Mollwo, March and Company, - Appellants; The Court of Wards, - Respondent
| Jurisdiction | UK Non-devolved |
| Judgment Date | 06 July 1872 |
| Date | 06 July 1872 |
| Court | Privy Council |
English Reports Citation: 17 E.R. 495
ON APPEAL FROM THE HIGH COURT AT FORT WILLIAM, IN BENGAL.
Mews' Dig. tit. India, 3. Legal Decisions; tit. Partnership, I. The Contract of Partnership, 1. What constitutes, c. Participation in Profit and Loss, d. Loans repayable out of profits. S.C. L.R. 4 P.C. 419. See Ross v. Parkyns, 1875, L.R. 20 Eq. 335; Pooley v. Driver, 1876, 5 Ch.D. 460; Ex parte Tennant, 1877, 6 Ch. D. 310; Frowde v. Williams, 1886, 56 L.J. Q.B. 65; Badeley v. Consolidated Bank, 1886, 88, 34 Ch.D. 552; 38 Ch.D. 246; Adam v. Newbigging, 1888, 13 A.C. 316; Gosling v. Gaskell (1897), A.C. 585, 595. See Indian Contract Act, 1872 (Act IX of 1872), Chapter XI. Cf. Partnership Act, 1890 (53 and 54 Vict., c. 39), s. 2. See also note to Cox v. Hickman, 1860, 8 H.L.C. 268; 11 E.R. H.L. 431.
ON APPEAL FROM THE HIGH COURT AT FORT WILLIAM, IN BENGAL. MOLLWO, MARCH AND CO.,-Appellants; THE COURT OF WARDS,- Respondent * [July 4, 5, 6, 1872]. Agreement in writing entered into between W. and Co., British Merchants, carrying on business at Calcutta with a Hindoo Rajah, by which, in consideration of moneys already advanced, and which might be thereafter advanced by the Rajah to them, they agreed to carry on the business subject to the control of the Rajah in several particulars; stipulating that the Rajah should receive a commission of twenty per cent on all profits made by the Firm, until the whole amount of the debt due to him should be paid off, with twelve per cent interest upon all cash advances which had been, or might be thereafter, made by him to the Firm. Further advances having been made by the Rajah to the Firm, W. and Co. executed to him a mortgage of certain Tea plantations, to secure the then amount of his advances, and the Rajah by a Deed released his right to commission and interest under the original agreement between them. No proceeds of the business were ever received by the Rajah, and though he was credited in the Books of the Firm with a considerable sum, that sum was never received by him, and was afterwards written back in the Books of the Firm. The Rajah did not interfere or exercise any such control in the business as to make him an ostensible Partner in the Firm :-Held, that having regard to the restrictions and modifications made of late in the rule of law formerly prevailing, that participation in the net proceeds of a business made the Participant liable as a Partner to third parties, and looking at the whole scope of the Agreement, the primary object was to .give security to the Rajah as a Creditor of the Firm of W. and Co., and that the participation given him in the net profits of the business was not sufficient to establish a partnership between W. and Co. and the Rajah as regarded third parties. Although a right to participate in the profits of a Trade is a strong test of partnership, and there may be cases where, from such perception alone, it may as a presumption, not of law, but of fact, be enforced; yet, whether that relation does or does not exist, must depend on the real intention and contract of the parties [9 Moo. P.C. (N.S.), 236]. The cases of Cox v. Hic&man (8 H.L.C. 268), and Sullen v. Sharp (Law Rep. 1 C.P. 86), referred to and acted on. In the absence of any law or established custom existing in India in respect to partnership transactions, the law of England is to be resorted to for principles and rules to guide the Courts. At the same time the usages of trade, and habits of business of the Indian community, so far as they may be peculiar or differ from those in England, are to be taken into consideration [9 Moo. P.C. (N.S.), 233]. This was an appeal from a judgment of the High Court at Fort William, in Bengal, in favour of the Respondents, reversing the decree of the Principal [215] Sudder Ameen of the 24 Pergunnahs made in favour of the Appellants. The suit was brought by the Appellants, who were Merchants trading in London, against Rajah Pertab Chunder Sing, Bahadoor, as being jointly liable with the other persons trading as Merchants under the style of Watson and Co., in Calcutta, in respect of the moneys due to the Appellants in certain transactions and dealings * Present: Sir James William Colvile, Sir Barnes Peacock, Sir Montague Edward Smith, and Sir Robert Porrett Collier. 495 IX MOOUE N.S., 216 MOLLWO V. COURT OF WARDS [1872] hereinafter mentioned. The Kajah having died after the commencement of the proceedings, the defence of the suit was continued on behalf of his representatives by the Court of Wards, the Respondents in the appeal. [216] The Appellants, before the transactions under which the suit arose, had carried on business as Merchants in London, and had had mutual dealings in trade with the Firm of W. N. Watson and Co., of Calcutta. The dealings consisted in the Plaintiffs' Firm and the Firm of W. N. Watson and Co., mutually consigning goods and merchandize to each other for sale, and in the Firm of W. N. Watson and Co., drawing Bills of Exchange on the Appellants against the goods so consigned by them, which were paid by the Appellants in London, and in paying moneys on each others' account in the usual course of Merchants in correspondence with each other. On the 19th of June, 1865, there was due to the Appellants from the Firm of W. N. Watson and Co. a balance of Rs. 2,92,000. 2p. on the account current between the two Firms. The business transactions between the two Firms were conducted under the partnership names, but the real question at issue between the parties was, whether or not the Kajah was jointly liable as a Partner with W. N. Watson and T. 0. Watson, who were admitted to have been the Partners in the Firm of W. N. Watson and Co., to pay the balance claimed, or any part thereof. The issues in the suit, as settled by the Officiating Judge of the Court of the 24 Pergunnahs, were: First, whether the Plaintiffs had dealings with the Firm of W. N. Watson and Co., and what was the balance due to the Plaintiffs on such dealings and transactions from that Firm. Second, whether the Rajah, the then Defendant, was liable to the Plaintiffs as a Partner of the Firm of W. N. Watson and Co.; and if so, for what time? Third, being held to be a Partner, for [217] what amount was the Defendant liable? whether for the whole, or only for a portion? The Judge thought it more expedient to try the second issue first, and this course was accordingly pursued. On the 30th of November, 1866, Mr. J. Beaufort, the Judge of the Court of the 24 Pergunnahs, by his judgment on this issue, found that the Rajah was a Partner of the Firm of Watson and Co., and that his liability commenced on the 27th of August, 1863, and ceased on the 3rd of March, 1865. The other issues were subsequently tried, and by his judgment, dated the 10th of September, 1868, he found that the Appellants were entitled to recover in respect of all the items in the account current except two, which he disallowed for reasons stated in his judgment. From this judgment an appeal was brought to the High Court of Judicature of Bengal, and a Division Bench, consisting of the Justices Jackson and Markby, reversed the judgment of the Court of the 24 Pergunnahs, holding that the Rajah was not liable as a Partner, or otherwise, to the Appellants for the balance or any part thereof; and from this judgment the present appeal was brought. The circumstances under which the Appellants contended that the Rajah was liable were as follows: - T. 0. Watson and his Son, W. N. Watson, commenced trading in partnership in February, 1862, under the style of W. N. Watson and Co. They had but little capital, and finding themselves in want of money, applied to the Rajah to assist them. He assisted them during the year 1862 by acceptances, which the Watsons did not meet or provide for, and [218] the Rajah took them up, and was induced to advance further large sums of money. In January, 1863, he retired an acceptance of Rs. 10,000, and others in the following March to the extent of Rs. 50,000. In April in that year he advanced Rs. 10,000 to the Firm, and in the following August Rs. 20,000. The business was, in fact, carried on mainly by the Rajah's capital. On the 27th of August, 1863, an Agreement, in the following terms, was made between the Watsons and the Rajah, although not signed by the Rajah: "Memorandum of Agreement made between Rajah Pertab Chunder Sing, Bahadoor, of Pykeparrah, in the suburbs of Calcutta, of the one part, and Messrs. W. N. Watson and Co., of Calcutta, Merchants, of the other part. " In consideration of certain sums of money already advanced, and which may 496 MOLLWO V. COURT OF WARDS [1872] IX MOORE N.S., 219 hereafter be advanced by the Rajah to Messrs. W. N. Watson and Co., and in consideration of his signing acceptances and other securities for the said W. N. Watson and Co., it is hereby agreed as follows: - " 1st. Henceforth the said W. N. Watson and Co. shall not make any shipment without first obtaining the consent of Eajah Pertab Chunder Sing, so long as the said Firm shall remain in debt to the Rajah, and so long as the liabilities incurred by him in signing acceptances for the Firm, or any portion thereof, shall be in existence. " 2nd. Upon such shipments being made, the shipping documents shall be considered at the disposal of the said Rajah Pertab Chunder Sing, and that the said Firm shall not without his consent sell, pledge, or hypothecate them to any person or Bank, [219] nor shall the Firm apply the proceeds thereof in payment of goods shipped without such consent. " 3rd. Remittances from home in the shape of goods will not be ordered by the Firm without the consent of the Rajah. " 4th. No consignment of goods shall be ordered from home by the Firm without the consent of the Rajah in writing. " 5th. All remittances received by the Firm from...
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