Seshi Ammal and Another vs Vairavan Chettiar by his authorised agent Ramaswami Chettiar and Another

John Wallis, C.J.—The main question argued in the. appeal is as to the liability of the defendants 2 and 3, the representatives of a deceased

partner of the 1st defendant for an advance of Rs. 2,301 made by the plaintiff to the 1st defendant after his partner''s death to enable him to take

up bills of lading for, and obtain delivery of goods, which had been ordered by the partners during the life-time of the deceased partner but did not

come forward until after his death. While Section 249 Indian Contract Act makes any partner liable for all debts and obligations incurred while he

is a partner in the usual course of business by or on behalf of the partnership, Section 261 provides that the estate of a partner who has died is not

in the absence of an express agreement liable in respect of any obligation incurred by the firm after his death. The debt now sued for was an

obligation incurred by the firm after his death and therefore is covered by the section. It is true that it was incurred by the surviving partner to

enable him to perform a contract entered into during the life-time of the deceased partner, but this is not enough to take it out of the section.

Section 263 no doubt provides that ""after a dissolution of partnership the rights and obligations of the partners continue in all things necessary for

the winding up of the business of the partnership,"" but these provisions cannot override the express provisions of Section 261 that obligations

created by the firm after the death of the deceased partner are not binding on his estate. "" It may be taken as a general proposition, that the estate

of a deceased partner is not liable to third parties for what may be done after his decease, by the surviving partners,"" (Lindley on Partnership Bk.

IV Chap. 3 Section 2 p. 708 Sth Edn.). Section 9 of the Partnership Act, 1890 makes the estate of a deceased partner liable in a due course of

administration for all debts and obligations of the firm incurred while he is a partner. At Common Law the estate of a deceased partner was not

entitled to the benefit of or liable under, partnership contracts, and equity seems only to have imposed liability in the case of contracts entered into

by the partnership in the life-time of the deceased partner, It has been held u/s 9 of the Partnership Act in Bagel v. Miller (1903) 2 K.B. 212 that

the representatives of a deceased partner could not be sued in a County Court together with the surviving partner for the price of goods ordered

by the partnership during his life-time but not delivered till after his death, on the ground that the obligation to pay was not incurred while he was a

partner, though apparently the court considered some other remedy was available against his representatives on the contract to purchase made

during his life-time, as to which see Maclean v. Kennard (1874) 9 Ch. 336 In this case the suit debt was binding on the partnership assets, which

the 1st defendant, surviving partner, had power to pledge in discharge of it, and I think as regards the amount in question the decree must be

against the 1st defendant personally and against the partnership assets in his hands. We modify the decree accordingly, and dismiss the appeal in

other respects. Parties to pay and receive proportionate costs throughout.

Seshagiri Aiyar, J.

I agree. The short and interesting point raised by Mr. Venkatarama Sastriar is res integra in this country and has very meagre authority, in favour

of it in England. The facts are that a firm consisting of two partners ordered goods during the life-time of both of them. After consignment and

before delivery one of them died. The survivor borrowed money to honour the bill of lading and took possession of the goods. The lender now

sues to enforce the liability on the assets of the partnership as well as on the properties of the deceased partner. The learned Vakil for the legal

representatives of the deceased partner contends that the estate is not liable. The sections of the Indian Contract Act bearing on the point are

Sections 251, 261 and 263. As regards Section 251, it is not denied that the honouring of the bill of lading and the acceptance of the goods are

acts "" necessary for, or usually done in carrying on the business."" Therefore, if the co-partner were alive he and his estate would have been bound.

Section 261 refers to obligations incurred after the death of the partner and expressly exempts the estate of the deceased from liability for such

obligations. In this case the obligation to pay for and to accept the goods was incurred during the life-time of the ""deceased partner. It is true that

the borrowing was after but the borrowing, in my opinion, is only the substitution of a new liability for an existing one and not the creation of a fresh

liability. The implication of the section seems to be that the estate should not fee answerable for fresh liabilities created solely after the death of the

partner. Then comes Section 263, It is difficult to construe this section as not dealing with devolution caused by the death of a partner. The

expression partners must mean those who constituted the partnership before it was dissolved by the death of one of them and prima facie in cases

of dissolution by death, the same liability would attach as before death provided the obligation was incurred for winding up the business. It cannot

seriously be argued that the acceptance of the goods ordered and their payment were not necessary for winding up the business. Consequently,

subject to the special apportionment of liability between the private debts and partnership debts mentioned in Section 262, it seems fairly clear

from the language of Section 263 that the deceased partner''s estate would be liable for obligations necessitated by the process of winding up the

business, unhampered by authority. This seems to be the plain interpretation of the sections referred to.

Mr. Venkatarama Sastriar relied strongl on Bagel v. Miller (1903) 2 K.B. 212 for his contention already referred to. The decision certainly

supports him. The learned Chief Justice, Lord Alverstone, says that ""there may be an obligation, but not the obligation alleged in the present case.

Section 9 of English Partnership Act on which the decision is based provides that ""after his death his estate is also severally liable in a due course of

administration for such debts and obligations."" The judgment may be said to have proceeded upon the unsustainability of the form of action

commenced by the plaintiff and not on a denial of the liability of the estate of the deceased partner to contribute. The observations of Channel, J.,

The plaintiff''s remedy is not by means of an action for goods sold and delivered "" supports this suggestion. But the weight of authority is against

restricting the principle of the Lord Chief Justice''s decision to forms of action alone. Lord Lindley at page 708 says :--""With respect to the direct

liability. of the assets of the deceased to creditors, it may be taken as a general proposition, that the estate of the deceased partner is not liable to

third parties for what may be done after his decease by the surviving partners.

In 22 Halsbury in the note to paragraph 47 the law is thus stated:--""But, though he has authority to pledge the partnership property this does not

erable him to bind his partners personally."" The authority quoted for this proposition namely Maine v. Holland (1889) 60 L.T. 285 does not

support it. Pollock in his Digest of the Law of Partnership puts the above statement of the law as an illustration to Section 9 of the Partnership Act.

Sir H.H. Shephard in his commentaries upon Sections 261 and 263 of the Contract Act inclines to the view that the estate would not be liable. It

must be stated that there is practically no difference in language between the sections of the English Partnership Act and those of the Indian

Contract Act on this ground.

As I feft considerable doubt on the question, with diffidence, I examined the American Law on the subject. In 30 Cyclopaedia of Law and

Procedure page 634 it is mentioned "" As a rule however, the estate of the deceased partner cannot be made directly liable to third persons by the

contracts of the survivor."" In this state of authorities, I feel compalled to hold that the contention of the learned Vakil for the appellant should be

accepted. The result of this view would be to restrict the operation of Section 263 so as to give the surviving partner alone and not the creditor a

right to proceed against the estate of the deceased partner in regard to an obligation incurred for winding up the business of the partnership. This

does not, in my opinion, stand in the way of the creditor proceeding against the assets of the partnership. The surviving partner is before the court

and he represents the partnership effectually; and a decree against him can be executed against the assets of the partnership in his hands. I would

modify the decree by directing that for the sum of Rs. 2,300 and odd borrowed after the death of the husband of the 2nd defendant the assets of

the partnership in the hands of the 1st defendant would be alone liable.

The latter will also be personally liable as mentioned by the learned Chief Justice. I agree in the order as to costs.