# DEVJI @ DEVIJI SHIVJI v. MAGANLAL R. ATHRANA & OTHERS

- **Citation:** [1964] 7 S.C.R. 564
- **Court:** Supreme Court of India
- **Decided:** 1964-04-01
- **Case number:** Civil Appeal No. 46 of 1961
- **Bench:** A. K. Sarkar, Raghubar Dayal, J. R. Mudholkar
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/devji-deviji-shivji-v-maganlal-r-athrana-others-3167
- **Pages:** 5

## Headnote

Partner#.iip-Sub-lease granted to
partner of firm-No
intention to bind to firm-Can other partners of firm be liable
-Indian Partnership Act, 1932, s. 22.
The plaintiff appellant instituted a suit agaim.t the defendants respondents for the recovery of a sum of Hs. 57,000/-.
The appellant was holding permanent lease hold rights over
a certain colliery. On January 31, 1949 the appellant granted
a sub-lease of the colliery to respondent No. 4 ior a term of 5
years. He joined respondents 1, 2 and 5 as defendants to the suit
on the ground that these three persons alcng with respondent
No. 4 formed a partnership firm knov..'n as Sa.urashtra Coal Con·
cern which was joined in the suit as defendant No.
5. The
appellant's case \Vas that respondent No. 4 \\·as. a be-nami.dar
"-
for the partnership firm
and.
therefore. all- the respondents
were liable for the
claim.
Hespondents 1 and 2 denied the
~ppellant's claim totally. According to them, respondent No. 4
took the sub-lease in his personal capacity and not on behalf
of the other respondents. Respondents 4 and 5 y:ho are father
and son, admitted the appellant's case that the lease was obtained b:,• respondent No. 4 on behalf of the partnership firm.
The trial court passed the decree against all the respondents.
On appeal. the High Court set aside the decree as against respondents 1 to :{ but affirmed the same against respondents 4
and 5.
Held: that Section 22 of the Indian Partnership Act, clear
ly provides that in order to bind a firm by an ~l\ct or an instrument executed b;· a partner on behalf of the firm, the Act
should be done or the instrument should be executed in the
name of the firm, or in any other manner expressing or implying an intention to bind the firm. The sub-lease was not executed in the name of the firm. On the facts of this case it \Yas
held that in obtaining the sub-lease. the parties to it did not
intend to bind the firm by that transaction. and therefore the
decree should be limited only against respondents 4 and 5.
Karmaii Abdullah Allarakia v. Vora Karimji Jiwanji, I.L.R
39 Born.
~GI. Gouthwaite v.
Duckworth. (1810) 12 East 421.
Mathui·a l\'ath Choudhuru
v. Sreej11kta BageS1vari Rani, 46
C.L.J. 362. Pandiri 11eeranna
v. Grandi
11eerflbhadrastvami.
I.L.R. -:i:l 1\1.Iad .. J:.-7. Lak~htnishankar Dei·shankar v.
Motiran1
Vishn11rcon, 6 B.L.R. 1106 and Gordhandas Chlwtalal Seth v.
Mahant Slzri Raghubirdasi Gangaramji. 3-l B.L.R. 1137, distin-
•'
guished.

## Text

1964
April 1
564
SUPREME COURT REPORTS
[l!J64-]
DEVJI @ DEVIJI SHIVJI
v.
MAGANLAL R. ATHRANA & OTHERS
[A. K. SARKAR, RAGHUBAR DAYAL AND J. R. MUDHOLKAR, JJ.J
Partner#.iip-Sub-lease granted to
partner of firm-No
intention to bind to firm-Can other partners of firm be liable
-Indian Partnership Act, 1932, s. 22.
The plaintiff appellant instituted a suit agaim.t the defendants respondents for the recovery of a sum of Hs. 57,000/-.
The appellant was holding permanent lease hold rights over
a certain colliery. On January 31, 1949 the appellant granted
a sub-lease of the colliery to respondent No. 4 ior a term of 5
years. He joined respondents 1, 2 and 5 as defendants to the suit
on the ground that these three persons alcng with respondent
No. 4 formed a partnership firm knov..'n as Sa.urashtra Coal Con·
cern which was joined in the suit as defendant No.
5. The
appellant's case \Vas that respondent No. 4 \\·as. a be-nami.dar
"-
for the partnership firm
and.
therefore. all- the respondents
were liable for the
claim.
Hespondents 1 and 2 denied the
~ppellant's claim totally. According to them, respondent No. 4
took the sub-lease in his personal capacity and not on behalf
of the other respondents. Respondents 4 and 5 y:ho are father
and son, admitted the appellant's case that the lease was obtained b:,• respondent No. 4 on behalf of the partnership firm.
The trial court passed the decree against all the respondents.
On appeal. the High Court set aside the decree as against respondents 1 to :{ but affirmed the same against respondents 4
and 5.
Held: that Section 22 of the Indian Partnership Act, clear
ly provides that in order to bind a firm by an ~l\ct or an instrument executed b;· a partner on behalf of the firm, the Act
should be done or the instrument should be executed in the
name of the firm, or in any other manner expressing or implying an intention to bind the firm. The sub-lease was not executed in the name of the firm. On the facts of this case it \Yas
held that in obtaining the sub-lease. the parties to it did not
intend to bind the firm by that transaction. and therefore the
decree should be limited only against respondents 4 and 5.
Karmaii Abdullah Allarakia v. Vora Karimji Jiwanji, I.L.R
39 Born.
~GI. Gouthwaite v.
Duckworth. (1810) 12 East 421.
Mathui·a l\'ath Choudhuru
v. Sreej11kta BageS1vari Rani, 46
C.L.J. 362. Pandiri 11eeranna
v. Grandi
11eerflbhadrastvami.
I.L.R. -:i:l 1\1.Iad .. J:.-7. Lak~htnishankar Dei·shankar v.
Motiran1
Vishn11rcon, 6 B.L.R. 1106 and Gordhandas Chlwtalal Seth v.
Mahant Slzri Raghubirdasi Gangaramji. 3-l B.L.R. 1137, distin-
•'
guished.
CIVIL APPELLATE JURISDICTION:
Civil Appeal No. 46
of 1961. Appeal from the judgment and decree dated July 17.
1958 of the Patna High Court in Appeal from Original
Decree No. 162 of 1952.
Sarjoo Prasad and D. N. Mukherjee, for the appellant.
R. C. Prasad, for respondents Nos. 1-3.
7 S.C.R.
SUPREME COURT REPORTS
565
April 1, 1964. The Judgment of the Court was delivered
1964
by
Devji @ De! iji
SMvji
MuDHOLKAR, J.-This is an appeal by a certificate
v.
granted by the High Court of Patna under Art. 133(l)(a)
ofMaganlalR.Alhrana
C
·
·
d
·
f
· ·
· tdb th
andOtl1'rs
the
onstitut10n, an anses out o a smt mstttu e
y
e
appellant against the respondents for the recovery of a sum
Mudhalkw, J.
of Rs. 57,000/-.
/
The appellant holds permanent lease-hold rights over a
colliery called the J ealgora Govindpur Colliery and had
worked the colliery himself for some time. On January 31,
1949, he granted a sub-lease of the colliery to respondent No.
4 for a term of five years. At that time, 2803 tons of slack and
rubble coal was lying in the colliery, and under the terms
of a separate agreement executed by respondent Nf<l. 4, he
was liable to pay for this coal at the rate of Rs. IO/- per ton
after selling it. According to the appellant, this coal was sold
by respondent No. 4, but he was not paid its price amounting
to Rs. 28,030/-. Further, according to him, royalty and commission were due to him from the respondents in respect of the
coal extracted by them from the colliery, as also Rs. 1.355/8/3
on account of a loan taken by them from him on February
17, 1949. The total claim was tentatively valued by him at
Rs. 57,000/-. He joined respondents I, 2 and 5 as defendants
to the suit on the ground that these three persons along with
respondent No. 4 formed a partnership firm known as Saurashtra Coal Concern which was joined in the suit as defendant No. 5 and is now respondent No. 3 before us. The
appyllant's case was that respondent No. 4 was a benamidar
for the partnership firm and, therefore, all the respondents
were liable for the claim.
Respondents 4 & 5, who are father and son, admitted
the appellant's contention that the lease was obtained by
respondent No. 4 on behalf of the partnership firm, but their
contention was that they surrendered their lease-hold interest
to the appellant on November 1, 1950, which was accepted
by him, and that he was, therefore, not entitled to the claim
in respect of royalty and commission from them for the period
subsequent to November I, 1950. Further, according to them,
the coal which was lying in the colliery was not actually
weighed at the time of the agreement and the figure of
2803 tons was put down only as a rough estimate. According
to them, on the date of the surrP,nder of the lease by them,
there was a stock of more than 2803 tons of slack and rubble, etc., as well as soft coke, including the stock left by
the appellant at the time of granting the sub-lease, because
that could not be sold, and the appellant took possession of
the entire stock lying in the colliery in November, 1950, after
promising to adjust it towards the dues. They, therefore,
-
19G4
Dctji @ Dev1ji
Skilji
v.
566
SUPREME COURT REPORTS
[1964}
disclaimed all liability to pay the price of 2803 tons of coal.
They also denied having taken a loan from the appellant as
alleged by him.
Maganlal R. Atltrana
No separate written statement was filed on behalf of
and Otltccs
d
N
3 b
d
1
h
respon ent
o.
, ut respon ents
& 2, w o were defenJtadltolka.r, .J.
dants 2 & 4 in the trial court, denied the appellant's claim
totally. According to them, respondent No. 4 took the sublease in his personal capacity and not on behalf of the other
respondents. They averred that there was no privily of contract between them and the appellant and that,
therefore.
he was not entitled to a decree against them. The real facts,
according to them. are that the respondent No. 4 took a sublease of the property from the appellant and gave a managing
agency of the same to the Saurashtra Coal Concern of which
the first respondent is the financing partner and the second
respondent is the working partner. This concern was, they
say, never a sub-lessee of the appellant.
They also denied
having anything to do with the stock of coal which the appellant is alleged to have sold to the 4th respondent.
The trial court negatived the claim of the appellant in
respect of the loan but decreed the claim for Rs. 28.030 /- as
the price of coal and commission thereon against all the
respondents. It further passed a preliminary decree for ascertaining the precise amount of royalty and commission which
would be due to the appellant on account cif the sub-lease.
The trial court further said that the minimum amount under
this head would be Rs. 26,000 I·. Respondents 1 to 3 preferred an appeal to the High Court and the High Court accepted it. Thus, the position now is that the de;:rce of the trial
court stands only against respondents 4 & 5, but has been
set aside as against respondents 1 to 3.
In view of the fact that both the courts below have
found concurrently that the sub-lease in question was taken
by respondent No. 4 alone, the only point urged by Mr.
Sarjoo Prasad in support of the appeal is that respondent
No. 4 being a partner in the Saurashtra Coal Concern, all
the partners of the firm are liable under the lease inasmuch
as the firm admittedly came into possession of the demised
colliery. He points out that even according to respondents 1
to 3, they came into possession of the demised colliery immediately after the execution of the sub-lease, .and wants this
Court to infer from this Jhat the partnership had already
come into existence before the lease was . obtained. This,
however, has never been the case of the 'i1ppellant in the
courts below. The only case which he put forward was that
the lease was taken by respondent No. 4 on behalf of all the
respondents. In other words, his case was that respondent
No. 4 was a benamidar for the partnership firm. It is only
7 S.C.R.
SUPRE~IE COURT REPORTS
567
this case which the respondents
had to meet, and in our
1964
judgment, it would not be proper to permit the appellant to
JJe1Ji@ Deviji
make out an entirely new case at this stage. Apart from that,
Shi•ji
s. 22 of the Indian Partnership Act, 1932, clearly provide£ ilfoyvn1"1R. At~rana
that in order to bind a firm by an act or an instrument exeand Olhcrs
cuted by a partner on behalf of the firm. the act should be
Mwlholkar, J.
done or the instrument should be executed in the name of the
firm, or in any other manner expressing or implying an intention to bind the firm. The sub-lease was not executed in the
name of the firm, and it has been, found by the courts below
that respondent No. 4 in obtaining the lease, did not act 'On
behalf of the firm. This in substance means :hat in obtaining
the sub-lease, the parties to "it did not intend to bind the firm
by that transaction.
In support of his contention, Mr.
Sarjoo Prasad has
strongly relied upon the decision in Karmali Abdulla Al/arakia v. Vora Karimji Jiwanji and others('). That was a case
in which the question for consideration was whether one of the
two partners is liable upon a hundi drawn by one of the partners
though the hundi was not drawn in the name of the firm. The
Privy Council following the decision in Gowhwaite v. Duckworth(') held that the other· partner would be liable though
on the face of it the hundi did not purport to be on behalf
of the firm. That decision, however, does not help the appellant, because while the transaction in connection with which
the hundi was drawn, was admittedly a partnership transaction, in the case before us, it has been found that the transaction, that is, the taking of the sub-lease, was not on behalf
<if the partnership. The next case relied upon was Mathura
Nath Choudhury v. Sreejukta Bageswari Rani and others(').
In that case, the question was whether the firm is liable for
the money borrowed by one of its partners. The High Court
pointed out that this is a question of fact and depends upon
the facts and circumstances of each particular case. In that
case also, it was found that the liability arose upon a contract entered into by one of the partners in connection with
the partnership business. This case is, therefore, similar to
the one just referred to above. The third case relied upon is
Pandiri
Veeranna v. Grandi Veerabhadraswami('). In that
q1se, the question was whether the fact tl;tat one of the several
partners had authority to acknoWiedge liability to save limitation as against his partners, had to be established only by
direct evidence or whether it could be inferred from the surrounding circumstances. The High Court held that it was
(') ILR 39 Born. 261 at 274, etc.
(') (1810) 12 East 421.
(') 46 CLJ 362.
(') ILR 41 Mad. 427 (Full Bench).
568
SUPREME COURT REPORTS
[1964)
1964
permissible to establish the existence of authority from the
Devji 1$ Deviji surrounding circumstances. The case is thus of no assistance
Sh..,ji
to the appellant. The next case relied upon was LakshmiM•,ganlal ~: Athrana rhankar Devshankar v. Motiram Vishnuram, etc.('). There, it
and OU.era
was held that where money borrowed by one partner in the
Mudholkar, J.
name of the firm but without the authority of the co-partners
has been applied to paying off the debts of the firm, the
lender is entitled in equity to repayment by the firm of the
amount which he can show to have been so applied and the
same rule extends to money bona fide borrowed and applied
for any legitimate purposes of the firm. It is difficult to appreciate how this case advances the present matter further,
because here, the sub-lease has not been obtained in the name
of the firm. The last case relied upon was Gordhandas Ch/iota/al
Seth v. Mahant Shrj, Raghuvirdasji
Gangaramji(')
That again is a case in which the firm was held to be bound
by the debts contracted by the managing partner for the
purposes of the factory run by the firm.
All the partners
were held liable, because the transaction was entered into
by the managing partner for the purpose of the partnership
business. This case is similar to the one just referred to above
and is, therefore, of no assistance to the appellant.
Mr. Sarjoo Prasad also referred to two other decisions
in Ram Kinkar Banerjee and others v. Satya Charan Srimani
and others(') and Raja Sri Sri Jyoti Prasad Singh Deo Bahadur v. Samuel Henry Seddon('). In these cases, the defendants
sought to be made liable were assignees of a lease, but that is
not the case here. Indeed, Mr. Sarjoo Prasad quite rightly
conceded that respondents I to 3 cannot be made liable upon
the ground that there was a privity of estate between them
and the appellant.
We, therefore, agree with the High Court that the decree
should be limited only against respondents 4 and 5, and
dismiss the appeal with costs.
Appeal dismissed.
(') 6 BLR 1106.
(') 34 BLR 1137.
(') AIR 1939 P.C. 14.
(') ILR 19 Pat. 433 at 459.