K.R.V. Firm vs Sathyavada Seetharamaswami and Others

Wallis, J.—This is a suit by the plaintiffs, a firm of merchants carrying on business in Madras, against the three defendants, who are brothers

alleged to be carrying on business in partnership in the mofussil for the price of goods sold and delivered with interest according to agreement; and

the plaint alleges that accounts were settled on 7th January 1909 when Rs. 3,976-0-6 were found due to the plaintiffs and the first defendant

signed for that amount in the books of the plaintiffs. The first and third defendants do not contest the suit. The second defendant has filed a written

statement in which he denies carrying on business in partnership with the first and third defendants and says that the business belonged exclusively

to the first defendant. He also denies that the business was a family trade and says there was no meaning in calling the defendants members of an

undivided Hindu family as there is no family property. He also pleads that the suit is barred by limitation.

The transactions with the first defendant are proved and are not barred owing to the acknowledgment by the first defendant. There must

therefore be judgment against him in any event. As regards the second defendant, I find it proved against him that he was a partner with the first

defendant. His denial that he had anything to do with the business is contradicted by the letters exhibited in his own writing. It is clear that the

defendants were undivided and were working together for profit in the business and this it seems to me renders them partners within the definition

of Section 239 of the Indian Contract Act. The business was no doubt carried on in the name of the first defendant as appears from the plaintiffs''

ledger, but there is nothing unusual in that. In the box the second defendant said something about being divided in status but not by metes and

bounds. In his written statement however he did not deny he was undivided, but only that there was any joint family property; and before he went

into the box his vakil had expressly admitted that he was undivided and that judgment must in any event be given on that basis.

As regards limitation it is contended that the written acknowledgment by the first defendant of January 1909 does not affect the other defendants

and that the suit is barred as against them under two recent decisions of this Court--Valasubramania Pilial v. Ramanathan Chettiar ILR (1909)

Mad. 421 and Shaik Mohideen Sahib v. Official Assignee of Madras (1912) 35 Mad. 142. This is a question of very great importance, because

written acknowledgments such as this are a very ordinary not to say necessary incident of business at any rate in this part of India, and any decision

affecting their validity must have a far-reaching operation. As is well known the object of the legislation on the subject was the desire to restrict the

rule laid down by Lord Mansfield and the Court of King''s Bench in Whitcomb v. Whiting 1 Sm. L.C. 579, that any acknowledgment or payment

by one co-debtor was sufficient to take the case out of the statute of limitation as regards the others. This was effected as to acknowledgments by

Lord Tenderden''s Act, 9 Geo. IV, cap. 14, and as to payments by the Mercantile Law Amendment Act, 1856, 19 & 20, Vict., c. 97, Section

The Indian Act of 1859 dealing only with acknowledgments provided generally (Section 4) that ""if more than one person be liable none of

them shall be chargeable by reason only of a written acknowledgment signed by another of them."" The Act of 1871, Section 20, contained the

following explanation 2: ""Nothing in this section renders one of several partners or executors chargeable by reason of a written promise or

acknowledgment signed by another of them."" Section 20 of Act XV of 1877 provided that ""Nothing in Sections 18 and 19 renders one of several

joint contractors, executors or mortgagees chargeable by reason only of a written acknowledgment, etc."" This is very near the language of Lord

Tenderden''s Act ""No such joint contractor, executor or administrator shall lose the benefit of the said enactments so as to be chargeable in respect

or by reason only of any written acknowledgment or promise made and signed by any other or others of them."" The main alteration for the present

purpose is that in the Indian Act partners are mentioned separately and not included under jointcontractors. It has never been held, so far as I

know, that the specific mention of the word partners makes any difference. Construing the language of the English sections Sterling, J., in In re

Macdonald (1897) 2 Ch. 181 , said that the word ""only"" is emphatic and in In re Tucker (1894) 3 Ch. 429, Lindlby, L.J., observed that ""the

object of the enactment was not to facilitate frauds (by debtors) upon creditors, but to protect debtors from stale demands,"" and Lord Herchell

observed that it ""was not...intended to have any application where the payment...was made by him for and on behalf of another co-debtor at his

request."" It had previously been held by the Court of Queen''s Bench in Goodwin v. Parton and Page (1879) 41 L.T. 91, that one of two partners

must be presumed in the absence of proof to the contrary to have authority to make a payment on account of a debt due to the firm so as to take

the debt out of the Statutes of Limitation against the other. This case was affirmed by the Court of Appeal in Goodwin v. Parton and Page (1880)

42 L.T. 568 and the same presumption is treated as applicable to acknowledgments in Lindley on Partnership and other text-books though I have

not, found any express decision on the point. In Khoodee Ramn Dutt v. Kishen Chand Golecha (1876) 25 W.R. 145, a case under the Act of

1871 where a question arose as how far an acknowledgment by one partner was binding on another the Court seems to have been of opinion that

if by the ordinary rules of partnership such an acknowledgment would be binding on the other co-partners that would be sufficient, but the language

is not very clear. In Premji Ludha v. Dossa, Doongersey ILR (1886) Bom. 358 , Scott, J., ruled, ""It must...be shown that the partner signing the

acknowledgment had the authority, express or implied, to do so. In a going mercantile concern such agency is, I think, to be presumed as a rule:

see Lindley on Partnership and Goodwill v. Parton and Page (1879) 41 L.T. 91"": but he held, following Watson v. Woodman (1875) 20 Eq. 721,

that as the partnership had ceased to be a going concern when the acknowledgment was made it was not binding as the presumption no longer

applied. In Gadu Bibi v. Parsotam ILR (1888) All. 418, the Allahabad High Court referred to this decision with approval and held that where an

acknowledgment was effected in the ordinary course of business of the firm and was such a transaction as was contemplated in Section 251 of the

Indian Contract Act, it was sufficient to save limitation. In Dalsukhram v. Kalidas ILR (1902) Bom. 42, Candy, J., referred to SCOTT, J.''S ruling

with. approval, and stated that it had been approved by Sargent, C.J., in an unreported case but the Court eventually sent down an issue whether

assuming the partnership to have been existing when the acknowledgment was made, such acknowledgment was or was not an act necessary for

or usually done in carrying on the business of the partnership (section 291 of the Indian Contract Act), in which case they held it must be taken to

have been done with the authority of the other partners. There it may be observed that Section 251 of the Indian Contract Act, 1872, which was

subsequent to the Limitation Act, IX of 1871, Section 20, in which partners are expressly mentioned, is quite general in its-terms and makes no

exception as to payments and acknowledgments made in the necessary or ordinary course of the partnership business. Now if, as here held, it be

enough to show that the acknowledgment was an act necessary for or usually done in carrying on the business of the partnership that would seem

to conclude the question so far as relates to trading partnerships in this part of India. It is the almost invariable practice of trade-creditors there to

insist on a written acknowledgment in their books being made by the debtors as a condition of giving credit and engaging in further transactions no

doubt as a safeguard against idle and dishonest defences being set up if they should ultimately be obliged to sue. Such acknowledgments are made

as a matter of course by the trade-debtors, whether carrying on business singly or in partnership, and are forthcoming in almost every suit for the

price of goods sold and delivered. This is a matter within the daily experience of Courts of First Instance and I think they are entitled to take

judicial notice of it if relevant and need not require it to be proved by evidence in each case.

Coming now to the decisions of this Court it was held by Subramania Ayyar and Boddam, JJ., in Rajagopala Pillai Vs. Krishnasami Chetti, that,

where a partnership is dissolved by the death of one of partners, the surviving partners cannot, hind the representatives of the deceased partner by

their acknowledgment of a debt of the firm unless they are specially authorized to do so. Here the learned judges would appear to have been of

opinion that but for the previous death of the partner the acknowledgment would have been binding but the point did not arise directly. The first

case on which the defendant relies is a decision of the learned Chief Justice and ABDUL Rahim, J., in Valasubramania Pillai v. Ramanathan

Chettiar ILR (1909) Mad. 421. In that case the learned judges dissented from the ruling of Scott, J., in Premji Ludha v. Dossa Doongersey ILR

(1886) Bom. 358, that in a going mercantile firm agency is to be presumed which they treated as obiter, and laid down that something more must

be shown that there must be ""some evidence that in the course of business the partners who made the payment had authority to do so on behalf of

the firm."" If I understand the learned judges rightly, they were of opinion that it was not enough to show that the payment was an act necessary for

as usually done in the course of the partnership business, Section 251, but there must be evidence as to the authority of the partners who made the

payment. The argument is not reported and it does not appear if the decisions in Goodwin v. Parton and Page (1879) 41 L.T. 91 and (1880) 42

L.T. 568 was not brought to the notice of the Court or was regarded as inapplicable. The next case Shaik Mohideen v. Official Assignee of

Madras ILR (1912) Mad. 142, was a decision of the learned Chief Justice and Sankaran Naik, J. In that case the acknowledgment had been

made by the partner in charge of a branch with reference to a debt contracted by that branch, and the learned judges held on appeal from a

decision of my own, that there was no evidence that the partner making the acknowledgment had authority to do so on behalf of the firm, and that

it was not a legitimate inference for the fact of his being in management that he had such authority. In this case, Dalsukhram v. Kalidas ILR (1902)

Bom. 42 as was referred to as well as Premji Ludha v. Dossa Doongersey ILR (1886) Bom. 358, but the Court was of opinion it did not help the

respondent plaintiff.

The conclusion to which I have come on this examination of the authorities is that there is a conflict between the decisions of the Bombay and

Allahabad High Courts and the decisions of this Court. According to the former it is enough to show that the payment or acknowledgment was an

act necessary for as usually done in the course of the partnership business to make it operative when done by one partner against the others.

According to the two Madras decisions evidence of authority from the other partners is necessary and cannot be presumed. These decisions are

binding on me, though I confess I should be-glad either to see them reconsidered or the law altered, because there is no real doubt in these cases

about the acknowledgment being made with the knowledge and consent and for the benefit of all the partners, though the creditors may have no

means of proving this, so that the effect of the more stringent rule is to facilitate frauds by debtors upon their creditors.

Coming now to the evidence in the present case all that appears is that the second defendant''s letters two years before the date of the

acknowledgment show that a settlement as it is called was contemplated of which a signature in the plaintiffs'' books would be a usual and

necessary incident, and that they (plural) were coming to Madras to make it; that the plaintiffs carried on business in Madras and the defendants in

the Godavari district; and that the first defendant came up to Madras and signed the acknowledgment in the books of the plaintiffs'' firms. Exhibit A

is as follows: ""Remaining debit balance Rs. 3,976-0-6. We bind ourselves on demand to pay to the plaintiffs'' order to persons possessing this

order at Madras Rs. 3,976-0-6 being the principal together with interest thereon at 1 per cent, per mensem from this date.

Satyavada Seetharamaswami''s

(""first defendant''s) signature.

The business was carried on in the name of the first defendant and it is argued for the plaintiff that the use of the plural verb in the original shows

that he was acting on behalf of others as well as himself and this is borne out by the interpreter. It may therefore, I think, be taken that the

acknowledgment purports to be made by the first defendant not merely on his own behalf but on behalf of the firm. There is also evidence in B that

the second defendant was in the habit of going to Madras and making payments on account of the firm. This evidence however does } not show

that the second defendant was authorized to make the, acknowledgment in question on behalf of the others, and following the decisions already

referred to I hold that the suit is barred as against the second and third defendants. I may say I attach no importance to the second defendant''s

statements in the box that the business had stopped two years previously, as his evidence as a whole shows he is not entitled to any credence, and

the reference to stopping on account of cholera in one of his letters does not clearly refer to stopping business, and in any case to more than a

temporary stoppage. There will be judgment for the amount claimed with further interest at contract rate to date and costs with further interest at 6

per cent, against the first defendant, and against the second and third defendants to the extent of the joint family properties in their hands.