Durga Prosonno Bose v. Raghu Nath Dass And Ors.

1. The plaintiff appealed to the District Judge, who has, in his judgment set forth at some length the arguments on both sides. He holds, and we think properly, that Article 99, Schedule II of the Limitation Act of 1877 was applicable to this suit, the period running from the time when the plaintiff was compelled to make the payments; and applying strictly the decision in the case of Dayal Jairaj v. Khatav Ladha (1875) 12 Bom. H.C. 97 (106), be was of opinion that the two defendants who joined with the plaintiff in executing the bond in favour of Trilochan Nag were liable for contribution to the plaintiff, but again reading strictly the case to which we have" just referred, he thought that the plaintiff was not entitled to maintain his action as against the defendant No. 1.

2. Now, it is necessary to bear in mind the frame of the suit. Strictly speaking, this is a suit for contribution, an action in equity well known to any one at all familiar with the practice and procedure which prevailed on the Equity Side of the old Supreme Court, and unless there is anything which would justify a demurrer on the part of the defendants, there can be no question that the plaintiff would be entitled to recover in this suit; provided, of course, that his allegations of fact are well founded. The Subordinate Judge thinks that, because the money which the plaintiff borrowed upon his own credit was applied for the purposes of the partnership business, it therefore became an item in the partnership account; and that consequently, in view of the remarks made by Lord Westbury in Knox v. Gye (1872) L.R., 5 E. & Ir. App., 656, the plaintiff could not maintain the action for contribution apart from the account. It seems to us that the Subordinate Judge has taken a somewhat narrow view of the object and scope of the action even upon the rules which were prevalent in the English Courts prior to the passing of the Judicature Act in 1873. Knox v. Gye (1872) L.R., 5 E. & Ir. App., 656, was a casein which the accounts of the business of which the parties were members were actually asked for; and the subject-matter of the action and the relief that was prayed for in that suit were intimately connected with the taking of the accounts. One of the noble and learned Lords held that, although the action was brought to recover a portion of the assets that had been realized by one of the partners after the dissolution of the partnership, it could not be recovered because the accounts could not be taken. The three other Judges were of opinion that an action for the recovery of a portion of the assets realized by one of the partners might be maintained. That view has been adopted by Mr. Justice Green in the case to which we have already referred, and by Latham, J., in the case of Merwanji Hormusji v. Rustomji Burjorji (1882) I.L.R., 6 Bom., 628. The ease of Knox v. Gye (1872) L.R., 5 E. & Ir. App., 656, occurred long before the Judicature Act came into force. Mr. Justice Lindley in his work on Partnership summarises the effect of the new rules in words, which to our minds are absolutely expressive of the way in which Courts of Equity, so far as we are aware, now deal with such matters. In Lindley on Partnership, 5th Edition, page 560, will be found the following passage: "The Judicature Acts and rules have materially altered the law relating to actions between partners. Formerly no action at law could be maintained by one partner against another if it in any way involved taking a partnership account: for, although the right to an account was a legal right, the old action of account, at least between partners, had long become obsolete, and Courts of law had no machinery enabling them to do justice in matters of account. Hence it became settled that actions involving accounts between partners could not be sustained. The Judicature Acts and rules have, however, abolished this rule; and the present state of the law on this subject appears to be as follows: First, as regards real property; secondly, as regards personal property; thirdly, as regards actions for money demands or damages. The three following rules may be taken as guides: (1) An action for damages may be maintained by one partner against another in all those cases in which such an action might have been maintained before the Judicature Acts, provided the action would not have been restrained by a Court of Equity. (2) Any action which would have been so restrained cannot be supported. (3) An action may be maintained by one partner against another for any money demand which before the Judicature Acts could have been made the subject of a suit for an account." And with reference to this he says: "Practically the important questions which will arise under the new procedure are reduced to the following. 1. When can an action be maintained between partners without taking a general account of all the partnership dealings and transactions? 2. When will such an account be ordered without a dissolution of the firm? The second of those questions has been already considered. The first, which has also been alluded to, can only be answered generally by saying that each case must depend upon its own circumstances and upon whether justice can really be done without taking such an account." Even under the old rules there were numerous exceptions in the practice generally followed in the common law Courts, and Mr. Justice Lindley in p. 562 gives for purposes of reference a summary of the circumstances under which an action could have been maintained, as also the circumstances under which it could not. In p. 564 will be found an abstract of a case where "A and B agreed to become partners and each agreed to furnish a certain amount of capital, and A lent B the amount B was to contribute. This loan constituted a debt for which an action by A against B would lie, although they may have actually become partners. And it also followed that if partners agreed to contribute capital from time to time to meet expenses as occasion might require, and one of them was compelled to pay the whole of the expenses for which all were liable, he could sue his co-partners for what they ought to have contributed according to their agreement." Another case of a similar character is given in p. 566, and in p. 567 some instances are given in which an action was held not to be maintainable. The case of Dayal Jairaj v. Khatav Ladha (1875) 12 Bom. H, C., 97, arose out of a suit brought in 1878; whilst that of Sedgwick v. Daniell (1857) 2 H. & N., 319, was undoubtedly under the old rules. There four persons, shareholders in a certain company, borrowed on their own credit a certain sum of money which was applied for the business of the company. The plaintiff in that action had to pay in the entire amount, and brought a suit for contribution against his co-partners. The learned Judges held that the action was maintainable. They said that, inasmuch as some of the shareholders had entered into a separate obligation, the suit was maintainable by the plaintiff as against the persons who joined in incurring the obligation with him. We think the learned District Judge in this case has regarded as a principle what was stated, as we understand it, merely as a test. To our minds the learned Judges in Sedgwick v. Daniell (1857) 2 H. & N., 319, considered the fact that four persons out of the company had entered into a transaction as an indication that transaction had nothing to do with the partnership business. In our opinion they simply used that circumstance as a test for determining whether the transaction in respect of which the action was brought was so intimately connected with the partnership business as to make it an item in the partnership account. We are inclined to think that if the District Judge had not taken that limited view of Sedgwick v. Daniell (1857) 2 H. & N., 319, his conclusion would have been different. In the case of Dayal Jairaj v. Khatav Ladha (1875) 12 Bom. H.C. Rep., 97, Mr. Justice Green, on appeal from the decision of Mr. Justice Sargent, pointed out what he thought was the principle properly deducible from the enunciations contained in Knox v. Gye (1872) L.R., 5 E. & Ir. App., 656, and applying the test pointed out in Sedgwick v. Daniell (1857) 2 H. & N., 319, which was strictly applicable to the facts of the case before him, he upheld the decision of the Court below. The facts of the Bombay case were shortly these, and they indicate exactly how matters stood before Mr. Justice Green: Six persons were members of a partnership business. Two retired before dissolution, two became insolvents, and the plaintiff had to pay all the amounts recoverable from the different parties. He then brought a suit against the only defendant who could be sued. Upon objections raised by the defendant he subsequently added the other persons who had joined with him in contracting the debt for which he had been sued and held liable. There is nothing in the facts of the present case which would, in our opinion, bar a suit for contribution, unless of course the money secured by the promissory note became an item of the partnership account. The most important allegation which affords an indication to the question whether the money was borrowed upon an understanding totally apart from the partnership business, or whether it became an item of the partnership business, is contained in paragraph 2 of the plaint. The plaintiff states that there was an agreement between the parties that one or more of them might upon his individual credit borrow money from outsiders which money he might pay into the business; and he alleges further that not only were the members so authorised, but also the gomastas were placed on the same footing, i.e., that under and by virtue of that agreement the gomastas had equal authority to pledge their credit. Apart from that agreement it cannot be said that the position of the gomastas was the same as that of the partners in the firm. To our mind this is a clear indication of the fact that the contract was wholly distinct from the partnership business. In considering also the question whether this suit is maintainable or not, we must bear in mind the allegations contained in paragraph 12 of the plaint relating to the renewal of one of the notes at the request of the defendants.

3. We have reserved for this stage this last case relied upon by the respondents in support of their contention. It is an unreported judgment delivered by two learned Judges of this Court on the 5th of January 1897 in appeal from Order No. 7 of 1896. The facts out of which that appeal arose are not sufficiently stated in the judgment, nor do we understand the learned Judges in the sense in which the judgment was attempted to be construed. If the facts had been identical with the facts of this case, and if the learned Judges had gone so far as the learned pleader for the respondents attempted to make out, we would have felt it our duty to make a reference to a Full Bench. Having regard to the opinion expressed by the learned Judges, almost in the language of Mr. Justice Lindley as given at p. 566 of his book, namely, that

"if it was a liability of the partnership, then the mere fact of one partner having been compelled to pay the whole of the partnership debt would not entitle him to sue his co-partners, or any of them, for contribution in the absence of any special circumstances,"

we think they had distinctly in view the fact that even under the old rules there might be special circumstances which would make the action maintainable. The case of Sadler v. Nixon (1834) 5 B. & Ad., 936, referred to in that judgment, as Mr. Justice Green points out, has been doubted in the English Courts; and a reference to it will show that case can hardly be regarded as an authority for the contention now advanced. Sadler v. Nixon was disposed of without any reasons being given. In this view of the law, and having regard to the case made by the plaintiff in this action, it appears to us that if there was a contract, either express or implied, between the plaintiff' and the defendants that he should, like the gomastas as he alleges, pledge his individual credit and borrow money from outsiders, and apply the same to the benefit of the business, the mere fact that the money was applied to the partnership business does not render it an item in the partnership account so as to preclude the plaintiff from maintaining the present action. The plaintiff' did not actually seek for an adjustment of account, although he stated in one of his prayers that if it was necessary that accounts should be taken he was not unwilling to that course being adopted. The test in all these actions, as pointed out in Sedgwick v. Daniell (1857) 2 H. & N., 319, is whether the money which was borrowed and sued for became by the mere fact of borrowing; an item in the partnership account; but we think that is clearly not so here. We are of opinion therefore that with respect to defendants 4 and 5 the District Judge's decision proceeding on a strict and somewhat literal interpretation of the case of Dayal Jairaj v. Khatav Ladha (1875) 12 Bom. H.C., 97, is correct so far as it goes; and we accordingly affirm his decree as against defendants 4 and 5; but we think that the dismissal of the suit against the other defendants is erroneous. We accordingly set aside the order of dismissal and remand the case to the District Judge either to try it himself or, in the event of the parties desiring that evidence should be gone into regarding the allegations in the plaint to which we have referred, to remit it to the Court of First Instance. In that case proper issues should be framed and the evidence directed to the points requiring determination. The plaintiff has throughout expressed his willingness to have the accounts adjusted; and as between him and the defendants 4 and 5, as also the other defendants, if his allegations are established, it will be a mere question whether he has been overpaid or not.

4. We think that under the circumstances of the case the plaintiff is entitled to his costs in all the Courts.