Case: Gambhir Mal Pandiya Vs. J. K. Jote Mills Co., Ltd., Kanpur And Another

passed against a firm, an individual partner who was not summoned personally may be summoned in the execution proceedings, and can contended that he was not a partner but cannot be allowed to challenge the authority of the other partner or partners to enter the transaction in dispute. In Bhagvan v. Hiraji, AIR 1932 Bom 516 Patkar and Murphy, JJ. took a different view. In that case, a plea that the partners were not authorised to refer a dispute to arbitration was allowed to be raised. Reliance was placed upon the fourth sub-rule of O.21, R. 50. In Cooverji Varjang v. Cooverbai Nagsey, AIR 1940 Bom 330 the judgment of Wadia, J. from which an appeal was taken to the Divisional Bench is printed. In that judgment, Wadia, J. held that under O.21 R. 50(2), the person summoned to show cause may not only prove that he was not a partner but take other defences appropriate to his own liability. The learned Judge apparently differed from Mirza, J. and preferred the view in AIR 1932 Bom 516 , and pointed out that the view was accepted in Tolaram Nathmull Firm v. Firm Mahomed Valli Patel, ILR (1939) 2 Cal 312: (AIR 1940 Cal 28 ) and Chhatoo Lal Misser and Co. v. Naraindas Baijnath Prasad, ILR R.56 Cal 704: (AIR 1930 Cal 53 ). In the last mentioned case, two defences were raised- (1) that the person summoned was not a partner, and (2) that the decree could not be, personally executed against him as he was a ward under the U.P. Court of Wards Act. The second plea was one of a special protection under law, and the case is thus distinguishable. 18. The Bombay view has, however, changed in recent years. In Rana Harkishandas v. Rana Gulabdas, ILR (1956) Bom 193 : ((S) AIR 1956 Bom 513 ) Gajendragadkar and Gokhale, JJ. dissented from AIR 1932 Bom 516 and laid down that in an enquiry contemplated under O.21, R.50(2), the only question that can be gone into is whether the person summoned as a partner to show cause was a partner at the material time or not. The learned Judges observed that unless the plea on this point by the person summoned to show cause succeeded, leave could not be withheld. According to the learned Judges, liability in sub-r.(2) of R. 50 means liability as a partner. They relied upon the decision of the Calcutta High Court in G. M. Shahani v. Havero Trading Co. Ltd., 51 Cal WN 488 in which Das, J. (as he then was and on appeal. Mc Nair and Gentle, JJ. had taken the same view and had dissented from the earlier Calcutta view. Rana Harikrishandass case ILR 1956 Bom 193 : (S) AIR 1956 Bom 513 ) was followed by another Division Bench of the Bombay High Court in Mandalsa Kumari Devi v. M. Ramnarain Private Ltd., ILR 1959 Bom 1468 : (AIR 1959 Bom 529 ). A similar view was earlier expressed by the Madras High Court in Kuppuswami v. Polite Pictures, ILR (1955) Mad 1106: (S) AIR 1955 Mad 154 ). 19. In our judgment, the view expressed in these later cases is the correct one.As we have pointed out O.30 of the Code permits suits to be brought against firms. The summons may be issued against the firm or against persons who are alleged to be partners individually. The suit, however, proceeds only against the firm. Any person who is summoned can appear, and prove that he is not a partner and never was; but if he raises that defence, he cannot defend the firm. Persons who admit that they are partners may defend the firm take as many pleas as they like but no enter upon issues between themselves. When the decree is passed, it is against the firm. Such a decree is capable of being executed against the property of the partnership and also against two classes of persons individually. They are (1) persons who appeared in answer to summons served on them as partners and either admitted that they were partners or were found to be so, and (2) persons who were summoned as partners but stayed away. The decree can also be executed against persons who were not summoned in the suit as partners, but R. 50 (2) of O.21 gives them an opportunity of showing cause and the plaintiff must prove their liability. This enquiry does not entitle the person summoned to reopen the decree. He can only prove that he was not a partner, and in a proper case, that the decree is the result of collusion, fraud or the like. But, he cannot claim to have other matters tried, so to speak, between himself and his other partners. Once he admits that he is a partner and has no special defence of collusion, fraud, etc. the Court must give leave forthwith. 20. In our opinion, of the three constructions suggested by the learned Attorney-General the widest meaning cannot be attributed to the word liability. The proper meaning thus is that primarily the question to try would be whether the person against whom the decree is sought to be executed was a partner of the firm, when the cause of action accrued, but he may question the decree on the ground of collusion, fraud or the like but so as not to have the suit tried over again or to raise issues between himself and his other partners. It is to be remembered that the leave that is sought is in respect of execution against the personal property of such partner and the leave that is granted or refused affects only such property and not the property of the firm. Ordinarily, when the person summoned admits that he is a partner, leave would be granted, unless he alleges collusion fraud or the like. No such question has been raised in this case, and the decision given by the High Court cannot be disturbed.

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]8. From the above analysis, it is clear that a plaintiff need sue only the firm, but if he wants to bind the partners individually he must serve them personally, for which purpose he can get a discovery of the names of partners of the firm. Persons served individually may appear and file written statements, but the proceedings go on against the firm only. They may, however, appear and plead that they are not partners or were not partners when the cause of action arose. But even if no other partner appears there may be a decree against the firm if the firm has been served with the summons. The gist of O. 30 thus is that the action proceeds against the firm, and the defence to the action by persons admitting that they are partners is on behalf of the firm. Persons sued as partners may, however, appear and seek to establish that they are not partners or were not partners when the cause of action arose ; but if they arise this special plea, they cannot defend the firm. This was laid down in connection with the analogous provisions of the English rule in Weirand Co. v. Mc Vicar and Co. 1925-2 KB127. Parners appearing and admitting their positions as partners can only defend the firm, because the suit continues in the firms name. The law is thus not concerned with a fight between the partners inter se, and an action between the partners is not to be tried within the action between the firm and the plaintiff. Of course, the partners who admit that they are partners need not raise a common defence. They may raise inconsistent defences, but all such defences must be directed to defend the firm and the plaintiff must surmount all such defences. Sees v. Wadeson (1889) 1 QB714. The purport of the rules as well as the two English cases which have correctly analysed the rules on the subject (the English and the Indian rules being alike ) is that the partnership is sued as a partnership and though the partners may put in separate defences, those defences must be on behalf of the firm. If some of the partners do not appear, those that do, must defend the firm; but if no proper defence is raised by them, the plaintiff cannot be deprived of a judgment. The judgment and decree thus obtained are executable against the partnership assets. This brings in the provisions of O. 21. R. 50 of the Code9. That rule enables a decree obtained against a partnership firm to be executed against the property of the partnership. Next, it enables the decree to be executed individually against a person who appeared in his own name under R. 6 or R. 7 of O. 30 or who admitted on the record or was adjudged to be a partner. Next, the decree can be executed against any person who is served individually as a partner but has failed to appear. Next, it permits the decree to be executed with the leave of the Court against persons belonging to the category of the person above mentioned, provided that they are summoned and either admit their liability or after an issue is tried, their liability is determined10. A large number of cases decided in India and England have laid down the kind of issue which may be tried under O. 21 R. 50(2) of the Code and the cognate provisions of the English rules. Since the English cases are first in point of time, we shall begin with them. It must be remembered in this connection that the English rules prescribe forms for recording appearance by persons summoned in actions against firms19. In our judgment, the view expressed in these later cases is the correct one.As we have pointed out O.30 of the Code permits suits to be brought against firms. The summons may be issued against the firm or against persons who are alleged to be partners individually. The suit, however, proceeds only against the firm. Any person who is summoned can appear, and prove that he is not a partner and never was; but if he raises that defence, he cannot defend the firm. Persons who admit that they are partners may defend the firm take as many pleas as they like but no enter upon issues between themselves. When the decree is passed, it is against the firm. Such a decree is capable of being executed against the property of the partnership and also against two classes of persons individually. They are (1) persons who appeared in answer to summons served on them as partners and either admitted that they were partners or were found to be so, and (2) persons who were summoned as partners but stayed away. The decree can also be executed against persons who were not summoned in the suit as partners, but R. 50 (2) of O.21 gives them an opportunity of showing cause and the plaintiff must prove their liability. This enquiry does not entitle the person summoned to reopen the decree. He can only prove that he was not a partner, and in a proper case, that the decree is the result of collusion, fraud or the like. But, he cannot claim to have other matters tried, so to speak, between himself and his other partners. Once he admits that he is a partner and has no special defence of collusion, fraud, etc. the Court must give leave forthwith20. In our opinion, of the three constructions suggested by the learned Attorney-General the widest meaning cannot be attributed to the wordliability. The proper meaning thus is that primarily the question to try would be whether the person against whom the decree is sought to be executed was a partner of the firm, when the cause of action accrued, but he may question the decree on the ground of collusion, fraud or the like but so as not to have the suit tried over again or to raise issues between himself and his other partners. It is to be remembered that the leave that is sought is in respect of execution against the personal property of such partner and the leave that is granted or refused affects only such property and not the property of the firm. Ordinarily, when the person summoned admits that he is a partner, leave would be granted, unless he alleges collusion fraud or the like. No such question has been raised in this case, and the decision given by the High Court cannot be disturbed.