and Others Vs. Shankar Sundaram and Others  Insc 113 (30 January 2008)
Sinha & Harjit Singh Bedi
out of SLP (C) No. 22880 of 2004) S.B. SINHA, J.
Appellants herein were defendant Nos. 4 to 7 in the suit.
No.1 filed the suit against them and four others.
are admittedly partners of defendant No.1 firm, M/s. AR. AS & P.V.PV
, registered under the Partnership Act, 1932. Defendant No.3 P. Shankar
(Respondent No.4 herein) was also a partner in the said firm.
Allegedly, Defendant No.2, P.V. Purushothaman (Respondent No.3 herein), who has
been described as the Managing Partner of the said firm, fraudulently obtained
an advance from the plaintiff wherefor a personal guarantee was furnished by
the defendant No.2.
a cheque for a sum of Rs. 50 lakhs was issued in the name of the defendant
Plaintiff-Respondent filed the aforementioned suit for realisation of a sum of
Rs.70,30,000/- with interest @ 20% per annum inter alia alleging that all the
defendants were jointly and severally liable therefor. An application under
Order XXXVIII Rule 5 of the Code of Civil Procedure was filed by the plaintiff.
Appellants in their written statement inter alia raised a contention that since
the amount of Rs. 50 lakhs purported to have been taken in advance by defendant
No.2 in connivance with defendant Nos. 3 & 8 had not been used for the
benefit of the partnership firm, no order of attachment could be issued as
against the appellants herein. The said contention of the appellants was
accepted by a learned Single Judge of the High Court by his order dated 10th
December, 2002 opining :- The copy of the partnership deed date 01-4-1996
has been filed by the contesting defendants in the typed set. A perusal of the
same clearly disclosed that the 2nd Defendant was not a partner in the 1st
defendant firm. Moreover, the plaintiff had also not filed any record to show
that the 2nd defendant was already in a partner (sic) in the 1st defendant firm
and the borrowal was also made only for the firm. Unless and until, it is
established by the plaintiff, I am of the view that the plaintiff is not
entitled to seek any interim order calling upon the defendants to execute a
intra court appeal was preferred thereagainst wherein a Division Bench of the
High Court by reason of the impugned judgment opined :- The Learned Judge
has not appreciated that the 3rd Defendant who is the partner of the firm as
per the partnership deed dated 1-4-1996 executed the promissory notes and
clause 10 of the partnership firm gives power to a partner to borrow monies
(sic) from the 3rd parties for the purpose of business. The 2nd Defendant gave
a letter which is only for personal guarantee. So, the reasonings given by the
Leaned Judge that since the 2nd defendant is not a partner, the borrowal of
money is not for the benefit of the partnership cannot be countenanced. When
the cheque was given in the name of the firm by the Plaintiff, prima facie, it
has to be taken that it is borrowed on behalf of the partnership firm. When the
payment of the money by the Plaintiff in the firm is not in dispute and in the
absence of any specific allegation that the amount was paid personally to the
defendants, 2, 3 and 8, though the cheque was issued in the name of the firma
and the Plaintiff also colluded with them, the argument of the Learned Counsel
regarding the alleged collusion cannot be accepted.
the amount is used for the firm or personally by the defendants 2, 3 and 8 can
be gone into only after adducing evidence. Prima facie, we find that since the
amount was paid in the name of the firm and promissory notes were executed by
the partners of the firm and no other partnership deed is produced before the Court
other than that the partnership dated 1-4-1996, the learned Judge is not
correct in rejecting the Application as if the plaintiff has no prima facie
case. The learned Judge has not given any other finding as to the necessity for
attachment, but rejected the application only on the ground that the 2nd
defendant is not the partner of the firm. On the said findings the appeal
preferred by the plaintiff- respondent was allowed. Appellants are thus before
Appellants are, thus, before us.
Ramamurthy, learned senior counsel appearing on behalf of the appellants, would
take us through the plaint as well as the written statement to contend that
from a perusal thereof it would appear that in obtaining the said purported
loan from the plaintiff-respondent, defendant Nos. 2, 3 & 8 played a prime
role As defendant No.2 was stated to be the Managing Partner of the firm, which
he was not, and in fact only his son (defendant No.3) was a partner, the
purported loan was granted by the plaintiff without even caring to ascertain as
to who are the partners of the said firm.
attention was furthermore drawn to various provisions of the Partnership Act
and in particular, Section 2(a); Section 18; Section 19; Section 22 and Section
28 thereof for advancing the proposition that the firm would be bound only when
a transaction is entered into by a partner of the firm and that too subject to
the limitations contained in the aforementioned provisions.
Mr. Amit Sharma, learned counsel appearing on behalf of the respondents, on the
other hand supported the impugned judgment.
Concededly, the amount of loan was advanced by a cheque.
said cheque was drawn in the name of the partnership firm.
again, the appellants were the partners thereof at the relevant time, although
an endeavour was made before the learned Single Judge to show that they ceased
to be so. Having regard to the fact that they purported to have retired from
the partnership firm in the year 2001 and the transaction herein between the
parties are of the year 2000, prima facie the liability of the appellants could
not have been ignored.
The application for attachment before judgment was filed by the plaintiff so as
to protect his interest in the event the suit is decreed.
court exercises, in such a situation, jurisdiction under Order XXXVIII Rule 5
of the Code of Civil Procedure. The Division Bench of the High Court merely
directed the appellants herein to furnish security within the time specified thereunder.
It was directed that only on their failure to do so, an order of attachment of
the 2nd item on the schedule to the petition shall be issued.
Appellants, in our opinion, are not seriously prejudiced thereby.
court while exercising its jurisdiction under Order XXXVIII Rule 5 of the Code
of Civil Procedure is required to form a prima facie opinion at that stage. It
need not go into the correctness or otherwise of all the contentions raised by
the parties. A cheque had been issued in the name of the firm. The appellants
are partners thereof. A pronote had been executed by a partner of the firm.
Thus even under the Partnership Act prima facie the plaintiff could enforce his
claim not only as against the firm but also as against its partners.
Sections 2(a) ; 18 ; 19 ; 22 and 28 to which our attention has been drawn,
instead of assisting the appellants, prima facie assist the
plaintiff-respondent. Allegations against defendant Nos. 2, 3 and 8 are
required to be gone into at the hearing of the suit. The Court at this stage is
required only to form a prima facie opinion. The plaintiff is entitled to
secure his interest keeping in view the amount involved in the suit. For the
said purpose a detailed discussion in regard to the question as to whether
defendant No.2 was a partner or not is not of much relevance.
any view of the matter as the appellants are not seriously prejudiced if they
furnish the security, this, in our opinion, is not a fit case where this Court
should exercise its jurisdiction under Article 136 of the Constitution of
For the reasons abovementioned this appeal fails and is dismissed. No order as