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HIGH COURT OF CALCUTTA
K. C. Das Gupta, Renupada Mukherjee
MAHADEODAS - Appellant
Versus
GHERULAL PARAKH - Respondent
A. F. O. D. 89 Of 1946
Decided On : APRIL 1, 1953
PARTNERSHIP - Forward Contracts - Wagering Contracts - Legality - Indian Contract Act, 1872, Sections 23, 30, 69 - Indian Partnership Act, 1932, Section 69(3)(a) - Hindu Law - Joint Family - Partnership between Joint Families - Validity - Public Policy - Immorality.
Fact of the Case:
Two joint Hindu families, one represented by Mahadeodas Maiya and his four sons, and the other by Gherulal Parakh and his three minor sons, entered into two partnerships for forward contracts in wheat. The first partnership was with Mulchand Guljarilal, and the second was with Baldeo Sahey Surajmall. Both partnerships resulted in losses, and the appellants, Mahadeodas Maiya and his sons, brought a suit against the respondents, Gherulal Parakh and his sons, for recovery of half of the losses incurred.
Finding of the Court:
1. The partnerships were formed between the two joint families as such, and not between individual members of the families. 2. The partnerships were governed by the Indian Partnership Act, 1932, and Section 69(3)(a) of the Act allowed for the enforcement of rights to sue for the dissolution of a firm or for accounts of a dissolved firm, even if the partnership was not registered. 3. The partnerships were for the purpose of dealing in differences in forward contracts, which amounted to wagering contracts. 4. Wagering contracts are not illegal or immoral, and the object of the partnerships was not forbidden by law or opposed to public policy.
Issues: 1. Whether the partnerships were formed between the two joint families as such or between individual members of the families. 2. Whether the partnerships were governed by the Indian Partnership Act, 1932, and whether Section 69(3)(a) of the Act allowed for the enforcement of rights to sue for the dissolution of a firm or for accounts of a dissolved firm, even if the partnership was not registered. 3. Whether the partnerships were for the purpose of dealing in differences in forward contracts, which amounted to wagering contracts. 4. Whether wagering contracts are illegal or immoral, and whether the object of the partnerships was forbidden by law or opposed to public policy.
Ratio Decidendi: 1. The court held that the partnerships were formed between the two joint families as such, and not between individual members of the families, based on the evidence presented and the fact that the letters forming the partnerships were written by the Kartas of the respective families. 2. The court held that the partnerships were governed by the Indian Partnership Act, 1932, and that Section 69(3)(a) of the Act allowed for the enforcement of rights to sue for the dissolution of a firm or for accounts of a dissolved firm, even if the partnership was not registered, as the suit was in substance a suit for accounts of a dissolved firm. 3. The court held that the partnerships were for the purpose of dealing in differences in forward contracts, which amounted to wagering contracts, based on the evidence presented and the fact that the intention was to deal in differences and not to ask for actual delivery. 4. The court held that wagering contracts are not illegal or immoral, and that the object of the partnerships was not forbidden by law or opposed to public policy, as the Indian Contract Act, 1872, only makes agreements by way of wager void, but does not make an agreement to enter into an agreement by way of wager void, and the object of the partnerships was not forbidden by law or regarded as immoral or against public policy by the court.
Final Decision: The court set aside the judgment and decree of the lower court and ordered that a decree be passed in favor of Mahadeodas Maiya against Gherulal Parakh for the sum of Rs. 3872/5/6, being half of the losses incurred in the partnership with Baldeo Sahey Surajmall and the expenses for telephone charges. The claim for interest was disallowed. The decretal amount was to bear interest at the rate of 6% per annum till the date of recovery. Mahadeodas Maiya was awarded half the costs here and below from Gherulal Parakh.
( 1 ) THE appellants Mahadeodas Maiya and his four sons are members of a joint Mitakshara family carrying on business under the name of Mahadeodas Surajmall at Darjeeling. The respondents are members of another joint Mitakshara Hindu family. They are Gherulal Parakh and his three minor sons. They carry on business at Darjeeling under the name and style of Ramlal Gherulal. The appellants brought the present action for recovery of Rs. 5300 as due from the respondents on account of two enterprises carried on by appellants and respondents as partners. Both these were for "forward contracts for purchase and sale of wheat". In one altogether 32 forward contracts were said to have been made between the partnership and the firm of Mulchand Guljari-mal, merchants of Hapur. The document on which the offer for the partnership was first made has been marked Ex. 6 (c), There was a previous suit by the appellants against the respondents on a claim over dues on account of the losses incurred in those transactions. A decree was passed in that suit in the terms of an award of arbitrators to whom the dispute had been referred. The further claim in connection with the same enterprise of forward contracts with Mulchand Guljarilal was put forward in the present suit, on the case that the accounts had not been finally settled between the partnership and Mulchand Guljarilal at the time when the previous suit was brought. In the other enterprise said to have been commenced on the basis of the letter marked Ex. 6 (d), altogether 49 forward contracts for wheat are said to have been made between Baldeo Sahey Surajmall of Hapur arid the partnership. All the contracts however resulted in loss and the appellants, had, it is averred, to pay Rs. 7065 for settlement of these claims, half of which is sought to be recovered in the suit. Other items are made up of Rs. 64/13/6 on account of telephone charges in connection with these contracts and Rs. 1088-14-3 on account of interest.
( 2 ) THE defendants resisted the claim on three grounds. First they contend that they had no connection with these contracts arid that their officer Sewkumar Vyas entered into these speculative transactions jointly with the appellants without knowledge of the respondents and without any authority from them. Next they contend that the forward contracts were in reality wagering contracts and consequently the partnership farmed for the business of such forward contracts was illegal and so no claim for recovery of amounts paid by the appellants for the business of these partnership is enforceable. Thirdly, it was contended that in any case the suit must fail because of the provisions of Section 69 of the Indian Partnership Act.
( 3 ) THE learned Subordinate Judge was of opinion that as there could be no partnership between two joint Hindu families as such, the provisions of the Indian Partnership Act were not attracted to this case and Section 69 of that Act was therefore no bar to the suit. He held also that the agreements to enter into forward contracts with Baldeo Sahey Surajmull and Mulchand Guljarilal were made by Sewkumar Vyas in exercise of the authority he had from the defendants in such matters and that the defendants were in law not parties to these agreements. Lastly he held that the contracts with the Hapur firms were wagering contracts, that the agreement to enter into such contracts were void, "as the object was forbidden by law and opposed to public policy". Accordingly he dismissed the suit.
( 4 ) IT is necessary first to consider the correctness of these three conclusions.
( 5 ) AS regards the agreement to enter into forward contracts with Baldeo Sahey Surajmall the important document is Ex. 6 (d) dated 23-3-1937. It is in these words :"to Bhai Mahadeo Das Surajmull of Darjeeling written by Ramlal Gherulal from Darjeeling whose compliment please accept. Further we shall share equally in all contracts of purchase and sale Teji Mandi, Lagonakhsana
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