CHANDULAL DAMODARDAS Vs. KESHAVLAL KUBERDAS AMIN

JUDGEMENT

(1.) The suit which has given rise to this second appeal was brought by the members of the firm known as " The Bavla Gujarat Cotton Press " for the specific performance of an oral agreement for a lease entered upon between the firm and one of its members, defendant No. 1. The agreement took place on September 21, 1925, and it has been found as a fact by the Courts below that its terms were that the plaintiff firm should take the property upon lease for fifty-one years beginning from the date of the agreement at an annual rent of Rs. 308-12-0, and that a formal lease was to be executed : but there is a finding that the date for the execution of the lease was left indefinite and that it depended upon defendant No. I himself having a title to convey upon the Thakore (who is admittedly the owner of the land) letting it first to Naran, and Naran then letting it to defendant No. 1. A number of defences were raised but were overruled, and the execution of a registered lease was ordered.

(2.) In this second appeal by defendant No. 1, four points are urged :-(1) that the plaintiff firm consists in fact of more than twenty members and,, therefore, under Section 4 of the Indian Companies Act, it cannot be recognised for want of registration of the company and cannot bring this suit; (2) that the agreement upon which the plaintiffs rely was not so much art agreement for a lease as an actual lease, and it is void for want of writing: and registration under Section .107 of the Transfer of Property Act; (3) that the agreement is indefinite in its terms, and both for this reason and because. three years have elapsed from the time when it became enforceable (assuming that it was enforceable) it cannot now be enforced; and (4) that defendant No. 1 is himself a member of the firm with whom the agreement was executed and thus occupies the position both of plaintiff and of defendant, and therefore the present suit is bad.

(3.) On the first point there is no direct authority applicable to the present case in the cases decided in India. The question arises in this way. There are in the list of plaintiffs eleven persons named as members of the firm. Among the defendants, defendants Nos. 1, 2 and 3 are members of the company, so that there are really at least fourteen members of the company. But plaintiff No. 3 is " The Bavla Vishnu Cotton Ginning Factory ", and in reply to a question put by the defendants asking for information as; to the number of members of the Bavla Vishnu Cotton Ginning Factory it. was stated that the firm consisted of four principal partners, of whom Keshavlal Hirachand had two sub-partners and Vithaldas Khushaldas had three sub-partners. Now it is incontrovertible that the members of the firm of the Bavla Vishnu Cotton Ginning Factory must be treated as members of the company of which the firm is a member. If an authority for this is needed, it is to be found in Pannaji Devichand V/s. Senaji Kapurchand (1926) I.L.R. 50 Mad 175. That case had an offshoot under a similar name in the Bombay Presidency, and has been reported in Pannaji V. Senaji ; and eventually the Madras case went in appeal to the Privy Council, and the appellate judgment (which merely accepts the reasoning of the High Court of Madras and dismisses the appeal) has been reported in Senaji V/s. Panaji .. The case is relied upon by the learned counsel for defendant No. 1 as dealing with a situation which is analogous to the present situation. There is no difficulty about deciding that the members of the Bavla Vishnu Cotton Ginning Factory are members of the plaintiff firm. But there is some difficulty in deciding whether the sub-partners of Keshavlal and Vithaldas are members of the Bavla Vishnu Cotton Ginning Factory. If they are members, then the plaintiff firm consists of more than twenty members. The reasoning adopted in Pannaji V/s. Senaji for holding that the individual members of the four firms which entered into the partnership in that case were themselves members of the partnership and that the partnership, consisting as it did of more than twenty individual members, required registration under Section 4 of the Indian Companies Act, was that the word " persons " used in Section 4 (2) of the Act was used not in the sense in which it is defined in the General Clauses Act (in which Act it includes a corporation or a body of persons) but in the sense of an individual, and that what the section prohibited was an unregistered association of more than twenty individuals. It is argued that on the analogy of this case the sub-partners of the two members of the Vishnu Cotton Ginning Factory must be regarded as individual members of the Bavla Vishnu Cotton Ginning Factory. The determination of the question depends upon the position of sub-partners. The point was raised at a late stage in the trial after all the evidence had been taken, and there is no evidence to show exactly what part the sub-partners took in the business. But as they have been described as sub-partners, it is reasonable to take it that they were in fact what is usually meant by a sub-partner. A sub-partner is described in " Lindley on Partnership", 10 Edition, at page 66; he is a stranger who agrees with one of the partners of the firm to share the profits derived by that partner from the firm; and it is said by the learned author that this arrangement does not make the stranger a partner in the original firm but constitutes what is called a sub-partnership which in no way affects the other members of the principal firm. A case is cited in which a certain person agreed with one of the partners in a business that he should be interested in the business so far as to receive a share of the partner's profits of the business and also that he should have a right to draw his share from the firm. But it was nevertheless held that he was not a partner in that firm; that he had no demand against it; that he had no account in it; and that his rights were limited to a share out of the profits paid to his principal partner. At page 553 it is stated that a sub-partner wishing to have an account of those profits to which he is entitled must bring his action against the principal alone and not make the other partners in the firm parties to the action. If it is not open to a sub-partner to sue for accounts, I do not see how it can be held that he is a partner of the firm. Moreover in Pannaji V/s. Senaji there is a passage which implies that the decision of the High Court would have been different if the four persons who signed the contract of partnership as representatives of the firms of which they were members had signed for their own individual benefit, the firms themselves being only in the position of sub-partners sharing in the profits of the four individuals who signed the agreement of partnership; the firm would then have been taken to consist of four members only and not of the total number of partners comprising the four firms. This implies that in the view of their Lordships sub-partners are not members of a firm and the existence of a sub-partner would not affect the number of members of a firm for the purposes of Section 4 of the Indian Companies Act. I hold that in this respect there is no objection to the suit.