Mayo Pharmacy v. Aboobacker Haji — 1989 DIGILAW 526 (KER)

Judgment :- 1. Defendants 2 and 3 in O.S.No.178 of 1978 on the file of the Court of Subordinate Judge, Kozhikode are the appellants. The suit was to recover Rs. 10,000/- on the strength of two promissory notes executed by the 1st defendant. 2. The material averments in the plaint may be summarised as follows:--Defendants 1 to 3 are the partners of the firm'Mayo Pharmacy' and the 1st defendant is the Managing Partner. The Ist defendant in his capacity as the Managing Partner, borrowed Rs.5,000/- on behalf of the firm on 5-8-1975 from the plaintiff and executed a promissory note in favour of the plaintiff. Subsequently, on 9-10-1975, the Ist defendant in his capacity as the Managing Partner of Mayo Pharmacy borrowed another sum of Rs.5,000/- and executed a promissory note. In spite of repeated demands, defendants did not pay the amount. Plaintiff also caused to send a lawyer's notice demanding payment, but that also did not yield any result. Hence the suit. 3. The Ist defendant remained exparte. Defendants 2 and 3 filed separate written statements, in which they contended that the plaint allegations are not true, that the promissory notes were the result of the conspiracy between the 1st defendant and the plaintiff with the object of defeating and defrauding the defendants 2 and 3, that no amount was borrowed for the benefit of Mayo Pharmacy, that in January, 1976, 1st defendant retired from partnership of Mayo Pharmacy, that the 1st defendant had access to letter pads, seal, etc. belonging to the firm, that it was quite easy for the 1st defendant to misuse those letter pads, seal, etc. to concoct promotes and that therefore the suit was liable to be dismissed. 4. Ext. Al dated 5-8-1975 and Ext.A2 dated 9-10-75 are the promissory notes. They are typewritten in the letter heads of Mayo Pharmacy and the 1st defendant designated himself as Managing Partner of Mayo Pharmacy has signed the pro notes. The stand taken by defendants 2 and 3 is that 1st defendant retired from the firm in January, 1976. This means that when Exts.A1 and A2 were executed, 1st defendant was the Managing Partner. 5. In order to prove the transactions, P.Ws.1 and 2 were examined. P.W.1 is the plaintiff. The stand taken by defendants 2 and 3 is that 1st defendant retired from the firm in January, 1976. This means that when Exts.A1 and A2 were executed, 1st defendant was the Managing Partner. 5. In order to prove the transactions, P.Ws.1 and 2 were examined. P.W.1 is the plaintiff. He gave evidence that the defendants were partners of Mayo Pharmacy and the 1st defendant was the Managing Partner, that the first defendant in his capacity as Managing Partner, of Mayo Pharmacy and for and on behalf of Mayo Pharmacy, borrowed Rs.5,000/- from him on 5-8-1975 and executed Ext. Al pronote that on 9-10-1975, he likewise borrowed another sum of Rs.5,000/- and executed Ext. A2 pronote for and on behalf of Mayo Pharmacy, that the 1st defendant signed the documents before him and PW.2, and that the husbands of defendants 2 and 3 were also there when the pronotes were executed and the amounts were borrowed. He also stated that inspite of repeated demands, money was not paid and on 23-7-1978, he caused a lawyer's notice, a copy of which is Ext. A3, to be sent that the said notice was returned by the 1st defendant and Ext. A4 is the letter returned unserved and that the letters sent by the 2nd and 3rd defendants were received by them and Exts. A5 and A6 are the acknowledgments. In cross examination, he stated that the 1st defendant and the husbands of defendants 2 and 3 demanded the amount and that they represented to him that the amounts were borrowed for and on behalf of the firm. Nothing has been brought out in cross examination to cast doubt on the veracity of the testimony of PW1. 6. PW.2 stated that he is the Manager of Prathap Pharmaceuticals, that he was a witness to the execution of pronotes Exts.A1 and A2 and payment of consideration and that at the time of borrowing the money, husbands of defendants 2 and 3 also accompanied the 1st defendant. In the course of cross examination, he stated that 1st defendant and the husbands of defendants 2 and 3 represented to PW.1 that the borrowing was for and on behalf of Mayo Pharmacy. Thus, PW.2 has corroborated PW.1 in all material particulars. Nothing has been elicited to discredit the testimony of PW.2. In the course of cross examination, he stated that 1st defendant and the husbands of defendants 2 and 3 represented to PW.1 that the borrowing was for and on behalf of Mayo Pharmacy. Thus, PW.2 has corroborated PW.1 in all material particulars. Nothing has been elicited to discredit the testimony of PW.2. Neither defendants 2 and 3, nor their husbands have gone to the witness box to controvert the evidence of P.Ws.1 and 2 and their evidence stood unchallenged. It is in these circumstances, the court below decreed the suit as prayed for. 7. Learned counsel for defendants 2 and 3 submitted that after closing the evidence, case was posted to 8-12-1980, that on 5-12-1980, he filed I.A.No.4481 of 1980 seeking to reopen the case and I.A.No.4482 of 1980 was filed to receive a document to file, but the learned Subordinate Judge dismissed the applications and decreed the suit as prayed for on 6-12-1980 and that therefore the judgment of the lower court should be set aside and the matter should be remanded to the lower court so as to give an opportunity to the defendants to adduce evidence. I do not find any substance in this contention. Defendants 2 and 3 had ample opportunity to adduce evidence. They did not want to adduce any evidence till the evidence was closed. From the order sheet it can be seen that the case was posted to 6-12-1980 and not to 8-12-1980 for judgment. The judgment was pronounced on 6-12-1980 and accordingly the applications for re-opening the case and also for receiving additional documents in evidence were dismissed. It may be noticed in this connection that the prayer in the IA. was only to re-open the case for the purpose of receiving a document and the prayer in I.A.No.4482/1980 was only to receive the document in evidence. Though the document was not formally admitted or marked, learned counsel invited my attention to the said document which is the deed of partnership containing an extract of the resolution passed by the partners of Mayo Pharmacy dated 13-1-1976 resolving to delete clause No.14 of the deed of partnership of the firm appointing Sri. P. Narendran as the Managing Partner of the firm with effect from the date of the resolution. P. Narendran as the Managing Partner of the firm with effect from the date of the resolution. He also invited my attention to Clause.24 of the Partnership Deed to the effect that the loans may be taken on the joint signature of the Managing Partner and or any other of partners 1 to 4 duly authorised in this behalf by majority decision of the partners 1 to 4 and submitted that in view of this provision, the 1st defendant alone could not have taken loan. This document only shows that the firm resolved to delete Clause.14 appointing 1st defendant as Manager with effect from 13-1-1976. Exts. Al and A3 being documents executed prior to that date, this resolution will have no bearing on the impugned transactions. 8. In this connection, reference has also to be made to S.32 (3) of the Partnership Act. It lays down that: "Notwithstanding the retirement of a partner from a firm, he and the partners continue to be liable as partners to third parties for any act done by any of them which would have been an act done by any of them which would have been an act of the firm if done before the retirement, until public notice is given of the retirement." S.45(1) provides that notwithstanding the dissolution of a firm, the partners continue to be liable as such to third parties for any act done by any of them which would have been an act of the firm if done before the dissolution until public notice is given of the dissolution. The mode of giving public notice has been laid down in S.72 of the Partnership Act a which says that a public notice has to be given by intimation to the Registrar of Firms under S.63 and by publication in the Official Gazette and in atleast one vernacular newspaper circulating in the district where the firm to which it relates has its place or principal place of business. It is not proved or even contended that notice was given to the Registrar of Firms of the dissolution or retirement or a publication was effected in the official gazette. Therefore, even if the retirement was before the execution of promissory notes, that would not have changed the position. In this case, the alleged retirement is subsequent to the execution of promissory-note. 9. Therefore, even if the retirement was before the execution of promissory notes, that would not have changed the position. In this case, the alleged retirement is subsequent to the execution of promissory-note. 9. It will also be profitable to refer to S.19 of the Indian Partnership Act, which reads as follows: " "19. Implied authority of partner as agent of the firm - (1) Subject to the provisions of S.22, the act of a partner which is done to carry on, in the usual way, business of the kind carried on by the firm, binds the firm. The Authority of a partner to bind the firm conferred by this section is called his "implied authority". 2. In the absence of any usage or custom of trade to the contrary, the implied authority of a partner does not empower him to - (a) submit a dispute relating to the business of the firm to arbitration; (b) open a banking account on behalf of the firm in his own name; (c) compromise or relinquish any claim or portion of a claim by the firm; (d) withdraw a suit or proceeding filed on behalf of the firm; (e) admit any liability in a suit or proceedings against the firm; (f) acquire immovable property on behalf of the firm; (g) transfer immovable property belonging to the firm; or (h) enter into partnership on behalf of the firm." The transactions under Exts: Al and A2 do not fall in any of the clauses (a) to (h) of S.19 and therefore the 1st defendant had implied the authority to borrow the money on behalf of the firm. S.22 of the Indian Partnership Act lays down that in order to bind a firm, an act or instrument done or executed by a partner or other person on behalf of the firm shall be done or executed in the firms name, or in any other manner expressing or implying an intention to bind the firm. The only question that has to be determined is whether the negotiable instruments in the present case conform to the requirement contained in S.22 of the Partnership Act. I shall deal with this aspect when I deal with the next contention raised by the learned counsel. 10. The next contention raised by the learned counsel for the appellant is that the promissory-notes Exts. I shall deal with this aspect when I deal with the next contention raised by the learned counsel. 10. The next contention raised by the learned counsel for the appellant is that the promissory-notes Exts. Al and A2 were executed only by the 1st defendant and that it would not indicate that the promissory-notes were executed on behalf of the firm. In this connection he relied on a Division Bench ruling of this Court in M. Rajagopal and Others v. K.S. Imam Ali (AIR 1981 Ker. 36). This Court observed: "The consistent view taken in the above decisions is therefore to hold that when liability is sought to be fastened on an undisclosed principal on the strength of a negotiable instrument, it is not enough if the principal's name is disclosed in some way but it must be disclosed in such a way that by any fair interpretation of the instrument it should be possible to hold that the undisclosed principle is the real person liable for the debt. When there is a conflict between Ss. 19 and 22 of the Partnership Act on the one hand and S.26, 27 and 28 of the Negotiable Instruments Act, the latter Act should prevail. A claim against a firm based on a written contract by one partner in the course of business with authority to act will be held to be binding on the firm. But when such a claim is made on the strength of a promissory note or a bill of exchange, court will have to be satisfied that the negotiable instrument discloses the liability of the firm clearly." In the above case, apart from the fact that the promissory note was executed in the letter head of the firm, there was nothing in the document to indicate that the amount was borrowed on behalf of the firm. The learned counsel also relied on the following observation of Privy Council in Sadasuk Janki Das v. Kishan Pershad (AIR 1918 PC 146): "It is of the utmost importance that the name of a person or firm to be charged upon a negotiable document should be clearly stated on the face or on the back of the document, so that the responsibility is made plain and can be instantly recognised as the document passes from hand to hand." The same view has been expressed in Sitaram v. Chimandas (AIR 1928 Bom. 516), Johnstone v. Mt. Jan. Bibi (AIR 1928 Lah.722), Punjab United Bank Ltd. v. Mohammed Hussain (AIR 1934 Lah. 358) and Rangaraju v. Firm Devichand Bhootaji (AIR 1945 Mad.439). The dictum laid down in all these decisions is that when one of . the partners of a firm signs a pronote, in order that all the partners are liable under it, it is necessary that not merely the firm's name should be disclosed 'in some way', but it must be disclosed in such away that on any fair interpretation of instrument the firm must be the real person liable upon the bill. 11. Another Division Bench of this Court considered the legal effect of a promissory-note executed by one of the partners, in K. A. Lona v. M/s. Dada Haji Ibrahim Hilari & Co. (AIR 1981 Ker. 86). On the question of the implied authority of a partner to borrow money, for and on behalf of the firm, the Division Bench observed as follows: "A reading of S.18 and 19 of the Partnership Act makes it clear that every partner is an agent of the firm for the purpose of carrying on business and the act of the partner which is done to carry on only in the usual way, business of the kind carried on by the firm binds the firm subject of course to the provision of S.22 of the Act." On the question of implied authority under S.20, the Division Bench said: "S.20 of the Indian Partnership Act contemplates contract between the partners to extend or restrict the implied authority of a partner. Such a restriction shall not affect an act done by a partner on behalf of the firm falling within his implied authority unless the person with whom he has dealings knows of the restriction or does not know or believe that partner to be a partner." 12. In the light of the principles enunciated in the above decision it cannot be contended that the 1st defendant alone could not have borrowed the money unless it is established that plaintiff was aware of such restriction on the basis of Clause.24 of the deed of partnership. In the light of the principles enunciated in the above decision it cannot be contended that the 1st defendant alone could not have borrowed the money unless it is established that plaintiff was aware of such restriction on the basis of Clause.24 of the deed of partnership. The promissory notes involved in the above decision were executed in the letter head of the firm and it contained full name, description and address of the partnership firm and the promissory note was signed by one partner, but he did not put the name of the firm or put his description as Managing Partner under the signature. In the body of the note, the promise was not that'I promise to pay', but that'we promise to pay'. The Division Bench held that the expression 'we' was deliberately used for the purpose of disclosing the liability of the firm. The Division Bench held that this coupled with the fact that promissory notes were executed on the letter heads, which contained the full-name, description and address of the firm indicated that they were executed on behalf of the firm. 13. In the instant case, promissory notes are executed in the letter heads of the firm, which contained the full name, address and telephone number of the firm. It was. signed by the 1st defendant and seals are seen affixed with the words 'for Mayo Pharmacy' and 'Managing Partner'. Similarly, in Ext.Al also seals are seen affixed with words 'Mayo Pharmacy' and 'Managing Partner'. The 1st defendant has signed below the words 'For Mayo Pharmacy' and Mayo Pharmacy respectively in Exts. Al and A2 and above the words'Managing Partner' in Exts. Al and A2. This makes it abundantly clear that the promissory notes were executed for the firm'Mayo Pharmacy". Applying the principles enunciated in the above decision to Exts. Al and A2 it has to be held that the documents disclose that the instruments were executed on behalf of the firm. These documents also conform to the provisions of S.22 of the Partnership Act which lays down that in order to bind the firm, an act or instrument executed by a partner or other person on behalf of the firm, shall be done or executed in the firm's name or in any other manner expressing or implying an intention to bind the firm. 14. 14. It was next argued by the learned counsel that all the partners have not been impleaded and that therefore the suit is bad for non joinder of parties. No such plea has been taken in the written statement of defendants 2 and 3. He also contended that the suit is against the named individuals and not against the firm and that therefore the suit is not maintainable. This contention also has not been taken either in the written statement of defendants 2 and 3 or in the Memorandum of Appeal. The learned counsel placed great reliance on a Division Bench ruling of the Allahabad High Court in Yadav Ram v. Laxman Singh Bisht (AIR 1978 All. 123) in support of this contention. The Court said: "It is true that a firm does not have a legal entity, but O.XXX R.1. CPC permits that two or more persons claiming as partners may sue or be sued in the name of the firm". 15. In my view of the above ruling will not in any way support the contention of the learned counsel. On the other hand it proceeds on the basis that two persons claiming as partners may sue or be sued. A firm is not a juristic person and what is contained in O.XXX, R.1 is merely permissive in character and it does not enjoin that the only manner in which a suit by or against a firm can be brought is in the form prescribed by this rule. A plaintiff bringing a suit against a firm may implead all the members of the firm as defendants in that suit and conversely, the members of a firm, can sue jointly in their individual names, and such a suit will nonetheless be a suit against the firm or by the firm (See Kuver Bank Ltd. (In Liquidation) v. State of West Bengal (AIR 1960 Cal. 81). 16. It may also be noted that defendants did not adduce any evidence. Neither defendants 2 and 3, nor their husbands came forward to give evidence disputing the liability of defendants 2 and 3 or the firm 'Mayo Pharmacy" for the amounts borrowed on Exts. Al and A2 or to controvert the evidence of P.Ws.1 and 2 that husbands of D.Ws.2 and 3 had accompanied 1st defendant when Exts.A1 and A2 were executed and consideration received. Their evidence on this aspect stood uncontroverted. Al and A2 or to controvert the evidence of P.Ws.1 and 2 that husbands of D.Ws.2 and 3 had accompanied 1st defendant when Exts.A1 and A2 were executed and consideration received. Their evidence on this aspect stood uncontroverted. The foregoing discussion would show that there is no merit in the various contentions raised by the learned counsel. Appeal fails and it is accordingly dismissed. In the circumstances of the case, there will be no order as to costs. Dismissed.