P L D 1974 Karachi 411 (PLP)

(2) Whether the defendant was bound to pay the amounts covered by fixed deposit receipts Nos. 36 and 37 to the plaintiff without his pro ducing the proper release documents and/or permissions from the heirs of late Khawaja Abdul Shakoor? (3) Whether there was no agreement between the plaintiff's late partner ship firm, Messrs Continental Cycle & Motor Company and defen dant for payment of the amounts covered by the fixed deposit receipts to the partners jointly or to the survivor of them? If so, to what effect? (4) Whether the defendant unlawfully and without justification refused to pay to the plaintiff the amount of fixed deposit receipts Nos. 36 and 37? (5) Whether the plaintiff has suffered any loss? (6) Whether the plaintiff is entitled to any damages? If so at what rate ?

8. The plaintiff alone was examined in the case. No one was examined on behalf of the Bank but the correspondence exchanged between the parties was exhibited by consent.

9. Issues Nos. 1, 2 and 4.‑These issues may be conveniently discussed together. Mr. Mohsin Tayyab Ali, learned counsel for the plaintiff, submitted that upon the dissolution of the partnership by the death of Khawaja Abdul Shakoor, the plaintiff was exclusively entitled to receive the amount of the F. D. receipt and the Bank was bound to pay the same to the plaintiff without demanding succession certificate and/or permission from the heirs of the deceased partner. He relied on section 47 of the Partnership Act, 1932 the first part of which reads as follows: "After the dissolution of a firm the authority of each partner to bind the firm, and the other mutual rights and obligations of the partners, continue notwithstanding the dissolution so, far as may be necessary to wind up the affairs of the firm and to complete transac tions begun but unfinished at the time of the dissolution, but not otherwise." His submissions are that the plaintiff, as surviving partner, continued to have the authority to recover debts due to the partnership firm from third parties, notwithstanding the dissolution of the partnership by the death of his partner in so far as it is necessary to wind up the affairs of the firm. That, the instructions of the plaintiff issued to the Bank in his letter dated 3‑4‑1958 (Exh. 71) to encash one F. D. receipt and renew the other, was a transaction necessary for the purposes of the winding up of the partnership business. That, in fact, it is not only the right but also the duty of a surviving partner to realise the assets for the purpose of winding up the affairs of the partner ship. That, as the mutual rights and obligations of the partners continue not with sanding the dissolution, a partner has the right and the implied authority under section 19 of the Partnership Act to recover a debt owed to the firm and payment by the debtor to any one of the partners discharges the debter. Therefore, the submission is that had the Bank complied with his instructions, the plaintiff could have given a good discharge to the Bank. He referred to Lindley "On the Law of Partnership, 12th Edition (1962), page

260. The learned Author, while commenting on the corresponding identical section 38 of the English Partnership Act, 1890, observed: "Notwithstanding a dissolution each partner can pay, or receive payment of, a partnership debt; for it is clearly settled that payment by one of several joint debts, or one of several joint creditors, extinguishes the debt irrespectively of any question of partnership. So again, it has been held that a continuing or surviving partner . . . . can withdraw a deposit or sell the partner ship assets, or pledge them for the purpose of completing a transaction already commenced, or of securing a debt already incurred or the overdraft on the partnership current account at the bank". The authority to withdraw a deposit referred to by Lindley, underlined in the above cited passage, is based on a decision in Dickson v. National Bank of Scotland ((1917) S C (H L) 50). This case has also been referred to, as an authority on the point by Halsbury's Laws of England, 3rd Edition, Volume 28, Art. 1122, p. 574 which states "and any person may, it seems, after dissolution, withdraw money on deposit with a bank, or receive a debt and give a release .". The learned counsel also referred to In re: Bourne ((1906) 2 Ch. 427) a decision of the Court of Appeal. In that case, a surviving partner carried on the business in the partnership name and continued the partnership banking account which was overdrawn at the death of the deceased partner and remained so withdrawn until the final winding up of the business. After paying certain moneys into this account and drawing certain moneys out, he deposited with the bank the title deeds of certain partnership property to secure the overdraft. It was held that in the absence of evidence to the contrary the bank was entitled to assume that the dealings with the account were for the purposes of winding up the partnership and its mortgage was a valid security and took priority over the lien of the executors of the deceased partner on the surplus assets for his share in the partnership. He also referred to Motilal Chimanram and another v. Sarup Chand Prithiraj and others (A I R 1937 Bom. 81). In that case, the question was whether a partner of dissolved firm can transfer a debt owing to a firm to another person. It was held that it is not a necessary act in the winding up of a dissolved firm for a partner to create a `novatio' in respect of a debt owing to the firm, because that is not recovering a debt, but really continuing it through somebody else as the debtor. With regard to the continuing authority of a partner for purposes of winding up, it was observed that although the dissolution of a firm causes a dissolution of the partner A ship between the partners, the partnership still subsists, but merely for the purpose of winding up its business and adjusting the rights of the partners inter se and, for this purpose, the authority of the partners to bind the firm and all their other mutual rights and obligations continue notwithstanding the dissolution. Wadia, J. observed: "It has been held that if a debt is owing to a firm, payment by the debtor to any one of the partners extinguishes the claim of all the partners and discharges the debtor, even though a particular partner or a third person is appointed to collect the debts owing to the firm, and whether the debtor is aware of such appointment or not. Any partner of a dissolved firm can therefore recover payment of a debt due to the firm. He can effectually release the debtor and also give a valid receipt for the debt. But neither the release nor the receipt will be binding on his co‑partners if the receipt is given, or the releasing partner acts in fraud of his co‑partners and in collusion with the debtor.‑Farrar v. Hutchinson (1839) 9 Ad. & E 641, Henderson 8r Smith v. Wild (1811) 2 Camp 561 and Palaniappa Chet liar v. Veerappa Chettiar A I R 1918 Mad. 238."

10. On the other hand, Mr. Mansoorul Arfin submitted that although the principle of law above enunciated by the plaintiff's counsel cannot be questioned, the short question in this case is, whether in the circumstances of the case, the plaintiff was really asking for withdrawal of the amounts of the F. D. receipts for the purposes of the winding up of the affairs of the partnerships. He submitted that the evidence is to the contrary and the correspondence shows that the withdrawal of the moneys was sought not for winding up but for his own sole proprietary use.

11. I have considered the respective submissions of counsel and the documentary evidence and I am of the opinion that the Bank had, in the circumstances of this case, reasonable grounds to assume that the plaintiff's request for payment of the F. D. receipts was not for the purposes of winding up of the partnership, but was for his own sole proprietary use.

12. In the first place the plaintiff did not indicate in his letter dated 3‑4‑1958 (Exh. 71) that the withdrawals of the amounts of the F. D. receipts were required by him for the purposes of the winding up. The letter was signed by the plaintiff as proprietor of the firm and he asked to encash one amount in order to operate on his now sole proprietary account for meeting all his future commitments", and by asking the Bank to renew the other F. D. receipt, he was not realising it for the purpose of winding up but was continuing the Bank as his own debtor. In fact, the original stand of the plaintiff in his correspondence was that he was sole owner of the two amounts of the F. D. receipts and was entitled to draw the amounts by making endorsements on them. He sent a photo copy of the award to the Bank, in which it was declared that he was the sole proprietor of the firm and he called upon the Bank to accept his exclusive title to the receipts as sole proprietor of the firm, so declared in the ‑award. He admitted in cross‑examination: "In my letter dated 3‑4‑1958 I did not give the reason to my bank that I have to pay‑off the legal representatives of my deceased brother and therefore the amounts of the two receipts be paid to me. In fact I did not give the reason in any of the letters addres sed to them." It is only after the Bank had pointed out that as there was no special mention of the two F. D. receipts in the award, it could not accept his exclusive title to them, that for the first time, in his letter dated 8‑11‑1960 (Exh. 59) he put forward the ground that under section 47 of the Partnership Act he was entitled to the amounts of the deposits as sole surviving partner to wind up the affairs of the firm and that the bank bad no concern with the award. The award dated 23‑12‑1957 took into account the assets and liabilities of the firm and, in effect, wound up the affairs of the partnership a few months before the plaintiff wrote his letter dated 3‑4‑1958 (Exh. 71). Therefore the statement of the plaintiff in evidence: "I made this request dated 3‑4‑1958 (Exh. 71) as the surviving partner of the firm to enable me to wind up the business and to pay off the legal representatives of my deceased brother" cannot be true. The request was not for the purposes of the winding up but for meeting his own personal liabilities to pay off the heirs under the award. The basis of his claim in suit is that he (and not the firm) had suffered loss and he stated in his evidence: "I have suffered losses in the actual sum claimed by me due to lack of funds" which again shows that the amounts were not required for winding up.

13. The Bank's difficulties were further increased because disputes had arisen between the heirs of the deceased partner who put the Bank on notice even before the plaintiff had requested for encashment of the amounts of the F. D. receipts. The Bank received several notices from he Advocates of the heirs asking for information with regard to the moneys held by the deceased in the firm name. Exhs. 74, 72, 67, and 66 are four such notices. The award made no specific mention of the two F. D. receipts and it was objected to by the heirs in the Court as well as in appeal, wherein a new ground was sought to be introduced in the memorandum of appeal to the effect that the amounts of the fixed deposits in question were fraudulently suppressed from the arbitrators by the plaintiff. Specifically, a notice dated 24‑4‑1961 (Exh.50) was received from Messrs Syed Sharifuddin & Co., Advocates acting on behalf of the two daughters of the deceased objecting to payment of the amount of the fixed deposits to the plaintiff and threat ening the Bank with liability for unauthorized payment. The Bank was therefore asking for protection from the plaintiff by producing a succession ertificate, which protection the plaintiff declined to give. There fore in my opinion the Bank was justified in asking the plaintiff to obtain a succession certificate for its protection before making payment, or permission letter from the heirs of the deceased partner. My findings therefore, on each of the three issues are in the negative.

14. Issue No. 3.‑The plaintiff has proved no agreement between the partners of the firm Messrs Continental Cycle & Motor Co. and the Bank that the amount of the F. D. receipt which stood in the name of the firm, were payable to the partners jointly or to the survivor of them upon the death of the one of them. Therefore, issue No. 3 is decided in the negative.

15. Issue No. 5.‑No evidence of loss has been given.

16. Issue No. 6.‑The plaintiff is not entitled to the damages claimed in suit. In paragraph 9 of the plaint the plaintiff has claimed interest at 9 on the amount of the deposits by way of damages for non‑payment during the period 16‑5‑1967 to 25‑5‑1962. In Bengal‑Nagpur Railway Co. Ltd.) v. Ruttanji Ramji and others (A I R 1938 P C 67), it was held that interest by way of damages is not payable under section 73, Contract Act fort withholding moneys due and illustration (n) to that section clearly bars the claim.

17. For the foregoing reasons and in view of my findings above, I would dismiss the suit with costs. K. B. A. Suit dismissed.