BISANCHAND CHAMPALAL GINNING FACTORY Vs. GOVINDA VISHNUSA

JUDGEMENT

(1.) 1. On 7th December 1928 ten ginning factories in Malkapur entered into a registered agreement to run the factories in a certain way so as to eliminate competition between themselves. The contracting parties agreed inter alia to work their factories only during certain specified periods, to charge an agreed minimum rate, to sup. ply certain accounts to the trustees appointed under the agreement, and to pay a certain specified proportion of their earnings into a pool to be kept by the said trustees and divided between the ten factories in certain specified shares. The plaintiff-firm of Govinda Vishnusa, which was appointed the trustees, has brought the suit out of which this appeal arises to compel the factories belonging to the firms of Badrinarayan Ramnath and Motilal Damodardas, defendants 8 and 9, which were parties to the above agreement but have refused to carry it out, to supply accounts and to pay such sums as may be found due according to the stipulations in the agreement. The other parties to the agreement, defendants 1 to 7, have abided by the agreement and are merely pro forma defendants. Defendants 8 and 9, who are the appellants in this Court, pleaded that the agreement in suit was in association of partnership consisting of more than 20 persons, that it therefore required registration under Section 4(2), Companies Act, 1913, and that in the absence of such registration the suit was not maintainable. The proprietors of the ten factories which were parties to the agreement are 48 individuals who belong to 16 different Hindu joint families. Some of the factories are owned by one or more individuals, some by all the members of one joint family, and others by all the members of two or more joint families. The details are given in para. 6 of the first Court's judgment. Both the lower Courts have held that the members of a joint family constitute one "person" within the meaning of Section 4(2), Companies Act, and a preliminary decree has been passed in the plaintiff's favour.

(2.) IN Akola Gin Combination v. Northcote Ginning Factory AIR 1914 Nag 26, where there was a similar agreement between 18 ginning factories in Akola, Stanyon, A.J.C., held that the definition of "person" as including any company or association or body of individuals, whether incorporated or not, which occurs in Clause 39, Section 3, General Clauses Act, 18975 was not applicable and that the word "person" in Section 4(2), Companies Act, denoted individuals and did not include bodies of individuals whether corporate or not. This decision was followed by a Bench of the Madras High Court in Pannaji Devichand v. Section Kapurchand AIR 1927 Mad 128, whose decision was upheld by the Privy Council in Senaji Kapurchand v. Pannaji Devichand A.I.R. 1930 P.C. 300. A contrary view was taken by the Allahabad High Court in Moti Bam v. Muhammad Abdul Jalil AIR 1924 All 414, where the definition in Clause (39), Section 3, General Clauses Act, was applied and it was held that an association of individuals known as a Hindu joint family was a "person" within the meaning of Section 4, Companies Act. The Allahabad High Court took the same view again in Mewa Bam v. Ram Gopal AIR 1926 All 837. The question whether a Hindu joint family is a "person" within the meaning of Section 4. Companies Act, was not before the Court either in the Akola Gin Combination v. Northcote Ginning Factory AIR 1914 Nag 26 or in Pannaji Devichand v. Senaji Kapurchand AIR 1927 Mad 128, but in the latter there is a reference to the decision in Mewa Ram v. Ram Gopal AIR 1926 All 837, which was distinguished. As the view taken by this Court and the Madras High Court that the definition of "person" defined in Section 3(39), General Clauses Act, does not apply to Section 4, Companies Act, has been approved by the Privy Council, it appears to me that the above cited decisions of the Allahabad High Court based on the supposition that this definition does apply must be regarded as unsound. The point in issue appears to me to be in essence one of fact. In Gungayya v. Venkataramiah AIR 1918 Mad 87, which was followed by Baker, J.C., in Rambhau v. Prayagdas AIR 1924 Nag 263, Kumaraswami Sastriyar, J., remarked: It is well settled that a contract of partnership between a member of a joint family and a stranger does not make every member of the joint family which the managing member represents a partner so as to clothe him with all the rights and obligations of a partner as defined in Section 239, Contract Act... It is no doubt true that as between the members of the undivided family and the coparcener who enters Into a contract of partnership for the benefit of the family they will be entitled to call upon him to account for the profits earned by him from the partnership and to share in such profits, but this will not place them in any position of direct contractual relationship with the other partners of the firm, Nor would the fact that the entire assets of the joint family might be available to the creditors of the firm make any difference. The position of the plaintiff in the present case cannot be higher than that of a sub-partner. The managing member of an undivided family though he has the power of representing the interests of the other members is not their agent in the strict sense of the term so as to clothe the other members of the family with all the rights of principals in respect of contracts entered into by their agent. His position is, as pointed by their Lordships of the Privy Council in Annamalai Chetty v. Murugesa Chetty (1903) 26 Mad 544, more analogous to that of a trustee.

(3.) THE appeal is therefore allowed and the case is remanded to the First Court for a decision of the question which of the 48 persons mentioned in the pleadings are partners, as opposed to sub-partners, to the agreement. The parties will be at liberty to make fresh pleadings and to adduce evidence on this point. If it is held that more than 20 of these individual members are partners to the agreement, then the present suit must fail. A certificate will issue for the refund of court-fees paid in this Court. Costs in this Court and in the lower appellate Court will be costs in the cause.