1. This appeal filed by the plaintiff in O.S.672 of 1968 on the file of the Sub Court, Coimbatore, is directed against the order dated 31211972 in I.A.No.131 of 1971, of the court below recording a compromise under Order 23 Rule 3 of the Code of defendants.
2. The said suit, O.S.672 of 1968,was filed by the plaintiff for recovery of a sum of Rs.22, 158.50 said to be owing from the defendants. While the said suit was pending the defendants filed I.A.131 of 1971, for recording a compromise said to have been entered into between the plaintiff and defendants. Under the compromise, the plaintiff is said to have received a sum of Rs.1, 000 and has agreed to receive the balance of Rs.4, 000 in full settlement of the claim as against the defendants. The plaintiff resisted the said application contending that there was no compromise of the suit claim, that the compromise said to have been entered into by one Mohanlal chainraj who was not binding o n the plaintiff and he had no authority to represent the firm, and that in fact though there was a compromise between Mohan lal Chainraj and the defendants with reference to the amounts due to him in respect of the claim in O.S.343 of 1968, the suit claim was not compromised at all.
3. In support of the defendant's case that there was a compromise between the parties in respect of the suit claim, they have filed Exs. A1 to A12, and examined PWs. 1 and 2, while the plaintiff has filed Ex.B.1 and examined RW1. The trial court held that as Mohanlal Chainraj has been authorized to act on behalf of the firm he had the requisite authority to compromise, and that the fact that admittedly there was a compromise in the other suit, O.S.343 of 1968, on the file of SubCourt, Coimbatore, at the instance of Mohanlal Chainraj, the compromise set up by the defendants in this case should also be true. In this view, the trial court recorded the compromise under O.23, R 3 of the Code of Civil Procedure. The plaintiff firm has challenged the finding of the trial court that there has been a compromise between the parties in relation to the suit claim and that the said compromise was legally valid.
4. According to the learned counsel for the appellant, there has, in fact, been no compromise in relation to the suit claim either at the instance of Mohanlal Chainraj, who is admittedly a partner of the plaintiff firm and that even if there had been any such compromise the same will not bind the firm as the person, who said to have the requisite authority to do so in the case that trail court seems to have to proceeded mainly on the evidence of PW2 who admits having receiving originally a sum of Rs.1,000/ and later after the filing of the application I.A.131 of 1971 out of which this appeal arises a sum of Rs.4,000/ as per the terms of the compromises said to have been entered into between the plaintiff and the defendants in a accepting the evidence of PW2 Jagadish Chainraj. The trial court has completely overlooked an obvious fact, which will go to show that PW 2 is not speaking the truth, The Counter Statement in 1. A. 13l of 1971 on behalf of the plaintiff firm was filed by PW 2 and in that counter, statement lie bad clearly stated that them was no compromise of the suit claim either an 26121969 won any other date And that the plaintiff firm or any of its partners Aid not take part in any compromise talks And that Mohanlal Chainraj. Aid not agree Jo compromise the suit claim on behalf of the plaintiff. This, the stand taken by FW, 2 at the stage of the, Filing of the counter, statement on behalf of the plaintiff firm is that there was me compromise, of the suit, claim at any time either at the instance of any Ad Abe partners or at the instance of Mohanlal chainraj nearly two yews after filing w the said counterstatement denying the truth of the compromise pleaded by the defendants and that even if The compromise is true the same is legally valid and binding m the plaintiff, Jagadish Chainraj as come forward now, at the ,Btage Of the trial,as PW 1 and has stated that at the instance of Mobanlal Chainlal he agreed Is the compromise and in fact received a sum of Rs. 11,000 Originally and later the balance of Rs. 4,060. In this state if the evidence of PW 2 cannot at all be accepted as true PW 2 adder filed the counterstatement denying Abe truth and validity of the compromise cannot receive the amount from the de and say that the receipt of the amount is on behalf of the plaintiff firm. The trial court is, therefore, in error in acting the evidence of PW 2 to the that be agreed to the compromise especially in the law cf Us earlier counterstatement, wherein le Had Stated that there was actually No compromise at all and no partner lad the authority to compromise If PW .2's is eschewed as being in consistent with the counter statement filed by him earlier in 1. A. 131 of 19,71, then we have only The evidence of PW 1, who is, said to be a relation of the defendants according to him the was, entered into Between the plaintiff and, the defendants at the instance of Monomial Clainraj in the of the settlement of the other disputes between Mohanlal Chainraj and defendants even assuming that mohanlal ChainraJ while compromising All be claims as against The defendants agreed for the settlement of the plaik claim as against the defendants at s 5000; the said compromise cannot be taken to bind the plaintiff firm. P. W. 1 has also deposed that P. W. 2 took part in the compromise talks and ultimately Jae received the entire sum of Rs. 5000 in pursuance the said compromise. Even assuming that R W evidence is true an this aspect, the question will arise whether Jagadish Chainraj P. W. 2 had the requisite authority to comprarnime the suit claim on behalf of the Am. the trial court has proceeded on the basis that since P. W. 2 as a partner had sufficient authority to Represent the firm he should be taken to have the requite authority to compromise. It has also taken the view that P. W. 2 has been conducting the suit and, therefore, himself and Monomial Should be taken to have the requisite authority to compromise the suit with the defendants in respect of the claim a against the defendants.
5. The two questions, therefore, that arise for consideration in this appeal, are:
1. Whether P W. .2 or Mohanlal Chainraj had any authority to compromise the suit claim as against the defendants?
2. Whether the compromise effected by any of them will bind the plaintiff firm?
On the first question, vie find from the materials on Record that Mohanlal chamraj has filed the suit, O. S. 343 of 1968 on the file of the Sub Court, Coimbatore, as against the same defendants claiming a sum of Rs. 35,000/ 'There was Also another claim as against them outstanding in favour of Mohanlal Chainraj The defendants' case is that while setting these disputes between Mohanlal Cbainraj and the defendants, the plaintfff's suit has also been settled at his instance, The fact that Mohanlal Chainraj Has settled his disputes with the defendants is met in dispute, and the dispute is only with regard to the alleged settleinent of the plaintiffs claim as against be defendant red by the suit, ~O.S. 1572 9f 1978 Me mere fact that the two other claims as against, the defendants have been settled Between the defendants mid the claimants, Mohanlal Chainraj will not automatically lead to the influence that the plaintiff's claim as against the defendant had also been settled As a matter of fact, the settlement effected between Mohanlal Chainraj and the defendants in O. S. .343 of 1968 has been reduced to writing and that has been marked as Ex. A. 6 in this case. There is no such deed recording the settlement so far as the plaintiff's suit claim is concerned before the filing of the application to record the compromise. The settlement is said to have been effected orally on the plaintiff receiving a sum of Rs, 1,000 at the first instance and agreeing to receive the balance of Rs. 4,000 later. Monhanlal Chainraj who is said to have effected the compromise of the suit, has not been examined. Though certain letters writ, ten by Mohanlal Chainraj to the defendants claiming the amounts due to the plaintiff firm, has been relied on by the defendants, to show that Mohanlal Chainraj was authorised to settle the claim on behalf of the defendants we do not see how the letters written by Mohanlal Chainraj demanding the amounts due to the, plaintiff will enable him to compromise the suit claim. On the materials, therefore, we are clearly of the view that Mohanlal Chainraj had no authority to compromise the suit claim on behalf of the plaintiff firm. Similarly, the evidence on record does not disclose any authority on the part of PW 2 to settle the suit claim. The trial Court refers to the fact that PW 2 is a partner of the firm and is the person who is conducting the suit and, therefore, when he comes and says that the suit has been settled it should be taken as true. But as already pointed out, PW 2 has himself denied the truth of the compromise and he has categorically stated in the counterstatement filed by him in I. A. 131 of 1971, that there was no compromise at any time. Having categorically denied the factum of the compromise, he has chosen to come as a defendants' witness and depose that there was a compromise and that he has received a sum of Rs. 1,000 in pursuance of the compromise at the first, instance and the balance after the filing of I. A. 1 of 1971. The evidence on record, indicates that there is a faction between the partners in the plaintiff firm after the Ming of the suit and that PW 2 has chosen to, collect the, sum of Rs 5,000 from the defendants as re, presenting one faction to the prejudice of the other faction If really there was a deed of compromise the parties would have entered into a deed Of compromise then and there as has been done in Ex. A. 6 with reference to the Mohanlal Chainraj's claims as against the defendants in 0. S. 343 of 1968 though there is such a deed of settlement signed by PW 2 and one J. C. Nichani, who was not a partner at a later point of time, having regard to the fact that the said deed came into existence only on 15121971 long after' the filing of 1. A. 1131 of 1971, that deed cannot support the defendants, plea that there was a concluded compromise even earlier. We have, therefore, no hesitation in holding that there was no compromise entered into between the plaintiff and the defendants before the filing of 1. A. 131 1971, One peculiar feature of Ex. A. is that it proceeds on the basis that the compromise was effected on 15121971 and not on any earlier date. It does not refer to any earlier arrangement under which the suit claim has been settled if really there was a settlement arrived at earlier as regards the plaintiffs suit claim one would expect a recital in that effect in Ex. A. 8. Ex. A. 8 shows that PW 2 entered into a compromise with the defendants only on 15121971, and not earlier. But the petition 1. A. 131' of 1971 for recording the compromise has been filed even on 1821071. Therefore, as on 1821971, there was no compromise established by the defendants. The question is whether such a compromise entered into by PW 2 either before or after the filing of L A. 131 of 1971 can be valid in law.
6. Section 19(2) of the Partnership Act 1932 clearly lays down that in the absence of any usage or custom of trade to the contrary, the implied authority of a partner does not empower him to compromise or relinquish any claim or portion of a claim by the firm or to withdraw the suit or proceeding filed on behalf of the firm, This section makes it clear that unless there is an express authority given to a partner by all the partners, that partner cannot compromise the claim or withdraw a suit. The trial court has assumed a power on the part of PW 2 to compromise merely because he was attending to the suit filed by the plaintiff firm. To file a suit and to conduct the same on behalf of the firm no express authority is necessary. Therefore, the trial court is in error in assuming an authority express or implied on the part of PW 2 to compromise the matter, merely because he had been conducting the suit on behalf of the plaintiff, or had been claiming the suit amount from the defendants even before the filing of the suit. The trial court has not anywhere said in its judgment that PW2 has an express authority to compromise the suit claim on behalf of the other partners. Though it has said that PW2 entered into a compromise with the consent of all the partners, it has not referred to any materials, which would indicate that there has been any implied or express consent given by the other partners to compromise the suit. In this view of the matter, we are not inclined to accept the view taken by the trial court.
7. The civil miscellaneous appeal is, therefore, allowed and the order of the trial court is set aside. The application I.A.131 of 1971, filed by the defendants will stand dismissed. The result is the suit will have to proceed to trial on merits. No order as to costs in the appeal.
8. Appeal allowed.