Authored By : T. Ameer Ali, J. Pratt

T. Ameer Ali and J. Pratt, JJ.

1. The plaintiff appealed to the District Judge, who has, inhis 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 of1877 was applicable to this suit, the period running from the time when theplaintiff was compelled to make the payments; and applying strictly thedecision in the case of Dayal Jairaj v. Khatav Ladha (1875) 12 Bom HC 97 (106),be was of opinion that the two defendants who joined with the plaintiff inexecuting the bond in favour of Trilochan Nag were liable for contribution tothe plaintiff, but again reading strictly the case to which we have" justreferred, he thought that the plaintiff was not entitled to maintain his actionas against the defendant No. 1.

2. Now, it is necessary to bear in mind the frame of thesuit. Strictly speaking, this is a suit for contribution, an action in equitywell known to any one at all familiar with the practice and procedure whichprevailed on the Equity Side of the old Supreme Court, and unless there isanything which would justify a demurrer on the part of the defendants, therecan be no question that the plaintiff would be entitled to recover in thissuit; provided, of course, that his allegations of fact are well founded. TheSubordinate Judge thinks that, because the money which the plaintiff borrowedupon 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 5E&Ir 656, the plaintiff could not maintain the action for contributionapart from the account. It seems to us that the Subordinate Judge has taken asomewhat narrow view of the object and scope of the action even upon the ruleswhich were prevalent in the English Courts prior to the passing of theJudicature Act in 1873. Knox v. Gye (1872) L.R 5 E & Ir App 656, was acasein which the accounts of the business of which the parties were memberswere actually asked for; and the subject-matter of the action and the reliefthat was prayed for in that suit were intimately connected with the taking ofthe accounts. One of the noble and learned Lords held that, although the actionwas brought to recover a portion of the assets that had been realized by one ofthe partners after the dissolution of the partnership, it could not berecovered because the accounts could not be taken. The three other Judges wereof opinion that an action for the recovery of a portion of the assets realizedby 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) ILR 6 Bom 628. Thecase of Knox v. Gye (1872) L.R 5 E & Ir App 656, occurred long before theJudicature Act came into force. Mr. Justice Lindley in his work on Partnershipsummarises the effect of the new rules in words, which to our minds areabsolutely expressive of the way in which Courts of Equity, so far as we areaware, now deal with such matters. In Lindley on Partnership, 5th Edition, page560, will be found the following passage: "The Judicature Acts and ruleshave materially altered the law relating to actions between partners. Formerlyno action at law could be maintained by one partner against another if it inany way involved taking a partnership account: for, although the right to anaccount was a legal right, the old action of account, at least betweenpartners, had long become obsolete, and Courts of law had no machinery enablingthem to do justice in matters of account. Hence it became settled that actionsinvolving accounts between partners could not be sustained. The Judicature Actsand rules have, however, abolished this rule; and the present state of the lawon this subject appears to be as follows: First, as regards real property;secondly, as regards personal property; thirdly, as regards actions for moneydemands or damages. The three following rules may be taken as guides: (1) Anaction for damages may be maintained by one partner against another in allthose cases in which such an action might have been maintained before theJudicature Acts, provided the action would not have been restrained by a Courtof Equity. (2) Any action which would have been so restrained cannot besupported. (3) An action may be maintained by one partner against another forany money demand which before the Judicature Acts could have been made thesubject of a suit for an account." And with reference to this he says:"Practically the important questions which will arise under the newprocedure are reduced to the following. 1. When can an action be maintainedbetween partners without taking a general account of all the partnershipdealings and transactions 2. When will such an account be ordered without adissolution of the firm The second of those questions has been alreadyconsidered. The first, which has also been alluded to, can only be answeredgenerally by saying that each case must depend upon its own circumstances andupon whether justice can really be done without taking such an account."Even under the old rules there were numerous exceptions in the practicegenerally followed in the common law Courts, and Mr. Justice Lindley in p. 562gives for purposes of reference a summary of the circumstances under which anaction could have been maintained, as also the circumstances under which itcould not. In p. 564 will be found an abstract of a case where "A and Bagreed to become partners and each agreed to furnish a certain amount ofcapital, and A lent B the amount B was to contribute. This loan constituted adebt for which an action by A against B would lie, although they may haveactually become partners. And it also followed that if partners agreed tocontribute capital from time to time to meet expenses as occasion mightrequire, and one of them was compelled to pay the whole of the expenses forwhich all were liable, he could sue his co-partners for what they ought to havecontributed according to their agreement." Another case of a similarcharacter is given in p. 566, and in p. 567 some instances are given in whichan action was held not to be maintainable. The case of Dayal Jairaj v. KhatavLadha (1875) 12 Bom HC 97, arose out of a suit brought in 1878; whilst that ofSedgwick v. Daniell (1857) 2 H&N 319, was undoubtedly under the old rules.There four persons, shareholders in a certain company, borrowed on their owncredit a certain sum of money which was applied for the business of thecompany. The plaintiff in that action had to pay in the entire amount, andbrought a suit for contribution against his co-partners. The learned Judgesheld that the action was maintainable. They said that, inasmuch as some of theshareholders had entered into a separate obligation, the suit was maintainableby the plaintiff as against the persons who joined in incurring the obligationwith him. We think the learned District Judge in this case has regarded as aprinciple what was stated, as we understand it, merely as a test. To our mindsthe learned Judges in Sedgwick v. Daniell (1857) 2 H&N 319, considered thefact that four persons out of the company had entered into a transaction as anindication that transaction had nothing to do with the partnership business. Inour opinion they simply used that circumstance as a test for determiningwhether the transaction in respect of which the action was brought was sointimately connected with the partnership business as to make it an item in thepartnership account. We are inclined to think that if the District Judge hadnot taken that limited view of Sedgwick v. Daniell (1857) 2 H&N 319, hisconclusion would have been different. In the case of Dayal Jairaj v. KhatavLadha (1875) 12 Bom HC Rep 97, Mr. Justice Green, on appeal from the decisionof Mr. Justice Sargent, pointed out what he thought was the principle properlydeducible from the enunciations contained in Knox v. Gye (1872) L.R 5 E&IrApp 656, and applying the test pointed out in Sedgwick v. Daniell (1857) 2H&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 wereshortly these, and they indicate exactly how matters stood before Mr. JusticeGreen: Six persons were members of a partnership business. Two retired beforedissolution, two became insolvents, and the plaintiff had to pay all theamounts recoverable from the different parties. He then brought a suit againstthe only defendant who could be sued. Upon objections raised by the defendanthe subsequently added the other persons who had joined with him in contractingthe debt for which he had been sued and held liable. There is nothing in thefacts of the present case which would, in our opinion, bar a suit forcontribution, unless of course the money secured by the promissory note becamean item of the partnership account. The most important allegation which affordsan indication to the question whether the money was borrowed upon anunderstanding totally apart from the partnership business, or whether it becamean 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 oneor more of them might upon his individual credit borrow money from outsiderswhich money he might pay into the business; and he alleges further that notonly were the members so authorised, but also the gomastas were placed on thesame footing, i.e., that under and by virtue of that agreement the gomastas hadequal authority to pledge their credit. Apart from that agreement it cannot besaid that the position of the gomastas was the same as that of the partners inthe firm. To our mind this is a clear indication of the fact that the contractwas wholly distinct from the partnership business. In considering also thequestion whether this suit is maintainable or not, we must bear in mind theallegations contained in paragraph 12 of the plaint relating to the renewal ofone of the notes at the request of the defendants.

3. We have reserved for this stage this last case reliedupon by the respondents in support of their contention. It is an unreported judgmentdelivered by two learned Judges of this Court on the 5th of January 1897 inappeal from Order No. 7 of 1896. The facts out of which that appeal arose arenot sufficiently stated in the judgment, nor do we understand the learnedJudges in the sense in which the judgment was attempted to be construed. If thefacts had been identical with the facts of this case, and if the learned Judgeshad gone so far as the learned pleader for the respondents attempted to makeout, we would have felt it our duty to make a reference to a Full Bench. Havingregard to the opinion expressed by the learned Judges, almost in the languageof Mr. Justice Lindley as given at p. 566 of his book, namely, that "if itwas a liability of the partnership, then the mere fact of one partner havingbeen compelled to pay the whole of the partnership debt would not entitle himto sue his co-partners, or any of them, for contribution in the absence of anyspecial circumstances," we think they had distinctly in view the fact thateven under the old rules there might be special circumstances which would makethe 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 doubtedin the English Courts; and a reference to it will show that case can hardly beregarded as an authority for the contention now advanced. Sadler v. Nixon wasdisposed of without any reasons being given. In this view of the law, andhaving regard to the case made by the plaintiff in this action, it appears tous that if there was a contract, either express or implied, between theplaintiff and the defendants that he should, like the gomastas as he alleges,pledge his individual credit and borrow money from outsiders, and apply thesame to the benefit of the business, the mere fact that the money was appliedto the partnership business does not render it an item in the partnershipaccount so as to preclude the plaintiff from maintaining the present action.The plaintiff did not actually seek for an adjustment of account, although hestated in one of his prayers that if it was necessary that accounts should betaken he was not unwilling to that course being adopted. The test in all theseactions, as pointed out in Sedgwick v. Daniell (1857) 2 H&N 319, is whetherthe 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 DistrictJudges decision proceeding on a strict and somewhat literal interpretation ofthe case of Dayal Jairaj v. Khatav Ladha (1875) 12 Bom HC 97, is correct so faras 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 iserroneous. We accordingly set aside the order of dismissal and remand the caseto the District Judge either to try it himself or, in the event of the partiesdesiring that evidence should be gone into regarding the allegations in theplaint 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 thepoints requiring determination. The plaintiff has throughout expressed hiswillingness to have the accounts adjusted; and as between him and thedefendants 4 and 5, as also the other defendants, if his allegations areestablished, it will be a mere question whether he has been overpaid or not.

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

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Durga Prosonno Bosevs. Raghu Nath Dass and Ors.(29.06.1898 - CALHC)