K CHENCHUVENKATANAGIAH CHETTY AND CO Vs. MPADMANATHAN CHETTY

JUDGEMENT

(1.) The only question that has been tried in this suit is whether the 2nd defendant was a partner in the firm of B.P. Sriramulu Chetty & Co. a firm with which the plaintiffs had dealings. Three persons were made defendants with an allegation that they were the partners of B.P. Sriramulu Chetty & Co. Defendants Nos. 1 and 3 admitted partnership and also their liability, but the 2nd defendant contended that he was not a partner in the firm. At the trial it has been found that the 2nd defendant was a partner till 31 March, 1921, and the respondent (2nd defendant) does not appear to impeach that finding here. The plaint transactions took place in June, 11321. The plaintiffs (appellants) now contend that, although the 2nd defendant may not have been a partner of the defendant's firm in June, 1921, yet, inasmuch as he was a partner in that firm up to 31 March, and no notice was given either to customers or to the general public of the dissolution of partnership, the 2nd defendant is liable under Section 264 of the Contract Act for the transactions carried von shortly after he actually left the partnership. Section 264 is as follows: Persons dealing with a firm will not be affected by a dissolution of which no public notice has been given, unless they themselves had notice of such dissolution.

(2.) This section has been considered in various, cases the first of which is Chundee Churn Dutt V/s. Eduljee Cowasjee Bijnee 8 C. 678 : 11 C.L.R. 225 : 4 Ind. Dec. (N.S.) 437 and there it was held that, when a partner ceased to be a partner in a firm and no notice of such cessation was given to old customers, he was still liable for acts done for the remaining partners. The question which was mainly considered in that case was what form of notice was requisite in order that such liability should cease. A similar view was taken in a recent Calcutta case, Jagat Chandra Bhattacharyya V/s. Gunny Hajee Ahmed 91 Ind. Cas. 821 : 30 C.W.N. 11 : A.I.R. 1926 Cal. 271 : 53 C. 214 where it was further held that Section 264 referred not only to persons dealing with the firm prior to dissolution but to all persons dealing with that firm. The law in England is "similar, and we may refer to Parkins V/s. Carrathers (1800) 170 E.R. 604 : 3 Esp. 248 : 6 R.R. 823. There is one Court in India which seems to take a different view" and that is the Lahore High Court. In Bichhia Lal V/s. Munshi Ram 68 Ind Cas. 932 : A.I.R. 1922 Lah. 466 it was held that Section 264 did not include persons dealing with a firm, for the first lime after the dissolution of partnership, that case is based on prior decisions of the Punjab Chief Court and the Sind Judicial Commissioner's Court. It also relies one case in Giovani Gorio and Co. v. Vallabh Das Kalianji 30 Ind. Cas. 864 : 17 Bom. L.R. 762 as another authority. Undoubtedly, in that case Beaman, J., does say that the expression "persons, dealing with a firm" in Section 264 of the Indian Contract Act means "persons Who have been the habit of dealing with and after time of the dissolution were contemplating further dealing with the firm, on the faith of the firm remaining same as that with which their dealings commenced." The learned Judge was considering a case in which an old customer of a firm was concerned and, although he distinctly says that Section 264 refers to such old customers, he has not considered the converse case of whether Section 264 definitely excludes new customers, and the arguments in his judgment set forth good reasons for treating old and new customers alike, The Calcutta High Court is distinctly of opinion that it includes new customers. In Mahadeva Iyer v. Ramakrishna Reddiar 92 Ind. Cas. 653 : 50 M.L.J. 67 : 23 L.W. 199 : A.I.R. 1926 Mad. 114 : (1925) M.W.N. 707 Odgers, J., observes that Section 264 of the Contract Act is clear that, in the absence of such notice, persons dealing with the firm are entitled to assume that the partnership still, continues; but the question of this distinction between the old and new customers was not considered. With all respect we agree with the view taken by the Calcutta High Court for the reasons therein given and also because it is clearly in accordance with the English Law on the subject; we must hold that, provided a person had knowledge of a partnership, he would not be effected by the dissolution of that partnership in his dealings with the firm unless he had adequate notice of the same as provided in Section 264 of the Contract Act. In this view and on the learned Judge's finding that the 2nd defendant was a partner up to the 31 March, 1921, we must hold that he is liable to the plaintiffs claim equally with the other defendants.

(3.) The appeal is, therefore, allowed with costs and the lower Court's decree will be modified accordingly.