Case Briefs

INDIAN CONTRACT ACT

1. S. 124 - Gajanan Moreshwar Parelkar v Moreshwar Madan Mantri

(Indemnity) (

Plaintiff, at the request of the defendant, executed two mortgages in favour of Mohandas. Defendant wrote a letter promising to indemnify the plaintiff against any suits by the mortgagee, along with executing a third mortgage in place of the previous two. Plaintiff prays that the defendant obtains a release of liability from Mohandas; Issues: 1) Can

the indemnified ask for performance of the contract of indemnity without suffering actual loss? 2) Whether the obligation of the plaintiff was

absolute. Held: S 124,125 do not apply, as said sections do not cover the

transaction. ICA is not exhaustive, and principles of equity will allow the indemnified to enforce said contract of indemnity without having suffered actual loss, when the obligation of the indemnity holder is absolute. Here, obligation is absolute. RATIO: There exist contracts of indemnity, which do not fall within the ambit of S 124,125. Contracts of indemnity can be enforced without the actual loss of the indemnified so long as there is an absolute liablity of the type covered by the contract of indemnity.)

2. S. 124 - Lala Shanti Swarup vs Munshi Singh & Others (Indemnity)

(Vendor sold an encumbered land to vendee, who promised to make

required payment against a mortgage to the mortgagee; Vendee

fails to do so, vendor sustains loss in the form of ¾th of their

property being sold; Vendor sues under implied contract of

guarantee. Issue: Is there a contract of guarantee? Is the suit barred

by limitation? Held: A conveyance which contains a covenant

whereby th epurchaser promises to pay off encumberances on the

sold property is nothing but an implied contract of indemnity, whose

cause of action arises when ACTUALLY DAMNIFIED (Mortgage decree

being passed does not amount to actual damnification))

3. S. 125– Gray v Lewis& Parker v Lewis (Indemnity)

4. Lep Air Services v Rolloswin (Guarantee) (

Plaintiffs were the forwarding agents of the defendants wherein they had to hand over imported goods to rolloswin. They had to be paid 40000 in sex weekly instalments of 6000 and one time 4000£ payment. Moschi, owner of Rollswin guaranteed the payment. Rolloswin could only pay 10000 and then defaulted. Lep air treated that as wrongful repudiation and repudiated the contract and brought this suit. The refree held that the guarantor was liable to the amount of £10000 only and not afterwards. Both parties appealed.) (Moschi contended that he was not liable at all-As (1)repudiation was accepted, it changed the essential nature of the debt to damages for which moschi was not the guarantor. (2)Acceptance of repudiation amounted to a material variation in the terms of contract which discharged him.) (held that he guarantor is liable for both before and after the date of acceptance of repudiation. (1) court held that liability for breach cannot change the existing liability of the guarantor as the creditor company has merely

exercised a legal right conferred upon him by law. A change in form is not a change of substance. (2)the exercise of right of repudiation given to the creditor cannot be regarded as a variation of the material terms of contract. According to the court, the referee’s judgement redress a guarantee obsolete as, if the creditor exercises his lawful right to accept repudiation, he forfeits the right to get payment for the instalments due after the repudiation, and if he doesn’t, he must continue to perform his end of the contract at considerable loss.)(repudiation is not to be taken as a material change in terms)

5. S. 126 – Mountstephen v Lakeman (Guarantee) (L, director of the

Board, tells M to connect the sewer system with individual houses

although the Board hasn’t asked M to do so, as a whole. L says that

he will see M gets paid (“I will see you paid”). Issue: Does the above

statement impose a primary of secondary obligation on L (ie is this a

contract of indemnity or guarantee?) Held: Through his statement

(when given its natural meaning), L placed a primary obligation on

himself to indemnify M; Lack of a principal debtor also makes this a

contract of indemnity )

6. S. 126 - Punjab National Bank Limited v Bikram Cotton Mills

(Guarantee) ( The Company executed 3 documents (promissory

note, hypothecation and a letter) in favour of its creditor, the bank;

On the same day, the Managing Agent of the company executed an

agreement of guarantee with the Bank; Issue: Is this an issue of

guarantee or indemnity? Whether the suit filed was premature?

Held: As all documents were executed on the same day, it can be

inferred from the conduct and intention of the parties that the agent

enetered into an agreement of guarantee. The bank was entitled to claim

at any time the money due from PD as well as from G under the promissory note and

the bond. The suit could not therefore be said to be premature. Also, the binding

obligation created under the composition ‘between the company and its creditors does

not affect the liability of the surety unless the contract of surety-ship otherwise

provides.G is liable for “ultimate balance” which should be determined) (the

nature of the bond of guarantee would be that of a continuing

guarantee)

7. S. 126 - Ramchandra B. Loyalka v Shapurji N. Bhownagree

(Guarantee)(D, a broker, forms a contract with P, to be a sub-broker

reponsible for certain constituencies; Said constituencies default

and owe D 16,000. P and D enter into a second agreement whereby

P will be liable for the above amount; Note: Sub-broker is suing

broker for his commissionIssue: Was the agreement whereby P will

be responsible for the constituencies a contract of guarantee or

indemnity? Held: For a contract of guarantee to subsist, there must

be three parties to the contract (PD-C, G-C and PD-G (this last

contract can be implied (S 145) or express, and is a contract of

indemnity between PD and G); (i) Here, the last contract was

absent, with the constituencies being unaware of the offer of P (the

sub-broker); (ii) P (sub-broker) has an interest in the transaction

(which happens in contracts of indemnity and not guarantee). Thus,

contract was of indemnity; Also, the fact that D sued the clients for

the price and then compromised without the consent of P is

immaterial as P is not a party to the contract (i.e., not guarantor))

8. S. 126 - U. P. State Sugar Corporation v Sumac International Limited

(Bank Guarantee) (Sumac entered into a contract with Sugar

Corporation wherein Sumacwould have to deliver a new wing of

Sugar mills to the corporation by a certain date; Sumac had to

execute fiveunconditional bank guarantees in favour of P(plaintiff)

for delivery, advance payments, etc. U.P. Government informed P

that it was to be converted into a joint venture and hence should

stop expansion of mills; P cancelled agreement with D, and sought

to enforce the bank guarantees. D applied for arbitration and an

interim injuction against encashing the bank guarantees. Issue:

When can injuctions be granted on unconditional bank guarantees.

Held: Injuctions are not easily granted as this would affect

commercial transactions. Two exceptions: (i) Fraud: must be of an

egregious nature such as to vitiate the entire underlying transaction;

must be that of the beneficiary, and not the fraud of anyone else. (ii)

Irretrievable harm/injury caused to either party on encashing

guarantee: exceptional circumstances that make it impossible for

the guarantor to reimburse himself if he ultimately succeeds, will

have to be decisively established; existence of any dispute between

the parties to the contract is not a ground for issuing an injunction

to restrain the enforcement of bank guarantees. Hence, no injuction

was granted)

9.

S. 126 – National Highway Authority of India v Ganga Enterprises

and Another (Bank Guarantee) (P invited bids for collection of toll on

a highway; D had to provide Rs 50 lakhs as bid security on issuing a

bid, in case of withdrawal of bid before 120 days, and Rs 2 Cr on

acceptance of the bid, as performance security; The bank guarantee

was to be paid by the bank without demur on a written demand

merely stating that one of those conditions has been fulfilled, D

removes his bid before 120 days, and his bid is found to be the

highest and is accepted, but after withdrawal of offer; Thus, no

contract formed; Issue: Whether P can enforce the bank guarantee

of bid security without the breach/formation of a contract? Held: The

bank guarantee was an “on demand guarantee” to be granted

without demur; By invoking the bank guarantee and/or

enforcing the bid security, there is no statutory right, exercise

of which was being fettered.Withdrawal of a bid and forfeiture

of security are two different things. Forfeiture of such

earnest/security, in no way, affects any statutory right under

the Indian Contract. Thus guarantee was enforceable, and to

enforce the back guarantee the creditor doesn’t have to show

any evidence to show a breach.The bid security was given to

meet specific contingency i.e. withdrawal of the offer within

120 days. The contingency having arisen, Appellants are

entitled to forfeit. The existence and non-existence of an

underlying contract become irrelevant when the invocation is

in terms of the bank guarantee.

10.

S. 126 - Mahatma Gandhi Sahakra Sakkare Karkhane v

National Heavy Engineering Co-Operative Limited and Another

(Bank Guarantee)

11.

S. 126 - Hindustan Construction Co. Ltd v State of Bihar &

Others (Bank Guarantee) (HCCL contracted with the government to

contruct a dam; had to execute two bank guarantees in favour of

the governement (performance and mobilisation advancement);

Governement applied to encash said guarantees claiming

non-performance by HCCL, who then files for interim injunctions; Issue:

Whether the bank guarantee is conditional or unconditional. Held:

Bank Guarantee was conditional (terms are of material importance);

Advancement guarantee can be enforced only if obligations of HCCL

are not discharged or there is misappropriation(neither of which can

be proved) Performance guarantee can be given only to the “chief

engineer” who was not the one who applied for it; Thus, injuction

granted)

12.S. 128 - Greer v Kettle (Guarantee) (

An agreement was made whereby Austin Friars ( A) were to be given a loan from Mercantile Marines(MC). A was to provide MC collaterals by way of shares of Iron Industrial Company to make the transaction a secured one. The Parent Trust company (P) agreed to guarantee the

secured debt , thereby becoming the surety. However, it was later found out that A had not issued any shares, and A went on to default on the loan. Issue: Whether P is still liable as surety although the debt is no longer secured, and whether P is estopped from declining the liable of surety. Held: The shares being given as collaterals was one of the pre-requisites for the defendant (P) to become a surety. They didn’t become guarantors for any unsecured loan , thus there is no question of imposing liability for which they never consented to. Also, estoppel cannot aply as P was not in a position to gain knowledge/privy to the existence or lack thereof shares mentioned in the recital; M was in such position, thus M is estopped. RATIO: A surety can insert pre-conditions to his liability as guarantor when he enters into a contract

.)

13.

S. 128, 133-139 - Charan Singh v Messrs Security Finance Pvt.

Ltd. and Others (Co-extensive Liability) (

Facts: Decree holder entered

into a compromise with one of the judgment debtors(Principal debtor) for the payment of Rs. 10,000/- then sues the other judgment

debtor(Guarantor) for the remaining Rs. 20,000/- Issue:Do sections(S 133 to 139) of ICA apply when the surety, PD, and creditor acquire the roles of decree holder and judgment debtors?Held: After a decree has been

passed, the liabilities of the surety and principal debtor are that under the decree and not under the original contract. i.e. The liability of the surety is no longer co-extensive with that of the debtor. The surety and PD become co-judgment debtors. The relevant sections of the ICA do not apply to decrees, only apply to creditor, surety and principal debtor. Thus, the creditor can get amount for surety)

14.

S. 128, 134 - Syndicate Bank v Channaveerappa Beleri and

Others (Co-extensive Liability) (Period of limitation for contracts of

guarantee) (

The Bank (P) gives a credit loan to a company, who defaults on their payment. P sues the directors of the company (D), who are the sureties of said loan; D claims limitation period starts from when the company (ie Debtor) defaults on payment; Issue: When does the period of limitation start for a contract of guarantee, as against the surety? Held: It runs from the time when the balance is constituted and demand is made. The Guarantee Contract mentions that there shall be payment on demand , thus a demand is a condition precedent for the liability of the guarantor. Time will start running when the contract is broken ( A. 55) or when the right to sue accrues ( A.113) , that is when the demand is made and it is refused by the surety. This is a contract of continuing guarantee with a live account. The time period started to run from the moment the refusal by the surety was made. Thus the suit is not

time barred. RATIO: Limitation period for a debtor starts when the debt is incurred , and for surety when the demand for payment is made.)

15.

S. 139 - Radha Kanta Pal v United Bank Of India Ltd.

(Guarantee) (Raji Kanta (legal heir-Radha Kanta) gave a fidelity bond

in favour of Nishe Kant (an employee of the bank), who then

misapproprited funds and left without a notice. The bank then

encashing promissory notes given by Rajni Kant as security; Radha

Kant wants to stop payment as he claims the bank continued to hire

Nishi Kant, even after knowlegde of dishonesty, without informing

the surety (Invoking the aplicability og S 139) Issue: Does the

surety’s liability get discharged under S 139? Held: The surety’s

liability, for the faithful discharge by another, of his duties depends

on the exact terms of that guarantee. (Utmost care in supervision

may not be a term in the contract; continued employment of proved

dishonesty is an implied term, wherein the surety’s liability is

discharged) The guarantor in such a case guarantees the fidelity

and not the infidelity of the servant. He guarantees the fidelity and

ensures the loss against the risk of infidelity and not the fact of

infidelity.Under Section 139 the two important requirements are: (i)

The act of the creditor is inconsistent against with the rights of the

surety. (ii) The remedy of the surety against the principal debtor

has been impaired. (ii) is lacking, thus S 139 does not apply,

although the creditor continued to hire Nishi Kant after knowledge

of his dishonesty, thereby violating the rights of the surety. Verdict

for the Bank to encash promissory notes, and Radha can sue Nishi

Kant)

16.

S. 134, 137 - Aziz Ahmad v Sher Ali and Others (Time bar=

barred debt, NOT extinguished debt; barred debt is still a live debt)

(

Facts: NA; Issue: Whether the surety is discharged when the creditor allows the execution of his decree against the principal debtor to be barred by limitation; Held: Mere omission to sue within limitation period does not discharge the surety. S 137 states that mere forbearance on part of the creditor does not discharge the surety.Debt becoming time barred does not amount to “omission” under S 134. On expiry of the period of limitation, the creditor loses the remedy but not the right to the debt, and thus omission to sue does not discharge the debtor. S 134 does not apply; The surety has argued that he will lose the right to seek remedy under s. 140 and s.145 as the rights of the creditor cannot be enforced.

(Applicability of S 139??) However the surety can guard against such contingency by including a term in the contract whereby as soon as the guaranteed debt becomes due , the surety will be invested with all the rights creditor has against the debtor after making the payment; read this case against the case of

Syndicate bank) RATIO: A creditor has no duty to the surety to pursue his legal remedy against the principal debtor and his failure to take action will not discharge the surety.

17.

S. 129 - Margaret Lalita Samuel v Indo Commercial Bank

Limited (Continuing Guarantee) (Samuel and his wife, the appellant,

exected a continuing guarantee in favour of a company which the

bank had a running account with. The company ceased to operate.

Issue: Was each debt a new loan, with a different cause of action,

thus barred by limitation? Ie what is the limitation period of a

continuing guarantee? Held:

The defendant undertook to pay any amount that may be due by the company at the foot of the general

balance of its account or any other account whatever. In the case of such continuing guarantee, so long as the account is a live account in the sense that it is not settled and there is no refusal on the part of the guarantor to carry out the obligation, the period of limitation does not commence running. Limitation would only run from the date of breach (ie refusal to pay by surety). The over draft account that the bank had in the name of the company continued to be active even after the company ceased the business. The defendant also sent a letter acknowledging her liablity, thus confirming the liability for the still active account)

18.

S. 133 - M. S. Anirudhan v The Thomco'S Bank Ltd ( the Bank

gave a form of guarantee, to be filled by G (Guarantor) to the PD

(debtor). G put in th value of 25K, which the bank refused, stating

their maximum was 20K. The PD made the value 20K, thus altering

the document; Issue: Whether surety’s liability is discharged under S

133; Whether this was a material alteration (change in the

nature/obligation of the contract), affecting the original contract;

Whether PD acted as the agent of G, who was thus estopped from

going back on granting implied authority to PD to make said

changes. Held: The alteration was held to be unsubstantial, as 25K

includes 20K, and it is in fact to the benefit of the guarantor. Also,

said alteration did not change the nature/obligation of the surety, it

only reduced the liability. S 133 does not apply. PD was held to act

as agent, had apparent authority to make such changes (due to the

fact that G had handed over the form to PD to give to the Bank), and

hence G was bound by the principle of estoppel. DISSENT: The

original offer of 25K was rejected by the Bank, and thus, no contract

was formed.)

19.

S. 129, 130 H.B. Basavaraj v Canara Bank (Continuing

guarantee:

In the absence of a specific written document by Basavaraj revoking the guarantee, the guarantee stands and the legal

representatives of the deceased are liable to repay the loan.)

20.

S. 140, 141 - Craythorne v Swinburne (Guarantee) (CHECK

BRIEF; The oral promise that John Swinburne gave was

actually, collateral to facilitate the guarantee and others were

not privy to the agreement and as such John Swinburne had

limited his liability. Defendant was collateral security and not

co-surety, and is exempt from the principles of equity (to

contribute to the debt payment) as he did so through specifics

in a contract)

21.

S. 139, 141 - State of Madhya Pradesh v Kaluram (Security) (

Facts:

Auction by the Divisional Forest officer held J as the highest bidder. Four installments of payment had to be made for the sold forest produce. As per the terms of the contract, the Government may prevent the forest contractor (J) from taking forest produce in excess of that which was paid for, w.r.t. particular installments. i.e. the forest produce not yet paid for was equivalent to security. (This could be resold). Issue: Whether S 141 of the ICA applies. I.e. whether the Government lost the principal debtor’s security without the consent of the surety, thus discharging the surety.

Held: The surety is discharged from all liability as S 141 applies. The State

lost the security of the forest contractor by allowing forest produce (completely under their control) to be taken without payment. Thus, the rights against the debtor that the surety acquires after the creditor is paid no longer exists, thereby discharging the surety. Ratio: The term

“security” under S 141 is not used in strictly technical terms, but refers to all rights, which the creditor possesses against the debtor/his property at the time of formation of contract. In this case, the right of re-sale of goods served as security under S 141)

22.

S. 134, 139 - Mahanth Singh v U Ba Yi (

Facts: Plaintiff was a

building contractor employed by four trustees of ‘X’ pagoda. Respondent is the guarantor of said trustees. Plaintiff filed a suit for payment against the four trustees, then changed the suit to strike down the names of the four ex-trustees, and add eight names of present trustees. Thus, due to some procedural rule, the plaintiff is prevented from instituting proceedings against the original four trustees. Issue: (i) whether the liability of the surety is discharged by the act of the present appellant in forgoing his claim against the principal debtors. i.e. Whether S 134, 139 apply. (ii) Whether the agreement of debt is declared void (due to inability of the creditor to file a claim) under S 2 (g), (j) under the ICA Held:(i) Surety is

still liable. S 134-The principal debtor is not discharged of his debt, the creditor is merely stopped from claiming said debt due to procedural instruments. S 139-The right of the surety against the debtor is not infringed, thus this section does not apply. (ii) S 2 (g), (j) apply only to those contracts which are void by substantive law, not procedural law. Hence, the principal debtor is not discharged absolutely, and surety remains liable. )

23.

S. 133, 135, 141 - Amrit Lal Goverdhan Lalan v State Bank of

Travancore & Others (Plaintiff is partner of a firm that is the pricipal

debtor of the bank. P is surety of said debt. According to facts, the

Bank owned certain stocks of the firm as collateral, but admitted to

being short of stocks worth Rs. 35,000 (or there abouts), through its

own negligence; Issue: Is the surety’s liablity discharged by virtue of

applicability of S 133, 135, 141? Held: S 133 is not applicable as the

facts show that the variance referred to by P (ie, variance wrt the

limit of credit to be granted) were merely internal communications,

not in the form of a formal document and thus not binding on the

Bank (ie no varuance took place); S 135 is not applicable as

according to facts, the Bank gave time to the PD to make good the

quantity of goods referred to in the monthly statement, which is not

equivalent to giving time to make payments ithin the meaning of S

135; S 141 is applicable; The bank, through its own carelessness,

lost some share of security for which the surety will no longer be

liable, under S 141; Thus, surety has to pay amount due-35,000 (ie

security lost))

24.

S. 139, 141 - State Bank of Saurashtra v Chitranjan Rangnath

Raja and Another (Bank had granted credit to the limit of Rs. 75,000

to the PD, who pledged 5000 tins of groundnut oil to the Bank, who

negligently lost said security; Issue: Whether the surety had

knowledge of the said securtiy and whether S 141 is applicable;

Held: S 141 would apply if it can be shown that the creditor had taken more

than one security from the principal debtor at the time when the contract of guarantee

was entered into. Here there were two forms of security: plegde of goods and personal

guarantee of the surety. Section 141 comprehends a situation where the debtor has

offered more than one security one of which is the personal guarantee of the surety.

The knowlegde of the surety wrt to the existence of the security is immaterial

(Although, it was found that the surety granted the guarantee on the assumption that

the security would be given). S 141 applied regardless of presence of knowledge on

the behalf of the surety)

25.

S. 148 - Trustees of the Port of Bombay v Premier Automobiles

Limited (Bailment) – High Court

26.

S. 148 - Trustees of the Port of Bombay v Premier Automobiles

Limited (Bailment) –Supreme Court

27.

S. 148 - State of Maharashtra, Bombay and Others v Britannia

Biscuits Company Limited and Others (Bailment) (Facts are similar

to United breweriers, except that there was a three month epriod

within which the biscuit tins had to be returned, and such tins were

accepted even after time limit was over. Issue: Sale or bailment?

Also, was there an obligation on the purchasers to return the tins?

Held: Intention (As can be seen from the accounts) of the company

shows that the transaction was a composite one, resulting first in

entrustment of the tins with the purchasers. If returned within three

months, the trust is returned, if not, the transaction becomes one of

sale. There exited no obligation to return (time was not strictly

followed). Neither the endorsement on the price list nor the endorsement on the

invoice can be said to create an obligation to return.)

28.

S. 148 - Messrs Kalyani Breweries Limited v State of West Bengal

and Others (Bailment)

(Facts: Kalyani Breweries sell beer, and the Tax Authorities claim that the amount obtained through the “forfeited

deposits” for the bottles actually amount to sale of the bottles. Issue:

Were the bottles sold or bailed?Held: The court held that the bottles were

sold and not bailed for two reasons. (i) The company failed to issue a circular describing their bailment scheme. I.e. The terms of the bailment were not set. Also, the “bailee” had no knowledge (implied of actual) of the proposed bailment. There can be no bailment WITHOUT the knowledge of the bailee. Further, CONSENT is not equal to KNOWLEDGE (ii) The

deposit amount was the same as that of the price of the bottle. This favoured an intention to sell, rather than bail.)

29.

S. 148 - State of Bombay v Memon Mahomed Haji Hasam

(Bailment)

(Facts: The Customs Authority requisitioned the petitioner’s trucks, and later sold said goods in an auction as unclaimed goods, while the appeal against the initial requisition was pending. The appeal was granted, and the owner demanded Issue: (i) Was there any obligation to take reasonable care of said goods? i.e. Whether the Government was in a position of bailee while the appeal was in progress. (ii) Whether bailment can take place without a contract Held: The argument of the government, which stated that bailment was absent due to the lack of a contract, was rejected, as there can exist a bailment WITHOUT a contract. The

Government was under both a statutory as well as implied obligation to take reasonable care of the goods. Also, the order of auction does not interfere with the owner’s right to his goods as said auction was procured through false representation of fact.)

30.

S. 148 - K. L. Johar and Company v Deputy Commercial Tax

Officer (Bailment) (Hire-purchase agreement amounts to a sale; A

was the owner and not the financial agent as the terms of the

agreement say that title will remain with the A till option to purchase

is exercised.

A hire purchase agreement has two elements: (1) element of bailment and (2) element of sale in the sense that it contemplates an eventual sale. The element of sale fructifies when the option is exercised by the intending purchaser after fulfilling the terms of the agreement. When all the terms of the agreement are satisfied and the option is exercised a sale takes place of the goods which till then had been hired. Tax is from the sale transaction. Also, the taxable amount will not be the final price paid at the option to sale (Re. 1) or the amount paid through hire instalations; will be determined reasonably by th etax authorities)

31.

S. 148 - United Breweries Limited v State of Andhra Pradesh

(Bailment) (

Facts: UB are suppliers of beer. The Sales Tax authority

wants to tax UB for the “sale” of the bottles and crates, while UB claims that there was no sale, but only bailment of said bottles and crates. UB charged a certain amount for the bottles and crates, providing for a refund of the said amount of the return of the bottles. They also asked their customers to charge the consumers the same amount as a deposit for the bottles. UB also issues a circular publicizing their scheme regarding

refundable deposits for bottles. Also, it must be noted that the deposit for the bottles was lesser than the actual price. Issue: Whether the bottles and crates were sold, or bailed. Held: The court looked into the

INTENTION of the parties. From the circular issued by UB, it is observed that they were anxious to get the bottles back. They urged their

customers to charge a deposit from the consumers so as the get the bottles back. They also stated that they would be able to gain greater business efficacy on return of the bottles. The forfeiture of the deposited amount did not amount to the price of the bottle, but came under S 74 of the ICA as LIQUIDATED damages. Also, the argument that there was no contractual obligation on the part of the customers to return said bottles, and hence bailment cannot be proved failed. This is because bailment is possible without the presence of a contract (implied, or otherwise)).

32.

S. 150 - Hyman v Nye & Sons (Bailment) (Defendant is a

jobmaster from who the plaintiff hired a pair of horses, a carriage

and a driver; Carriage breaks down, P sues for damages. Issue: The

degree of duty of care in the case of a hire agreement. Held:

Reasonable care must be taken. NOTE: English law says that the

hirer is not liable for defects he knew nothing about (or

could not have reasonably known about). S 150 negates this

rule wrt India.The thing bailedmust be as fit and proper as care

and skill can make it for use in a reasonable and proper manner. It is

not at all unreasonable to exact such vigilance from a person who

makes it his business to let out carriages for hire. The defendant had

to show in this case that the accident was not preventable by him

by exercise of any skill. He did not show the same in the initial trial.

Result: The trial judge gave too low a level of duty of care to the

jury, new trial.)

33.

S. 151 – Coggs v Bernard (Gratuitous Bailment) (Check briefs)

34.

S. 148 - The Pioneer Container, KH Enterprise v Pioneer

Container (Sub Bailment) – Privy Council (Taiwan, Hong Kong,

sub-bailment; imposition of a duty on sub-bailee outside a contract;

clause regarding specific governing law applicable based on the

terms which the owner had allowed to bailee to sub-bail said goods.

Check brief)

35.

S. 148 - Morris v C. W. Martin and Sons Ltd. (Sub Bailment) -

Court of Appeal (D as sub-bailee for reward was under a duty of

care and P as head-bailor could sue for breach of this duty.A

common law duty exists only if there is a relationship between

the parties. One way of establishing such a relationship is by

taking voluntarily into custody the goods which are the

property of another.The judge held that the defendant by

voluntarily accepting from Mr Beder the custody of the fur,

which they knew was a property of a customer of his, brought

into existence a relationship of bailor and bailee by sub

bailment and created a common law duty by the defendant to

the plaintiff. The common law duty was with respect to taking

care of her mink stole. The other common law duty was that

the mink stole should not be converted meaning that nothing

should happen to it that interferes with Mrs Morris’s right to

property of the mink stole. Whether it be a contractual

bailment or a tortious bailment, the bailee has reversionary

rights over the goods and thus the bailee would have the

liability that the goods don’t get converted. CW Marrtin held

vicariously liable, exemption clause does not apply.)

36.

S. 151 - Lakshmi Narain Baijnath v Secretary of State for India

(Duty of Care of Bailee) (Defendant was transporting bales of

jute-caught in cyclone-allowed jute to stay in the boat during the

cyclone-boat leaks, jute stays wet for 30 hours-damaged, and

rejected by the Mills; Issue: To what extent is the duty of care of the

bailee under S 151; Held: This is an issue of fact rather than an issue

of law. Courts held that the bailee did not take reasonable care of a

prudent madn u/S 151, held liable for damage caused.)

37.

S. 160, 161, 167, 171 – Coastal Oil Mills, Ongole v Andhra

Pradesh Industrial Development Corporation, Vice-Chairman,

Hyderabad and Others (Third Party in Bailment) (AP Ind Corp seized

bailee’s goods on default of the latter in certain payments; AP

wrongfully claimed the bailor’s goods and refused to give said goods

(oil) back; By a petition and decree by the 2

nd

_{defendant- the bank,}

goods were auctioned off (however, most of the goods had perished

by then); Issue: third party in bailment; Held: the Bank was held to

be liable as it failed to establish its lien over the goods; The bank

was also responsible for withholding and auctioning the goods; AP

and bailee not liable.)

38.

S. 170 - Messrs Kalloomal Tapeshwari Prasad and Company v

Messrs Rastriya Chemicals and Fertilizers Limited and Another

(Particular Lien) (Bailor had contracted to send 5000 metric tons of

fertilizer for storage to bailee; bailor sent more than the agreed

amount; bailee incurred expenses in accomodating for the excess;

Issue: Whether the bailee could exercise a particular right of lien;

Held:

S170 applies only to situations where labour and skill have been applied to the goods bailed so as to improve the goods bailed. The bailee was only required to transport and store the goods and hence it was decided that no labour, skill or improvement in the goods to entitle him enforce the lien. Also, there was a clause in their bailment contract than prevented any exercise of lien by the bailee, and hence the bailee’s suit fails on this ground as well. Held that he has right to recover the extra charges by separate suit but his lien is unenforceable. )

39.

S. 170 - E. H. Parakh and Others v G. Mackenzie and Company

Limited (Particular Lien) (

The bailee did not do anything to improve the goods by exercise of labour or skill but only stored it, hence no lien under S170 of ICA)

40.

S. 171 - R. D. Saxena v Balram Prasad Sharma (General Lien of

advocates) (The relationship of advocate and client was severed as

between the plaintiff (advocate) and defendant (MD of firm);

Advocate claims a right of lien over case files till general balance is

paid; Issue: Does P have a right of general lien over case

files/litigation paper? Held:

Files containing copies of the records (perhaps some original documents also) cannot be equated with the "goods" referred to in the section. The advocate keeping the files cannot amount to "goods bailed". In the case of litigation papers in the hands of the advocate there is neither delivery of goods nor any contract that they shall be returned or otherwise disposed of. ‘Goods’ are items as defined under the SOGA. Thus understood "goods" to fall within the purview of section 171 of the Indian Contract Act should have marketability and the person to whom it is bailed should be in a position to dispose it of in consideration of money. In other words the goods referred to in section 171 of the Indian Contract Act are saleable goods. There is no scope for converting the case files into money, nor can they be sold to any third party. Hence, S 171 does not apply.)

41.

S. 171 - Board of Trustees of The Port of Bombay v Sriyanesh

Knitters (General Lien) (Respondent settles disputes with the import

authorities on import duty, and meanwhile, appellants hold the

goods; A then claims right of general lien as wharfingers. Issue:

Whether A falls into the category of five specified persons who have

a right of general lien without the existence of an express contract

(as there was no contract of bailment in this case; Held: S 171 has

two parts. Part I refers to five categories that have a statutory right

of general lien, in the absence of a contract to the contrary; Part II

refers to any other person not in part I, who do not have a statutory

right under S 171; Court, through an analysis of fact and law, holds

that A has the statutory right of general lien, as they fall under the

category of wharfingers)

42.

S. 172 - 176 - Central Bank of India v Siriguppa Sugars and

Chemicals Limited and Others (Pledge) (Rights of the pawnee to

acquire sale proceeds over the rights of any unsecured creditors;

Both the Cane Commissioner and the workmen in the absence of a liquidation, stand

only as unsecured creditors and their rights cannot prevail over the rights of the

pawnee of the goods. The appellant as the pawnee, is entitled to the amount in

the sale proceeds towards the debt due and only if there is surplus, to make it

available for disbursal to the Cane Commissioner and to the Labour Commissioner.)

43.

S. 172 - 176 - Karnataka Pawnbrokers' Association and Others

v State of Karnataka and Others (Pledge) (Right of the

pawnee/plegdee to sell goods on default of pawner; Question of

whether sales tax is to be imposed on the pawnee of the auctioner

of resale of unredeemed goods. Held: Pawnee has special property

right over pawnor’s goods. Pawnee falls under “dealer”, and

conducts “business”.

The act (of selling goods) incidental and ancillary to the

main business will also come under the definition of ‘business’ under the sale tax Act)

44.

S. 172 - 176 - Lallan Prasad v Rahmat Ali and Another (Pledge)

(Aero scraps; Whether a plegdee can sue for debt given that he

denies the pledge (which, on facts was found to have taken place)

and he is not in a position to return said goods. Held: But if he sues

on the debt denying the pledge, and it is found that he was

given possession of the goods pledged and had retained the

same, the pawner has the right to redeem the goods so

pledged by payment of the debt. If the pawnee is not in a

position to redeliver the goods he cannot have both the

payment of the debt and also the goods. Ingredients of a valid

pledge: (1) that it is essential to the contract of pawn that the

property pledged should be actually or constructively

delivered to the pawnee and; (2) a pawnee has only a special

property in the pledge but the general property therein

remains in the pawner and wholly reverts to him on discharge

of the debt.

45.

S. 178 - 178A - The Official Assignee of Madras v The

Mercantile Bank of India (Mercantile Agent)

46.

S. 178 - 178A - Morvi Mercantile Bank Limited and Another v

Union of India, Through The General Manager, Central Railway,

Bombay (Mercantile Agent)

47.

S. 182 - Loon Karan Sohan Lal v Firm John and Co. and Others

(Agency) (Difference between a person employed to do an act for

another, and a person employed to do at act at the bidding of the

other. Loon not agent, as the actual relationship is looked at, and

not the terms of the contract)

48.

S. 182 - Lakshminarayan Ram Gopaland Son v The

Government Of Hyderabad (Agency) (Appellants were agents of the

government; Whether remuneration given by the government to the

app. Is taxable (ie whether agent ran a business or not; whether

app. Was servant or agent; Held: Difference between agent and

servant: An agent is just given direction regarding the nature of work, the

manner of doing it is his discretion, has authority to enter into contracts. Independent

contractor: only undertakes to provide a specified result; Held, app. Were agents; Did

not carry out a business (trade, commerce of manufacture), rather simple received a

commission, not taxable)

49.

S. 182 - Kuchwar Lime And Stone Co v MS. Dehri Rohtas Light

Railway (Agency) (Authority of an agent can be implied, and a

contract for agency is not required. Colliery, by sanction for the coal

commissioner, acted as agent of the co. whose actios were binding.

Liable for demmurrage although delivery of goods did not take

place, as goods stored for the benefit of the co. Once Compnay

refused to take delivery, Railway was to act as bailee of the goods,

but only for a reasonable time, after which they must sell said

goods. Co. not liable for 200 days, only liable for a reasonable period

of a month)

50.

S. 185 - Mohd. Moinuddin v Mir Ahmed Ali (Agency) (Plaintiff

represents def. in suits, then sues for remuneration as consideration

for agreement to represent. Held: S 185 does not mean that P

cannot sue D for the amount owed, merely states that consideration

is not required for a contract of agency, does not stop the agent

from claiming remuneration/commission for work done)

51.

S. 186, 237 - Harshad J. Shah and Another v L.I.C. of India and

Others (Case for LIC; Two types of authority: (1) Actual: a manifestation

of consent that he should represent or act for the principal made by the principal to the

agent himself ; Can be express (writing) or implied (by law or conduct or

circumstanes of the case); (i) Incidental (ii) Usual (iii) Customary

authority. (2) Apparent Authority: a manifestation made by the principal to

third parties.It is the authority of an agent as it appears to others. S 237; Held:

The court holds that the mere fact that LIC accepted the premium cannot be

regarded as proof for inducing the policy holders into believing that the agents have authority to do so

.)

52.

S. 186 – Chairman, Life Insurance Corporation and Others v

Rajiv Kumar Bhaskar (Agency)

53.

S. 189 - Shanti Lal and Another v Tara Chand Madan Gopal

(Agency, Agent’s authority in emergency) (R had a commission

agency shop, bought grains for A, destroyed by flood. Whether R

can be reimbursed by A; Application of S 151, 152, 189, 214; Held: R

was not careless, complied with S 151, 152 (Duty of care of a

bailee); In case of emergency, bailee has the authority to act as

agent under S 189 and S 214; Held in this case that R complied with

all above sections and did not breach any duty of care; Judgment for

R)

54.

S. 190, 194(direct application) - De Bussche v Alt (Sub

Agency) (P gives a ship to be sold to a company who, with the

EXPRESS authority of the principal (P), appoints D as the

sub-agent/substitued agent. D must sell the ship for 90,000 cash only,

but instead buys it himself, then sells for a profit. Issue: Whether D

is liable to P as an agent, for derivation of profits, being a sub-agent;

If this authority is exercised, privity arises between the principal and the sub-agent. The latter becomes responsible to the principal as if the principal himself had appointed him his agent. When the agreement for resale of the ship was concluded, the defendant was still an agent of the plaintiff. Therefore, the plaintiff had a right to the benefits accrued from the sale transaction)

55.

S. 190 - 194 - Nensukhdas Shivnaraen v Birdichand Anraj (Sub

Agency)

56.

S. 196 - Bolton Partners v Lambert (Ratification of Agency) (D

withdrew offer before ratification of the agent’s unauthorised act of

acceptance of sale of goods;

It was held that the principle of ratification had a retrospective effect and therefore the contract would have been complete on the day the agent accepted on behalf of the company. Exceptions to Ratification: (1) Where a vested estate is divested; (2) Where there has been forgery; (3) Where the ratification is after the time when the act could be done.Doctrine of ratification- “when a principal on whose behalf a contract has been made, though it may be made in the first instance

without his authority, adopts it and ratifies it, then, whether the contract is one which is for his benefit and which he is enforcing, or which is sought to be enforced against him, the ratification is referred to the date of the original contract, and the contract becomes as from its inception as binding on him as if he had been originally a party”)

57.

S. 196 - Keighley Maxsted & Co v Durant (t/a Bryan Durant &

Co) (Ratification of Agency) (Agent(Corn merchant) entered into a

contract (Buying of corn at a higher price than agreed upon) with D

in his own name/his own interest with no intention to do otherwise

given to the D. Ratification is not possible by P as they were third

parties to a contrcat already formed.

The question which arises on this state of the facts is whether, where a person who has made a contract for himself without a suggestion that he is acting to any extent for another (an undisclosed principal), and without any authority to act for another, can bind a third party as principal the person with whom he contracted, by the fact that in his own mind merely he made a contract in the hope and expectation that his contract would be ratified or shared by the person as to whom he entertained that hope and expectation. The Court held that he could not. )

58.

S. 201 - Monindra Lal Chatterjee v Hari Pada (Revocation of

Agency, formation of new agency with legal representatives)

(Plaintiff is suing the defendant for accounts, primary contention

being that the suit is barred by limitation due to the death of one

principal. Held:

The agency of defendant 1 under Guru Pada and Hari Pada was a separate agency. The properties which defendant 1 was to manage were no doubt the same, viz., the joint properties of Gokul Mohini and Guru Pada and Hari Pada, but the defendant was the agent of two sets of principals appointed at different times and by different acts. When Guru Pada dies, that specific agency was severed, while the other one with Hari Pada continued (he failed to show that they were jont principals, and not joint and several principals); A new agency was enetered into by the son of Guru Pada with the defendant, and as three years had elapsed since the formation of this agency, the claim for accounts by the son is barred by limitation. Hari Pada can still claim accounts as the agency is

substisting)

59.

S. 202 - Ishwarappa v Arunkumar (Irrevocable Agency) (A

claims to be personally liable for the contruction of R’s house, thus

claims agency cannot be termination until A is reimbursed. Whether

the power of attorny granted to A is one of general agency or of the

type uner S 202 (with a self-interest); Held: A is unable to establish

via facts, the personal liablity he claimed to have incurred. The

power of attorny granted does not give him authority to become

personally laible; For power of attorny to fall uner S 202, the suit

property must be given as security for person liablity, this was not

the case; Appeal dismissed, R (Principal) wins)

60.

S. 205 - Boulton Brothers and Company Limited, (India) v New

Victoria Mills Company Limited, Cawnpore (Revocation of Agency-

sufficient cause)

61.

S. 205 - Drew v Nunn (Revocation of Agency) (D acts as

principal, and held out his wife as his agent, having full authority to

contract with P; D goes insane, notice of the same is not given to P

(a prior creditor) W contracts with P; Is authority revoked on the

principal’s insanity – Yes,

In the present case a great change had occurred in the condition of the principal: he was so far afflicted with insanity as to be

disabled from acting for himself; therefore his wife, who was his agent, could no longer act for him. Thus, anyone to whom D himself had not held out W as agent, could only sue the agent for wrongful act, and not D; However, the defendant, by holding out his wife as agent, entered into a contract with the plaintiff that she had authority to act upon his behalf, and that until the plaintiff had notice that this authority was revoked he was entitled to act upon the defendant's

representations, and sue D for amount.)

62.

S. 212 - Pannalal Jankidas v Mohanlal and Another (Negligence

of the Agent) (Go down-explosion-government ordinance-distinction

between insured and uninsured; Majority: Agents were negligent,

breach of duty, Mohanlal wins; Diss: Too many intervening acts

(ordinace), chain of causation broken)

63.

S. 213 - Narandas Morardas Gaziwala and Others v S. P. Am.

Papammal and Another (R (Agent) sues A for accounts; Issue:

Whether the agent can sue the principal for accounts; Held: Under

equity, agent can sue for accounts, although there is no statutory

right conferring the same.

There may be special circumstances

rendering it equitable that the principal should account to the agent. Such a case may arise when all the accounts are in the possession of the

Principal and the agent does not possess accounts to enable him to determine his claim for commission against his principal. The right of the agent may also arise in an exceptional case when his remuneration

depends on the extent of dealings which are not known to him or where he cannot be aware of the extent of the amount due to him unless the

accounts of his principal are gone into.)

64.

S. 215 - Gopaldas v Thakurdas (Agent Lien) ( D agent of P,

invested their own money to buy goods for P; P did not pay the

balance due, so D sold, without notice, P’s goods. Issue: Extent of

agent’s lien; Held : General rule: Agent has only right of retention,

not sale; However, when agent in vests his own money, he acts as

tacit pawnee and thus can sell the goods to claim his dues, but only

after reasonable notice to the principal (akin to plegde); P entitled to

loss sustained by D’s sale, as the agent wrongfully sold said goods

(in excess of their authority) without any notice)

65.

S. 230 - Patiram Banerjee v Kankinarra Company Limited and

Another (Undisclosed Principal) (Facts: Plaitiff contracted to buy

goods from X (apparently their principals) for the defendant. P gives

a bought note for the same; Failure to make payment or delivery;

Issue: Whether this is a case ruled by S 230 of the ICA, or is P

merely a broker/intermediary of D; Held: Now there is, I think, a material

difference between the words sold for you to my principals' and 'bought of you for my

principals'. The rule of law, no doubt, is that, if the principal is undisclosed, the broker

saying 'bought of you for my principals' is himself liable; but this contract says 'sold

for you to my principals, i.e., I, your broker, have made a contract for my principals,

the buyers.'I have already pointed out that the note in this case is in the 2nd of these

two forms, and, on its true construction, I hold that the plaintiff was no more than an

intermediary, and was not an agent for sale, to whom the provisions of S. 230 of the

Contract Act

applies, so as to make him liable as an agent who has not disclosed his

principal's name.)

INDIAN PARTNERSHIP ACT

1. S. 4 - Santiranjan Das Gupta v Dasuram Murzamull (Pliantiff owned a

mill, defendant wanted to use said mill for his paddy. Issue: Was there a

partnership. Held: No partnership as only oral evidence with no

factual/written/documental (common account) present; Lack of mutual

agency; No record of terms and conditions; S 4 and 6 must be complied

with to amount to a partnership. Not done so here.)

2. S. 4 - Champaran Cane Concern v State of Bihar and Another (Issue:

Whether the Cane Concern was a co-ownership for income tax

puposes. Points of difference between co-ownership and partnership:

Agreement, sharing of profits, transfer of interest (partnership-only

with the consent of the other partners), mutual agency)

3. S. 4 - Deputy Commissioner of Sales Tax (Law), Board of v K. Kelukutty

4. S. 6 - Govindan ‘Tea Kadai’ Nair v Nagabhushanammal and Another

(Plaitiff bought a tea shop, with defendant paying half the price

amount; Leased out, sharing of profits Issue: Co-ownership or

partnership; Whether the City Civil Court had the required jurisdiction

(would be present if there is a partnership). Held: Mere sharing of

profits/return from property held by persons with a common interest

would not make them partners; No business was carried out; Essentials

under S 6 and S 4 lacking)

5. S. 7 - Karumuthu Thiagarajan Chettiar and Another v E M Muthapp

Chettiar (Managing agency to run Mills for a period of four years, in

rotation. Sole business was management of mills; business was to pass

to heirs. Issues: Was this a partnership at will? Was there fraud on part

of the defendant who had purchased shares of one Mill and was now in

a controlling position. Held: Duration was implied, though uncertain

(Rotation, passes to heirs); Failing which, determination was defnitely

provided for – termination of the agency led to termination of the

partnership; No fraud- no agreement to not buy shares. Defendant had

two capacities: that of a partner and shareholder)

6. S 13(c). Bhagchand v. Kaluram (Ratio: S 13(c) is applicable unless there

is a contract to the contrary, which is not so in this case. The deep

provides for interest on the capital to a partner which means that the

plaitiffs are entilted to interest on the capital, but said unterest is only

payable out of the profits, as laid down in S 13(c), in the absence of a

contract to the contrary)

7. S. 14 - Ganpati Salt Works and Another Etc. v State of Gujarat and

Another

8. S. 14 - Ved Gupta v Apsara Theatres (Facts: Ved Gupta procured a

license for the running of a Cinema in his name; Entered into

partnership with 11 other people to run Apsara Theaters; Was expelled

from the partnership; Surviving partner filed petition to state that the

license was partnership property, and hence Apsara Theters could still

screen films; Issue: Was the license personal or partnership property?

Held: License was granted to Ved Gupta in his sole capacity; Was not

incorporated into the firm, according to facts and circumstances)

9. S. 14 - Addanki Narayanappa and Another v Bhaskara Krishtappa and

13 Others (Members of two HUF form a partnership; Members of one

family files for dissolution, but the other family claim dissolution has

already taken place by an unregistered document which noted the

relinquishment of interest in certain firm assets (immovable property)

by the other family members. Issue: Do documents dealing with

relinquishment of interests w.r.t immovable property of the firm need to

be registered? (Status of immovable and moveable property under firm

property) Held: Document merely represented that the partnership

came to an end. The interest of a partner in partnership assets

comprising of movable as well as immovable property should be

treated only as movable property.)

10.

S. 14 - Boda Narayana Murthy and Sons v Valluri Venkata Suguna

and Others (Mortgagor (Boda) took a mortgage on a property where a

firm of which he was partner screened movies in Minerva Theaters.

Petitioner wants to obtain a mortgage decree against the firm, but this

is possible only if said property is partnership property u/S. 14; Issue: Is

the aforementioned property that of the firm? Held: Firms can use

property owned by others for the purpose of business; The status of

any property depends of the agreement between partners; The

partners co-owned the property in different shares when compared to

their interests in the firm (This goes against the principle that this was

firm property); No evidence to support the proposition that said

property fell within S 14)

11.

S. 4 and S 6 - S. K. Parthasarathy Naidu and Another v K. Rama

Naidu and Others (Conflict between three persons as to whether there

exists a relationship of partnership or debtor-creditor. Documents

signed that gave capital of Rs. 1 L each to the respondent (R), with

sharing of certain profits agreed upon. Held: Intention of the parties

must be looked at to determine whether a partnership existed or not;

Sharing of profits is not the only criterion for formation of a partnership;

Three ingredients: (i) Agreement (ii) Sharing of profits (iii) Mutual

agency; Here, (i) and (iii) were missing; Relationship= to that of

debtor-creditor)

12.

S. 15 - Deoraj Divanchand Verma v State (Facts:Applicant convicted

for violation of certain rules; Acknowlegdes that he is parter of shop in

question. Issue related to whether or not applicant fell within the

definition of “employer” under the Central Provinces Act; Held: The

concept of agency is inbuilt within the IPA i.e. Partner acts as agent of

the firm in firm business (S 18); Also, u/S 15, a partner is owner of firm

assets)

13.

S. 16 & 17 - Devilal Jaiswal and Another v Vidarbha Bottlers Private

Limited and Others

14.

S. 11(2),9 - Novartis Vaccines & Diagnostics Inc., United States of

America v Aventis Pharma Limited (Rights and Duties of a Partner)

(Facts: NV and AP enter into a JVA agreement; AP sells competing

anti-rabies drugs; Issue: Was this in contravention of the JVA; Held:

Contruction of partnership deeds must be done as a whole, in its

entirity; Four canons of construction for commercial documents:

ordinary, businesslike, commercial object, Avoid unreasonable

outcome; S 11(2): validity of negative covenant. RATIO: Just because

there is no negative covenant restricting sale does not mean said sale

is allowed by the agreement; Partners have an obligation and duty to

act in good faith, for the benefit of the company (S 9)).

15.

S. 19 - Prabhakar Traders v Veejay Traders and Others (Implied

Authority) (Plaintiff claims the defendant firm purchased paddy on

credit; One partner accepts the same AFTER the suit is filed; Issue:

Whether the admission of this partner can bind the firm; Held: S 19

limits the scope of implied authority; This case falls within S 19 (2) (e),

where a partner is restricted from making any admissions regarding a

pending suit w.r.t. the firm; Distinction must be recognised between S

19 and S 23; Also, the partner cannot be held liable either as his

admission was neither clear nor categorical)

16.

S. 28, S 32 (Proviso) - Tower Cabinet Co v Ingram (Holding Out)

(Ingran and Christmas enter into a partnership; Ingram retires, issues a

notice to the banks; C uses notpaper with both their names for an order

given to Tower Cabinet; T did not know I was a partner, found out after

I’s retirement; Suing for holding out. Issue: Whether I “knowingly

allowed himself to be represented” i.e. Whether I was “holding himself

out”. Held: Use of old notepaper did not amount to I “knowingly

representing himself as a partner”; Client needs to know about the

status of partner before retirement thereof.)

17.

S. 28 - Scarf v Jardine (Holding Out) (Scarf and Rogers were

partners, Scarf retired, and was replaced by Beech; Jardine sold goods

to the new firm, as he did to the old firm, without notice of the change;

On non-payment, Jardine sued B and R, and when they became

insolvent, he filed a suit to sue S, B and R jointly liable; Issue: Can S, B

and R be held jointly liable? If not, was there election as to whom to

hold accountable? Held: The principle of estoppel applies, whereby J

can sue either S and R (estoppel/holding out) OR R and B (on

fact). He cannot sue all three as they are not jointly liable; By suing B

and R first, he has made his election and cannot now sue S; Novation?)

18.

S. 25, 28, 32 - Ms. Glorious Plastics Ltd. v (1) Laghate Enterprises

and Others, (2) Andvilal Doshi and Others (Holding Out) (Bills of

exchange drawn on the plaitiff; on non-payment plaitiff sues the firm

and one retired partner under S 25, or under S 28; Issue: Do S 25, S 28,

S 32 proviso apply? Held: S 25 applies ONLY to acts done when said

person was partner of the firm; here, said transaction was done after

the partner retired thus S 25 does not apply; Applicability of S 28: (i)

representation (ii) reasonable belief in rep. (iii) Reliance amd faith on

rep.; here, the plaintiff did not even know of the existence of said

partner; Also, the proviso of S 32 applies: lack of knowledge)

19.

S. 29 - Mangilal v Bhanwarlal and Others (Rights of transferee of a

partner’s interest; Facts: Assignee sued for accounts claiming the firm

that dealt with cotton was dissolved. Issue: Whether said firm was

dissolved. Held: Dissolution can be express or implied. Implication of

dissolution cannot be determined by mere closure of business, lack og

interest of partners, vacating of shop, discharge of servants. Intention

has to be determined. Found that evidence was lacking to prove

dissolution; assignee was suing for accounts in an undissolved firm-

under S 29, claim fails. Ratio: Assignee can sue for accounts ONLY

in a dissolved firm)

20.

S. 30 - Narayan Prasad Vijaivargiya v Commissioner of Income Tax,

West Bengal (Minor as a Partner) (The assessee-firm filed a suit again

the Income Tax Officer as the latter refused to renew the registration of

said firm on the basis that Mohanla (a minor) was treated as a

full-fledged partner in contravence with the IPA. Issue: Status of Mohanlal,

the minor. Held: The partnership deed expressly stated that the adult

partners intend to give the benefits of the partnership to said minor,

and when calling the minor a partner, included that “partner” included

those deriving only benefits from the firm; The objective of the deed

must be looked at in its entirity, and such intention shows that S 30 has

been complied with)

21.

S. 30 - Income Tax Officer v Messrs Sureshchand Rameshchand

(Minor as a Partner) (Difference between accounting and assessing

year; 3 major partners + 2 minors formed a partnership. Income Tax

Officer refused to grant registration of the firm for the assessing year of

1971-72, ‘72-73 as they claimed Sureshchand gained majority during

1970-71 as he also signed the application form; Issue: Applicability of S

30(6); Held: S turns 18 on May 4

th

_{, ’71 after the close of the accounting}

year for 1970-71, thus registration for 1971-72 must be granted; S

30(6) allows 6 months to pass before declaring whether said minor

joins or leaves the partnership; this period had not expired by the time

the accounting year 1971-72 had closed. Thus authorities should have

granted registration for assessment year ’72-73 as well.)

22.

S. 30 - The Commissioner of Income tax, Bombay - Messrs

Dwarkadas Khetan and Co. (Minor as a Partner) (Khetan entered into a

contract with four other people, one of whom was a minor; The deed

provided that said minor was a full-fledged partner with managing

ability and sharing of losses. Issue: Whether the commissioner can

interpret the deed as merely a beneficiary and thus alter the deed;

Held: Above cannot be done as the commissioner does nort have the

power to register a firm different from that of the intention of parties.

Deed invalid, registration not granted)

23.

S. 30(7) - B. Anandkumar and Co. and others v Southern

Petrochemicals Industries Corporation Limited, Represented by its

Secretary (Minor as a Partner) (Plaintiff, seller of fertilizer, sues the

defendant, a partnership firm. Two members retired, a minor elected to

be a partner, suit against last aforementioned partner filed four years

late. Issue: Can the retired partners and the minor who elected to be a

partner be held liable? RATIO: Retired partners liable only for those

transactions that occurred while they were partners; Minor, u/S 30(7)

liable retrospectively (i.e. S 31 is subject to the provisions of S 30(7))

but suit was barred by limitation)

24.

S. 30 - Venkideswara Prabhu Ravindranatha Prabhu v Surendranatha

Prabhu Sudhakara Prabhu and Others (Minor as a Partner) (Partnership

formed out of a joint family for retention of a provision store. One minor

elects to be a full-fledged partner, and one partitions his interest in the

property in favour of three others. Issue: Do the last three persons

mentioned become partners by virtue of being part of the Hindu Joint

Family; transferees by virtue of S. 29 due to execution of the partition;

beneficiaries under S 30. Held: HUF does not mean partnership, cannot

be a partner by birth/status; Partition does not fall under transfer of

interest as given in S 29;To be a beneficiary, two conditions must be

satisfied: (i)Proof of Consent of all partners and (ii) Agreement between

minor and partner, both of which are herein lacking) Partnership

dealing with the concept of sub-partnership (S 29)

25.

S. 31 - Meenakshi Achi and Another v P. S. M. Subramanian Chettiar

and Others ( Partnership of which one partner dies and his widow is

said to be partner by the plaintiff, a creditor. M tries to deny being a

partenr to avoid liability wrt to payment of debts to P. Issue: Whether M