TMI Blog1956 (2) TMI 68X X X X Extracts X X X X X X X X Extracts X X X X ..... th this firm through the Maral of V. V. of Ariyaludi, since dead. This depositing was in April 1928. It is the case for the plaintiff that the new firm assumed liability to pay the debt and consequently that he, the creditor, has agreed to accept the new firm as his debtor and to discharge the old partnership from its liability. The new firm has been making payments now and then towards this deposit and by 13-4-1941 the plaintiff's money in deposit in this firm had amounted to ₹ 7813-6-6, the interest stipulated being the current rate of interest prevailing in Rangoon plus one anna. Towards the balance of the amount due under this deposit a kaiyeluthu letter, described as a promissory note, was executed under date 13-4-1941 (Ex. AD which is reproduced below : P. S. SM Sitkwin Ariyakudi V. V. Maral Karalkudi PS. M. Subramanian Chettiar 1st Chitrai of Vishu year (13-4-1041) Executed by Muthukaruppan Chettiar The amount due from us in settlement of our previous accounts is ₹ 7.873-6-6. We have credited in your name the said Bum of rupees seven thousand eight hundred seventy-three annas six pies six only with interest at Re. 0-1-0 over and above t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In fact it is not the case for this Meenakshi Achi that there was no depositing and improving of the amount of the plaintiff but her case is only that defendant I was managing and she knows nothing, which is found to be false, and she is putting the plaintiff to strict proof. The depositing was spoken to during the trial by the plaintiff Subramanian Chettiar as well as by defendant 1 Subramanian Chettiar. Their evidence stood unshaken in cross-examination and has been accepted by the learned Subordinate Judge. This plaintiff has given a registered lawyer's notice preceding the suit under Ex. A-12 and it is significant that there has been no denial of liability by defendant 2. It is in evidence that this Meenakshi Achi was receiving throughout the balance-sheets etc., from the suit firm showing thereby that she could not have been ignorant of the suit transaction, as pretended to by her now. Therefore the learned Subordinate Judge who had an opportunity of seeing this Meenakshi Achi in the box as D. W. 1 has rightly disbelieved her evidence and this is a circumstance entitled to weight. On point (1) we therefore find that the depositing of the amount for improvement as pleade ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore point (2) also fails. 20. 'Point 3' : A partnership is defined by 6. 4 replacing the repealed Section 239 Contract Act widening it (Birdichand v. Harakchand) as the relation subsisting between persons who have agreed to share the profits of a business, carried on by all or any of them acting for all . As the definition shows, a partnership consists of three essential elements: (i) it must be the result of an agreement between several persons, (ii) the agreement must be to share the profits of a business and (Hi) the business must be carried on by all or any of them acting for all. All the three above essentials must exist before a partnership can come into existence; and there must be an intention to become partners: per Lord Esher Sutton Co. v. Grey, (1894) 1 Q. B. 285. As to (i) we have to remember that a partnership cannot be the result of status but only of a contractual agreement between the various parties. (See 40 Am. Jur. 145 -- Tests of Judicial of Partnership), it is pointed out by Section 5 which further goes on to say that the members of an undivided Hindu family carrying on a joint family business are not necessarily partners. Of course t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hether the parties are partners or not. The reason is that partnership accounts are generally maintained in a different way than is the case where one or more of the parties are lenders. Even this however is not an infallible guide. As Section 6 says all the relevant facts must be scrutinised in each case in order to determine whether a particular set of persons are partners or not MANU/OU/0080/1937 Commr. of I. T. v. Kikabhai, (1930) 4 ITC 178: AIR 1930 Nag 6; British Cotton Growers Association v. Commr. of MANU/LA/0001/1937 Debt Parshad v. Jai Ram Das MANU/PH/0121/1952(N) ; Madho Prasad v. Gouri Dutt, AIR 1939 Pat 323; Chimanrani Motilal v. Jayantilal, AIR 1939 Bom 410; Raghumall v. O. A. Calcutta, AIR 1924 Cal 424; Hakam Rai v. Ganga Ram, AIR 192G Lah 340; Chokalinga v. Muthuswami AIR1925Mad768 English Cases: Davis v. Davis (1894) 1 Ch 393; In re Young Ex parte Jones, (1896) 2 QB 484; Walker v. Hirsch, (1884) 27 Ch. D. 460; Adam v. Newkiggins. (1888) 13 AC 308. For detailed discussion and cases, see Lindley, pp. 105 et seq.). 22. Once admitted as partner, the rules as to relations of partners with third persons are contained in Sections 18 to 30. Section 18 lays down the f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the firm done before retirement, the retiring partner remains liable for the same, unless, as Section 32(2) provides. On the words of Under bill (p. 79) a tripartite agreement is made by him with the third parties concerned and the partners of the reconstituted firm, discharge him from such liability. Even where partners agree amongst themselves that the continuing partners shall be liable for the obligation of a retiring partner, such an agreement cannot per se affect the rights of the creditors being res inter alios acta. Such agreement may be either express or may be implied by a course of dealing between the third parties and the new firm, after knowledge of his retirement. But it will not be presumed and if it exists will have to be strictly proved. Eenson v. Hadfield, (1844) 4 Hare 32. This refers to the subject of novation for which Section 62, Contract Act provides. Scarf v. Jardine, (1882) 7 AC 345. Retirement is not the same as dissolution. On retirement of a partner, the firm continues to exist as such, which is not the case when a partnership is dissolved. 24. Bearing these principles in mind, if we examine the facts of this case, we find that on the death of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... R/0004/1947. The only point of substance urged in favour of the contention that Meenakshi Achi was not a partner is two-fold viz., that in the other suits filed against Meenakshi Achi as well as in the present suit allegations have been made suggesting as if Meenakshi Achi was not a partner but only the guardian of her minor adopted son, the present defendant 3. Secondly, in O. S. No. 131 of 1944 the three partners who were found entitled to shares were held to be Somasundara, Subramania and Meyyappa. In regard to the former, the plain provisions of the Partnership Act can only be displaced by contracts to the contrary and the alleged custom of the Nattukottai Chettys is neither here nor there. In regard to the suit O. S. No. 131 of 1944, it will be remembered that the present plaintiff was not a party to that suit and he will not be bound by what the three persons alleged as between themselves adjudicated and got. 25. Therefore, on point (3) it has to be held that defendant 2 Meenakshi Achi continued throughout as a partner of the Sitkwin firm and is therefore liable for the suit debt both out of the assets of the firm and also personally. 26. Point (4) : When a person ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... attendant upon his entry is a question of fact and circumstances indicating assumption or non-assumption have to be gathered from the treatment of the existing debts by the firm to the knowledge of the incoming partner as the debts of the new firm or from other facts and circumstances which justly raise an implication and its assumption (40 AM. Jur Section 219 et seq.). The result of the Indian authorities on the subject also appears to be that there must be evidence which, though not much, must be sufficient to establish privity between the newly constituted firm and the creditor if an incoming partner is to be held liable for any old debt of the firm. (1865) LR 1 PC 27; 35 Cal WN 593; Jagan Nath and Co v. Cresswell. ILR 40 Cal 814; ILR 49 Mad 930: AIR 1926 Mad 1138;- Shewak Mahtom v. Saint Joseph, 9 C LR 21; Ex. P. Whitmore, (1838) 3 Deac. 365; British Homes Assurance Corpn. Ltd. v. Paterson, (1902) 2 Ch 404; Crau-furd v. Cocks, 6 Ex. 287 (Z14); Panduranga Bhatta v. Krishna Nayak Sons, AIR 1027 Mad 889; Smith v. Patrick, (1901) AC 282. 29. In this case Meenakshi Achi after she has been admitted as a new partner and the firm has been reconstituted, has assumed the liabili ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the partnership business of the P. S. SM. firm. Therefore, this Meyyappa Chettiar, in any event, under Section 28, Partnership Act, can be construed as holding out as a partner and the two essential elements emphasised under Section 28 viz., (i) that there must be a representation and (ii) credit must be given to the firm on the faith of such representation, have been made out. That Meyyappa Chettiar has been making representations to all and sundry, including this plaintiff who is a close relative and living in the vicinity has been made out. That on the faith of such representation the, present plaintiff has given credit to the firm in the sense that he has not withdrawn the deposit and allowed the firm to make use of that money and enjoy that credit has also been made out. This Meyyappa Chettiar by reason of his adoption also has become entitled to the right, title and interest of his adoptive father in the firm. Therefore, apart from the fact that Meyyappa Chettiar has not been opposing here the decree passed against him, it is obvious that he has been rightly made liable with Meenakshi Achi. 32. Point (5) : The suit is not barred by limitation for the reasons set ..... X X X X Extracts X X X X X X X X Extracts X X X X
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