Birdichand Sukhraj Marwadi v. Harakchand Jagraj Marwadi

Birdichand Sukhraj Marwadi v. Harakchand Jagraj Marwadi

Facts

The plaintiff purchased cartloads of cotton from a third party and the defendant held half the share in the profit or the loss arising out of the said transaction. Since the price began to fall, the defendant told the plaintiff’s to sell it. The plaintiff did so and in order to recover the extra loss caused due to selling off the defendant’s share of the cotton, the plaintiff sued the defendant for his half share in the loss. The defendant argued that the said transaction, even if accepted as constituting partnership, can’t be basis for the plaintiff’s claim as the firm was not registered. Section 69 (1)[1] applicable here.

Issue

Whether an isolated adventure for the purchase and sale of cotton entered into by two persons who agree to share the profits or the losses makes them partners within the meaning of the Partnership Act.

Judgement

Trial Court: The transaction was a partnership transaction and as per s.69 the suit could not lie.

High Court

1. (Law)The court stated that there is no doubt that an “isolated adventure” could constitute a partnership. However, a basic requirement that must be fulfilled with regards to this is that the adventure should constitute a business and this business should be on the joint account. Partnership rests on agreement and so long as the agreement contemplates an outgoing and an incoming on the joint account in respect of a business, the partnership is complete and all subsequent rights and liabilities are governed by laws which relate to partnership. There is difference between cases of purchase of property for joint user from those in which it is purchased for a joint endeavour.
2. Since, there could be neither profit nor loss until the cotton was resold the transaction was not merely to purchase cotton for the purpose of sharing it between them but to resell it. The transaction was on their joint account. Both the parties were to share the profit or bear the loss half and half. That meant that neither could sell his half of the cotton as an independent transaction in which he alone was interested without the consent of the other. Whatever was done had to be done on the joint account. Therefore it was a clear case of partnership and the suit could not lie because of Section 69(1), Partnership Act.