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Her Highness Maharani Mandalsa Devi and ors. Vs. M. RamnaraIn (P) Ltd. and ors. - Court Judgment

LegalCrystal Citation
SubjectCommercial
CourtSupreme Court of India
Decided On
Judge
Reported inAIR1965SC1718; [1965]3SCR421
ActsCode of Civil Procedure (CPC), 1908 - Order 21, Rule 50 and 50(2) - Order XXX, Rules 1 and 4
AppellantHer Highness Maharani Mandalsa Devi and ors.
RespondentM. RamnaraIn (P) Ltd. and ors.
Cases ReferredChhattoo Lal Misser & Co. v. Naraindas BaijnathPrasad I.L.R.
Excerpt:
commercial - consent - order 21 rules 50 and 50 (2) and order 30 rules 1 and 4 of code of civil procedure, 1908 - summary suit instituted by respondent claiming money decree - firm admitted liability and demanded payment in installments - decree with interest and installments passed by court - application under order 21 rule 50 (2) filed for execution of decree - affidavit filed by opposite party - pointed absence of consent of central government in induction of maharaja's name - high court rejected contentions of affidavit and allowed application - appellate court also held appellants not entitled to raise other defenses to merits of claim on an application under order 21 rule 50 (2) - decree passed against firm basically a decree against all partners - permission of central government..........as if they are named asplaintiffs in the plaint. rule 6 provides that the persons sued in the firmname must appear individually in their own names. a suit by or in the name of afirm is thus really a suit by or in the name of all its partners, see rodriguezv. speyer brothers1919 a.c. 59, purushottam umedbhai & co. v. m/s. manilal & sons : [1961]1scr982 . so also asuit against the firm is really a suit against all the partners of the firm. inwestern national bank of city of new york v. perez, triana & co. [1891] 1 q.b. 304, lindley, l.j. said :'when a firm's name is used, it is only aconvenient method of denoting those persons who compose the firm at the timewhen that name is used, and a plaintiff who sues partners in the name of theirfirm in truth sues them individually, just as much.....
Judgment:

Bachawat, J.

1. Maharaja Sir Rajendra Prakash Bahadur Maharaja of Sirmur, MaharaniMandalsa Kumari Debi Rajmata of Sirmur, Maharani Premlata Debi of ChhotaUdaipur, Maiyan Sahiba Sheba Kumari Debi of Jharipani, Major Rao Raja SirendraSingh, Jagat Pershad, Shib Chander Kumar, Praduman Kumar and Dayawati Ranicarried on business in co-partnership under the firm name and style of Messrs.Jagatsons International Corporation (hereinafter referred to as the firm) atNew Delhi. Respondent No. 1, Ramnarain (Private) Ltd. instituted Summary SuitNo. 162 of 1957 against Messrs. Jagatsons International Corporation on theOriginal Side of the Bombay High Court claiming a money decree for Rs.1,96,831.58 N.P. The suit was instituted on the allegation that respondent No.1 and the firm had entered into an agreement in writing dated September 26, 1956,whereby respondent No. 1 agreed to provide finance to the firm, as a result ofthe dealings under the agreement a sum of Rs. 1,96,831.58 N.P. was due torespondent No. 1 from the firm, and in view of the breaches of the agreement bythe firm, the agreement has stood terminated. The consent of the CentralGovernment to the institution of the suit was not obtained, though the Maharajaof Sirmur is a Ruler of the former Indian State within the meaning of s. 87B ofthe Code of Civil Procedure. The summons of the suit was served on Shib ChanderKumar as a partner of the firm and as a person having the control or managementof the partnership business. On July 15, 1957, at the hearing of the summonsfor judgment taken out by respondent No. 1, the firm admitted its liability asclaimed in the plaint and applied for instalments, and the Court passed adecree for Rs. 1,89,643.98 N.P and further interest, and directed that thedecretal amount would be payable in certain instalments. The firm committeddefaults in payment of the instalments payable under the decree. On December13, 1957, respondent No. 1 filed an application under O. 21 r. 50(2) of theCode of Civil Procedure for leave to execute the decree against (1) MaharaniMandalsa Kumari Debi, (2) Maharani Premlata Debi, (3) Maiyan Sahiba ShebaKumari Debi, (4) Major Rao Raja Sirendra Singh, (5) Jagat Pershad, (6) PradumanKumar and (7) Dayawati Rani claiming that respondent No. 1 was entitled tocause the decree to be executed against them as being partners in the firm. Theopposite parties to the application filed an affidavit alleging (1) that thesuit and all proceedings therein were incompetent in the absence of therequisite consent of the Central Government under s. 86 of the Code of CivilProcedure; (2) Jagat Pershad and Shib Chander Kumar entered into the agreementdated September 26, 1956 and utilised the moneys received under it in fraud ofthe other partners and without their authority, Shib Chander Kumar dishonestlyand fraudulently concealed from the other partners the fact of the institutionof the suit and without the authority and knowledge of the other partnerssubmitted to a consent decree in the suit.

2. By an order dated March 18, 1958, a learned single Judge of the HighCourt rejected all the contentions in the affidavit, and allowed theapplication under O. 21, r. 50(2) of the Code of Civil Procedure. The learnedsingle Judge held that (1) the defect of the absence of the requisite consentunder s. 86 read with s. 87-B did not render the decree a nullity, and theobjection could not be taken in execution proceedings; (2) the other defencesto the merits of the claim in the suit could not be agitated in a proceedingunder O. 21, r. 50(2) of the Code of Civil Procedure. An appeal preferred by appellants,Maharani Mandalsa Kumari Debi, Maharani Premlata Debi, Major Rao Raja SirendraSingh and Maiyan Sahiba Sheba Kumari Debi was dismissed by a Bench of the HighCourt on November 21, 1958. The appellate Court held that (1) though the decreeagainst the firm was a decree against all its partners including the Maharajaof Sirmur, and though the decree against the Maharaja of Sirmur might be anullity, the decree against the other partners of the firm was valid, and (2)the appellants were not entitled to raise other defences to the merits of theclaim on an application under O. 21, r. 50(2) of the Code of Civil Procedure.The appellants now appeal to this Court under a certificate granted by the HighCourt.

3. On behalf of the appellants Mr. D. N. Mukherjee contended that (1) thesuit against the firm of Jagatsons International Corporation was a suit againstall its partners and in the absence of the requisite consent under s. 86 readwith s. 87-B of the Code of Civil Procedure, the suit was not competent againstthe Maharaja of Sirmur, and the decree against him was null and void; (2)consequently, the suit against the firm under the provisions of O. 30 of theCode of Civil Procedure was not competent and the decree passed in the suit waswholly void, the decree not being a decree against the firm could not beexecuted by recourse to the machinery of O. 21, r. 50, Code of Civil Procedure,and the application against the appellants under O. 21, r. 50(2), Code of CivilProcedure was not maintainable; and (3) the appellants were entitled to disputetheir liability in an application under O. 21, r. 50(2) of the Code of CivilProcedure on all the grounds raised in the affidavit field on their behalf andthe court ought to have tried and decided all those questions.

4. In answer to the first contention of Mr. D. N. Mukherjee, Mr. Andleyargued that for the purposes of a suit under O. 30. Code of Civil Procedure,the firm of Jagatsons International Corporation is a legal entity separate anddistinct from its partners, and no question of obtaining the consent of theCentral Government to sue one of its partners under s. 86 read with s. 87-B ofthe Code of Civil Procedure to the institution of such a suit arises. Mr.Andley relied upon the observations of Das, J. in Dulichand Lakshminarayan v.The Commissioner of Income-tax, Nagpur [1956] S.C.R. 156 that for thesake of convenience, O. 30 of the Code of Civil Procedure permits a firm to sueor be sued in the firm name 'as if it were a corporate body'.Consistently with this legal fiction, R. 3 permits service of the summons on apartner or a person having control or management of the partnership business,R. 4 permits the institution and continuance of the suit in the firm name inspite of the death of a partner before the institution or during the pendencyof the suit without joining the legal representatives of the deceased partneras a party to the suit, and R. 9 permits a suit between a firm and one or moreof its partners and between firms having one or more common partners. But thelegal fiction must not be carried too far. For some purposes the law hasextended a limited personality to a firm, see Bhagangi Morarji Goculdas v.Alembic Chemicals Works Co.[1948] L.R. 75 IndAp 147, but the firm is not alegal entity, see Purushottam Umedbhai & Co. v. M/s. Manilal & Sons : [1961]1SCR982 , Lindley on Partnership, 12th Edn., pp. 27-28. Thepersons who are individually called partners are collectively called a firm,and the name under which their business is carried on is called the firm name :see s. 4 of the Indian Partnership Act, 1932. Order 30, R. 1 of the Code ofCivil Procedure enables two or more persons claiming or being liable aspartners and carrying on business in India to sue or be sued in the name of thefirm of which they were partners at the time of the accrual of the cause ofaction. Rule 1 shows that the individual partners sue or are sued in theircollective firm name. Rule 2 provides that on disclosure of the names of thepartners of the plaintiff firm, the suit proceeds as if they are named asplaintiffs in the plaint. Rule 6 provides that the persons sued in the firmname must appear individually in their own names. A suit by or in the name of afirm is thus really a suit by or in the name of all its partners, see Rodriguezv. Speyer Brothers1919 A.C. 59, Purushottam Umedbhai & Co. v. M/s. Manilal & Sons : [1961]1SCR982 . So also asuit against the firm is really a suit against all the partners of the firm. InWestern National Bank of City of New York v. Perez, Triana & Co. [1891] 1 Q.B. 304, Lindley, L.J. said :

'When a firm's name is used, it is only aconvenient method of denoting those persons who compose the firm at the timewhen that name is used, and a plaintiff who sues partners in the name of theirfirm in truth sues them individually, just as much as if he had set out alltheir names'.

5. The decree passed in the suit, though in form against the firm, is ineffect a decree against all the partners. In Lovell & Christmas v.Beauchamp [1894] A.C. 607 Lord Herschell, L.C. said :

'Although the judgment may be pronounced againstthe firm in the firm's name, it is in reality a judgment against all thepersons who are in fact members of the firm; and it is because such a judgmentexists that the right of execution follows'.

6. The firm name of Jagatsons International Corporation applies as much tothe Maharaja of Sirmur as to the other partners. When respondent No. 1 sued thefirm of Jagatsons International Corporation, it sued the Maharaja of Sirmur andall the other partners as if the plaint had set out their names, and the decreepassed in the suit is in reality a decree against all the partners of the firmincluding the Maharaja of Sirmur. Now, the Maharaja of Sirmur is the Ruler of aformer Indian State, and s. 86 read with s. 87-B of the Code of Civil Procedurebarred the institution of a suit against him except with the consent of theCentral Government. No such consent was given for the institution of the suitagainst the Maharaja of Sirmur. In the absence of the requisite consent of theCentral Government, a suit, which is in reality, though not in form, a suitagainst the Maharaja of Sirmur, is barred by s. 86 read with s. 87-B. SeeGaekwar Baroda State Railway v. Hafiz Habib-Ul-Haq [1938] L.R. 65 Ind.182,Consequently, the suit so far as it was one against the Maharaja ofSirmur was incompetent and the decree against the firm so far as it is a decreeagainst him personally was a nullity. The first contention of Mr. Mukherjee is,therefore, sound and should be accepted.

7. But we think that the second contention of Mr. Mukherjee should berejected. Beyond doubt, in a normal case where all the partners of a firm arecapable of being sued and of being adjudged judgment-debtors, a suit may befiled and a decree may be obtained against a firm under O. 30 of the Code ofCivil Procedure, and such a decree may be executed against the property of thepartnership and against all the partners by following the procedure of O. 21,r. 50 of the Code of Civil Procedure. But there may be abnormal cases where asuit is filed against a firm under the provisions of O. 30, of the Code ofCivil Procedure, and it is found that one of its partners cannot be sued orcannot be adjudged a judgment-debtor. Thus, take the case of an infant whounder the English law, can be a partner in a firm, but, though a partner,cannot contract debts by trading and cannot be adjudged to be a debtor inrespect of such debts. In Lovell & Christmas v. Beauchamp [1894] A.C. 607, the House of Lords held that a creditor of a firm of which an infant waspartner could issue a writ against the firm in the firm's name, and in such asuit judgment could be recovered against the defendant firm other than theinfant partner, and if a judgment had been improperly signed against the firmsimply, such a judgment could be suitably amended so as to make it a judgmentagainst the firm other than the infant partner. The precise point decided in thiscase cannot arise in this country, because under our law, a minor may not be apartner in a firm, though he may be admitted to the benefits of thepartnership. But the case shows that a creditor of a firm of which one of thepartners cannot be adjudged to be a debtor, may institute a suit against a firmin the firm name under O. 30 of the Code of Civil Procedure, and may in such asuit obtain a decree against the firm other than the partner who cannot beadjudged a debtor. Again, take a case where the creditor of a firm institutes asuit against a firm and one of its partners at the time of the accrual of thecause of action is dead at the time of the institution of the suit. The suitagainst the firm is really a suit against all the partners who were its partnersat the time of the accrual of the cause of action, including the dead partner.Order 30, R. 4 of a Code of Civil Procedure enables the creditor to institutethe suit against the firm in the firm name without joining the legalrepresentative of the deceased partner. The suit is, therefore, competent, butno suit can be instituted nor can a decree be obtained against a dead person.The decree passed in such a suit will, therefore, bind the partnership and allthe surviving partners, but will not affect the separate property of thedeceased partner. In Ellis v. Wadeson [1899] 1 Q.B. 714, Romer, L.J.observed :

'Now consider the question of death. Suppose apartner dies before action brought, and an action is brought against the firmin the firm's name. The dead man is not a party to the action, so far as hisprivate estate is concerned, for a dead man cannot be sued, though the legalpersonal representative of a dead man can be sued in a proper case. In thatcase the action would be an action solely against the surviving partners.... Ifthe legal personal representatives of a deceased partner are not addedexpressly as defendants, and the action is brought against the firm in thefirm's name, then judgment can only be obtained as against the survivingpartners and be enforced against them and against the partnership assets'.

8. The above illustrations show that a suit may be brought under theprovisions of O. 30 of the Code of Civil Procedure against a firm of which apartner is not capable of being sued or being adjudged a debtor, and in such asuit a decree enforceable against the other partners and the partnership assetsmay be passed. Now, in the instant case, respondent No. 1 sued the firm ofJagatsons International Corporation under the provisions of O. 30 of the Codeof Civil Procedure. The assets of the firm as also all its partners jointly andseverally are liable to satisfy the debts of the firm. Even the Maharaja ofSirmur is jointly and severally liable for the debts of the firm; only theinstitution of a suit against him without the consent of the Central Governmentis barred by s. 86 read with s. 87-B of the Code of Civil Procedure. As thesuit was instituted without the requisite consent of the Central Government, nodecree could be passed in the suit against the Maharaja of Sirmur. But the suitagainst the firm other than the Maharaja of Sirmur was competent, and a decreecould be passed against the firm other than the Maharaja of Sirmur, and such adecree could be executed against the partnership property and against the otherpartners by following the procedure of O. 21, r. 50 of the Code of CivilProcedure. It is true that respondent No. 1 obtained a decree against the firmof Jagatsons International Corporation simply, but the decree should besuitably amended so as to make it a decree against the firm of JagatsonsInternational Corporation other than the Maharaja of Sirmur, and the decree soread is a valid decree which may be executed against the partnership propertyand the other partners of the firm by recourse to the machinery of O. 21, r. 50of the Code of Civil Procedure. The application of respondent No. 1 under O.21, r. 50(2) for leave to execute the decree against the other partners is,therefore maintainable. The second contention of Mr. Mukherjee must, therefore,be rejected.

9. The third contention of Mr. Mukherjee raises the question as to whatdefences may be raised by a respondent to an application under O. 21, r. 50(2)of the Code of Civil Procedure. The law on this point is now well-settled. InGambhir Mal Pandiya v. J.K. Jute Mills Co. Ltd., Kanpur : [1963]2SCR190 ,Hidayatullah, J. speaking on behalf of the Court observed :

'.... primarily the question to try would bewhether the persona against whom the decree is sought to be executed was apartner of the firm, when the cause of action accrued, but he may question thedecree on the ground of collusion, fraud or the like but so as not to have thesuit tried over again or to raise issues between himself and his otherpartners'.

10. The respondent to an application under O. 21, r. 50(2) of the Code ofCivil Procedure is also entitled to raise a plea of special protection underthe law, and on this ground, the learned judge at pp. 205-206 of the Reportdistinguished the case of Chhattoo Lal Misser & Co. v. Naraindas BaijnathPrasad I.L.R.1928. Cal. 704. We may add that the respondent may alsodefend the application on the ground that the decree sought to be executedagainst him is a nullity.

11. Now, in the instant case, none of the appellant is entitled to anyspecial protection from the institution of the suit under s. 86 read with s.87-B, Code of Civil Procedure. The Maharaja of Sirmur was entitled to thisspecial protection, but he was not a party to the application under O. 21, r.50(2) of the Code of Civil Procedure. Nor is the decree against the firm otherthan the Maharaja of Sirmur a nullity. The affidavit filed on behalf of theappellants does not sufficiently raise a plea that the decree was the result ofany collusion, fraud or the like. The affidavit incorrectly assumes that thedecree passed on admission of the appearing partner, was a consent decree.Allegations of dishonesty and fraudulent concealment of the fact of theinstitution of the suit are made against Shib Chander Kumar, one of thepartners of the firm, but no allegation of fraud or collusion is made againstrespondent No. 1. It was not alleged that respondent No. 1 was a party to anyfraud or collusion or that it obtained the decree by fraud or collusion. Theappellants alleged that their partners, Jagat Pershad and Shib Chander Kumar,had entered into the agreement dated September 26, 1956, and had utilised themoneys received under it in fraud of the appellants and without their authority,but the appellants are not entitled to raise these pleas in the applicationunder O. 21 r. 50(2) of the Code of Civil Procedure. The appellants wereadmittedly partners of the firm of Jagatsons International Corporation at thetime when the cause of action accrued. In the absence of any pea questioningthe decree on the ground of collusion, fraud or the like, respondent No. 1 isentitled to an order under O. 21, r. 50(2) of the Code of Civil Proceduregiving it leave to execute the decree against the appellants as partners in thefirm. The third contention of Mr. Mukherjee must, therefore, be rejected.

12. In the result, the appeal is dismissed with costs.

13. Appeal dismissed.


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