Posted On by &filed under High Court, Madhya Pradesh High Court.


Madhya Pradesh High Court
Sharda Talkies (Firm) And Anr. vs Smt. Madhulata Vyas And Ors. on 16 February, 1995
Equivalent citations: AIR 1996 MP 68, 1996 (0) MPLJ 697
Author: R Garg
Bench: A Mathur, R Garg


JUDGMENT

R.S. Garg, J.

1. The defendants Nos. 1and 3, being aggrieved by the judgment and decree, dated 6-3-1984 passed in Civil Suit No. 94B of 1976 by the First Additional Judge to the Court of District Judge, Raipur, decreeing the plaintiffs’ suit for a sum of Rs. 1.03,413.88 with costs and interest thereon at 6 per cent per annum from the date of the suit till realisation, have preferred this appeal.

2. The original plaintiff Mohanlal Vyas, since deceased, father of plaintiffs Nos. 2 to 6 and husband of plaintiff No. 1, was a business-man and a man of means. Defendant No. 1 is a firm carrying on a cinema business in the name and styles of M/s. Sharda Talkies at Raipur. The firm ‘M/s. Sharda Talkies’ (hereinafter referred to as the ‘firm’ for the sake of brevity) was managed by the deceased Shyam Charan, now represented by the legal representatives, respondents Nos. 7 to 9 and appellant No. 2/defendant No. 3, namely, Lalit Kumar Tiwari. As the original plaintiff and defendant No. 2 died during the pendency of the suit, their legal representatives were substitued in their place. The plaintiff Mohanlal Vyas, according to his allegations in the plaint, made deposit with defendant No. 1 in the year 1948-49, of a sum of Rs. 10,000/- under an oral agreement that the defendant shall pay interest at the rate of Rs. 9/- per cent per annum, which was to be credited in the account books of defendant No. 1 with yearly intervals. Accordingly to the plaintiffs, the deceased, Sharda Charan Tiwari had supplied the account of the said talkies from the year 1960-61 till 1965-66 and had acknowledged the balance of Rupees 1,01,054.96. According to the plaintiffs, defendant No. 3, representing to be a partner of the firm, acknowledge the amount on 17-9-1968 for the Diwali accounting year 1966-67 and also acknowledged the balance for the Diwali accounting year 1967-68. The plaintiff further stated that the defendants applied copies of extracts of the accounts for the Diwali years 1958-59,1960-61 to 1967-68. The plaintiffs further pleaded that defendant No. 3, being a partner of the firm, acknowledged the balance of Rs. 1,27,979.88 on 6-7-1970. This acknowledgment was inclusive of the interest accrued amounting to Rs. 10,566.00.

3. The plaintiffs further pleaded that the defendants were maintaining the accounts regularly and the defendants credited the amounts paid by Mohanlal Vyas. As and when the amount was withdrawn by Mohanlal Vyas, the accounts were debited. Any interest accrued on the said deposit was credited in favour of Mohanlal Vyas at the end of the year and after the close of the year, the accounts were settled by adjusting the entries and’striking the balance which was carried forward to the next year. According to the plaintiffs, such settlements were made on 1-2-1961, 21-2-1968, 17-9-1968 and 6-7-1970. The statements prepared by the defendants were signed by the deceased Shyam Charan Tiwari for the years 1960-61 to 1965-66. Defendant No. 3 Lalit Kumar signed the statements for the years 1966-67,1967-68, and 1968-69. All these statements were signed by defendant No. 3 as a partner of the firm M/s. Sharda Talkies. According to the plaintiffs, the statements of accounts were not mere acknowledgments of liability but were accounts stated, which furnished a cause of action in favour of the plaintiffs. The plaintiff Mohanlal Vyas demanded balance amount by his registered notice dated 2-12-1973, but the defendants did not care to reply, nor did they pay the amount, The plaintiffs, therefore, filed the suit for the recovery of Rupees 1,03413.88.

4. The plaintiffs submitted that the cause of action accrued in his favour on 17-9-1968 and 6-7-1970 when the defendants acknowledged the balance and promised to pay. The plaintiffs also stated that various payments were made to the plaintiffs on 21-1-1970, 13-4-1970, 22-9-1970 and 21-12-1970, under a cheque. As the last payment was made on 21-12-1970 and some amount was paid in cash on 22-1-1971, the suit filed by the plaintiff on 15-12-1973 was well within limitation.

5. The defendants resisted the suit on various grounds, According to the defendants, defendant No. 3 having retired from the partnership of the defendant No. 1 firm from 1-4-1970, he could not give any acknowledgment on behalf of the firm. A new firm was constituted on 1-4-1970 and, therefore, the acknowledgment given by defendant. No 3 would not bind the defendants. It was also contended that the amount given to the defendants was not a deposit but, in fact, was a loan which was carrying interest and the plaintiff being a money lender has neither maintained the accounts nor has sent the same and is not entitled to interest and costs on it. The defendants denied the acknowledgment of loan and the alleged settlement of account. It was also contended that no payments were made to the plaintiff on 21-1-1970, 3-4-1970 and 22-9-1970, However, in para 23 of the written statement, the defendants admitted payment of Rs. 2,000/- on 21-12-1970. According to the defendants, even this part payment made on 21-12-1970 would not bring the suit within limitation.

6. The learned trial Court framed as many as 8 issues and held that on 17-9-1968, defendant No. 3, for and on behalf of the firm M/s. Sharda Talkies, acknowledged the liability of the firm in favour of the plaintiffs to the tune of Rs. 1,15,599.88 and promised to pay the same. It held that defendant No. 3 acknowledged the liability of the firm on behalf of the firm in favour of the plaintiffs to the extent of Rs. 1,27,979.88. The trial Court also found that though defendant No. 3 retired from the partnership of the firm on 31-3-1970 and another firm under the same name and style was constituted with effect from 1-4-1970 the retirement of defendant No. 3 from the firm was of no consequence as no public notice under Section 72 of the Partnership Act was published. The trial Court further held that defendant No. 3 could and did bind the firm by the said acknowledg-ments dated 17-9-1968 and 6-7-1970. According to the trial Court the defendants failed to prove that the plaintiff was a money lender or was engaged in money lending business. Lastly, holding that the amount given to defendant firm was in the nature of a deposit and not a loan, the suit being within limitation, the plaintiff was entitled to a decree. It accordingly decreed the claim with interest at the rate of 6 per cent per annum from the date of suit till realisation. Costs were also awarded to the plaintiffs.

7. Being aggrieved by the said judgment and decree, defendants Nos. 1 and 3 have preferred this appeal. Counsel for the appellants challenged the findings of the Court below and contended —

(a) that admittedly even according to the admission of the plaintiff, he is a money lender;

(b) that it is not clear as to whether the money was given to the firm or partners;

(c) that the amount given to the defendant firm was not a deposit but was a loan and, therefore, limitation would start from the date of loan;

(d) that the alleged acknowledgment is given by Lalit Kumar, the same is bad in law and cannot bind the firm because Lalit Kumar retired from the partnership of the firm;

(e) that the suit is patently barred by limitation as the same has not been filed within three years of the date of the said alleged acknowledgment dated 6-7-1970; and

(f) that the cheque dated 21-12-1970 has not been produced in the Court and, in the absence of primary evidence, no reliance could be placed on it, therefore, the cause of action would not accrue on 21-12-1970.

8. Replying the above arguments, it was contended that even if the plaintiff is a money lender vis-a-vis others, at least in the instant dealing, he had made certain deposits, therefore, he cannot be deemed to be a money lender. It is clear from the record that the money was deposited with the firm and even if it was deposited with the partners, they accepted the same for and on behalf of the firm. It was further submitted that the amount was deposited with the defendants and there was no transaction of loan. Limitation would be three years from the date of demand, therefore, the suit is within limitation from the date of demand. In the alternative, it was submitted that in view of the admission of the defendant firm that a sum of Rs. 2,000/- was paid to the plaintiff under a cheque dated 21-12-1970, it would give a fresh limitation. The suit filed on 15-12-1973 is well within time. Counsel for the plaintiffs next submitted that the acknowledgment by Lalit Kumar would bind the firm because in view of Sections 32 and 72 of the Indian Partnership Act, the firm is liable to make payments to the third parties. The partners might have settled their liability but are answerable to the third parties in absence of public notice. We have heard both the parties and have perused the record.

9. The question whether the amount given to the defendant was a deposit or a loan is the crucual question which would decided many of the questions argued. In case, it is held that the transaction between the parties was a ‘deposit’ then the question of the suit being barred by limitation or the plaintiff being a money lender would not be required to be answered, because in the case of a deposit, the relation between the parties is of a depositor and depositee (bank), while in case of a loan the relationship between the parties is of a creditor and a debtor. Similarly, if the amounts is held to be a loan, then the limitation would be from the date when the loan is made, while in the case of deposit, limitation would be three years from the date the demand is made by the depositor.

10. There is a subtle distinction between a deposit and a loan. In the case of a loan, the amount is given by the creditor to the debtor at the request of and for the requirements and dues of the debtor under certain terms and conditions. In the case of a deposit, the depositee received money at the instance of the depositor. In the case of a deposit, the requirement of the depositee is neither relevant nor material. The depositor has to go to the depositee for depositing the amount or the depositee may go and collect the amount. But in case of a loan, the debtor has to request the creditor to advance certain amount for meeting his requirement for using the amount. The distinction between the two terms, i.e., deposit and loan was first con- . sidered by the Privy Council in Md. Akbar Khan v. Attar Singh, AIR 1936 PC 171. The Privy Council held :

“It should be remembered that the two terms (‘deposit’ and ‘loan’) are not mutually exclusive. A deposit of money is not confined to a bailment of specific currency to be returned in specie. As in the case of a deposit with a banker, it does not necessarily involve the creation of a trust, but may involve only the creation of the relation of debtor and creditor, a loan under conditions. The distinction which is perhaps the most obvious is that the deposit not for a fixed term does not seem to impose an immediate obligation on the depositee to seek out the depositor and repay him. He is to keep the money till asked for it. A demand by the depositor would therefore, seem to be a normal condition of the obligation of the depositee to repay.”

11. The matter was reconsidered by the Privy Council in Suleman Haji v. Haji Abdulla, AIR 1940 PC 132, and the principles laid down in Md. Akbar Khan’s case were followed. In the matter of V.R.S. Annamalai v. Veerappa, AIR 1956 SC 12their Lordships of the Supreme Court laid down the test, holding that where a transaction is a transaction of loan or deposit does not depend merely on the terms of the document but has got to be judged from the intention of the parties and all the circumstances of the case. Even though the transaction is a transaction of deposit the deposit can be coupled with in agreement that it will be payable on demand. Such an agreement can be express or implied and if an express agreement in that behalf is recorded in the document, the transaction of deposit cannot be thereby converted into a transaction of loan and the words “we shall pay the said sum” cannot convert the ‘document into a promissory note. The promise to pay will be involved in a promissory note as well as in a deposit within the meaning of Article 60 (new Article 22} of the Limitation Act, and the Court will have regard to the intention of the parties and the circumstances of the case in order to arrive at the conclusion whether the document is a promissory note. In Abdul Hamid v. Rahmat Bi AIR 1965 Madras 427, relying upon Annamalai v. Veerappa (supra), it was held that the terms ‘loans’ and ‘deposits’ are not mutually exclusive terms. There are a number of common features between the two. In a sense a deposit is also a loan with the difference that it is a loan with something more. Both are debts repayable. But the question as to when repayment is to be made furnishes the real point of distrinction between the two con-cepts. A loan is repayable the moment it is incurred, but this is not so with the deposit. Either the repayment will depend upon maturity date fixed therefor, or the terms of the agreement relating to the demand, on making of which the deposit will become repayable. In other words, unlike a loan, there is no immediate obligation to repay to case of in a deposit. That is the essence of the distinction between a loan and a deposit.

12. Although that is the distinction between a loan and deposit, the question in a given case whether the debt is a deposit or a loan will be one of fact which will have to be decided on the facts ‘and circumstances of each case. The use of the terms ‘loan’ or ‘deposit’ may not itself be conclusive, though of course, it is a circumstance which would be taken into account. What should be regarded is the cumulative effect of the evidence which bears on the character of the debt as a loan or a deposit. Where certain amounts are paid or given by a particular person to other without there being a requirement of the person receiving the same, without applying the above test, it would certainly be a deposit. This is the ony distinction.

13. In the matter of Ram Janki Devi v. Juggilai Kamla Pat, AIR 1971 SC 2551, the Supreme Court had occasion to consider the distinction between deposit of money and a loan. The Supreme Court held that the case of deposit is something more than a mere loan of money. It will depend on the facts of each case whether the transaction is clothed with the character of a deposit of money. The surrounding circumstances, the relationship and character of the transaction and the manner in which parties treated the transaction will throw light on the true form of the transaction. The Supreme Court further held that the documents by themselves are not conclusive of the question.

14. It is, therefore, necessary to determine whether the money given by the plaintiff Mohanlal Vyas to defendant No. 3 was a money loan or it was a deposit under some agreement with the debtor payable on demand. An attempt was made by the counsel for the appellants to establish that there is nothing on the record to show or suggest that the defendants were well-to-do persons who were carrying on business and, therefore, they would not have accepted any deposit. It was further contended that defendants were not the bankers and, therefore, the finding recorded by the trial Court that the amount given by the plaintiff was a deposit, was erroneous. Was this a loan or was it deposit payable on demand ? This question, we are called upon to answer. It is a trite law that in case of demand the transaction is a deposit and not a loan. When a khata is opened in the name of a person and interest is regularly added to the said account every year and the account was sent to the person regularly for a long time, it was held by the Gujarat High Court in Ramprasad Firm v. Bai Reva, AIR 1970 Gujarat 269, that the transaction was a transaction of deposit and not that of a loan. In the instant case, it is apparent that the accounts were maintained by the defendant No. 3. He was crediting interest in favour of the plaintiff every year and was sending the accounts to the plaintiff. The books of the firm show that the khata had been in favour of the plaintiff; that the balance and the account was sent every year, interest was added and the balance was carried forward to the next year. There was no fixed period for repayment of money. Under these circumstances it would be a transaction of deposit and not a loan.

15. It is not disputed that the transaction commenced in the year 1948. The defendant has filed copies of the relevant entries in the accounts books of the defendants, where Ex. D3, Khata 1, shows a deposit of Rs. 10,000/-by Mohanlal with defendant No. 1. It was argued that certain Hundies were given by the defendant to the plaintiff. Therefore, this deposit has to be treated as a loan. The said acknowledgments are not on record. We do not know what were the contents of the said Hundis. But the extracts of the accounts for the subsequent years clearly show that the said account continued for years and the plaintiff was depositing money at irregular intervals and was withdrawing money in the same fashion. Had this been a transaction of loan, then the position of the account would not have been, as it is in the present case. The evidence on record shows that very small items were deposited by the plaintiff Mohanlal Vyas in his Khata maintained by the defendant firm. Similarly, as and when he wanted, he withdrew the amount from the said account. The relationship between the parties is apparent. It is clear that the defendant firm was in fact acting as a banker. They had given facility of deposits and withdrawals to the plaintiff Mohanlal Vyas who, as and when, thought necessary deposited or withdrew the amount. These circumstances, prima facie, show that the relationship between the parties was not of a debtor and creditor, but in fact was that of a depositor and a depositee.

16. P. W. 2, Ram Shankar, who is Munim of the defendant No. 1 firm has proved the khata entries. From these khata entries, it can be safely concluded that the amount was deposited with the defendant. It is also not disputed that with yearly intervals, interest was regularly added. The amount was deposited by Mohanlal Vyas and the said amount was carried forward to the next year. The defendants were giving copies of the account regularly to Mohanlal Vyas. As held above, for loan the defendants must plead and prove that they were in need of money, therefore, the plaintiffs’ advanced them some moneys on certain terms and conditions. In the instant case, there is nothing on record to show and suggest that the defendant firm was facing financial stringency or was in need of money. If this material aspect of the matter is missing, then it cannot be held that the defendant would take a loan, despite there being no need. The defendant No. 1 itself was crediting interest in favour of the plaintiff on the deposits which were made by the plaintiff and ultimately the said account and the amount was carried forward in the next year. This fact also lends support to the fact that the transaction between the parties was a transaction of deposit and not a loan.

17. The trial Court, in para 29 of its judgment, has mentioned some of the salient features of the transaction between the parties and has held that the transactions involved in the suit were those of deposits and not of loan. We need not repeat the said circumstances. We endorse the same and hold that the transaction between the parties was basically and continued to be of a deposit. It was never intended to be, nor it was understood to be a transaction of loan.

18. Once it is held that the transaction between the parties is a transaction of a loan, then Article 19 of the Limitation Act would be applicable, which say that the limitation would be three years from the date when the loan is taken. In the instant case, we have held that it is not a transaction of loan. Therefore, Article 22 of the Limitation Act, 1963, would be applicable. For money deposited under an agreement that it shall be payable on demand, limitation is three years from the date when the demand is made. In the intant case, admittedly the demand was made by a registered notice, dated 2-12-1973. Therefore, the suit would be within limitation and by any stretch of imagination it cannot be held that the suit is barred by limitation.

19. Even otherwise, it is clear from the admission made in para 23 of the written statement filed by defendants Nos. 1 and 2 that the plaintiff received Rs. 5,000/-on 13-4-1970, Rs. 2,500/- on 22-9-1970 and Rupees 2,000/- on 21-12-1970 and Rs. 2,500/- on 21-8-1971. It is not the case of the defendants that these amounts were paid to the plaintiff in full and final settlement of the claim. The payments were unconditional. Once the payment is made by the defendant/debtor to the plaintiff/creditor, there would be a fresh cause of action for recovery of the amount in favour of the plaintiff on the basis of admission that the plaintiff received the amounts on 21-12-1970 and 28-1-1971, the suit filed on 15-12-1973 cannot be held to be barred by limitation.

20. In continuation, it was argued that the cheque dated 21-I-I970 was not produced in the Court. Therefore, in the absence of primary evidence, as required under Section 64 of the Evidence Act, no reliance could be placed on the evidence therefore also the cause of action would not accrue on 22-12-1970, i.e., the date when payment is alleged to have been received by the plaintiff. We fail to understand this argument. The issue between the parties was as to whether any payment was made to the plaintiff under cheque dated 21-12-1970 or not. The evidence is clinching and positively proves that the amount was paid to the plaintiff on 22-12-1970. Once it is held that the amount was paid on 22-2-1970 under the cheque dated 21-12-1970, coupled with the admission made in para 23 of the written statement, it cannot be held that the primary evidence was missing. The cheque might have been the primary evidence, but the issue between the parties was is relation to payment. The defendant himself admitted the payment under the cheque dated 21-12-1970. Now, therefore, the absence of the cheque would not mitigate against the filing of the suit. Under these circumstances, we are of the opinion that the suit of the plaintiff is not barred by limitation.

21. It was next contended that even according to the plaintiff, he holds money lenders licence, therefore, he is not entitled to costs and interest. The defendants contended that the plaintiff has already been over paid and the suit is liable to be dismissed. This argument is based on the premises that the very first transaction between the parties was that of a loan. But, in view of our finding recorded above, the transaction could not be held to be a loan transaction. Once it is held that the transaction between the parties was a transaction of deposit, then the subsequent conduct of the plaintiff which shows or make him a money lender, would not come to the help or assistance of the defendants. The defendant must prove that the very first transaction between the parties was of loan. In the instant case, the defendants have pathetically failed to prove that the transaction was of loan. Even assuming that the plaintiff subsequently became a money lender, obtained a licence and gave loans to others, it would not help the defendants. Assuming a money lender who holds a licence makes certain deposits with the bank, in case of withdrawal or in case of demand for recovery, the bank would never be permitted to raise the defence that the plaintiff or the depositor being a money lender is not entitled to interest. The bank has to bank upon the transaction entered into between the parties. In the instant case, the defendants cannot take any assistance from the subsequent conduct of the plaintiff. The plaintiff has clearly proved that the transaction between the parties was a transaction of deposit and as such, holding of a licence in the subsequent period would not made the plaintiff a money lender. As the plaintiff was not a money lender on the date of the initial deposit, the provisions of the Money Lenders Act would not be applicable. The argument of the learned counsel for the appellants that the plaintiff is a money lender is, accordingly rejected.

22. It was strongly urged that the pleadings or the evidence does not show as to whether money was given to firm or partners. It is not in dispute that certain amount was given by the plaintiff to the defendant firm. Even if the money was given to the partner, but was deposited in the accounts of the firm, it will have to be held that the money was received by the partner for and on behalf of the defendant-firm. There is always an implied authority in favour of a partner to receive payment or make payment for and on behalf of the firm. Under these circumstances, if it is not clear from the record as to whether the money was given to the firm or to the partners, it will make no difference.

23. Defendant No. 3, on 17-9-1968 gave an acknowledgment in favour of the plaintiff, acknowledging liability to the tune of Rs. 101,054.96. Similarly, he gave another acknowledgment in favour of the plaintiff on 6-10-1970, acknowledging the liability for Rs. 1,27,979.88. The defendants say and argue that the acknowledgment dated 6-7-1970 cannot bind the defendant firm, as the defendant No. 3 had already retired from the partnership of the firm on 31-3-1970 and another firm in the same name and style was constituted on 1-4-1970. Though in view of the admission made by the defendant that the last payment was made under a cheque on 22-12-1970, this question does not arise because the limitation would commence even otherwise, from the date of the notice, i.e., 3-12-1973. But as the question is of general importance, we propose to answer the same.

24. It was argued on behalf of the appellants that in view of Section 20, Sub-section (2) of the Limitation Act, which is an explanation or corollary to Sections 18 and 19, nothing in Section 18 or Section 19 renders one of the several partners chargeable, by reason only of a written acknowledgment signed by any other or others of them. It was argued that even if Lalit Kumar had given any acknowledgment acknowledging liability for a time barred debt, it would not bind the firm or other partners. According to Section 18, where before the expiration of the prescribed period for a suit or application in respect of any property or right has been made in writingsigned by the party against whom such property or right is claimed or by any person through whom he derives his title or liability, a fresh period of limitation shall be computed from the time when the acknowledgment was so signed. According to Section 19, where payment on account of a debt or of interest on a legacy is made before the expiration of the prescribed period by the person liable to pay the debt or legacy or by his agent duly authorised in this behalf, a fresh period of limitation shall be computed from the time when the payment was made. A combined reading of Sections 18 and 19 of the Limitation Act would show that for making payment of the debt or discharging the liability, within the period of limitation, when the acknowledgment is given, it would give a fresh period of limitation and a suit would always be maintainable within the period so prescribed by law. And, in case where some payment is made to discharge a part of the liability before the expiration of the prescribed period by the person liable to pay the debt, then a fresh period of limitation shall be computed from the time when the payment was made. In the instant case, the acknowledgments were given by Lalit Kumar on 6-7-1970. The payment was made on 21-12-1970 by the firm itself. Therefore, according to Section 19 of the Limitation Act, there would be a fresh period of limitation which shall be computed from the time when payment was made. The suit was filed on 15-12-1973. In view of the language of Section 19, the suit is maintainable and within time.

25. Section 20, Sub-section (2) is a matter of policy. This section in fact, as stated above, is an explanation or a corollary to the provisions of Sections 18 and 19. It concerns itself with the question as to who can keep alive a liability which has not become time barred. This section has nothing to do with the revival of a time barred debt. The word ‘only’ in Sub-section. (2) is emphatic. The object of the section is not to facilitate frauds by debtors upon creditors but to protect debtors and it has no application where the payment or acknowledgment is made by a debtor for and on behalf of another co-debtor at his request. The effect of Sub-section (2) is that if one of the partners has done anything which starts a new period of limitation, then that new period starts only against him and not against other partners. The effect of Section 20, Sub-section (2) amounts to cutting down the effect of Sections 18 and 19 of the Limitation Act.

26. ‘Partnership’ as defined in Section 4 of the Indian Partnership Act, 1932, means the relation between persons who have agreed to share the profit of a business carried on by all or any of them acting for all. The words ‘acting for all’ is important. It is the principle of agency or authority on which each partner binds or associates, and it has been held by almost every High Court that the authority of the partners to sign, etc. on the firm’s behalf is an ordinary rule. The partner has an implied authority to keep it alive and evidence of authority from other partners is not necessary. In the instant case, though a specific authority to give acknowledgment on 6-7-1970 by Lalit Kumar has not been proved, but the facts prima facie show that the new firm which was constituted under the name and style of the same firm was having the father and two sons of Lalit Kumar as partners. It is not the case of the defendant firm that they had informed the plaintiff that Lalit Kumar had already retired from the partnership with effect from 31-3-1970. The defendants cannot be permitted to take advantage of their own wrong. If the defendants had entered into a new agreement after the retirement of a partner, namely, Lalit Kumar. then it was their duty to give a public notice of the fact that Lalit Kumar stands retired from the firm. According to Section 72 of the Indian Partnership Act, a public notice under the Act is to be given, where it relates to the retirement or expulsion of a partner from a registered firm or to the dissolution of a registered firm or to the election to become or not to become a partner in a registered firm by a person attaining majority, who was admitted as a minor to the benefits of the partnership, by notice to the Registrar of Firms under Section 63, and by publication in the official gazette and in at least one vernacular newspaper circulating in the district where the firm to which it relates has its place or principal place of business. Counsel for the appellants was unable to show that such a notice was ever given under Section 72 of the Partnership Act, as a matter of public policy. The general public is not expected to know the constitution of the firm, the addition or retirement of partner, dissolution and reconstitution of the firm in the same name. It is only by public notice under Section 72 of the Act the general public is informed that a particular person continues or discontinues to be a partner. By this the general public is called upon to know that now they are supposed to deal with particular -persons. In the absence of a public notice, a firm which continues to carry on business in the same name would never be permitted to say that there was some retirement and the retiring partners could not give an acknowledgment binding on the firm. Section 32 of the Partnership Act relates to retirement of a partner. A partner may retire with the consent, of all the other partners or in accordance with an express agreement by partners, or where the partnership is at will, by giving notice in writing to all the other partners of his intention to retire. A retiring partner may be discharged from any liability to any third party for acts of the firm done before his retirement by an agreement made by him with such third party and the partners of the reconstituted firm, and such agreement may be implied by a course of dealing between such third party and the reconstituted firm after he had knowledge of the retirement. In the instant case, the defendants’ plea is that Lalit Kumar retired from the partnership with effect from 30-3-1970. There is nothing on record to show or suggest that the retiring partner was discharged from any liability to any third party for acts of the firm done before his retirement. Lalit Kumar, therefore, is answerable to the claim of the plaintiff and as no public notice was given to the public, the acknowledgment given by Lalit Kumar would be binding on the firm also. It is not the case of the defendants that Lalit Kumar made acknowledgment in favour of the plaintiff fraudulently contrary to the interest of the defendants, Section 32, Sub-section (3) of the Partnership Act states 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 of the firm, if done before the retirement, until public notice is given of the retirement. A notice under Sub-section (3) relating to retirement may be given by the retiring partner or by any of the partners of the reconstituted firm. The consequences of default in giving public notice are two-fold, namely, holding out of the retired partner and estoppel against the firm. The principal as stated above, in the circumstances of the case, is that as long as a public notice is not given, the firm will be answerable for acts of the retired partner and later for acts of the firm, provided only that in either case, the act is such that it could not have been an act of the firm, if done before retirement, that is to say, that it would have been within the scope of the authority of the doer. In the instant case, there is nothing to show that a public notice was given under Sub-section (3) of Section 32 of the Act. Therefore, because of the default of a retiring partner and the firm, each of them would be answerable for the acts of each. When a partnership has existed, but one of the partners has retired without notice being given in the Gazette, and the name of the firm is still preserved, a person dealing with the firm after the dissolution, may still call all the original parties, unless he had notice or knew that one of them had retired. Lord Selborne, in Scarf v. Jardine, (1882) 7 AC 345, has stated :

“The principle of law, which is stated in Lindley on Partnership is incontrovertible, namely that when an ostensible partner retires, or when a partnership between several known partners is dissolved, those who dealt with the firm before a change took place are entitled to assume, until they have notice to the contrary, that no change has occurred, and the principle on which they are entitled to assume is that of the estoppel of a person who has accredited another as his known agent from denying that agency at a subsequent time as against the persons to whom he has credited him, by reason of any secret revocation.”

27. In the absence of a public notice, which is the mandate of law, required to be published under Section 32(3) of the Partnership Act, the firm is bound by the acts of defendant No. 3 to the third parties, as the third parties could not know that defendant No. 3 stood retired. The firm even in equity would not be permitted to take advantage of its own fault. The defendant No. 3 would be deemed to be a partner of the firm. We accordingly hold that the acknowledgment given by Lalit Kumar, defendant No. 3 is binding on the firm and the firm is answerable to the claim of the plaintiffs.

28. it was next urged that from Ex. D-92, it is clear that the plaintiff is a money lender. Ex.-D-32 is not conclusive proof of the fact that the plaintiff is/was a money lender. It may be relevant factor, but as we have held that the transaction between the parties was only a transaction of deposit, Ex. D-92 does not help the defendants.

29. For the above reasons, we find no merits in appeal. It is dismissed with costs.


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