). Defendant 1 is also alleged to have made and endorsed a payment of Rs. 1,000 for interest on 16th August, 1917, thus saving limitation. The defence is that the partnership between defendant 1 and defendant 5 had ceased to the knowledge of plaintiffs long before 16th August, 1917, and had been dissolved by a decree in a suit for dissolution (O.S. No. 7 of 1918) brought by defendant, 5 the capitalist partner, against defendant 1. The decree decided that the partnership was dissolved as from nth March; 1915. Consequently defendant I had no authority to bind his former partner in 1917 by an endorsement of part payment in order to save limitation. It is no doubt clear law that after dissolution no ex-partner has power to do any act to bind another ex-partner. Cf. Watson v. Woodman (1875) 20 Eq Cas 721where the Vice-Chancellor held that it was not there proved that the two parties concerned had so intended that they should for the purposes of that suit be deemed to have continued partners. In Raja-gopala Pillai v. Krisknaswami Chetty : (1898)8MLJ261 it was held that the fact that a partnership is being wound up is by itself insufficient to authorise a surviving partner to bind the representatives of a deceased partner. But in the present case it is clear that is regards third parties (in the position of the plaintiffs) there was no notice, express or constructive, given of dissolution and Section 264 of the Contract Act is clear that in the absence of such notice, persons dealing with a firm are entitled to assume that the partnership still continues. Chundee Churn Dutt v. Eduljee Cowasjee Bijnee I.L.R. (1882) C 678 Gorio v. Vallabhdas : AIR1915Bom209 . Therefore plaintiffs were still entitled even after 1915 to regard the partnership between defendant 1 and defendant 5 with whom they have dealt for 15 years as subsisting. The question then arises, had defendant 1 authority to bind his firm by making this payment. My own opinion is that, as in the case of a mercantile firm as here, each partner is entrusted by his copartners with a general authority to do any act necessary for or usually done in carrying on the business of such partnership, a partner's authority extends to making an acknowledgment by part-payment so as to bind his partners. I am fortified in this opinion by that of Kumaraswami Sastri, J., in his referring judgment in Veeranna v. Veerabhadraswami I.L.R. (1918) M. 427 : 34 M.L.J. 373. However a question has been raised on limitation with regard to the provisions of 5. 21 (2) of the Limitation Act which runs as follows:

Nothing in the said sections renders one of several joint contractors, partners, executors or mortgagees chargeable by reason only of a written acknowledgment signed or of a payment made by, or by the agent of, any other or others of them.

2. These words have been construed in Veeranna v. Veerabhadraswami (4) by the Full Bench of this Court. There the learned Judges say:

It is important to notice the exact wording of Section 21(2) of the Limitation Act. The section does not say that a person shall not be liable on an acknowledgment signed by the partner by reason only of his being a partner but by reason only of a written acknowledgment signed by his partner; and it amounts to saying that if you have no more than a written acknowledgment signed by one defendant, the fact that the other defendant is his partner cannot affect the latter's liability. You could obviously have a case where one partner signed an acknowledgment in respect of a gambling debt of his own; but for the sub-section, proof of the acknowledgment would be sufficient to fix the other partner with liability, a conclusion manifestly repugnant both to sense and justice.

3. Here there is no question that that part-payment was in respect of a partnership debt (Ex. A). There is also ample evidence from the surrounding circumstances which we are entitled to look at Veeranna v. Veerabhadraswami I.L.R. (1918) M. 427 for the conclusion that there was express authority for defendant 1 to make the acknowledgment to rebut the possible validity of the contention that from the wording of Section 21(2), Limitation Act, there is no presumption in India that a partner has power to acknowledge though the validity of this contention is at least doubtful after the exposition of the sub-section by the Full Bench. P.W. 3, a clerk of appellants' (defendants') firm swears that the entry in Ex. E (1) showing the payment of Rs. 1,000 on 16th August, 1917, was made under the orders of defendants 1 and 5; he also states that the partnership has rot been wound up or the accounts settled. Defendant 5 himself applied for a loan to the South Indian Bank in 1915 (Ex. G) in which he sets out the present loan. Ex. H is (he defendant 5's plaint in the dissolution suit against defendant 1. He says that since his (defendant 5's) father's death, in 1907, defendant 1 and Anr. assistant partner conducted the entire business. Defendant 5 was obliged to rely on defendant 1 for the conduct by him of all matters connected with the partnership and all such things as the collection of out-standings, etc. In Ex. F. dated 6th February, 1918, the present appellant admits that defendant I has to pay a share of the debt due to Manavala Reddy. There is also a correspondence between the Receiver in the dissolution suit and the vakil of Manavala Reddi's sons which shows that at first at any rate the appellants were willing to discharge their half of the suit debt and did not question their liability to do so. There is no doubt on the evidence, which there is no reason to discredit, that never until this suit was brought did appellants dispute their liability nor suggest that defendant 1 was not authorised to make the acknowledgment. The proviso of Section 21(2) of the Limitation Act as construed by the Full Bench can therefore have no application to the present case. I am therefore of opinion that the Subordinate Judge was correct in the conclusion he came to and I would dismiss this appeal with costs of plaintiffs (respondents 13). Costs not to come out of partnership assets.

Spencer, J.

I agree that the appeal must be dismissed with costs and I will give my reasons in my own language. Defendants 6 and 7 are sons of the 5th defendant, who died during the suit under appeal and 10th defendant is the Receiver in O.S. No. 7 of 1918.

4. From the terms of the reference in Veeranna v. Veerabhadraswami ILR (1918) M 427 it appears that the Full Bench had not to consider the effect of Section 21(2) of the Limitation Act upon acknowledgments of debts and payments saving limitation by partners, with express reference to the circumstance of the partnership being a continuing one or one that had been dissolved at the time of acknowledgment or payment. The learned Judges observed that they saw nothing in the sub-section to make it necessary to suppose that it was intended to apply to transactions conducted in the ordinary course of partnership. They overruled Valasubramania Pillai v. S.V.R.R.M. Ramanathan Chettiar I.L.R. (1908) M. 421. So long as a partnership continues, it is a part of the ordinary course of partnership business to pay partnership debts, and therefore it would ordinarily be sufficient to prove that the debt in question was a partnership debt and that the person who paid the interest on it or part of the principal was a partner in order to give an extended period of limitation calculated from the date of payment as against all the other partners. Even after dissolution, Section 263 of the Contract Act provides that the rights and obligations of the partners continue in all things necessary for winding up the business, and from Section 265 it appears that payment of the firm's debts is part of the business of winding up. But after 0 partnership has become dissolved, it may not be the particular duty of every person who has been a partner to pay and acknowledge debts of the firm, as by arrangement that may be done by the Court, or by a Receiver or by one of the ex-partners acting as agent for the others. So far as strangers are concerned, a partnership dissolved is a partnership in being, unless and until they receive notice of dissolution. In the case of old customers, like the plaintiffs in this case, express notice is necessary vide Chundee Churn Dull v. Eduljee Cowasjee Bijnee I.L.R. (1882) C 678 and Pollock and Mulla's commentary on Section 264. ft has not been proved by the evidence in this case that the plaintiffs received any notice of the partnership of defendants 1 and 5 having become dissolved on 11th March, 1915 or indeed on any date before 16th August, 1917, when the payment of Rs. 1,000 was made by 1st defendant to 2nd plaintiff according to his evidence as P.W. 4 and the ledger, Ex. E (1). For some unaccountable reason no issue as to limitation was directly raised in the Lower Court. P.W. 3, who was a clerk of the firm, says that the firm's business was closed on 14th Thai, Rakshasa, corresponding to 27th January, 1916, but 7th defendant who, as authorised agent of his father, 5th defendant, brought O.S. No. 7 of 1918 on the file of the Sub-Court of Ramnad against 1st defendant to obtain a declaration that the partnership terminated on nth March, 1915, did not present the plaint in that suit to the Court before 1st February, 1918 (see Ex. H). In paragraph 11 of the plaint the 5th defendant states that he was dependent on the 1st defendant for all matters connected with the business of the firm, such as the collection of outstandings even after 10th March, 1915, pending the settlement of the accounts.

5. Fifth defendant in Ex. G. a loan application made to the South Indian Bank, and 7th defendant in his affidavit (Ex. F) and in his letter (Ex. D-2) to the Receiver admitted that the debt due to the plaintiffs was a partnership debt of the P.K.N. Firm, and P.Ws. 3 and 4 deposed, without being contradicted or shaken in cross-examination, that the payment of Rs. 1,000 was a joint payment by both 1st and 5th defendants and that the entry in the accounts was made under the authority of both of them. This is quite enough to fix all the appellants with liability and to save limitation. I agree in the proposed order for costs.


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