B.S. Mahadeva Iyer and Others vs Ramakrishna Reddiar and Others

Odgers, J.—In this case the plaintiffs are the sons of one 8. V. Manavala Reddiar who died about 1915 and they sue the defendants who

are, as to defendants Nos. 2 to 4, the undivided sons of defendant No. 1 and as to defendants Nos. 6 and 7, the undivided sons of defendant No.

Defendant No. 1 and defendant No. 5 carried on business in partnership in cotton and money-lending under the style of ""P.K.N."" Firm

Defendant No. 1 borrowed from Manavala Reddy Rs. 10,000 from his family funds, is his (defendant No. 1''s) capacity as managing partner, on

26th August 1914. The suit is brought on the promissory note executed thereupon (Ex. A).) Defendant No. 1 is also alleged to have made and

endorsed a payment of Rs. 1,000 for interest on 16th August 1917 thus saving limitation. The defence is that the partnership between defendant

No. 1 and defendant No. 5 had ceased to the knowledge of. plaintiffs long before 16th August 1917 and had been dissolved by a decree in a suit

for dissolution (O.S. No. 7 of 1918) brought by defendant No. 5, the capitalist partner, against defendant No. 1. The decree decided that the

partnership was dissolved as from 11th March 1915. Consequently defendant No. 1 had no authority to bind his former partner in 1917 by an

endorsement of part payment in order to save limitation. It is, no doubt, clear law that after dissolution no ex-partner has power to do any act to

bind another ex-partner, cf., Watson v. Woodman 24 W.R. 47, where the Vice-Chancellor held that it was not there proved that the two parties

concerned had so intended that they should for the purposes of that suit be deemed to have continued partners. In Rajagopala Pillai v. Krishnasami

Chetti 8 M.L.J. 261 it was held that the fact that a partnership is being wound up is by itself insufficient to authorise a surviving partner to bind the

representatives of a deceased partner. But in the present case it is clear that as regards third parties (in the position of the plaintiffs) there was no

notice, express or constructive, given of dissolution and Section 264 of the Contract Act is clear that in the absence of such notice, persons dealing

with a firm are entitled to assume that the partnership still continues Chundee Churn Dutt v. Eduljee Cowasjee Bijnee 4 Ind. Dec. 437 Giovani

Gorio and Co. v. Vallabh Das Kalianji 17 Bom. L.R. 762. Therefore plaintiffs were still entitled even after 1915 to regard the partnership between

defendant No. 1 and defendant No. 5 with whom they have dealt for 15 years as subsisting. The question then arises, had defendant No. 1

authority to bind his firm by making this payment. My own opinion is that as, in the case of a mercantile firm as here, each partner is entrusted by

his co-partners with a general authority to do any act necessary for or usually done in carrying on the business of such partnership, a partner''s

authority extends to making an acknowledgment by part-payment so as to bind his partners. I am fortified in this opinion by that of Kumaraswami

Sastri, J., in his referring judgment in Pandiri Veeranna v. Grandhi Veerabhadraswami 23 M.L.T. 261 : (1918) M.W.N. 285 : 7 L.W. 552.

However a question has been raised on limitation with regard to the provisions of Section 21(2) of the Limitation Act which runs as follows:

Nothing in the said sections renders one of several joint contractors, partners, executors or mortgagees chargeable by reason only of a written

acknowledgment signed or of a payment made by, or by the agent of, any other or others of them.

These words have been construed in Pandiri Veeranna v. Grandhi Veerabhadraswami (1918) M.W.N. 285 : 7 L.W. 552 by the Full Bench of

this Court. There the learned Judges say ""It is important to notice the exact wording of Section 21 (2) of the Limitation Act. The section does not

say that a person shall not be liable on an acknowledgment signed by the partner by, reason only of his being a partner but by reason only of a

written acknowledgment signed by his partner; and it amounts to saying that if you have no more than written acknowledgment signed by one

defendant the fact that the other defendant is his partner cannot affect the latter liability. You would obviously have a case where one partner

signed an acknowledgment in respect of a gambling debt of his own; but for the sub-section, proof of the acknowledgment would be sufficient to

fix the other partner with liability, a conclusion manifestly repugnant both to sense and justice."" (Page 434*). Here there is no question that the part-

payment was in respect of a partnership debt-(Ex. A).'' There is also ample evidence from the surrounding circumstances which we are'' entitled to

look at Pandiri Veeranna v. Grandhi Veerabhadraswami (1918) M.W.N. 285 : 7 L.W. 552 for the conclusion that there was express authority

for defendant No. 1 to make the acknowledgment to rebut the possible validity of the contention that from the wording of Section 21(2), Limitation

Act, there is no presumption in India, that a. partner has power to acknowledge, though the validity of this contention is at least doubtful after the

exposition of the sub-section by the Full Bench. Plaintiff witness No. 3 a clerk of appellants'' (defendants'') firm swears that the entry in Ex. E (1)

showing the payment of Rs. 1,000 on 16th August 1917 was made under the orders of defendants Nos. 1 and 5; He also states that the

partnership has not been wound up or the account settled. Defendant No. 5 himself applied for a loan to the South Indian Bank in 1915 (Ex. G) in

which he sets out the present loan. Exhibit H is the defendant No. 5''s plaint in the dissolution suit against respondent No. 1. He says that since his

(defendant No. 5''s) father''s death in 1907, defendant No. 1 and another assistant partner, conducted the entire business. Defendant No. 5 was

obliged to rely on defendant No. 1 for the conduct by him of all matters connected with the partnership and all such things as the collection of

outstandings, etc. In Ex. F dated 6th February 1918 the present appellant admits"" that defendant No. 1 has to pay a share of the debt due to

Manavala Reddi. There is also a correspondence between the Receiver in the dissolution suit and the Vakil of Manavala Reddi''s sons which

shows that at first at any rate the appellants were willing to discharge their half of the suit debt and did not question their liability to do so. There is

no doubt on the evidence, which there is no reason to discredit, that never until this suit was brought did appellants dispute their liability nor suggest

that defendant No. 1 was not authorised to make the acknowledgment. The proviso of Section 21(2) of the Limitation Act as construed by the Full

Bench can, therefore, have no application to the present case. I am, therefore, of opinion, that the Subordinate Judge was correct in the conclusion

he came to and I would dismiss this appeal with costs of plaintiffs (respondents Nos. 1 to 3). Costa not to come out of partnership assets.

Spencer, J.

I agree that the appeal must be dismissed with costs and I will give my reasons in my own language. Defendants Nos. 6 and 7 sons of 5th

defendant, who died during the suit, appeal and 10th defendant is the Receiver in O.S. No. 7 of 1918.

From the terms of the reference in Pandiri Veeranna v. Grandhi Veerabhadraswami (1918) M.W.N. 285 : 7 L.W. 552 it appears that the Full

Bench had not to consider the effect of Section 21(2) of the Limitation Act upon acknowledgments of debts and payments saving limitation by

partners with express reference to the circumstance of the partnership being a continuing one or one that had been dissolved at the time of

acknowledgment or payment. The learned Judges observed that they saw nothing in the sub-section to make it necessary to suppose that it was

intended to apply to transactions conducted in the ordinary course of partnership. They overruled Valasubramania Pillai v. Ramanathan Chettiar 5

M.L.T. 102 So long as a partnership continues, it is a part of the ordinary course of partnership business to pay partnership debts, and, therefore,

it would ordinarily be sufficient to prove that the debt in question was a partnership debt and that the person who paid the interest on it or part of

the principal was a partner in order to give an extended period of limitation calculated from the date of payment as against all the other partners.

Even after dissolution, Section 263 of the Contract Act provides that the rights and obligations of the partners continue in all things necessary for

winding up the business, and from Section 265 it appears that payment of the firm''s debts is part of the business of winding up. But after a

partnership has become dissolved, it may not be the particular duty of every person who has been a partner to pay and acknowledge debts of the

firm, as by arrangement that may be done by the Court, or by a Receiver or by one of the ex-partners acting as agent for the others. So far as

strangers are concerned, a partnership dissolved is a partnership in being, unless and until they receive notice of dissolution. In the case of old

customers, like the plaintiffs in this case, express notice is necessary vide Chundee Churn Dutt v. Eduljee Cowasjee Bijnee 11 C.L.R. 225 : 4 Ind.

Dec. and Pollock and Mulla''s Commentary on Section 264. It has not been proved by the evidence in this case that the plaintiffs received any

notice of the partnership of defendants Nos. 1 and 5 having become dissolved on 11th March 1915 or indeed on any date before 16th August

1917 when the payment of Rs. 1,000 was made by 1st defendant to 2nd plaintiff according to his evidence as P.W. No. 4 and the ledger Ex.

E(1). For some unaccountable reason no issue as to limitation was directly raised in the lower Court. Plaintiff witness No. 3 who was clerk of the

firm, gays that the firm''s business was closed on 14th Thai, Rakshasa, corresponding to January 27th 1916, but the defendant who as authorised

agent of his father, 5th defendant, brought O. 8. No. 7 of 1918 on the file of the Sub-Court of Ramnad against 1st defendant to obtain a

declaration that the partnership terminated on 11th March 1915 did not present the plaint in that suit to the. Court before 1st February 1918 (see

Ex. H). In para. 11 of the plaint the 5th defendant states that he was dependent on the 1st defendant for all matters connected with, the business of

the firm such as the collection of outstandings even after 10th March 1925 pending the settlement of the accounts.

Fifth defendant in Ex. G a loan application made to the South Indian Bank, and 7th defendant in his affidavit (Ex. F) and in his letter (Ex. D-2) to

the Receiver admitted that the debt due to the plaintiffs was a partnership debt of the P.K.N. firm, and P.Ws. Nos. 3 and 4 deposed, without

being contradicted or shaken in cross-examination, that the payment of Rs. 1,000 was a joint payment by both 1st and 5th defendants and that the

entry in the accounts was made under the authority of both of them. This is quite enough to fix all the appellants with liability and to save limitation. I

agree in the proposed order for costs.