Jampa Sattiraju and Others vs Kallepara Venkatasatyam and Others

Horwill, J.—The plaintiffs and the defendants were partners and had advanced various sums of money to the partnership. The plaintiffs filed

the present suit for accounts, and after the preliminary decree had been passed and the matter was in the hands of the Commissioner, who was

directed to take accounts, the defendants filed an application asking the Court to direct the Commissioner to work out the individual debts of the

partners in accordance with the provisions of the Madras Agriculturists'' Relief Act. The petition was dismissed on the ground that although all the

partners were agriculturists; the Act could not apply to a partnership or to money advanced by partners to their business.

The defendants'' case, as put in this Court, is that from the very inception, these debts were debts within the meaning of Section 3(3) of the Act.

It seems to me that this argument cannot be accepted. When the money was advanced, it was advanced to the partnership and although a

partnership has no corporate existence, yet one can speak of partnership assets and these advances were intended to be assets of the partnership.

The right of the partners to recover these advances could only arise upon a dissolution of the partnership. No obligation arose, at the time the

advances to the partnership were made, to return upon demand of otherwise the money so advanced. A debt implies a legal liability to repay; and

while the partnership was in being, there was no legal liability on the other partners to repay the advances made to the partnership. The only way in

which the advance could be recovered was by the equitable action of the Court at the time of the dissolution of the partnership. Even then, there is

no obligation to one partner by the other partners with regard to individual advances. The partner who made the advance has merely an equitable

right to have the advance repaid out of the assets of the partnership.

A further difficulty that arises in accepting the contention of the learned advocate for the petitioners is that until the Court passed a final decree--

or at any rate had passed orders after receiving the Commissioner''s report and hearing objections thereon--it was impossible to know what

amount should be paid to the various partners. Until all the disputes arising between the partners had been considered and adjudicated upon by the

Court, there could have been no debt and therefore nothing to which the Act could be applied. Until the final decree was passed, there was no

debt by one partner to another.

Wood v. Scoles (1866) 1 Ch. App. 369 has been quoted to show that loans to a partnership stand on a different footing from capital advances

by the partners. That may be so; but in that particular case, the distinction between loan and capital was to be found in the agreement between the

partners at the time the partnership came into existence. Such an agreement would be enforced by the Court when the assets were distributed

upon dissolution. I find nothing in that case to suggest that there was any legal liability on one partner to another to repay these advances. In

Doraisami Padayachi v. Vaithilinga Padayachi (1916) 32 M.L.J. 422 : ILR 40 Mad. 31 a Full Bench of this Court was called upon to consider

whether a promise by a partner to pay what was due on accounts on winding up was a promise to pay a debt which would operate to save

limitation The learned Judges felt themselves called upon to define the word ''debt''. They say:

We think the word ''debt''...must be taken to have been used in its ordinary meaning of a sum payable in respect of a money demand recoverable

by action.

An opinion was expressed by Sir John Wallis, C. J., that a debt has always meant an ascertained amount.

It is argued that the word ''debt'', as defined in the Madras Agriculturists'' Relief Act, has a wider meaning than that ordinarily given to it. ""Debt

is defined in the Act as ""any liability in cash or kind whether secured or unsecured, due from an agriculturist. "" There is no reason to suppose that

debt is meant to include, contrary to the ordinary usage, an unascertained amount., However that may be, it is quite clear from this definition that it

is a liability, and ''liability'' must mean a legal liability, a liability enforceable at law. An advance made by a partner to the partnership, does not entail

a liability by the partners to repay that advance, but rather,, as I have already pointed out, a mere right in equity to have a claim on the assets to the

extent of the advance at the time of the dissolution of the partnership. Muthammal v. Sivakami Ammal (1925) 21 L.W. 606, has been referred to

show that the word ''liability'' is not always given the meaning that I have given to it above, but the question that arose there was whether a son is

liable to pay what his deceased father would have had to pay by way of mesne profits. In considering that point, the learned Judges were not

concerned with the definition of the English word ''liability'', which is a word that has acquired a technical meaning, but rather to ascertain whether

the ancient texts required the son under the circumstances to pay mesne profits. I do not find anything in that judgment which has any material

bearing on the point at issue in the present case. I need not discuss Mathu v. Achu (1934) 67 M.L.J. l58 : ILR 57 Mad. 1074, in which there was

a transfer of an actionable claim; and in which it was held that there can be a debt even though some calculation may be necessary to ascertain how

much it is.

In the result, this petition fails and is dismissed with costs.