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Smart Summary

Factual and Procedural Background

This second appeal arises from a money suit based on a hundi for Rs. 2,200, payable 60 days after the date of drawing, drawn by the firm Sastu Ram-Ram Kishun in favour of Thagan Sao Ramchander. The plaintiffs were the sons of Thagan Sao, who carried on his business under the name Thagan Sao-Ram Chander. After the death of their father, the business was carried on by their guardian, Gopi Lal, under the same name. The defendants borrowed the money and issued the hundi during this period. The suit was originally filed by four minor plaintiffs, one of whom died during the proceedings. The defendants raised three defenses: (1) the suit was barred by limitation, (2) entitlement to a set-off, and (3) denial of interest liability on the basis that the money was a deposit, not a loan. The third defense was rejected by the lower courts and not pressed on appeal. The appeal concerns the limitation and set-off defenses.

Legal Issues Presented

  1. Whether the suit was barred by limitation, considering the status of the plaintiffs as minors and the nature of the hundi being drawn in the name of a firm versus individuals.
  2. Whether the defendants were entitled to a set-off claim of Rs. 666 incurred as litigation costs in a guardianship proceeding related to the minor plaintiffs.

Arguments of the Parties

Appellants' Arguments

  • The hundi being drawn in the name of a firm precluded the plaintiffs from claiming benefit under Section 6 of the Limitation Act, as the firm had an adult agent or manager who could sue.
  • The set-off amount of Rs. 666 representing litigation costs in guardianship proceedings was legally recoverable under Section 70 of the Contract Act as an ascertained sum.

Respondents' Arguments

  • The plaintiffs, being minors and successors to their father's business carried on under an alias, were entitled to the benefit of Section 6 of the Limitation Act despite the hundi being drawn in a business name.
  • The litigation costs claimed as set-off were not connected to the hundi transaction and were not legally recoverable from the plaintiffs.

Table of Precedents Cited

Precedent Rule or Principle Cited For Application by the Court
Section 6 of the Limitation Act Extension of limitation period for minors The court upheld that plaintiffs, being minors, were entitled to the benefit of Section 6 despite the hundi being drawn in a firm name, as the firm has no separate legal existence from its partners.
Section 239 of the Contract Act (replaced by Indian Partnership Act) Definition of "firm" as a collective of persons, not a legal entity The court reasoned that a firm is not a juristic person; thus the suit was effectively by individuals using a collective business name, supporting the plaintiffs' claim.
Indian Partnership Act, 1932 Clarification of firm and partners' legal status Reinforced that the firm name is a collective name for partners and does not create a separate legal persona, supporting the application of Section 6 benefits to the minor plaintiffs.
Section 70 of the Contract Act Obligation to compensate for lawful benefits conferred without intention of gratuity The court held that costs of guardianship litigation were not recoverable under Section 70 as the minors did not voluntarily enjoy the benefit and the litigation was unrelated to the hundi transaction.
Section 49 of the Guardians and Wards Act Court's power to apportion costs of guardianship litigation The court noted that the proper course for recovering litigation costs was through the estate of the minors by court order, not by direct claim against the minors.

Court's Reasoning and Analysis

The court analyzed the nature of the plaintiffs' status and the legal character of a firm. It held that a firm is not a separate juristic person but a collective name for individuals, so the benefit of Section 6 of the Limitation Act applies to the plaintiffs as minors despite the hundi being drawn in a firm name. The court rejected the appellants' argument that the presence of an adult agent or manager deprived the plaintiffs of this benefit, emphasizing that the plaintiffs were minors who could not contractually form a partnership. Regarding the limitation plea, the court found that the suit was not barred because the cause of action accrued during the plaintiffs’ minority, and this was evident from the pleadings.

On the issue of set-off, the court considered the defendants' claim for Rs. 666 as litigation costs incurred in a guardianship dispute. It concluded that this amount was not legally recoverable as an equitable set-off or under Section 70 of the Contract Act, because the minors did not voluntarily accept the benefit and the litigation was unrelated to the hundi transaction. The court also noted that the Guardians and Wards Act provides mechanisms for apportioning such costs through the estate, not by direct claims against minors.

Holding and Implications

The appeal was dismissed with costs.

The court upheld the plaintiffs' entitlement to the benefit of Section 6 of the Limitation Act in respect of the hundi drawn in a business name, confirming that the legal identity of minors is preserved notwithstanding the use of a firm's name. The defendants were denied recovery of litigation costs related to guardianship proceedings as a set-off against the hundi claim. This decision directly resolves the parties' dispute but does not establish new precedent beyond the application of established principles concerning limitation for minors and the legal status of firms.

    Ram Das v. Ram Babu

    Mohammad Noor, J.:— This second appeal arises out of a simple money suit based on a hundi for Rs. 2,200, payable 60 days after the date of drawing which was drawn by a firm named Sastu Ram-Ram Kishun on itself in favour of Thagan Sao Ramchander. According to the plaint, and the fact was not disputed by the defendants, Thagan Sao-Ram Chan-der was the name in which Thagan Sao, the father of the plaintiffs, was carrying on his business, and Sastu Ram-Ram Kishun was the name of a firm of which one Bhagwan Das (now dead) and defendant 1 (his brother) were the partners. When Thagan Sao died the three present plaintiffs and their brother (now dead) succeeded to his business which was carried on by one Gopi Lal, their maternal grandfather, as their guardian in the same name of Thagan Sao-Ram Chander. It was during this period that the defendants borrowed the money and gave the hundi in question. Originally there were four plaintiffs, all minors. One of them died during the pendency of the suit which was continued by the remaining three. The defence, so far as it is relevant for the purposes of this appeal, were two: first, that the suit was barred by limitation, and, secondly, that the defendants were entitled to a certain set-off against the plaintiffs' claim. There was a third defence, which related to interest. The defendants' case was that the money, namely Rs. 2,200, was not a loan but was kept in deposit with them and that they were not liable for interest. This last plea was overruled by both the Courts below and has not been pressed before us. We are therefore concerned with the two pleas, namely that of limitation and set-off.

    2. Coming to the plea of limitation, the plaint on the face of it, apart from other considerations, was barred by limitation, as the suit was instituted more than three years after the due date of the hundi. The plaintiffs in their plaint sought to save limitation by stating certain payments made by the defendants which, would give then a fresh start of the period of limitation. These payments were held by the trial Court not sufficient to save the suit from limitation, but it held that it was not barred by limitation, as all the plaintiffs were minors. This view was upheld by the Court of appeal below. It has been contended before us by the learned advocate for the appellants, that as the hundi was drawn up-not in favour of an individual but that of a firm, the firm cannot get the benefit of Section 6 of the Limitation Act. His argument, as far as I have been able to follow it, may be summarised thus: (1) that the hundi was in the name of a firm, (2) that the firm had an adult agent or manager, (3) that as the firm, though the partners were minors, could sue through its agents or manager, the benefit of Section 6 of the Lim. Act, is not available to the plaintiffs. In my opinion, there is no force in this contention. In the eye of the law, a firm has no existence apart from the members which constitute that firm. A firm is not a person either natural or artificial and it is a person who can sue and be sued. “Firm” was defined in Section 239 of the Contract Act, (the chapter in which this section occurred has since been repealed and has been replaced by the Indian Partnership Act) thus:

    “Partnership” is the relation which subsists between persons who have agreed to combine their property, labour or skill in some business, and to share the profits thereof between them. Persons who have entered into partnership with one another are called collectively a ‘firm.’

    3. The definition of firm’ has been made more clear by the Indian Partnership Act of 1932, which says “persons who have entered into partnership with one another are called individually ‘partners’ and collectively ‘a firm’, and the name under which their business is carried on is called the ‘firm name.’ The nama under which partners carry on a particular business is in fact the name of the, partners taken as a whole. Firm is not a juristic persona to be taken cognizance of as such by the law, such as, an idol or a corporation is. No doubt the Code of Civil Procedure, when it was re-enacted in 1908, allowed partners collectively to sue or to be sued in the name which the partners collectively adopt for the purpose of transacting their business. It is a facility given by the legislature in order to avoid mentioning large number of names either in the category of the plaintiffs or in the category of the defendants. It is to be noted that the Code does not allow the firms to sue or be sued. It allows the individuals constituting the firm to sue and be sued in the name of the firm. The privilege is given to persons, but the Code does not treat the firm as a juristic persona. I cannot do better than to quote a passage from Mulla's well-known treatise on the Indian Contract Act. Under S. 239, the learned commentator says:

    But the Common Law has no means of admitting any kind of legal existence between that of a formally constituted corporation and that of an individual human being (though the procedure of Courts of equity can go near it in what are called representative suits); and for English jurisprudence the firm is only a compendious name for certain persons who carry on business or have authorized one or more of their number to carry it on, in such a way that they are jointly entitled to the profits and jointly liable for the debts and losses of the undertaking.

    4. He then proceeds:

    For the purpose of determining legal rights there is no such thing as a firm known to the law, and this is so likewise under this Act. It is true that under the Code of Civil Procedure, 1908, O. 30, as under the English Rules of Court, and, we are informed, by statute in many other jurisdictions, actions may be brought by and against partners in the name of the firm, and even between firms and their members; but this is only a matter of procedure.

    5. It is clear therefore that when a suit is instituted by or against a firm, it is really a suit by or against a group of individuals and the name of the firm is the collective name of the individuals. Now, in this particular case, as I have said, it was clearly stated in the plaint and was not disputed in the written statement that it was the plaintiffs' father alone, without any partner, who was carrying on his business under the name of Thagan Sao-Ram Chander. It is therefore clear that at the time when the plaintiffs' father was carrying on the business Thagan Sao-Ram Chander was not even the name of any firm but an alias of Thagan Sao only. Such a thing has been recognised in O. 30, R. 10 of the CPC, which authorises an individual to be sued in the name in which he is carrying on his business, though it does not authorise him to sue as such. The principle is obvious. If a man is known among those with whom he has business relations by a particular name, those persons can sue him in that name, but the man himself must sue in his own name. When however the plaintiffs' father died, his four sons, all minors, succeeded him, the business was thereafter carried on through their guardian or agent in the name used by their father. Thagan Sao-Ram Chander became the name of the plaintiffs. The relationship between these four plaintiffs cannot possibly be that of partners. Partnership is not a status, but is a creation of contract, and these minors were unable on account of their minority to enter into any contract of partnership.

    6. The correct position therefore was that after the death of Thagan Sao, Thagan Sao-Ram Chander became, as I have said, the name of his four minor sons collectively, something analogous to the position when an individual for the purpose of business adopts another name and it was by this name that they were known among those persons with whom they had business relations. When the defendants drew up the hundi in favour of Thagan Sao-Ram Chander, they in fact drew it in favour of the four sons of Thagan Sao, who were minors and whose business was being carried on by Gopi Lal, their maternal grandfather. In fact Bhagwan Das (the brother of defendant 1 and the father of defendant 7) was the brother-in-law of the plaintiffs and he was fully aware of the real situation. Now, when the hundi was in favour of the minors and became payable when they were minors, I see no reason why the plaintiffs cannot avail themselves of the provisions of Section 6 of the Lim. Act, simply because the hundi under which they were suing was given not in their own name but in a name by which they were known to those with whom they had business relations. The fact that there was a manager who could have sued during the minority of the plaintiffs makes no difference. It was then urged that this plai of minority to save limitation was no raised in the plaint and it came to the defendants as a surprise at the time of argument. Here again I find no force in the contention. The very law, which prescribes that a certain class of suits must be instituted within a certain time, provides the circumstances under which certain other period will apply. It appears on the face of the record that the plaintiffs are minors. It is clear from the pleading itself that the money was taken from the plaintiffs during their minority and that the money became due to them during their minority. The decision of the question of limitation therefore did not depend upon the determination of any issue of fact which ought to have been stated and which the defendants could not disprove. I think the question of limitation was rightly decided against the defendants.

    7. The next question is that of set-off. Four items were claimed as set-off by the defendants. Two of them, namely one of Rs. 600 and another of Rs. 164-0-3, have been allowed by both the Courts below and there is no question about them before us. Another item of Rs. 45-14-2 has been disallowed by both the Courts and there is no question about that either. The controversy before us was confined to item 4 of Rs. 666 odd, which was allowed by the trial Court and disallowed by the lower appellate Court. This item represents, according to the defendants, the cost of litigation which they incurred in the proceeding for the appointment of a guardian of the properties of the minor plaintiffs. It appears that the plaintiffs were under the guardianship of their maternal grandfather Gopi Lal. Bhagwan Das, a member of the firm which drew the hundi, applied to be appointed a guardian of the plaintiffs, and there was a dispute between him and Gopi Lal. It seems that the ultimate order of the Court was that a Pleader of the Court, Babu Gobind Prasad, be appointed guardian. The defendants want the plaintiffs to recoup them of this cost which was incurred by them in this guardianship litigation, and according to the accounts submitted by them, Rs. 666 odd is thus due. The genuineness of the account and the correctness of the amount spent have been doubted by the lower appellate Court. Be that as it may, the question for the present in second appeal is whether this amount is allowable under the law. The trial Court allowed this amount as an equitable set-off. The Court of appeal below was of opinion that in the circumstances; of the case no question of equitable set-off arose. The learned Advocate for the appellants has not seriously pressed the question of equitable set-off and I myself fail to understand how this amount; can be allowed as equitable set-off. The amount, which is said to have been spent in litigation, is in no way connected with, the hundi transaction. The learned Advocate, however, contended that defendants were entitled to this amount under the Code of Civil Procedure, it being; an ascertained sum legally recoverable under Section 70 of the Contract Act. I have doubt whether this sum can be said to be an ascertained sum in the sense in which the word has been used in the Code of Civil Procedure, as the necessity of each item of expenditure will have to be determined. I am however clearly of opinion that the amount is not legally recoverable from the plaintiffs. Section 70 of the Contract Act, runs thus:

    Where a person lawfully does anything for another person, or delivers anything to him, not intending to do so gratuitously, and such other person enjoys the benefit thereof, the latter is bound to make compensation to the former in respect of, or to restore, the thing so done or delivered.

    8. The complete circumstances under which the guardianship litigation was carried on are not before us. We are not in a position to say how far that litigation was carried on in good faith nor are we in a position to say whether Bhagwan Das was not trying to become the guardian of the minors for his own benefit. Leaving this aspect of the case aside, this is not a case in which a person has supplied the necessities of life to a minor for which the minors are legally, liable. S. 70, in my opinion, contemplates a case in which a certain benefit is done to another and is not intended to be done gratutiously, and the man to whom; benefit is done enjoys the benefit voluntarily, that is to say, he should have an option of refusing to enjoy the benefit. It does not mean that the benefit should be thrust upon him without his having the option of refusing it. Nobody has a right to force a benefit upon another. There is no law of which I am aware, which entitles a man to start a litigation for the appointment of a guardian of a minor and then later on call upon the minor to recoup him of the cost of litigation.

    9. Apart from this, as has been pointed out by the learned Advocate for the respondents, Section 49 of the Guardians and Wards Act, gives the Court ample power to order who should bear the cost of the litigation. If Bhagwan Das carried on this litigation honestly for the benefit of the estate of the minors, it was open to him to ask the Court to allow him that cost from the estate of the minors. This he did not do, and I am sure a suit for the recovery of this amount against the minors will, in no circumstances, be maintainable. I would, therefore, dismiss this appeal with costs.

    10. Sunders, J.:— I agree.

    S.R/R.K

    11. Appeal dismissed.

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    Comments

    Ram Das v. Ram Babu
    (Jul 23, 1935)