Important point
Liability of the partner of a partnership firm is joint and several and it is open to a creditor of the firm to recover the debt of the firm from any one or more of the partners.

Headnote:Civil Procedure Code, 1908—Sections 144 and 145; Order 21 Rules 50 and 58—Indian Partnership Act, 1932—Sections 24 and 25—Execution of decree against firm—Attachment of partnership property—Liability of a partner for acts of the firm—Effect of notice to the acting partner—A decree for Rs. 37,255.07 was passed against State of Rajasthan in respect of construction work of irrigation department under Arbitration Act—Money was recovered by the company, decree holder in the execution—Two securities were furnished against the said amount—Along with the surety bonds, one house was also furnished against security—Appeal filed by the State against the judgment and decree was allowed ex-parte by the High Court—Application u/s 144 Cr.P.C. moved by the State—State of Rajasthan impleaded the company and two sureties as respondents—‘D’ wife of exclusive owner of the house executed a Will bequeathing the house in favour of her daughter’s son, appellant—Attachment order in respect of that house was passed by the District Judge in Execution case—It was held that ‘D’ being partner of the firm had no right to execute the Will in respect of the disputed house—High Court held that the Will was prepared to defraud the creditor—Appellant directed to pay a sum of Rs. 1 lakh in full satisfaction of the claim made by State of Rajasthan —Till the sum of Rs. one lakh is paid, there will be a charge over the house property.
       Held : Section 24 is based on the principle that as a partner stands as an agent in relation to the firm, a notice to the agent is tantamount to the principles and vice versa. As a general rule, notice to a principal is notice to all his agents; and notice to an agent of matters connected with his agency is notice to his principal. Under Section 25, the liability of the partners is joint and several. It is open to a creditor of the firm to recover the debt from any one or more of the partners. Each partner shall be liable as if the debt of the firm has been incurred on his personal liability. (Paras 12 and 13)
       The above Rule 49 provides that no execution can issue against any partnership property except on a decree passed against the firm or against the partners in the firm as such. In the instant case, as already noticed, the State has obtained a decree against the partnership firm. The High Court has clearly held in its judgment that the Will was a created document to delay the recovery proceedings. It is further seen that the liability is not disputed by the firm or partners and that the terms of the order dated 12.2.1980 were required to be satisfied by the partners. (Para 18)
       The execution under this Rule can only be granted where a decree has been passed against a firm. A decree against the firm must perforce be in the firm’s name. Under this Rule, execution may be granted against the partnership property. It may also be granted against the partners, in which case the decree-holder may proceed against the separate property of the partners. (Para 20)
       We shall now advert to the submissions made by the learned Additional Advocate General appearing for the respondent-State. The starting point for the litigation is the decree dated 6.6.1970 passed against the State of Rajasthan in respect of the construction work of irrigation department. An appeal was preferred by the State of Rajasthan on 12.2.1980, an application under Section 144 C.P.C. was moved on behalf of the State on 2.4.1981 and Smt. Dhanwanti Devi executed a Will on 7.12.1983 and died in the month of May, 1985. In May, 1987, the District Judge, Sri Ganganagar allowed the application filed by the State of Rajasthan under Section 144 C.P.C. The attachment of the property was made of the house in question on 21.11.1992. Several other proceedings were taken thereafter by both the parties opposing attachment and the execution etc. Ultimately, the District Judge dismissed the application filed under Order 21 Rules 49 and 50 C.P.C. and the Review Application was also dismissed on 5.9.1998. Thereupon the appellant filed S.B. Civil Execution First Appeal No. 2 of 1998 and the said appeal was dismissed on 12.11.2003. Now the parties are in this Court. (Para 23)
       It is not in dispute that the decree amount of Rs. 37,593/- was received by the State on 17.10.1992. The dispute between the parties is only with reference to the interest on the principal amount of Rs. 37,593/- as on 17.10.1992, which according to the State, was payable by the Firm. A sum of Rs. 61,890/- was arrived at as interest on Rs. 37,593/- as on 17.10.1992. (Para 24)
       It is true that justice must be done at all costs. At the same time, we should not also forget that the justice should be tempered with mercy. Asking a party to pay interest on Rs. 37,593/- at 18% p.a. from 17.10.1992, in our considered opinion, is on the high side and excessive. This apart, asking both the parties to continue the execution proceedings at this distance of time is also not proper. The State has to wait for some more time to realise the fruits of the decree. (Para 25)
       The total interest payable on Rs. 37,593/- from 17.10.1992 as on today @ 18% p.a. comes to Rs. 1,49,848/- (Rs. 87,958/- + Rs. 61,890/-) By this order, we are directing the appellant to pay a sum of Rs. 1,00,000/- in full satisfaction of the claim made by State of Rajasthan. The difference will be only Rs. 49,848/-. For recovery of the same, we need not direct the parties to proceed further in the execution at this distance of time. Though the interest is claimed at 18% p.a. by the State, we cannot also shut our eyes at the prevailing bank rate for fixed deposits and for lending which is not more than 6-7%. (Para 26)

Judgment

Dr. AR. Lakshmanan, J.—Leave granted.

2. The unsuccessful appellant in S.B. Civil Execution First Appeal No. 2 of 1998 before the High Court of Rajasthan is the appellant before us by special leave. The appeal is preferred against the judgment and final order dated 12.11.2003 passed by the High Court of Rajasthan in S.B. Civil Execution First Appeal No. 2 of 1998 whereby the appeal preferred by the appellant was dismissed.

3. Briefly stated, the facts are that a decree for Rs. 37,255.07 was passed against the State of Rajasthan on 6.6.1970 in respect of the construction work of irrigation department under Arbitration Act in case No. 4 of 1969 entitled Sharma & Co. vs. State of Rajasthan. The said company filed execution and recovered Rs. 37,592.57. As against the said amount, two securities were furnished, one by Shri Gurbachan Singh for Rs. 2927.57 and another by Smt. Kamla for Rs. 37,592.57. Along with the aforesaid surety bonds, House No. 79B Block Sri Ganganagar was also furnished against security. The appeal preferred by the State of Rajasthan against the aforesaid judgment and decree was allowed ex parte by the High Court. An application under Section 144 of C.P.C. was moved on behalf of the State which was registered as Civil Misc. Case No. 2 of 1981. The State of Rajasthan impleaded Sharma & Co., Smt. Kamla Devi and Shri Gurbachan Singh as respondents to the said proceedings. Smt. Dhanwanti Devi, the wife of Shri Shiv Lal Sharma was the exclusive owner of House bearing No. 80B Block Sri Ganganagar. She executed a Will dated 7.12.1983 bequeathing the aforesaid house in favour of her daughter’s son Ashutosh. Smt. Dhanwanti Devi died in May, 1985. It is stated that the probate proceedings are pending in respect of the aforesaid Will. The District Judge, Sri Ganganagar allowed the application filed by the State of Rajasthan under Section 144 C.P.C. and held that the action can be taken against Smt. Kamla Devi and that the applicant-State was entitled to interest from Sharma & Co. and that the aforesaid application was maintainable under Sections 144 & 145 C.P.C. The Court while allowing the said application held as follows:

“On the basis of the above discussions, we reach to the conclusion that this application is maintainable under Sections 144, 145 C.P.C. against the non-applicant Nos. 1 and 2 and the applicant is fully entitled to get the action taken. Recovery against non-applicant No.2 be made up to the extent of Rs. 35,592.57 as per the security while the action for the recovery for the interest amount of Rs. 37,592.57 @ Rs. 1.1/2 per hundred per month that would be worked out from the date of filing the application dated 21.4.1981 will be taken against non-applicant No.1.”

4. The attachment order in respect of House No. 80B Block Sri Ganganagar was passed by the District Judge in Execution Case No. 2 of 1989 on 21.11.1992 on the application of the State. It was reiterated that the aforesaid house exclusively belonged to Smt. Dhanwanti Devi and she had bequeathed the same in favour of the appellant - Ashutosh on 7.12.1983 and that Smt. Dhanwanti Devi was not a party to the suit at any point of time. It was prayed that House No. 80B Block Sri Ganganagar be released in his favour as the same can not be attached in execution. It was further alleged that the appellant-Ashutosh had become the exclusive owner of the house pursuant to the Will executed by Smt. Dhanwanti Devi in his favour and no other person had any title or interest in the same house. The State of Rajasthan filed reply to the application under Order 21 Rule 58 C.P.C. It was asserted that Smt. Dhanwanti Devi was the partner of the aforesaid firm to the extent of 12½ paise and she was liable for payment of suit liability. It was also stated that Smt. Dhanwanti Devi had executed the Will in order to escape from her liability to the suit claim. The Additional District and Sessions Judge dismissed the application under Order 21 Rule 58 C.P.C. filed by the a

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2005 Supreme(SC) 1111

Important pointLiability of the partner of a partnership firm is joint and several and it is open to a creditor of the firm to recover the debt of the firm from any one or more of the partners.

Cases Referred (4)

Important point
Liability of the partner of a partnership firm is joint and several and it is open to a creditor of the firm to recover the debt of the firm from any one or more of the partners.