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S. Meikole Udayar Vs. S.P. Periasami Konar and ors. - Court Judgment

LegalCrystal Citation
SubjectContract
CourtChennai High Court
Decided On
Case NumberAppeal No. 259 of 1962
Judge
Reported inAIR1967Mad449
ActsLimitation Act, 1908 - Schedule - Article 106
AppellantS. Meikole Udayar
RespondentS.P. Periasami Konar and ors.
Cases ReferredSathappa Chetti v. Subramanian Chetty
Excerpt:
.....is that the plaintiff having failed to implead the other partners of his firm, the suit was not maintainable and must fail. obviously, the contract entered into by the plaintiff with the highways is just like any other works contract and the fact that the government was a party thereto would make no difference to the contract. but in this case no such difficulty arises as clearly the works contract with the highways departments involved no public policy and the entering into the suit partnership cannot be regarded as contravening any public policy. nor are we satisfied that the court below was right in its assumption that the suit firm was dissolved on 19th august 1956. as far as we can see from the record, there is no evidence direct or circumstantial which supports that finding of the..........works contract with the highways departments involved no public policy and the entering into the suit partnership cannot be regarded as contravening any public policy. we may also add that mr. sundaram aiyar, learned counsel for the respondents, rightly realised the position and could not convince us that the court below was right on this point. nor are we satisfied that the court below was right in its assumption that the suit firm was dissolved on 19th august 1956. as far as we can see from the record, there is no evidence direct or circumstantial which supports that finding of the court below. it is true that there is evidence to the effect that the plaintiff was urging upon the defendant by certain letters that they should meet in the second week of august 1956 to settle the.....
Judgment:

Veeraswami, J.

(1) This appeal by the plaintiff is from a decree of the subordinate Judge of Sivaganga dismissing the suit against the respondents for rendition of accounts. His case was that he entered into a contract with the Highways for construction of Kodai kanal-Moonar road and commenced work on 25-1-1965. He took the respondents (defendants) as partners in the single venture on the understanding that it should come to an end at the conclusion of the works contract with the Highways and the passing of the final bills relating thereto. The terms of the partnership were reduced to writing in a deed dated 18th May 1955 tense was styled as 'Michael Udayar and Co'. Each of the partners to this firm was to contribute a share capital of Rs.10,000 and that if further capital was necessary, they should contribute the same in equal shares by raising loans. They were to share the profits of the firm equally. The business of the partnership was to be managed and conducted by the respondents subject to the control of the appellant and the respondents were to maintain proper accounts. In case of differences between the partners, touching the work, the partnership should be dissolved after a month's notice given by any one of the partners. This arrangement was given effect to, but according to the plaintiff, the defendants did not carry on the work faithfully and honestly and they were found to be negligent with the result, the construction work was delayed and eventually the department itself took over the work for completion some where in March 1958. As a result of the contract work having thus come to an end in March 1958, by the terms of the partnership, so the plaintiff claims, the firm became dissolved then. The suit was resisted by the defendants on various grounds which included that the partnership was an illegal one that since the firm had been dissolved even as early as on 19th August 1956, the suit was barred under Art. 106 of the Limitation Act, 1908 and that in any case, since the plaintiff entered into an agreement of partnership on behalf of Michael Udayar and Co., a firm of partnership in which the plaintiff was a partner with certain others, the suit brought by the plaintiff in his individual capacity and in his own name was not maintainable.

(2) The court below in the first instance framed three issues covering the first two grounds, which we mentioned of the defense in the written statements but on 21st August 1961 settled two additional issues raising the last ground of the defense. On the question of limitation, the court below itself observed that thought it was raised in the pleading, learned counsel on either side did not press for an issue nor did they argue the question. Nevertheless, the court below went into that question and on its finding on the evidence that the firm must be deemed to have been dissolved on 19th August 1956, held that the suit which was instituted on 30th March 1960 was barred by limitation. It also found that as the provisions in the Madras Detailed Standard Specifications were deemed to be incorporated in the works contract entered into by the plaintiff with the Highways and those provisions amount others prohibited assignment or subletting of the contract and as the plaintiff had, as claimed in the suit, entered into a partnership with the respondents, this was opposed to public policy and therefore the contract of partnership was illegal. The further finding of the court below is that the plaintiff having failed to implead the other partners of his firm, the suit was not maintainable and must fail.

(3) We are of the view that the court below was not correct on any of the points aforementioned. We cannot but express our surprise that the learned Subordinate Judge should have led himself to think that merely because the words contract with the Highways prohibited assignment or sub-letting and the plaintiff entered into a partnership with the respondents any public policy was involved therein. Obviously, the contract entered into by the plaintiff with the Highways is just like any other works contract and the fact that the Government was a party thereto would make no difference to the contract. Neither the Contract Act nor the Partnership Act treats the Government on any special footing for purposes of contracts or formation thereof or their enforceability. Apparently the Subordinate Judge proceeded on the basis, and, quite erroneously, that wherever there was a contract with the Highways for construction of road, public was involved, and, therefore, also public policy. It is hardly necessary to point out that this line of reasoning is quite incorrect. A contract can be said to be illegal if it is opposed to a statute or public policy. What is public policy is difficult to define. One can easily understand what it is though the range of understanding may vary with individuals. But in this case no such difficulty arises as clearly the works contract with the Highways departments involved no public policy and the entering into the suit partnership cannot be regarded as contravening any public policy. We may also add that Mr. Sundaram Aiyar, learned counsel for the respondents, rightly realised the position and could not convince us that the court below was right on this point. Nor are we satisfied that the court below was right in its assumption that the suit firm was dissolved on 19th August 1956. As far as we can see from the record, there is no evidence direct or circumstantial which supports that finding of the court below. It is true that there is evidence to the effect that the plaintiff was urging upon the defendant by certain letters that they should meet in the second week of August 1956 to settle the affairs in relation to the partnership. Beyond that, as we said, there is no basis for supporting the finding. It is true that the court below has not stated that there us any direct evidence but it was inclined to infer that there must have bee a dissolution on 19th August 1956 and that this inference the court purported to draw from Ex. B 1 but we can find no justification for this.

(4) The takes us to the last ground as to the maintainability of the suit. The actual finding of the court below is that the plaintiff having entered into partnership with the respondents Michael Udayar and Co. The suit instituted by him in his individual capacity had not been properly laid and court not be sustained. The contention has been developed before us on the ground that a firm cannot be a partner of another firm and that where factually a firm enters into a partnership with another firm, the true position in law would be that the partners of the joining firm will automatically become the partners of the new firm. As a proposition of law, no exception can be taken to it. A firm is certainly not a legal entity and cannot be regarded as a person unlike a company which is a corporate body and a person in the eye of the law. A firm is but a compendious expression to indicate the relationship brought about between two or more persons who agree between themselves on a common venture on terms based on mutual consent. These propositions are now well settled and reference need be made only to Sheodoyal Khemka v. Joharmul Manful : AIR1924Cal74 . Dulichand v. I. T. Commr. : [1956]29ITR535(SC) , Mohamed Abdul Latiff v. Ismail : AIR1934Mad9 and Firm Brij Kishore v. Sheo Charan Lal : AIR1938All69 . In the third case cited, a Division Bench of this court held that though a firm was not a juristic person and as such could not enter into a partnership, there was nothing to prevent the partners of the firm as individuals as being partners in another firm by the use of the firm's name. In the Allahabad case it was held that where a firm entered into a partnership with other individuals, one of the partners of such firm could sue for accounts on behalf of all in accordance with the form of procedure laid down in Order 30, C.P. Code. For the appellant the contention is that where a partners of a firm purports to enter into a contract of partnership with another firm representing his firm and on behalf of it, it is not necessary for him in a suit for rendition of accounts against his partners in the second firm to implead the rest of the partners in his own firm as plaintiffs. In support of this proposition reliance is placed on Sathappa Chetti v. Subramanian Chetty . We are of the view that this decision lays down no such proposition.

(5) Mr. Sundaram Aiyar for the respondents has pressed upon us that in such a case, the plaintiff must take other persons of his own firm as plaintiffs or defendants and that in the absence of it, the suit will not be maintainable. On the view we take of the facts of this case, we think it unnecessary to decide this question. It is true the partnership agreement with the respondents recite as a preamble, that the plaintiff entered into it on behalf of his firm S. Michael Udayar and Co., but whether he signed the document in that capacity is not clear. The evidence is to the effect that he entered into the partnership for and on behalf of S. Michael Udayar and Co., but his assertion was that it was his firm, that he was its proprietor and so he was entitled to sue in his own individual name. The real question however, is whether assuming that he entered into the partnership agreement for S. Michael Udayar and Co., he had authority to do so under the terms of the partnership agreement in relation to S. Michael Udayar and Co. The only provision that Mr. Sundaram Aiyar could point to in that partnership agreement is this:

'If it is found necessary to take in further shareholders besides the parties to this partnership, those parties shall be taken in only after obtaining the consent of all the said parties herein.'

Clearly this provision only means that the partners shall be at liberty to take any further partners to that firm and it certainly does not mean that the plaintiff was authorised to enter into a partnership with third parties on behalf of the firm. Our attention has not been invited to any other evidence to justify the stand that the plaintiff had authority to enter into a partnership with the respondents on behalf of Michael Udayar and Co. No doubt no point would appear to have been taken in that form in the court below. But the fact remains that if the respondents maintain that the suit as framed does not lie, it was for them to show that the plaintiff had authority to enter into a partnership with the respondents on behalf of Michael Udayar and Co. If such authority is not shown notwithstanding the recital in the preamble of agreement with the respondents, it has to be taken that the plaintiff entered into the agreement only in his individual capacity. It is because, as a fact he had no authority to represent Michael Udayar and Co., and commit it to the suit agreement. We are, therefore, of the view that the objections to the maintainability of the suit cannot be sustained.

(6) The appeal is allowed and the suit is remitted to the court below for trial. Opportunity will be given to both sides to adduce documentary evidence on the question whether the suit firm was dissolved on 19th August 1956 and oral evidence will only be admitted for purpose of marking such documentary evidence. Costs so far will be borne by each party both here and below. Court fee paid on the memorandum of appeal will be refunded.

(7) Appeal allowed.


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