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Muthuswami Nadan and anr. Vs. A.A.K. Sankaralingam Chetty - Court Judgment

LegalCrystal Citation
SubjectContract
CourtChennai
Decided On
Judge
Reported inAIR1916Mad235; 30Ind.Cas.675
AppellantMuthuswami Nadan and anr.
RespondentA.A.K. Sankaralingam Chetty
Cases ReferredKondamodalu Linga Reddi v. Alluri Sarvarayudu
Excerpt:
contract act (ix of 1872), sections 251, 263 - partnership--dissolution--one partner authorized to collect outstanding and pay debts--extent of authority, whether includes power to acknowledge debts--acknowledgment. - - , would draw in the case of existing partnerships could not be applied to a case like the present. in his examination-in-chief he clearly says that he did not authorise the 1st defendant to sign pro-notes or settlement of accounts on behalf of him also......made after the dissolution of partnership. in such a case, it seems to us 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. the presumption which wallis, j., would draw in the case of existing partnerships could not be applied to a case like the present.2. it was argued before us that such evidence was forthcoming in the deposition of the 2nd defendant himself. this runs as follows:after we separated, i did not authorise the 1st defendant to sign promissory notes for settlement of accounts on behalf of me also3. cross-examination: the 1st defendant said that the assets and liabilities could not be divided then and there, that he would himself collect outstandings and pay off.....
Judgment:

1. The only question for decision in this appeal is, whether the acknowledgment of liability by the 1st defendant on 27th May 1909 is binding on the 2nd defendant. The original liability was admittedly incurred on account of a partnership between the 1st and the 2nd defendants; but this partnership had ceased in 1906. It has been held in two cases in this Court, Valasubramania Pillai v. Ramanathan Chettiar 2 Ind. Cas. 309 : and Sheik Mohideen Sahib v. Official Assignee of Madras 11 Ind. Cas. 332(1911) 1 M.W.N. 347 that a part-payment or acknowledgment by one partner of a going concern will not bind another partner (so as to save limitation) in the absence of evidence of authorisation. Mere proof of the partnership would not be sufficient. In a more recent case, K.B.V. Firm v. Sathayavada Sitharama Swami 21 Ind. Cas. 634 Wallis, J., expresses doubts of the correctness of these rulings, and appears to hold that authorisation might be presumed from the ordinary course of partnership business. But, however this may be, such a presumption could hardly be drawn in the case of an acknowledgment made after the dissolution of partnership. In such a case, it seems to us 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. The presumption which Wallis, J., would draw in the case of existing partnerships could not be applied to a case like the present.

2. It was argued before us that such evidence was forthcoming in the deposition of the 2nd defendant himself. This runs as follows:

After we separated, I did not authorise the 1st defendant to sign promissory notes for settlement of accounts on behalf of me also

3. Cross-examination: The 1st defendant said that the assets and liabilities could not be divided then and there, that he would himself collect outstandings and pay off liabilities and that we may divide the balance. I agreed to this....

Re-examination: I then allowed the 1st defendant to collect outstandings and pay off creditors but did not authorise him to renew liabilities.

4. Regarding this evidence, the Subordinate Judge simply remarks that no authorisation to acknowledge debts is to be found in it. We must understand him to mean that although he does not disbelieve the evidence in so far as it favours the plaintiffs (which he could hardly do, seeing it is that of the 2nd defendant himself), he does not find anything in it which, if accepted, would amount to an authority to acknowledge liability. The appellants' Vakil argues that lie has overlooked the principle enunciated in Story on Agency, paragraph 138, and quoted with approval in Kondamodalu Linga Reddi v. Alluri Sarvarayudu 6 Ind. Cas. 407 that where an agent is authorised to pay money for work done for his principal, or where he is referred to, to settle and adjust any account or business, his admissions of the existence of the debt, and of its validity, will be sufficient to take the case out of the Statute of Limitations.'

5. We do not think the Subordinate Judge has weighed the evidence from this point of view and we feel constrained to call for a finding on the following.

6. Issue:

Was the 1st defendant expressly or impliedly authorised by the 2nd defendant at the time of dissolution of partnership, or afterwards, to acknowledge liability for the outstanding debts of the firm?

7. The finding should be submitted within six weeks from this date and seven days will be allowed for filing objections.

8. In compliance with the order contained in the above judgment, the Subordinate Judge of Ramnad submitted the following.

Finding.

9. In this appeal I am called upon to submit a finding upon the following issue:

Was the 1st defendant expressly or impliedly authorised by the 2nd defendant at the time of the dissolution of partnership, or afterwards, to acknowledge liability for the outstanding debts of the firm?

2. The burden of proving this issue lies on plaintiffs, and the only evidence upon which reliance is placed is that of 2nd defendant. In the judgment of the High Court in which a finding is called for, it is stated that in the case of an acknowledgment made by one partner after dissolution of partnership, 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.' Heading the evidence of the 2nd defendant, I do not find in it any express authority given by him to first defendant to acknowledge debts. In his examination-in-chief he clearly says that he did not authorise the 1st defendant to sign pro-notes or settlement of accounts on behalf of him also. In cross-examination, he says that he agreed to 1st defendant's proposal to collect outstandings and pay off liabilities. Even here he does not appear to have been asked, and certainly does not say, that 1st defendant wanted authority to acknowledge debts and that he agreed to his doing so. And in re-examination he expressly says that he did not authorise him to renew liabilities.

3. There is, therefore, to use the words of their Lordships found in the judgment calling for a finding, no 'express evidence of authority.'

4. I am called upon to weigh the evidence from the point of view laid down in the following passage: 'Where an agent is authorised to pay money for work done for his principal or where he is referred to to settle and adjust any account or business, his admissions of the existence of the debt, and of its validity, will be sufficient to take the case out of the Statute of Limitation.'

5. I understand this passage to mean that authority to settle and adjust any account or business implies an authority to acknowledge debts. Even if such be the case, such an authority cannot be implied from 2nd defendant's statement in cross-examination to the effect that he agreed to 1st defendant's proposal that he should himself collect outstandings and pay off liabilities.' The 2nd defendant never agreed to 1st defendant settling and adjusting any account or business; he simply agreed to his collecting outstandings and paying off liabilities. And from an authority to collect outstandings and pay off liabilities, a power to acknowledge liabilities cannot be implied. It may be otherwise if a general power to settle and adjust a business is given, but such is not the case here. I may also state that no case of agency was set out in the plaint, and that 2nd defendant was sought to be bound by 1st defendant's acknowledgment, as they were partners.

6. That 2nd defendant would not have given 1st defendant a general authority to settle and adjust accounts is apparent from the fact that under the award, Exhibit II, both the partners are to collect the outstandings and pay off the debts.

7. I, therefore, find the issue in the negative.

ordinate Judge has found that the authority to pay debts is limited to the amount actually collected.


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