BIRDICHAND SUKHRAJ MARWADI Vs. HARAKCHAND JAGRAJ MARWADI

JUDGEMENT

(1.) THE question at issue in this appeal is whether an isolated adventure for the purchase and sale of cotton entered into by two persons who agree to share the profits or the losses makes them partners within the meaning of the Partnership Act. The plaintiff's case is that he purchased 50 cartloads of cotton on 1st February 1935 from a third party at a certain rate and that "the defendant held half the share in the profit or the loss arising out of the said transaction." The prices began to fall and on 16th March 1935 the defendant told the plaintiff's munim to sell. He did so and the plaintiff now sues the defendant for his half share in the loss. The defendant replied that this agreement, even if accepted as laid, constituted a partnership transaction: that the firm was not registered, and so the suit was barred by Section 69(1), Partnership Act. There were also other defences but the case proceeded on this preliminary point without going into the evidence. The lower Courts upheld the objection and dismissed the suit. The plaintiff appeals. The appeal went first to a Single Bench but Niyogi J., considered the point a difficult one which should be decided by the Division Bench. The difficulty arises because we have recently decided in Suganmal v. Mt. Umraobi AIR 1938 Nag 550 at p. 553 that an isolated act of money-lending does not constitute a partnership transaction even when the money is advanced by two persons jointly on a common adventure.

(2.) THERE is little doubt that an isolated adventure can constitute a partnership. That is the English rule as well: see Halsbury's Laws of England, Vol. 24 (Hailsham edition) p. 400, para. 781. There can be equally little doubt on our view that it need not always do so. The question is: What are the tests to decide whether a case falls within one class or the other ? But whatever the tests the joint adventure must, as we said before, amount to a "business." That is Section 4. But what exactly constitutes a business? That is not clear. Illus. (a) to Section 239, Contract Act, (now repealed and replaced by Section 4, Partnership Act) would appear to be on all fours with the present case. It is as follows: A and B buy 100 bales of cotton, which they agree to sell for their joint account. A and B are partners in respect of such cotton.

(3.) IF Section 4 has effected a change it has been in the direction of widening the definition of partnership and not of narrowing it. Whereas originally it was necessary to agree to combine "property, labour and skill" as well as to share profits, now all we need consider is an agreement to share profits. The limitation effected by the words "property, labour and skill" has been removed. Whether that makes any real change we need not consider. But if it does then it does so in the shape of extending the scope of the definition and not of contracting it. It is however as necessary now as it was before, that the agreement should relate to a business. That part of the definition has not been altered. Therefore if illus. (a) was illustrative of business under the old definition, we conceive that it must still be so under the new. We were also referred to London Financial Association v. Kelk (1884) 26 Ch D 107. But the facts there were different. Indeed fundamentally the position there was the same as the position in our decision in Suganmal v. Mt. Umraobi AIR 1938 Nag 550 at p. 553 where we held that an isolated act of money-lending when entered into by two persons in common does not necessarily constitute a partnership. Bacon, V.C. explained the difference at page 143: It does not appear to me that either in law or in fact any kind of partnership was created. Bach of the three parties was entitled under the contract to an undivided share in the subject. Each paid for that share with individual separate money. The three had, no doubt, in a sense, a common interest in the subject, but no one of the essential elements of a partnership was found to exist in the case, for no one of them could interfere with either of the others in whatever disposition the others might make of their separate shares, nor could the death or bankruptcy or transfer or devolution of the shares of any one of the parties affect the rights of the others: neither of them could object to the introduction of any other person, or be liable in respect of any debt or engagement of the others. Nor can it be truly said that any analogy exists between this case and the well-known cases in bankruptcy where, one partner, a trustee, having employed trust moneys with the knowledge and consent of his co-partners in the partnership business, a joint debt is contracted by all the partners. Here the only money furnished by the directors was for the purchase of the separate share acquired by them, while each of the parties dealt only with their own moneys, and each of them acquired rights and interests wholly distinct from those of the others.