(1) The suit, C. S. No. 82 of 1953, out of which the above appeal arises was filed on the original side of this court by a firm of partnership, Messrs. V. M. Periyaswami Chetti and Co., to recover a sum of Rs. 21,701-2-6 with further interest and costs under the following circumstances.
(2) The plaintiff-firm is carrying on business in metals, brass and copper sheets etc. at 399 Mint Street, Sowcarpet, Madras. They sold and delivered goods (metals, brass and copper sheets etc.) to another firm called M. K. M. Khader Masthan Sahib and Bros. which was a partnership consisting of two partners, who were brothers, M. Khader Masthan Sahib and Mohideen Mastan Sahib. This firm was carrying on business at Ayyasami Pillai St. Pudupet, Madras.
The course of business is in respect of the dealings between the plaintiff firm and the firm of M. K. M. Khader Masthan Sahib and Bros., appears to be to settle accounts periodically at the end of Panguni in each Tamil year, and obtain the signature of one or other of the partners of the N. K. M. Firm.
On 14-7-1950 there was a settlement of accounts as on 13-4-1950 in and by which one of the partners of M. K. M, firm, namely, Khader Mastan Sahib acknowledged that a sum of Rs. 32,255-5-6 was due by the M. K. M. firm to the plaintiff firm. Even thereafter the plaintiff firm dealt with the M. K. M. firm and obtained part payments towards the amounts due to them. The final result of these transactions as on 6-9-1950 was a total liability of Rs. 21,701-2-6 due by the M. K. M. firm to the plaintiff firm. It is this amount together with interest claimed at 12 per cent aggregating to Rs 7,420 which formed the subject matter of the suit.
(3) The partner, Mohideen Masthan of the M. K. M. firm died on 5-10-1949. The other partner Khader Masthan also died in November 1952. The suit was instituted on 20-2-1953 impleading the legal representatives of both the deceased partners. The first defendant in the suit is the mother of the partners; the second defendant is the widow of Khader Masthan and defendants 3 to 9 are the children of Khader Masthan. The tenth defendant is the widow of Mohideen Masthan and defendants 11 to 15 are the children of Mohideen Masthan. A decree was passed by the learned Master on 15-12-1953 against the second defendant, the widow of Khader Masthan and defendants 3 to 9 the children of Khader Masthan and also against the first defendants as the legal representative of Khader Masthan. This decree has become final.
(4) Before the learned Judge who tried the suit on the Original Side the suit was resisted only by defendants 11 to 14, the minor children of Mohideen Masthan, who were represented by Sri. H. Rama Rao appointed as the court guardian. The contention raised on their behalf was that there was no proof that Khader Masthan and Mohideen Masthan were partners, and that the liability for which Khader Masthan had signed in the books of the plaintiff firm was not binding upon the legal representatives of Mohideen Masthan and that in any event the claim as against them (defendants 11 to 14) was barred by limitation.
(5) The learned Judge held that Ex. P. 11 which is a deed of dissolution dated 16-7-1950 was clear proof of a partnership having subsisted between the brothers, and it was clearly shown that Mohideen Masthan and Khader Masthan were partners in the business of M. K. M. Khader Masthan Sahib and Bros. He therefore held that the suit liability was a liability of the M. K. M. firm.
The question of limitation was overruled by the learned Judge relying upon Ex. P. 6 dated 18-3-1951 which was a reply to a lawyer's notice issued on behalf of the plaintiff firm in which the suit claim was acknowledged by the tenth defendant acting for herself and as guardian of her minor children, defendants 11 to 14, and also by 15th defendant who was an adult daughter. Holding that the tenth defendant was the legal guardian of her minor children and that an acknowledgment by a lawful guardian was sufficient to extend the period of limitation in favour of the creditor, the learned Judge negatived the plea of limitation. In the result the suit was decreed as prayed for with costs.
(6) Defendants 11 to 14 are the appellants in this appeal, and their only contention is that the suit ought to have been dismissed so far as they are concerned on the ground of limitation. The tenth defendant is not the lawful guardian of her minor children, defendants 11 to 14 as the parties are Muslims and as under the Muhammadan law it is now well settled ever since Imambandi v. Haj Mutsaddi, ILR 45 Cal 878: (AIR 1918 PC 11), that the only legal guardian or property of a Muhammadan minor is his father, paternal grandfather or an executor appointed by the father and the paternal grandfather under a testament. The learned counsel appearing for the respondents before us conceded this position and we have, therefore, to proceed on the footing that the acknowledgment relied upon under Ex. P. 6 dated 18-3-1951 will not avail the plaintiff firm to sustain any cause of action against the appellants.
(7) On behalf of the plaintiffs respondents the point urged to save the suit claim from the bar of limitation is the signing by Khader Masthan of the account settled on 14-7-1950. If this can bind the appellants certainly the decree of the learned Judge can be upheld.
(8) It must be remembered that on the date when Khader Masthan made the acknowledgment on 14-7-1950 his brother and copartners Mohideen Masthan was dead, he having died on 5-10-1949,. By reason of his death the firm of M. K. M. Khader Masthan and Bros. became dissolved. The question for consideration, therefore, is can a partners make a valid acknowledgment of a liability of a partnership debt after the dissolution of the partnership by reason of the death of a partner so as to bind the minor legal representatives of the deceased partner and to afford the creditor in whose favour the acknowledgment is made a fresh period of limitation to be computed from the time when the acknowledgment is made.
(9) Though there is a direct decision of this court reported in Rajagopala Pillai v. Krishnaswami Chetti, 8 Mad LJ 261, holding that the legal representatives of a deceased partner cannot be validly bound by an acknowledgment made by the surviving partners after dissolution caused by death, inasmuch as the matter has been argued before us we would consider the position as if the matter is res integra.
(10) During the subsistence of a partnership, the partners are agents as well as principals inter se, inasmuch as every partner is deemed to be in law to be the agent of the other partner. S. 18 of the Partnership Act, provides, that a partner is the agent of the firm for the purposes of the business of the firm. S. 19 deals with the implied authority of a partner as agent of the firm and sub-sec. (2) of that section provides for several acts to which the implied authority of a partner cannot extend.
The power to acknowledge a debt of the partnership is not one such act provided for under S. 19(2) of the Partnership Act. But in order to test the validity of an acknowledgment of a debt to conform, to the requirements of the Limitation Act one has to examine the relevant provisions of the said Act. Sec. 21(2) of the Indian Limitation Act is 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."
The scope of S. 21(2) of the Indian Limitation Act was considered by a Full Bench of this court in Veeranna v. Veera Bhadrasami, ILR 41 Mad 427: (AIR 1919 Mad 1140) (FB), wherein it was held as follows:
"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."
That decision also pointed out that the authority of one partner to make the acknowledgment may be inferred from other circumstances such as the position of the other partners of the firm in the business. It is therefore clear that under the Limitation Act the theory of an implied agency which underlies the conception of a partnership under the Indian Partnership Act is by itself not sufficient to enable a partner to bind the other partners by an acknowledgment of a liability of the firm.
But it may be that very little evidence will be sufficient to make the non-acknowledging partner liable such as the course of business, the conduct of the parties etc. As has been pointed out by the Full Bench itself it is not possible or desirable to point out the quantum of evidence necessary to make such acknowledgments by one partner valid and binding on the other partners.
(11) Once the partnership is dissolved even the theory of implied agency disappears. The jural relationship of partners having been put an end to thereafter there can be no question of any partner acting in any representative capacity so as to bind the firm or his quandom partners. Sir Charles Hall V. C. observed as follows:
"If while the partnership subsisted each partner could and should be deemed to be the agent of the other to make the payments, so as to exclude the operation of the statute, such agency, I consider, terminated on the dissolution of the partnership; no such agency being by the deed of dissolution expressly or necessarily or otherwise impliedly created." Watson v. Woodman, (1875) 20 Eq 721 at p. 730.
But reference will have to be made to S. 47 of the Partnership Act which is as follows:
"After the dissolution of a firm the authority of each partner to bind the firm, and the other mutual rights and obligations of the partners, continue notwithstanding the dissolution, so far as may be necessary to wind up the affairs of the firm and to complete transactions begun but unfinished at the time of the dissolution, but not otherwise."
(12) It may be contended, as in fact, it was, that despite the dissolution of the M. K. M. firm by reason of the death of Mohideen Mastan the authority of Khader Masthan to make a valid acknowledgment of the partnership liability continued to subsist in accordance with the terms of S. 47. But two things stand in the way of accepting such a contention. One is that S. 47 enables the continuance of the authority only "so far as may be necessary to wind up the affairs of the firm and to complete the transactions begun but unfinished." There is no proof in this case that the acknowledgment of the liability was necessary to wind up the affairs of the firm.
A payment of debt will be necessary and will be a proper step towards the winding up of the firm. But the surviving partner cannot choose to keep alive a debt by making periodical acknowledgments and pretend that that was a step necessary to wind up the affairs of the firm. Of course there may be circumstances in a particular case in which even such a step may be held to be necessary towards winding up. In the present case there is complete absence of any evidence to prove this ingredient of S. 47 even if it can otherwise be invoked.
(13) The next thing which one has to reckon with before applying S. 47 is that it purports to regulate only the rights and obligations between partners inter se. If one partner dies there cannot be any relationship of partners between the surviving partner and the legal representatives of the deceased partner. We are of opinion that S. 47 cannot be invoked to a case of this description.
(14) Section 45 of the Partnership Act may now be referred to:
"Notwithstanding the dissolution of a firm, the partners continue to be liable as such to third parties for any act done by any of them which would have been an act of the firm if done before the dissolution, until public notice is given of the dissolution:
Provided that the estate of a partner who dies, or who is adjudicated an insolvent, or of a partner who, not having been known to the person dealing with the firm to be a partner, retires from the firm, is not liable under this section for acts done after the date on which he ceases to be partner."
(15) The proviso may be invoked to the facts of the present case as the act that is relied upon for holding the estate of a deceased partner liable is an act done after the date on which the partnership ceased.
(16) Learned counsel for the respondent relied upon Seshi Ammal v. Vairavan Chettiar, ILR 42 Mad 15: (AIR 1919 Mad 829), as containing observations supporting his contention. We do not think that he is right in so contending. In ILR 42 Mad 15: (AIR 1919 Mad 829) what was held was that the estate of a deceased partner is not liable to a creditor for a debt incurred by the surviving partner subsequent to the death of the former although the debt was incurred to take up bills of lading for and obtain delivery of goods which had been ordered by the partner during the lifetime of the deceased partner but did not come forward until after his death. The actual decision in the case was that the estate of a deceased partner was not liable.
We do not read the observations in the judgment of Seshagiri Iyer J., s in any way supporting the plea of the respondent in the present case, namely, that an acknowledgment by a surviving partner of a partnership liability and extend the period of limitation so as to bind the legal representatives of the deceased partner.
(17) The next decision relied upon by the learned counsel for the respondent is Muthusami Nadan v. Sankaralingam Chetti, 1915 Mad WN 722: (AIR 1916 Mad 235). The learned Judges held in that case that there can be no presumption of authorisation of acknowledgment on the part of the acknowledging partner in a case where there has been a dissolution of partnership. Their Lordships observe,
"In such a case, it seems to be clear that express evidence of authority must be forthcoming, if the acknowledgment is to be held binding on any ex partner except the one who made it."
It was no doubt found as a fact in that particular case that there was authorisation to acknowledge the debt. Neither the decision in the case. nor the observations therein, can really help the respondent in the present case.
(18) The learned counsel also relied upon Mahadev Aiyar v. Ramkrishna Reddiar, 50 Mad LJ 67: (AIR 1926 Mad 114). In that case the finding was to the following effect:
"There is also ample evidence from the surrounding circumstances which we are entitled to look at. Vide Veeranna v. Veerabadraswami, ILR 41 Mad 427: (AIR 1919 Mad 1140) (FB), for the conclusion that there was express authority for defendant 1 to make the acknowledgment to rebut possible validity of the contention that from the wording of S. 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."
Spencer J., observed at page 72 (of Mad LJ): (at p. 117 of AIR) as follows:
"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. B. 2) to the receiver admitted that the debt due to the plaintiff 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 joint payment by both first and fifth defendant 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."
We do not think that the decision in the above case is any authority in support of the respondent's contention.
(19) As stated already the direct decision is that contained in 8 Mad LJ 261, which has been followed subsequently by the Judicial Commissioner of the Nagpur Court in Sheonarain v. Babulal, AIR 1925 Nag
268. Lindley in his book on Partnership sets out the legal position thus:
"But it is thought to be still good law application to the Limitation Act, 1939, and notwithstanding the repeal of S. 14 of the Mercantile Law Amendment Act, 1856, that after a dissolution a part payment by a continuing or a surviving partner will not prevent a retired partner or the executors of a deceased partner from availing themselves of the statute; and the same is true of acknowledgment." (Lindley, 11th Edition at page 338).
The decision in Babu v. Dayambai, ILR 60 Bom 5: (AIR 1935 Bom 357), held as follows:
"An acknowledgment of a debt, due by the firm, made by a surviving partner after the firm is dissolved by the death of a partner, is binding on the heirs of the deceased partner, where it is not proved that the creditor had notice of such a dissolution."
That decision dealt with the provisions of Ss. 261 and 264 of the Indian Contract Act which subsisted before the Indian Partnership Act. Section 264 of the Contract Act did not contain the proviso now found in S. 45 of the Partnership Act. It cannot therefore be treated as an authority for deciding a case governed by the present Partnership Act.
(20) Following 8 Mad LJ 261, we are of opinion that defendants 11 to 14 are not bound by the acknowledgment made by Khader Masthan.
(21) We therefore hold that the suit is barred by limitation as against defendants 11 to 14, the appellants before us. In the result, the judgment and decree of the learned Judge will stand modified by the suit being directed to be dismissed in so far as defendants 11 to 14 are concerned. There will be no order for costs in favour of defendants 11 to 14 against the plaintiffs either here or in the suit. The appellants will pay the court-fee due to the Government.
(22) Decree modified.