Rajagopal Oil Mills, Shevapet and Others vs Louis Dreyfus and Co. Ltd., G.T., Madras and Others

Anantanarayanan, J.

(1) These are two related appeals. In C. C. C. A. No. 22 of 1956 the appellants are the Rajagopal Oil Mills, Salem, (1st defendant) and

defendants 2 to 4. This is the main appeal, which involves a question of some interest whether, in the context of the suit transaction and other

related transactions of the firm Rajagopal Oil Mills, the karta of this joint family business (second defendant) is not estopped from contending that

the firm is not liable upon the suit transaction because the transaction was conducted and put through by Gopal (third defendant), a junior member

of the family firm. C. C. C. A. No. 25 of 1956 is an appeal by Messrs. Louis Dreyfus and Co. Ltd. (plaintiffs in the lower court) upon two

relatively subsidiary matters, concerning the actual date upon which the breach of contract occurred, and the assessment of the quantum of

damages by the lower court.

(2) Very briefly, the evidence conclusively shows that the Rajagopal Oil Mills (first defendant) entered into a contract with Louis Dreyfus and Co.

Ltd. (plaintiffs) on 11-10-1950 under contract No. 21 (Ex. A1), for the sale and delivery by the defendants to the plaintiffs of 200 candies of 500

lbs. net each of groundnut expeller oil at Rs. 372 per candy, delivery to be at Madras Harbour not later than 15-12-1950. It is not in dispute that

the first defendant firm failed to deliver, apparently owing to a sudden rise in the prices ruling in the market, and that there was breach of contract.

The appeal by the plaintiff''s firm (C. C. C. A. No. 25 of 1956) is upon the two simple and relatively minor matters of the actual date with

reference to which the breach of contract should be held to have occurred, whether it was the date 14-12-1950 as found by the lower court, or

the extended date 22-12-1950, and whether the quantum of damages had been rightly estimated.

(3) It is the main appeal (C. C. C. A No. 22 of 1956) in which the question which presents certain difficulties in its solution has arisen.

Unfortunately, the facts and pleadings were themselves not clear at the trial, and the true issue does not appear to have emerged in a clear form.

For this reason, the judgment of the lower court is not particularly helpful, though it does contain references to the relevant oral and documentary

evidence.

The second defendant (M. A. Venuswami Chettiar) who is the karta of this joint family business, and the head of the family consisting of himself

and his sons defendants 3, 4 and 5 in the Court below, contended that the first defendant firm was his sole proprietary concern, and that his sons

were not liable upon the contract. Louis Dreyfus and Co. Ltd. (plaintiffs) contended per contra that the first defendant firm was a partnership firm,

with defendants 2, 3 and 4 as partners together. (After discussing the evidence the Judgment proceeded:)

(4) In view of all this evidence, we have no doubt whatever that the first defendant firm was a joint family firm, of which the second defendant was

the karta. In certain documents, and for certain limited purposes such as applying to the Central Bank of India, etc. for facilities, the second, third

and fourth defendants alone have described themselves as partners, and third, fourth defendants alone, as though they were partners.

But this description has really no significance, when the true principle is borne in mind. A joint family business is not a partnership, and the two

concepts are almost exclusive, though of course, there could be a valid partnership between the joint family firm represented by the karta, and

other parties. the distinction has been clearly recognised in S. 5 of the Indian Partnership Act, and the following passage in Mayne''s Hindu Law

(11th Edition, p. 380) will be sufficient for this purpose.

it has been held in some cases that the members of a trading family, though not partners inter se, stand in the relation of partners, as regards

persons dealing with them. This formula, if it refers to more than the personal liability for the debts of the firm, would seem opposed both to Hindu

Law governing a joint family, and to S. 5 of the Indian Partnership Act.

We may here add that in Desai on the ""Law of Partnership"" (Second Edition, page 30), the distinction between the joint family firm and an ordinary

commercial partnership; has been clearly set forth. Upon this aspect, we need not add anything further.

(5) But the far more important point is, assuming that the first defendant firm was a joint family firm with second defendant as the karta, as it clearly

was, whether the firm and second defendant were bound by the suit transactions. The history of these transactions throughout exhibited the feature

that third defendant (Gopal) signed, authorised, accepted and dealt with business as a kind of de facto manager.

The argument of learned counsel for the present appellants (Mr. Vasanta Pai) could be tersely stated in this form. Whatever Gopal (third

defendant) did, he was certainly bound by the transactions and personally liable therefor, though he was only a junior member of the firm and not

the karta. This is because he held out that he had an authority to commit the firm, and throughout acted in fact upon that basis and assumption.

The decisions in Chidambaram v. Muthaya AIR 1936 Rang 160, Yeshvant Dattatraya Vs. Shripad Sadashiv, and of this Court in P.A.R.

Ramaswami Chettiar Vs. Srinivasa Iyer and Others, are clearly authorities for the view that, under such circumstances, the third defendant would

be personally liable. But, it is contended, the converse position does not at all follow. The karta (second defendant) was not involved in these

transactions, and hence neither the firm itself (first defendant), nor the karta (second defendant) would be liable.

There is not a scrap of writing to show that Venuswami Chettiar (second defendant) on behalf of the firm entered into the suit transaction, or into

any of the other transactions, and this necessarily involves the inference that first and second defendants are not liable. Certain dicta of

Venkataramana Rao, J. in P.A.R. Ramaswami Chettiar Vs. Srinivasa Iyer and Others, are relied upon, to show that a creditor dealing with the

manager of a joint family business, does so at his risk, and with knowledge of certain limitations imposed by law.

It is even sought to be argued that each transaction must be separately authorised by the karta, and that person in the situation of Louis Dreyfus

Co. Ltd. (plaintiffs) must take care to see that it is the karta who authorised in every instance, so as to bind the family firm. If the junior member is

throughout acting as a de facto manager, in the correspondence, receipts for cheques and indents etc., it is at the peril of the other party.

(6) Even in this form, this broad proposition is somewhat doubtful. We think that the true test would be, in all such cases, whether the karta

permitted the junior member concerned to function as a de facto manager in respect of the transactions, with knowledge and with implied approval

or approval by conduct. If the karta did so, we are quite unable to see how the family firm would not be bound, because, in effect, it would be the

karta who entered into the transactions and authorised them.

Learned Counsel for plaintiffs-respondents (Sri. R. Narasimhachariar) has even relied upon a passage in an earlier edition of Mayne to show that

several kartas may, in fact, manage a joint family business; but it is not necessary to proceed into this, for our present purpose. In any event, if the

evidence shows that a karta like the second defendant authorised these transactions, permitted his son (third defendant) to enter into them, with full

knowledge of them, and approbated them we have no doubt at all that the firm would be bound. The karta himself, as representing the firm, will

certainly be bound upon several factors of the principle of estoppel by conduct.

(7) Before proceeding to the authorities in illustration of this, we shall first show clearly and indisputably, that the second defendant himself

throughout must be held to have had knowledge of these transactions, that third defendant (Gopal) entered into them and conducted the business

under his authority and with his consent, and that virtually the second defendant held out third defendant as the de facto manager, and approved the

transactions, when it was convenient for him to do so. (After discussing the evidence in para 8 the judgment proceeded:)

(8) The law of estoppel by conduct was stated long ago in Pickard v. Sears (1837) 6 Ad & El 469, and has received statutory expression in the

Indian Evidence Act (Section 115). The form in which it is usually stated is that:

Where one by his words or conduct wilfully causes another to believe in the existence of a certain state of things, and induces him to act on that

belief, or to alter his own previous position, the former is concluded from averring against the latter a different state of things as existing at that time.

We have also found in Casperz on ""Estoppel"" (4th Edition Section 105, pages 111), an actual reference to the members of a Hindu joint family

who held out one of their member as manager of the estate, in such a manner as to induce outsiders dealing with him to believe that he had

authority to mortgage their interest. The learned author points out that, under such circumstances, those members are estopped from denying the

binding nature of the mortgage, on the ground that member had no power to act on behalf of the family.

Again, since it is clear that a prior transaction was approbated by second defendant, entered into with plaintiffs under identical circumstances, when

it was convenient for second defendant to do so, because there was a settlement, the karta (second defendant) cannot be now heard to reprobate

and to deny. ""One cannot play fast and loose"" (Bigelow 6th edition, p. 783). In American Jurisprudence vol. XIX Section 127 page 781, we find

the law of estoppel to be stated in this form, that even if the party adjudged to be estopped was silent, and so conducted himself as to warrant the

conclusion that he consented to the transaction and approved of it, he would be bound.

We have hence no hesitation in concluding that the first defendant-firm and the second defendant are bound by the suit transaction, and liable for

the breach of contract, along with the third defendant. However, as contended by the learned counsel for the appellants, it appears to be

indisputable that no liability can attach itself to the fourth defendant amongst the appellants, and the appeal will have to be allowed only to this

limited extent.

(9) We may immediately deal with the related appeal by the plaintiffs in the lower Court. We have already referred to the two short grounds upon

which this appeal is sought to be pressed. On the first ground, we do not think that the learned Judge was in error in specifying the date of the

breach of contract as 14-12-1950, and in applying remedies with reference to prices upon that date.

It is true that the plaintiff-firm unilaterally extended the time for compliance with the contract upto 22-12-1950, under an alleged option

empowering the buyers to do so. But this locus poenitentiae for performance cannot be pressed into service, particularly against the background of

a rising market, as postponing the date upon which the breach occurred when the first defendant firm did not honour the contract at all.

The second point is that the learned Judge has calculated the quantum of damages at 50 per cent of that which would be strictly due, because with

reference to certain other firms that failed to deliver, such a rate was accepted as an equitable settlement. There may be some broad equity in this

procedure, but it will not suffice as a basis for a finding at law. We therefore partly allow this appeal, and find that the plaintiff-firm is entitled to

damages at Rs. 4000/- more than what was decreed by the lower court which we find to be a fair and proper figure under the circumstances,

which also has been accepted as a just and proper figure of assessment of damages by learned counsel for the plaintiff-firm.

(10) C. C. C. A. No. 22 of 1956 is dismissed, except with reference to the fourth defendant, except, of course, with reference to his interest in the

joint family firm and C. C. C. A. No. 25 of 1956 is allowed to the extent indicated above with costs to the plaintiff-firm in C. C. C. A. 22/56.

(11) Order accordingly.