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Smart Summary

Factual and Procedural Background

This appeal is by defendant 1 (the appellant) against the decision of the District Judge of Berhampore which, on appeal, reversed the decision of the Munsif of Aska and decreed the plaintiff's suit for contribution or reimbursement in respect of money paid by the plaintiff-respondent to satisfy a decree passed on 8 December 1932.

The plaintiff made payments to satisfy that decree on various dates from 21 March 1935 to 28 September 1935. The plaintiff's pleadings asserted a partnership by an agreement dated 29 May 1929 between defendant 1 (the appellant), "the plaintiff, Lingaraj Das who is defendant 2" and one Trilochan Das. It was pleaded that the partnership was dissolved and accounts settled by a registered deed dated 25 August 1933, under which the appellant was to take over the bus and satisfy all partnership debts. By amendment (5 August 1938) it was alleged that Trilochan Das retired from the partnership business on 20 October 1929, being then a minor.

The appellant contested the suit, alleging that the registered deed of 25 August 1933 (Ex. I) was signed under coercion and misrepresentation, that it did not operate as a dissolution, and denying that Trilochan ever retired from the partnership. The trial Court (Munsif of Aska) dismissed the suit; on appeal the District Judge decreed the suit. The present appeal to the High Court challenges that appellate decree.

Legal Issues Presented

  1. Whether a suit for reimbursement or contribution would lie in the facts of this case (as opposed to a suit for accounts or for winding up the partnership).
  2. Whether the suit was maintainable under Section 69 of the Partnership Act where it was alleged that the firm was unregistered.
  3. Whether defendant 2 (admittedly a partner and a party to the 25 August 1933 document) was a necessary party to the suit such that no decree could be passed against the appellant when defendant 2 was given up in the trial Court.

Arguments of the Parties

Appellant's Arguments

  • The registered document dated 25 August 1933 (Ex. I) was executed by the appellant under coercion and misrepresentation and therefore did not effect a dissolution binding on him.
  • That the suit for reimbursement or contribution would not lie; instead the plaintiff should have pursued a suit for accounts or winding up.
  • The suit was not maintainable under Section 69 of the Partnership Act because the firm was unregistered.
  • Defendant 2 was a necessary party to the suit; since he had been given up in the trial Court, the appellate Court could not properly pass a decree against the appellant.

Plaintiff-Respondent's Allegations and Position

  • There existed a partnership by agreement dated 29 May 1929 involving the appellant, the plaintiff (described in the text as "Lingaraj Das who is defendant 2") and Trilochan Das.
  • The partnership was dissolved and the accounts were settled by a registered deed dated 25 August 1933 under which the appellant agreed to take over the bus and satisfy all partnership debts.
  • The plaintiff paid certain sums to satisfy a decree and sought contribution or reimbursement from the appellant in respect of those payments.
  • By amendment, the plaintiff alleged that Trilochan Das retired on 20 October 1929 while a minor.

Table of Precedents Cited

Precedent Rule or Principle Cited For Application by the Court
Halsbury's Laws of England, vol. 24, Article 918, p. 481 (new ed.) Partners are not regarded as creditor and debtor inter se until the concern is wound up or there is a binding settlement of accounts; therefore one partner has no right of action against another for balances until after final settlement. The Court relied on this passage to hold that Ex. I (the deed of 25 August 1933) constituted a final settlement between the actual partners, permitting the plaintiff to bring a contribution suit on the terms of that document.
A.I.R. 1942 Pat. 2041 (at p. 206) Quotation from Halsbury was quoted with approval in this decision. The Court referenced this decision as an instance where the Halsbury passage was approved, supporting the principle that a binding settlement permits a contribution action.
A.I.R. 1937 Bom. 2252 Decided that Section 69 of the Partnership Act may apply even after the partnership has been dissolved. The decision was referred to by the Court to show that Section 69 can apply post-dissolution, but the Court considered it unnecessary to decide Section 69's applicability on the facts here.
A.I.R. 1940 Nag. 783 Also a decision indicating Section 69 may apply after dissolution. Referred to alongside the Bombay decision for the same purpose; the Court chose not to decide the Section 69 issue.
A.I.R. 1939 Pat. 2894 Held that a plaint filed by an unregistered firm has no legal effect. The Court discussed this authority but distinguished it: in that earlier case the question of registration was raised before the courts of fact; here the registration point was not taken below and thus could not be urged in this second appeal.
A.I.R. 1925 P.C. 835 (Privy Council) Principle stated: "No Court can enforce as valid, that which competent enactments have declared shall not be valid..." (applied in the context of stamp/contract validity). The Court cited this passage but held the facts distinguishable: the Privy Council dealt with a pure question of law raised before courts of fact, whereas the present registration point involves mixed questions of fact and law and was not pleaded below, so the Privy Council decision did not authorize permitting the point in this second appeal.

Court's Reasoning and Analysis

The Court proceeded in several distinct steps in its analysis, applying statutory principles and the parties' documentary record to the facts set out in the pleadings and evidence:

  1. Status of Trilochan Das: The Court observed that under the pre-1932 law (Contract Act, Section 247 and Section 248 as referenced) and under the Partnership Act (S. 30) a minor cannot be a partner (though a minor may be admitted to the benefits of a partnership). Because Trilochan was admittedly a minor at the relevant time, the lower Courts were wrong to treat him as a partner or to address whether he "retired" on 20 October 1929. The Court therefore treated Trilochan as not having been a partner for the purposes of the deed of 25 August 1933.
  2. Effect of Ex. I (deed of 25 August 1933): Ex. I was executed by the appellant, the plaintiff-respondent and defendant 2, and the document shows that they proceeded on the basis that these three were the only partners. The appellant's allegation of coercion or misrepresentation in signing Ex. I was found not proved by the lower Courts and was not pressed before the High Court. There was no independent evidence that Trilochan became a partner after attaining majority. On this basis the Court held the parties must be bound by Ex. I which shows Trilochan was not a partner.
  3. Right to contribution after a binding settlement: The Court accepted the legal proposition (quoted from Halsbury and cited decisions) that partners are not treated as creditor and debtor inter se until the concern is wound up or there is a binding settlement; accordingly, one partner cannot ordinarily sue another for a balance until after final settlement. Because Ex. I constituted a final settlement between the persons who were actually partners, nothing prevented the plaintiff-respondent from bringing a contribution suit on the terms of that document.
  4. Section 69 and registration objection: The appellant's contention that the suit was not maintainable under Section 69 of the Partnership Act because the firm was unregistered was considered. The Court held it unnecessary to decide whether Section 69 applied on these facts. Even if Section 69 were assumed to apply, the appellant could not raise the registration point in this second appeal because the point had not been taken before the lower Courts or in the memorandum of appeal. The Court treated the registration question as a mixed question of fact and law requiring evidence, and noted that under Order VI, Rule 6 of the CPC any condition precedent intended to be contested must be specifically pleaded by the party who relies on its non-performance. The appellant (defendant) should have pleaded non-registration; having failed to do so, the point was not before the Court and could not be raised in second appeal. The Court considered and distinguished a Privy Council authority relied on by the appellant, finding the factual circumstances different.
  5. Necessary party point: The Court reasoned that, since Ex. I was a binding settlement and the only person who incurred liability to the plaintiff by reason of that document was defendant 1 (the appellant), defendant 2 was not a necessary party. Therefore, the argument that defendant 2's absence prevented a decree was rejected.
  6. Disposition: On these bases the Court concluded that the appellant's points were invalid and dismissed the appeal with costs. A second judge (Chatterji, J.) agreed.

Holding and Implications

Holding: Appeal dismissed with costs.

Implications and immediate effects:

  • The appellate decree of the District Judge (which reversed the trial Court and decreed the plaintiff's suit for contribution or reimbursement) stands.
  • The Court treated the registered deed of 25 August 1933 (Ex. I) as a binding and final settlement between the actual partners and held that the plaintiff could sue for contribution on the terms of that document.
  • The objection based on non-registration under Section 69 of the Partnership Act was overruled on procedural and pleading grounds (it was not pleaded below and involves factual inquiry), so the point could not be raised in this second appeal.
  • The Court found that defendant 2 was not a necessary party for the purposes of decreeing the plaintiff's claim against the appellant under Ex. I.
  • The opinion does not announce any novel legal principle; it applies established principles about minors and partnership, the effect of a binding settlement, and procedural requirements for pleading conditions precedent.

    Mohamad Ali v. Karji Kondho Rayaguru

    Beevor, J.:— This is an appeal by defendant 1 against a decision of the District Judge of Berhampore who, on appeal, reversed the decision of the Munsif of Aska and decreed the plaintiff's suit for contribution or reimbursement in respect of money paid by the plaintiff respondent to satisfy a certain decree. The decree in question was passed on 8rd December 1932 and payments to satisfy the decree were made by the plaintiff-respondent on various dates from 21st March 1935 to 28th September 1935. The plaintiff pleaded that there was a partnership by an agreement dated 29th May 1929 by which defendant 1, the appellant, was to run a bus service in partnership with the plaintiff, Lingaraj Das who is defendant 2 and one Trilochan Das. It was further pleaded that the partnership was dissolved and the accounts were settled on 25th August 1933 and that by the terms of the registered deed of agreement dissolving the partnership the present appellant was to take over the bus and was to satisfy all the debts of the partnership. By an amendment of the plaint on 5th August 1938 it was alleged that Trilochan Das retired from the partnership business on 20th October 1929 being then a minor.

    2. The appellant contested the suit. He alleged that the registered document of 25th August 1933 was signed by him under coercion and misrepresentation. He alleged that this did not operate as dissolution of partnership and by an additional written statement he denied that Trilochan ever retired from the partnership and he denied that the plaintiff was entitled to the amount claimed. As I have said, the trial Court dismissed the suit but on appeal the learned District Judge decreed the suit. Three points really have been urged before us; first that the suit for reimbursement or contribution would not lie but only a suit for accounts or for winding up the partnership, secondly it is urged that the suit was not maintainable under Section 69 of the Partnership Act, because the firm was unregistered and thirdly it was urged that defendant 2 who was admittedly a partner in the alleged partnership and was also a party to the document of 25th August 1933, was a necessary party to the suit and as he was given up in the trial Court no decree could be passed against the appellant by the appellate Court. As regards the first point, both the lower Courts as well as the parties seem to have ignored the provision of law which was the same under the Contract Act, Section 247 of the prior to the passing of the Partnership Act, 1932, as under S. 30 of the latter Act, viz., that a minor cannot be a partner in a firm though of course he can be admitted to the benefits of the partnership. The Courts were, therefore, wrong in considering that Trilochan Das could have been a partner in the firm while he was admittedly a minor and they need not have addressed themselves to the question whether he actually retired from the partnership on 20th October 1929, a date when he was admittedly still a minor, because there was no question of his retiring from the partnership on that date as he was not then a partner.

    3. No doubt under the present Partnership Act, S. 30, a minor who is admitted to the benefits of a partnership will become a partner if he fails to give notice within six months of his becoming a major, but this would not apply in the present case as this Trilochan Das appears to have become a major before this Act came into force. Under the previous law, under Section 248 of the Contract Act, on attaining majority a minor became liable for all the obligations incurred by the partnership since he was admitted to its benefits unless he gave public notice within a reasonable time of his repudiation of partnership but this section did not provide definitely that he became a partner.

    4. How Ex. I is the deed of 1933 which was executed by the present appellant, the plaintiff-respondent and defendant 2. It is clear from this document that they proceeded on the basis that they were the only three partners. The appellant's plea that this document was executed as a result of coercion or misrepresentation was found not proved by the lower Courts and has not been pressed before us. There is no independent evidence to show that Trilochan Das actually became a partner or accepted the position of a partner after he became a major and in these circumstances I consider that the parties to this appeal must be bound by Ex. 1 which shows that Trilochan Das was not a partner. It is certainly true, and it is unnecessary to cite authorities for the proposition, that partners in a firm are not ordinarily entitled to bring a contribution suit in respect of individual items which they have paid on account of partnership debts, but it seems to me that the limits of this rule of law are clearly set out in a passage from Halsbury's Laws of England, vol. 24, Article 918, p. 481, new edition, which was quoted with approval in a decision of this Court in A.I.R 1942 Pat. 2041 at p. 206. The passage runs as follows:

    “Partners are not, as regards partnership dealings, considered as debtor and creditor inter se until the concern is wound up or until there is a binding settlement of the accounts. It follows that one partner has no right of action against another for the balance owing to him until after final settlement of the accounts.”

    5. When it has been found that Trilochan Das was not a partner of the firm it seems to me impossible to avoid the conclusion that Ex. 1 was a final settlement of accounts between all the three persons who were really partners in the firm and thereafter there was nothing to prevent the plaintiff-respondent from bringing a contribution suit on the terms of that document. We were referred to the decision of the Bombay High Court in A.I.R 1937 Bom. 2252 and a decision of the Nagpur High Court in A.I.R 1940 Nag. 783 to show that Section 69 of the Partnership Act, will apply even after the partnership has been dissolved. I think it is unnecessary to consider the question whether Section 69 of the Partnership Act, is applicable to the facts of the present suit because even if it is assumed for the purpose of argument that section is applicable, it is not open to the appellant to urge that the suit is bad on the ground that the firm was not registered. This point was not taken before the lower Courts or even in the memorandum of appeal to this Court. It is a mixed question of fact and law and it cannot be decided without a finding of fact whether the firm was or was not actually registered under the Partnership Act, and in these circumstances I think that the point cannot now be raised in second appeal. It is urged, however, that in A.I.R 1939 Pat. 2894 it was held by a bench of this Court that a plaint filed by an unregistered firm has no legal effect and that, therefore, the Court in the present case must satisfy itself that the plaint filed was actually maintainable. Now, in that previous decision of this Court, the question regarding registration was raised before the Courts of fact and I cannot think that it is now open to the appellant to urge this point which was not taken before the lower Courts. Under O. 6, R. 6 of the CPC it is provided that any condition precedent, the performance or occurrence of which is intended to be contested, shall be distinctly specified in his pleading by the plaintiff or defendant, as the case may be, and subject thereto an averment of the performance or occurrence of all conditions precedent necessary for the case of the plaintiff or defendant shall be implied in his pleading. It is the defendant-appellant who is now intending to contest the performance of the condition precedent viz., the registration of the firm. It was, therefore, for this defendant-appellant to raise this point in his pleading and if the point was not raised the question was not at all before the Court. We were referred in this connexion to a decision of the Privy Council reported in A.I.R 1925 P.C 835 wherein at page 84 it was stated:

    “No Court can enforce as valid, that which competent enactments have declared shall not be valid, nor is obedience to such an enactment a thing from which a Court can be dispensed by the consent of the parties or by a failure to plead or to argue the point at the outset.”

    6. The question which was then raised before the Privy Council was whether an oral contract was valid to create a contract to grant a policy of sea insurance and their Lordships applied the provisions of Section 7 of the Stamp Act, (2 of 1899) though the point had not been taken in the lower Courts. It seems to me that the facts of that case are clearly distinguishable from the case now before us. The question what acts were necessary to create a valid contract or a particular type was a pure question of law. The question whether there was any evidence to prove such a contract is also a question of law. It is clear from the judgment that the existence of the contract was in dispute before the Courts of fact and this decision of the Privy Council is therefore, no authority for the proposition that the appellant in the present case can raise in second appeal this question regarding Section 69 of the Partnership Act, which involves a question of fact which in turn requires evidence which is not yet on record. It was suggested that we should remand the case for evidence and a finding on the point whether the firm in question was registered under the Partnership Act. Even if it is open to us to grant a remand for such a purpose I do not think that any such remand should be granted. For these reasons I am satisfied that the plea that the suit is not maintainable under Section 69 of the Partnership Act, must be overruled. The third point viz., defendant 2 was a necessary party in appeal seems to me invalid. I have shown that the plaintiff-respondent was entitled to bring his suit on the terms of Ex. 1, the document of 25th August 1933. The only person who incurred any liability to the plaintiff by reason of that document was defendant 1 and I consider that defendant 2 was, therefore, an unnecessary party. For these reasons I would dismiss the appeal with costs.

    7. Chatterji, J.:— I agree.

    R.K

    8. Appeal dismissed.

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    Comments

    Mohamad Ali v. Karji Kondho Rayaguru
    (Jan 31, 1945)