Back
2018 Supreme(Mad) 1104
IN THE HIGH COURT OF JUDICATURE AT MADRAS
M. VENUGOPAL, S. VAIDYANATHAN, JJ.
BR & Co., Represented by its Partner, M.R. Rajaram Kumar - Appellant
Versus
The Reserve Bank of India, South Zone Office, Rep. by its Zonal Officer, Rajaji Salai, Fort Glacis, Chennai & Others – Respondents
Writ Appeal No. 667 of 2018 & C.M.P. Nos. 6389 & 6390 of 2018
Decided On : 28-03-2018
For the Appellant : A. Sundaravadhanan
Partnership firm's implied authority to borrow money for business purposes and the discretionary nature of relief under Article 226 of the Constitution of India
Headnote:
Financial Agreement - Partnership Firm - Indian Partnership Act, 1932 - Section 19
Fact of the Case:
The appellant, a partnership firm, challenged the freezing of its bank account by the third respondent bank. The appellant argued that it had not availed any loan from the bank and should not be held liable for the debt of another partnership firm with a common partner.
Finding of the Court:
The court found that the dispute between the parties arose from a financial agreement and should be resolved before the appropriate forum. The court also noted that a partnership firm is not a legal entity in the strict sense and that every partner has implied authority to borrow money for the firm's business.
Issues: Dispute arising from a financial agreement, freezing of bank account, liability of partnership firm for debt of another firm
Ratio Decidendi: Partnership firm's authority to borrow money, dispute resolution through appropriate forum, discretionary nature of relief under Article 226 of the Constitution of India
Final Decision: The court dismissed the Writ Appeal, finding no merit in the appellant's arguments and upheld the freezing of the bank account. No costs were awarded.
M. Venugopal, J.
Heard the learned counsel for the appellant/writ petitioner and perused the materials available on record. In view of the judgment that is being rendered, it is not necessary to issue notice to the respondents, as the Writ Appeal is being disposed of even at the stage of admission itself.
2. Earlier, the Learned Single Judge, while passing the impugned order dated 15.02.2018 in W.P. No. 331 of 2018 filed by the appellant/writ petitioner, at paragraph 6, has observed the following and disposed of the Writ Petition without expressing any view on the merits of the claim made by the respective parties:
"6. Upon hearing the learned counsels appearing on either side and considering the above facts and circumstances, this Court is of the view that the dispute between the parties is arising out of a financial agreement entered between them and therefore, if any dispute arises between them out of such agreement or in respect of any proceedings initiated in terms of the said agreement, this Court, while exercising the jurisdiction under Article 226 of the Constitution of India, undoubtedly, a discretionary jurisdiction, need not necessarily go into all those disputed question of facts, as it is for the parties to agitate the matter before the appropriate forum by filing appropriate proceedings. Initially, this Court was of the view that the matter would be settled between the parties by way of negotiations and hence, adjourned the matter on several occasions. However, as it appears that the parties are not willing to settle the matter amicably, it is for them to work out their remedy before the appropriate forum by filing appropriate proceedings. .. ..."
3. However, the Learned Single Judge has granted liberty to the appellant/writ petitioner-partnership Company to work out their remedy before the appropriate forum by filing appropriate proceedings.
4. Assailing the correctness, legality and validity of the impugned order passed by the Learned Single Judge in W.P.No.331 of 2018, the learned counsel appearing for the appellant/writ petitioner submitted that the learned Single Judge has failed to appreciate that the appellant/writ petitioner-partnership firm was not issued with any notice prior to the freezing of its Bank account, and hence, the impugned order passed by the learned Single Judge is liable to be set aside in the eye of law.
5. Added further, it is the submission of the learned counsel for the appellant that when there are secured assets to a sum of Rs.25,00,00,000/- for the loan given to the fourth respondent by the third respondent, without proceeding against the same, the third respondent/Authorised Signatory of Coimbatore Branch of IDBI Bank Ltd., had frozen the Bank Account of the writ petitioner, which cannot be countenanced under the tenets of law.
6. The Learned counsel for the appellant proceeds to take a plea that only after the request was made for issuance of a Demand Draft, the matter was informed and in fact, the third respondent-Bank has not taken steps to inform the freezing of the Bank Account or after the freezing of the Bank Account and in this regard, there has been negation of principles of natural justice.
7. Lastly, it is the contention of the Learned counsel for the appellant that the appellant/ writ petitioner-partnership firm had not availed of any loan from the Third Respondent/ Bank and just because one partner is common in both the appellant/partnership firm and the fourth respondent-partnership firm, it cannot make the appellant/partnership firm liable for the debt of the fourth respondent.
8. It comes to be known that the appellant/writ petitioner is a partnership firm having an account with the Third Respondent-Bank and according to the writ petitioner, before formation of the partnership firm, the amount was borrowed as Proprietorship concern in the same name and subsequent to the formation of partnership firm, the same account was operated by the partnership firm and the sa
