S. Meikole Udayar vs S.P. Periasami Konar and Others

Veeraswami, J.

(1) This appeal by the plaintiff is from a decree of the subordinate Judge of Sivaganga dismissing the suit against the respondents for rendition of

accounts. His case was that he entered into a contract with the Highways for construction of Kodai kanal-Moonar road and commenced work on

25-1-1965. He took the respondents (defendants) as partners in the single venture on the understanding that it should come to an end at the

conclusion of the works contract with the Highways and the passing of the final bills relating thereto. The terms of the partnership were reduced to

writing in a deed dated 18th May 1955 tense was styled as ""Michael Udayar and Co"". Each of the partners to this firm was to contribute a share

capital of Rs.10,000 and that if further capital was necessary, they should contribute the same in equal shares by raising loans. They were to share

the profits of the firm equally. The business of the partnership was to be managed and conducted by the respondents subject to the control of the

appellant and the respondents were to maintain proper accounts. In case of differences between the partners, touching the work, the partnership

should be dissolved after a month''s notice given by any one of the partners. This arrangement was given effect to, but according to the plaintiff, the

defendants did not carry on the work faithfully and honestly and they were found to be negligent with the result, the construction work was delayed

and eventually the department itself took over the work for completion some where in March 1958. As a result of the contract work having thus

come to an end in March 1958, by the terms of the partnership, so the plaintiff claims, the firm became dissolved then. The suit was resisted by the

defendants on various grounds which included that the partnership was an illegal one that since the firm had been dissolved even as early as on

19th August 1956, the suit was barred under Art. 106 of the Limitation Act, 1908 and that in any case, since the plaintiff entered into an agreement

of partnership on behalf of Michael Udayar and Co., a firm of partnership in which the plaintiff was a partner with certain others, the suit brought

by the plaintiff in his individual capacity and in his own name was not maintainable.

(2) The court below in the first instance framed three issues covering the first two grounds, which we mentioned of the defense in the written

statements but on 21st August 1961 settled two additional issues raising the last ground of the defense. On the question of limitation, the court

below itself observed that thought it was raised in the pleading, learned counsel on either side did not press for an issue nor did they argue the

question. Nevertheless, the court below went into that question and on its finding on the evidence that the firm must be deemed to have been

dissolved on 19th August 1956, held that the suit which was instituted on 30th March 1960 was barred by limitation. It also found that as the

provisions in the Madras Detailed Standard Specifications were deemed to be incorporated in the works contract entered into by the plaintiff with

the Highways and those provisions amount others prohibited assignment or subletting of the contract and as the plaintiff had, as claimed in the suit,

entered into a partnership with the respondents, this was opposed to public policy and therefore the contract of partnership was illegal. The further

finding of the court below is that the plaintiff having failed to implead the other partners of his firm, the suit was not maintainable and must fail.

(3) We are of the view that the court below was not correct on any of the points aforementioned. We cannot but express our surprise that the

learned Subordinate Judge should have led himself to think that merely because the words contract with the Highways prohibited assignment or

sub-letting and the plaintiff entered into a partnership with the respondents any public policy was involved therein. Obviously, the contract entered

into by the plaintiff with the Highways is just like any other works contract and the fact that the Government was a party thereto would make no

difference to the contract. Neither the Contract Act nor the Partnership Act treats the Government on any special footing for purposes of contracts

or formation thereof or their enforceability. Apparently the Subordinate Judge proceeded on the basis, and, quite erroneously, that wherever there

was a contract with the Highways for construction of road, public was involved, and, therefore, also public policy. It is hardly necessary to point

out that this line of reasoning is quite incorrect. A contract can be said to be illegal if it is opposed to a statute or public policy. What is public

policy is difficult to define. One can easily understand what it is though the range of understanding may vary with individuals. But in this case no

such difficulty arises as clearly the works contract with the Highways departments involved no public policy and the entering into the suit

partnership cannot be regarded as contravening any public policy. We may also add that Mr. Sundaram Aiyar, learned counsel for the

respondents, rightly realised the position and could not convince us that the court below was right on this point. Nor are we satisfied that the court

below was right in its assumption that the suit firm was dissolved on 19th August 1956. As far as we can see from the record, there is no evidence

direct or circumstantial which supports that finding of the court below. It is true that there is evidence to the effect that the plaintiff was urging upon

the defendant by certain letters that they should meet in the second week of August 1956 to settle the affairs in relation to the partnership. Beyond

that, as we said, there is no basis for supporting the finding. It is true that the court below has not stated that there us any direct evidence but it was

inclined to infer that there must have bee a dissolution on 19th August 1956 and that this inference the court purported to draw from Ex. B 1 but

we can find no justification for this.

(4) The takes us to the last ground as to the maintainability of the suit. The actual finding of the court below is that the plaintiff having entered into

partnership with the respondents Michael Udayar and Co. The suit instituted by him in his individual capacity had not been properly laid and court

not be sustained. The contention has been developed before us on the ground that a firm cannot be a partner of another firm and that where

factually a firm enters into a partnership with another firm, the true position in law would be that the partners of the joining firm will automatically

become the partners of the new firm. As a proposition of law, no exception can be taken to it. A firm is certainly not a legal entity and cannot be

regarded as a person unlike a company which is a corporate body and a person in the eye of the law. A firm is but a compendious expression to

indicate the relationship brought about between two or more persons who agree between themselves on a common venture on terms based on

mutual consent. These propositions are now well settled and reference need be made only to Seodoyal Khemka and Another Vs. Joharmull

Manmull and Others, . Dulichand Lakshminarayan Vs. The Commissioner of Income Tax, Nagpur, , K.T.M. Muhammad Abdul Latiff Rowther

and Others Vs. S.M.S. Sheik Ismail Rowther and Others, and Firm Brij Kishore Ram Sarup Vs. Sheo Charan Lal . In the third case cited, a

Division Bench of this court held that though a firm was not a juristic person and as such could not enter into a partnership, there was nothing to

prevent the partners of the firm as individuals as being partners in another firm by the use of the firm''s name. In the Allahabad case it was held that

where a firm entered into a partnership with other individuals, one of the partners of such firm could sue for accounts on behalf of all in accordance

with the form of procedure laid down in Order 30, C.P. Code. For the appellant the contention is that where a partners of a firm purports to enter

into a contract of partnership with another firm representing his firm and on behalf of it, it is not necessary for him in a suit for rendition of accounts

against his partners in the second firm to implead the rest of the partners in his own firm as plaintiffs. In support of this proposition reliance is placed

on AIR 1927 70 (Privy Council) We are of the view that this decision lays down no such proposition.

(5) Mr. Sundaram Aiyar for the respondents has pressed upon us that in such a case, the plaintiff must take other persons of his own firm as

plaintiffs or defendants and that in the absence of it, the suit will not be maintainable. On the view we take of the facts of this case, we think it

unnecessary to decide this question. It is true the partnership agreement with the respondents recite as a preamble, that the plaintiff entered into it

on behalf of his firm S. Michael Udayar and Co., but whether he signed the document in that capacity is not clear. The evidence is to the effect that

he entered into the partnership for and on behalf of S. Michael Udayar and Co., but his assertion was that it was his firm, that he was its proprietor

and so he was entitled to sue in his own individual name. The real question however, is whether assuming that he entered into the partnership

agreement for S. Michael Udayar and Co., he had authority to do so under the terms of the partnership agreement in relation to S. Michael Udayar

and Co. The only provision that Mr. Sundaram Aiyar could point to in that partnership agreement is this:

If it is found necessary to take in further shareholders besides the parties to this partnership, those parties shall be taken in only after obtaining the

consent of all the said parties herein.

Clearly this provision only means that the partners shall be at liberty to take any further partners to that firm and it certainly does not mean that the

plaintiff was authorised to enter into a partnership with third parties on behalf of the firm. Our attention has not been invited to any other evidence

to justify the stand that the plaintiff had authority to enter into a partnership with the respondents on behalf of Michael Udayar and Co. No doubt

no point would appear to have been taken in that form in the court below. But the fact remains that if the respondents maintain that the suit as

framed does not lie, it was for them to show that the plaintiff had authority to enter into a partnership with the respondents on behalf of Michael

Udayar and Co. If such authority is not shown notwithstanding the recital in the preamble of agreement with the respondents, it has to be taken that

the plaintiff entered into the agreement only in his individual capacity. It is because, as a fact he had no authority to represent Michael Udayar and

Co., and commit it to the suit agreement. We are, therefore, of the view that the objections to the maintainability of the suit cannot be sustained.

(6) The appeal is allowed and the suit is remitted to the court below for trial. Opportunity will be given to both sides to adduce documentary

evidence on the question whether the suit firm was dissolved on 19th August 1956 and oral evidence will only be admitted for purpose of marking

such documentary evidence. Costs so far will be borne by each party both here and below. Court fee paid on the memorandum of appeal will be

refunded.

(7) Appeal allowed.