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1929 Supreme(SC) 20
PRIVY COUNCIL [ON APPEAL FROM THEEAST INDIES]
VISCOUNT DUNEDIN, LORD CARSON, AND SIR CHARLES SARGANT.
JWALADUTT R. PILLANI - Appellant
Versus
BANSILAL MOTILAL - Respondents
On Appeal from the High Court at Bombay.
Decided On : Feb. 28. 1929.
Solicitors for appellant:Lattey & Dawe. Solicitors for respondent: T. L. Wilson & Co.
Public notice of a partnership's dissolution under Section 264 of the Indian Contract Act, 1872, does not exempt a retired partner from liability toward old customers; such persons are entitled to specific notice of the retirement.
Headnote:(A) Indian Contract Act, 1872 - Section 264 - Dissolution of partnership - Public notice - Liability of retired partner to old customers - Public notice of dissolution does not discharge a retired partner from liability to old customers who have no specific notice of the retirement.
(B) Indian Contract Act, 1872 - Nature of the Act - Not an exhaustive code - The Act defines and amends certain parts of the law relating to contracts but does not profess to be a complete code; therefore, it does not exhaustively deal with all questions arising in a dissolution of partnership.
Facts of the case:
A partner retired from a firm after a promissory note had been issued to a customer. Public notice of the retirement was given via newspapers, but no specific notice was sent to the customer. A subsequent promissory note was issued to replace the original. The retired partner contested liability on the second note, arguing that public notice was sufficient to terminate liability.
Findings of Court:
The retired partner is liable to the old customer because public notice is insufficient; specific notice is required for old customers under the law.
Issues: Whether public notice of a partner's retirement under Section 264 of the Indian Contract Act, 1872, is sufficient to exempt the retired partner from liability toward old customers of the firm.
Ratio Decidendi: Section 264 is a negative proposition and does not expressly override the principle that old customers require specific notice of dissolution. Since the Indian Contract Act is not an exhaustive code, the existing common law principle, which requires specific notice for old customers to prevent estoppel by representation, continues to apply. The court declined to upset long-standing commercial practice based on an ambiguous statutory expression.
Result: Appeal dismissed with costs.
Legal Category Hierarchy
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commercial law
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partnership law
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dissolution of partnership
- liability of retired partner
- notice of dissolution
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dissolution of partnership
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partnership law
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civil law
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statutory interpretation
- exhaustive codes
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statutory interpretation
Judgement
Appeal (No. 154 of 1927) from a decree of the High Court in its Appellate Jurisdiction (March 29, 1927) affirming a decree of the Court in its Original Jurisdiction (August 26, 1926).
The question upon the appeal was whether the appellant was liable upon a promissory note drawn in favour of the respondent by a partnership firm in which the appellant at the date of the note had ceased to be a partner, The promissory note was in discharge of one drawn before the dissolution. The respondent was found not to have had notice of the dissolution, though public notice by advertisement had been given.
The facts appear from the judgment of the Judicial Committee.
The Appellate Court, affirming Taleyarkhan J., held the appellant liable. The learned judges (Martin
C.J. and Blackwell J.) were of opinion that the case being on the original side English law applied in the absence of Indian legislation, and that under that law old customers of a firm were not affected by a dissolution of which they had no notice. In their view s. 264 of the Indian Contract Act, 1872, which did not apply in terms, did not apply by inference.
1929. Feb. 11, 12. W. A. Greene K.C. and E. B. Raikes for the appellant. The Indian Contract Act, 1872, deals exhaustively with the subject of partnership Mohori v. Dhurmodas Ghose (( 1900) L. R. 30 I. A. 114, 125.); Ramdas Vithaldas v. S. Amerchand & Co. (( 1916) L. R. 431. A. 164,170.); Norendra Nath Sircar v. Kamalbasini Dasi . (( 1896) L. R. 23 I. A. 18, 26.)
Sect. 264 draws no distinction between old customers and new customers, and by implication provides that public notice of a dissolution shall affect all persons dealing with the firm. It is conceded that under the law of England the appellant would have been liable. Chundee Chum Dutt v. Eduljee Cowasjee Bijnee (( 1882) I. L. R. 8 C. 678.) was wrongly decided. [Reference was made also to Ezekiel Moses v. Russa Engineering Works, Ld. (( 1913) I. L. R. 1 R. 47.); Jagat Chandra Bhattacharjee v. Gunny Hajee Ahmad . (( 1925) I. L. R. 53 C. 214.)]
Upjohn K.C., De Gruyther K.C., Sir George Lowndes K.C. and Sir Cassie Holden for the respondent. Even where a subject is dealt with in a separate chapter of the Contract Act, the Act is not exhaustive of the subject Irrawaddy Flotilla Co v. Bugwandas . (( 1891) L. R. 18 I. A. 121, 129.) The cases relied on for the appellant decided only that the Act is exhaustive in matters with which it expressly deals. The Act does not by s. 264 and 265 cover all questions arising in a dissolution. It is clear that in England old customers are entitled to specific notice of a dissolution In re Hodgson (( 1885) 31 Ch.
D. 177, 184.); Scarf v. Jardine . (( 1882) 7 App. Cas. 345, 349.) That view had been adopted in India before the Act of 1872 Shewram v. Rohomutoollah . (( 1864) S. H. C. R. 94.) Had it been intended to provide otherwise in 1872 it would have been done in clear and express terms. The English rule is based upon holding out or estoppel by representation, which principle is enacted by s. 115 of the Act. In 1882 the High Court at Calcutta in Chundee Churn Dutt v. Eduljee Cowasjee Bijnee (I. L. R. 8 C. 678.) held that specific notice was required in the case of old customers and that decision has since been followed in India. That course of decisions should not now be interfered with, seeing that s. 264 does not expressly provide otherwise.
Greene K.C. in reply referred to Pollock and Mullas Indian Contract Act, p. 803.
Feb. 28. The judgment of their Lordships was delivered by
VISCOUNT DUNEDIN. The facts in this case are not in dispute. The appellant Pillani was a partner of a firm of Husseinbhai Pillani Wadia & Co. On April 3, 1923, that firm along with Wadia Woollen Mills, Ld., granted in respect of a loan a promissory note for 2 lacs of rupees with interest at 7¾ per cent, in favour of the respondent Raja Bahadur Bansilal Motilal. On September 12, 1923, the firm dissolved partnership and the appellant retired. The fir
