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N. Ranganayakulu Vs. J. Narasimharao and Company and ors. - Court Judgment

LegalCrystal Citation
SubjectCivil
CourtAndhra Pradesh High Court
Decided On
Case NumberCivil Revn. Petn. No. 791 of 1969
Judge
Reported inAIR1971AP58
ActsCode of Civil Procedure (CPC), 1908 - Sections 51 and 115 - Order 21, Rules 30, 40 and 50; Partnership Act, 1932 - Sections 25, 30 and 30(3)
AppellantN. Ranganayakulu
RespondentJ. Narasimharao and Company and ors.
Appellant AdvocateY. Suryanarayana, Adv.
Respondent AdvocateN. Ramamohana Rao, Adv.
Excerpt:
.....against arrest and detention - revision petition against order of lower court - after judgment debtor was arrested and brought to court opportunity to show cause against detention be given - no compliance with this requirement - held, revision petition allowed. - - alternatively, the court may make the order of detention in prison if it is satisfied that the judgment-debtor has, after the institution, concealed or removed any part of his property. 9. the wording of section 51 is clearly indicative of the positive that in the case of decrees for money, where the terms thereof do not contain any limitations about its enforcement, resort to the method of arrest as a means of execution is ordinarily. execution may also be granted against a person who has been adjudged to be a..........the effect of rule 50 of order 21. it provides that where a decree has been passed against a firm execution may be granted against any property of the partnership, against any person who has appeared in his own name under rule 6 or 7 of order 30 or who admitted on the pleadings that he is a partner. execution may also be granted against a person who has been adjudged to be a partner or against a person who has been individually served with summons as a partner but has failed to appear. the underlying purpose of this rule, is that for the recovery of the debts of a firm recourse can be had not only to the assets of the firm but to other means of relation of the debt are also allowed. apart from the assets of the firm. the partners who have been served with summons in such capacity.....
Judgment:

1. In O. S. No. 30 of 1967 on the file of the District Munsif, Khammam, the respondent in this revision petition obtained a decree against three defendants for recovery of Rs. 2,558-10p together with further amounts of interest and costs as specified in the decree. The three defendants are a firm doing business in the name of Nagubandi Ranganayakulu, now represented by a Receiver appointed by the Subordinate Judge, Warangal in O. S. No. 82 of 1966 and Ranganayakulu and Madhava Rao who are the partners of the 1st defendant firm. The decree in O. S. No. 30 of 1967 was transferred to the Mahabubad court for execution. The respondent decree holder moved the court in E. P. No. 25 of 1968 for the arrest and detention in civil prison of the 2nd defendant, Ranganayakulu. The petition was granted by the executing court. The order is challenged in this revision petition by the judgment-debtor who is directed to be arrested and detained in prison.

2. There are various points taken by Mr. Y. Suranarayana in support of this revision petition. He contends that ton a true construction of the terms of the decree, no personal liability is imposed on the 2nd judgment-debtor (hereinafter referred to as the debtor) and that a partner cannot be subjected to the coercive process of arrest for the recovery of a partnership debit in respect of which such personal liability has not been expressly undertaken by the partner concerned. It is further urged by him that the decree nakes the debtor liable only in the contingency of non-satisfaction after execution is taken or levied against the firm's assets. He has also submitted that the executing court has erred in passing the final order of arrest and detention without giving the debtor an opportunity of showing cause against the arrest. It is stated that debtor, on his appearance in Court, raised a preliminary question about the validity of the process of arrest and if his objection was overruled, it was still incumbent on the court to give him an opportunity of resisting the petition on merits. This omission, he urges, renders the decision null and void.

3. While countering all the arguments of the petitioner. Mr. N. Ramamohan Rao, appearing for the decree-holder challenged the competence of the revision petition itself. He states that the order directing the arrest and detention in prison is open to appeal and consequently petitioner's resort to the revisional jurisdictional of this Court is misconceived.

4. The preliminary point was sought to be reinforced by the principle laid down in S. S. Khanna v. F. J. Dillon, : [1964]4SCR409 . One of the questions decided in that case was whether the jurisdiction under section 115, Civil Procedure Code, can only be exercised in a case in which no appeal lies to the High Court either directly or indirectly after other appeals. The ratio of the decision is that the expression 'case' occurring in section 115 includes a part of a case and that the revision jurisdiction of the High Court may be exercised irrespective of the question whether an appeal lies from the ultimate decree or order passed in the suit. The question raised in the instant case is altogether different. The above decision cited by the learned counsel does not bear on the argument advanced by him. The maintainability of the revision petition is questioned by him not on the ground that the ultimate decision in the case is not rendered, but on the ground that an appeal lies to a Subordinate Court against this very order that is challenged in revision petition. The point to be considered therefore, is whether the order in question is appealable.

5. The submission of the learned counsel for the petitioner is that the order made by the lower court is not the final one contemplated by Rule 40 of Order 21, Civil Procedure Code, but that the District Munsif was called upon to adjudicate only on the preliminary question whether the execution by way of arrest was permissible in the circumstances of the case. Counsel contends that the direction given by the lower court that the petitioner be detained in civil prison was given as a result of misconception of the scope of the inquiry and that the order must be deemed not to be the final order of arrest which alone would attract the provisions of section 47, Civil Procedure Code. Counsel draws a distinction between an order made by the executing court on a preliminary objection in respect of the procedure of arrest and the final order that is made by a court directing the arrest of a debtor. In the present case, the court was really concerned with the situation as it obtained at the earlier stage and it was called upon to consider only whether execution by way of arrest was maintainable. The fact that the court misunderstood the position and after overruling the contention of the petitioner about the maintainability of the process of arrest had also passed the final order. imposes had also passed the final order, imposes no disability on the petitioner in invoking the revisional jurisdiction of this Court. The counsel says that it is in this perspective that the matter should be decided.

6. I have been taken through the counter filed by the debtor in the lower court. The contents thereof, lend support to the contention of Mr. Survanarayana that the only point on which the debtor sought the adjudication of the court was, whether recourse should be allowed to be had by the decree-holder t the method of execution by way of arrest. The debtor apparently was led to act on the hypothesis that he should seek adjudication on merits at a subsequent stage. I am inclined to accept the submission of the counsel for the petitioner that what the court was invited to consider in the first instance was, whether, under the terms of the decree as also under law, the debtor was liable to be arrested in execution of the decree for a partnership debt. The effect of the order made by the court must be judged in the light of the contentions presented by the parties. It is true that the decree-holder sought an outright or final order of arrest; but it is equally manifest that the debtor pressed for the adjudication only of the preliminary point and not for a decision n the question whether the application for arrest was to be allowed if his preliminary objection fails. One of the points urged in the revision petition is that instead of limiting the decision to the preliminary question the court has acted erroneously and with material irregularity in passing the final order of arrest without affording an opportunity to the debtor the application for arrest. On a consideration of the entire matter, it appears to me that the order made by the lower court cannot be construed as the final order, especially because of the instance of the Judgment-debtor, which is apparent from his counter. that the preliminary question should be decided in the first instance. The objection to the maintainability of this revision petition cannot. therefore be upheld.

7. The power to direct the arrest of a judgment-debtor and his detention in civil prison, in execution of a decree for money is conferred on courts by section 51 of the Code of Civil Procedure. It enacts inter alia, that subject to the conditions and limitations as may be prescribed, the court may direct the execution of a decree by arrest and detention in prison of the judgment-debtor. The proviso to section 51 is to the effect that where a decree is for payment of money, execution by detention in prison cannot be ordered except on giving the judgment debtor an opportunity of showing cause against the proposed mode of execution. The further conditions are that the court should specify the reason for its satisfaction that the judgment-debtor is likely to abscond or leave the local limits of the court's jurisdiction with the object of obstructing or delaying the execution of the decree. Alternatively, the court may make the order of detention in prison if it is satisfied that the judgment-debtor has, after the institution, concealed or removed any part of his property.

8. There are two other contingencies contemplated by clauses (b) and (c) of the proviso. Clause (b) which is the provision on which applications for arrest are in the large bulk of cases founded, enables the court to direct the detention of the judgment-debtor in prison if.

'. .......the judgment-debtor has, or has had since the date of the decree, the means to pay the amount of the decree or some substantial part thereof and refuses or neglects or has refused or neglected to pay the same'.

Clause (c) embowers the Court to pass a similar order if the decree is for a sum for which the judgment-debtor was bound in a fiduciary capacity to account.

9. The wording of section 51 is clearly indicative of the positive that in the case of decrees for money, where the terms thereof do not contain any limitations about its enforcement, resort to the method of arrest as a means of execution is ordinarily. if not invariably permissible. It is no doubt subject to the limitations prescribed by Order 21 of the Code. The exercise of the power by court is further circumstance by the proviso of Section 51. The process of execution by arrest is regulated in the manner stated above, but it is manifest that the mode of execution by arrest becomes applicable to all decrees for recovery of money. The effect is virtually to confer a substantive right though it wears the garb of a procedural remedy. The principle underlying section 51 is that every liability for the satisfaction of a decree for money may subject to certain conditions entail the liability to be arrested though the decree may not have prescribed it as a remedy for recovery. The code confers a right on the decree holder which is apparently procedural but is in reality of a substantive nature. It is to be noted that Order 21, Rule 30 provides for the satisfaction of a decree for money by the mode of arrest, even when it is made as an alternative to some other relief. It is thus clear that the application for the coercive process of arrest is warranted by the terms of section 51 and rule 30 of order 21 of the Code.

10. But Mr. Suryanarayana, contends that where the substantive law which governs the transaction that merged in the decree does not impose a personal obligation, the decree for money cannot be secured for the decree-holder by a higher remedy than what he had under the substantive law to which the rights and obligations in respect of the transaction are attributable. Counsel urged that the decree was based on a partnership debt. Though the judgment-debtor's property is subject under the law as also under the terms of the decree to satisfy the liability his personal inability to satisfy the decree on pain of arrest and detention in prison does not arise. It is his submission that the fact that the decree has been superimposed on the earlier obligation is of no moment and the test is whether the undertaking or the promise that merged in the decree made it obligatory on a partner to satisfy the debt on pain of arrest and detention in prison. He referred me to the provisions of section 4 of the C.P.C. which, inter alia, provides that nothing in the code shall affect any special law or any special form of procedure prescribed thereunder.

11. An illustration where a local law has been held to be of an overriding character is found in K. Seetharama Rao Bahadur v. M. Anja Ratna Raja Kumar, : AIR1961AP399 . The question for determination was whether notwithstanding the immunity from arrest and detention as per section 58-A of the Madras Estates Abolition Act. a judgment-debtor liable to satisfy a decree for money, was amenable to the coercive process of arrest under section 51 of the Civil Procedure Code. The Division Bench held that the special law had a controlling effect, and read with section 4 of the Code, the provisions of section 58-A were to revail. There is thus judicial recognition of the position that section 51 is operative subject only to the overriding special law if any.

12. The question, therefore, is whether under the law governing the rights and obligations of partners vis-a-vis creditors of the firm a partner is liable to be arrested and detained in prison for the satisfaction of the debts of the firm. Counsel was not able to draw my attention to any provision of the Indian Partnership Act which lends support to his thesis that there is an inhibition on the creditor's rights to seek such remedies as the civil procedure code allows for the relation of the decretal debt from the partners. Section 25 of the Indian Partnership Act makes it plain that every partner is liable jointly with all the other partners and also severally for all acts of the firm done while he is partner. Thus, the statute renders the partners liable for all acts of the first and this can only mean that each partner shall be liable as if the debt in question has been incurred on his personal liability. When the provisions of S. 25 are considered in just position with sub-section (3) of Section 30 the legislative intendment underlying section 25 is made all the more clear. The sub-section (3) of Section 30 draws a distinction between personal liability and liability limited to the share held by a minor in the firm's assets.

13. It is noteworthy that the expression 'personally liable' is employed in section 30 is in contra-distinction with liability limited to a partner's assets in the firm. It was faintly suggested that the inference to be drawn is that 'personal liability' is conceived of in S. 30 as limited to the assets other than the partnership assets and that even in respect of partners (i.e. other than the persons admitted to the benefits of a partnership) personal liability should have the same connotation i.e. the liability to satisfy the debt by the application of his general assets. It is not possible to accept this submission. The suggestion made by counsel ignores the vital point that in regard to a minor, personal liability could never mean the liability to be arrested for the recovery of a debt. The case of a person admitted to the benefits of a partnership stands apart. The provisions of Section 30 do not furnish any useful analogy. Two decisions of the Supreme Court were cited at the barrel the earlier of the two decisions is Topangpal v. M/s. Kundomal Gangaram. : AIR1960SC388 . The question primarily dealt with was one of construction of the decree. There was a decree against a firm and assets of the firm in the hands of the partners. A decree personally against the partners, was sought in the plaint. On the consideration of the terms of the decree, all that could be said was that it was ambiguous and a reference to the pleadings was, therefore permissible to determine, the effect of the decree. Subbarao, J. (as he then was ) in speaking for the court held that inasmuch as a personal relief was asked for in the plaint but not granted by the decree, the execution was to be limited to the assets of the firm.

It is to be noticed that the Supreme Court did not express any opinion against the tenability of personal decree against the partners. If the law does not allow it, the court could not have awarded it and there was no need at all to construe the decree to ascertain whether personal liability of the partners was enforceable. The necessary implication of the decision is that the individual partners may be held personally liable for the satisfaction of the firm's debts. When this premise is valid, and there is no express prohibition of arrest as a mode of execution in the law f partnership the conclusion the section 51 is attracted is irresistible. Although the question actually decided in that case was whether the execution could be levied against the personal assets of the partners, it is submitted by counsel for respondent that the decision is impliedly an authority for the view the partners are personally liable for the satisfaction of firm's debts. Section 49 of the Indian Partnership Act categorically provides for recourse against the personal assets of partners for the satisfaction of firm's debts. When the personal liability is made out, the procedural remedy under section 51, is an inevitable adjunct to such liability, unless there is a contrary rule of law which governs the jural relationship in respect of such debts. There is no rule or provision of law to the contrary to which may attention was drawn.

14. In Prem Ballabh v. Mathura Datt, : [1967]2SCR298 the question arose as to the applicability of clause (c) of the proviso to section 51 to the facts of that case As per clause (c) they existence of a fiduciary relationship to account for money is a sufficient foundation for the detention in prison of a judgment-debtor. The managing partner had over-drawn from out of the firm's money and a final decree was passed holding him liable for the overdrawn sum. Execution by way of arrest was sought but the Supreme Court negative the prayer for arrest because there was no proof of fraud or clandestine dealing vis-a-vis the other partners. The principle laid down in this case has relevancy only in respect in this case has relevancy only in respect of clause (c) of the proviso and it does not throw any light on the point raised by Mr. Suryanarayana, which does not rest on a fiduciary relationship towards a creditor. That case defined the nature of the obligation of one partner receiving moneys on behalf of the firm, to the other partners.

15. It is pertinent to consider the effect of Rule 50 of Order 21. It provides that where a decree has been passed against a firm execution may be granted against any property of the partnership, against any person who has appeared in his own name under Rule 6 or 7 of Order 30 or who admitted on the pleadings that he is a partner. Execution may also be granted against a person who has been adjudged to be a partner or against a person who has been individually served with summons as a partner but has failed to appear. The underlying purpose of this rule, is that for the recovery of the debts of a firm recourse can be had not only to the assets of the firm but to other means of relation of the debt are also allowed. Apart from the assets of the firm. the partners who have been served with summons in such capacity and also persons who have been adjudged as partners can be made liable under the decree can be made liable under the decree. The procedure also enables the judgment-creditor to proceed against a person who has been left out and has not been eonomine impleaded as a partner by having an adjudication of the Court that the person concerned was in fact a partner. This provision, taken in conjunction sith Sec. 51, leaves no doubt that the remedy by way of arrest is available for the enforcement of the liability of the partners.

16. Mr. attention was drawn to a passage at page 334 of 12th edition of 'Lindley on Partnership'. The learned author considers the question of execution against partners for the debts of the firm in the passage to which my attention was drawn. There is, however, no enunciation of a principle by the author, which precludes the mode of execution by arrest for the recovery of a partnership debt from an individual partner. The passage relied on by the learned counsel does not support his proposition. At page 278 the learned author dealt with the question of liability of arrest. The view expressed by the author is that, if a creditor of a firm obtained judgment against it and arrested the partners and then let one of them go, the others were entitled to be discharged from custody. This implied that recourse to the mode of arrest is permissible. It may be mentioned that in England arrest for debt is abolished now except in a few special cases.

17. The position, therefore, is that there is no rule or provision of any special law displacing or overriding the effect of section 51, Civil Procedure Code. The result is that the application for arrest must be held to be maintainable. It is then argued that the plaint asked for a decree personally against the petitioner but it was not granted. I do not agree with the construction placed by the learned counsel for the petitioner on the decree. The decree need not specify that the judgment-debtor is liable to be arrested for the recovery of the debt. the normal provisions for the recovery of a decree for money laid down by the Code of Civil Procedure, would be applicable to such decrees unless there is a clear prison to the contrary in the decree. I am unable to accept the submission of Mr. Suryanarayana, that the decree disables the decree-holder from seeking execution by way of arrest of the judgment-debtor.

18. It only remains to consider whether in the instant case, the Court was justified in directing the arrest and detention in prison of the petitioner. It must be remembered that there is a decree against the assets of the firm. The partnership is now represented by a receiver. It is stated that the partnership owns an oil and rice mill and the business is now being carried on, on behalf of the firm under the supervision of the receiver. In answer to my query it was stated that the receiver has not deposited, in court in the action in which he was appointed, any sums of money. There is, therefore, no such fund available for the satisfaction of the decree. However, it is patent that the partnership has got assets of a considerably higher value than the amount due to the decree-holder as per the decree in question. The decree-holder made no attempt to proceed against, the assets of the firm, nor has he made any earnest attempt to proceed against the assets of the petitioner. It is true that a decree-holder is not bound in the first instance. to seek satisfaction of the decree by proceeding against the assets of the firm or of the petitioner. But the point to be considered is, whether the discretion to detain the judgment-debtor in prison is to be exercised in the circumstances of the case. As pointed out by me, when I dealt with the primary objection the court had not considered thoroughly and in all its bearings the question whether the judgment-debtor ought to be detained in civil prison for the realisation of the debt.

There is no doubt some reference to the means of the judgment-debtor in one paragraph of the order of the lower court. But, in my opinion, the consideration of that question by the Court at that stage was inappropriate because the judgment-debtor has not been called upon to show cause why on the merits the application should not be granted. The proper thing in the circumstances would be to remit the application for consideration to the lower court to give an opportunity to the judgment-debtor to show cause against his arrest and detention in civil prison. The lower court failed to bear in mind that after the judgment-debtor was arrested and brought to the court, it was necessary to give him further opportunity to show cause against the detention in prison. In my opinion, there was no compliance with this requirement. The revision petition, is therefore, allowed but in the circumstances I make no order as to costs. The execution petition will now be considered further by the lower court in the light of the observations made herein.

19. Petition allowed.


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