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P.L.S.R. Muthia Chetty Through His Son and Authorised Agent Palaniappa Chetty and ors. Vs. K.R.V.R. Veerappa Chetty by His Agent and ors. - Court Judgment

LegalCrystal Citation
CourtChennai
Decided On
Judge
Reported in121Ind.Cas.488
AppellantP.L.S.R. Muthia Chetty Through His Son and Authorised Agent Palaniappa Chetty and ors.
RespondentK.R.V.R. Veerappa Chetty by His Agent and ors.
Cases ReferredAhmad Musaji Salehji v. Hashim Ebrahim Salehji
Excerpt:
partnership - assignment by partner--assignee whether bound by settlement by assignor after assignment with remaining partners--suit in british india--for accounts of partnership in federated malay states--amount due, calculation of--date of conversion into british indian currency. - .....for the assignment. the 1st defendant having learned of ex. e replied by a registered letter ex. f dated 4th march, 1919. in it he says that he had written to arunachalam the 6th defendant who was then the local agent to close the business at the termination of his agency and wind up the firm and not to enter into any new transactions but to make the necessary collections and disbursements for winding up the firm. the plaintiff addressed ex. l on 16th march, 1919, to the 6th defendant. exhibit d 34 ind. cas. 543 : 4 l.w. 10; (1916) 2 m.w.n. 18; 20 m.l.t.134 was sent as an enclosure with this letter. exhibit g was a letter by the 3rd defendant to the 1st defendant in which he acknowledges the receipt of ex. f. meanwhile the 3rd defendant's son raised a dispute about the validity of the.....
Judgment:

Ramesam, J.

1. These two appeals arise out of the same original suit and in each appeal there is a memorandum of objections. Appeal No. 340 of 1924, is by the plaintiff and the memorandum of objections is by the 1st respondent who is the 1st defendant. Appeal No. 204 of 1925, is filed by defendants Nos. 1 and 7 and the memorandum of objections is preferred by the plaintiff who is the 1st respondent.

2. The facts may be briefly stated as follows : Defendants Nos. 1 to 3 and the father of the 4th defendant entered into a partnership for carrying on a money-lending business at Parit Buntar in the Federated Malay States under the name and style of R.M.V.R.A.N. This was on 23rd March, 1914. Four partners had equal shares in it. The 4th defendant's father died in August, 1916; but the business was continued with the 4th defendant as a partner in his place by the consent of all the partners. In or about April, 1917, a new partnership was constituted by taking in two new partners, defendants Nos. 5 and 6, In the new partnership the 1st defendant's share was the largest and the shares of the 5th and 6th defendants were smaller than those of the others. The 7th defendant is a son of the 1st defendant, the 8th defendant is a son of the 4th, the 9th defendant is a son of the 6th and the 10th defendant is a son of the 5th. On the 25th January, 1919, the 3rd defendant executed Ex. 0 in savour of the present plaintiff purporting to transfer his interest in the partnership. He informed the firm of the fact of transfer by two letters, Ex. E dated the 28th of January, 1919, sent directly and Ex. D (I) handed over to the plaintiff an'd forwarded by him with Ex. L. Exhibit H is a hundi for Rs. 16,500 which was the consideration for the assignment. The 1st defendant having learned of Ex. E replied by a registered letter Ex. F dated 4th March, 1919. In it he says that he had written to Arunachalam the 6th defendant who was then the local agent to close the business at the termination of his agency and wind up the firm and not to enter into any new transactions but to make the necessary collections and disbursements for winding up the firm. The plaintiff addressed Ex. L on 16th March, 1919, to the 6th defendant. Exhibit D 34 Ind. Cas. 543 : 4 L.W. 10; (1916) 2 M.W.N. 18; 20 M.L.T.134 was sent as an enclosure with this letter. Exhibit G was a letter by the 3rd defendant to the 1st defendant in which he acknowledges the receipt of Ex. F. Meanwhile the 3rd defendant's son raised a dispute about the validity of the assignment by the 3rd defendant and he issued through his Vakil the notice Ex. 1 contesting the validity of the assignment. He also issued a similar letter to the 4th defendant--Ex. VI. Exhibit II is a letter addressed by the plaintiff to the 1st defendant in which he requests that he should be taken as a partner in the firm and that the firm should not stop business merely because the 3rd defendant's share was transferred to him. In September, 1919, a new firm was formed by defendants Nos. 1 and 6 and Ex. N is the power of-attorney executed by the Ist defendant in favour of the 6th defendant. Exhibit J is a registered deed of assignment confirming Ex. C which was not registered. In March, 1920, the plaintiff's agent in the Federated Malay States got his Solicitors, Messrs. Gibb and Hope to issue the notice Ex. III to the 6th defendant demanding him to render an account of the profits of the firm. Exhibit III-A is the reply to Ex. III by Messrs. Donaldson and Burkinshaw, Solicitors of the 6th defendant. In this letter they refer the plaintiff's Solicitors to the 1st defendant on the ground that the 6th defendant was only accountable to him. They also refer to the fact that the 3rd defendant's son raised a dispute as to the assignment. On this ground they refused to recognise the plaintiff's right to demand an account. Exhibit IV is the reply to Ex. III-A in which Messrs. Gibb and Hope say that they had also written to the 1st defendant. They also intimate their intention of filing a plaint and request the addressees to make arrangements for accepting service at Perak. Exhibit IV-A is the reply to Ex. IV. It says that Veerappa Chetty (the 1st defendant) does not admit that the plaintiff has any rights. It is dated 31st March, 1920. There is no further correspondence up to December. On 6th December, Messrs. Donaldson and Burkinshaw addressed the letter Ex. V to the plaintiff and the 3rd defendant and to his son. In this letter they say 'The firm has now been wound up and the accounts are ready. Veerappa Ohetty, the managing partner desires to close the matter and pay out the sums due.They then refer to the fact of receipt of notices of assignment from the plaintiff and notice of objection from the 3rd defendant's son. They also say that unless the disputes are settled by agreement or otherwise payments cannot be made. The present suit was filed on 20th January, 1922. Meanwhile the 3rd defendant's son himself filed a suit O.S. No. 42 of 1919. That suit was finally settled by reference to arbitrators and their award in August, 1922. Under this award the 3rd defendant's right to assign was recognised by his son. In the written statement of the defendants they plead that there was a settlement of the accounts of the partnership on or about 29th, March, 1920. On the basis of this settlement a certain sum of money was allotted to the 3rd defendantand the basis of the settlement was also accepted by defendants Nos. 2 and 5. The Subordinate Judge finding that the settlement is not binding on the plaintiff, has gone into the accounts himself and found that in addition to the assets found according to the settlement certain other sums under various headings were due to the partnership and the plaintiff's share in such additional sum was found to be 1380 dollars. The first item of dispute between the parties is whether the plaintiff is entitled to this additional sum.

3. Another question in the case is, what is the rate of conversion of dollars into the British Indian Currency. As the exchange was varying between January, 1919, and April, 1925, the date of the final decrees, this question turns upon the date when the conversion into British Indian Currency should be made. The dollars reached its lowest value on 11th March, 1920, when 100 dollars were equivalent to Rs. 95 and on 29th March, 1920, it was Rs. 99-80. The Subordinate Judge held that the date of the final decree should be adopted as the date of conversion. These two questions are the subject of Appeal No. 204. The appellants-(defendants) contend that the settlement of 29th March, 1920, should be held to be binding on the plaintiff and that the same date ought to be adopted as the date of conversion into British Indian Currency.

4. Taking up the first question as to the binding nature of the settlement of 29th March, 1920, I may observe that the settlement itself is somewhat suspicious.

5. We must, therefore, hold that the plaintiff had the first notice of the closing of accounts on 6th December 1920, and he was not bound to recognise any such closing prior to that date. Assuming that there was some such settlement, the next question is--is it binding on the plaintiff? Mr. Varada-chari relied on Chidambaram Chetty v. Karuthan Chetty 34 Ind. Cas. 543 : 4 L.W. 10; (1916) 2 M.W.N. 18; 20 M.L.T.134. It was observed in this decision that the principle of Section 31 of the English Partnership Act may be recognised as the principle to be adopted in India. So far as the first clause of the section is concerned it gives the assignee no right to interfere in the affairs of the partnership and all bona fide actions during the continuance of the partnership will be binding on him. Under Clause 2, the assignee is entitled to an account as from the dissolution. In the present case the other partners were not willing to take the plaintiff as a partner and they all agreed to dissolve the partnership. This could have only been by March, 1919. But the pleadings in the case show that all the parties recognised 25th January, 1919, as the date of dissolution. In the decision in Chidambaram Chetty v. Karuthan Chetty 34 Ind. Cas. 543 : 4 L.W. 10; (1916) 2 M.W.N. 18; 20 M.L.T.134 Clause 2 of Section 31 also was referred to and it was observed that it may be taken as the Law in India. In Dhanaji Jhelaji v. Gulabchand Pana : AIR1925Bom347 , it was observed that the Common Law with regard to the position of an assignee of a partner was codified by Section 31 of the Partnership Act and Section 31 (2) was also recognised as having codified the Common Law. In Stevenson and Sons Limited v. Aktiengesells-chaft Fur Cartounagem-Industrie (1918) A.C. 239 : 87 L.J.K.B. 416 : 118 L.T. 126 : 62 S.J. 290 : 34 T.L.R. 206 Lord Atkinson referred to the decision of Grant M.R. in Featherstonhaugh v. Tenwick (1810) 17 Ves. 298 : 11 R.R. 77 : 34 E.R. 115 and pointed out that at Common Law the assignee of a partner was not bound by any settlement behind his back. He also referred to the approval of the rule by Lord Selbourneand Lord Blackburn in Cassels v. Stewart (1881) 6 App. Cas. 64 : 29 W.R. 636. He also pointed out that the relation of surviving partners and the representatives or assignee of the out going partner is a fiduciary relation. So it must be taken that Section 31(2) of the Partnership Act only codified the Common Law. If so, a settlement behind the back of the assignee cannot be binding as a settlement. Lord Lindley states the rule thus at page 450 of his book on Partnership:

6. 'His rights are not affected by any sale of or agreement for valuing and dealing with the assignor's share which may have been entered into between the partners subsequently to the assignment and with notice of it,' and Watts v. Drisoll (1901) 1 Oh. 294 : 70 L.J. Ch. 157 : 84 L.T. 97 : 49 W.R. 146 : 17 T.L.R. 101 is cited in support of the statement of law. Mr. Varadachariar while recognising the force of these authorities relies on Section 263 of the Contract Act for the proposition that the rights and obligations of the partners continue in all things necessary for winding up the business. He, therefore, contends that the 1st defendant who was the managing partner has a right to make collections and put up to sale items of the assets belonging to the partnership and realise them in the shape of money and deal with the claims of the servants of the partnership. This is true; but in the present case the two very important items of the assets of the partnership are (1) the inams or the amounts due from various constituents of the firm to the firm on money lending transactions, and (2) the house belonging to the partnership. According to the settlement of accounts the inams were taken up by the new firm at the value of the principal amounts, the interest being remitted. Similarly a certain valuation was put upon the house and it was taken up by the new firm. This is different from putting up these items to a public sale in open market after due notice to the public. Here they were taken over by another firm consisting of two of the partners of the dissolved firm. It cannot be said that such a transaction should not be scrutinised and must be taken to be prima facie binding on the assignee unless it is shown to be mala fide. On the other hand such a transaction is prima facie not binding. The Court is, therefore, entitled to look into the matter itself. The lower Court has given certain valuations of the inams and the house on the evidence on record and we are not prepared to differ from its conclusions. Some of the items in the inams were disallowed and others were allowed. As to the other items of assets, one of them is item No. 6 in Ex. O. It related to the salary of Arunachalam and under this head the Subordinate Judge disallowed 1138 dollars out of the figure mentioned in the settlement on the ground that the agent Arunachalam was also attending to the new firm. But he was engaged for a term of three years and the work of winding up was going on certainly during these years. The fresh business was started on 25th January, 1919. Anyhow, the partnership has no right to stop his salary during the term ordinarily agreed upon, which among Chetties is admitted to be three years. We think this item must be allowed, that is, the figure allowed by the Subordinate Judge must be diminished by the plaintiff's share of this item, namely, 215 dollars. As to the other items, we are not prepared to differ from the Subordinate Judge. The first item (which is a very large item) is described as samans, i.e., presents allowed to agents among Chetties, In the present case the agent is a brother-in-law of the 1st defendant who was a partner of the old firm. He is also a partner of the new firm, It was said that the amount of the samans was really drawn by the agent some time before and the parties were only settling the claim in 1920. This is true, but it is not clear how much of the amount was drawn before January 1919 and how much after January 1919. In these circumstances we are not prepared to interfere with the conclusions of the Subordinate Judge. Similar remarks apply to the other items particularly to the 3rd item which related to the samans of an earlier agent Avadayappa Chetty. The result is that the Subordinate Judge's conclusion on the first question must be confirmed subject to the diminution of the amount awarded to the plaintiff by 215 dollars.

7. On the second point the Subordinate Judge relied on the decision in Manners v. Pearson (1898) 1 Ch. 581 : 67 L.J. Ch. 304 : 78 L.T. 432 : 46 W.R. 498. In this case Lindley, M.R. and Rigby, L.J., held that the date of the ascertainment by the Court must be the date of conversion. The defendant pleaded that the amount due was found to be certain amount on then31st August, 1896, but offered to convert it into English money only on 13th November, 1897. The plaintiff insisted on 31st August, 1898, or certain earlier dates as the proper dates of conversion. The Court ascertained the amount on 4th November, 1897, and held that that date was the date to be adopted for conversion. Vaughan Williams, L.J., dissented. He thought that 31st August, 1896, the date on which a certain sum of money was found due to the plaintiff, should be the proper date. In Di Ferdinando v. Simon Smits and Co. v. Roche, J. held that the conversion should be made not on the date when the Court ascertained the amount but on the date when it was properly due to the plaintiff, that is in that case the date when the breach was committed. In the case of a partnership which is wound up the date of the termination of the winding up would be the proper date. Roche, J., distinguishing an earlier decision of his own apparently decided a different principle. This decision was confirmed by the Court of Appeal in Di Ferdinando v. Simon Smits and Co. (1920) 3 K.B. 409 : 89 L.J.K.B. 1039 : 26 Com. Cas. 37 : 36 T.L.R. 797. Bankes, L.J., followed the dissenting judgment of Vaughan Williams, L.J., A similar rule was applied by Bailhache, J., in Barry v. Van Den Hurk (1920) 2 K.B. 709 : 89 L.J.K.B. 899 : 123 L.T. 719 : 64 S.J. 602 : 36 T.L.E. 663 and this decision though it did not go to the Court of Appeal was approved by Bankes and Sorut-ton, L. J J., in Di Ferdinando v. Simon Smits and Co. (1920) 3 K.B. 409 : 89 L.J.K.B. 1039 : 26 Com. Cas. 37 : 36 T.L.R. 797 already mentioned. So also the same rule was applied by McCardie, J. in Lebeaupin v. Crispin and Co. (1920) 2 K.B. 714 : 89 L.J.K.B. 1024 : 25 Com. Cas. 335 : 64 S.J. 652 : 36 T.L.R. 739. This was also approved by the same Judges in the Court 6f Appeal. Finally in S.S. Celia v. Valturno (1921) 2 A.O. 544 : 90 L.J.P. 385 : 27 Com. Cas. 46 : 37 T.H.R. 969. Lord Buckmaster approved the view of jVaughan Williams, L J., and was not prepared to accept the view of Lindley, M.R. and Rigby, L.J. He [also approved of the cases in Di Ferdinendo v. Simon Smits and Co. (1920) 2 K.B. 704. I think the decision in Manners v. Pearson (1898) 1 Ch. 581 : 67 L.J. Ch. 304 : 78 L.T. 432 : 46 W.R. 498 has practically ceased to be the law and it seems to me that we have nothing to do with the date of the determination of the amount of the Court. The plaintiff's share was certainly ascertainable by the 6th December, 1920, when the winding up was completed and the accounts were ready according to the 1st defendant's own statement and if the plaintiff was willing to accept the amount he could have taken the amount that might be ascertained as the proper amount due on that date. It is true that this need not be th'e amount which the defendants were willing to offer. But still the assets of the partnership may be held to have crystallized on that date and the only question remaining for the Court would be to decide the difference between the parties. It is impossible to accept any date earler than 6th December, 1920, because the winding up was not completed and not until after the partnership assets are all realised and converted into money can the share of a partner be settled Vide Lindley, page 427. On the 6th December, 1920, the rate was Rs. 154-b-0. The appellant gains only Re. 1-S-O by our view. To this extent the judgment of the lower Court is modified.

8. The memorandum of objections in Appeal No. 204 relates to the value of the house. We have already held that there is no reason to disturb the finding of the Subordinate Judge in this matter. Another item, in the memorandum of objections is a claim for the rent of the house up to the date of Buit. But if the plaintiff has got his share of the value of the house in December, 1920 the house being sold some time in 1920, there is no question of any claim for rent. Another ground in the memorandum of objections is that the date of the preliminary decree ought to be adopted as the date of conversion. This question has already been dealt with in the judgment in the main appeal.

9. In Appeal No. 340 the only point is the rate of interest that should be allowed to the plaintiff. Some of the inams of the suit firm were taken over by the new K.R.V.R. Firm. In such a case it is now conceded to be the law that the assignee is entitled at his option either to the profits of the new firm or interest. In the present case he elected to take interest. The Subordinate Judge held that the reasonable rate of interest, to be given to the plaintiff is 9 per cent. The plaintiff wants this to be inr creased and the defendant in the memorani dum of objections wants it to be reduced to 6 per cent. We think the rate allowed by the Subordinate Judge is the reasonable rate and we decline to interfere with his discretion. This is the courae followed by the Privy Council in Ahmad Musaji Salehji v. Hashim Ebrahim Salehji 28 Ind. Cas. 710 : 42 Order 914 : 19 O.W.N. 449 : 17 M.L.T. 312 : 2 L.W. 377 : 21 O.L.J. 419 : 13 A.L.J. 540 : 17 Bom. L.R. 432 : 29 M.L.J. 70; (1915) M.W.N. 485 : 42 I.A. 91 (P.C.).

10. The result is Appeal No. 340 and its memorandum of objections are dismissed with costs. Appeal No. 204 is modified as indicated above. The memorandum of objec-ctions is dismissed with costs. In Appeal No. 204 the parties will give and take proportionate costs. In the lower Court also the parties will give and take proportionate costs.

Jackson, J.--I agree.


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