WRIT PETITION NO. 7066 OF 2017

8th November 2019

Petitioner Counsel: Shri Shyam Dewani
Respondent Counsel: Shri R.L. Khapre Shri Sudhanshu Joshi
Act Name: Code of Civil Procedure, 1908 Indian Arbitration Act, 1940 Indian Partnership Act, 1932 Indian Contract Act, 1872 Income Tax Act, 1961 Registration Act, 1908

HeadLine : Execution of decree passed against the erstwhile partners of partnership firm – Attachment of property of firm - Choice of decree holder to execute decree - Availability

Section :
Section 20 Indian Arbitration Act, 1940 Section 24 Indian Partnership Act, 1932 Section 25 Indian Partnership Act, 1932 Section 30 Indian Partnership Act, 1932 Section 40 Indian Partnership Act, 1932 Section 45(1) Indian Partnership Act, 1932 Section 48 Indian Partnership Act, 1932 Section 49 Indian Partnership Act, 1932 Section 50(2) Code of Civil Procedure, 1908 Section 128 Indian Contract Act, 1872 Section 189(3) Income Tax Act, 1961 Section 17(1) Registration Act, 1908

Cases Cited :
Para 18: Ashutosh Vs. State of Rajasthan and Others, (2005) 7 SCC 308
Para 18: Dena Bank Vs. Bhikhabhai Prabhudas Parekh & Co.,
Para 18: ITO (III) Vs. Arunagiri Chettiar,
Para 19: State Bank of India Vs. M/s. Indexport Registered and Others, (1992) 3 SCC 159
Para 20: Karri Venkayyamma Vs. Goluguri Tirapayya, AIR 1955 Madras 32
Para 20: Yakub Ibrahim Vs. Gulamabbas and others, AIR 1958 Bom. 51
Para 20: Central Glass Factory (Madras) Vs. Special Commercial Tax Officer, Non-Resident Circle, Hyderabad, 1965 SCC OnLine AP 237
Para 20: Manohar Lal & Padam Prakash Vs. Commissioner of Income Tax and another, 1987 SCC OnLine All 885
Para 20: S.V. Chandra Pandian and Others Vs. S.V. Sivalinga Nadar and Others, (1993) 1 SCC 589

JUDGEMENT

Heard Shri Shyam Dewani, the learned counsel for the petitioners, Shri R.L. Khapre, the learned counsel for respondents 1 to 6 and Shri Sudhanshu Joshi, the learned counsel for respondents 17 to 19.

2. Petitioner Shri Jitendra Diwanchand Bhutani, who is admittedly a judgment-debtor, preferred an application Exhibit-93 in Regular Darkhast 487/2006, the prayer clause of which reads thus:
Prayer:- It is therefore prayed that the Honourable Court may kindly please to:
a) Order for executing the decree passed in the matter firstly against the properties mention in para 5 of the application, which are admittedly belonging to the original partners and in respect of one of the property, an order of injunction was passed in the matter, in the peculiar facts and circumstances of the case and in the interest of justice:
b) grant any other relief as may be deemed, fit and proper in the circumstances and interest on justice may require.

3. Vide the order impugned dated 16.08.2017 the Executing Court rejected the application Exhibit-93.

4. Being aggrieved, the judgment-debtor is invoking this court writ jurisdiction.

5. The litigation as a checkered and tortuous history. Not surprisingly, the learned counsel for the judgment-debtor Shri Shyam Dewani invoked several provisions of the Indian Partnership Act, 1932 and the Civil Procedure Code, 1908 to persuade me to hold that the order impugned is unsustainable. However, in my considered view, the submissions advanced are not only devoid of substance, the submissions bring in sharp focus the desperation of the judgment-debtor to somehow or the other prevent and deprive the decree holders from enjoying the fruits of the decree.

6. Before the submissions are considered, the bare essential facts may be noted.

7. Disputes qua the rendition of accounts and the distribution of the profits of a partnership firm led to filing of petition under Section 20 of the Indian Arbitration Act, 1940 (‘Arbitration Act’) which was initially registered as MJC 441/1969 and subsequently re-registered as Regular Civil Suit 54/1974. The suit was dismissed vide judgment dated 26.02.1980 as barred by limitation. The judgment and decree of dismissal was challenged in First Appeal 108/1980 which was decided by this Court vide judgment dated 21.09.1989. The appeal was partly allowed and the Civil Judge was directed to appoint an Arbitrator and refer the dispute to the appointed Arbitrator in view of the arbitration agreement in the partnership deed.

8. The dispute was referred to the learned Arbitrator Shri Onkar Chagani who delivered an award dated 22.03.1993, the operative part of which reads thus:
Now therefore, on consideration of the claims made by the claimants, I do hereby make this Award that the Respondent jointly and severally to pay to the claimants a sum of Rs. 50,22,486 (Fifth Lakhs Twenty Two Thousand Four Hundred Eighty Six only) plus simple interest at the rate of 9% p.a. on the principle amount of Awarded sum of Rs. 15,88,416.00 from the date of Award till the date of decree or actual payment whichever is earlier and the cost of Arbitration proceedings of Rs. 3000/- as awarded.

9. It is not in dispute that the award dated 22.03.1993 was made Rule of the court, which judgment and order was confirmed by this Court in First Appeal 444/2006 and the special leave petition challenging the judgment of this Court was dismissed.

10. The substratum of application Exhibit-93, which is rejected by the order impugned, may now be noticed.

11. The judgment-debtor referred to the provisions of Order XXI, Rule 50 of the CPC and provisions of Section 45(1), 48 and 49 of the Indian Partnership Act, 1932 to contend that the decree be first executed against the properties mentioned in paragraph 5 of the application, which are (i) land and building situated at plot 9, Old Nehru Nagar, Bhilai and land and building situated at Bhilai G.E. Road, Powerhouse, Bhilai. The contention is premised on the judgment-debtor being one of the legal representatives of one of the partners of the firm Shri Diwanchand Bhutani, and the assumption that property standing in the name of the firm or its original partners or a person directly inheriting such property is required to be first attached in execution of the decree.

12. The decree holder resisted application Exhibit-93, inter alia on the ground that identical or similar objections were either raised and rejected or could have been raised and were not raised, and the principle of res judicata and in any event constructive res judicata would come into play. The decree holder contended that the award dated 22.03.1993 and the decree which made the award Rule of the court is joint and several and the decree holder is therefore, entitled to execute the decree against the judgment-debtor and the property of his choice and any other view would fall foul of the position of law settled by the enunciation by the Supreme Court. The decree holder contended that in execution, the court is not entitled to go behind or beyond the decree.

13. The Executing Court held, and rightly so, that the provisions of Order XXI, Rule 50 of the CPC are not attracted since the judgment-debtor was admittedly a party to the original proceedings which culminated in the joint and several decree. The Executing Court held that since the decree is joint and several against defendants 1 to 10, entertaining the objections as formulated would be going beyond the decree which is clearly impermissible.

14. The submissions of the learned Counsel Shri Shyam Dewani for the judgment-debtor may now be considered.
The first submission is that the order impugned is inconsistent with the provisions of Section 50(2) of the Civil Procedure Code (“Code” for short), which read thus :
“50. Legal representative— (1) ----------
(2) Where the decree is executed against such legal representative, he shall be liable only to the extent of the property of the deceased which has come to his hands and has not been duly disposed of; and, for the purpose of ascertaining such liability, the Court executing the decree may, of its own motion or on the application of the decree-holder, compel such legal representative to produce such accounts as it thinks fit.”
The submission is absolutely meritless and is rejected. The judgment-debtor is a party to the original proceedings. Section 50(2) of the Code is of no relevance since the decree is not being executed against the legal representative.

15. Shri Shyam Dewani, learned Counsel then relies on the provisions of Order XXI Rule 49 of the Code. The said provision is of no relevance and the submission of the learned Counsel Shri Shyam Dewani is incomprehensible. Rule 49 stipulates that save as otherwise provided by the said rule, property belonging to a partnership shall not be attached or sold in execution of a decree other than a decree passed against the firm or against the partner in the firm as such. The issue involved in the present case is whether the judgment-debtor can insist that the decree-holder first proceed against the property belonging to the firm.

16. Shri Shyam Dewani, learned Counsel then refers to Order XXI Rule 50 of the Code which provides that where a decree has been passed against a firm, the execution may be granted not only against any property of the partnership, but also against any person who has appeared in his own name under Rule 6 or Rule 7 of Order XXX of Code or who has admitted on the pleadings that he is, or who has been adjudged a partner.
The proviso states that the provisions of Section 30 of the Indian Partnership Act, 1932 shall not be deemed to be limited or affected by sub-rule (1) of Rule 50 of Order XXI of the Code.
The reliance on the said provision is clearly misplaced, considering that the decree is being executed against a party-defendant. Rule 50 of Order XXI of the Code is an enabling provision which entitles a decree-holder to execute the decree passed against a firm not only against any property of the partnership firm, but also against persons falling in the categories envisaged in sub-rule (1)(b) and (c). Again, in the context of the facts, the said provision is of no relevance.

17. Shri Shyam Dewani, learned Counsel would then refer to and rely upon the provisions of Sections 40, 48 and 49 of the Indian Partnership Act, 1932. Section 40 deals with dissolution of the firm by agreement, Section 48 deals with the mode of settlement of accounts between the partners and Section 49 deals with payment of firm debts and of separate debts. Shri Shyam Dewani, learned Counsel would submit that conjoint reading of the aforesaid provisions would suggest that if there is property owned by the partnership firm, the decree-holder is required to first proceed against the said property. The submission is noted only for rejection. Section 49 provides that where there are joint debts due from the firm and also separate debts due from any partner, the property of the firm shall be applied in the first instance in payment of the debts of the firm, and the surplus, if any, shall be utilized to pay the separate debts of the partners. Similarly, the separate property of any partner shall be applied first in the payment of his separate debts and the surplus, if any, then shall be applied to pay the firm debts. Be it noted, that the award of the Arbitrator, which is made Rule of the Court, is against the erstwhile partners of a partnership firm. The decree is joint and several. In such factual matrix, the provisions of the Indian Partnership Act, 1932 which are pressed in service would have no applicability. The decree-holder cannot be prevented from proceeding with the execution in the manner of his choice and there is no substance in the contention that the decree-holder must be compelled to first proceed against certain properties which according to the judgment-debtor are the properties of the firm.

18. Shri R.L. Khapre, learned Counsel for the decreeholder has brought to my notice the decision of the Hon’ble Supreme Court in Ashutosh vs. State of Rajasthan and Others, (2005) 7 SCC 308, and in particular the following observations :
“10. Both the contentions raised by the learned counsel appearing for the appellant have absolutely no merit. It is not in dispute that the decree was passed against the firm in which Smt. Dhanwanti Devi was also a partner. Under the provisions of the Partnership Act, one partner is the agent of the other. The partner is always liable for partnership debt unless there is implied or express restriction. In the instant case, notice was duly served on Smt. Dhanwanti Devi and her husband at House No.80, B-Block, Sri Ganganagar. Sections 24 and 25 of the Indian Partnership Act, 1932 can be usefully referred to in the present context which are reproduced hereunder:
"24. Effect of notice to the acting partner - Notice to the partner who habitually acts in the business of the firm of any matter relating to the affairs of the firm operates as notice to the firm, except in the case of a fraud on the firm committed by or with the consent of that partner.
25. Liability of a partner for acts of the firm - Every partner is liable, jointly with all the other partners and also severally for all acts of the firm done while he is a partner."
12. 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.
13. 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.
14. The judgment in the case of Dena Bank v. Bhikhabhai Prabhudas Parekh & Co., can be beneficially referred to in the present context. Two questions arose for consideration by this Court in this case. Firstly, whether the recovery of sales tax dues amounting to Crown debt shall have precedence over the right of the Bank to proceed against the property of the borrowers mortgaged in favour of the Bank. Secondly, whether property belonging to the partners can be proceeded against for recovery of dues on account of sales tax assessed against the partnership firm under the provisions of the Karnataka Sales Tax Act, 1957. We are concerned only with regard to the second question. In para 18, R.C. Lahoti, J. (as he then was) observed as under : (SCC p.706)
"18. The High Court has relied on Section 25 of the Partnership Act, 1932 for the purpose of holding the partners as individuals liable to meet the tax liability of the firm. Section 25 provides that every partner is liable, jointly with all the other partners and also severally for all acts of the firm done while he is a partner. A firm is not a legal entity. It is only a collective or compendious name for all the partners. In other words, a firm does not have any existence away from its partners. A decree in favour of or against a firm in the name of the firm has the same effect as a decree in favour of or against the partners. While the firm is incurring a liability it can be assumed that all the partners were incurring that liability and so the partners remain liable jointly and severally for all the acts of the firm."
15. In the case of ITO (III) v. Arunagiri Chettiar, this Court considered the question as to whether an erstwhile partner is liable to pay the tax arrears due from the partnership firm pertaining to the period when he was a partner. The Madras High Court has held that he is not. Disputing the correctness of the said judgment, the Revenue came in appeal before this Court. This Court while allowing the appeal and setting aside the judgment of the High Court observed as follows:
"Section 25 of the Partnership Act does not make a distinction between a continuing partner and an erstwhile partner. Its principle is clear and specific, viz. that every partner is liable for all the acts of the firm done while he is a partner jointly along with other partners and also severally. Therefore, it cannot be held that the said liability ceases merely because a partner has ceased to be partner subsequent to the said period."

19. Shri R.L. Khapre, learned Counsel then relies on the decision of the Hon’ble Supreme Court in State Bank of India vs. M/s. Indexport Registered and Others, (1992) 3 SCC 159, to buttress the submission that it is unfettered right of the decree-holder to execute a joint and several decree in the manner he likes. Reliance is placed in particular on paragraphs 10, 13 and 22 of the said decision, which read thus :
10. It will be noticed that the loan was taken by the firm, namely respondent 1, which consisted of Shri Dhaneshwar Kumar Jain, respondent 2 (defendant 2) and Shri Ajay Kishan Mehta (since deceased). Respondent 2 (defendant 2) had created an equitable mortgage of his shop and respondent 4, who is a father of late Shri Ajay Kishan Mehta stood guarantor for the loan to respondent 1. The very wordings of the decree quoted above shows that it is a personal decree against all the defendants/judgment-debtors. Respondent 4 was defendant 4, so it is a money decree against defendant 4 as well. It is also a mortgage decree against the mortgagor, namely-defendant 2 only. The decree specifically mentions that a money decree is being passed for recovery of Rs 33,705.22 with costs and the defendants shall pay interest at 7% per annum from the date of the institution of the suit till its realisation. There is also a decree passed in favour of the Bank entitling it to sell the shop in case decretal amount is not paid within three months from the date of the decree and the decree specifically mentions that it will be deemed to be a personal decree against all the defendants (respondents). Only qua defendant 3 it can be executed only to the extent the mother inherited the estate of her son Shri Ajay Kishan Mehta. It is thus clear from the decree that it is a money decree against all the defendants (respondents) and a mortgage decree only against defendant 2 (respondent 2) so far as the shop is concerned. The decree does not put any fetter on the right of the decree-holder to execute it against any party, whether as a money decree or as a mortgage decree. The execution of the money decree is not made dependent on first applying for execution of the mortgage decree. The choice is left entirely with the decree-holder. The question arises whether a decree which is framed as a composite decree, as a matter of law, must be executed against the mortgage property first or can a money decree, which covers whole or part of decretal amount covering mortgage decree can be executed earlier. There is nothing in law which provides such a composite decree to be first executed only against the property. It will be noticed that there is no preliminary mortgage decree either. It is a final mortgage decree for sale of shop after three months. The decree is not in the prescribed Form No. 5 of Appendix ‘D’ to the Code of Civil Procedure.
13. In the present case before us the decree does not postpone the execution. The decree is simultaneous and it is jointly and severally against all the defendants including the guarantor. It is the right of the decreeholder to proceed with it in a way he likes. Section 128 of the Indian Contract Act itself provides that “the liability of the surety is coextensive with that of the principal debtor, unless it is otherwise provided by the contract.
22. The decree for money is a simple decree against the judgment-debtors including the guarantor and in no way subject to the execution of the mortgage decree against judgment-debtor 2. If on principle a guarantor could be sued without even suing the principal debtor there is no reason, even if the decretal amount is covered by the mortgaged decree, to force the decreeholder to proceed against the mortgaged property first and then to proceed against the guarantor. It appears the above-quoted observations in Manku Narayana case are not based on any established principle of law and/or reasons, and in fact, are contrary to law. It, of course depends on the facts of each case how the composite decree is drawn up. But if the composite decree is a decree which is both a personal decree as well as a mortgage decree, without any limitation on its execution, the decree-holder, in principle, cannot be forced to first exhaust the remedy by way of execution of the mortgage decree alone and told that only if the amount recovered is insufficient, he can be permitted to take recourse to the execution of the personal decree. For a simple mortgage decree as prescribed in Form No. 5 of Appendix ‘D’ of the Code of Civil Procedure it could be so because the decree provides like that. It is only when the sum realised on sale of the mortgaged property is insufficient then the judgment-debtor can be proceeded with personally. But the observations of the Court in Manku Narayana case that even if the two portions of the decree are severable and merely because a portion of the decretal amount is covered by the mortgage decree, the decree-holder, per force has to proceed against the mortgaged property first are not based on any principle of law. With all due respect to the learned Judges, in the light of the observations made by us earlier, we are constrained to observe that Manku Narayana case was not correctly decided.”

20. Shri Shyam Dewani, learned Counsel relies on the decisions ;
(1) Karri Venkayyamma v. Goluguri Tirapayya, AIR 1955 Madras 32,
(2) Yakub Ibrahim v. Gulamabbas and others, AIR 1958 Bom. 51,
(3) Central Glass Factory (Madras) v. Special Commercial Tax Officer, Non-Resident Circle, Hyderabad, 1965 SCC OnLine AP 237,
(4) Manohar Lal & Padam Prakash v. Commissioner of Income Tax and another, 1987 SCC OnLine All 885,
(5) S.V. Chandra Pandian and Others v. S.V. Sivalinga Nadar and Others, (1993) 1 SCC 589.
I am afraid, the said decisions have no application to the factual matrix and are irrelevant.
Karri Venkayyamma v. Goluguri Tirapayya enunciates that legal representative of a partner is not liable to render accounts to the other partners and that the other partners must allege and establish the liability of the deceased partner, and the amounts so ascertained could be recovered from the assets of the deceased in the hands of his legal representative. The judgmentdebtor is not impleaded in the execution proceedings as a legal representative. The judgment-debtor is a party to the original proceedings who has suffered a joint and several decree.
Yakub Ibrahim v. Gulamabbas and others articulates that in view of the mutual agency and mutual obligation of the partners to render accounts, the position of parties in a partnership suit is in some particulars different from that of parties in an ordinary suit. Each of the partners, is in turn the plaintiff and defendant.
Central Glass Factory (Madras) v. Special Commercial Tax Officer, Non-Resident Circle, Hyderabad was a case where the Government sought to attach the property of the partnership to recover the dues from one partner on the premise that the property of the partnership which is attached constitutes the share of the debtor-partner.
Manohar Lal & Padam Prakash v. Commissioner of Income Tax and another considers the provisions of Section 189(3) of the Income Tax Act, 1961 and holds that for realising the tax dues against the firm the personal properties of the partners could not have attached and sold by the Tax Recovery Officer.
S.V. Chandra Pandian and Others v. S.V. Sivalinga Nadar and Others considers the applicability of Section 17(1) of the Registration Act, 1908 to the distribution of residue after settlement of accounts. The said decision has no bearing on the issue involving.

21. The petition is without substance and is dismissed.

22. The Executing Court shall dispose of execution proceedings as expeditiously as possible and in any event, within six months.

23. Since parties are litigating since 1969, the Executing Court shall not grant unnecessary adjournment and the execution proceedings shall be conducted as far as possible on day to day basis and adjournment shall be granted only for exceptional and compelling reasons.

Decision : Petition dismissed