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M/S. Raja theatre, Coimbatore Vs. M/S. Selvam Financiers and Others - Court Judgment

LegalCrystal Citation
SubjectCommercial
CourtChennai High Court
Decided On
Case NumberAppeal against Order No. 78 of 1982
Judge
Reported inAIR1992Mad227; (1991)IMLJ346
ActsCode of Civil Procedure (CPC), 1908 - Sections 60 and 151 - Order 21, Rules 46 and 49 - Order 38, Rules 5 and 11 - Order 40, Rule 1; Indian Partnership Act - Sections 31(1), 32(1) and 59; Registration Act, 1908 - Sections 17(1)
AppellantM/S. Raja theatre, Coimbatore
RespondentM/S. Selvam Financiers and Others
Appellant AdvocateS. Jayaraman and ;M.R. Raghavan, Advs.
Respondent AdvocateB.T. Seshadri, Adv.
Cases ReferredDeendyal v. Jagdeep
Excerpt:
.....and brother..........each other with regard to the actual date on which the first respondent retired from the firm m/s. rajatheatres. in ex.b1 it is stated that the first respondent would be retiring from the firm by executing a proper document within thirty days from 1-3-1979 i.e., on 1-4-1979. on the other hand, ex.x2 says that the first respondent ceased to be partner from 31-12-1978. in view of the contradictory versions in ex.b1 and x2 with regard to the date on which the first respondent retired from the firm and in view of the fact that there is no explanation for presenting ex.x2 stated to have been signed by the first respondent on 1-3-1979 before the registrar of firms only on 4-12-1981 no reliance can be placed on ex.b8 in support of the case of the first respondent.9. there is yet another.....
Judgment:
ORDER

Somasundaram, J.

1. The second respondent-garnishee in I.A. No. 1167 of 1980 in O.P. No. 1453 of 1980 on the file of theSub-Court, Coimbatore, is the appellant in this civil miscellaneous appeal. The petitioner in the said I.A. No. 1167 of 1980 is the first respondent in this civil miscellaneous appeal. The first respondent in the said application is the second respondent in this civil miscellaneous appeal. For the sake of convenience, the parties are referred to in this judgment as per their array in the Interlocutary Application.

2. The petitioner filed the application I.A. No. 1167 of 1980 in O.S. No. 1453 of 1980 on the file of the Sub Court, Coimbatore under O. 38, Rr. 5 and 11(a) read with O. 21, R. 49 and O.40 R.1 and S. 151, C.P.C., to call upon the first respondent to furnish sufficient security, failing which to order attachment before judgment of the share, interest, profit, credit and deposits to him in the partnership firm M/s. Raja Theatre at Coimbatore. The case of the petitioner in I.A. No. 1167 of 1980 is as follows:--

O.S. No. 1453 of 1980 has been filed by the petitioner-firm against the defendants for the recovery of a sum of Rs. 1,31,600/- together with interest at 18% per annum. The first respondent in I.A. No. 1167 of 1980 and his wife are the defendants in the said suit. The defendant are heavily involved in debts having borrowed moneys from various financiers throughout Tamilnadu. The defendants have disposed of the negatives and exhibition rights of the various films and secreted all the sale proceeds. The defendants have disposed of their valuable immovable properties. The immovable property viz., the house bearing door No. 83/11C Barathi Park Road, Coimbatore Standing in the name of the second defendant in the suit has been mortgaged and the equity of redemption is practically worth nothing. The first respondent owned 30% share in the partnership firm M/s. Raja Theatres. The other partners of the said firm are one Baskaran, the elder brother of the first respondent Viswanatha Chettiar and his sons Ravindranath and Sekar. The first respondent has been making attempts to dispose of his interest in the said partnership firm. Unless the first respondent's interest as partner in the properties and profits of the firm M/s. Raja Theaters are attached, the first respondent is likely to enter into somearrangement with the other partners of the said firm for transfering the same to them or to some third parties. On 31-10-1980 the lower Court passed an interim order in I.A. No. 1167 of 1980 directing interim attachment of the interest and share of the first respondent in the partnership firm M/s. Raja Theatres and the attachment was effected by pro-order on 15-11-1980. The first respondent remained ex parte in I.A. No. 1167 of 1980.

3. The second respondent filed a counter contending as follows:-- The first respondent had no interest in the partnership firm, M/s. Raja Theatres. Even long prior to the filing of the suit the first respondent ceased to have any interest in the partnership firm. Even otherwise the application for attachment is not maintainable in view of the fact that the partners of the firm have not been made parties in the garnishee proceedings. As per the agreement dated 1-3-1979 among Visvanatha Chettiar and his two sons on the one hand and the first respondent on the other the assets and liabilities of the first respondent in the partnership firm are to be taken over by Viswanatha Chettiar and his two sons in lieu of their discharging the debts due by the first respondent as a partner of the firm. The petitioner is not entitled to the relief in the application, because, the first respondent has no interest whatsoever in the firm M/s. Raja Theatre on the date of the filing of the application as well as on the date of the order of attachment.

4. The lower Court, on a consideration of the entire evidence on record, held that the first respondent did not retire from the firm M/s. Raja Theatres per the agreement dated 1-3-1979 marked as Ex. B1 in this case as alleged by the second respondent, and therefore the first respondent continued to have right, title and interest in the said partnership firm to an extent of 30% on the date of the filing of the application I.A. No. 1167 of 1980 and such right, title and interest of the first respondent in the partnership firm is liable to be attached, and consequently allowed the application and directed the attachment effected by pro-order on 15-11-1980 to be made absolute. As against the order of thelower court in I.A. No. 1167 of 1980 the second respondent-garnishee was filed this present civil miscellaneous appeal.

5. The two points which arise for consideration in this civil miscellaneous appeal are:

(1) Whether the first respondent had any right, title and interest in the firm M/s. Raja Theatres as on the date of attachment in Application I.A. No. 1167 of 1980 i.e., on 15-11-1980?

(2) Whether such right, title and interests of the first respondent in the firm M/s. Raja Theatres is liable for attachment before judgment in the suit under O. 38, R. 5, C.P.C.?

6. POINT No. 1:-- The interim attachment was ordered in I.A. No. 1167 of 1980 on 31-10-1980 and the attachment was effected by pro-order on 15-11-1980. Mr. M. R. Narayanaswami, learned counsel for the second respondent would submit that on both the dates referred to above the first respondent had no right, title and interest in the firm M/s. Raja Theatre as he retired from the said firm as early as on 31-12-1978. The agreement as Ex. B5 and the certified copy of Form 'A' maintained by the Registrar of Firms under S. 59 of the Indian Partnership Act marked as Ex. B.8 in this case will go to show that the first respondent was not having any interest in the partnership firm on the date of attachment and, therefore, the order of the lower Court directing attachment of the right, title and interest of the first respondent in the firm Raja Theatres is illegal. Now, let us examine how far the documents Exs. B1, B5 and B8 relied on by the learned counsel for the second respondent go to prove the case of the second respondent that the first respondent had no manner of right, title or interest in the partnership Raja Theatres after 31-12-1978. Ex. B1 is an unregistered agreement entered into between Vishwanatha Chettiar, the brother of the first respondent and his two sons Ravindranath and Sekar on the one hand and the first respondent on the other. A perusal of Ex. B1 shows that it is not a deed of dissolution of partnership firm M/s. Raja Theatres nor is it a deed by which the firstrespondent has actually transferred all his right, title and interest in the firm in favour of the other parties to the agreement, Ex. B1. Ex. B1 also does not show that the first respondent retired from the firm with effect from 31-12-1978. The recitals in Ex. B1 with regard to the another firms Raju Chettiar and Brother clearly show that some of the partners of the firm Raju Chettiar and Brother viz., Ravindaranath and Sekar and their mother Indrani Viswanathan actually retired from the said firm with effect from 31-12-1978 and the assets of the firm Raju Chettiar and Brother have become the absolute properties of the first respondent. On the other hand, the recitals in Ex.B1 with regard to the partnership firm Raja Theatres go to show that the other three partners Viswanathan and his two sons only agreed to take over the 30% share of the first respondent and the liabilities of the first respondent in the firm and for that purpose they have agreed to take a proper document from the first respondent on a later date. Such a (sic) subsequent transferring his 30% share in the partnership firm in favour of the other partners was not at all executed by the 1st respondent at a later date. Further, there is no recital in Ex.B1 to the effect that the first respondent retired from the partnership firm M/s. Raja Theatres with effect from 31-12-1978. A perusal of Ex.B1 shows that it is only an agreement to perform some acts in future in respect of the transfer of the rights and liabilities of the first respondent in the partnership firm Raja Theatres. By any stretch of imagination Ex.B1 cannot be construed as a document under which the first respondent actually transferred all his right title and interest in the partnership firm in favour of the other partners. As rightly held by the lower Court the agreement Ex.B1 is only executory in nature and it cannot transfer the right, title and interest of the first respondent in the firm M/s. Raja Theatres to Vishwanatha Chettiar and his two sons. In these circumstances it has to be held that Ex. B1 does not support the case of the second respondent that the first respondent retired from the firm M/s. Raja Theatres with effect from 31-12-1978 and that by executing Ex.B1 the first respondent has actually transferredall his right, title and interest in the firm in favour of the other partners with effect from 31-12-1978 as contended by learned counsel for the second respondent.

7. The learned counsel for the second respondent then placed reliance on Ex. B5 in support of his contention that the first respondent ceased to have any right, title and interest in the firm M/ s. Raja Theatres and he retired from the said firm as early as 31-12-1978. Ex. B5 is the ledger entry dated 31-12-1978 at page 392 of the ledger book of Raja Theatres. Ex. B5 shows that in the account of the first respondent a balance was struck as on 31-12-1978 and the amount available to his credit was distributed in favour of Viswa-natha Chettiar and his two sons. No reliance can be placed on Ex. B5 because it is a self-serving document and none of the partners viz., Vishwanatha Chettiar, his two sons and the first respondent have signed the ledger entry at page 392 of the ledger book of Raja Theatres. Further, the ledger entry dated 31-12-1978 at page 392, Ex. B5 is not supported by any receipt obtained from any one of the partners.

8. The third document relied on by the learned counsel for the second respondent in support of his contention is Ex.B8. Ex.B8 is the certified copy of Form A maintained by the Registrar of Firms under S. 59 of the Indian Partnership Act relating to the firm Raja Theatres. Ex. X1 is the original of Ex.B8. Ex.B2 is an application dated 1-3-1989 presented by one Kumar to the Registrar of Firms and signed by the outgoing partner the first respondent. The endorsement made by the Registrar of Firms in Ex.X2 shows that it was received by him only on 4-12-1981 though Ex.X2 was stated to have been prepared and signed by the first respondent on 1-3-1979. There was no explanation on the side of the second respondent as to why the form marked as Ex.X-2 alleged to have been executed by the first respondent on 1-3-1979 should be filed before the Registrar of Firms only on 4-12-1981. The recitals in Exs.B1 and X2 are contradictory to each other with regard to the actual date on which the first respondent retired from the firm M/s. RajaTheatres. In Ex.B1 it is stated that the first respondent would be retiring from the firm by executing a proper document within thirty days from 1-3-1979 i.e., on 1-4-1979. On the other hand, Ex.X2 says that the first respondent ceased to be partner from 31-12-1978. In view of the contradictory versions in Ex.B1 and X2 with regard to the date on which the first respondent retired from the firm and in view of the fact that there is no explanation for presenting Ex.X2 stated to have been signed by the first respondent on 1-3-1979 before the Registrar of Firms only on 4-12-1981 no reliance can be placed on Ex.B8 in support of the case of the first respondent.

9. There is yet another circumstance which goes to show that the first respondent had not retired from the firm M/s. Raja Theatres. Ex.A1 shows that the partnership M/s. Theatres is a partnership at will. In the case of a partnership at will, a partner can retire from the partnership by giving notice in writing to the other partners as contemplated in S. 31(1)(c) of the Partnership Act. S. 32(1) of the Partnership Act provides that a partner may retire with the consent of all other partners and in accordance with the express agreement between the partners or where the partnership is at will by giving notice in writing to the other partners of his intention to retire. In the present case there was no express agreement by the partners with regard to the retirement of the first respondent and there was no consent of all other partners for his retirement. As a result a notice in writing expressing his intention to the Partnership Act (sic). Admittedly such a notice as contemplated in S. 32(1)(c) of the Partnership Act was not given by the first respondent to the other partners of the firm. In such circumstances, the case of the second respondent that the first respondent had retired from the firm M/s. Raja Theatres with effect from 31-12-1978 cannot be true and valid in law. In these circumstances the lower Court rightly came to the conclusion that the first respondent did not retire from the firm M/s. Raja Theatres as per the agreement Ex.B1 dated 1-3-1979 with effect from 31-12-1978 and that the first respondent is having his rights, title and interest in the said partnership firm to an extent of 30%.

10. Point No. 2 :-- Mr. M. R. Narayanaswami, learned counsel for the second respondent would contend, that the petitioner has filed the suit O. S. No. 145 of 1980 against the first respondent and his wife for recovery of money on the basis of a promissory note in their individual capacity; the suit was filed neither against the partnership firm nor against the first respondent in his capacity as a partner of the firm; In such a suit the right, title and interest of the first respondent in the firm M/s. Raja Theatres is not liable for attachment under Order 38 Rule 5 C.P.C. The learned counsel for the second respondent further contended that in any event the attachment made in this case is invalid, because, the procedure laid down in Order 38 Rule 5 C.P.C., was not followed by the lower Court before ordering attachment. We are unable to accept the above contention of the learned counsel for the second respondent. The right, title and interest of a partner in a partnership firm is a saleable property and such right, title and interest of a partner in the partnership firm can be attached and sold. In Dhanaraja v. Motilal, AIR 1929 Mad 651 a Full Bench of this Court, while dealing with the question whether a partner's interest in a partnership firm can be attached and sold, answered the question in the affirmative and held as follows:--

'It cannot be and is not disputed that a partner's interest in a partnership is saleable property, within the meaning of S. 60, Civil P.C., and may be attached and sold in execution of a decree obtained against the partner by his creditor. See Parvatheesam v. Bapamma ILR (1890) Mad 447 and Jagat Chunder Roy v. Iswarchundar Roy ILR (1893) Cal 693. In both these cases reliance is placed upon the following observations of their lordships of the Privy Council in Deendyal v. Jagdeep ILR (1877) Cal 198, in which the question arose as to the rights of an execution creditor and of a purchaser at an execution sale, in regard to the interests of an undivided coparcener in the Hindu family. Their Lordships, in holding that such interest was liable to be attached and sold, observed as follows:

'It is sufficient to instance the seizure andsale of a share in a trading partnership, at the suit of a separate creditor of one of the partners. The partner could not have himself sold his share so as to introduce a stranger into the firm without the consent of his copartners; but the purchaser at the execution sale acquires the interest sold within the right to have partnership accounts taken, in order to ascertain and realize its value.'

When it is said that the right, title and interest of a partner in a partnership firm can he attached and sold, it can be done so only by proceeding against the firm i.e., only by proceeding against the right, title and interest of such partners in the partnership firm. In view of the decision referred above it has to be held that the right title and interest of the first respondent in the partnership firm is liable to be purchased against by the petitioner, who is the creditor of the first respondent.

11. It is a settled position of law that the interest of a partnership in the partnership property is movable property. In Narayan-appa v. Bhaskarakrishappa : [1966]3SCR400 the Supreme Court has held as follows :--

'The interest of the partners of a family in the partnership assets was moveable property, and the document evidencing the re-linquishment of that interest was not compulsorily registrablc under section 17(1) Registration Act'.

Once when it is held that the interest of a partner in a partnership firm is moveable property then, Order 21 Rule 46 (1) C.P.C is attracted. Order XXI Rule 40(1) CPC., prescribes the mode of attachment of debt, share and other property not in possession of judgment-debtor and the relevant portion of the Rule provides that in the case of the other moveable property not in the possession of a judgment-debtor, the attachment shall be made by a written order prohibiting the person in possession of the same from giving it over to the judgment-debtor. Order XXI Rule 46 (2) further provides that a copy of such order shall be affixed on some conspicuous part of the Court-house and another copy shall be sent in the case of the debt tothe debtor, in the case of the share, to the proper officer of the corporation, and in the case of the other moveable property (except as aforesaid) to the person in possession of the same. Order 38 Rule 11-A(1) provides that the provisions of C.P.C. applicable to an attachment made in execution of a decree shall apply to an attachment before judgment which continues after the judgment by virtue of provisions of Rule 11. In view of Order 38 Rule 11-A(1), the Court, while ordering attachment of movables before judgment under Order 38 Rule 5 C.P.C, has to follow the procedure prescribed in Qrder XXI Rule 46(1) and (2) C.P.C. In view of the above position of law it has to be held that the right, title and interest of the first respondent in the partnership firm M/s. Raja Theatres is liable for attachment before judgment under Order 38 Rule 5 C.P.C. In the affidavit filed in support of the petition T. A. No. 1167 of 1980 the petitioner has made out a case for attachment of the share in the property and credit and deposits due to the first respondent in the partnership firm M/s. Raja Theatres and in the application for attachment the petitioner requested the lower court to call upon the first respondent to furnish sufficient and sound security failing which to order attachment before judgment. The lower court by the order dated 31-10-1980 ordered interim attachment only, of the interest and share of the first respondent in the partnership firm and the lower court was right in doing so in view of the provision contained in Order 38 Rule 5(3) C.P.C. The first respondent remained ex parte and the order of attachment was effected by pro-order over the said rights of the first respondent in the partnership firm on 15-11-1980. In these circumstances, there is no merit in the contention of the learned counsel for the second respondent that the procedure prescribed in Order 38 Rule 5 C.P.C., was not followed by the lower court before ordering attachment before judgment.

12. In these circumstances, the lower court rightly held that first respondent did not reitre from the firm M/s. Raja Theatres with effect from 31-12-1978; that the first respondent has right, title and interest in the partnership firm M/ s. Raja Theatres to the extent of 30 and such right, title and interest of the first respondent in the firm is liable to be attachedand consequently made the order of interim attachment absolute. Hence the order of the lower court is not liable to be interfered with in this appeal. There are no merits in the civil miscellaneous appeal and the same is liable to be dismissed. Accordingly the civil miscellaneous appeal is dismissed. No costs.

13. Appeal dismissed.


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