Candy. J:-
Plaintiffs, the owners of the firm of Vadilal Dalsukhram at Ahmedabad, were creditors of the firm of Kalidas Sankalchand, owned by defendant 1, Kalidas Sankal-chand, and defendant 2, Sankalchand Mahasukhram. This latter firm owned two printing presses, one at Ahmedabad, the other at Bombay.
The money dealings between the two firms were said to be of long standing, balances of account being signed by one or other of the defendants acknowledging the amount due to the plaintiffs firm. The last of such acknowledgments was signed by defendant 1 on 27th December 1894, and the present suit was brought within three years in 1897 for the sum admitted in the acknowledgment to be due, together with interest.
Defendant 1 admitted the liability of his firm.
Defendant 2 pleaded that the partnership between himself and defendant 1 had been closed in 1892, which fact was known to plaintiffs, and thus he was not bound by the acknowledgment signed by defendant 1 in 1894, and the claim against him was barred.
In the Court of first instance the Subordinate Judge held that for the purposes of the present suit it was sufficient to say that the printing presses, which were going on before 1892, still go on: that the defendants have never given any notice to plaintiffs or to the public about the closing of the partnership- and that the partnership account between them is not yet settled: that partial division which was attempted by the arbitrators appointed by the partners "would not vanish the firm". He found that defendants own statement and evidence in the previous proceedings show that fresh business is still going on, and that both defendants are quarrelling about it. .Under these circumstances the admission signed by defendant 1 binds the firm property and not defendant 2 personally: Premji Ladha v. Dossa Doonger-sey (1) and Act XV of 1877, section 21 No authority is proved to have been given to defendant 1 by defendant 2 to sign for him. Defendant 2 is therefore not personally liable for the claim."
Plaintiffs appealed against this decision to the District Court, urging that as the firm was held liable, defendant 2 must be also personally liable equally with defendant 1.
Defendant 2 also filed cross-objections, urging that he was not bound by the acknowledgment signed by defendant 1, and thus the firm was not liable.
The Subordinate Judge, A. P., accepted this latter plea on the ground that the partnership between the defendants was not "a going concern" at the date of the acknowledgment. He held that partners might continue liable for contracting purposes until notice of dissolution, but the same doctrine would not hold good for the purposes of limitation. He therefore awarded the claim against defendant 1 alone.
Plaintiffs have now filed this second appeal, urging that the acknowledgment signed by defendant 1 was binding on defendant 2, and that the firm property and both partners are liable.
The learned pleaders on both sides have referred at some length to the evidence, and have asked us to draw certain inferences of fact. But, this is a second appeal : and it is solely our province to state the law applicable to such facts as may be found, and if the lower appellate Court has misunderstood the law, to correct the mistake and remand the appeal that it may be disposed of according to law.
In our opinion the Subordinate Judge, A, P., has fallen into an error. He has, from the case quoted in the judgment of the Court of first instance, adopted the term "a going concern," and applied it to the present case without seeing that the facts of the two cases may be entirely different. In Premji Ludha v. Dosaa Docmgersey (2) the defendants firm had traded in rice, but at the end of the year 1881 all active business was stopped, and since that time the partners had been engaged in recovering outstanding and in winding up the affairs of the firm. In the course of the winding up it became necessary to raise money to meet liabilities, and the suit was brought to recover these moneys, the original loans being time-barred, but the bar of limitation being sought to be avoided by an acknowledgment signed by one of the partners within three years of the date of suit.
Mr. Justice Scott held that as the firm had stopped all trading, the business being closed, and the partnership at an end for trading purposes, the agency, which would be presumed as an ordinary rule in a going mercantile concern, did not exist, and that thus it was necessary to show that in point of fact the partner who signed the acknowledgment was authorised by the other partners to do so. The above ruling was in bam Ravji Ramchandra v. Narayandas (3) quoted with approval by Sir Charles Sargent, C. J., who showed that the question as to an acknowledgment by one partner may arise either during the partnership or after its dissolution: and the consideration which would determine whether the acknowledgment of one partner should be regarded as binding on the others must necessarily be very different in the two cases.
Now in the present case there is not a trace of a suggestion that from 1892 the printing presses ceased to work, and that since that time all that the partners were engaged in was recovering outstandings and winding up the affairs of the firm. On the contrary it was found by the first Court, and not controverted by the lower appellate Court, that the presses continued to work. The Subordinate Judge, A. P., found that the arbitrators who were called in to effect a division in 1892 did allot the Ahmedabad press to defendant 1 and the Bombay press to defendant 2. If it be found as a fact that defendants 1 and 2 accepted such arrangement, then it is obvious that from that date the presses were not worked in partnership, and thus there was dissolution. But then comes the important question, had plaintiffs notice of such dissolution 1 Section 264 of the Contract Act provides that persons dealing with a firm will not be affected by a dissolution of which no public notice has been given, unless they themselves had notice of such dissolution. This is a question of fact which was in issue between the parties, but on which the lower appellate Court has expressed no opinion. If the plaintiffs cannot be affected with notice that since 1892 the two presses continued to be worked by the two defendants separately, or that there had in any way been a dissolution of the previous partnership, then the previous dealing, which was for one partner to sign acknowledgments for the firm, would, in the absence of any express or implied direction to the contrary from any member of the firm, hold good. For these reasons we must reverse the decree of the lower appellate Court and remand the appeal to be disposed of in conformity with the above remarks. Costs of this second appeal to be costs in the cause.
Fulton, J.-I concur in Mr. Justice Candys Judgment and merely add that it seems to me that the lower appellate Court has not decided the material issues.
The first question to be decided is whether the partnership between the two defendants had been dissolved by mutual agreement before the date of the fast acknowledgment. The burden of proof is on the second defendant.
If it was still subsisting when the acknowledgment was signed, the Court must decide whether that acknowledgment of liability by one of the partners was or was not an act necessary for or usually done in carrying on the business of the partnership. The burden of proof on this issue will bo on the plaintiff who seeks to take the case out of the general rule contained in section 21 of the Limitation Act. He has only got the acknowledgment of one partner and must therefore in order to bring the case within section 251 of the Contract Act prove the special circumstances therein stated so as to bind the other partner by the acknowledgment. The subject has been so fully discussed by my learned colleague that further remarks seem unnecessary.
3. If the partnership had as a fact been dissolved at the date of the acknowledgment the Court must decide whether public notice of the dissolution had been given or whether as a fact the plaintiff had notice of such dissolution. If he had not and the decision on section 251 is in his favour he will still be entitled to a decree against both defendants under the provisions of section 264-. The burden of proof on this issue will be on the 2nd defendant who alleges that plaintiff had notice of the dissolution.
I concur in the order reversing the decree and remanding the appeal to the lower appellate Court for a fresh decision. Costs of this second appeal to be costs in the cause
Appeal remanded.