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Andhra Pradesh High Court
Gurram Subbarayudu (Died) Gurram Subbamma - Appellant
Versus
Moto Pothula Narasimham (Died) Garre Venkaiah - RESPONDENT
Decided On: 08-17-73
The other partners of a firm are liable for the debt due under a promissory note executed by the managing partner of the firm.
Headnote:
PARTNERSHIP - LIABILITY OF PARTNERS - PROMISSORY NOTE EXECUTED BY MANAGING PARTNER - LIABILITY OF OTHER PARTNERS - NEGOTIABLE INSTRUMENTS ACT, 1881, SECTIONS 5, 18, 19, 22, 25, 50 - PARTNERSHIP ACT, 1932, SECTIONS 16(2).
Fact of the Case:
A suit was filed by the endorsee of a promissory note executed by the managing partner of a firm against the other partners of the firm for recovery of monies due on the promissory note. The other partners contended that they were not liable as they were not the executants of the promissory note and the plaintiff was not a holder in due course.
Finding of the Court:
The court held that the other partners of the firm were liable for the debt due under the promissory note as the promissory note was executed by the managing partner of the firm and the monies drawn were utilised for the purpose of the firm.
Issues: Whether the other partners of the firm were liable for the debt due under the promissory note.
Ratio Decidendi: Under Sections 5, 18, and 19 of the Partnership Act, the other partners are liable for the acts of one of the partners of a firm. Under Section 22 of the Act, an act done or instrument executed by a partner on behalf of the firm shall be done or executed in the firm name which will bind the firm and the other partners, and under Section 25, every partner is liable jointly with all the other partners and also severally, for all acts of the firm done while he is a partner.
Final Decision: The second appeal was allowed and the judgment and decree of the subordinate judge were set aside and those of the district munsif were confirmed.
( 1 ) THE only point that arises for the consideration in this appeal is whether in a suit by a transferee of a pronote for recovery of monies due on the pronote executed by the managing partner of a firm, the others partners of the firm can be made liable.
( 2 ) ONE Palwadi Hanumantharao the 2nd defendant for an on behalf of the firm palwadi Hanumaiah Son and Co. , executed a pronote Exhibit A-2 in renewal of prior pronotes evidenced by Exhibits X-1 to X-3 for Rs. 1,000. 00 on 1-8-1949 in favour of 1st defendant. The 1st defendant transferred this pronote by an endorsement Exhibit A-1 for consideration in favour of the plaintiff on 20-5-1961 and the endorsee has filed the suit claiming the money due against the partners of the firm of Hanumaiah Son and Company, defendants 2 to 5. While the 2nd defendant the managing partner of the firm, in his written statement admitted the execution of the promissory note as a partner of the firm of P. Hanumaiah son and Company and passing of the consideration thereunder , defendants 3 to 5 , the other partners in their written statement contended that the 2nd defendant was not the managing partner of the firm and the firm itself was dissolved to the knowledge of the plaintiff and the 2nd defendant had no authority to renew any debts of the firm, that the plaintiff is not a holder in due course, that the transfer is not valid and supported by consideration, that defendants 3 to 5 being non-executants under the suit promissory note the plaintiff is not entitled to a decree as against them, that the suit pronote is also time barred and the defendants cannot be held personaly liable for the suit amount.
( 3 ) ON all the contentions, appropriate issues were framed and the Court held against defendants in these issues and the suit was decreed.
( 4 ) IN appeal before the Subordinate Judge by defendants 3 to 5 the rest of the contentions pressed was that the plaintiff who is an endorsee of the suit promissory note is not entitled to proceed against the non-executants thereto, nor can he plead any liability on the part of the non-executants on the basis of the original debt, for he did not obtain the assignment of the debt. This contention was upheld by the Subordinate Judge relying on the decision in maruthamuthu Naicker v. Kadir Badsha , AIR 1938 Mad 377 (FB) and ramakrishnareddy v. Sitaramireddy, 1961-2 Andh WR 43 = (AIR 1962 Andh Pra 255) and the decree as against defendants 3 to 5 partners of the firm was therefore set aside and the decree as against the firm and the managing partners of the firm 2nd defendant was confirmed. Hence this appeal by the plaintiff.
( 5 ) IN Sadasukh Janki Das v. Sir Kishen Pershad, AIR 1918 PC 146 it was pointed out that it is of the utmost importance that the name of a person or firm to be charged upon a negotiable instrument should be clearly stated on the face or on the back of the document so that the responsibility is made plain and can be instantly recognised as the document passes from hand to hand and that it is not sufficient that the principals name should be in some way disclosed. It must be disclosed in such a way that on any fair interpretation of the instrument his name is the real name of the person liable upon the instrument. In AIR 1938 Mad 377 (FB) also it was pointed out that it is a fundamental principle of the relating to negotiable instruments that no one whose name does not appear on the instrument can be held liable thereon. The above cases dealt with the liability of the members of the joint family for the debt incurred on a pronote by a karta of a family. It is in that connection that the above caution was administered. It was also pointed out in that case that where the endorsement on the pronote is in blank it only operates to transfer the property in the instrument and does not operate as an assignment of the debt, but the endorsement may operate to assign, the debt as well when it is so worded and the requirements of t
