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1934 Supreme(SC) 31
Privy Council At Madras
Sir Lancelot Sanderson, Wright , Justice Lords Blanesburgh , JJ.
P.K.P.S. Pichappa Chettiar and others -Appellant
Versus
Chokalingam Pillai and others -Resopndent
Appeal No. 122 of 1931
Decided On : 21-06-1934
T.L. Wilson, Wyesingha, Chinnai Durai , Leslie DeGruyther, J.M. Parikh, A.M. Dunne
A managing member of a Hindu joint family entering a partnership with a stranger does not make other family members partners ipso facto. Only those who contractually agree to the partnership are bound; the family unit does not automatically become a partner.
Headnote:(A) Indian Partnership Act, 1932 (formerly Indian Contract Act) - Partnership with managing member of a Hindu joint family - Where a managing member of a joint family enters into a partnership with a stranger, the other members of the family do not ipso facto become partners in the business so as to be clothed with all the rights and obligations of a partner - In such a case, the family as a unit does not become a partner, but only such of its members as in fact enter into a contractual relation with the stranger.
(B) Partnership - Duration and Limitation - Entries in daybooks and ledgers showing share capital, coupled with admissions made by a partner in other legal proceedings, are sufficient to establish the continuance of a partnership, even if the registration of the firm omits the name of said partner.
Facts of the case:
A suit was brought for a declaration that a partnership in a money-lending and banking business carried on in a foreign city was dissolved and for a direction for accounts. It was alleged that the managing member of a Hindu joint family had entered into a partnership with the appellants. The lower court held that the partnership existed and that the entire family property was liable as the family had benefited from the partnership funds. The High Court reversed this, holding that the partnership had ended years prior and the suit was barred by limitation.
Findings of Court:
The court found that the managing member was indeed a partner and that the partnership continued until the institution of the suit, based on ledger entries and the partner's own admissions. However, it was found that the other members of the joint family were not partners, as the business was not a traditional family occupation and there was no evidence of their agreement or ratification of the partnership.
Issues: Whether the managing member of the joint family was a partner, whether the partnership continued until the date of the suit, and whether the other members of the joint family were liable as partners or through the benefit derived from the partnership.
Ratio Decidendi: The court ruled that the entry of a managing member of a Hindu joint family into a partnership with a stranger does not automatically make other family members partners. Since there was no evidence that the other members agreed to the partnership or that the business was a family trade, they could not be held liable in their personal capacity.
Result: Appeal allowed in part; decree modified to declare the deceased managing member as a partner and order the taking of accounts, while dismissing the claim against the respondents in their personal capacity.
This is an appeal against a decree of the High Court of Judicature at Madras, dated 9th September 1929 reversing the decree of the Court of the Subordinate Judge of Ramnad, at Madura, dated 18th January 1927. The question for determination in this appeal is whether the respondents and/or their deceased uncle Virappa Pillai were partners of the appellants in the business of money-lenders and bankers carried on at Colombo under the style of P.K.P.S., and if Virappa Pillai was a partner, whether his partnership was on his own account or as managing member of the Hindu joint family to which he and the respondents belonged. The suit was brought on 8th April 1924 by P.K.P.S. Pichappa Chettiar against (1) K.V.R. Virappa Pillai, (2) Chokalingam Pillai (3) Shanmukhan Pillai (a minor by his guardian ad litem Defendant 2), (4) P.K.P.S. Palaniyappa Chettiar (5) P.K.P.S. Raman Chettiar, and (6) P.K.P.S. Chidambaram Chettiar. Defendants (4), (5) and (6) as members of the firm of P.K.P.S. were throughout associated with the plaintiff in interest as against defendants (1) (2) and (3). Virappa Pillai died after the institution of the suit, and the above-mentioned defendants (2) and (3) are on the record as his legal representatives, as well as in their personal capacity. It appears that the appellants, viz., the plaintiff and defendants (5) and (6) and Palaniappa Chettiar (defendant 4), hereinafter called the "Chetties," carried on the business of money-lenders and bankers under the style of P.K.P.S. in India and elsewhere, and though closely related they were divided.
The respondents, viz., Chokalingam Pillai and Shanmugan Pillai, defendants 2 and 3, belong to an undivided Hindu joint family. Kuranthappa Pillai was the head of this family, but he had retired from active life before 1908. He had two sons, Virappa Pillai (defendant 1), who from 1908 was the managing member of the joint family, and Ramaswami Pillai. Kuranthappa died about 1919 and Ramaswami in 1914 or 1915; the respondents are the sons of Ramaswami. The plaintiff alleged that he and defendants 4, 5 and 6 together styled P.K.P.S., with the family of defendants 1 to 3, and the late Ramaswami Pillai, represented by defendant 1 as the family manager, had since 1908 been carrying on in partnership in Colombo as money-lenders and bankers under the style of P. K. P. S. a business which although separate was in effect a branch of the P.K.P.S. business carried on elsewhere. It was alleged that the capital of the firm was Rs. 25,500, the total shares being 4 1/4 divided as follows 1/8 share viz., Rs.750, for the deity Bhumiswarar; 3/16 shares, viz., Rupees 18,375, for P.K.P.S., i.e., the plaintiff and defendants 4, 5 and 6; and 1/16 shares, viz., Rs. 6,375, for K.V.R., i.e., the family of defendants 1 to 3 and the late Ramaswami Pillai.
There are no written articles. The partnership was alleged to be a partnership at will. It was alleged by the plaintiff that the business of the said partnership in Colombo was managed successively by Ramaswami and Virappa as agents for the partnership until about 1915, when Ramaswami died, and that then Virappa continued the management until about 1916, when one Lakshmana Pillai relieved him of the agency. The said Lakshmana was relieved by Subrahmanyan Chetti, who in turn was relieved about September 1923 when Virappa again took up the management; and acted as agent until February 1924 when he returned to India. The plaintiff further alleged that the partnership was profitable until about the year 1916, since which date the business was carried on at a loss. The plaintiff alleged that he pressed Virappa to settle accounts and to pay the amount alleged to be due from him, and he further alleged that an agreement in respect thereof was arrived at. Among other prayers, he claimed specific performance of the alleged agreement. The Subordinate Judge held that the agreement was not proved, and refused the prayer for specific performance.
