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2013 DIGILAW 594 (AP)

G. Chandra Sekhar Rao v. State Bank of Hyderabad

2013-07-29

L.NARASIMHA REDDY, S.V.BHATT

body2013
Judgment : LNR, J. Defendant No.6 in O.S.No.1617 of 1985 on the file of the learned V Additional Judge, City Civil Court, Hyderabd is the appellant. For the sake of convenience, the parties are referred to as arrayed in the suit. The plaintiff filed the suit against the defendants for recovery of a sum of Rs.4,73,185/-together with interest. It was pleaded that the 1st defendant, a firm, in which defendants 2 to 4 were partners obtained loan/cash credit facility and have executed a document, dated 13.11.1979. According to the plaintiff, in the year 1983, a proposal was mooted for reconstitution of the 1st defendant and on that, they made it clear that the liability of the erstwhile partners i.e., defendants 2 to 4 does not get altered. It was also pleaded that without any intimation to them, the 1st respondent had permitted not only the erstwhile partners, but also those who joined later, including the 6th defendant, to retire from partnership. With these and other allegations, the plaintiff prayed for a decree for recovery of amount. The suit was opposed by defendant No.2 by filing a written statement and respondents defendants 3 and 4 adopted the same. They did not dispute the factum of borrowing of the amount. However, their plea was that they retired from the firm and therefore, they cannot be saddled with any liability. The 7th respondent herein also filed an independent written statement. He too denied the liability. Defendants 1,5 and 6 remained ex parte. The 7th defendant died during the pendency of the suit. Through its judgment, dated 17.04.1997, the trial Court decreed the suit as prayed for and held defendants 1 to 6 as jointly and severally liable to pay the decretal amount. Hence, this appeal. Learned counsel for the 6th defendant submits that his client joined the 1st defendant-firm as a partner only on 02.03.1983 and he cannot be held liable to pay the decretal amount in relation to a transaction, which was entered into in the year 1979. Learned counsel for the plaintiff, on the other hand, submits that being a partner of the 1st defendant-firm, the 6th defendant is also liable to pay the decretal amount either in its entirety or in part depending upon the adjustment between the partners. The suit was filed for recovery of the amount that was lent by the plaintiff to the 1st defendant. The suit was filed for recovery of the amount that was lent by the plaintiff to the 1st defendant. Of the several defendants, few of them filed written statements. The trial Court took note of the pleadings before it and framed the following issues for its consideration: 1. Whether the plaintiff bank is entitled to the suit sum with future interest as prayed for? 2. Whether the suit is barred by time? 3. Whether the interest claimed is usurious? 4. Whether the suit is liable for dismissal for mis-joinder of parties? On behalf of the plaintiff, P.W.1 was examined and Exs.A.1 to A.27 were filed. On behalf of the defendants, D.Ws.1 and 2 were examined and Exs.B.1 to B.20 were filed. The suit was decreed as prayed for and defendants 1 to 6 were held jointly and severally liable to pay the decretal amount. In view of the extensive submissions made by the learned counsel for the parties before us, we find that the following points arise for consideration: 1. Whether the plaintiff proved the case for recovery of amount? And 2. Whether the 6th defendant can be held jointly and severally liable to pay the decretal amount? The plaintiff pleaded that it has advanced amounts or created the credit facility in favour of the 1st defendant-firm. The various documents such as Ex.A.3-letter, dated 13.11.1979, Ex.A.4-sanction letter, dated 13.09.1982, Ex.A.5-promisory note, dated 10.12.1982, Ex.A.6-D.P.Note deliver letter, dated 10.12.1982 vouch for the same. In addition to that, the agreement of overdraft facility was created through Ex.A.8 dated 10.12.1982. In relation thereto, indemnity agreement and bond marked as Ex.A.9 and Ex.10 were executed on the same day. These and other documents clearly establish that the plaintiff has extended the loan/credit facility to the 1st defendant. None of the defendants who contested the suit have doubted the genuinity of the documents filed by the plaintiff. The trial Court recorded a finding to the effect that the plaintiff proved its claim and we are in total agreement with that. Coming to point No.2, it is not in dispute that the 6th defendant joined partnership firm on 02.08.1983 and the same is evident from Ex.A.21, the document pertaining to newly constituted firm. The trial Court recorded a finding to the effect that the plaintiff proved its claim and we are in total agreement with that. Coming to point No.2, it is not in dispute that the 6th defendant joined partnership firm on 02.08.1983 and the same is evident from Ex.A.21, the document pertaining to newly constituted firm. This development was informed to the plaintiff and in their letter dated 01.07.1983, marked as Ex.A.22, the plaintiff has categorically stated that notwithstanding the retirement of the erstwhile partners, the liability to clear the amounts due to it would rest upon such retired partners. The stand taken by the plaintiff accords with Section 32 of the Indian Partnership Act, 1932 (for short ‘the Act’), which reads: 32. Retirement of a partner:- (1) A partner may retire- (a) with the consent of all the other partners, (b) in accordance with an express agreement by the partners, or (a) where the partnership is at will, by giving notice in writing to all the other partners of the intention to retire. (2)A retiring partner may be discharged from any liability to any third party for acts of the firm done before his retirement by an agreement made by him with such third party and the partners of the reconstituted firm, and such agreement may be implied by a course of dealing between such third party and the reconstituted firm after he had knowledge of the retirement. (3)Notwithstanding the retirement of a partner from a firm, he and the partners continue to be liable as partners to third parties for any act done by any of them which would have been an act of the firm if done before the retirement, until public notice is given of the retirement: Provided that a retired partner is not liable to any third party who deals with the firm without knowing that he was a partner. (4) Notices under sub-section (3) may be given by the retired partner or by any partner of the reconstituted firm. It is only when the third party borrower agrees to relieve the erstwhile partners from the obligation, that they can get the benefit. As long as the third party did not accede to the request, the liability continues to be with them There is another angle, from which the matter can be examined. It is only when the third party borrower agrees to relieve the erstwhile partners from the obligation, that they can get the benefit. As long as the third party did not accede to the request, the liability continues to be with them There is another angle, from which the matter can be examined. Section 31 of the Act, in a way, defines the relationship of a newly joined partner vis-a-vis the firm; which reads: 31. Introduction of a partner:- (1) Subject to contract between the partners and to the provisions of Section 30, no person shall be introduced as a partner into a firm without the consent of all the existing partners. (2)Subject to the provisions of Section 30, a person who is introduced as a partner into a firm does no thereby become liable for any act of the firm done before he became a partner. The provision mandates that a person who joins a partnership firm cannot be fastened with the liability, which was existing anterior to the date, on which he joined. Whether one goes by the purport of Section 31, which is meant for protecting the rights of the newly joined partners or Section32, which keeps the obligation of the retiring partners intact, unless that was relieved by the concerned third parties, the inescapable conclusion is that the 6th defendant, who joined as a partner of the firm on 02.03.1983 much long after the loan transaction between the plaintiff and the 1st defendant has taken place, cannot be saddled with the liability. Therefore, the appeal is allowed and it is directed that the decree passed by the trial Court in O.S.No.1617 of 1985 can be enforced against the others. The miscellaneous petition filed in this appeal shall also stand disposed of. There shall be no order as to costs.