ORDER OF REFERENCE TO A FULL BENCH.
The Chief Justice. — It is quite clear in this case that the 1st defendant and his adult son, the 2nd defendant, carried on business as timber merchants with the joint family property. It is also clear that the advances made by the plaintiff were made to them both, and that the 2nd defendant was personally liable on them as well as the 1st defendant. This is abundantly proved by the fact that the 2nd defendant has signed the settlements in the plaintiff's books Exhibt A, dated the 27th April 1907, and A-1, dated the 12th September 1909 and the promissory-notes D, dated the 1st May 1907 and E, dated the 13th September 1909. He did not sign the settlement A-2, the promissory-note F, dated the 26th September 1910, or the letter J, dated the 1st October 1910, as he was absent, but on the 7th February 1911 February 1911 he signed the letter Exhibit G, set out in the judgment of the Subordinate Judge, in which he stated that he and his father had been borrowing from the plaintiff, that his father had settled accounts on the 26th September 1910 and signed in the plaintiff's book, that he had not signed as he was not present, and that subsequently they had received further advances to the extent of Rs. 4,000. In this letter he undertook to discharge both these amounts on his personal liability and added, “There subsists also my personal liability for the whole of the amount payable according to your accounts As I did not sign in your accounts, this letter was written and given.” He did not however sign the subsequent settlement A-3, dated the 7th September 1913, or the promissory-note Exhibit H, dated the 7th September 1913, or the letter Exhibit K, dated the 9th September 1913, by which the 1st defendant acknowledged the joint indebtedness to the extent of Rs. 9,855 and arranged for a further advance of Rs. 1,200 for which they were to give a fresh mortgage. The plaintiff has given evidence in support of his case, and neither the first nor the 2nd defendant has ventured to go into the box; and the witnesses called for the 2nd defendant to prove that he had no connection with his father's business are contradicted by the documents under his own signature already mentioned. There is evidence, and it is the 2nd defendant's case, that for the last few years he has been looking after a cloth business, and according to the plaintiff's evidence the 1st defendant was the manager and always wrote the letters and invoices relating to the timber business.
In these circumstances, the only question is whether the suit is barred against the 2nd defendant personally, and this depends on whether the 1st defendant can be assumed to have had implied authority to sign the settlement in Exhibit A-4 and the letter Exhibit K on behalf of the 2nd defendant as well as himself. The last acknowledgments were made by the 1st defendant when he was managing the joint timber business which was being carried on with joint family funds by the 1st and 2nd defendants as co-contractors or partners and while the 2nd defendant was looking after another business. According to the decisions of this Court in Valasubramania Pillai v. S.V.R R. M. Ramanathan Chettiar.(1), and in Shaik Mohideen Sahib v. Official Assignee of Madras(2), these facts are not sufficient to raise a presumption that the 1st defendant had authority to make an acknowledgment on behalf of 2nd defendant. In the latter case it was expressly decided that the fact of a partner being left in management of the business did not give rise to a presumption that he was authorized to sign acknowledgments. I have pointed out in K. R. V. Firm v. Seetharamaswami, that a different view has been taken by other Courts in India in the cases cited to which may be added Lalta Prasad v. Babu Parsad and also apparently in England where the statutory provisions are substantially the same as in India. The point is fully discussed in I.L.R, 37 Mad., 146, and, as it is one of great importance to the commercial community, we have decided to refer to a Full Bench the question whether, in the absence of direct evidence that a co-contractor or partner has authorized his co-contractor or partner to make acknowledgments or payments saving limitation on his behalf, such authority can be inferred from other circumstances such as the position of the other co-contractors or partners in the business?
Kumaraswami Sastri, J.—I agree to the reference proposed by my Lord, as I am of opinion that the decisions in Valasubramania Pillai v. S. V. R. R. M. Ramanathan Chettiar(3) and in Shaik Mohideen Sahib v. Official Assignee of Madras(4) require reconsideration in the light of the decision in K. R. V. Firm v. Seetharamaswami(5), which, if I may say so with respect, gives cogent reasons for placing on Sect. 21 of the Limitation Act a more liberal construction in conformity with the decisions of the other High Courts. There is no essential difference between the position of partners in England and India and if under Sect. 251 of the Contract Act, the act of one partner which is necessary for or is usually done in the course of the business binds the other partners there is no reason why acknowledgments of liability or payments made by one partner should not bind the others. I have rarely come across any instance where partners, while providing for authority to borrow on behalf of the firm, make any express provision for acknowledgments or payments with reference to limitation. Very often partnership agreement restricts the powers of certain of the partners to borrow, but when there is no restriction, business is conducted on the footing that one who has the power to borrow has also power to settle accounts make payments and in general to do all things necessary to ensure the credit of the firm. It is well known that Marvadis and Nattukottai Chetties who open account with persons insist on periodical settlements and would make no further advances unless accounts are settled when required. The object of the settlement is to prevent disputes as to its correctness and pleas of limitation from being raised. It is difficult to see why partners who allow business to be conducted on lines which are well known to everybody should not be presumed to have given authority in the absence of evidence that the authority to borrow was limited and excluded the doing of things which are ordinarily done where accounts are opened with moneylenders.
I do not think that the wording of Sect. 21 concludes the matters or makes any difference in the general law applicable to partners. The use of the words “by reason only of” in the Acts of 1877 and 1908 instead of the words ‘by reason of‘ suggests that the legislature did not intend to affect the powers of one partner to bind another by acts falling under Sect. 251 of the Contract Act. If it is shown that one partner has been borrowing moneys, making payments and settling accounts without objection by the other partners, it may well be presumed that he was authorized to do so. There is no reason why we should go further and require an express authority treating the implied authority as useless for the purpose of Sect. 21.
Sect. 21 is similar in language to Sect. 14 of the Mercantile Law Amendment Act of 1856 which has received judicial interpretation in England so far as partners are concerned. The following passage from Lightwood (time limit to action) correctly summarises the law in England on the subject: “Though the doctrine of implied agency as between co-debtors is abolished one may still be the actual agent of the other so as to bind him by payment. In the absence of evidence to the contrary one partner is presumed to be the agent of the other to make payments in respect of partnership debts (Goodwin v. Parton) and though the agency is in general terminated by a dissolution of partnership (Watson v. Woodman, it may under special circumstances be treated as continuing where for instance the retirement of a partner is kept secret and payments of interest are made in the name of the firm, In re Tucker.
I agree with the judgment in I.L.R, 37 Mad., 146 which deals fully with the English and Indian statutes and decisions which is entirely in accordance with my experience of the consciousness of the mercantile community and the course of business usually followed. The same view has subsequently been taken in Lalta Prasad v. Babu Prasad and in Abdulalli v. Ranchadlal and in Karmali Abdulla v. Karimji Jiwanji(6).
[The question referred for decision to the Full Bench came on for hearing on 20th February 1918 before the Full Bench as constituted above].
Mr. V. Ramadoss for the Appellant.
Mr. T. Ramachandra Row for the Respondent.
OPINION
In this case the two defendants carried on the business of timber merchants as a family business, they being father and son in an undivided Hindu family. They are sued on a debt which would be statute-barred in the absence of an acknowledgment sufficient, within Sect. 19 of the Limitation Act, te take it out of the statute. There is such an acknowledgment, but it is only signed by the 1st defendant, the father, and the question is whether it can operate as against the son, the co defendant also.
The learned Judges who referred the case have propounded a question about the answer to which we feel no hesitation, but it is obviously referred to us because they felt a doubt as to whether the decisions in Valasubramania Pillai v. S.V.R R. M. Ramanathan Chettiar and Saaik Mohideen Sahib v. Official Assignee of Madras did not preclude them from arriving at the conclusion which they clearly thought to be the right one.
The exact question propounded is “whether in the absence of direct evidence that a co-contractor or partner has authorised his co-contractor or partner to make acknowledgments or payments saving limitation on his behalf, such authority can be inferred from other circumstances such as the position of the other co-contractors or partners in the business.” Our answer is in the affirmative. We think that direct evidence of a specific authority to give acknowledgments is quite unnecessary, and that authority may be inferred from circumstances though it is of course quite beyond our province to indicate what circumstances should in our opinion be deemed sufficient to warrant the inference. It is important to notice the exact wording of Sect. 21 (2) of the Limitation Act. The section does not say that a person shall not be liable on an acknowledgment signed by the partner by reason only of his being a partner but by reason only of a written acknowledgment signed by his partner; and it amounts to saying that if you have no more than a written acknowledgment signed by one defendant the fact that the other defendant is his partner cannot affect the latter's liability. You could obviously have a case where one partner signed an acknowledgment in respect of a gambling debt of his own; but for the sub-section proof of the acknowledgment would be sufficient to fix the other partner with liability, a conclusion manifestly repugnant both to sense and justice. We see nothing in the sub-section to make it necessary to suppose that it is intended to apply to transactions conducted in the ordinary course of partnership business. We need only refer to the general principle of law embodied in Sect. 251 of the Contract Act that partners are the agents of one another and that their acts dote in the ordinary course of the partnership business bind the partnership.
As regards the two decisions referred to, it is not quite easy to say whether they should properly be regarded as laying down as a condition of liability that there should be direct evidence of express authority to give acknowledgments. But at least one sentence in Shaik Mohideen Sahib v. Official Assignee of Madras lends colour to that view. White, C. J., referring to the former decision in Valasubramania Pillai v. S.V.R.R.M Ramanathan Chettiar says: ‘’ Following the principle we here (i.e, 32 Mad., 421) lay down, we have to see in this case if there is evidence that the person who made the acknowledgment had authority to do so on behalf of his firm.” Those words are capable of the construction that what is meant is direct evidence of specific authority, and they were obviously so regarded by the learned Judges who referred this question to us. If that be so, we have no hesitation in saying that they were wrongly decided and should no longer be regarded as law. Such a view is completely at variance with that taken by the other Courts of India and by the English Courts in their construction of the corresponding sections of the English Acts and would obviously put a premium on commercial dishonesty.
M.RQuestion Answered in the affirmative.