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In Re: Canara Bank, Siddharth Kumar Modi and Others Vs. Jagjit Singh Bindra - Court Judgment

LegalCrystal Citation
Subject Company
CourtDelhi High Court
Decided On
Case NumberI.A. No. 3069 of 1980, in Suit No. 1046 of 1979
Judge
Reported inAIR1984Delhi116; [1985]57CompCas631(Delhi)
ActsCode of Civil Procedure (CPC), 1908 - Sections 151 - Order 1, Rule 10; Indian Limitation Act, 1877 - Sections 22; Indian Partnership Act, 1932 - Sections 26, 27 and 45
AppellantIn Re: Canara Bank, Siddharth Kumar Modi and Others
RespondentJagjit Singh Bindra
Cases ReferredState Bank of Patiala v. Amar Nath
Excerpt:
.....the course of its business receives money or property from a third party, and the money or property is misapplied by any of the partners while it is in the custody of the firm, the firm is liable to make good the loss......canara bank, nehru place, new delhi, seeking leave to be imp leaded as a defendant in the present suit. the plaintiffs and the defendant entered into a partnership in terms of a deed dated october 28, 1976/november 5, 1977, to carry on business under the name and style of 'tantra'. it appears that disputes arose between the plaintiffs and the defendant. the plaintiffs, thereforee, filed the present suit for dissolution of the partnership and rendition of accounts. 2. the applicant-bank by this application alleges that the partnership firm, m/s. tantra, acting through its partners, i.e., the plaintiffs and the defendant, approached the applicant for grant of loan facilities to finance certain packing credit commitments mentioned in the loan documents, the advance was in the nature of.....
Judgment:

Sultan Singh J.

1. This is an application under O. 1, r. 10, read with s. 151 of the CPC, on behalf of the Canara Bank, Nehru Place, New Delhi, seeking leave to be imp leaded as a defendant in the present suit. The plaintiffs and the defendant entered into a partnership in terms of a deed dated October 28, 1976/November 5, 1977, to carry on business under the name and style of 'Tantra'. It appears that disputes arose between the plaintiffs and the defendant. The plaintiffs, thereforee, filed the present suit for dissolution of the partnership and rendition of accounts.

2. The applicant-bank by this application alleges that the partnership firm, M/s. Tantra, acting through its partners, i.e., the plaintiffs and the defendant, approached the applicant for grant of loan facilities to finance certain packing credit commitments mentioned in the loan documents, the advance was in the nature of cash a credit limit of Rs. 1,50,000 and bills discounting facility up to Rs. 1,50,000, that the plaintiffs and the defendant are engaged in the business of fabrication and export of garments and that the parties to the suit are jointly and severally liable to the applicant. Para. 5 of the application details the various documents alleged to have been executed by the parties to this suit. It is alleged that a sum of Rs. 1,81,822.70 became due from the plaintiffs and the defendant to the applicant which they failed they failed to pay and, thereforee, the applicant was compelled to file a suit for recovery against them being Suit No. 615 of 1980, Canara Bank v. Tantra, pending in this court. It appears that the plaintiffs and the defendant denied their liability to the applicant on various grounds. It is not necessary to reproduce the defense of that suit. The applicant alleges that the present suit is mala fide and has been filed with a view to defraud and defeat the applicant's legitimate claim, that the applicant is a secured creditor and it has a first charge on the goods of the partnership firm, that the bank is vitally interested in the result of a suit, that its presence is necessary to safeguard its interest. On these allegations, the applicant has prayed that it be added as a defendant and the suit be stayed.

3. The application is contested by the plaintiffs and the defendant. It has been submitted that the applicant, Canara Bank, is not entitled to be imp leaded as a party in the suit for dissolution and rendition of accounts and the suit is not liable to be stayed. It is further alleged that the rights of the applicant, if any, are entirely independent of the present suit.

4. The short question is : whether the applicant is either a necessary or a proper party to be imp leaded as a defendant and/or the suit is liable to be stayed Learned counsel for the applicant does not press its prayer for stay of the suit. He, however, submits that the applicant be imp leaded as a defendant to enable it to protect its interest.

5. Order 1, r. 10 of the CPC reads as under :

'10. (1) Where a suit has been instituted in the name of the wrong person as plaintiff or where it is doubtful whether it has been instituted in the name of the right plaintiff, the court may at any stage of the suit, if satisfied that the suit has been instituted through a bona fide mistake, and that it is necessary for the determination of the real matter in dispute so to do, order any other person to be substituted or added as plaintiff upon such terms as the court thinks just.

(2) The court may at any stage of the proceedings, either upon or without the application of either party, and on such terms as may appear to the court to be just, order that the name of any party improperly joined, whether as plaintiff or defendant, be struck out, and that the name of any person who ought to have been joined, whether as plaintiff or defendant, or whose presence before the court may be necessary in order to enable the court effectually and completely to adjudicate upon and settle all the questions involved in the suit, be added.

(3) No person shall be added as a plaintiff suing without a next friend or as the next friend of a plaintiff under any disability without his consent.

(4) Where a defendant is added, the plaint shall, unless the court otherwise directs, be amended in such manner as may be necessary, and amended copies of the summons and of the plaint shall be served on the new defendant and, if the court thinks fit, on the original defendant.

(5) Subject to the provisions of the Indian Limitation Act, 1877, section 22, the proceedings as against any person added as defendant shall be deemed to have begun only on the service of the summons.'

6. Sub-r. (2) provides that the court may at any stage of the proceedings strike out the name of any party improperly joined to the suit as plaintiff or defendant in the suit. It further provides that if the presence of any person before the court is necessary to enable the court to adjudicate upon between the parties, the court has jurisdiction to add such a person. Thus, there are two types of persons who may be added as party to the suit, (1) person who is a necessary party, i.e., in the absence of whom relief claimed in the suit cannot be granted. In other words, it means that for the grant of relief claimed in a suit, a person who ought to have joined must be added, (2) the second class of persons consists of those who are proper parties, i.e., whose presence may be necessary with a view to fully adjudicate upon the matters involved in the suit.

7. The suit of the plaintiffs is that they are partners with the defendant in terms of the partnership deed, that disputes have arisen between them, that they do not want to continue the partnership and that the defendant rendition of accounts against the defendant. The applicant, Canara Bank, according to its allegation, is a creditor of the partnership firm, M/s. Tantra. The learned counsel submits that the present suit between the parties is a collusive one and has been filed with a view to defeat the claim of the applicant. He submits that the parties may dispose of the property of the firm and after the firm is dissolved, the applicant would not be able to recover the decree that is likely to be passed in the suit filed by it against the said firm. Whether the applicant-bank would be in a position to recover its decree is not the question involved before me. The point for decision is whether the presence of the applicant is necessary to grant any relief either to plaintiffs or to the defendant, or the suit cannot proceed in the absence of the applicant. In other words, whether the applicant-bank is either a necessary or a proper party to be imp leaded in the suit. Further, question is whether the court is in a position to decide the disputes between the plaintiffs and the defendant in the absence of the applicant-bank. The learned counsel for the applicant submits that a person should be added as a party to the suit if the court is of the opinion that by adding that party, it would be in a better position to effectually and completely adjudicate upon the controversy. In the instant case, I am of the opinion that by adding the applicant-bank as a party to the present litigation between the partners, it may complicate the matters instead of deciding the disputes between the plaintiffs and the defendant. The disputes between the plaintiffs and the defendant are only regarding the existence of partnership and whether the firm should be dissolved and the defendant be directed to render accounts. I do not appreciate how the presence of the applicant-bank who is only an alleged creditor of the firm will decide any of the questions which are involved in the present suit. The learned counsel for the applicant has referred to Benares Bank Ltd. v. Bhagwan Das AIR 1947 All 18, wherein it has been observed that there are two tests on which the question must be determined as to who is a necessary party. 'Firstly there must be a right to some relief against such party in respect of the matter involved in the proceedings in question and, secondly it should not be possible to pass an effective decree in the absence of such party.' He also relies upon Hardeva v. Ismail , to the said effect. There is no dispute about the principle of law laid down in these judgments cited by the learned counsel for the applicant but the question still remains whether the parties to the present suit are seeking any relief against the applicant-bank or they have any right against him or the bank has any right against the plaintiffs and the defendant with respect to the matters in dispute between the parties to the present suit.

8. The learned counsel for the applicant has referred to ss. 26, 27 and 45 of the Indian Partnership Act, 1932, which read as under :

'26. Where, by the wrongful act or omission of partner acting in the ordinary course of the business of a firm, or with the authority of his partners, loss or injury is caused to any third party, or any penalty is incurred, the firm is liable thereforee to the same extent the partner.

27. Where -

(a) a partner acting within his apparent authority receives money or property from a third party and misapplies it, or

(b) a firm in the course of its business receives money or property from a third party, and the money or property is misapplied by any of the partners while it is in the custody of the firm, the firm is liable to make good the loss.

45. (1) Notwithstanding the dissolution of a firm, the partners continue to be liable as such to third parties for any act done by any act done by any of them which would have been an act of the firm if done before the dissolution, until public notice is given of the dissolution :

Provided that the estate of a partner who dies, or who is adjudicated an insolvent, or of partner who, not having been known to the person dealing with the firm to be a partner, retires from the firm, is not liable under this section for acts done after the date on which he ceases to be a partner.

(2) Notices under sub-section (1) may be given by any partner.'

9. These provisions show that if an act on behalf of a firm has been done by a partner during the continuance of the partnership, the other partners would also be liable to the third party. According to the allegations contained in the application, the loan was advanced by the bank to the partnership firm, M/s. Tantra, of which the plaintiffs and the defendant are alleged to be the partners. The suit by the applicant was filed prior to the present suit for dissolution was entered into with the plaintiffs and the defendant with the applicant-bank during the continuance of the partnership. All these provisions referred to by the learned counsel for the applicant only make it clear that the partners of the firm would be liable to the bank. These provisions referred to by the learned counsel for the applicant, however, do not enable it to be added as a defendant to the present suit.

10. The learned counsel for the plaintiffs has referred to State Bank of Patiala v. Amar Nath [1982] 84 PLR 479 : [1985] 57 Com Cas 628 (P&H;). In that case, a suit for dissolution and rendition of accounts of a partnership firm was pending. The State Bank of Patiala, creditor of the partnership firm, made an application for impleading it as a party. It was held that the bank was not a necessary party. It has been observed that if a person is not a necessary party to the litigation or his presence is not necessary to adjudicate the case effectually and completely, he shall not be added as a defendant without the consent of the plaintiff. It was further observed that to implead the bank as a defendant was not necessary to decide the dispute between the parties and that even if the goods were hypothecated with the bank, it did not mean that it was entitled to become a defendant in a litigation between the partners of the firm regarding accounts of the firm. The bank has already filed a suit against the partners of the firm, M/s. Tantra. I am, thereforee, of the opinion that in a suit for dissolution and rendition of accounts between the partners of a firm, a creditor of the firm is neither a necessary nor a proper party to the suit for accounts and, thereforee, the creditor should not be imp leaded in the suit as a defendant. The application being without any merit is dismissed with costs Rs. 500 to be shared half and half by the plaintiffs and the defendant.


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