The main legal point established in the judgment is that the retirement of a partner or dissolution of a firm does not affect the rights and liabilities of the partners towards third parties until public notice is given, and the termination of the authority of an agent does not take effect before it becomes known to the agent or third parties.

Shamsuddin, J.

1. 2nd defendant in O. S. No. 16 of 1977 on the file of the Court of Additional Sub Judge, Parur is the appellant in this appeal.

2. The above suit was filed by the 1st respondent herein for recovery of money. 1st defendant is a partnership firm run under the name and style 'M/s Hilal Traders' and constituted under Ext. A1 partnership deed dated 1st October 1969. Its partners are defendants 2 and 3. Defendants 2 and 3 executed Ext. A2 power of attorney dated 1st October 1969 in favour of the 4th defendant to manage the affairs of the firm. The firm was carrying on business in arecanuts and hill produces.

3. 1st defendant represented by its partners defendants 2 and 3 and acting through the power of attorney holder the 4th defendant, requested plaintiff - Bank in 1969-70 to extend financial assistance to. it. Defendants agreed to execute necessary documents and to give proper security. Defendants 2 and 3 also informed the Bank of the power of attorney given by them in favour of the 4th defendant authorising him to do all acts necessary for the management of the affairs of business of 1st defendant firm including operation of all accounts standing in the name of the firm.

4. On such representation and on an undertaking to discharge the liabilities incurred by 1st defendant firm, plaintiff - Bank allowed the following facilities: (1) cash credit key loan facilities with a limit of Rs. 75,000 which was later enhanced to Rs. 1,50,000 with a sub limit of Rs. 25,000 for Mundy type facility; (2), documentary bills purchase with a limit of Rs. 25,000 which was also later increased to Rs. 75,000 and (3) clean demand bills purchase with a limit of Rs. 10,000. The first defendant represented by its partners defendants 2 and 3 executed an agreement Ext. A16, dated 24th February 1971 in favour of the plaintiff for the above cash credit facilities on security of pledge of goods, hill produce, merchandise and documents of title to goods and agreed to comply with all the terms and conditions mentioned therein.

5. Thereafter, 1st defendant operated the accounts and drew various amounts. On 2nd March 1971, 2nd defendant deposited with the plaintiff - Bank at Cochin, registration copies of title deeds of two items of properties which are items 1 and 2 in the plaint schedule with intent to create an equitable mortgage for the amounts drawn on various counts.

6. In the course of their business, 1st defendant used to deposit despatch consignments of betel-nuts to various places and discount demand bills issued by it against consignments mentioned in the bills and transport documents with the plaintiff - Bank and withdraw amounts in relation thereto. 1st defendant used to realise the value of goods represented in the transport bills. However, some of the bills were not honoured and some were returned unpaid. Between December 1971 and February 1972, nine such bills amounting to a sum of Rs. 83,593.65 were returned (including Bank charges, but excluding overdue interest). One of the bills sent to Mandvi, Bombay, was returned, as upon verification of bags, they were found to contain palm chips instead of supari. Failure of consignees to honour the respective bills were duly conveyed to defendants 1 to 4 by the plaintiff - Bank and the plaintiff - Bank demanded from them the amount drawn against such bills. Plaintiff - Bank also demanded defendants 1 to 4 to repay all outstandings in their accounts, to which defendants requested for further finance. They also expressed willingness to furnish further security. They were prepared to give further security to such advances by way of further collateral security.

7. Third defendant deposited on 8th April 1972 and 18th July 1972 with the plaintiff - Bank, title deeds in respect of her properties with intent to give security and created an equitable mortgage in favour of the plaintiff - Bank in respect of the properties covered by the deposited title deeds. On 1st August 1972 the 3rd defendant al