The Russa Engineering Works Ltd. vs The Kanara Transport Co. and Others

C.V. Kumaraswami Sastri, Officiating C.J.

This is an appeal that arises out of an application to execute a decree which was passed against two defendants, the Kanara Transport Co. and

Captain Bhandarkar. The decree, as is usual with decrees against firms, was obtained in the firm''s name, there being at that time no question as to

who were the partners of that firm. Under the Rules on the Original Side that question has to be raised, in cases where each of the alleged partner

is not served personally, in execution of the decree. Where it is sought to execute the decree against persons who are not named but simply as

against a firm, notice has to go to those persons to show cause why execution should not go against them as partners of the firm. In this case such

notices went and we are concerned with two persons, Sanjeeva Rao and Panduranga Bhat. Sanjeeva Rao did not appear and contest the motion

and an ex parte order for execution was passed as a matter of course. Panduranga Bhat appeared and denied that he was a partner. His case was

that he was asked to become a partner in this firm by Captain Bhandarkar who is his brother-jn-law, that he agreed to become a partner on

condition that the accounts were looked into, and Sanjeeva Rao ceased to be a partner and he took his place as partner and that as none of these

conditions was fulfilled he has not become a partner of the firm and therefore is not liable on any claim against the firm.

The partnership was started under an oral agreement; at any rate, we do not find any document evidencing the partnership when it was started.

According to the evidence it was started on the 1st October, 1922. It is clear from the evidence and Exs. III, IV and VI that Panduranga Bhat was

not a partner when the partnership was started or for some time afterwards. Ex. II, as to the genuineness of which there is no dispute, is dated the

17th April, 1923 and is signed by Panduranga Bhat, Bhandarkar, Sundar Rao and Shiva Rao. The document runs as follows:

We, viz., (1) Uppinangady Panduranga Bhat, (2) P.R. Bhandarkar, (3) Kalle Sundar Rao, and (4) Kalle Shiva Rao, are the only partners of the

concern named Kanara Transport Co., Mangalore, South Kanara, and there are no other partners. Mr. Kalle Sanjeeva Rao is no longer a partner

of the firm. All the four partners are entitled to share in the profits and losses equally. All the four of us are jointly and severally liable for the debts

of the concern hitherto incurred. A regular deed of partnership will be entered into within a fortnight from date.

It is clear from this document thai there is a specific statement made that Sanjeeva Rao was no longer a partner of the firm, so that, even

assuming the respondent''s case to be true, one of the conditions that were necessary, namely, the retirement of Sanjeeva Rao, is specifically stated

in Ex. II. As regards other conditions they are not set out in Ex. II and we agree with the learned Judge in thinking that we cannot import into Ex. II

the other conditions alleged.

The learned Judge has disposed of the case on the ground that as the appellants have claimed against Sanjeeva Rao also as a partner and as it is

not shown that he has left the firm, they cannot have it both ways and that therefore the fact that they claimed against Sanjeeva Rao is evidence to

show that Panduranga Bhat could not be a partner. We think the proper way to appreciate the evidence in this case is first of all to see whether

there is anything in the evidence to show that the statement which has been made in Ex. II that Sanjeeva Rao was no longer a partner of the firm is

not correct. The onus, we think, clearly lies upon Panduranga Bhat who now wants to show that the recitals in Ex. II are not correct. There is no

evidence that Sanjeeva Rao after the date of Ex. II did any act or made any assertion which could lead one to a reasonable supposition that he

continued to be a partner of the firm. On the contrary Sanjeeva Rao went further than the statement in Ex. II. He denied that he ever was a partner

of the firm and on the evidence there is nothing to show that Sanjeeva Rao either by reason of his own acts or by reason of any acts of the

partnership can be treated as continuing as a partner of the firm after the date of Ex. II.

The next question is whether the plaintiffs by claiming against both Sanjeeva Rao and Panduranga Bhat have done anything which would support

the case of Panduranga Bhat that he is not liable. The claim is in respect of dealings between the plaintiff firm and the firm of Kanara Transport

Company. The account which appears on page 39 of the printed book, as to which there is no dispute, shows that dealings began on the 31st

August, 1922 and went on till the 14th August, 1923 and Ex. II is dated 17th April, 1923 so that Sanjeeva Rao has gone out and Panduranga

Bhat has come in under Ex. II after that date. Being a continuous transaction Panduranga Bhat would be liable for transactions from the 30th April,

1923, to the date when they close. Being-one continuous transaction the plaintiffs would have to make both of them parties and claim against both

of them in any event, and the fact that they chose to claim against Sanjeeva Rao in respect of the transactions subsequent to his withdrawal and

against Panduranga Bhat for transactions antecedent to his coming in would not by itself be a ground for denying the plaintiffs such rights as they

might have against each of the partners. We think that on the evidence it is difficult to hold that Sanjeeva Rao continued to be a partner after the

date of Ex. IT. and, the onus being on the respondent to show that he ceased to be a partner, we do not think that we can hold that he has no

liability under this decree.

As regards the liability of the respondent, we agree with the contention of Mr. Radhakrishnayya that we cannot make him liable in respect of

antecedent transactions on the strength of an agreement contained in Ex. II between the partners inter se that he would be liable for transactions

hitherto incurred and future liability. The law on this subject is, we think, clearly contained in Section 249 of the Indian Contract Act which

expressly excludes such liability as regards the creditors of the firm. Section 249 of the Indian Contract Act is really the same as Section 17 of the

English Partnership Act and the law has been set out in Lindley on Partnership (3rd Edition) pages 273 and 275. This view is also supported by

the decision of the Privy Council in Rolfe and the Bank of Australia v. Flower, Salting and Co. (1865) L R 1 P C 27. The learned Judge has

referred to Vagarnath and Co. v. Cresswell and Ors. ILR (1913) C 814, a decision of Imam, J., on a question of trademark, but if that decision

held that apart from privity of contract a creditor of the firm is entitled to rely on an agreement between the partners, we respectfully dissent from it.

It is, however, possible to distinguish that case from the present one that all the parties were aware of this agreement and entered into it on that

footing. It seems to us to be clear that the respondent cannot be made liable for any transactions before the 30th April, 1923. Sanjeeva Rao has

not appealed against the order which makes him liable for subsequent transactions but we have got power under the Code, even though he has not

appealed to adjust the rights so as to do justice between the present appellant and respondent. We think the proper order to make is to direct

execution to go against Sanjeeva Rao for Rs. 5,334-3-3. As regards Panduranga Bhat execution will issue against him for Rs. 3,621-6-0 with

interest at 12 per cent from the various dates in the account till decree and 6 per cent thereafter. As regards costs the respondent will pay the

appellant half his taxed costs.