Legal heirs of a deceased partner are liable for partnership debts only to the extent of inherited assets, excluding personal liability beyond that scope.

ORAL ORDER

The petitioners have challenged an order dated

03.04.2012 passed by the respondent No.2 in Case No.J.R.D/U.B.F/1525/2006-07 as well as an order dated

30.12.2017 passed by the Karnataka Appellate Tribunal, Bengaluru, in Co-operative Appeal No.318/2012.

2. The facts in brief are that, the respondent No.1, which is a co-operative Society registered under the Karnataka Co-operative Societies Act, 1959 had advanced a pledge loan of Rs.22,50,000/- to M/s. Pushpak Motors on the security of 72 brand new Yamaha motorcycles. The said loan became recoverable and proceedings were initiated by the respondent No.1 for recovery of Rs.18,47,850/- and Rs.13,12,763/- being the interest and penal interest thereon.

3. During the pendency of the proceedings, one of the partners named Mr. S. Ravi, the predecessor of the petitioners died on 16.08.2001. Later, another partner died on 25.06.2006. The respondent No.1 adduced evidence and produced documents to substantiate its claim for recovery. The petitioners being the legal heirs of the said Mr. S. Ravi also entered the witness box and adduced evidence and produced Exs.R1 to R9. The respondent No.2 passed an award dated 03.04.2012 awarding a sum of Rs.31,60,613/- along with interest and penal interest stated therein, recoverable from the petitioners and the other partner of the Firm. The petitioners thereafter challenged this order before the Karnataka Appellate Tribunal (for short, ‘the Tribunal’) in Co-operative Appeal No.318/2012. The said appeal was also dismissed in terms of an order dated 30.12.2017.

4. Being aggrieved by the same, the petitioners are before this Court.

5. Respondent No.1 has filed statement of objections inter alia contending that the petitioners being the legal representatives of the deceased Mr. S. Ravi and having inherited the estate of the deceased are liable to discharge the debt of the deceased to the respondent No.1 - co-operative Bank and sought to justify the impugned orders.

6. Learned counsel for the petitioners contended that the petitioners were not the members of the respondent No.1 and they were not the ones who had availed the loan from the respondent No.1. They were not even the guarantors to the respondent No.1 and were not the partners of the firm. Therefore, he contends that the impugned order passed by the respondent No.2 directing recovery of Rs.31,60,613/- from the petitioners is illegal and improper. He also contends that as per the partnership deed, the death of Mr. S. Ravi did not result in dissolution of the Firm and the partners were entitled to continue the business. He, therefore, contends that the petitioners are not liable and it is only the Firm which is liable for the dues. He also contends that the loan was sanctioned to the respondent No.1 against the pledge of 72 brand new motorcycles and therefore, the loan had to be recovered by proceeding against those pledged items and not against the petitioners. He also contends that the motorcycles which were pledged were in the custody of the respondent No.1 and therefore, respondent No.1 had all the means to proceed against the pledged property to recover the outstanding loan.

7. Per contra, the learned counsel for the respondent No.1 submits that the petitioners being the legal heirs of Mr. S. Ravi, who was a partner of the Firm, are equally liable to meet the liability of their predecessor. He, therefore, contends that the impugned award passed by the respondent No.2 is just and proper and does not call for any interference.

8. The learned Additional Government Advocate submitted that the petitioners being the legal heirs of the partner of the Firm are liable for the dues of the Firm.

9. I have considered the submissions of the learned counsel for the petition