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National Textile Corporation Ltd., Unit, Coimbatore Murugan Mills Ltd. Vs. C.M. Joseph and ors. - Court Judgment

LegalCrystal Citation
SubjectCivil
CourtChennai High Court
Decided On
Reported in(1998)2MLJ195
AppellantNational Textile Corporation Ltd., Unit, Coimbatore Murugan Mills Ltd.
RespondentC.M. Joseph and ors.
Cases ReferredKukumchand Insurance Co. Ltd. v. Bank of Baroda
Excerpt:
- .....states as follows:execution of decree against firm: (1) where a decree has been passed against a firm, execution may be granted: (a) against any property of the partnership.(b) against any person who has appeared in his own name under rule 6 or rule 7 of order 30 or who has been admitted on the pleadings that he' is, or who has been adjudicated to be, a partner;(c) against any person who has been individually served as a partner with a summons and has failed to appear;provided that nothing in this sub-rule shall be deemed to limit or otherwise affect the provisions of section 30 of the indian partnership act, 1932. (2) where the decree holder claims to be entitled to cause the decree to be executed against any person other than such a person as is referred to in sub-rule (1), clauses.....
Judgment:
ORDER

K. Govindarajan, J.

1. The petitioner filed the sut in O.S. No. 231 of 1983 on the file of the Sub Court, Coimbatore for recovery of a sum of Rs. 60,310.21. In the said suit, he impleaded two defendants, one Janab Ibrahim, Proprietor, AMN Textiles and J & J Enterprises, represented by its parnters. In the said suit, the petitioner came forward with the plea that under an agreement dated 1.4.1982 the second defendant, who is the third respondent in C.R.P. No. 762 of 1993 became a selling agent of the petitioner/plaintiff in respect of various goods and products manufactured by it. According to the petitioner in due course of the business, the second defendant/third respondent took orders with the petitioner from time to time for supply of goods to the first defendant/fourth respondent in C.R.P. No. 762 of 1993. In respect of the goods purchased by the first defendant/fourth respondent from the petitioner/plaintiff, a sum of Rs. 57,514.36 was payable by the first defendant/fourth respondent to the petitioner. Since the amount was not paid, they filed the suit. The said suit was decreed on 2.2.1984. The first defendant has submitted to the decree. To execute that decree, the petitioner filed E.P. No. 60 of 1988. Originally the petitioner impleaded the defendants 1 and 2. The petitioners sought to attach and bring the properties of the first respondent herein, in C.R.P. No. 762 of 1993. He filed an application in E.A. No. 78 of 1989 under Section 47, read with Section 151 of the Civil Procedure Code to hold and order the execution proceedings initiated against him are not maintainable. According to the first respondent, he was only a dormant partner and the third respondent firm was impleaded as first respondent/defendant in the suit, appeared through its partner. P. Jacob, who alone signed the vakalath. Though he took time to file a written statement, he did not file the same, but, on the other hand submitted to the decree. It is the case of the first respondent that no notice was served in the suit at any time and he did not authorise the second respondent to do anything on his behalf. On the other hand, the second respondent did not inform the petitioner about the developments of the suit. The first respondent came to know of the present proceedings only after the receipt of the notice in the execution petition. According to him, the act on the part of the second respondent is nothing but a fraud. The fifth respondent, admittedly, is a principal-debtor and no decree is passed against him. Though the plaintiff/ petitioner filed an application in I.A. No. 432 of 1986 to irnplead him under Order I, Rule 10 of the Code to enable the fifth respondent to substitute him in the place of fourth respondent, that was dismissed on 2.2.1987. It is further stated that the third respondent-firm is only an indenting agent and so they are guarantor. Having failed to secure a relief against the fourth and fifth respondents, the liability of the third respondent also disappears. Moreover, the remedy against the fourth respondent is clearly time-barred not only by efflux of time but also on principles of res judicata and estoppel. The said application was contested by the first respondent/plaintiff. The fact stated therein was not denied. The main defence in the said application was, since the first respondent is the partner of the third respondent-firm, he is also liable for the decree amount. Accepting the case of the first respondent, the court below allowed the petition filed by him. Aggrieved against the same, the petitioner has filed the above revisions.

2. The petitioner/plaitniff has impleaded the third respondent-firm in C.R.P. No. 762 of 1993, represented by its partner, the second respondent herein, P. Jacob. It is also not in dispute that in the suit, the fifth respondent herein the principal judgment-debtor was not impleaded as defendant and no decree is passed against him. He also died and no steps to implead the legal representatives have been taken. The first respondent was subsequently impleaded in the execution proceedings. On the basis of the abovesaid undisputed facts, now it has to be decided whether the petitioner/plaintiff is entitled to proceed with the property of the first respondent herein.

3. The decree obtained against the partnership firm has become final. Since there is no dispute regarding the status of the said firm, the first respondent cannot be heard to say that the decree will not bind on him and he is not liable for the debt, merely on the ground that he was not a party to the suit. I can seek aid in support of my conclusion from the decisions in Kuppusami Mudaliar v. Polite Pictures : AIR1955Mad154 in Gambhir Mai v. J.K. Jute Mills : [1963]2SCR190 and in J.K. Jute Mills Co. Ltd. v. Firm Birdhichand : AIR1958All176 .

4. If a decree is passed against a firm, and such a decree is capable of being executed against the property of the partnership and also against the persons individually either who appear in answer to the summons served on them as parnters and admit that they are partners or were found to be so, or partners who were summoned or persons who were summoned as partners, but stayed away, such a decree can also be executed against the persons, who were not summoned in the suit as partners. But Rule 50(2) of Order 21 of the Code gives them an opportunity of showing cause, and the plaintiff must prove their liability.

5. In this case, admittedly, the first respondent was not served with summons in the suit. For the first time, as stated earlier, he was impleaded in the execution petition. So, he is entitled to have an opportunity of showing cause under Order 21, Rule 50(2) of the Code, as to why his property could not be proceeded against, for the liability of the said firm.

6. Admittedly, in this case, such a petition under Order 21, Rule 50 of the Code was not filed. On that basis the court below found that the execution proceedings cannot be allowed to be proceeded with against the first respondent. The learned Counsel appearing for the petitioner has submitted that merely because such a procedure has not been followed, the liability of the firm cannot be taken away and so long as the said firm is liable for the decree amount, the first respondent herein cannot escape from his liability. Order 21, Rule 50 of the Code states as follows:

Execution of decree against firm: (1) Where a decree has been passed against a firm, execution may be granted: (a) against any property of the partnership.

(b) against any person who has appeared in his own name under Rule 6 or Rule 7 of Order 30 or who has been admitted on the pleadings that he' is, or who has been adjudicated to be, a partner;

(c) against any person who has been individually served as a partner with a summons and has failed to appear;

Provided that nothing in this sub-rule shall be deemed to limit or otherwise affect the provisions of Section 30 of the Indian Partnership Act, 1932. (2) Where the decree holder claims to be entitled to cause the decree to be executed against any person other than such a person as is referred to in Sub-rule (1), clauses (b) and (c), as being a partner in the firm, he may apply to the court which passed the decree for leave, and where the liability is not disputed, such court may grant such leave, or, where such liability is disputed, may order that the liability of such person be tried and determined in any manner in which any issue in a suit may be tried and determined.

This Rule deals with the execution of the decrees obtained against the firms. It enables a decree to be executed against partnership assets. It also enables the decree that may be executed against any one who appeared in the suit and admitted that he was a partner who was lawfully adjudged in the suit to be a partner. It also enables that the decree may be executed against any person lawfully summoned in the suit as a partner but who did not choose to appear individually to defend the action. It also provides that if it is desired to execute the decree against a personas being a partner of a firm who is not able to categories the abovementioned, then the leave of the court must be obtained and the court before granting such a leave should summon that person whose liability, unless he admits, should be tried as an issue.

7. While construing the scope of the said provision, Ismail, J. as he then was, in Ravindra Finance Co. v. Yasani Tobacco Co. Limited : AIR1979Mad25 cited supra, has held as follows:

Thus, there is the clear difference between the partners being personally parties to the decree and they being not parties to the decree. In fact, Clauses (b) and (c) of Sub-rule (1) of Rule 50, Order 21, C.P.C. will clearly show that the partners should have appeared in their own name under Rule 6 or Rule 7 of Order 30, C.P.C, or should have been admitted on the pleadings that they are, or have been adjuged to be, partners, or summons in the suit should have been individually served on them and they must have failed to appear. Only in such cases, the decrees can be executed against the partners. In all other cases Sub-rule (2) of Rule 50, Order 21, C.P.C. applies, which enables the court which passed the decree to grant leave. In this particular case, the respondents 2 and 3 have not appeared in their own name under Rule 6 or Rule 7 of Order 30, C.P.C. They have not been admitted on the pleadings that they were, or were adjudged to be, partners, and no summons in the suit had been served on them individually. In those cirucmstnaces, neither clause (b) nor clause (c) of Sub-rule (1) of Rule 50, Order 21, C.P.C. will apply and therefore, the learned Judge was right in dismissing the application filed by the petitioner herein.

8. The Court below following the decision in Sri Laxmi Ganapathy Mills v. C. Radhakrishnan (1990)1 L.W. 12 i rejected the case of the first respondent and held that the execution application is maintainable in spite of the fact that no such leave is obtained under Order 21, Rule 5.0 of the Code. The said finding is sustainable. In this application filed by him under Section 47 of the Code, the first respondent herein has got opportunity to raise all his defence which he is entitled in law. So merely because the petitioner has not filed a separate application under Order 21, Rule 50 of the Code, it cannot be said that the execution petition against the first respondent, has to be rejected, if otherwise it is maintainable. After all the said provision is provided only to give an opportunity to the first respondent to defend his case. Such an opportunity is given in the present application.

9. The first respondent has raised an objection saying that under Section 19(2)(c), (e) of the Indian Partnership Act 1932, the second respondent was not empowered to submit to the decree as has been done by him in this case and so such a decree will not bind on them. That was accepted by the court below.

10. The learned Counsel appearing for the first respondent relying on the decision in Chainraj Ramchand v. V.S. Narayanswamy : AIR1982Mad326 , wherein the Division Bench of this Court has-held as follows:

Section 19(2) of the Partnership Act, 1932 clearly lays down that in the absence of any usage or custom of trade to the contrary, the implied authority of a partner does not empower him to compromise or relinquish any claim or portion of a claim by the firm or to withdraw the suit or proceeding filed on behalf of the firm. This section makes it clear that unless there is an express authority given to a partner by all the partners, that partner cannot compromise the claim or withdraw a suit.

In the abovesaid decision, on the basis of some compromise, said to have been entered into between a person representing the firm and defendants, the defendants filed an application to record the compromise. The plaintiff firm contested the said application on the ground that one Mohanlal Chainraj who was not partner of the plaintiff-firm had entered into a compromise and the same cannot be put against the plaintiff-firm. Accepting the case of the plaintiff, the Division Bench, rejected the application filed by the defendants. So, the said decision cannot be relied on in support of the case of the first respondent herein.

11. The Apex Court in : [1963]2SCR190 , cited supra, while dealing with the nature of the defence which could be taken by such a partner, where the decree was passed against the firm, has held as follows:

The suit, however, proceeds only against the firm. Any person who is summoned can appear, and prove that he is not a partner and never was; but if he raises that defence, he cannot defend the firm. Persons who admit that they are partners may defend the firm, take as many pleas as themselves....

The decree can also be executed against persons who were not summoned in the suit as partners, but Rule 50(2) of Order 21 gives them an opportunity of showing cause and the plaintiff must prove their liability. This enquiry does not entitle the person summoned to reopen the decree. He can only prove that he was not a partner, and in a proper case, that the decree is the result of collusion, fraud or the like. Once he admits that he is a partner and has no special defence of collusion, fraud, etc., the Court must give leave forthwith.

12. The Apex Court, in the abovesaid decision, while dealing with the scope of liability of a partner who was not a party to the suit, has held further as follows:

The proper meaning thus is that primarily the question to try would be whether the person against whom the decree is sought to be executed was a partner of the firm. When the cause of action accrued, but he may question the decree on the ground of collusion, fraud or the like but so as not to have the suit tried over again or to raise issues between himself and his other partners. It is to be remembered that the leave that is sought is in respect of execution against the personal property of such partner and the leave that is granted or refused affects only such property and not the property of the firm. Ordinarily when the person summoned admits that he is a partner, leave would be granted, unless he alleges collusion, fraud or the like.

13. Similar view has been taken by the Apex Court in Mandated Devi v. M. Ramnarain (P) Ltd. : [1965]3SCR421 .

14. Even in : AIR1958All176 , cited supra, the learned Judge has held as follows:

The ground on which execution is sought against a partner by the decree-holder under Rule 50(2) is that he is a partner, and since the partner sought to be made liable had no opportunity, before, to meet the decree-holder's contention, the only matter to be enquired into was whether the decree-holder's allegation that he was a partner was correct or not.

15. In the present case, it is not in dispute that the first respondent is the partner of the said firm. The only contention that was raised before the court below is that no authorisation was given to the second respondent herein to submit to the decree. This is an inter se dispute between the first and second respondents. By raising that issue, the first respondent cannot nullify the decree. This position has already been clarified, by the Apex Court in the decision cited supra. Only to support the contention that the first respondent authorised the second respondent to submit to the decree, the first respondent has raised the plea of fraud. So, such a contention also cannot be sustained.

16. The next contention that was raised before the court below and was accepted by it is that without getting any decree against the principal judgment-debtor, there cannot be any decree against the other defendants. In this case, admittedly, the fifth respondent is the principal judgment-debtor and no decree was obtained against him. It is also submitted that now the fifth respondent is dead and there cannot be any execution proceedings against the fifth respondent, and so the liability of the surety is also discharged. Even such submission cannot be accepted, in view of the decision of Shivaraj Patil, J., in Balakrishnah v. H. Chunnilal Bagwar : 1997(2)CTC523 , wherein the learned Judge, following the decision of the Apex Court in State Bank of India v. Indexport Registered and Ors. : AIR1992SC1740 and in Kukumchand Insurance Co. Ltd. v. Bank of Baroda : AIR1977Ker204 has held as follows:

Since the judgment of the Apex Court is directly on the point, it is not possible for me to take a different view interpreting Section 128 of the Indian Contract Act, as is sought to be done by the learned Counsel for the petitioner. On this ground alone, this civil revision petition is liable to be dismissed.

17. In view of the above discussions, the orders of the court below cannot be sustained and they are set aside. Consequently, E.A. No. 78 of 1989 is dismissed and C.R.P. Nos. 762 and 763 of 1993 are allowed; consequently, E.P. No. 66 of 1988 is directed to be proceeded further. No costs.


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