TMI Blog1955 (11) TMI 50X X X X Extracts X X X X X X X X Extracts X X X X ..... ged for . The Plaintiffs intimated about the dishonour of the cheque to all the partners of the Defendants and called upon them to pay the Plaintiffs that amount. A sum of Rs. 5000/- was paid by the Defendants to the Plaintiffs in part payment on 12-7-1949 and the balance of Rs. 5000/- is the subject-matter of one of the claims of the Plaintiffs in this suit. At the hearing of the suit the Defendants gave up their contention that they were not liable to repay this amount of Rs. 5000/-. 2. It is also the case of the Plaintiffs, and that is now the subject-matter of dispute between the parties, that on 5-8-1949 the Plaintiffs lent and advanced to Messrs. Jamnadas Co., of which Jamnadas was the sole proprietor, a sum of Rs 34,000 at interest. As collateral security for repayment of that loan of Rs. 34,000 Jamnadas delivered to the Plaintiffs a crossed and bearer cheque for Rs. 34,000/- which was post-dated 20-8-1949. That cheque was drawn by the Defendants in favour of Jamnadas Co., and was signed on behalf of the Defendants by Jamnadas, as a partner of the Defendants firm. Jamnadas endorsed over that cheque as the proprietor of Jamnadas Co. in favour of the Plaintiffs, wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Bombay as he had money dealings with both Jamnadas and Lavji. In view of the fact that the Defendants are not now disputing their liability to the Plaintiffs in respect of the balance of Rs. 5000/- under the first loan I need not refer to the evidence of Laxmichand relating to that transaction. That evidence is on the same lines as those mentioned by me while summarising the Plaintiffs' case in the plaint in respect of that balance of Rs. 5,000/-. 5. As to the monetary dealing between the Plaintiffs and Jamnadas now in dispute Laxmichand stated that on 5-8-1949 Jamnadas came to his pedhi. He had brought with him a post-dated cheque bearing date 20-8-1849 for Rs. 34,000/- signed by himself on behalf of the Defendants and drawn in favour of Jamnadas . Co. which was Jamnadas's own firm. Laxmichand was informed by Jamnadas that he had to take this amount of Rs. 34,000/- from the Defendants but the Defendants were unable to pay this amount. Jamnadas further stated that he wanted Rs. 34, 000/- at once for his own business and the Plaintiffs should therefore discount the cheque and pay him Rs. 34,000/-. This was all that the witness stated about this cheque but a question ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wo mortgages; but he denied any knowledge of the fact that the financial position of Jamnadas at that time was unsound. He also stated in his evidence that prior to 16-6-1949 the Plaintiffs had no dealings with the Defendants. He also admitted that he knew that Abbasbhai was a substantial party; but he did not make any inquiry of Abbasbhai when the cheque for Rs. 34,000 was given to him and when that cheque was dishonoured. It was put to the witness that in fact on 5-8-1949 Jamnadas had overdrawn a sum of Rs. 50, 000/- from the Defendants in his account of the picture Mela; and that nothing was due to Jamnadas in his account with the Defendants in respect of the picture Char Din. It was also put to him that the picture Dada did not belong to Jamnadas but was owned by the Defendants. Laxmichand stated that he did not know that such was the position nor did he know that on 5-8-1949 Jamnadas was indebted to the Defendants and that nothing was payable to him by the Defendants. He admitted that in the affidavits made by him at the time of summons for Judgment in this suit he had not made any reference to the representations which according to his evidence here were made to him by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y stated that from the books of account he could- say that no sum of Rs. 34,000/- or any other sum was payable by the Defendants to Jamnadas on 5-8-1949. In his cross-examination he stated that Mela and Char Din were the only pictures of Jamnadas that the Defendants were distributing. He stated that there was no guarantee or advance given or paid by the Defendants to Jamnadas In respect of these pictures. This suggestion was made because if any advance or guarantee was given the account of Jamnadas was bound to show that Jamnadas had overdrawn large sums although the real position would be different. But as I have already stated Joshi deposed that there was no advance paid or guarantee given in respect of those pictures of Jamnadas. 8. Lavji Kanakia, a partner in the Defendants firm was next examined. He produced the deed of partnership of the Defendants firm. That writing is dated 16-7-1945 and shows that the partners were, Jamnadas, Lavji, Nanubhai Vyas and Abdulhusein Hyderabadwalla. Lavji stated that no amount of Rs. 34,000/- or any other amount was payable by the Defendants to Jamnadas on 5-8-1949. He further stated that there was no conversation between any of the partn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his own favour. Nor am I able to read the express term contained in the partnership agreement which no doubt conferred full powers of management of the business of the Defendants on Jamnadas and Lavji and also authorised them to borrow moneys and maintain and operate banking accounts on behalf of the Defendants, as authorising Jamnadas on behalf of the firm to enter into on behalf of the firm any contracts with himself. Partnership firms can and at times do enter into contracts with one of the partners but this can only be with the consent and knowledge of all the partners. It is not necessary here to refer to the application of the doctrines of ratification, acquiescence, waiver or estoppel for no such consideration arises in the present case. A partner without the knowledge and consent of his other partners cannot on behalf of the firm enter into a contract with himself. That partners in any particular case may permit this to be done or acquiesce in it is a totally different matter. The question before me is one of agency and authority and it is not possible to interpret the authorisation clause in the partnership agreement as conferring on Jamnadas the power either to e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ay in terms that acts outside the stated limits are not binding on the firm. The English Act contains a provision which runs as follows: Where one partner pledges the credit of the firm for a purpose apparently not connected with the firm's ordinary course of business, the firm is not bound, unless he is in fact specially authorised by the other partners but this section does not affect any personal liability incurred by the individual partner. The implied authority of a partner to bind the firm is therefore restricted to acts usually done in the business of the kind carried on by the firm. But if all that can be said of an act is that it was convenient or that it facilitated the transaction of the business of the firm or that it was done because it was in the interest of the firm to contract with an individual partner, that is not sufficient to bind the firm in the absence of evidence of sanction by the other partners. The same principle applies and with the same certainty where a partner purporting to act on behalf of the firm draws a cheque in his own favour and then endorses it in favour of a third party to secure repayment of his own separate debt. In any such c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r. 13. Learned counsel for the Defendants relied on the following statement of law in Lindley on Partnership (11th Edition) at p. 245. Again, although a partner may be a bona fide holder, for his separate use, of the paper of his firm, yet if he gives such paper in payment of a separate debt of his own, this is prima facie an irregular proceeding and a fraud on his co-partners. Consequently, the creditor taking the paper must rebut this prima facie inference before he can compel the firm to pay. A bona fide holder for value without notice is of course in a different position. It was urged on behalf of the plaintiffs that this proposition has been too widely stated and that the cases cited in the foot-note under it do not bear out the rule. I do not agree. This statement of law has to be read in its own context and is made while considering the liability of partners in respect of acts which are unauthorised and are known so to be. A dealing known to be between a partner purporting to act on behalf of the firm and himself is prima facie deemed to be an unauthorised act because it is affected by the limitations inherent in the doctrine of the agency of a partner. I read thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to have made to him by Jamnadas. The only fact on which the Plaintiffs can rely is that Laxmichand had knowledge of the fact that some pictures of Jamnadas were being distributed by the Defendants on commission basis. I need not refer again to what I have already said. Laxmichand as I have pointed out was put on further inquiry in the matter of this cheque and as emerges from his own evidence he could very easily have made an inquiry of the Defendants firm or of the other partners of Jamnadas whom he knew and whom he could readily have contacted. He neglected to do so. And even if he is to be wholly believed he relied only on the word of Jamnadas. He should have known that until accounts of a partnership business are finally made up no partner can be said to be a creditor of the firm or the other partners and even if there are separate business dealings between a partner and his firm the partner may have already been paid or even otherwise may not in fact have become entitled to receive any amount from the firm. But this is not all. As was rightly pointed out by Mr. B.J. Kapadia learned counsel for the Defendants, there had been no monetary dealings between the defendants ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clude the bona fide purchaser of the instrument from being a holder in due course and relied on a decision of a Court of Appeal in England in the Royal Bank of Scotland v. Tottenham (1894) 2 QB 715 (A). The proposition is unassailable. So also is the proposition that if a partner has implied authority to borrow money, he can speaking generally, do so by discounting a postdated cheque of the firm. Nevertheless the offer of the post-dated cheque in circumstances similar to those that were present in this case was in my judgment an additional factor that should have made the plaintiffs more diligent in the matter of making some further and independent inquiries about this cheque. This they admittedly neglected to do. 16. In substance and in effect Jamnadas was in the matter of this transaction acting both as principal debtor as well as guarantor claiming to be the holder of the cheque by virtue of his purported agency. If the whole position be viewed in this manner the conclusion must result that it would in such a case become incumbent on the creditor to make reasonable independent inquiry into the credentials of the partners who professes to have acted as the agent of the firm an ..... X X X X Extracts X X X X X X X X Extracts X X X X
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