1. The suit which has given rise to this second appeal was brought by the members of the firm known as “The Bavla Gujarat Cotton Press” for the specific performance of an oral agreement for a lease entered upon between the firm and one of its members, defendant 1. The agreement took place on 21st September 1925, and it has been found as a fact by the Courts below that its terms were that the plaintiff firm should take the property upon lease for fifty-one years beginning from the date of the agreement at an annual rent of Rupees 308-12-0, and that a formal lease was to be executed; but there is a finding that the date for the execution of the lease was left indefinite and that it depended upon defendant 1 himself having a title to convey upon the Thakore (who is admittedly the owner of the land) letting it first to Naran, and Naran then letting it to defendant 1. A number of defences were raised but were overruled, and the execution of a registered lease was ordered.
2. In this second appeal by defendant 1 four points are urged: (1) that the plaintiff firm consists in fact of more than twenty members, and, therefore, under Section 4 of the Companies Act, it cannot be recognized for want of registration of the company and cannot bring this suit; (2) that the agreement upon which the plaintiffs rely was not so much an agreement for a lease as an actual lease, and it is void for want of writing and registration under Section 107 of the Transfer of Property Act; (3) that the agreement is indefinite in its terms, and both for this reason and because three years have elapsed from the time when it became enforceable (assuming that it was enforceable) it cannot now be enforced, and (4) that defendant 1 is himself a member of the firm with whom the agreement was executed and thus occupies the position both of plaintiff and of defendant, and therefore the present suit is bad.
3. On the first point there is no direct authority applicable to the present case in the cases decided in India. The question arises in this way. There are in the list of plaintiffs eleven persons named as members of the firm. Among the defendants, defendants 1, 2 and 3 are members of the company, so that there are really at least fourteen members of the company. But plaintiff 3 is “The Bavla Yishnu Cotton Ginning Factory,” and in reply to a question put by the defendants asking for information as to the number of members of the Bavla Vishnu Cotton Ginning Factory it was stated that, the firm consisted of four principal partners, of whom Kesbavlal Hirachand had two sub-partners and Vithaldas Khushaldas had three sub-partners. Now it is incontrovertible that the members of the firm of the Bavla Vishnu Cotton Ginning Factory must be treated as members of the company of which the firm is a member. If an authority for this is needed, it is to be found in 50 Mad 175 (1). That case had an offshoot under a similar name in the Bombay Presidency, and has been reported in 36 Bom LR 786 (2); and eventually the Madras case went in appeal to the Privy Council, and the appellate judgment (which merely accepts the reasoning of the High Court of Madras and dismisses the appeal) has been reported in 32 Bom LR 1607 (3). The case is relied upon by the learned counsel for defendant 1 as dealing with a situation which is analogous to the present situation. There is no difficulty about deciding that the members of the Bavla Yishnu Cotton Ginning Factory are members of the plaintiff firm. But there is some difficulty in deciding whether the sub-partners of Keshavlal and Yithaldas are members of the Bavla Vishnu Gotton Ginning Factory. If they are members, then the plaintiff firm consists of more than twenty members. The reasoning adopted in 36 Bom LR 786 for holding that the individual members of the four firms which entered into the partnership in that case were them Belves members of the partnership and that the partnership, consisting as it did of more than twenty individual members, required registration under Section 4 of the Companies Act, was that the word “persons” used in S. 4(2) of the Act was used not in the sense in which it is defined in the General Clauses Act (in which Act it includes a corporation or a body of persons) but in the sense of an individual, and that what the section prohibited was an unregistered association of more than twenty individuals. It is argued that on the analogy of this case the sub-partners of the two members of the Vishnu Cotton Ginning Factory must be regarded as individual members of the Bavla Yishnu Cotton Ginning Factory. The determination of the question depends upon the position of sub-partners. The point was raised at a late stage in the trial after all the evidence had been taken, and there is no evidence to show exactly what part the sub-partners took in the business. But as they have been described as sub-partners, it is reasonable to take it that they were in fact what is usually meant by a sub-partner. A sub-partner is described in “Lindley on Partnership”, Edn. 10, at p. 66: he is a stranger who agrees with one of the partners of the firm to share the profits derived by that partner from the firm; and it is said by the learned author that this arrangement does not make the stranger a partner in the original firm but constitutes what is called a sub-partnership which in no way affects the other members of the principal firm. A case is cited in which a certain person agreed with one of the partners in a business that he should be interested in the business so far as to receive a share of the partner's profits of the business and also-that he should have a right to draw his share from the firm. But it was nevertheless held that he was not a partner in that firm that he had no demand against it that he had no account in it and that his rights were limited to a share out of the profits paid to his principal partner. At p. 553 it is stated that a sub-partner wishing to have an account of those profits to which he is entitled must bring his action against the principal alone and not make the other partners in the firm parties to the action. If it is not open to a sub-partner to sue for accounts, I do not see how it can be held that he is a, partner of the firm. Moreover in 36 Bom LR 786 there is a passage which implies that the decision of the High Court, would have been different if the four persons who signed the contract of partnership as representatives of the firms of which they were members had signed for their own individual benefit, the firms themselves being only in the position of sub-partners sharing in the profits of the four individuals who signed the agreement of partnership; the firm would then, have been taken to consist of four members only and not of the total number of partners comprising the four firms. This implies that in the view of their Lordships sub-partners are not members of firm and the existence of a sub-partner would not affect the number of members of a firm for the purposes of Section 4 of the Companies Act. I hold that in this respect there is no objection to the suit.
4. It is then contended that the agreement in fact created an immediate demise of the property and operated as an actual transfer and therefore required writing and registration under Section 107 of the Transfer of Property Act, and in the absence of writing and registration, cannot now be enforced. I agree that since the plaintiff firm actually took possession of the property upon the very day of the agreement and paid rent, it is difficult to say that the agreement did not amount to a lease within the definition of Section 105 of the Transfer of Property Act, and to that extent is void. But the agreement was also an agreement for a lease and I do not know why, in so far as it is an agreement for a lease, it should be void merely because, regarded as a transfer of property it is void. In 58 IA 91 (4) the facts were almost exactly the same, the only difference being that it was a suit in ejectment in which the defendant pleaded a right under an agreement of lease. It was held that as there was no lease by means of a registered document as required by Section 107 of the Transfer of Property Act, the plaintiff was entitled to eject the defendant, but that had the defendant been within time (which on the facts of that case he was not), it would have been open to him to sue for specific performance of the verbal agreement for a lease and in the meantime to ask for the plaintiff's ejectment suit to be stayed. That was a case where under an oral agreement for a lease the defendant was put into immediate possession of the property, just as the plaintiff was put into immediate possession of the property here.
5. It is then contended that the agreement is indefinite. The evidence is unsatisfactory; but nevertheless both the Courts below have come to a definite conclusion as to the main terms of the agreement, namely that it was to be for an annual rent of Rs. 308-12-0 and for a term of fifty-one years. As regards the formal lease, it is held that no definite date was fixed. The plaintiff says in his evidence that the lease was to be given in a month or two but I doubt if that statement can be taken literally, since the date of the lease must have depended upon the date when defendant 1 obtained his title to lease the land, and that would not be until the Thakore had first leased it to Naran and Naran leased it to defendant 1.
6. Nor do I see any objection to enforcing the agreement on the score of limitation. It could not be enforced until the defendant got his title, and it appears from the judgment of the learned Assistant Judge in appeal that the deed which the Thakore and Naran had to execute in favour of defendant 1 before defendant 1 could get his title was not executed until the year 1927. This suit has been brought in the year 1928 and is clearly in time. The last point however is serious, for the plaintiff. Defendant 1 is a partner of the plaintiff firm and he is being sued by the plaintiff firm not as a formal defendant but as a contesting defendant, and he himself has contested the legality of the suit upon this ground. In 25 Bom 606 (5), reference was made to the rule that the same individual, even if he has two capacities, cannot be both a plaintiff and a defendant in the same action, and it was held that where an individual wast a common partner in two houses of trade, no action could be brought by one firm against the other firm upon any transaction which was between them while such individual was a common partner. So far as it goes, this statement appears to be unequivocal. But their Lordships stated that the rule was subject to an exception in equity in certain cases where it might be possible to ascertain the rights and liabilities of a member of a firm when all the parties were before the Court; and they said that although the Courts of equity in England strictly observed the rule that a man cannot be both plaintiff and defendant, they did not allow it to stand in the way of their doing justice between the parties, and provided all interested persons were before the Court, either as plaintiffs or as defendants, they adjusted and determined their rights. In the case which was then being decided a question arose as to the right of one of the partners of a firm to recover money against the firm and the order that was made in the case provided not for recovery of the money but for a, declaration that member of the firm in the taking of the partnership accounts was entitled to credit of the sum in dispute. This question does not seem to have been considered at all by the learned Assistant Judge before whom the present appeal was brought, and it may be that the matter was not raised in this Court but it was raised in the trial Court, and the equitable principle referred to in 25 Bom LR 606 was considered but I think misuoderstood. I do not think that the learned Judges who decided 25 Bom LR 606 would have extended the equitable principle to cover a case 43 the present, which cannot be adequately dealt with merely by a declaration of a right to a credit on the partnership accounts. It is contended on the other side that O. 30, R. 9 of the CPC, contemplates suits between a member of firm and the firm of which he is a member, and that if a suit of the present kind cannot be included among the suits dealt with in R. 9, then there is no remedy for the aggrieved party. R. 9 merely says that R. 30 (which deals with suits by or against corporations) shall apply to Suits between a firm and one or more of the partners therein and to suits between firms having one or more partners in common. But in his commentary upon R. 9, Sir Dinahah Mulla expressly states that neither this nor any of the rules of Cl. 30 alters the substantative law as it existed before, and therefore apparently, if one or more partners using the name of the firm under this rule were to bring suit against another partner claiming money as due to the plaintiff in connection with the affairs of the firm, “the only relief which the plaintiff could obtain would be on account of the dealings and transactions of the partners.” I do not think that it can be said that R. 9 gives the plaintiff firm a right to bring the present suit and that under the existing law they have any remedy at all. Reliance is placed upon a passage occurring at p. 339, Edn. 10 of “Lindley on Partnership,” which is this:
Again, there appears to be no reason why an action should not now be maintained for the recovery of a debt due from one partner to the firm; nor why, if two firms have a common partner, an action should not be maintained by one firm against the other.
7. And further on it is said that in all cases in which such actions will lie, the firm or firms may sue or be sued in their firm name. But the learned author was referring only to suits for money, and nothing is said as to the form of the decree that would issue in such a case and it may well be that the Courts in the circumstances of each particular case would fall back upon their power to declare the plaintiff or the defendant entitled to a credit in the accounts of the firm. In my opinion the suit is bad on this ground, and I therefore allow the appeal and direct that the suit be dismissed.
8. In the circumstances I direct that each party bear its own costs throughout.
V.B/R.K
9. Appeal allowed.