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Govinda Chnadra Basak Vs. Haridas Basak - Court Judgment

LegalCrystal Citation
SubjectCivil
CourtKolkata
Decided On
Judge
Reported in35Ind.Cas.48
AppellantGovinda Chnadra Basak
RespondentHaridas Basak
Cases Referred and Barwell v. Parker
Excerpt:
partnership - one partner contributing more capital than his share, rights of--interest. - .....subject to any agreement between the parties, interest is payable on money paid or advanced by one partner for partner ship purposes beyond the amount of capital which he had agreed to subscribe. this principle is obviously consistent with the rules of justice, equity and good conscience which we are bound to administer. in millar v. craig (1843) 6 beav. 433 : 49 e.r. 893 : 63 r.r. 134 lord langdale m.r., observed: 'can one believe that a party to whom the whole capital belonged renounced his advantage in that respect, and continuing to take an equally laborious part in the transaction of the business, should bring in his whole income, both partnership and private, and yet intend to reserve no advantage of that income upon the settlement of accounts between himself and copartner? i must.....
Judgment:

Asutosh Mookerjee, J.

1. This is an appeal by the defendant in a suit for dissolution of partnership and adjustment of accounts. The plaintiff and the defendant were partners. Their original idea was that capital should be contributed equally by both of them; but in the events which have happened, the defendant, it is said, has contributed a much larger sum than the plaintiff has done. The defendant prays that in the settlement of accounts he may be allowed interest on the excess sum contributed by him towards the capital. The Courts below have disallowed this claim. In our opinion the view taken by the District Judge cannot be supported.

2. On behalf of the respondent, it has been urged that, . as a general rule, interest between partners is not allowed, unless there is an express stipulation, or a particular course of dealing between the parties as shown by the partnership books, or, a trade' custom to the contrary. This may be accepted as a correct statement of the general rule, and is recognised in a long line of authorities. Rishton v. Grissell (1868) 5 Eq. 326; Hill v. King (1863) 3 De G.J. & Sm. 418 : 9 Jur. (N.S.) 527 : 8 L.T. 220 : 1 N.R. 341 : 32 L.J. Ch. 79 : 46 E.R. 697 : 142 R.R. 118; Rhodes v. Rhodes (1860) 6 Jur. (N.S.) 600 : Johns. 653 : 119 R.R. 1058; Stevens v. Cook (1859) 5 Jur. (N.S.) 1415 : 115 R.R. 1066; Cooke v. Benbow (1863) 3 De G.J. & Sm, 1 : 6 N.R. 135 : 46 E.R. 538 : 142 R.R. 1; Boddam v. Ryley (1783) 1 Brown. C.C. 239 : (1785) 2 Brown. C.C. 2 : (1787) 4 Brown. P.C. 561 : 28 E.R. 1104; Pim v. Harris (1876) Ir.R. 10 Eq. 442. But upon this rule, there has been engrafted an important qualification, namely, that an advance by a partner to the firm is treated, not as an increase of its capital, but rather as a loan on which interest should be paid; and that, subject to any agreement between the parties, interest is payable on money paid or advanced by one partner for partner ship purposes beyond the amount of capital which he had agreed to subscribe. This principle is obviously consistent with the rules of justice, equity and good conscience which we are bound to administer. In Millar v. Craig (1843) 6 Beav. 433 : 49 E.R. 893 : 63 R.R. 134 Lord Langdale M.R., observed: 'Can one believe that a party to whom the whole capital belonged renounced his advantage in that respect, and continuing to take an equally laborious part in the transaction of the business, should bring in his whole income, both partnership and private, and yet intend to reserve no advantage of that income upon the settlement of accounts between himself and copartner? I must say, I have great difficulty in coming to such a conclusion as that.' A similar view was expressed by Knight Bruce, L.J., in Ex parte Chippendale (1853) 4 De G.M. & G. 19 at p. 36 : 18 Jur. 710 : 22 L.J. Ch. 926 : 2 W.R. 547 : 23 L.T. (O.S.) 200 : 102 R.R. 7 : 43 E.R. 415 at p. 421: 'But there remains the question of interest. As to this I have doubted. Without, however, relying merely on Lord Hardwicke's authority, as, for instance, on Omychund v. Barker (1744) 1 Atk. 21 : 2 Eq. Ab. 397 : Willes 538 : 26 E.R. 15 and Barwell v. Parker (1751) 2 Ves. Sen. 364 : 28 E.R. 233 I think that mercantile usage and the general course of trade dealings do, where a partner in a trade has duly and properly advanced money of his own for the purposes of the partnership business, so as to become justly a creditor in account with the partnership for the amount, raise an implied contract for interest, so as to entitle the partner advancing to have his account with the firm credited with interest accordingly, although his partners may not have authorised, and may not have known of the transaction, at least in the absence of any express contract to the contrary.' To the same effect are the observations of Turner, L.J., that the view can be defended on grounds of equity. In our opinion, it is fairly clear that in the present case the plaintiff-respondent who claims the benefit of the profits which have accrued from the sums advanced to the partnership business by the defendant, is bound in justice to make an allowance for interest on those sums to his partner.

3. The result is that this appeal is allowed in part and the preliminary decree made by the District Judge modified. We direct that on all sums advanced by the defendant towards the partnership concern in excess of his share of the capital, interest be allowed in his favour at the rate of six per cent. per annum. Each party will pay his own costs throughout the litigation.


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