K.R.V. Firm vs Sathyavada Sitharama Swami and Others

Wallis, J.—This is a suit by the plaintiff, 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 the 7th January 1909 when Rs. 3976-0-6 were found due to the plaintiffs and the 1st defendant

signed for that amount in the books of the plaintiffs. The 1st and 3rd defendants do not contest the suit. The 2nd defendant has filed a written

statement in which he denies carrying on business in partnership with the 1st and 3rd defendants and says that the business belonged exclusively to

the 1st 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 1st defendant are proved and are not barred owing to the acknowledgment by the 3rd defendant. There must

therefore be judgment against him in any event. As regards the 2nd defendant, I find it proved against him that he was a partner with the 1st

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

in Section 239 of the Indian Contract Act. The business was no doubt carried on in the name of the 1st defendant as appears from the plaintiff''s

Ledger, but there is nothing unusual in that. In the box the 2nd defendant said something about being divided in status but not by metes and

bounds. In the 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 1st 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 in Valasubramania Pillai v. S.V.R.B. M. Ramanathan Chettiar

ILR (1908) M. 421 and Sheik Moideen Saib v. The Official Assignee of Madras ILR (1911) M. 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 this legislation was to restrict the rule laid

down by Lord Mansfield and the Court of King''s Bench in Whitcomb v. Whiting (1781) 1 Sm. L.C. 501, 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 Tenderten''s Act 9 Geo. 4 c. 14, and as to payments by the Mercantile Law Amendment Act 1856, 19 and 20 Vic. c. 97 Section 14. 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 an

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 &c."" This is very near the language of Lord

Tenderten''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 reasononly 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 joint contractors. 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 Starling J. in In re

Macdonald (1897) 2 Ch. 181 said that the word "" only"" is emphatic and in In re Tinker (1894) 3 Cb. 429 Lindley L. J. observed that "" the object

of the enactment was not to facilitate frauds by debtors upon creditors, but to protect debtors against state claims,"" and Lord Herschell 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 (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 (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 Khudu Ram Dutt v. Kishen Chand (1876) 25 W.B. 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 Prengi Moha v.

Dorsa, DoongerseyI.L.R. (1886) 13, 358. Scott J. ruled ""It must be shewn that the partners 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. Goodwin v.

Parton3;"" 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 Bihi v. Pursotatn ILR (l888) A. 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 Dulsukram v.

Kalidas ILR (1902) B.42, Candy J. referred to Scott J.''s ruling with approval, and stated that it had been approved by Sargeant 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 as 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 under the authority of the other partners. Here it may be

observed that Section 251 of the Indian Contract Act of 1872 which was subsequent to Limitation Act IX of 1871 Section 20 in which partners

are expressly mentioned, is quite general in its terms and mikes 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 shew 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 here 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 Aiyar and Boddam J. J. in Rajagopala Pillai Vs. Krishnasami Chetti, , that

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

by their acknowledgment of a debt of the firm unless they are specifically authorised 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 Abdur Bahim J. in V alasubramdnia Pillai v. S.V.B.B.M.

Ramanadhan Chettiar ILR (1909) M. 421. In that case the learned judges dissented from the ruling of Scott J. in Prenji Maha v. Doosa

Doongersey ILR (1886) B. 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 shewn, 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 tightly 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 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 decision in Goodwin v. Parton (1879) 41 L.T.

91 affirmed in (18S0) 42 L.T. 568 was not brought to the notice of the Court or was regarded as inapplicable. The next case Sheik Moideen v.

The Official Assignee of Madras ILR (1911) M. 421 was a decision of the learned Chief Justice and Sankaran Nair 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 Dalsukran v. Kalidas ILR (1902) B. 42 was referred to as well as Prengi Moha v. Dossa Doongersey ILR (1886) B. 358 but the

Court was of opinion that it did not help the respondent plaintiff. The conclusion to which I have come on the 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 or 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 fraud

by debtors upon their creditors.

Coming now to the evidence in the present case all that appears is that the 2nd 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 plaintiff''s books would be a usual and

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

the Godaveri District; and that the 1st defendant came up to Madras and signed the acknowledgment in the books of the plaintiff''s firm. Exhibit A

is as follows. "" Remaining debit balance 3978-0-6. We bind ourselves on demand to pay to the plaintiff''s order to persons possessing this order at

Madras Rs. 3976-0-6 being the principal together with interest thereon at one per cent, per mensem from this date.

Sathyavada Sitharamaswami

(1st defendant''s signature).

The business was carried on in the name of the 1st 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 1st defendant not merely on his own behalf but on behalf of the firm. There is also evidence in B that

the 2nd 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

2nd defendant was authorised 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 2nd and 3rd defendants, I may say I attach no importance to the 2nd 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 p. c. against the 1st

defendant and against the 2nd and 3rd defendants to the extent of the joint family properties in their hands.