K. Chenchuvenkatanagiah Chetty and Co. and Others vs M. Padmanathan Chetty and Others

The only question that has been tried in this suit is whether the 2nd defendant was a partner in the firm of B.P. Sriramulu Chetty & Co. a firm

with which the plaintiffs had dealings. Three persons were made defendants with an allegation that they were the partners of B.P. Sriramulu Chetty

& Co. Defendants Nos. 1 and 3 admitted partnership and also their liability, but the 2nd defendant contended that he was not a partner in the firm.

At the trial it has been found that the 2nd defendant was a partner till 31st March, 1921, and the respondent (2nd defendant) does not appear to

impeach that finding here. The plaint transactions took place in June, 11321. The plaintiffs (appellants) now contend that, although the 2nd

defendant may not have been a partner of the defendant''s firm in June, 1921, yet, inasmuch as he was a partner in that firm up to 31st March, and

no notice was given either to customers or to the general public of the dissolution of partnership, the 2nd defendant is liable u/s 264 of the Contract

Act for the transactions carried von shortly after he actually left the partnership. Section 264 is as follows:

Persons dealing with a firm will not be affected by a dissolution of which no public notice has been given, unless they themselves had notice of such

dissolution.

This section has been considered in various, cases the first of which is Chundee Churn Dutt v. Eduljee Cowasjee Bijnee 8 C. 678 : 11 C.L.R.

225 : 4 Ind. Dec. 437 and there it was held that, when a partner ceased to be a partner in a firm and no notice of such cessation was given to old

customers, he was still liable for acts done for the remaining partners. The question which was mainly considered in that case was what form of

notice was requisite in order that such liability should cease. A similar view was taken in a recent Calcutta case, Jagat Chandra Bhattacharyya and

Others Vs. Gunny Hajee Ahmed, where it was further held that Section 264 referred not only to persons dealing with the firm prior to dissolution

but to all persons dealing with that firm. The law in England is ""similar, and we may refer to Parkins v. Carrathers (1800) 170 E.R. 604 : 3 Esp.

248 : 6 R.R. 823. There is one Court in India which seems to take a different view"" and that is the Lahore High Court. In Bichhia Lal v. Munshi

Ram 68 Ind Cas. 932 : AIR 1922 Lah. 466 it was held that Section 264 did not include persons dealing with a firm, for the first lime after the

dissolution of partnership, that case is based on prior decisions of the Punjab Chief Court and the Sind Judicial Commissioner''s Court. It also

relies one case in Giovani Gorio and Co. v. Vallabh Das Kalianji 30 Ind. Cas. 864 : 17 Bom. L.R. 762 as another authority. Undoubtedly, in that

case Beaman, J., does say that the expression ""persons, dealing with a firm"" in Section 264 of the Indian Contract Act means ""persons Who have

been the habit of dealing with and after time of the dissolution were contemplating further dealing with the firm, on the faith of the firm remaining

same as that with which their dealings commenced."" The learned Judge was considering a case in which an old customer of a firm was concerned

and, although he distinctly says that Section 264 refers to such old customers, he has not considered the converse case of whether Section 264

definitely excludes new customers, and the arguments in his judgment set forth good reasons for treating old and new customers alike, The Calcutta

High Court is distinctly of opinion that it includes new customers. In B.S. Mahadeva Aiyar and Others Vs. Ramakrishna Reddiar and Others,

Odgers, J., observes that Section 264 of the Contract Act is clear that, in the absence of such notice, persons dealing with the firm are entitled to

assume that the partnership still, continues; but the question of this distinction between the old and new customers was not considered. With all

respect we agree with the view taken by the Calcutta High Court for the reasons therein given and also because it is clearly in accordance with the

English Law on the subject; we must hold that, provided a person had knowledge of a partnership, he would not be effected by the dissolution of

that partnership in his dealings with the firm unless he had adequate notice of the same as provided in Section 264 of the Contract Act. In this view

and on the learned Judge''s finding that the 2nd defendant was a partner up to the 31st March, 1921, we must hold that he is liable to the plaintiffs''

claim equally with the other defendants.

The appeal is, therefore, allowed with costs and the lower Court''s decree will be modified accordingly.