JUDGMENT
Ajoy Nath Ray, J.
1. This is a bank’s suit against six defendants. It is the admitted case that prior to 1982 the 2nd defendant carried on business under the name and style of the 1st Defendant. The bank’s case is that in the year 1982 a partnership was constituted by the defendant Nos. 2, 3 and 4 adopting the same name as is now borne by the first defendant. The 5th defendant and the 6th defendant are sought to be made liable by the bank as guarantors in respect of the 1st defendant after it became a partnership concern.
2. In 1980 and 1981 several sums of money were advanced by the bank to the 2nd defendant. The amounts are mentioned in paragraphs 7 and 8 of the plaint and the only witness deposing on behalf of the bank has proved these advances made to the 2nd defendant to my complete satisfaction. The matter of passing of decree as against the 2nd defendant is accordingly beyond any dispute.
3. The bank’s case is that in or about the month of May, 1982 several documents were executed by the defendants Nos. 2, 3 and 4 whereby the entire liability then outstanding to the debit of the 2nd defendant was taken over by the firm, i.e., the 1st defendant as well as by the other partners of the said firm, i.e., the defendant, Nos. 3 and 4.
4. The 3rd defendant, though present in Court at the commencement of trial, chose to stay away from the proceedings altogether. The 2nd defendant has purposely stayed away as is quite understandable because there are many signatures and receipts executed by the 2nd defendant which made his liability quite inescapable.
The 6th defendant has also not participated in the proceedings.
5. The defendants Nos. 4 and 5 have contested the suit. The 4th, defendant is the wife of the 5th. It is in evidence that she is a housewife and that she has acted upon the instructions of her husband. The 4th defendant came to Court for the purpose of giving evidence but the evidence could not be taken as she was prepared to speak only in Malayalam. From her appearance it did not appear that the 5th defendant was not telling the truth when he asserted that she was only a housewife.
6. The 5th defendant came and gave evidence on his behalf as well as, effectively, on behalf of the 4th defendant. The case of the 5th defendant is that he was led by the 2nd defendant and 3rd defendant into advancing moneys for the purpose of reopening the ice factory of the 2nd defendant which was then lying closed. It is his case moneys were advanced by him and his wife and that receipts were granted to that effect by the defendants Nos. 2 and 3. Such receipts were not in evidence and as such it is not appropriate to hold that any moneys were in fact advanced by the 4th and 5th defendants, to the 2nd or 3rd defendants.
7. It is the further case of the 4th and the 5th defendants that the business of ice factory under the name and style of the first defendant never got under way. They said that they were swindled by Sunil Malhotra and Sant Pal Kapoor. Mr. Kutty said from the box that he suspected about this fraud when he unearthed what purported to be an original partnership deed as between the 2nd and 3rd defendants from the file at the business premises of the 1st defendant. That unearthed partnership deed was obviously taken away by him and the same has been one of the exhibits of the defendant Nos. 4 and 5.
8. Mr. Kutty further asserted that apart from obtaining a reconnection of electricity, the 2nd defendant did nothing in the matter of recommencement of the business under the partnership. The partnership agreement, as amongst the second, third and fourth defendants, therefore, never got going in the shape of a business carried on.
9. The further case of Mr. Kutty is that one Bijon Roy and one Kohli of the bank came along with defendant Nos. 2 and 3 to Mr. Kutty for the purpose of persuading him to join the partnership. It is alleged that these two bank officials held out promises that further loan and advances would be given to the partnership in case the single venture of the defendant No. 2 was changed into a partnership. I am unable to accept the oral evidence of Mr. Kutty in this regard. There is no document to suggest that the bank made any promises for advancing money in case the single venture was changed into a partnership or upon the contingency of the 4th defendant or the 3rd defendant joining the venture alongwith the 2nd defendant.
10. The 4th and 5th defendants contested the suit on the basis of the following six issues :-
(1) Is the defendant No. 4 liable as a partner of the defendant No. 1 firm and if so, to what extent ?
(2) Did the defendant Nos. 4 and 5 act on the basis of the representations made by the plaintiff and the defendants Nos. 2 and 3 as alleged in paragraph 27 of the written statement?
(3) Were the defendants Nos. 4 and 5 induced to execute the alleged Deed of Partnership dated 21st January, 1982 and the alleged documents purportedly dated 13th May, 1982 and 18th May, 1982 as alleged in paragraph 27 of the written statement ?
(4) Are the documents dated 13th May, 1982 and 18th May, 1982 illegal, null and void, of no effect and not binding on the defendants Nos. 4 and 5 alleged in para 27 of the written statement ?
(5) Are the defendants Nos. 4 and 5 liable as guarantors as alleged in the plaint ? If so, to what extent ?
(6) To what reliefs, if any, is the plaintiff entitled against the defendants Nos. 4 and 5 ?
11. At the time of argument, Mr. Surajit Mitra took principally two points in support of his clients. The first point that Mr. Mitra took was that the bank having not advanced any consideration towards the defendant No. 4 or even the defendant No. 1, as a partnership concern, the bank was forbidden in law from reclaiming any advance. The substance of Mr. Mitra’s contention is that a bank can claim back moneys only upon a contract; a loan is called back by a creditor from the borrower upon a contract of repayment which is usually implied as soon as moneys are advanced by the creditor to the debtor. Like all contracts a contract for money payable or repayable on demand is to be supported by some consideration for the purpose of being a valid contract in Indian Law. Mr. Mitra stated that even if the 4th defendant executed documents promising to pay back money, the 6ame are unenforceable as the bank never gave her or the 1st defendant any consideration. All advances according to Mr. Mitra ceased in the year 1981 and all these advances had been actually taken and appropriated by the 2nd defendant when he was carrying on business under the name and style of the 1st defendant as his sole proprietorship concern. From the evidence of the bank, it cannot be disputed that the loans were never granted after 1981 and that no money was in fact advanced to the purportedly newly constituted partnership of the defendants Nos. 2, 3 and 4.
12. The amount of money due to the bank upon loans already advanced in may 1982 was Rs. 3,24,947.60. This is pleaded in paragraph 12 of the plaint and the amount as against the defendant No. 2 may be taken as proved. There is also an exhibit (regarding paying up of this sum of money), executed by the 4th defendant. But the said document is unenforceable for the same reason as above i.e., complete lack of consideration on the part of the bank.
13. It was argued by Mr. Kalyan Sengupta on the basis of the copy partnership deed being part of Exhibit ‘E’ that the partners had exchanged consideration amongst themselves by way of the new partners getting interest in the assets of the firm at the factory at 300, Roy Bahadur Road, amongst other things, and that the return consideration was furnished by the new entrants by taking over all the liability of the firm. This might or might not be true as amongst the partners themselves. But the point of consideration does not arise in relation to the partners as amongst themselves. Whether the second defendant or the third defendant could have compelled the 4th defendant to meet proportionate liabilities to the bank on the basis of the partnership deed is a completely separate issue than what arises for determination here. The bank is not a party to the deed of partnership. The bank has no locus standi to enforce the same. The bank must furnish its own consideration to the new entrants or to the new partnership firm if it is to recoup its money from the parties newly coming in the year 1982.
14. The situation is not only legal but also completely logical and fair. Before advent of new parties in 1982 the bank had but one debtor and that debtor was Sunil Malhotra, the second defendant in this suit. The bank parted with; no further money and advanced no further consideration in 1982. It could not, therefore, be, that out of an empty sky the bank would suddenly get 2, 3 or even more debtors for the purpose of satisfying a debt alerady. existing only as against the second defendant. In the law of the contract as prevalent in the country one cannot get something utterly for nothing. The benefit of getting an extra number of debtors for the possible satisfaction of an existing debt is a real benefit both in fact and in the eye of law. The bank could not get such a benefit without further other or any advance being made in or after 1982.
15. The second point urged by Mr. Mitra was that though a partnership deed might have been signed yet no partnership actually existed as amongst the parties. Mr. Mitra relied upon Section 4 of the Partnership Act which is quoted below :- –
“4. Definition of “Partnership”, “Partner”, “firm” and “firm name”- “Partnership” is the relation between persons who have agreed to share the profits of a business carried on by all or any of them acting for all.
Persons who have entered into partnership with one another are called individually “partners” and collectively “a firm” and the name under which their business is carried on is called the “firm name”.”
16. It will be seen from the express words of the said section that the carrying on of a business is a pre-condition and a must prior to partnership arising amongst parties or partners. If there is no business of any type carried on at any time then, a partnership can not arise even though the parties might go on calling themselves partners orally or in documents, however numerous might those documents be.
17. Section 6 of the Partnership Act provides as follows :
“6. Mode of determining existence of partnership-In determining whether a group of persons is or is not a firm, or whether a person is or is not a partner in a firm, regard shall be had to the real relation between the parties, as shown by all relevant facts taken together.
Explanation 1.-The sharing of profits or of gross returns arising from property by persons holding a joint or common interest in that property does not of itself make such persons partners.
Explanation 2.-The receipt by a person of a share of the profits of a business, or of a payment contingent upon the earning of profits of varying with the profits earned by a business does not of itself make him a partner with the persons carrying on the business, and, in particular, the receipt of such share or payment-
(a) by a lender of money to persons engaged or about to engage in any business,
(b) by a servant or agent as remuneration,
(c) by the widow or child or a deceased partner, as annuity, or
(d) by a previous owner or part owner of the business, as consideration for the sale of the goodwill or share thereof,
does not of itself make the receiver a partner with the persons carrying on the business”.
18. As the above section clarifies, and as is the well known and accepted law, the existence of a partnership is a question to be determined by a Court whenever the question arises in a particular litigation. It is a mixed question of law and fact.
19. Parties cannot turn themselves into partners merely by calling themselves partners. Upon examination of all the relevant facts the Court can come to a conclusion that the parties have in fact become partners. When parties carry on business as partners’ they carry on business only in, the hope that in law they are actually partners. In most cases the hope is well founded and nobody would ever dispute that the partners who are describing! themselves as such are not actually business partners. But there are borderline cases where all the circumstances have to be examined for determining whether a contract of partnership has in fact been entered into by the parties, and whether a partnership has thereupon arisen.
20. Let us suppose that a contract of partnership is entered into by several persons but no business is even commenced. Would they be partners amongst themselves ? The answer to this question must be in the negative. Even if the entering into of partnership deed might be a very1 good beginning and quite a good step forward towards the achievement of a partnership’, in law yet such a partnership can never arise unless some sort of business is carried on for some slight-period at the material time to some slight ascertainable degree. Holding otherwise would mean that the words “a business carried on” occurring in Section 4 of the Partnership Act might also mean a business to be carried on in future. Such reading of words into a long standing statute is wholly impermissible.
21. In the evidence before me, Mr. Roy Chowdhury on behalf of the bank said clearly to the effect that he had no personal knowledge of the carrying on of any business by the first defendant in or after 1982. He gave evidence about an Inspector of the bank going and checking about the carrying on business by the first defendant but this evidence is-hearsay of the worst sort and cannot be any evidence of the firm carrying on any business.
22. Mr. Kutty on: the other hand gave the contrary evidence that no business was ever carried on by the first defendant and that the closed business of the ice factory was never reopened. Promises to that effect made by the second and the third defendants appeared to be false promises.
23. In the documents before me there is nothing whatever to show that any business was transacted by the first defendant at any time in or after 1982. Under these circumstances it is not possible to hold that any business was carried on at any material time by the defendants No. 2, 3 and 4 partnership with one another.
24. It was also argued on behalf of the plaintiff that the partnership deed is admitted in the written statement to be correctly reproduced by way of a copy in the plaint and that the signature of the 4th defendant appears on a copy deed which is part of annexure E. It was said on the basis of the terms in this deed that the commencement of business in partnership with effect from 1st January, 1982 is admitted in the recital of the partnership deed. Though such admission is relevant yet it is not a conclusive proof of the existence of such partnership. Sections 17, 21 and 31′ of the Indian Evidence Act are quite clear on this point. Moreover there are defendants other than 4th defendant who are not before me and as against them the partnership would have to be proved like in an undefended case. These are the defendants No. 2 and 3. The original partnership deed itself is also not traceable and where the same lies to-day, if anywhere, has not clearly come out in the evidence before me. Under these circumstances it is not possible to come to a conclusion that there was any partnership in law as amongst the defendants No. 2, 3 & 4 at any point of time even though a deed to that effect might have been executed. The persons who sought to call themselves partners both in the deed and in the several documents before the bank failed to become partners in law by failing to carry on any business together at any point of time.
25. On this basis the 4th defendant is not in law a partner of the first defendant and as such is not liable for the debt of defendant No. 2 which might have been otherwise in case the liability for one partner existing in respect of debts contracted by the other could have been proved in the instant case.
26. The first issue is accordingly answered in favour of the 4th defendant. The 5th issue must also be answered in favour of the 4th and 5th defendants on the simple proposition that there cannot be any debt due from a guarantor unless the main debt exists, and the guarantor has also been furnished with some consideration: or the other for the contract of guarantee. Like in the case of the main debt, there is no evidence of any consideration flowing to the 5th defendant from the bank. Nor is it possible for the 5th defendant to guarantee the liability of the first defendant or of the partners of the 1st defendant unless the first defendant firm contracted its main liability or the partners (or, alleged partners) of the firm contracted their main liabilities. I have been unable to hold that there has been any liability proved in the instant matter excepting that of the defendant No. 2 in. his sole and personal capacity.
27. I am unable to answer any of the issues 2, or 3 in favour of the 4th or the 5th defendant in the sense of declaring any documents to have been brought into’ existency by reason of any misrepresentation of any other vitiating-factors. The documents were executed quite properly but for the reasons aforesaid are empty and are of no legal effect as against the defendants No. 4 & 5. Only to this extent the fourth issue is answered in favour of the defendants No. 4 arid 5.
28. In the result, as against the defendant No. 2 there shall be a decree for Rs. 4,09,905.90 less the sum of-Rs. 49,960/- which represents the sale proceeds for sales made by Receivers in this manner. There shall be interest pendente lite @ 13% P.a. on the principal sum of Rs. 2,67,000/and on the said sum there shall be a further interest @ 6% p.a.; the decree for interest shall also be only as against the second defendant. The plaintiff shall be entitled to costs as against the second defendant.
29. The third and the 6th defendants, in spite of their absence, have benefited from the arguments advanced on behalf of the defendants No. 4 & 5. It is not possible in law to differentiate as between defendants No. 3 & 4 or as between defendants No. 5 & 6. Accordingly the suit, excepting as against the 2nd defendant shall stand dismissed.
30. There will be no order as to costs excepting as indicated above.