Narayanaswamy Mudali vs Gangadhara Mudali and Another

The suit in terms is one for dissolution of partnership. The court below has come to the conclusion that it is barred by limitation, applying Article

106 of the Limitation Act.

Two points have been raised before us by the learned vakil for the appellant. One is that in the reference to the arbitrators there was a request

to settle the accounts, that is equivalent to an acknowledgment of liability and that, consequently, the suit is not barred by limitation. The other is

that to the suit as framed Article 120 applies. As regards the first of these points, the question is as to whether Ex. D dated the 1st December 1912

contains an acknowledgment of liability. It is true that the document says that the account should be looked into, the loss and profits between the

parties should be ascertained and that the parties will be bound to take whatever may be settled by the arbitrators. But the reference never

fructified into an award. Some of the arbitrators died and as a result the reference came to an end. Whether in these circumstances the letter to the

arbitrators could amount to an acknowledgment depends upon the interpretation to be placed on the decision of the Judicial Committee in

Maniram v. Seth Seth Rupchand ILR (1906) Cal. 1047. The Committee pointed out that there were three classes of acknowledgments; the first is

an unconditional undertaking to pay, the second is an unconditional acknowledgment of liability, and the third is a conditional acknowledgment of

liability. As regards the third class it is pointed out that if the condition is not fulfilled there will be no acknowledgment at all; and the case of

reference to arbitrators was specially regarded by the Judicial Committee as a case of conditional acknowledgment. This is what is stated by Sir

Alfred Wills at page 1058 : ""There can be no reason for giving a different meaning to an acknowledgment that there is a right to have the accounts

settled, and no qualification of the natural inference that whoever is the creditor shall be paid, when the condition is performed by the ascertainment

of a balance in favour the claimant,"" that is to say, until there is an ascertainment of the balance by the party to whom the accounts, have been

referred there will be no acknowledgment of liability. Reliance is placed for this statement of law upon a decision of Lord Justice Mellish in In Re

River Steamer Company Mitchell''s claim (1871) L.R. 6 Ch. 822 In the present case, as we pointed out, the reference fell through and

consequently the condition attaching to the enforcement of acknowledgment never was fulfilled. In Bollapragada Ramamurthy trading under the

name and style of Bollapragada Ramamurthi and Co. Vs. Thammana Gopayya and Others, two learned Judges of this Court have construed the

33 Cal. case in the sense in which we interpreted it. Mr. Ramachandra Aiyar relies strongly upon the decision of this Court in Sitayya v.

Rangareddi ILR (1887) Mad. 259. There, there was an award which the court set aside. But the learned Judges referred to the reference itself as

containing an acknowledgment of liability. No doubt this case is in favour of the appellant and although the Judicial Committee in the case of Mani

Ram Sethi v. Seth Rupchand ILR (1906) Cal. 1047 referred to this case their Lordships did not regard it as having any reference to a conditional

acknowledgment. In this view we would have upheld the decision of the District Judge but for the fact that we do not agree with him that Article

106 of the Limitation Act applies to the present case. As we stated at the outset, the suit is in terms one for dissolution of partnership and under

Order XX Rule 15 it is the court that has to fix the time from which the partnership shall cease to exist. Mr. Ananthakrishna Aiyar has contended

that the parties all through understood the plaint as having declared that the partnership had been put an end to and containing a claim for an

account of a dissolved partnership. But in the face of the language of the plaint it is impossible to uphold such a view. It may be that Mr.

Ananthakrishna Aiyar is justified in saying that this is altogether a new case which was not considered by either of the courts below; and we cannot

say that the point was clearly put in the grounds of second appeal here. In these circumstances while we think that we cannot uphold the conclusion

of the courts below that Article 106 is applicable, we must hold that Mr. Ananthakrishna Aiyar is entitled to his costs in this court and that the

question as to limitation should be tried in the light of our observations. We reverse the decree of the District Judge and remand the appeal to him

for disposal according to law. The appellant must pay the costs of the respondent in this court. Further costs will be provided for in the decrees of

the court below.