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Mathura Nath Choudhury v. Sreejukta Bageswari Rani
Concise Analytical Summary of the Provided Opinion
Factual and Procedural Background
The plaintiff was the owner of an elephant named Lal Bahadur. Defendants 1 and 3 (who carried on the business of catching wild elephants) and defendant 2 (a servant of defendant 1) were involved in an agreement under which defendant 1 took possession of the elephant for use in the elephant-catching business. The material term of the agreement provided that the defendant would remain liable to pay Rs. 5,100 as the price of the elephant and Rs. 200 as the balance of the hire money if the elephant, while in the defendant's possession, became unfit for work or died and could not be returned.
The elephant became ill and died on or shortly after 29 December 1923. The plaintiff thereupon sued defendants 1 and 2 for recovery of Rs. 5,000. Defendant 1 alleged in his written statement that defendant 3 (the appellant) was a partner in the business and had not been made a party; the plaintiff then applied to add defendant 3 as a party. The Subordinate Judge ordered that Mathuranath (Mathuranath) Choudhury be added as a party and issued summons.
The name of Mathuranath Choudhury was inserted on the body of the plaint under the other defendants but no further amendments were made to the body of the pleading or the prayers. The order adding defendant 3 was passed after settlement of issues. The plaintiff applied for fresh issues to be framed in relation to defendant 3; two such issues were added:
- Whether defendant 2 was an agent of defendant 3 and whether defendant 3 was liable if not;
- Whether defendant 3 was a partner of defendant 1 in the elephant-catching business and thus liable to the plaintiff.
Defendant 3 denied knowledge of the agreement and contested liability; at trial evidence was led and it appears defendant 3 admitted he was a partner of defendant 1. The trial Court decreed the suit against all defendants jointly. On appeal, the District Judge of the Assam Valley District affirmed the trial Court's findings and dismissed defendant 3's appeal. Defendant 3 appealed further to the Court delivering the present opinion.
Legal Issues Presented
- Whether the plaint was improperly amended (the addition of defendant 3 after settlement of issues and without further amendment to the body/prayers) such that no relief could properly be granted against defendant 3.
- Whether defendant 3 is liable as a partner for the agreement made by defendant 1, having regard to the law embodied in Section 251 of the Indian Contract Act and related authorities.
- Whether defendant 1 exceeded his authority in entering into the agreement and, if so, whether that would preclude liability of the other partners (particularly defendant 3).
- Whether the stipulated sum of Rs. 5,000 was in the nature of a penalty such that the Court should have enquired into the elephant's real value and reduced the decree accordingly (with reference to Section 74 of the Contract Act).
Arguments of the Parties
Appellant (defendant 3) — principal arguments as recorded in the opinion
- The suit should not have been decreed against him because the plaint was not properly amended after he was added as a party and no specific relief was prayed against him in the plaint.
- Defendant 1 exceeded his authority in entering into the agreement, so the other partners (including defendant 3) should not be held liable.
- The agreement was with defendant 1 alone (and defendant 2 as servant), not with the partnership; consequently defendant 3 should not be liable for the contract.
- The stipulated sum of Rs. 5,000 was in the nature of a penalty; the Court should have inquired into the real value of the elephant and adjusted any decree accordingly.
Respondent / Plaintiff (as recorded or reflected in the opinion)
- The plaintiff maintained that the elephant was hired to defendants 1 and 2 under the stated agreement and sued for Rs. 5,000 on the basis of that agreement when the elephant died.
- When defendant 1 raised the objection that defendant 3 was a partner and not a party, the plaintiff applied to add defendant 3 and, by so doing, intended to claim a decree against him as a partner liable for conduct of the business.
- At trial the evidence supported the plaintiff's position that the plaintiff had agreed to let the elephant on condition that Rs. 5,000 would be paid if the elephant died or disappeared; the elephant was found to be a trained animal used for the business.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Kush Kanta v. Chandra Kanta | Sets out that a bailee is responsible to the bailor for loss, destruction or deterioration of bailed property upon failure to return it according to contract; an action of trover is maintainable where the bailee fails to re-deliver as per contract. | The Court observed that the decision, on its facts, held that a partner not party to an agreement should not be made liable; but the present Court found that the case does not support the appellant's contention and, if scrutinized, assists the plaintiff's case instead. |
| Ram Chandra Sahu v. Kasim Khan | Head-note: The liability of a dormant partner extends only to sums borrowed by the active partner in his capacity as a member of the firm; money borrowed by a partner individually and later used by the firm does not render the firm liable. The question whether the firm is liable is primarily a question of fact. | The Court described the principle and treated the question of firm liability as one of fact depending on circumstances; the Court relied on this exposition to frame the factual inquiry but did not find that this precedent established appellant's immunity on the facts before it. |
| Paterson v. Gandasequi | Where the principal is not known at the time of the purchase by the agent, when discovered the seller may elect to sue either principal or agent; a dormant agent may be assimilated to a dormant partner for the purposes of liability. | The Court invoked this principle to explain that an undisclosed or dormant partner may be sued once discovered and to support application of Section 251 and Section 231 of the Contract Act in concluding that defendant 3 could be held liable on the contract made by defendant 1. |
Court's Reasoning and Analysis
The Court proceeded through the appellant's points sequentially and applied established principles of partnership and contract law, as recorded below.
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Technical objection to amendment of plaint:
The Court regarded the objection that the plaint was not properly amended as highly technical and covered by Section 99 of the Civil Procedure Code (CPC). There had been no failure of justice from the omission to pray a particular relief against defendant 3. By adding defendant 3 as a defendant, the plaintiff manifested an intention to claim a decree against him as a partner; accordingly the Court overruled this objection.
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Allegation that defendant 1 exceeded his authority:
This ground was also overruled principally because it had not been taken in the Courts below; the Court observed that whether defendant 1 exceeded his authority was a matter to be decided on the evidence and facts. The Subordinate Judge's treatment of liability under Section 251 of the Indian Contract Act was noted: nothing in the written statement suggested the appellant was not liable or that the act was not necessary for the business.
The appellant's contention that the Rs. 5,000 condition was unusual and entered into without authority was unsupported on the record except by showing that defendant 1 made different stipulations in some other hiring agreements; the Court found nothing unusual in the agreement in question. Evidence supported that the plaintiff agreed to let the elephant only on condition of the Rs. 5,000 guarantee and that the elephant was a trained animal used for the business.
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Whether the contract was in the course of partnership business (and thus whether defendant 3 is liable):
The Court addressed the contention that the agreement was with defendant 1 alone or that it was not in the course of partnership business. It examined the authorities and principles governing the liability of partners — including Section 251 of the Indian Contract Act and comparative authority (Paterson v. Gandasequi) about undisclosed principals/partners — and concluded that where an act is necessary for or usually done in carrying on the partnership business, other partners are liable. The appellant did not contend that defendant 1 did not act as a partner or that his act fell within any exemption to Section 251. Applying these principles to the findings below, the Court held that defendant 3 could not be said to be not liable under the agreement made by defendant 1.
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Allegation that the Rs. 5,000 was a penalty:
The appellant's argument that the stipulated Rs. 5,000 was penal and should have led to an inquiry into the elephant's real value was rejected on procedural and substantive grounds. Procedurally, the point was not raised in earlier Courts so no inquiry into value had been undertaken at trial. Substantively, the agreement expressly gave the value as Rs. 5,000 and provided that if the defendant failed to return the animal, he would pay Rs. 5,000 as its value. The Court held that Section 74 of the Contract Act did not apply to the agreement as it stood: this was a simple hire agreement with a reservation that the stipulated amount would be paid if the animal were not returned, rather than a case of a contractual breach attracting Section 74.
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Disposition of other procedural application (Rule 860(S) of 1926):
A separate Rule 860(S) of 1926 was obtained by defendant 1 (a respondent) to transport him into the category of appellant on the basis that he feared collision between the plaintiff and Mathuranath; the Court observed that such contingency did not arise and the application was not pressed, so the Rule was discharged.
Holding and Implications
Holding: The appeal is dismissed. The Rule obtained (Rule 860(S) of 1926) is discharged.
Direct consequences and orders made by the Court (as recorded):
- The decree of the trial Court, as affirmed by the District Judge, stands against defendant 3 (appellant) and the other defendants as previously decreed.
- Costs were awarded as follows: the appellant (defendant 3) will pay full costs to the plaintiff (respondent Bageswari Rani) and half costs to defendant 1 (respondent Bhagyamal Bama). No order as to costs was made in favour of defendant 2 (respondent).
- The separate Rule obtained by defendant 1 (Rule 860(S) of 1926) is discharged.
Implications beyond the parties: The opinion applies settled principles of partnership and contract law (including Section 251 of the Indian Contract Act and authorities on undisclosed principals/partners) to the facts and does not purport to lay down a new legal principle or precedent beyond its factual application. No broader or novel precedent is stated to have been established by this decision in the text of the opinion.
1. The facts which have given rise to the suit and this appeal are that the plaintiff was the owner of an elephant by the name of Lal Bahadur. Defendants 1 and 3 carried on; the business of catching wild elephants and the plaintiff's case is that defendant 1 and his servant defendant 2 hired from her the elephant for the purpose of employing him in their business. There was an agreement between the plaintiff and defendants 1 and 2 of which the materia portion was to the following effect:
I remain liable to pay to you Rs. 5,100 as the price of the elephant and Rs. 200 as the balance of the hire (money); if during the period the elephant remains in my possession, it be broken in health or becomes unfit for work or dies and I cannot return it to you at the stipulated time.
2. Under this agreement defendant 1 took possession of the elephant and used it for shikar or catching wild elephants in the Garo Hills up till the 29th December 1923 when it was found that the animal was ill and it died soon after. The plaintiff thereupon on the basis of the agreement brought the present suit for recovery of Rs. 5,000 from defendants 1 and 2. Defendant 1 in his written statement alleged that defendant 3 (the appellant before us) was a partner in the business and should have been made a party and that the suit should not proceed in his absence. Thereafter the plaintiff made an application in which she applied to make defendant 3 a party defendant and said that she was making the application on the objection taken by defendant 1 and as defendant 3 was an undisclosed partner in the business. The Sub-Judge before whom the application was made passed the following order:
The plaintiff makes an application to add Muthuranath Choudhury as a party. It occurs thus: He is a necessary party. Add him as a party. Issue summons.”
3. On the body of the plaint the name of Mathuranath Choudhury, the appellant, was inserted at the heading under the names of the other defendants but no further alteration was made in the plaint either in the body of the plaint or in the prayers alleging facts against defendant 3 and seeking particular relief against him. The order adding defendant 3 as a party was passed after the settlement of issues in the case. The plaintiff, therefore, applied again to frame fresh issues with, reference to defendant 3 and the following issues were added:
(a) Was defendant 2 an agent of defendant 3 Mathuranath Choudhury and was he authorized by defendant 3 to enter into the agreement with plaintiff? If not, is defendant 3 liable?
(b) Was defendant 3 partner of defendant 1 in the elephant catching business and as such liable to the plaintiff?
4. Defendant 3 in his written statement denied any knowledge of the agreement with the plaintiff and otherwise supported defendant 1 in his contention that no decree could be passed in the suit. The parties went to trial and evidence was adduced on both sides and it appears that it was admitted by defendant 3 that he was a partner of defendant 1 in the business. The trial Court decreed the suit against all the defendants jointly. On appeal by defendant 3 the learned District Judge of the Assam Valley District maintained all the findings of the trial Court and dismissed the appeal. Defendant 3 appeals before us and it has been contended on his behalf, firstly, that the suit should not have been decreed as against him as the plaint was not properly amended and no relief was asked against him by the plaintiff in the plaint. The objection was not specifically raised in any of the Courts below nor in the grounds of appeal in this Court. Moreover we do not think that there is any substance in it. The objection is a highly technical one and is fully covered by Section 99 of the CPC. There has been no failure of justice on account of the omission in asking for a particular relief against defendant 3. By the addition of defendant 3 as a defendant to the suit the plaintiff intended to claim a decree against him as well, being a partner in the business, for the conduct of which the defendant was let out. This objection must, therefore, be overruled. It is next argued that defendant 1 exceeded his authority in entering into an agreement like the present. This objection should also be overruled on the ground that it was not taken in any of the Courts below; and it is an objection which must be decided on the evidence and on the facts of the case. The learned Subordinate Judge in dealing with the liability of the appellant under Section 251 of the Indian Contract Act, observed that not a word was said in the written statement to suggest that he was not liable for or was not bound by the act of defendant 1 and that the said act was not necessary for the business. The ground upon which this portion of the appellant's case has been placed before us is that the condition to pay the sum of Rs. 5,000 in the event of the elephant being lost was an unusual condition into which defendant 1 entered without obtaining a valid authority from his partners; and he is, therefore, personally liable and not the other partners of the business. There is nothing on the record to support this contention except the fact that in some agreements by which elephants were hired for the business defendant 1 made different stipulations. There does not seem to be anything unusual in the agreement before us. It has been found upon the evidence that the plaintiff was not willing to let out the elephant, but on the insistence of the defendants she agreed to do so on condition that she must be paid Rs. 5,000 if the elephant died or disappeared. It is also found that the elephant was a trained elephant for the purpose of catching wild elephants.
5. It has been strenuously argued that on the agreement defendant 3 cannot be made liable, firstly on the ground that the agreement was with defendant 1; and, secondly, because it has not been proved that it was in the course of the partnership business that this contract was entered into. It is said that the agreement was with defendant 1 (We may leave out of consideration defendant 2 as he was merely a servant of defendant 1, though an ex-parte decree was passed against him) and for this construction of the agreement reliance has been placed upon the case of Kush Kanta v. Chandra Kanta (1). In that case the law which is so well known was thus laid down:
The bailee is responsible to the bailor for loss, destruction, or deterioration of the bailed property upon his failure to return the same according to contract upon the expiry of the term of business; an action of trover is maintainable against a bailee where he fails to re-deliver the bailed property or to deliver it over in accordance with the terms of the contract.
6. On the particular facts of that case it was held that a partner who was not a party to the agreement should not be made liable though the contracting defendant took the elephant and employed it for the purpose of the business of the company and which contract the company refused to execute to the knowledge of the plaintiff. On these circumstances it was held that no other partner of the business besides the contracting defendant might be made liable under the agreement though the hire was for the benefit of the partnership business. That case, therefore, does not support the defendant's contention and if it is carefully scrutinized it goes a great way to help the plaintiff's case. Reliance has also been placed upon the decision in the case of Ram Chandra Sahu v. Kasim Khan (2) the head-note of which is to the following effect:
The liability of the dormant partner extends only to sums borrowed by the active partner in his capacity as a member of the firm. The ultimate use by the firm of money borrowed by one of its members individually on his own credit does not render the firm liable for the loan.
7. In that case, it appears that the borrowing defendant was a partner of the firm and had also other business in which he was interested. He borrowed some money on his own account and in his own name. He found subsequently that the defendant firm was in need of pecuniary help and the money he had borrowed he employed for the business of the firm. In these circumstances the learned Judge held that the firm or all the members constituting the firm could not be made liable for the money thus borrowed, as it was not borrowed originally for the purposes of the firm by the borrowing defendant as a partner of it and was not also so borrowed with the knowledge of the plaintiff. The learned Judges also observed that where one member of a partnership borrowed money upon his own credit by giving his own promissory note for the sum so borrowed and subsequently used the proceeds of the notes in the partnership business, of his own free will, without being under any obligation to or to contract with the lender so to do, the partnership was not liable for the loan. The substance of the matter is whether the firm is liable for the money borrowed by one of its partners is pre-eminently a question of fact and depends upon the circumstances of each particular case.
8. With regard to the liability of defendant 3, if it be conceded that the money was borrowed and spent for the purpose of the business, there can be no question on the law as embodied in the Indian Contract Act and laid down by innumerable cases. Under Section 251 of the Contract Act, the appellant is liable if the act of defendant 1 was necessary for or usually done in carrying on the business of the partnership of which he was a member. It is not the appellant's case that defendant 1 did not act as a partner or his act was one which could be brought under the exemption to S. 251. As to undisclosed or dormant partner the law is clear. The leading case upon this point is the case of Paterson v. Gandasequi (3), where the law is thus laid down:
If the principal be not known at the time of the purchase made by the agent, it seems that, when discovered the principal or the agent may be sued at the election of the seller;
9. And it was observed in that case that a dormant agent might be assimilated to a dormant partner where though the party furnishing goods to the ostensible partners intended at the time to give credit only to them, yet he might afterwards pursue his remedy against the dormant partner, when discovered. Section 251 of the Contract Act, which contains the law of partnership controls the relation between partners which is similar to the relation between principal and agent: and under Section 231 of the Contract Act, the principal is as much liable for the act of the agent himself. It cannot therefore be said that on the contract as it stands and on the findings of fact arrived at by the Court below defendant 3 is not liable under the agreement made between the plaintiff and defendant 1.
10. The last point taken by the appellant is that the sum of Rs. 5,000 stipulated to be payable to the plaintiff on the loss of the animal was in the nature of a penalty and the Court should have enquired as to the real value of the elephant and passed a decree accordingly. This point also was not raised in any of the Courts below and consequently there has been no enquiry as to the value of the animal. In the agreement the value of the elephant was given as Rs. 5,000 and it was stipulated that if the defendant failed to return the animal to the plaintiff he would pay Rs. 5,000 as the value of the animal. To the agreement as it stands Section 74 of the Contract Act, has no application. It is a simple agreement. The plaintiff said that she would part with her thing if the defendant guaranteed to pay a certain amount if the thing was lost. It was not a case of a breach of contract or the non-performance of spy particular agreement by the defendant. It was a sort of contract on hire with the reservation that if the article is not returned the value stipulated in the agreement should be paid to the owner. In our opinion this contention fails. The result is that all the points urged on behalf of the appellant fail and this appeal is dismissed with costs. The appellant will pay full costs to the plaintiff respondent Bageswari Rani and half costs to defendant 1, respondent Bhagyamal Bama. We make no order as regards cests in favour of defendant 2, respondent.
Rule 860(S) of 1926.
11. This Rule was obtained from this Court by defendant 1, respondent for the purpose of transporting that defendant-respondent to the category of appellant on the ground that he apprehended that the plaintiff and the appellant might collide and did not place the case properly before the Court. Such contingency has not arisen and the learned advocate for the defendant does not press the application. The Rule is accordingly discharged.
12. Appeal dismissed:
13. Rule discharged.
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