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1907 Supreme(Cal) 18
CALCUTTA HIGH COURT
Baney Madhub Mullick - Appellant
Versus
Subal Chunder Law - Respondent
Suit No. 485 of 1905
Decided On : 27-05-1907
Headnote:
Mistake - Partnership - Promissory Notes - Settlement - Reopening Accounts - [Indian Contract Act, 1872, Section 25] - [Indian Contract Act, 1872, Section 73] - [Specific Relief Act, 1877, Section 28] - The court held that where parties have settled their accounts by ascertaining the exact balance, and it later turns out that there were errors in the account, the account may be reopened in equity. The court distinguished cases where parties agree to take a gross sum as the balance, in which case the accounts will not be reopened unless vitiated by fraud. The court found that the parties in this case had settled their accounts by ascertaining the exact balance, but the plaintiff had been induced to accept a lesser sum. The court held that this was sufficient to distinguish the case from McKellar v. Wallace, and that the account could be reopened. The court further held that the plaintiff was entitled to a half-share in the three government promissory notes that had been omitted from the accounts, as the parties had made a common mistake in omitting them. The court applied the principle of common mistake under Section 25 of the Indian Contract Act, 1872, and held that the settlement was voidable under Section 73 of the Indian Contract Act, 1872. The court also relied on the provisions of Section 28 of the Specific Relief Act, 1877, to grant relief to the plaintiff.
Fact of the Case:
Two partners in a firm, the plaintiff and the defendant, settled their accounts after the plaintiff decided to retire. The settlement did not include three government promissory notes that were later found during the firm's relocation. The plaintiff claimed a half-share in the notes, arguing that they were omitted from the settlement due to a common mistake.
Finding of the Court:
The court found that the parties had settled their accounts by ascertaining the exact balance, but the plaintiff had been induced to accept a lesser sum. The court held that this was sufficient to distinguish the case from McKellar v. Wallace, and that the account could be reopened. The court further held that the plaintiff was entitled to a half-share in the three government promissory notes that had been omitted from the accounts, as the parties had made a common mistake in omitting them.
Issues: Whether the settlement between the parties could be reopened due to the omission of the three government promissory notes from the accounts. Whether the plaintiff was entitled to a half-share in the notes.
Ratio Decidendi: Where parties have settled their accounts by ascertaining the exact balance, and it later turns out that there were errors in the account, the account may be reopened in equity. The court distinguished cases where parties agree to take a gross sum as the balance, in which case the accounts will not be reopened unless vitiated by fraud. The court found that the parties in this case had settled their accounts by ascertaining the exact balance, but the plaintiff had been induced to accept a lesser sum. The court held that this was sufficient to distinguish the case from McKellar v. Wallace, and that the account could be reopened. The court further held that the plaintiff was entitled to a half-share in the three government promissory notes that had been omitted from the accounts, as the parties had made a common mistake in omitting them.
Final Decision: The court decreed in favor of the plaintiff, granting him a half-share in the three government promissory notes.
JUDGMENT
Chitty, J. - This is a suit by the Plaintiff for a half-share in 3 Government promissory notes of the aggregate face value of Rs. 7,000. The Defendant claims that the notes belong entirely to him. The facts, though somewhat peculiar, are not seriously disputed, and on those facts I am at loss to see how in law or on common principles of honesty the Plaintiff's claim can be resisted. The parties belonged to a very old established firm in this city, Bissonath Law & Co., which carried on at 2, Larkins' Lane a business in wine and oil-man stores, hardware and other commodities. There were at one time 5 partners including Plaintiff and Defendant. In the eighties the firm was possessed of (inter alia) the 3 Government promissory notes in question in the suit. Those notes in 1886 disappeared and it was not then known whether they had been mislaid, lost or stolen. In 1895 the firm was re-constituted with 3 partners, Plaintiff, Defendant, and one Gocool Chundra Law. The Plaintiff had a share of 5 annas 6 pies and the others' shares of 5 annas 3 pies each. The partnership was for a term of 20 years, any partner being at liberty to retire at any time on giving 12 months' notice. The deed of partnership, dated 26th November 1895, is before the Court (Ex. A). In the year 1896, the 3 Government promissory notes, which had for 10 years been carried through the books, were by consent of the three partners written off. They were carried from the treasury account to the shop account and there debited. From that date (31st Chaitra 1302) they appeared no more in the firm's accounts. On the 26th January 1898 the 3rd partner Gocool Chundra Law died. He was at the date of his death heavily indebted to the firm and the loss occasioned thereby amounting to over Rs. 9,000 was equally divided between Plaintiff and Defendant, who with the consent of Gocool Chundra's son took over his share in the partnership. Thence forward Plaintiff and Defendant appear to have been considered as equal sharers in the firm, though strictly speaking their shares would be 8 annas 1 1/2 pies and 7 annas 10 1/2 pies. In February 1904 Plaintiff expressed a wish to retire from the firm from the 16th Falgoon then following. He had apparently forgotten the provisions in the deed as to 12 months' notice. Correspondence of a perfectly amicable character passed between him and the Defendant which I need not discuss in detail. Defendant was willing that Plaintiff should retire, but it was found impracticable that he should do so from the early date which he had suggested. It was, however, ultimately agreed that his interest in the firm should cease from the 31st Chaitra 1310. Negotiations commenced as to the taking of accounts and the price at which Plaintiff should be bought out. The Defendant at first suggested that he should accept a sum of Rs. 3,000 in full satisfaction for his eight annas share. This ridiculous proposal, it is needless to say, did not meet with Plaintiff's approval. In March the Plaintiff had the accounts examined, probably not very systematically or accurately. The result of that examination showed a sum of Rs. 57,686-8 to be due to him and by his letter of 26th March 1904 he offered to accept Rs. 45,000 in full satisfaction of his claim. This the Defendant did not accept and it was then mutually agreed that the accounts should be more carefully examined. This was eventually done by one Tulsi Das Paul and Netye, a son of Plaintiff. They were assisted by Ram Charan, the accountant of the firm, who was no doubt acting on behalf of Defendant. The Defendant repudiates this and tries to make out that he had no one to watch his interest. The question is not a very material one for several reasons. First, Ram Charan was an old and trusted servant of the firm, having been in their employ for some 40 years. There is no reason to suppose that he did not see that the accounts were properly taken. Indeed he admits that they were, and there is, moreover, no reason
