Arunachalam Servai vs K. Nottam Beer Varu Rowther

Srinivasa Ayyangar, J.—The point taken and argued with considerable strenuousness by Mr. K.V. Sesha Ayyangar, the learned vakil for

the appellant in this second appeal is one of considerable legal interest. The respondent as plaintiff instituted the original suit for levying contribution

from the defendant on the ground that both of them having been joint judgment-debtors under a decree, he the plaintiff was compelled to pay for

the satisfaction and discharge of that decree the amount claimed in the plaint over and above the amount he was liable to pay as and for his share.

The defence raised by the appellant before us was that the debt in respect of which the decree was passed by the Court was really the debt of a

partnership in which the plaintiff and the defendant were partners and that therefore, firstly, the plaintiff was not entitled to sue for contribution and

could, if at all, have only sued for a taking of the partnership accounts, and secondly, that, even if it should be held that the plaintiff could maintain

such a suit, the defendant should have been permitted in equity to require such accounts to be taken and show thereon that the plaintiff would not

be entitled to recover the amount claimed because of his being in possession of the funds of She partnership sufficient to make up the amount

claimed. With reference to such claim and such pleas thereto it would be proper to make some observations in limine.

Prima facie, when there is a decree against two persons jointly and severally, each is liable to contribute equally to discharge the decree, and

there is always in such cases an implied contract of indemnity that, if one of them should be compelled to pay up more than his share, the other is

bound to make good the same. This is, however, on the basis that the obligations of the defendant inter so are determined only by the decree and

are not subject to any other rights or obligations. No doubt if it should be established that, having reference to the facts of the particular case, such

implied contract as between co-judgment-debtors should be deemed to be displaced, then the legal principle may not be applicable. Thus if, for

instance, one of the judgment-debtors should have had the decree passed against him merely because he was the guarantor of the debt which was

exclusively payable by the other judgment-debtor as the principal, then it follows that the implied obligation of the principal debtor under the

contract of guarantee to keep the guarantor indemnified from any loss or damage would displace or be available to be set off against the other

implication of indemnity. Again, if the judgment-debtors inter se should be found to have enjoyed the original consideration for the debt which

became merged in the decree in unequal proportions, it follows that it is such proportion that will govern, as between them, their mutual obligations

under the decree. Again it was open to the defendant to set up and prove that as a fact that the plaintiff discharged the decree not from his own

funds but only from partnership moneys and that therefore the very cause of action for the plaintiff failed. But such a case has not been made by

what has been found by the lower appellate Court. In all cases, when what is prima facie shown is only the decree, the liability is on the other party

to allege and prove that the obligation either does not subsist altogether or subsists only to a smaller extent than claimed, by reason of other legal

rights and obligations inter se. When both the judgment-debtors are partners in a business and the judgment debt is a partnership debt, the

discharge of that debt has been held not to give to the partner so paying off a right to levy contribution from his other partner without reference to

the partnership accounts,'' because on the legal principle that under the contract of the partnership each partner is only the agent of the other and

the rights of the partners are not with reference to single items of transactions, but to the taking of the entire accounts of the partnership. But such a

principle is inapplicable to the case of a debt which is not properly and legally a partnership debt. A partnership debt is a debt of the partnership

and not merely a debt which is somehow merely connected with the partnership. A partnership debt has various legal incidents as such and it is

only to such debts properly so called that the rule above enunciated can be applicable. In the present case, however, on; the facts it is abundantly

clear that the debt which is also a decree debt is not in any real sense of the word a partnership debt. If for the purpose of paying off a debt which

is a partnership debt two partners especially after dissolution go and borrow on their own individual credit and raise money sufficient to pay off the

partnership debt, it would be a travesty to call the new debt a partnership debt. That is what has been found.

On that finding it follows that none of the questions raised by the learned vakil for the appellant in this ease really arise. But the matter having

been argued before us at considerable length, we may as well briefly refer to some of the aspects of the question. The decision that was strongly

relied on by the vakil for the appellant is Damodara Shanbhaga v. Subroya Pai [1917] 6 M.L.W. 742. In that case Sadasiva Iyer, J., after a re-

view of the authorities came to the conclusion that where a decree was obtained against two persons who were trading as a firm and one of the

partners had to pay up the whole amount, he or his assignee could not maintain an action for contribution against the other partner. On the findings

in that case on which the judgment is based, namely, that the decree-debt which was discharged was a partnership debt and that the partnership

was still subsisting, it follows that the decision in that case has no application to the facts of the case before us. We are not also concerned to

discuss ''some of the obiter dicta of the learned Judge in the course of his judgment. As observed by the learned Judge himself in that case, we are

not prepared to say that even in respect of a partnership debt entirely discharged by one of the partners, whether during the subsistence of the

partnership or after dissolution, there may not be special circumstances entitling him to recover contribution from the other partner. But what has

been strongly urged by the learned vakil for the appellant before us was not so much that the plaintiff had no right of contribution, but that the

plaintiff should not be allowed to levy such contribution without allowing the defendant to have the accounts of the partnership taken for the

purpose of finding whether on the whole of the accounts, including the suit item, there was any liability or not on the part of the defendant.

There has no doubt been a series of cases in this Court and in the Bombay High Court such as S. Vannimundar v. S. Vannimundar [1905] 28

Mad. 344, where it was held that, even long after a partnership suit would be barred, one of the partners may maintain against another partner a

claim for his share of certain partnership assets recovered by him. There were also converse cases such as Sadhu Narayana Ayyangar v.

Ramaswami Ayyangar [1909] 32 Mad. 203. But we must hold that all these views have been finally overruled by their Lordships of the Judicial

Committee in the case of Gopal Chetty v. Vijiaraghavachariar AIR 1922 P.C. 115. The raison de etre of that decision is that, so far as a

partnership is concerned, the only right of a partner is to have the accounts taken, and if that right be barred by the law of limitation, he can have no

right to anything which really is included in the right to account. That case is an authority also for the position that such a right cannot be enforced at

the instance of a defendant if it cannot be enforced at the instance of the plaintiff. It seems to us that it really makes no difference on principle in

respect of such cases as the present whether a suit for the taking of the partnership accounts is or is not barred by the law of limitation.

As stated by Lindley, L. J., in the case of Edmunds v. Wallingford [1885]14 Q.B.D. 811, the right to indemnity or contribution exist in such

cases although there may be no express agreement to indemnify or contribute and although there may be in that sense no privity between the

plaintiff and the defendant. A case very similar to the present one is that of Laban Sardar v. Choyen Mallick [1915] 19 C.W.N. 768, where the

learned Judges hold that there is a right of contribution even if a debt which ripened into a decree had been borrowed for partnership purposes.

The present case is in principle indistinguishable from the case of Subbarayudu v. Adinarayudu [1895] 18 Mad. 134 where it was held that a right

of contribution existed.

If the partners of a firm do not think it worth their while to file a suit in respect of the partnership accounts, it can only be because they have

effected a settlement of the same among themselves or they do not consider it worth their while to do so. In such cases we do not see that there is

anything inequitable in allowing contribution where a decree is obtained against both of them. On the facts of this case and in the view we have

taken it is really unnecessary to deal at great length with all the eases cited at the Bar. In the result we hold that the decision of the lower appellate

Court was right. The second appeal is, therefore, dismissed with costs. The memorandum of objections is, on the facts found, dismissed with

costs.